France's disdain for the Celtic Tiger

Some countries are trying to emulate Ireland's recent economic success, but the Irish miracle isn't looked upon favourably in all quarters. I caught a debate about tax and employment on a French current affairs show the other day (C'est dans l'air). The show featured a number of economists from French universities, including one from the Sorbonne. Another guest was the editor of a French business magazine. When they turned to discuss Ireland's progress towards prosperity, the gallic pundits showed mostly contempt for the Emerald Isle.

The panellists were discussing whether high tax and social insurance costs on businesses and individuals in France are preventing the creation of jobs.  As a comparison they mentioned Ireland, a country which reduced taxes and benefited from a boom in employment.

All but one of the commentators attributed Ireland's economic boom to low taxes. There was no recognition that, while low tax is now key to sustaining economic growth, various other factors contributed significantly to the birth of the tiger. For example, no mention of the impact of increased investment in education, low labour costs, or the way structural funds were used to upgrade infrastructure. No consideration for the dynamics of convergence whereby countries behind the pack can race towards catch up when certain parameters, such as investment in technology, are adjusted in the right way. One economist contemptuously dismissed Ireland's policy as fiscal dumping. Another suggested that the only reason Ireland could afford to lower its taxes was that it milked EU transfers which acted like a Marshal fund. In short, the majority view was that Ireland didn't deserve much respect.

Notably, however, one of the commentators demurred. He provided the corrective that Ireland's economy remained in the doldrums long after it joined the EU, and almost crashed in the 1980s. It only turned around, he went on, when public spending was brought under control. He didn't stop there. He then  suggested that France needed a dose of the same medicine in relation to its own public spending which is running amok and is horribly inefficient. He argued that French social costs and taxes on labour are a serious damper on jobs growth. Predictably, his colleagues raised their noses but failed to make their own prescriptions very clear.

The debate illustrated that the French elite is badly out of touch with the reality of globalisation and the brutal forces behind competition for investment.  The lone voice crying out for change was drowned out by the usual platitudes about "le modele français". The program also showed how Ireland isn't universally admired for its current approach. If French policymakers get their way on fiscal harmonisation, they'll be looking for the hide of the tiger.

Ciarán Mac Aonghusa, Churchtown, Dublin 14