Examine the rise of the ‘Celtic Tiger’ and critically assess the benefits it is said to have brought to Irish society Paper
Celtic Tiger is a name for the period of rapid economic growth in the Ireland that began in the 1990s and slowed in 2001, only to pick up pace again in 2003 and then have slowed down once again by 2006. During this time, Ireland experienced a boom in which it was transformed from one of Europe’s poorer countries into one of its wealthiest. The causes of Ireland’s growth are the subject of some debate, but credit has been primarily given to free market capitalism: low corporate taxation, decades of investment in domestic higher education, a low-cost labour market, and a policy of restraint in government spending, in addition to transfer payments from the European Union. This essay will examine the rapid rise of the ‘Celtic Tiger’ and outline and assess the benefits this growth has said to have brought to Irish society.
For a generation after achieving independence from the United Kingdom in 1921, Ireland sought to be economically self-sufficient. It relied on small-scale agriculture, exporting primary produce to the U.K. market and manufacturing mainly for the home market of less than 3 million people. Trade barriers such as high tariffs and a policy of import substitution sought to make this reliance on economic nationalism successful. The country was gradually electrified and new state-owned factories were encouraged, such as the Shannon Hydroelectric scheme. Ireland’s Free State sought economic protectionism, i.e. a free market internally within protective walls and imposed tariffs on British consumer goods.
However the country was not wealthy enough to sustain the limited trading and in the 1950’s, under pressure from the USA, it began to ‘open up’ its economy to liberal economic principles, I.e. an internationally ‘free market’. This brought about the formation of the Irish Development Authority in 1950 which was set up to encourage and subsidise foreign investment, following this in 1957 Ireland joined the World Bank and International Monetary Fund. Although none of these new introductions saw immediate effects and in the 1960s and 1970s the domestic economy was still weak and actually showed signs of decline. Due to the years of tariffs and protectionism and the inadequate amount of competitive products to sell on the European market, the 1980s saw one quarter of a million young people emigrate from Ireland because of the lack of work and career opportunities. On the other hand, Ireland was beginning to see the appearance of large, increasingly American, transnationals.
With this increased influx of foreign investment Irelands poor economy began to steadily increase until the 1990s when it experienced a dramatic boom and this became known as the ‘Celtic Tiger’. Ireland had created an environment for growth and benefited from a number of external factors. Globalization and rapid technological advances spurred the industries in which Ireland was strong and could offer further competitive advantages. The U.S. economy surged, and U.S. businesses in high-growth sectors- including Microsoft, Dell, Hewlett-Packard, and IBM-saw Ireland as an attractive location for serving the increasingly integrated European market. Some major factors influencing these large corporations to locate to Ireland where the English speaking workforce, this enabled easier communications between the managers and the workforce. “Foreign business, in turn, saw the advantages of an English-speaking, well-educated populace with ready access to the large European market and the broad institutional stability provided by the European umbrella” (McCarthy,2001). Also good relations between employees, employers and the state meant that a ten year agreement was made on wages and wage increases.
This was attractive to US investment as it meant they did not have to worry about strikes or demands for more wages because it had already been pre-agreed. In addition to this in 1996, Ireland made college education basically free, creating an even more educated work force. The Irish government also devised a favourable corporation tax regime at a standard rate of 12.5 per cent and the provision of subsidies and investment capital. On top of this the new investors had a steady flow of labour due to an influx of foreign workers; and a sustained period of low interest rates following Ireland joining the Euro. The Celtic Tiger brought about many benefits to Ireland in the years of the boom. ‘The statistics show that by the end of the millennium Ireland boasted one of the world’s highest levels of GDP per capita, approximately 20 per cent above the European average. Compared to 30 years before when it was approximately 35 per cent poorer than the European average. Also the GNP growth for the decade was 7.9 per cent and in 2000 at its peak, it was 8.6 per cent. In addition to the GNP growth in the decade, there was an average increase in take-home pay of 35 per cent, two thirds of this was from pay rises and the rest from tax cuts. Between 1989 and 1997, net new jobs increased by 23 per cent and unemployment which was at 10.3 per cent in 1997 fell to just 4 per cent in 2000’ (www.cia.gov). “Ireland now ranks as the world’s third largest world exporter on a per capita basis behind Singapore and Belgium and Luxembourg. For example, one-third of all personal computers sold in Europe are now made in Ireland.” (McCarthy, 2001)
The Celtic tiger did produce many benefits in the years of the boom, however these benefits are much out-weighted by the consequences. The dramatic and rapid growth “has not been shared equally, but has been accompanied by increasing social polarization between those in skilled employment and those who have unskilled jobs or no jobs at all” (Breathnach, 1998). As well as this the rich people in Ireland have become richer and the poor have become poorer. For example, ‘between 1987 and 1995 the disposable income of the richest 40 per cent of households grew twice as quickly as that of the poorest 40 per cent of households’ (O’Hearn, 1998). “In a recent speech, David Begg, general secretary of the Irish Trades Union Congress pointed out that Ireland remained the most unequal country in Europe with regard to income” (McCarthy,2001). There were also high levels of corruption during this time which resulted in a mass of investigative tribunals in the 1990s, such as the Mahon tribunal.
Ultimately, the biggest consequence of the Celtic Tiger on Ireland is its huge dependence on foreign companies who invested there during the boom. McLoughlin (1998) said on this “throughout the EU countries foreign companies account for on average 19 per cent of manufacturing output. In Ireland they account for more than 50 per cent.” Foreign companies are now beginning to move from Ireland to different countries who offer for example, lower wages. A perfect example of this is the Dell Computer Company located in Limerick. Dell which was once Ireland’s second largest employer in the Celtic Tiger era, announced in January 2009 that it would be transferring 1900 jobs to Poland because of the cheaper wages. The initiatives that once attracted these companies to Ireland are being copied by different countries and in some cases they are even being improved, which is drawing the companies out of Ireland. The next stage for Ireland to gain some of its own independence is to explore policies that promote the spill over from foreign companies to Irish native business. Or better yet for Irish entrepreneurs to come to the fore-front of the market and force other companies to compete these foreign companies to compete with them. The key for Ireland to achieve its sole independence with regards to its economy is to make the economy a more modern one rather than one that relies on the success of foreign business.
In conclusion, Ireland’s future in relation to its economy is uncertain. This is due to the dramatic downturn in the property market, the loss of competitiveness in attracting and keeping foreign investment and the global recession that is currently happening. Ireland has and will continue to see the closure of firms, increased unemployment, pressure on wages, a further downturn in consumer spending and the progressing collapse of the construction industry. Also a further trend is beginning to emerge that had all but disappeared in the years of the Celtic tiger and that is emigration. Many of Ireland’s young people are having to immigrate to places like Australia, New Zealand and America in the search for work. This would indicate that Ireland is diminishing back to the way that it was before the Celtic Tiger era and the immediate benefits that Ireland saw in the years of the boom had no long term effects.