Every once in a while we have to be told to "slow down, you are going too fast; stop and think." Sometimes it is a speeding accident, or an exciting idea gone wrong, or a personal excess that should be controlled.
In Ireland's case it was the soaring economy, leaping home prices, and, in the face of free-flowing money, the rushing greed of more than a few Irish to get their shares.
As in the United States, bankers and real estate moguls thought they were invincible. Charge high prices, borrow whatever you want; the money tree was open. Salaries skyrocketed, social welfare payments moved higher, everyone benefited. From street vendors to hotel owners, from contractors to cab drivers, from store owners to entertainers, all boats were rising as prices doubled and tripled and people from all over the European Common Market rushed to Ireland to share in the glory.
Then, at the height of the frenzy, the natural order of things inevitably returned to fundamental economics and the spiral ended in a crash.
Like the uncontrolled hedge funds in New York City that had to go bankrupt because they took outrageous risks in pursuit of a higher personal bonus and the failed banks and mortgage companies in
California that approved $500,000 mortgages on salaries of $40,000 a year and lost billions on foreclosures, some of Ireland's banking leaders have paid a high price for their indiscretions as the government had to step in and guarantee bank assets to avoid panic withdrawals.
Government political leaders had to act. And they did. They have created nearly a new economy. New banking controls, lower wages for all public employees (the prime minister himself took a 20 percent reduction in pay) and profound cutbacks in government spending have arrested the slide and set Ireland on a path to economic health and stability quicker than any felt possible.
The latest quarterly national reports from the Central Statistics Office (CSO) that were published in mid-December "indicate that on a seasonally adjusted basis there was a .03 percent increase in Gross Domestic Product (GDP) in the quarter ending in September," thereby technically, at least, ending the recession if you accept the common definition that a recession is two quarters in a row of falling GDP.
Ireland's unemployment rate has stopped growing and has leveled off at 12.5 percent. And the passage by the Irish Parliament last month of the operational budget for 2010, which includes what the Irish newspapers describe as "brutal" reductions in across the board spending, drew tippings of the hat for a courageous government from European Common Market leaders. This despite the great pain the country is enduring with labor strikes and high unemployment.
And now, with a strong government enforcing the newly learned lessons of the recession, Ireland has become an even more profitable country to interest and attract new American business ventures.
Prices are falling in Ireland. According to the CSO, on the average, November 2009 consumer prices and service providers' prices are down 5.7 percent from November 2008. Engineering costs are down 9.8 percent; advertising costs are down 7.7 percent, clothing is down 13.9 percent, and food prices are down 7.6 percent.
For foreign investors, especially Americans, Ireland remains an exciting country in which to do business. There is no more profitable or operationally friendly country for a new plant or research and development facility than the Republic of Ireland. A highly educated English speaking workforce, corporate tax rates ranking with the lowest in the world, easy access to the Common Market and the United States, and a supportive educational system are key advantages to investors.
Ireland's full return to prosperity will take some time, and there will be bumps in the road, but the journey has more than just begun. When economic success arrives once again, the "recession lessons" will help ensure safer growth in the years ahead.