Wednesday, September 13, 2006

The Secret of Our Success: Johnnies

Malcolm Gladwell has an interesting take on the reasons for the success of Ireland's "Celtic Tiger" economy in an article in the August 28th issue of The New Yorker:

"In the past two decades . . . Ireland has gone from being one of the most economically backward countries in Western Europe to being one of the strongest: its growth rate has been roughly double that of the rest of Europe. There is no shortage of conventional explanations. Ireland joined the European Union. It opened up its markets. It invested well in education and economic infrastructure. It’s a politically stable country with a sophisticated, mobile workforce.

But, as the Harvard economists David Bloom and David Canning suggest in their study of the “Celtic Tiger,” of greater importance may have been a singular demographic fact. In 1979, restrictions on contraception that had been in place since Ireland’s founding were lifted, and the birth rate began to fall. In 1970, the average Irishwoman had 3.9 children. By the mid-nineteen-nineties, that number was less than two. As a result, when the Irish children born in the nineteen-sixties hit the workforce, there weren’t a lot of children in the generation just behind them. Ireland was suddenly free of the enormous social cost of supporting and educating and caring for a large dependent population. It was like a family of four in which, all of a sudden, the elder child is old enough to take care of her little brother and the mother can rejoin the workforce. Overnight, that family doubles its number of breadwinners and becomes much better off.

This relation between the number of people who aren’t of working age and the number of people who are is captured in the dependency ratio. In Ireland during the sixties, when contraception was illegal, there were ten people who were too old or too young to work for every fourteen people in a position to earn a paycheck. That meant that the country was spending a large percentage of its resources on caring for the young and the old. Last year, Ireland’s dependency ratio hit an all-time low: for every ten dependents, it had twenty-two people of working age. That change coincides precisely with the country’s extraordinary economic surge."


Unknown said...

interestingly though, most of the Western world that has developed before Ireland is worried about falling birth rate, because traditionally the young are needed to wipe the old's bottom, and work to pay their pensions...

John said...

Hi Stef--

Indeed. If Gladwell's theory is correct, it's only a matter of time before the dependency ratio reverses again, unless, of course, the PDs take power and implement their involuntary euthanasia for the poor programme.