Which Path? Domestic adaptation to economic internationalization in Ireland

Paper presented at the APSA Annual Meeting in Chicago, 2-5 September 2004The growing integration of international markets raises the question of how, and to what extent, domestic political processes within states continue to matter. The thesis that markets force a 'race to the bottom' and the destruction of the welfare state has been discredited; there is continuing scope for diversity. Two patterns have commonly been identified. Continental European countries cluster together around politically coordinated adjustment strategies, while the liberal, Anglo-American countries adopt ever more market-driven responses. The new EU member states in central Europe and the Balkans have been expected to join the latter category. However, a third overlooked possibility exists – that market-oriented adjustment might continue to be strongly politically mediated, in line with expectations about the incentives facing small open economies, even in liberal economies. The excellent economic performance of the Irish, Dutch and Danish economies during the 1990s belies the suggestion that neo-liberal policies produce the best outcomes. Yet Ireland is very different from these two, as it is a 'liberal market economy', while they are 'coordinated' or 'social market economies'. This paper examines the role of institutions and actors in adjustment to economic internationalization in Ireland. The argument is that path-dependent development does not preclude institutional innovation; but that there are limits to the politics of redistribution and collective consumption within a liberal economy.Irish Research Council for the Humanities and Social Science