The Celtic Tiger

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BEFORE THE CELTIC TIGER

"I have to make a mental effort to remember the Dublin of the 1950s, which is in many ways a Third World city," recalls Garvin. "Horses, no motorcars, children in bare feet, dirt everywhere, people living in slums, no television, no bathrooms - a really impoverished European country that really didn't seem to be going anywhere."

Prior to the Celtic Tiger, Ireland's economy and standard of living was horrible.

• High Unemployment
• Slow economical growth
• High Inflation
• Heavy Taxes
• Towering public Debts.
• Heavy Emigration of young people

Many factors contributed to Ireland's problems.

• Wrong fiscal policies
• Protectionism

  is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over or competition.

INTRODUCTION OF THE CELTIC TIGER

Many people are uncertain of the direct roots of the Celtic Tiger. The general consenus, however, is these factors contributed to the economic boom.

• Taxation Changes
• Foreign Investment
• Changes in the Education

One of the factors was the changes in taxes, which resulted in the election of Fianna Fail. In 1987, the Republican party, Fianna Fail won the Irish General Elections without having the overall majority vote. The party and their leader, Charles Haughey, introduced a new plan to eliminate some of Ireland's problems.

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• The government cut spending on many of their programs and agencies
• They encouraged business investment by creating International Financial Services Centre
• The introduction Irish Social Partnership

This partnership was introduced in 1987 which included voluntarily agreements between the Government, main employer groups and the trade unions.Agreements included the employers moderately increase the wage rates while the government make reductions in direct income taxes.

• Decreased the corportation tax, which is one of the lowest corportation tax in the EU.

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Another factor of the Celtic Tiger was Ireland's involvement in the European Union, which promoted foreign investment.

• Ireland joined the European Union in 1973.

The economic association of over a dozen European countries which seek to create a unified, barrier-free market for products and services throughout the continent, as well as a common currency with a unified authority over that currency

• Business now had free access to a much larger market and exports could be diversified away from dependence on the U.K.
• Companies like Dell, Microsoft, Intel and Gateway placed their factories in Ireland due to their EU membership, low tax rates, government grants, and well educated, English-speaking work force.
• U.S. economic boom translated into the Irish economy.

Another element of the Celtic Tiger involved the advancement of education system, which derived from Ireland's demongraphics.

• 40 percent of Ireland's population is below the age of 25 compared to the 30 percent in the other European Union countries.
  • The Baby Boom in Ireland started 20 years later and lasted longer than most other countries.
  • Many years of emigration prior to the 1980s.
• In 1968, the cost of second level of education, high school, became free, which allowed more people to earn a high school degree.
  • The second level of education tripled
• Also in 1968, the government started to give grants to students for third level of education
  • This increase the attendance of third level education by three times

Positive Economic Effects

1. Unemployment rate dropped significantly
   • Fell from 18% in lat 1980's to 4.2% in 2005
   • Average industrial wage grew at one of the highest rates in Europe
2. Public Debt
   • Dramatically cut to become one of the lowest in Europe (34% GDP in 2001)
   • Public spending doubled without any significant increase in taxation levels
3. Modern Ireland around 2001
   • New transportation services finally implemented

     

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   • New monuments
   • Enhanced street appearance
4. Dual Labor Market
   • Increased the number of highly skilled workers
   • Vast amount of well paid jobs

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• Primary Sector constitutes large fertile pastures: cattle, beef, and diary products; 8% of Irish Employment
• Secondary Sector is dominated by textile companies like Fruit of the Loom, Dell, Intel, Pfizer and IBM. 29% of Irish Employment
• Tertiary Sector is most important to Irish economic growth, it is made up of industries such as accountancy, legal services, call centres, finance, stock brocking, catering, and tourism. 64% of Irish Employment

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Negative Economic Effects

1. Inflation of prices
   • groceries and chain store prices increased
   • housing property increased
2. Neglect of certain government responsibilities
   • health care service did not receive sufficient funds
   • at first transportation sector was not reformed
     • transportation system was insufficient
     • road ways could not support all the commuters
3. Loss of culture among those with high paying jobs
   • Irish people had more money to spend and grew out of old Irish ways
   • There were more expensive cars and designer labels around Ireland
4. Capitalist Economy Expansion
   • Some desperate workers had to take the low paying jobs that attracted foreign companies to Ireland
     • Unskilled jobs
     • Low wages
     • No job security
   • Poverty levels increased
     • The gap between the rich and the poor grew significantly
     • Inflation of prices

Positive and Negative Aspects of Boom on Society

Robert Dahl- "Because we wish to advance political equality, the democratic process, and primary political rights, we insist that our economic order must help to bring about these values, or at the very least not impair them."

Negative Effects

1. Uneven Distribution of Wealth
   • Wealth was concentrated in certain areas
   • 1 in 4 children live in poverty.

http://upload.wikimedia.org/wikipedia/commons/3/3b/Ireland_income_distribution_chart.gif

Republic of Ireland Percent Unemployed per Area,1997

• Midlands 5
• Mideast 7
• Midwest 8
• West 10
• Southeast 12
• Border 14
• Southwest 15
• Dublin 30

1. Increase in Crime
   • Crime coincided with poverty and unemployment. Before economic growth,poverty was common place.
   • Increased illegal trade, people looking to make money.
2. GDP vs GNP
   • GDP figures overstate the national income available to Irish people to spend.
   • The gap between GDP and GNP is getting larger.
   • This is a mark of the country's economic immaturity, and its failure to nurture indigenous industry.

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1. Loss of Identity
   • Adopted American ways, became less Irish.

Will the Celtic Tiger Last?

1. The Celtic Tiger slowed down in 2001
   • Large reduction in investment in the Information Technology Industry and global economies
     • Ireland accounted for around 50% of packaged software in Europe in 2002
   • Foot and mouth disease and Septemeber 11, 2001 attacks destroyed Ireland's tourism and agricultural sector
   • Irish wage costs increased and a general reduction in Ireland's economic competitveness forced companies to Eastern Europe and China
2. These problems did not add up to a full-blown out recession, but just a slowdown in the Ireland's economic growth
3. In 2003, there was a recovery of the Irish Economy
   • U.S investment levels increased once again
   • Great increase in property values and constructino sector
   • Increasement of the global information technology industry: Ireland produces 25% of all European computers
   • Renewed investement by multi-national firms: Intel, Google, Abbot Laboratories, and Bell Labs which attract high-skilled jobs