From Silk to Silicon
Trade between nations has taken place since the second century BC. An ancient network of trade routes known as ‘Silk Road’ connected the East and West. It derives its name from the trade of silk between the regions of Asia, Africa and Europe. This transcontinental network only gained widespread acceptance in the academic world during the 20th century.
The 20th century was a pivotal time of international trade. International trade flourished at the turn of the century thanks to the frenzy of cross — border trade and investment driven by a trend of Internationalism. But with the outbreak of two world wars national economies turn inwards. The Great Depression of the interwar period brought the American and global economy to a complete halt.
It was not until 1944 at the Bretton Woods conference in New Hampshire, that the foundation of the modern international trade system was developed. Proposal were put forward on the problems of an international payment system by U.S, Canadian and British government.
The agreement resulting from this conference led to the establishment of the International Monetary Fund (I.M.F) and the International Bank for Reconstruction and Development. The Gold Standard Exchange established linking the U.S dollar to the price of gold.
The global economy was now under the leadership of the United States. The closing decades of the 20th century ushered in the era of globalization.
Globalization: Trade, Tech and Travel
What is globalization? Fundamentally, it is the process of the closer integration of countries and people by the reduction of cost and inefficiencies in relation to transportation and communication. Another key trend of globalization is the removal of trade barriers allowing for the free movement of goods, services, capital and information. With rise of international trade blocs such as the European Union have allowed for the free movement of people in-between member nations.
To help understand globalization in a less abstract sense we can just look at the innovation in relation to our daily lives. For example, transportation and communication. We can book a flight to go on holidays in under a half an hour. We can google the cost of flights, accommodation, events taking place in our location of choice and get recommendations on where to go and what to do on review websites. Less than twenty years ago we would have had to use the services of a travel agent and take advantage of what is on offer due to the costs at the time.
The Irish Economy
The Irish economy has grown exponentially thanks to the trend of globalization. Ireland joined the European Communities in 1973. Before joining the European nations Ireland’s economy was heavily dependent on agricultural. The wealth of the nation came from mostly trading with the UK. Ireland was a country that suffered from mass unemployment, poverty and emigration.
The Irish economy has benefited greatly from membership of the European Union over last few decades. Irish business got access to a market of 510 million people, recieved 74.3 billion from the EU. Ireland has contributed 32 billion to the EU Budget. Now, Ireland is the second most competitive economy within the European Union. Ireland’s largest trading partner is the United States taking 27% of Irish exports. Ireland’s four other largest trading partners are Belgium, UK, Germany and Netherlands who purchase 40% of Irish exports combined.
Crisis, Growth and Change
The Irish economy has grown rapidly over the last two years. G.D.P growth for 2017 was measured at 7.2% for the full calendar year. Since the Financial Crisis and the Great Recession left it’s fallout the Irish economy has rebounded and found its feet again.
In 2008 the Irish economy contracted at a rate of -10%. Due to a construction boom driven by cheap and easy credit unwinding, leaving the country and its economy in the depth of crisis. In 2006 the unemployment rate was 4.6% and rose to 15% by 2012. The traditional trends of the Irish economy started to appear again along with the spike in unemployment came emigration.
The best of the Irish labour force left for Australia and Canada. New graduates started their career in medical profession in the distant but welcoming regions of The Middle East. Builders, electricians, plumbers left Ireland to take advantages of opportunities in Australia causing a trend of a housing shortage in Ireland of the last few years since the global economy started to expand again.
Manufacturing has become one of the largest contributors to Irish GDP. Gross domestic product (G.D.P), can be defined as the total monetary value of all the goods and service produced in an economy over a given period of time. For 2017, manufacturing achieved a record output at 261 million to the Irish economy.
To help gauge the health of the Irish manufacturing sector an economic indicator used for measuring manufacturing is called The Purchasing Managers’ Index (P.M.I) which measures the direction of the manufacturing and service sector. The index provides insight into whether or not market conditions are expanding, contracting or staying the same.
The P.M.I is published monthly with the purpose of providing managers, investors and analysts with information on the current and future business conditions.
The P.M.I is measured using the value of 0 to 100. A P.M.I report above 50 shows economic expansion, below 50 shows economic contraction and if a reading is at 50 there is no change. The further from 50 the greater the level of change.
The A.I.B Ireland Service P.M.I declined to 55.3 from 55.9 for March. Services are another serious contributor to the Irish economy. One of the most important trends caused by Globalization has been the influx of multinational companies setting up their European HQ in Ireland. Facebook, eBay, Twitter and many investment banks such as JP Morgan and Bank of America has a large presence in Ireland. The chaos and uncertainty unleashed on the global economy since Brexit has benefited Ireland as some companies are relocating their European operations from the UK to Dublin. This influx of capital and business operations has lead to employment growth.
Consumer confidence of March was 93% positive. There has been an improvement consumer perceptions over the last two years. They’re now optimistic about their financial future, economic outlook and employment expectations. The unemployment rate in Ireland is currently at 5.4%. Unemployment is now at lows not seen since February 2008. The current Irish government has a policy objective of reaching full employment by 2020. The lowest unemployment ever recorded for the Irish economy is 3.9% in 2000.
Conclusion and Final Thoughts
The Irish economy can be easily used to show the benefits of Globalization and it can also be used to show its faults, failures and shallow benefits. The process of globalization makes national governments less effective in their attempts to manage their economic performance.
The housing boom in Ireland was driven by cheap and easy access to international credit. Currency, interest rates and monetary policy have been centralized by the European Union. The Irish government’s economic polices are now outside of their control. The European Central Bank set the level of interest on the flow of credit. Also, Globalization places downward pressure on individual nations as they have to compete with one another. The most common form of this competition is the lowering of taxes to make nations attractive to foreign capital, businesses and potential workers.
This trend of driving down taxes to be competitive as a global economy has and will have devastating consequences on public services. The Irish economy’s expansion for 2017 with a G.D.P print of 7.2% is a theoretical success to be envied by any developed and emerging economy. In that same year the Irish people suffered from strikes from transportation services and medical professionals.