Irish State – Number 1 Globalised Economy

Joe Craig

4th February 2002

The Irish State is the world’s most globalised economy by a long way according to a study of 62 countries carried out by A T Kearney Management Consultants and published by the US Foreign Policy magazine.

The study used data on international trade and investment, political indicators, information technology and communications to create a composite index of globalisation.  The resulting index is weighted towards foreign direct investment and portfolio investment ‘due to their particular importance in the ebb and flow of globalisation.’  The result is that the Irish State comes top, ahead of counties such as Singapore which was number one in the last such survey of 50 countries at the end of 1998.

Foreign Policy attributes the rise, from 6th in this last survey to number one, to ‘Ireland’s strong pro-business and English-speaking population …helping to transform the island into a highly attractive location for foreign investors…In a bid to attract more international capital and technology investments, the country has cut corporate taxes (already among Europe’s lowest) and adopted a National Development Plan designed to improve infrastructure and government efficiency.  Privatisation of state assets in telecommunications and banking have created positive signals for investment, while Ireland’s decision to join the euro currency zone has dramatically reduced barriers against financial flows to and from other euro zone countries.’

The figures behind the index bear out this judgement.  Foreign Direct Investment (FDI) flowing into the state has grown from $1,447m (US$ current) in 1995 to $19,010m in 2000, a growth of 1,314%, the fourth highest growth rate in the survey.  FDI outflows were understandably smaller but still grew by 220% during the same period to $1,806m.  FDI as a percentage of Gross Domestic Product (GDP - total production in the state during the year) grew by 20.8 percentage points from 3.4% in 1995 to 24.2% in 2000, the third highest share after the Netherlands and Finland.

Portfolio investment inflows, investment in bonds and shares – pieces of paper – as opposed to factories and equipment etc., has increased from $771,000 in 1995 to $80,251m in 2000, an increase of a staggering 10,309%! Outflows increased from $1,056m to $78,817m or by 7,367%.  ‘These inflows and outflows totalled a scant 1.6 percent of the national economy in 1996, on par with countries like Chile, the Czech republic, and Israel.  By 2000, however, portfolio flows had grown to the world’s largest when measured as a share of gross domestic product, owing largely to the growth of Dublin’s International Financial Services Center, a leading location for international banking, investment funds, corporate treasury, and insurance activities.’  They thus accounted for 167% of GDP, more than that other famous centre of international banking Switzerland on 41% and the Netherlands on 37%.  The UK came in at sixth place at 28%.

The effects of FDI on the pattern of trade can be seen in the growth of exports in goods from $55,293m in 1995 to $81,731m in 2000 and growth in imports of goods from $34,866m to $47,822m during the same years.  The growth in trade in what is called services was more dramatic; exports grew from $5,017m to $15,018 and imports from $11,303m to $28,365m, the highest rate of growth in exports and imports of any country in the survey.  The trade share of GDP grew from 154% to 187%, the third highest behind Singapore and Malaysia.

This pattern of investment and trade led the Irish state to have the highest share of international income payments and receipts of any country in the survey, accounting for 78% of GDP in 2000 compared to second placed Singapore on 40% and third placed Panama on 38%.  The UK was fourth placed on 31%.

While the state did not fare so highly in other measures of globalisation, 19th in terms of internet users as a percentage of population and 16th in internet hosts per capita, it was second after Singapore for international telephone traffic per capita.  Testament no doubt not only to the existence of so much US investment and the International Financial Services Centre but also to a history of emigration as well as a strongly developed tourist industry.

So what are we to make of such statistics?  Often they are trotted simply to create a reaction of amazement at the sheer scale of the forces that rule ordinary people’s lives.  The point is to drive home the political message that workers are powerless against such vast forces.  Obviously that isn’t the point of bringing them to the attention of visitors to our website.  So what is our point in highlighting them?

Firstly the survey tells us something about the world beyond one small island off the edge of Europe.  So when it comes to communications technology Foreign Affairs tells us that ‘The United States excels in levels of  IT infrastructure development, with one internet host for every three residents…the United States also maintains some 77,000 of the world’s 118,000 secure servers (computers capable of supporting encryption and other advanced functions necessary for e-commerce transactions).  And the vast majority of worldwide Internet content is physically housed in the United States, which helps to explain why 95 percent of the bandwidth that ties together world regions flows to and from the country.’

The survey also records increases in merchandise exports and services of more than 12% and 6% in 2000, both more than triple the previous year’s growth.  Similarly FDI increased ‘spectacularly’ during the year while the share going to ‘emerging markets’ (poorer countries) declined for the fourth year in a row.

Secondly it must be understood that the forces of globalisation are vast.  But what does this signify?  For socialists first and foremost it confirms the increasing interconnectedness of the world and the vital need for that internationalism that has always been inscribed on our banner.  The Marxist analysis that capitalism increasingly socialises production while sabotaging this potential through private appropriation is more and more confirmed at a global level.  This is another way of saying that the world is increasingly ripe for a new way of organising society.

Some socialists fail to see this underlying truth because they can only see the powerful forces that are ranged against labour movements organised on a purely national basis, and at present really only on narrow sectional grounds – when was the last national action by all workers within Ireland for example?  They thus attempt to minimise the import of globalisation, i.e. imperialism.  But this again only demonstrates the absolute necessity of a socialist strategy of internationalism, a strategy totally foreign to the present bureaucratic leaders of Ireland’s labour movement as of every other.  What other convincing strategy is there against multinational capital but a multinational resistance?

The figures presented in this survey damn those on the left who can see no way forward but to tell workers that their rights and living standards can be defended without seeking a new practice of resistance based on internationalism.  Recognising the need for such a way forward is the first step in developing it.