The state, initially named the Irish Free State, was established in 1922 as a dominion within the British Commonwealth, and gained increasing sovereignty through the Statute of Westminster and the abdication crisis of 1936. A new constitution was introduced in 1937 that declared it an entirely sovereign state and named it simply as "Ireland". The last formal link with the United Kingdom was severed in 1949 when Ireland declared itself a republic, and formally ceased to be a dominion. Consequently it left the then British Commonwealth, having already ceased to attend Commonwealth meetings since 1937.
During British rule and initial independence, Ireland was one of the poorest countries in Western Europe and had high emigration, but in contrast to many other states in the period, stayed financially solvent and remained a democracy. The protectionist economy was opened in the late 1950s and Ireland joined the European Economic Community (European Union) in 1973. An economic crisis led Ireland to start large-scale economic reforms in the late 1980s. Ireland reduced taxation and regulation dramatically compared to other EU countries. The Irish economy grew rapidly during the course of the 1990s, which saw the beginning of unprecedented economic growth in the in a phenomenon known as the "Celtic Tiger".The financial crisis of 2007–2010 impacted the Irish economy heavily. Ireland entered recession in 2008. In 2009, the unemployment rate in Ireland reached 12.5%.
The state is ranked as the 31st economic power in the world, and in 2006 Ireland had the sixth highest nominal gross domestic product per capita (the ninth highest per capita considering purchasing power parity). Ireland has the fifth highest Human Development Index rank in the world, and has one of the highest qualities of life in the world, ranking first in the Economist Intelligence Unit’s quality-of-life index. Ireland was ranked sixth on the Global Peace Index, has high rankings for its education system, political freedom and civil rights, press freedom (ranked first in 2009) and economic freedom (ranked fourth in 2009). It is also ranked fifth from bottom on the Failed States Index, being one of the most sustainable states in the world. Ireland is a member of the EU, OECD, and United Nations.