Celtic Tiger
The "Celtic Tiger" is a nickname for the Republic of Ireland, referring to that country's rapid economic growth during the 1990s. The term is an analogy to the nickname "East Asian Tigers" applied to South Korea, Singapore, Hong Kong, Taiwan and other countries of East Asia during their period of rapid growth in the 1980s. The Celtic Tiger is often also called the The Boom or Ireland's Economic Miracle.
The Celtic Tiger
The original Celtic Tiger occured in the late 1990's and lasted till the worldwide downturn of 2001. In the oringial Celtic Tiger the Irish economy boomed by 5%-6% annually, dramatically raising Irish living standards.
Causes
Many economists credit Ireland's low taxation rate (10%-12.5% throughout the late 1990') and business-friendly regulation policies as responsible for much of the growth. A more sceptical intrepretation is that much of the growth was due to the fact that the economy of Ireland had lagged the rest of northwestern Europe for so long that it had become the one of last sources of a relatively large, relatively low-wage labour pool left in that region of the world. Ireland's membership of the European Union since 1973 has helped the country gain access to markets that previously it had to access through the United Kingdom, and provided subsidies and investment capital. IDA Ireland successfully attracted a variety of high profile companies (such as Dell, Intel and Gateway) throughout the 1990's to locate in Ireland. They were attracted to Ireland for several reasons; a young well-educated English speaking labour force, a favorable time zone (whilst US workers slept, Irish ones could be working), low tax rates, grants, EU membership allowed easy export of products, low government intervention in business, and stabilty in Northern Ireland brought about by the Good Friday Agreement. The government's use of tax incentives and the countries low tax rate were two of the most important contributors to the Celtic Tiger's rise.
Certain individuals are regarded as having had a significant impact on the success of the boom. Charlie McCreevy the Minister for Finance between 1997 and 2004 is highly respected in Ireland for pursuing good fiscal policies and managing to reduce the public debt dramatically over just a few years. He was voted Ireland's best Minister for Finance of all time in 2004. Mary Harney the Minister for Enterprise, Trade & Employment between 1997 and 2004 was responsible for courting hugh volumes of Foreign Direct Investment during her tenure - by the the time she left the department, Ireland was recieving 25% of all European FDI - a massive achievment considering the fact that Ireland contains only 1% of Europes population.)
Consequences
During the Celtic Tiger period, Ireland was transformed from one of the poorest countries in Western Europe to one of the wealthiest. After successive governments led by weak and highly currupt politicians such as the now discraced Charles Haughey, the country was rapidly transformed to become of Europes richest nations. The major changes included:
- Disposable income soared to record levels enabling a hugh rise in consumer spending. It became a common sight to see expensive cars and designer lables around the nations towns and cities.
- Unemployment fell from 18% in the late 1980's to 4.9% by the end of the boom and average industrail wages grew at one of the highest rates in Europe.
- Inflation regurlarly brushed 5% per annum, pushing Irish prices up to match those of the Nordic Europe.
- Public debt was dramatically cut (it stood at about 36% of GDP by the end of 2000) to become one of Europes lowest, enabling public spending to double without any increase in taxation.
- Irelands historic trend of emmigration was stopped and Ireland even started to become a destination for many immigrants - this significantly changed Irish demographics and resulted in expanding multi-culturism.
- Growing wealth was blamed for rising crime levels among youths, particularly increased drink related violence among both youths and the general public resulting from increases spending power.
- A large investment in modernising Irish infastrucre and citie streetscapes resulted from the new wealth - the National Development Plan lead to hugh investments in new roads, local attorities took the inititive to build new monuments such as the Spire of Dublin and new transport services came on stream such as the Luas.
- Many older generations in Ireland belive that the Culture of Ireland was eroded in the Boom years by growing consumerism and the adoption of American Capitalist ideals.
- The growing success of Irelands economy raised the low confidence and self-doubt that plagued Irish society for decades. Irish people are now far quicker to participate in international activities.
- A brain drain occured. Many young people left the rural countryside, to live and work in urban centers. This has increased the urbanisation of Ireland.
The Downturn 2001-2003
The Celtic Tiger came to a sudden halt in 2001 after a half decade of astonishingly high growth. The economic downturn was in-line with a US downturn - due to Irelands close US econmic ties. Other major factors included; drop in investment in the worldwide IT industry in which Ireland is a major player; Foot and mouth disease and the September 11, 2001 attacks damaged the tourism sector (and agricultural sector); several factories moved operations to Eastern Europe and China; and the rising value of the euro hit non-EMU exports. However the downturn was not a full blown Recession, mearly a slowdown in the rate of Irish economic expansion. Signs of a recovery became evident in late 2003 as US investment levels increased once again.
Celtic Tiger 2
After the slowdown in 2001 and 2002 economic growth began to accelerate dramatically in late 2003 and 2004. The Irish media has quickly jumped upon this as an oppertunity to document the return of the Celtic Tiger - commonly refered to in the press as the Celtic Tiger 2 and Celtic Tiger Mark 2. In 2004 Irish growth was the highest of the 15 old european states (the EU pre-May 2004) at 4.5%.
Causes
The reasons for the resurrection of the Irish ecomomic boom are somewhat controversial in Ireland. There is currently open debate in the country - the skeptics say that recent growth is only due to the hugh increase in house values and catch-up growth in employment in the construction sector, whilst others claim that there are several factors at play in the new boom, these including:
- The soon to be released SSIA government savings scheme has relaxed consumers concerns about spending and thus fueled retail sales growth.
- The continued investment by multi-national firms - Intel have resumed Irish expansion, Google have based major offices in Dublin, and Bell Labs are to open a facility in the near future.
- A successful drive to attract high skill jobs to Ireland - the location of Google and Bell Labs in Ireland are the cornerstone of this new drive. A new state body has been established to promote new science companies in Ireland - Sciences Foundation Ireland.
- A rebound in tourism - after three bad years in the industry caused by Foot and mouth disease and the September 11, 2001 attacks in New York which hit US visitor numbers.
- A US recovery has boosted Ireland's economy dramatically due to Ireland's close economic ties to the US.
- Recovery of world IT industry - Ireland produces 25% of all European PC's - Dell, IBM, Apple and HP all have sizeable Irish operations.
Challenges and Treats Ahead
The return of the boom in 2004 has thus far been largely casused by a single industry - the hugh construction sector which is only now catching up with the demand caused by the first boom. Many highly regarded international figures and publications such as The Economist have warned of a crash in Irish property prices. Already, rent yields are falling nationwide on residental property and output has now outpaced supply - 2004 saw the construction of 80,000 new homes - compared to the UK's 160,000 - a nation that has 15 times Irelands population.
Loss of competitiveness
Rising wages, inflation, poor infrastructure, excessive public spending and the accession of eight new Eastern European members to the EU in 2004 are just some of the other treats to the continued competitiveness of the Irish Economy and sustained growth. Irish wages are now substantially above the EU average - particularly in the Dublin region. These pressures will damage low to mid skill jobs, largely in manufacturing. Outsourceing of many professional jobs is beginning to take place also. Poland recently gained several hundred former Irish jobs with the accountancy devision of Philips. The goverment has set up Science Foundation Ireland [1] to help promote high-skill education and invest in science inititives to create a Knowlege Economy in Ireland which would lessen the worries that jobs could simply be outsourced to a cheaper location.
Promotion of Indigenous Industry
One of the major challeges facing Ireland is the sucessful promotion of indigenous industry. Althought Ireland boosts a few large international companies such as CRH, Kerry Group, Elan and Ryanair, these are exceptions to rather than the rule. There are very few other companies with over a billion euro in annual revenue. The government has charged Enterprise Ireland [2] with the task of boosting Irelands indigenous industry. In 2003 the government launched a one-stop-shop website for setting up and running a business in Ireland - it is hoped basis.ie will make starting a business in Ireland easier and quicker.
Over-Relience on Foreign Energy Sources
Another possible treat is Ireland's over-relience on foreign oil. Ireland for many years curbed dependence on foreign energy sources by developing its peat bogs, building a dam on the River Shannon and developing off shore gas fields. However today the potential for hydroelectricty has been tapped as far as it can be, gas is now in use to the extent it can be and the peat bogs are no longer economical - this has lead to an ever-increasing need for oil. One solution is to develop Ireland's hugh potential for wind power and to a lesser extent wave power. The worlds largest off-shore windfarm is currently in construction off the east coast of the island near Arklow.
Spreading the Wealth
Like any country that undergoes rapid growth, Irelands new wealth is concentrated in a handful of locations - pricipally on the east coast surrounding Dublin. The challenge is to spread the new wealth nationwide to remote areas such as Connemara and Donegal. To do this the government has taken three main measures:
- Establishment of a National Development Plan (NDP) [3] to invest in infastructre throughout the country.
- Formulation of a National Spatial Strategy [4] to focus on the development of Gateways and Hubs - towns such as Mullingar, Athlone, and Ennis have been designated as Gateways and Hubs.
- Decentralisation of Government departments to regional centers. This will involve moving 10,000 civil servents out of the capital.
Books
- The Celtic Tiger: Ireland's Continuing Economic Miracle by Paul Sweeney ISBN 1860761488
- After the Celtic Tiger: Challenges Ahead by Peter Clinch, Frank Convery and Brendan Walsh ISBN 086278767X
- The Celtic Tiger? : The Myth of Social Partnership by Kieran Allen ISBN 0719058481
- The Making of the Celtic Tiger: The Inside Story of Ireland's Boom Economy by Ray Mac Sharry, Joseph O'Malley and Kieran Kennedy ISBN 1856353362
- The End of Irish History? : Critical Approaches to the Celtic Tiger by Colin Coulter, Steve Coleman ISBN 0719062314
- The Celtic Tiger In Distress: Growth with Inequality in Ireland by Peadar Kirby, Peadar Kir ISBN 0333964357
- Can the Celtic Tiger Cross the Irish Border? (Cross Currents) by John Bradley, Esmond Birnie ISBN 1859183123
- Inside the Celtic Tiger: The Irish Economy and the Asian Model (Contemporary Irish Studies) by Denis O'Hearn ASIN 0745312837
External Links
- The Celtic Tiger In Distress
- Celtic Tiger II on way - Business World
- Celtic Tiger roars again - but not for the poor - The Gaurdian
- Survey: Ireland - The luck of the Irish - Economist Magazine
- IDA Success Stories