Celtic Tiger
The "Celtic Tiger" is a term referring to the economy of Ireland from the mid-1990s to the end of the first decade of the 21st century, a period of rapid real economic growth fuelled by foreign direct investment. The boom was dampened by a subsequent property bubble which resulted in a severe economic downturn.
At the start of the 1990s, Ireland was a relatively poor country by Western European standards, with high poverty, high unemployment, inflation, and low economic growth. The Irish economy expanded at an average rate of 9.4% between 1995 and 2000, and continued to grow at an average rate of 5.9% during the following decade until 2008, when it fell into recession. Ireland's rapid economic growth has been described as a rare example of a Western country matching the growth of East Asian nations, i.e. the 'Four Asian Tigers'.
The economy underwent a dramatic reversal from 2008, affected by the Great Recession and ensuing European debt crisis, with GDP contracting by 14% and unemployment levels rising to 14% by 2011. The recession lasted until 2014. In 2015, the economy posted a growth rate of 6.7% marked the beginning of a new period of strong economic growth.
Term
The colloquial term "Celtic Tiger" has been used to refer to the country itself, and to the years associated with the boom. The first recorded use of the phrase is in a 1994 Morgan Stanley report by Kevin Gardiner. The term refers to Ireland's similarity to the East Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan during their periods of rapid growth between the early 1960s and late 1990s. An Tíogar Ceilteach, the Irish language version of the term, appears in the Foras na Gaeilge terminology database and has been used in government and administrative contexts since at least 2005.The Celtic Tiger period has also been called "The Boom" or "Ireland's Economic Miracle". During that time, the country experienced a period of economic growth that transformed it from one of Western 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 state-driven economic development; social partnership among employers, government and trade unions; increased participation by women in the labour force; decades of investment in domestic higher education; targeting of foreign direct investment; a low corporation tax rate; an English-speaking workforce; and membership of the European Union, which provided transfer payments and export access to the Single Market.
During the 2008 financial crisis, the Celtic Tiger had all but died. Some critics, such as David McWilliams, who had been warning about impending collapse for some time, concluded: "The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things."
Historian Richard Aldous stated the Celtic Tiger has now gone the "way of the dodo". In early 2008, many commentators thought a soft landing was likely, but by January 2009, it seemed possible the country could experience a depression. In early January 2009, The Irish Times, in an editorial, declared:
"We have gone from the Celtic Tiger to an era of financial fear with the suddenness of a Titanic-style shipwreck, thrown from comfort, even luxury, into a cold sea of uncertainty." In February 2010, a report by Davy Research concluded that Ireland had "largely wasted” its years of high income during the boom, with private enterprise investing its wealth "in the wrong places". It compared Ireland's growth to other small eurozone countries such as Finland and Belgium – noting that the physical wealth of those countries exceeds that of Ireland because of their "vastly superior" transport infrastructure, telecommunications network, and public services.
Tiger economy
From 1995 to 2000, GDP growth rate ranged between 7.8 and 11.5%; it then slowed to between 4.4 and 6.5% from 2001 to 2007. During that period, the Irish GDP per capita rose dramatically to equal, then eventually surpass, that of all but one state in Western Europe. Although GDP does not represent the standard of living, and the GNP remained lower than the GDP, in 2007, the GNP achieved the same level as of some other Western European countries'.Causes
Historian R. F. Foster argues the cause was a combination of a new sense of initiative and the entry of American corporations such as Intel. He concludes the chief factors were low taxation, pro-business regulatory policies, and a young, tech-savvy workforce. For many multinationals, the decision to do business in Ireland was made easier still by generous incentives from the Industrial Development Authority. In addition European Union membership was helpful, giving the country lucrative access to markets that it had previously reached only through the United Kingdom, and pumping huge subsidies and investment capital into the Irish economy. Frederic Mishkin has also suggested that the economic boom partly resulted from the austerity plan of Charles Haughey. People and businesses expected a stable economy, boosting their confidence to spend and invest due to anticipated stability in output.Tax policy
Many economists credit Ireland's growth to a low corporate taxation rate. Since 1956, successive Irish governments have pursued low-taxation policies.European Union Structural and Cohesion Funds
Since joining the EU in 1973, Ireland has received over €17 billion in EU Structural and Cohesion Funds. These are made up of the European Regional Development Fund and the European Social Fund and were used to increase investment in the education system and to build physical infrastructure. These transfer payments from members of the European Union, such as Germany and France, were as high as 4% of Ireland's gross national product. Ireland is unique among cohesion countries, having allocated up to 35% of its Structural Funds to human resource investments, compared with an average of around 25% for other cohesion fund recipients. The Irish economy's increased productive capacity is sometimes attributed to these investments, which made Ireland more attractive to high-tech businesses, though the libertarian Cato Institute has suggested that the EU transfer payments were economically inefficient and may have actually slowed growth. The conservative Heritage Foundation also attributed to transfer payments no significant role in causing growth.Trade within the European Union
Ireland's membership in the EU since 1973 helped the country gain access to Europe's large markets. Ireland's trade had previously been predominantly with the United Kingdom.Industrial policies
In the 1990s, the provision of subsidies and investment capital by Irish state organisations encouraged high-profile companies, such as Dell, Intel, and Microsoft, to locate in Ireland; these companies were attracted to Ireland because of its EU membership, relatively low wages, government grants, and low tax rates. Enterprise Ireland, a state agency, provides financial, technical, and social support to start-up businesses. Additionally, the building of the International Financial Services Centre in Dublin led to the creation of 14,000 high-value jobs in the accounting, legal, and financial management sectors.In July 2003, the government established the Science Foundation Ireland on a statutory basis to promote education for highly skilled careers, particularly in biotechnology and information and communications technology, with the additional purpose to invest in science initiatives that aim to further Ireland's knowledge economy.
Geography and demographics
The time zone difference allows Irish and British employees to work the first part of each day while US workers sleep. US firms were drawn to Ireland by cheap wage costs compared to the UK, and by the limited government intervention in business compared to other EU members, and particularly to countries in Eastern Europe. Growing stability in Northern Ireland brought about by the Good Friday Agreement further established Ireland's ability to provide a stable business environment.Irish workers can communicate effectively with Americans – especially compared to those in other low-wage, non-English-speaking EU nations, such as Portugal and Spain; this factor was vital to U.S. companies' choosing Ireland for their European headquarters. It has also been argued that the demographic dividend from the rising ratio of workers to dependents due to falling fertility, and increased female labour market participation, increased income per capita.
Impact of economic growth
Ireland was transformed from one of the poorest countries in Western Europe to one of the wealthiest. Disposable income soared to record levels, enabling a huge rise in consumer spending with foreign holidays accounting for over 91% of total holiday expenditure in 2004. However, the gap between the highest and lowest income households widened in the five-year period to 2004–2005; in response, the Economic and Social Research Institute stated in 2002: "On balance, budgets over the past 10 to 20 years have been more favourable to high income groups than low income groups, but particularly so during periods of high growth". Unemployment fell from 18% in the late 1980s to 4.5% by the end of 2007, and average industrial wages grew at one of the highest rates in Europe. Inflation brushed 5% per annum towards the end of the "Tiger" period, pushing Irish prices up to those of Nordic Europe, even though wage rates are roughly the same as in the UK. The national debt had remained constant during the boom, but the GDP to debt ratio rose, due to the dramatic rise in GDP.The new wealth resulted in large investments in modernising Irish infrastructure and cities. The National Development Plan led to improvements in roads, and new transport services were developed, such as the Luas light rail lines, the Dublin Port Tunnel, and the extension of the Cork Suburban Rail. Local authorities enhanced city streets and built monuments such as the Spire of Dublin. An academic said in 2008 that the jumbo breakfast roll became "perhaps the ultimate symbol of our contemporary Celtic Tigerland", product of Irish conglomerate IAWS and eaten by busy workers buying food in filling station convenience stores.
Ireland's trend of net emigration was reversed as the republic became a destination for immigrants. This significantly changed Irish demographics and resulted in expanding multiculturalism, particularly in the Dublin, Cork, Limerick, and Galway areas. It was estimated in 2007 that 10% of Irish residents were foreign-born; most of the new arrivals were citizens of Poland and the Baltic states, many of whom found work in the retail and service sectors. A study conducted in 2006 found that many Irish people regarded immigration as an important factor for economic progress. Within Ireland, many young people left the rural countryside to live and work in urban centres.
Many people in Ireland believe that the growing consumerism during the boom years eroded the country's culture, with the adoption of American capitalist ideals. While Ireland's historical economic ties to the UK had often been the subject of criticism, Peader Kirby argued that the new ties to the US economy were met with a "satisfied silence". Nevertheless, voices on the political left have decried the "closer to Boston than Berlin" philosophy of the Fianna Fáil-Progressive Democrat government. Writers such as William Wall, Mike McCormick, and Gerry Murphy have satirised these developments. Growing wealth was blamed for rising crime levels among youths, particularly alcohol-related violence resulting from increased spending power. However, it was also accompanied by rapidly increased life expectancy and very high quality of life ratings; the country ranked first in The Economist's 2005 quality of life index, dropping to 12th by 2013.
The growing success of Ireland's economy encouraged entrepreneurship and risk-taking, qualities that had been dormant during poor economic periods. However, whilst some semblance of a culture of entrepreneurship exists, foreign-owned companies account for 93% of Ireland's exports.