By Luciana Aguilar Laurencich
Edited by Andrzej Drzewieniecki & Andrada Bozianu
Brexit, geographical location and the demands of the twenty-first-century economic system. This, and a lot more, all added up to Ireland’s transformation from rags to riches. Beyond the Celtic Tiger’s golden era, Ireland’s present-day economy is a Western example of success. But what did this mean for the Irish and what will it mean for future generations?
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Rewinding to British Control over Ireland
Ireland’s poverty history seemed like a never-ending chain reaction until the late twentieth century. Its impoverishment dates back to Anglo-Scottish projects, following the pattern of most colonial governance throughout human history.
Ever since the infamous Potato Famine up to the 1980s Irish economic crisis, crossing the Irish Sea was the safest option to raise one’s living standards. Approximately ten million people emigrated from the island in the 1800s, making it the biggest exodus in Europe.
This massive shift in the country’s demographics took until the late twentieth century to finally experience a significant population increase.
From ‘The Doom and Gloom’ to ‘The Boom’
What is known as the Celtic Tiger is the period of Ireland’s exponential economic growth between 1994 and 2008. This period transformed the country’s status from being one of the poorest economies in Western Europe to the second-highest GDP at purchasing power parity per capita in the world by 2022.
Taking a closer look at the decisions that preceded the emergence of the “Celtic Tiger”, unveils the build-up of the political and economic momentum which fueled it.
For instance, investing in human capital has been an intrinsic strategy in Ireland’s case. Ever since the 1960s, prioritising the role of education for the Irish population, enabled a future expansionary fiscal contraction for the country’s benefit.
In 1973, acceding to the EEC unlocked European Structural and Cohesion funds to be primarily invested in human resources, with education holding a large share.
Prompt introduction of free secondary education and grants for third-level education later on translated into the formation of an Irish high-skilled workforce.
Later on, the birth of the International Financial Services Center in Dublin in 1987 opened space for the creation of high-value jobs within the growing demands in the legal, accounting and financial management sectors.
By 1992, the EU had become an appealing hub for Foreign Direct Investment, and Ireland was remarkably attractive. The EU's strong trade ties with the US started warming up the conditions for America’s inclination to invest in Ireland. Additionally, its well-educated English-speaking workforce made the country only more appealing for trans-Atlantic investment.
Feeding the Tiger
The Irish atypical example, diverging from Western countries' growth rates, was once analogous to the East Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan) phenomenon.
Despite similar exponential growth rates, a comparison between Ireland’s development strategies and Asia’s is relevant to depict how their processes for expansion are poles apart.
For instance, rather than directing Foreign Direct Investment towards promoting rapid industrialisation and manufacturing, Ireland’s FDI strategies focused on services, particularly in the technology and finance sectors.
Strategies such as the adoption of fiscal rectitude and new consensus economic policies helped achieve macroeconomic stability in the late 1990s. What stood out was the emphasis on reducing public spending to overcome the national debt, rather than increasing taxes.
Reducing public spending opened space for tax reduction at the corporate level. Naturally, this enabled the private sector’s economic activity to grow.
Ireland's internal governance was not only adapting but thriving in the fast-paced global economics, which was rapidly transforming into a digital and globalized system. The Celtic Tiger was the consequence of this successful assimilation with the international macroeconomic context.
A paper published by Trinity College, Dublin, exposes a more inclusive overview of how a blend of factors aligned to create the Irish growth miracle.
What Sets Ireland Apart from the Others?
The Brexit Referendum, the digital revolution, geographical positioning, globalisation, low-cost air travel - the odds were in the country’s favour, and they continue to be so.
Ireland possesses inherent privileges that fit into the twenty-first century’s demands, and they managed to make the best out of it.
Firstly, when the UK voted to detach from the EU, Ireland prepared and adapted to the best of its advantages. Dublin accounted for the largest share of Brexit-related financial company relocations. Cultural similarities and language increased the chances of a smooth transition.
Secondly, fast-growing, powerful transnational companies started immigrating to the Irish corporate tax haven (12.5 per cent). Humans, too, followed the same trend.
Ironically, a country whose population had once depleted due to emigration is now experiencing massive immigration beyond Irish expats. Microsoft, Apple, Google, and Facebook, are among many of the most popular platforms that are now based in the technology hub of the EU, Dublin.
Thirdly, to finally delineate Ireland’s spatiotemporal shamrocks, one needs to take a look at the world map. This island is the last outpost of the European Union towards the West. The Irish Sea meets the Atlantic Ocean, dismantling a strategic positioning that ensures lucrative routes and services for the increasing flow of goods.
One of them, air transport, contributes to 6.8 per cent of Ireland’s GDP. The flow of goods, investments and people is hugely benefited not only because of the ease of travel through this medium but also because of the revolutionary introduction of low-cost air travel. Ryanair, the kick-off of the deregulation of the aviation industry, is, indeed, Irish.
These factors are making Irish revenues gain weight faster than ever before. Yet, is Ireland ready to tackle the consequences of an economy fueled by globalisation?
Translating Numbers to Societal Change
Unsurprisingly, decades of economic growth made Ireland’s population happier, healthier, and living longer. The prospects of a more egalitarian (and expensive) society may not be unforeseen.
Despite numerous positive economic indicators and growth levels, Irish people experience negative offshoots, especially within their households.
Demographics have grown faster than accommodation units, upfronting the biggest housing crisis experienced in the country. In defiance of the 4.8 per cent unemployment rate, spinning homelessness rates are exceeding Irish Famine’s figures.
Additionally, attention has grown towards macroeconomic figures, which are supposed to portray the country’s wealth. Indicators such as Ireland’s GDP and GNI are found to be heavily inflated by the 1,500 TNCs and the well-known aviation leasing hubs hosted in Ireland.
Thus, measuring the size of the Irish economy is more and more difficult, as the global economy becomes a melting pot of global trade, multinational investments and interconnected financial markets.
The country fails to address the repatriation of TNCs profits abroad, nor can it tackle the soaring cost of living, sitting at about 25 times higher than EU standards, bringing back Irish emigration patterns.
These big socio-economic changes that once seemed like a step forward for a more egalitarian society, are now unveiling gloomy projections for the Irish. Economic insecurity and levels of deprivation are proving to discourage family planning and hesitancy to afford a life in Ireland.
Given emerging societal problems in Ireland, the legacy of the Celtic Tiger’s success presently amounts to a statistical illusion. The Irish economy may well have flourished under globalisation, but the conventional figures used to illustrate a country's economic performance do not capture the social cost of globalisation pressures.
All in all, positive macroeconomic statistics make good press for foreign capital but do not necessarily translate to social prosperity. Other economies reliant on globalisation should take notes.
Sources: Maynooth University, OECD, Politico, Statista, Technological University Dublin, The Irish Times, Trinity College, University College Cork
Written by Luciana Aguilar Laurencich
December 2023
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