A Roaring Tiger
Economic Boom
The beginning of the 1990's brought with it a positive outlook for the Irish economy. By opening it's doors to foreign investors, Ireland made the shift from an agricultural lead economy to one lead by industry. It seemed that Ireland had finally caught up in the game of industrialization. Once the "Celtic Tiger" was underway, Ireland quickly became one of the leading software exporters in the world. Large software companies such as Dell, Intel, and Gateway saw Ireland as ripe land for investing where they could expand their companies abroad. American companies became particularly interested in Ireland due to its young, well-educated, English speaking labor force. American companies also favored the Irish time zone as it is compatible with the US time zone (Ireland is 5 hours ahead of the U.S). This meant that when workers in the U.S. were sleeping, their Irish counterparts were working. This fact was of particular importance to companies with large legal and financial departments. Also, the fact that there was little government intervention was important because it allowed for a stable operating environment for companies. What was also very attractive to foreign investors was Ireland's membership in the European Union. Investors, especially American firms, saw Ireland as a way of gaining access to the large European markets. Ireland benefited from it's membership in the EU as its economy experienced low wages, low tax rates, and received government grants.
Other Economic Results
Along with the increase in software production, other things happened because of the boom.
- Unemployment fell from 18% in the late 80's to 4.9% by the end of the boom
- Average industrial wages grew at one of the highest rates in Europe
- Inflation was around 5% per year. This increased prices and everything became more expensive, especially in the grocery industry
- Public debt was significantly reduced, making it one of the lowest in Europe
- There was a large investment in Ireland’s infrastructure in an effort to modernize the country and attract tourists. The apperance enhancing process included the creation of new monuments, better roads, and more trees, etc.
Social Effects
The Celtic Tiger had inevitable and undeniable effects at the social level:
- Ireland’s trademark trend of emigration was haulted and even reversed. People began to immigrate to Ireland, and an expansion of multiculturalism occurred, mainly in the Dublin area, with 10% of the Ireland's population not from Ireland or the UK.
- There was an increase in the urbanization: many people left the countryside and came to live and work in the cities.
- There was a rise in crime level, especially among youth due to alcohol related violence, which was a result of increased spending power
- Older generations felt that the modernization that was created by the boom was overshadowing and drowning out the culture of Ireland
- For decades Ireland had suffered from a lack of confidence, but as the economy florished, people became quick and eager to engage in economic activity, including starting new businesses.
- The Celtic Tiger has even helped ease the troubles in Northern Ireland, as an increase in trading across the border has brought people together. Now the end to the conflict is closer than it was in the 1980's.
Government Criticisms
Although many of the results of the Celtic Tiger were positive, there are still criticisms of how the government reacted during the boom and seemed to neglect certain responsibilites. For example:
- health services received very little reform since long waiting lists, bed shortages, and understaffing were not unusual. Despite the fact that the health budget was doubled, there was little noticable change to health service facilities.
- There was no reform of transportation systems. The main airline company, Aer Rianta, the main bus company, Bus Eireann, and the main railway company, Iarnrod Eireann monopolized the transportation sector.
- Roadways also suffered as they became congested due to large amounts of commuters. In the early 2000's, there was construction of new roads, but it was more expensive than what had been expected.
- The telecommunications industry was slow to upgrade Ireland's network
Economic Downturn
From 2001 to 2003, Ireland’s Celtic Tiger came to a sudden stop after nearly half a decade of increasing growth. Much of the cause for this downturn was the fact that Ireland had very close economic ties to the U.S., which also experienced an economic slowdown. Another reason for the downturn was that there was a large drop in investment in the worldwide IT industry. As the leading exporter of software at the time, Ireland suffered from the stock market crash of the late 1990's that resulted from the lower IT investments. September 11th along with the foot and mouth disease were also causes of the economic downturn because high-spenders from Britain and the U.S. were not traveling to the country, which in turn hurt tourism tremendously. Other factors that caused the downturn were that companies started to move to Eastern European countries or Asian countries such as China because the wages were increasing and there was a loss of competitiveness. Also, the value of the Euro was rising.
Celtic Tiger, Round 2
Ireland's economy made a comback in late 2003 and 2004 after the downturn two years earlier. In fact, in 2004, the Irish growth became the highest of the 15 EU countries when it reached 4.5% (site). This rate compares to the low rates of 1-3% that Germany, France and Itlay were experiencing at the same time. The fact that Ireland's growth was ignited again was a huge publicity attracter, as the Irish media was quick to document the Tiger's return. The cause of this second boom is debatable, however, it is known that the construction industry has been primarily responsible as it has been catching up with the demand caused by the initial boom (site). To get a sense of the signficant increase in Irish construction, 160,000 new homes were built in the U.K in 2004, but Ireland, a country 15 times smaller than the U.K., managed to construct an impressive 80,000 new homes.
Challenges
As a result of the economic advancement, Ireland's new wealth is not evenly distrubte. This is, however, common for countries that experience rapid economic growth. Most of Ireland's wealth is condensed on the east coast surrounding Dublin, one and the challenge will be to spread it more evenly throughout the country, even making sure to reach the very remote areas. In order to do this, the government has taken measures such as establishing the National Development Plan (NDP) which invests in infrastructure throughout Ireland. As a result of the uneven wealth distribution, there has been a growing gap between the rich and the poor. In an article written in 2004 called "Celtic Tiger roars again - but not for the poor", citizens complain that, "all this wealth is sitting in one corner and we are sitting in the other. We feel excluded, we're not part of this great rich image." The wealth disparity is so large that the UN claimed Ireland had the greatest level of inquality of all western countries, except the U.S.
Current Economic Makeup
The Irish economy today is made up of three sectors, the primary, secondary, and tertiary. The primary sector, which accounts for 5% of Irish GDP and only 8% of Irish employment, is primarily made up of cattle grazing, dairy production, fishing, tillage farming, and forestry and accounts for the mining of zinc and lead as well as natural gas exploration. Peat exploitation is also a source of large employment opportunities and is a valuable contribution to energy needs. The secondary sector accounts for 46% of Irish GDP and 29% of Irish employment. This sector is comprised of high-tech companies such as Dell, Intel, Pfizer, and IBM. This sector manufactures products such as computers, computer parts, confectionary, beer, high quality glass and crystal, software, and machinery. Unfortunately, there is now large competition from Eastern Europe and Asian countries in the lower skill levels of manufacturing, such as confectionery manufacturing. The tertiary sector is the largest driver of Ireland’s modernized economic growth, accounting for 49% of Irish GDP and 64% of Irish employment. Its industries include accountancy, legal sector, call centers and customer service operations, finance and stock broking, catering, and tourism. Many U.S. companies establish their customer service operations in Ireland because employees are young, English speaking, and are well-educated. Tourism is very important to the Irish economy since it attracts five million people annually and employs over 100,000 individuals (site).
