The Irish Potato Reasons and Explanation of the Rise and the Fall of the Irish Economy.

[Eza 5]

Ireland

 

 

 

The Irish Potato

 

Early 1900

 

The only product Ireland produces is the Irish potato. So that is what all the Irish eat. When there happens to be a crop failure and the harvest of the potatoes fails to feed the Irish people they all leave to the United States of America to eat.

 

This is in short and simplified the situation of the Irish economy. At least this is how the Irish economic situation in the early twentieth century can be described.

 

The influence of the European Union

 

Since the grow of the European Economic Community and the rise of the European Union the Irish government started to build an artificial economy. With grants of the European Union and the Irish government and low income taxes for companies foreign companies are lured to the Irish island.

 

American companies look at the financial benefits only. Several American companies established their European head quarters in Ireland. The Irish iseland is seen like a portal to the European continent. And the European society is one of the richest in the world. The European market is one of the places where American companies expected to earn big profits.

 

Reasons to call the Irish economy an artistic phenomenon

 

The artificial state of the Irish economy can made clear by several properties.

 

1.The Irish economy consists mainly of foreign companies. The Irish themselves don´t start international companies that produce for the European continent.

2.The Irish economy rests on grants from the European Community and the Iris government and the low Irish income taxes. They lead to low costs for the foreign companies to produce in Ireland. The moment the grants are finished, the Irish income taxes for companies rise and the costs rise the foreign companies look for other countries where their products can be produced cheaper.

3.The Irish economy doesn't support the production of the companies. The internal Irish market is too small to support the production of products that are fit for the export.

4.The Irish economy is not build by the Irish. The Irish economy has no history. The Irish economy didn't arise out of a self supported growth of the Irish economy.

5.The Irish economy is not rooted in the Irish society. If an Irishman would establish a company he would become the owner of the company. The owner has his family, his roots, his friends, his social neighbourhood in Ireland. The profits are mainly made in Ireland too. His customers are in Ireland. This means that financial profits are not the main reasons to produce in Ireland. And the economic situation is not the main reason to be established in the Irish country.

6.Ireland is an iseland at the border of Europe. Ireland is surrounded by seas and an ocean. All ingredients for products and all finished products have to be transported by air or by ship. Ireland lays on a pretty distance from the economic market on the European market. All this means the European market is difficult to reach from Ireland. And the costs for transportation are high. American entrepeneurs are probably not aware of these disadvantages of Ireland. And Irish company hunters would probably not tell them these disadvantages. Only after some time the American company directors will find this out by themselves.

 

These considerations lead to the conclusion that the Irish economy is artificial.

 

Luxury and spending money

 

With building this artificial economy and after luring lots of American companies to Ireland the Irish economy earnt lots of money from the companies. The transportation of raw materials and elements and of finished products produced income for Ireland. The factories and the offices and head quarters of the American companies need workers and employees. The Irish workers and employees earn their sales. Allthough the Irish income taxes are low the taxes provide the Irish government with a huge income. The government earns more by low company income taxes with a lot of foreign companies compared to a situation with high company income taxes with only a few companies that pay taxes to the Irish government. And since huge international companies established their head quarters and factories in Ireland who earn lots of income the taxes produce high incomes for the Irish government too.

 

What happened next was that the Irish inhabitants and the Irish government started to spend money. The Irish government spents money to very luxury goods, buildings and infrastructure. An example is the new terminal of the airport. This very luxury building is opened shortly ago. And even the lamp-posts in Ireland are very luxury. Some of the street lights are not simple metal poles with a bended top with a light. As it seems the Irish government likes to place high fashionable designed lamp-posts in the Irish cities.

 

The Irish government spent a lot of money to a lot of other expensive activities.

 

There seem to have been little to no critics about this spending drove of the Irish government. The Irish economy seemed to boom and to florish. The incomes seemed to grow and to stay high.

 

It seems the Irish people didn't protest massively against the spendings of the Irish government. The people spent as much as the government themselves.

 

Bankes developed the habit to finance new buildings completey. This is very risky. The risk of a loss of money when the project fails lays completely with the bank. The developer doesn't bear any risk. If the building and development project fails the bank bears the losses. The banks didn't ask for any financial contribution of the builders. This would have ment that the builders would feel the pain of a failure of a building project themselves too. This might have caused more carefull executions and more carefull designed plans for new buildings.

 

In a growing and booming economy the Irish banks earned lots of money by the loans they lent out. The more loans were lent out the more the banks earnt. So the banks became less carefull about the risks of the loans the banks provided.

 

This leads to high risks when the economy finishes to grow.

 

The growth of the Irish economy, the prosperity, the welfare and the comfortable and luxury life of the Irish people and the size and the revenues of the companies in Irish are financed with loans.

 

Threads

 

The Irish economy faces different threats and changes.

 

1.East European countries join the European Union. The sales in those countries are considerable lower than the sales in the countries that started the European Union. And the sales are much lower than the sales in Ireland.

2.Transportation costs of raw materials and end-products are considerably lower. The products can be transported by inland navigation ships, trains and trucks. They are considerable cheaper compared to air transportation by air planes. The oversea transhipment and the transportation by sea going vessels are maybe more expensive and more complicated too.

3.The European grants became lower. The grants for a foreing company to establish a factory and their European headquarters in Ireland can only obtained once. The huge grants for poor regions of the Europe Union are not available for Ireland, the Irish goverment and companies established in Ireland anymore.

4.Since the profits for companies in Ireland became less and lower some companies started to leave Ireland. Some factories are transported to East European countries. This results in lower income for the Ireland government and the Irish economy and the Irish working people.

5.The prices of buildings and houses started to drop. While the real estate business and the distrubiton of mortgages and loans were build upon the unrealistic expectation that the prices of buildings and houses would rise all the time this caused severe problems for developers, house owners, mortgage owners and building owners and banks.

6.The international economical and bank crises reached the Irish economy too. So the revenues dropped.

7.This results into the situation that the house owners, business men, building owners and real estate developing companies and other companies are not longer able to pay off the loans. The banks face a huge portfoilo of loans, that are not going to be paid back.

 

Wrong and opposite approach

 

In stead of facing the problems by increasing the savings and changing the habit of spending money into saving money and to only spend money that is saved before spending the Irish banks and the Irish government increase the habit of enlarging the loans. The Irish government took over lots of bad loans. And the Irish government makes itself the quarantor of the losts of the Irish banks. The governments spends billions to save the Irish banks. With this approach the Irish government manages to increase the debts of the Irish government with billions of euros.

 

The result of the big losses and huge budgetary deficit of the Irish government the interest and the costs the financial market asks from the Irish government grow. This means it becomes more expensive and more difficult for the Irish government to attract loans to defray their expenses and loans to the banks.

 

Domino

 

The situation looks like a set of dominoes. If one domino starts to drop the other dominoes follow the first one in its fall.

 

Mutual dependence

 

Since the different parts of the economy and the companies, banks and the government are too closely attached, the mutual dependences are too strong and the risks are too high and not enough covered by capital the downfall of the first one causes the down going of a lot of other companies, people, house owners, bank and the government.

 

The lower prices of houses cause problems for house owners, house building companies, banks, the rest of the economy and other companies, the government and leads to a electorical loss of the leading party. The consequences of the house crisis are the mortgage crisis, the bank crisis, the governmental financial crisis and the political crisis.

 

This report started with the observation that the Irish economy is artificial. The growth has been very fast. The artificial state of the economy results in an even faster downfall. The international bank crisis and the international economic increase the collapse of the Irish economy.

 

The artificial condition of the economy consist for a part in the situation, that the economy is build upon and has grown because of the grants of the government. Once the financial support of the government drops the economy has not enough strenght and not enough relief to exist by it self.

 

Conclusion

 

The failure of understanding that the Irish economy is artificial and built upon quick-sand means the Irish government fails to see the real condition of the Irish economy. This results in the failure of taking the correct measures to solve the problems. The result is that the taken measures increase the problems in stead of contributing to the solution of the problems.

 

Opinion

 

This article contains the simplified opinion of the writer.

 

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1835 words.

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Edited November 25, 2010 by Eza (see edit history)

[Eza 5]

The Irish potato

 

 

 

Chapter 2.

 

Inhabitants decrease of Ireland

 

 

Emigration

 

The topic post argues, that Irish emigrate to the United States of America. Some numbers can underbuild that statement. For that reason the numbers of people who left Ireland from 1841 till 1926 are listed. These figurs show, that over half of the population of Ireland left the country in a time interval of 85 years. The population of Ireland was 6,5 million people in 1841. After some massive emigration the population of Ireland dropped to 2,972 million persons in the year 1926. In 85 year the number of inhabitants decreased with 3.5 million persons. Probably these persons have in most cases left the country. This means that in 1926 more Irish were living in another country. And the number of people who left the country overrated the Irish that lived in Ireland.

 

Numbers

 

Year Number of emigrants

 

1841 6,529,000

1871 4,953,000

1901 3,222,000

1926 2,972,000

 

A lot of the emigrants left to the United States of America. Around 1920 the United States of America introduced more severe immigrant laws and rules. The result is that more Irish went to England.

 

Production of the Irish potato

 

The topic start argues, that the main product of Ireland used to be the Irish potato. 51.3% of the overall total of workers in Ireland worked on farms in 1926. In that year was 12.7% of the people working in the industry. And 0.4% of the working people were fishermen. These numbers show in some way the importancy and the relative big part of the products of the farms of the working population. These figurs underbuild the opinion, that Ireland was an agricultural country before and in the start of the 20th century.

 

In 1937 91% of the export was exported to England. 50% of the import came from England. This shows that England bought most of the goods and food products Ireland produced and exported.

 

In the years 1934 till 1938 the potato contributed about probably 95% to the Irish agricultural food production.

 

55% of the people left

 

So while the first sentences of the start post simplify the history of Ireland and the events from around 1840 till 1920 the figurs show that Ireland used to be a poor agricultural country. Almost 55% of the inhabitants left the country in a period of 85 years. And the potato was a big part of the product of the country.

 

Reasons

 

Reasons for the emigration to the United States of America were among other reasons the poverty in Ireland and at the country side, some failures in the production of potatoes that lead to hunger in Ireland and the lack of employment opportunities and places to work and earn a living.

 

European stimulation

 

After the entrance of the European Community in 1972 Ireland could gain European grants of the program to stimulate and support poor regions of the European Community. These grants helped the Irish government to stimulate the Irish economy.

 

American companies

 

Some large American companies started their main offices in Ireland. The low costs and financial profits and grants are probably some of the reasons of the settlement of these companies in Ireland. Another reason might be, that Ireland is about the European country that is the closest to the United States of America. So the travelling time to Ireland from the United States is the shortiest compared to the countries of the European continent.

 

The long distances to the main European market and the long transportation lines to the other European countries and the difficulties and costs for overseas transportation by ships and air planes were probably no obvious difficulties for the American companies. Huge international American companies like Google, Microsoft and Hewlett Packard have offices in Ireland. Dell used to have one factory or more factories. Dell seems to have removed their factories to East Europe.

 

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653 words.

 

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Edited November 25, 2010 by Eza (see edit history)