I find myself this week in Ulaanbaatar, Mongolia’s capital city. I’m here for a few days to work with local officials as they seek to better measure housing market trends. It’s fascinating work and in principle, I’m here to pass on my expertise but, given my interests, it’s next-to-impossible not to look around and try to learn, as well as to teach.

I suspect most Irish people know little about Mongolia. There are, of course, an increasing number of Mongolians living, working and learning in Ireland – official numbers show that while there were only 400 Mongolians issued with a PPS number in the decade to 2017, almost 1,800 have been issued with PPS numbers since the start of 2018 (and of course, both countries were in lockdown for much of 2020 and 2021).

But in its parallels and its obvious differences, Mongolia can help Ireland understand itself better. Some differences are obvious: Ireland is a small peripheral island plucked from the extreme periphery of the world economy and put into something closer to its centre by Europeans’ discovery of the Americas half a millennium ago. Mongolia is a large, very sparsely populated country. But it is a region that has been central to the world economy since its formation in the fourth millennium BCE after the mastery of the horse for human travel shrank the time needed to travel across Eurasia from months to weeks.

This revolution in human transport was the backbone of the Mongol’s conquering of the world economy under Chinggis Khan and his descendants in the 13^th century CE. So central were the Mongols to the world economy – as they took over both the Islamic and Chinese polities, the two hubs of the world economy back then – that in my ten-week undergrad course, “The Development of the World Economy”, one week is entitled ‘The Mongol World Economy’. (I regret to inform the curious reader that there is, alas, no week entitled ‘The Irish World Economy’.)

A second obvious difference – besides location – is related to geography, in particular natural endowments. Ireland, especially in the Celtic Tiger period, was a poster child for a country that had managed to find prosperity without having an abundance of any particular minerals or other natural resources. (One of the few places I’ve been to that is perhaps less well known than Ulaanbaatar is Saskatoon in Canada, to which I was invited back in 2008 to explain how Ireland had done it.)

Mongolia, on the other hand, has extensive natural resources, in particular mineral deposits. This includes gold, copper and tungsten – but as we approach the mid-2020s, it is expected that copper and coal will drive much of the country’s economic growth as it integrates, in particular, with the Chinese economy. Covid-19 severely disrupted trade with China but that is expected to ease this year.

The third striking difference is prosperity. The average income per head in Mongolia is just $13,000 a year (adjusting for the local cost of living) and while officially the figure in Ireland is over $100,000, even if we adjust down to something like $75,000 – to account for national accounts oddities – average living standards in Ireland are a multiple, between five and ten times, those in Mongolia.

Parallels in the periphery

But Mongolia’s growing links with the Chinese economy hint at its first parallel with Ireland. Notwithstanding its illustrious past, Mongolia is currently a small and relatively poor economy. It will have to leverage openness to drive prosperity. In describing Ireland’s path to prosperity, it is impossible to avoid using the same terms and processes.

Indeed, the parallel goes further. Both countries are small (in population terms) and in the shadow of much larger and more powerful neighbours. And the neighbour on which future prosperity is most likely to depend will be different from the neighbour on which both countries are used to depending.

In Ireland’s case, its economic development from the 17^th to the 20^th centuries was inextricably linked with Britain’s. Migrants came to Ireland from Britain in their thousands in the 17^th century – and the flow went the other way for much of the 18^th, 19^th and 20^th centuries. And capital flowed between the two also: Ireland’s 19th-century railway network, for example, was as comprehensive as it was only because Ireland had a system of public capital markets based on (and linked to) the British system.

In the 20^th century, Ireland became a free-rider on Britain’s relative decline after World War 2. Only after entry into the European Economic Community a half-century ago – and in particular the opening of the Single European Market in the early 1990s – did Ireland’s principal economic partner shift. Now, continental Europe, rather than Britain, is at the core of Ireland’s economic success.

In particular, Ireland has leveraged its emergence from the periphery centuries ago to act as a bridge for North American firms to access the world’s most valuable consumer market. On independence, the UK was the destination for almost 99 per cent of all exports – now its share is only just above 10 per cent.

Whereas Ireland had depended on Britain and now depends on Europe, Mongolia is shifting from Russia to China. Mongolia had been strongly linked with the Russian/Soviet economy: indeed, its rail network is still partly owned by the Russian rail company. But increasingly, China – an economy many times larger than Russia’s and also on Mongolia’s doorstep – is the driving force behind Mongolian economic development.

A shift in economic focus has generated economic success in both Ireland and Mongolia. While levels of prosperity are different, another parallel between the two countries can be found in economic growth over the past decade – and the role that cities play in that.

For Mongolia and for Ireland, the 2010s were a decade of growth. Living standards in Mongolia rose by over 60 per cent during the 2010s, according to the IMF’s World Economic Outlook. A large economy typically relies on that economic heft to drive its economy: incomes follow the population. But in a small country, the link goes the other way: when it finds a successful business model and incomes rise, the population follows. And so that prosperity is reflected in the flows of people. Mongolia’s population is growing – and growing at a faster rate than before. In 2020, its population was 22 per cent larger than a decade earlier.

Similarly, Ireland has enjoyed growth in incomes and growth in population over the last decade. In Ireland, even after stripping out the effect of multinationals, average incomes in 2021 were almost one-third higher than a decade previously. And population growth – while not at Mongolian levels – is very high by the standard of Ireland’s peers in the high-income world. Ireland’s population at the Census last year was 11 per cent higher than a decade previously.

Growth brings challanges

But growth brings challenges – challenges that many countries would gladly have, but challenges nonetheless. In particular, a growing population needs new infrastructure and services – and a richer population demands better infrastructures and services.

And so we come to a key difference between the two countries. Mongolia does not appear to have the same fear of growing that Ireland has. To give one statistic, Mongolia has added almost 12,400 hospital beds over the last two decades – with 2,000 of those added in 2022 alone. The statistics on hospital beds in Ireland over time are somewhat slippery – itself a bad sign – but even being generous, Ireland has added at best 2,000 in the last decade.

But it is in housing – what else?! – where this is most obvious. Irish politicians like to bemoan Dublin’s outsized role in the Irish economy. First, this is something of a falsehood (although I’ll return to this below). A smaller share of the population live in Dublin now than in the 1960s, despite Ireland in the 1960s being a country where agriculture was the most important sector.

Secondly, as the transition from agriculture through to services suggests, this completely misunderstands the role that cities play and the (lack of) freedom that policymakers have to choose where jobs go. Cities are centres of specialization and as such bigger cities are preferred, on average, to smaller cities because they allow, for example, a couple where both have degrees (and thus specialized skills) to find jobs that match those skills better.

Politicians cannot determine the spread of jobs by simple diktat. The choice is rarely between Dublin and, say, Carrick-on-Shannon or Wexford – more often the choice is between Dublin, Geneva and Singapore.

However, politicians can determine the spread of housing, if not by diktat then not far off. Since the early 1970s, constraining Dublin’s growth has been the central plank of regional policy in Ireland – at the same time that Ireland has pursued, in a remarkably successful way for the last three decades, a policy to create jobs everywhere in the country (including Dublin).

The result is that Ireland’s cities – not just Dublin, but Cork and Galway and increasingly Limerick and Waterford as well – are increasingly successful on most dimensions with the hugely important exception of housing.

Here the contrast with Ulaanbaatar could not be greater. Dublin and Ulaanbaatar are both dominant in their economies – as is common in small countries. (The smaller the country, the larger the share that lives in the biggest city, on average.) In a country of 3.4 million people, the capital makes up just under half that total. In the early 1990s, when Mongolia was home to just 2.2 million people, Ulaanbaatar made up just under 30 per cent of the overall population, the same share Dublin has been stuck at for decades.

Coming here, there are two things that strike a housing economist (and that may also strike a normal person too). First, this is a city that is not afraid of building up. They do this in part because it’s simply a more efficient use of land but also in part because the city is surrounded by Terelj National Park, a piece of preserved steppe that honours the country’s illustrious past and of course Chinggis Khan. Note that density and environmental protection are complements, not substitutes.

This willingness to build taller is shown in the graph accompanying this piece. It shows the typical number of floors by year of construction (of buildings still in existence). As population growth continued, the city went from building six-storey blocks for much of the 1990s and 2000s to building 12-storey blocks by the mid-2010s. This obvious form of alleviating pressure on scarce urban land continues, with buildings built this year typically 16 storeys in height – and two visible from my hotel room rising to 25 storeys.

Secondly, this is not a city that is afraid of building – full stop. Cranes and skeletons of buildings are everywhere. This makes sense given growth in those living and working in the booming city. In 2010, Ulaanbaatar had 361,000 people formally at work. By 2020, that had grown to almost 520,000, an increase of 157,000. This gives a sense of the growth in households (and thus homes needed), as unemployment was largely unchanged during the decade.

The country added in the same period 165,000 new homes and, based on spending share, approximately 140,000 of those homes were added in Ulaanbaatar. While there was some replacement taking place, overall, between the 2010 and 2020 Censuses, Ulaanbaatar was able to increase its stock of formal dwellings by just over 50 per cent – in excess of the proportionate increase in jobs.

This stands in stark contrast with Ireland and with Dublin. Dublin has added 216,000 new workers in the last decade – the country has added an astonishing 680,000 jobs – and while at least some of those are people coming out of unemployment, the city’s population is up 190,000 in the same period.

But for all those new jobs and people, housing simply isn’t being added at anything like the same rate. While Dublin added 216,000 new jobs in the 2010s, it built just 40,000 homes. Think about that: the number of jobs grew by almost 40 per cent but the number of homes grew by just 8 per cent.

The only way to make that maths work is some combination of cramming – as in, more people squeezing into the same dwellings – and sprawling, making people live further from work.

Closing our eyes and hoping that jobs will simply spread out from centres of agglomeration into formerly agricultural locations is not a strategy for success. There is of course no one-size-fits-all rule about where jobs must go. But, like Mongolia, we must recognise that our cities – and our biggest city in particular – are at the heart of our future success (or lack thereof).

Astonishingly, we have a National Planning Framework that, between now and 2040, seeks not to facilitate Dublin’s growth but to shrink its share of the population even further over the next two decades. That is – to put it mildly – not a great start.