The Irish model: or why low budget, low taxes is bad for the economy.

I want to call your attention here to an article of Prof. Vicenç Navarro (in Spanish) where he discusses the Irish model and how it has fascinated specially right-wing politicians in Spain, who would like to follow this failed ultra-liberal ideal (liberal always in the European/International sense of the word: market fanatic). 

Some translated excerpts (my translation):

Characteristics of the (failed) Irish model:

A dramatic reduction of taxes. The fiscal burden of Ireland (measured by the percentage of taxes on GDP) is one of the lowest of the EU-15 [prior to Eastern expansion]. This low tax burden is specially marked in the business tax (12.5%), the lowest in the EU-15, whose average is 24%.

A consequence of the limited tax burden (a mere 31%of GDP, the lowest of the EU-15, averaging 42%) is the low development of its public sector, including its welfare state (i.e. public transferences such as pensions, public services, such as health, education, social services, kindergartens and home services to the elderly, among others). Its public social expending is the lowest of the EU-15 (as percentage of GDP is just 18%, an statistic much lower than the EU-15 average: 27%). The percentage of adult population working in the public sector is also the lowest of the EU-15 (12%) after Spain (9%) and Portugal (7%). The EU-15 average [for this statistic] is 15%.

Another characteristic of the Irish model is the extreme deregulation of the labor market, with a strong salary moderation, what has determined a decline of the job rents as percentage of the national rent. This has created a huge indebtedness of Irish families, what has facilitated the expansion of the banking sector that, as in Spain, has been dedicated to speculative activities in the real state and construction sectors, the cause of the economic "boom".

Later he concludes:

This is the neoliberal recipe for all the countries (included Spain) that has reached its highest expression in Ireland. These policies are enormously counter-producing because, besides of damaging the well being and quality of life of the Irish popular classes, they are making impossible the economic recovery, as the recession existent in Europe makes difficult that the various countries can stimulate their economies by increasing exports.

I would add that the high value of the euro, which could and surely should be much lower, maybe at 1:1 parity with the US dollar, is particularly harmful to any export-oriented attempt of recovery, specially within a Capitalist framework.