When many Americans think of Ireland, they often think of the pastoral country portrayed on the silver screen, in movies like The Quiet Man, or more recently, in Waking Ned Devine. They envision a poverty-stricken, backward country with little or no industry. However, modern Ireland has little in common with these conceptions. As a matter of fact, fans of Ireland’s economy have dubbed the Emerald Isle with a new term of affection: the Celtic Tiger.
As The Economist recently explained:
Surely no other country in the rich world has seen its image change so fast. Fifteen years ago Ireland was deemed an economic failure, a country that after years of mismanagement was suffering from an awful cocktail of high unemployment, slow growth, high inflation, heavy taxation and towering public debts. Yet within a few years it had become the “Celtic Tiger,” a rare example of a developed country with a growth record to match East Asia's, as well as enviably low unemployment and inflation, a low tax burden and a tiny public debt.(1)
The Economist isn’t alone in its favorable analysis of Ireland. Citing a top corporate tax rate of 12½%, a strong free-trade policy, and constitutionally-protected private property rights, the Heritage Foundation’s 2004 Index of Economic Freedom states that Ireland has one of the “most pro-business environments”(2) in the world.
Further, in stark contrast to how many outsiders view the tiny country, Ireland has been ranked as the most “globalized economy in the world.”(3)
In reference to free trade, accounting giant KPMG has stated that Ireland’s “exceptionally buoyant” economy is “considered to be one of the most open economies in the world.”(4)
The story gets better. Ireland has the youngest and fastest-growing population in Europe. Moreover, the 2004 IMD World Competitiveness Yearbook reports that Ireland has one of the most well-educated populations in the world. This is what economists refer to as human capital, and in terms of human capital, Ireland is strong.
Ireland is a modern day rags-to-riches, or more accurately, a famine-to-feast chronicle. When you add it all up, the recent turnaround of Ireland is quite a story.
So why haven’t you heard it before?
More specifically, as an investor, why don’t you own more shares in Irish companies?
Oddly enough, with all her accomplishments, Ireland has barely been a blip on the radar screens of many investment firms. Equally odd are the countries which some money managers consider to be superior investment choices, such as China (an officially communist country), France (a socialist country with near double-digit unemployment), and Russia (a country governed by a former KGB officer). As a matter of fact, if you look in your investment accounts, you will probably find that you own more companies based in France or China than in Ireland.
Perhaps it is the fact that the status quo doesn’t support investing in Ireland. Maybe an anti-Catholic bias prevents Wall Street professionals from investing in this country. Whatever the reason, most financial professionals are largely disinterested in Ireland. We think they are missing the boat. If your goal as an investor is to buy the best companies in the best countries in the world, it is hard to ignore Ireland.
Legally protected property rights, legally-protected innocent life, political freedom, low regulation, low corporate taxes, free trade — this is the recipe for success.
This is Ireland.
Notes:
1. The Luck of the Irish, The Economist, Oct 14, 2004.
2. 2004 Index of Economic Freedom, published by the Heritage Foundation and the Wall Street Journal.
3. A.T. Kearney/Foreign Policy Magazine Globalization Index, 2003. A.T. Kearney, Inc., and the Carnegie Endowment for International Peace.
4. “Doing Business in Ireland,” KPMG, 2004.
John Clark is the CEO of Paladin Financial Group. He may be reached at jclark@investprolife.com.
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