The Full Wiki

Celtic Tiger: Map

Advertisements
  
  
  

Wikipedia article:

Map showing all locations mentioned on Wikipedia article:



Two covers of the Economist magazine, showing the speed and effect of the change.
Two special reports on Ireland, the first in 1988, describing Ireland as the "Poorest of the rich", the second in 1997, less than a decade later, showing the "The Celtic Tiger: Europe's shining light"


Celtic Tiger is a term used to describe a period of rapid economic growth in Irelandmarker between 1995–2007, coming to a dramatic halt by 2008, with a GDP contraction of 14% by 2010.

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 Celtic Tiger refers to the East Asian Tigers—the tigers of South Koreamarker, Singaporemarker, Hong Kongmarker, and Taiwanmarker during their periods of rapid growth in the 1980s and 1990s. The Celtic Tiger period has also been called the "The Boom" or "Ireland's Economic Miracle".

In early January 2009, the Irish Times in an editorial declared that: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. During that time, Ireland experienced a boom in which it was transformed from one of 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 between employers, government and unions, increased participation in the labour force of women, decades of investment in domestic higher education; targeting of foreign direct investment; a low corporation tax rate; an English-speaking workforce, and crucial EU membership – which provided transfer payments and export access to the Single Market.

Historian Richard Aldous considers that the Celtic Tiger has now gone the way of the dodo. In early 2008 many commentators thought a soft landing was likely. By January 2009, it seemed possible the country could experience a depression.

The aspiration to become a Celtic Tiger has also been expressed by leaders of the other Celtic countries. Addressing the Council on Foreign Relations in New Yorkmarker in October 2007, Alex Salmond, the First Minister of Scotlandmarker, said "we have everything it takes for a Celtic Lion economy to take off in Scotland" (the lion rampant is the heraldic symbol of Scotland).

Celtic Tiger

From 1994 to 2000 GNP rate growth ranged between 6 and 11% through 2001 and early 2002 to 2%. The rate then rose back to an average of about 5%. During that period Irish living standards rose dramatically to equal then eventually surpass that of all but one state in Western Europe.By mid-2007 in the wake of the growing global financial crisis the Tiger had all but died. Some critics, such as David McWilliams who had been warning about impending collapse for some time concluded that:

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.

Causes

Tax

Many economists credit Ireland's growth to a low corporate taxation rate (10 to 12.5 percent throughout the late 1990s), and to net transfer payments from members of the European Union like Germany and France that were as high as 4% of gross national product. Since 1956, successive Irish governments have pursued low taxation policies, including former Minister for Finance, Charlie McCreevy.

EU Aid

The EU aid was used to increase investment in the education system and physical infrastructure. The increased productive capacity of the Irish economy 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 Heritage Foundation also downplayed the role of transfer payments. Ireland's membership in the European Union 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 (such as IDA Ireland) encouraged high-profile companies like Dell, Intelmarker, and Microsoft to locate in Ireland. These companies were attracted to Ireland because of its European Union 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.

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.

Geography and Demographics

A favourable time zone difference allows Irish employees to work the first part of each day while U.S. workers sleep. This was particularly attractive to companies with large legal and financial departments; an Irish lawyer could work on a lawsuit in the morning while their American counterpart slept. U.S. firms were assured by the limited government intervention in business compared to other EU members, and particularly to countries in Eastern Europe. Growing stability in Northern Irelandmarker brought about by the Good Friday Agreement further established Ireland's ability to provide a stable business environment.

Irish workers could effectively communicate with Americans—especially compared to other low-wage EU nations such as Portugalmarker and Spainmarker—a factor that was vital to U.S. companies choosing Ireland for their 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.

Consequences

Public debt as a percentage of GDP dropped significantly over the 1990s.


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. Unemployment fell from 18% in the late 1980s to 3.5% by the end of the boom, 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 has remained constant during the boom, but the GDP to Debt ratio has dropped, 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 Tunnelmarker, and the extension of the Cork Suburban Rail. Local authorities enhanced city streets, and built monuments like the Spire of Dublinmarker.

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 Dublinmarker, Corkmarker, Limerickmarker and Galwaymarker 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. Within Ireland, many young people left the rural countryside to live and work in urban centres. 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.

Many people in Ireland believe that 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 United Kingdom had often been the subject of criticism, Peader Kirby argues that the new ties to the U.S. economy were met with a "satisfied silence." Nevertheless, voices on the left have decried the "closer to Boston than Berlin" philosophy of the government parties. Writers such as William Wall, Mike McCormick and Gerry Murphy have satirised these developments.

Similarly, many Irish people maintain what they consider a pragmatic approach to immigration, saying that it is necessary to bring about further GDP growth and that Ireland, as a nation with a long history of emigration, has an obligation to accept immigrants.

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 (indeed, the country ranked first in The Economist's quality of life index).

Banking Scandals

The New York Times in 2005 described Ireland as the "Wild West of European finance", a perception that helped prompt the creation of the Irish Financial Services Regulatory Authority.Despite its mandate for stricter oversight, the agency never imposed major sanctions on any Irish institution, even though Ireland had experienced several major banking scandals in overcharging of their customers. Industry representatives disputed the idea that Ireland may be home to unchecked financial frauds.
In December 2008, iregularities in directors loans, that were kept off a bank's balance sheet for eight years forced the resignation of the financial regulator.


Economic commentator David McWilliams has described the collapse of Anglo Irish Bank as Ireland's Enron.

Downturn, 2001–2003

The Celtic Tiger's momentum slowed sharply in 2002, after seven years of high growth. The Irish economic downturn was in line with the worldwide downturn.

The economy was impacted by a large reduction in investment in the worldwide information technology (IT) industry. The industry had over-expanded in the late 1990s, and its stock market equity declined sharply. Ireland was a major player in the IT industry: In 2002, it had exported US$10.4 billion worth of computer services, compared to $6.9 billion from the United States. Ireland accounted for approximately 50 percent of all mass-market packaged software sold in Europe in 2002 (OECD, 2002; OECD, 2004).

Foot and mouth disease and the September 11, 2001 attacks damaged Ireland's tourism and agricultural sectors, deterring U.S. and British tourists. Several companies moved operations to Eastern Europe and the People's Republic of China because of a rise in Irish wage costs, insurance premiums, and a general reduction in Ireland's economic competitiveness. The rising value of the Euro hit non-EMU exports, particularly those to the U.S. and the United Kingdom.

At the same time, economies globally experienced a slowdown. The economy of the United States grew only 0.3% in April, May and June 2002 from a year earlier. The Federal Reserve made 11 rate cuts that year in an attempt to stimulate the U.S. economy. In Europe, the EU scarcely grew throughout the whole of 2002, and many governments (notably Germany and France) lost control of public finances, causing large deficits that broke the terms of the EMU Stability and Growth Pact.

The economic downturn in Ireland was not a recession but a slowdown in the rate of economic expansion. Signs of a recovery became evident in late 2003 as U.S. investment levels increased once again. Many senior economists have heavily criticised the Government and the economic imbalance in favour of the construction industry and the prospect of sustaining economic growth in the future.

Post-2003 resurgence

The information technology recovery has helped the Irish economy to boom once again.


After the slowdown in 2001 and 2002, Irish economic growth began to accelerate again in late 2003 and 2004. Some of the media considered that an opportunity to document the return of the Celtic Tiger — occasionally referred to in the press as the "Celtic Tiger 2" and "Celtic Tiger Mark 2". In 2004, Irish growth was the highest, at 4.5%, of the EU-15 states, and a similar figure was forecast for 2005. Those rates contrast with growth rates of 1% to 3% for many other European economies, including Germany, France, and Italy.

The reasons for the continuation of the Irish economic boom were somewhat controversial within Ireland. Skeptics said that the recent growth was merely due to a great increase in property values, and to catch-up growth in employment in the construction sector. A variety of other factors have also been put forward .

Globally, the U.Smarker. recovery boosted Ireland's economy due to Ireland's close economic ties to the U.S. The decline in tourism as a result of foot and mouth disease and the September 11, 2001 attacks had reversed itself. The recovery of the global information technology industry was also a factor: Ireland produced 25% of all European PCs, and Dell, IBM, Applemarker and HP all had sizeable Irish operations, with Dell having its major European manufacturing plant in Limerickmarker.

There has been a renewed investment by multi-national firms. Intelmarker had resumed its Irish expansion, Google created an office in Dublinmarker, Abbott Laboratories was building a new Irish facility and Bell Labsmarker were to open a future facility.

Domestically, a new state body, Science Foundation Ireland, was established to promote new science companies in Ireland. A drive had been underway to attract high-skill jobs to Ireland. Maturing funds from the SSIA government savings scheme relaxed consumers' concerns about spending and thus fuelled retail sales growth.

In September 2009, Tanaiste Mary Coughlan, said Ireland had lost ground in international competitiveness every year since 2000.

Challenges



Property market

The return of the boom in 2004 is claimed to be primarily the result of the large construction sector catching up with the demand caused by the first boom. The construction sector represented nearly 12% of GDP and a large proportion of employment among young, unskilled men. A number of sources, including The Economist, warned of excessive Irish property values. 2004 saw the construction of 80,000 new homes, compared to the United Kingdom's 160,000 – a nation that has 15 times Ireland's population. It is estimated that home completions in 2006 may have reached 90,000..

In January 2009 UCD economist Morgan Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.

Loss of competitiveness

Rising wages, inflation and excessive public spending led to a loss of competitiveness in the Irish economy. Irish wages are now substantially above the EU average, particularly in the Dublin region. These pressures primarily affect unskilled, semi-skilled, and manufacturing jobs. Outsourcing of professional jobs is also increasing, with Polandmarker in 2008 gaining several hundred former Irish jobs from the accountancy division of Philips and Dell in January 2009 announced the transfer from Ireland, of 1700 manufacturing jobs, to Poland.

In 2006 there was a surge in Foreign Direct Investment and a substantial net increase in IDA supported jobs.

The government has set up Science Foundation Ireland to promote education for highly-skilled careers, and to invest in science initiatives that will further Ireland's knowledge economy.

Promotion of indigenous industry

One of the major challenges facing Ireland is the successful promotion of indigenous industry. Although Ireland boasts a few large international companies, such as AIB, CRH, Kerry Group, Smurfit Kappa Group, Elán and Ryanair, there are few companies with over one billion euros in annual revenue. The government has charged Enterprise Ireland with the task of boosting Ireland's indigenous industry. The government launched a Web site in 2003 with the objective of streamlining and marketing the process of starting a business in Ireland.

Reliance on foreign energy sources

Ireland relies on imported fossil fuels for over 80% of its energy.
Ireland for many years in the middle twentieth century limited its dependence on external energy sources by developing its peat bogs, building various hydroelectric projects including a dam at Ardnacrushamarker on the River Shannon in 1928, and developing offshore gas fields and diversifying into coal in the 1970s. Gas, peat and hydroelectric power have been almost fully exploited in Ireland. This situation has led to a continuously increasing need for fossil fuels at a time of increasing concerns about security of supply and global warming. One solution is to develop alternative energy sources including wind power and, to a lesser extent, wave power. Wind however is not a panacea as it needs to have conventional plant to augment it. An offshore wind farm is currently under construction off the east coast near Arklowmarker, and many remote locations in the west show potential for wind farm development. A report  by Sustainable Energy Ireland indicated that if wind power were properly developed, Ireland could  one day be exporting excess wind power if the natural difficulties of integrating wind power into the national grid are solved. Wind power currently  supplies 5% of Ireland's electricity.


Distribution of Wealth

Ireland's new wealth is not evenly distributed. The United Nations reported in 2004 that Ireland was second only to the United States in inequality among Western nations. The government has established a National Development Plan to invest in infrastructure throughout the country, and has formulated the National Spatial Strategy to focus on the development of 'gateways' and 'hubs'— towns such as Naasmarker, Mullingarmarker, Athlonemarker, and Ennismarker have been so-designated.

The government has enlisted Ballymun Regeneration Ltd. to regenerate the Ballymun area in north Dublin that was built as recently as the 1960s, and move people into better homes. They began knocking down the Ballymun Flats in 2004.

There is some opposition to the theory that Ireland's wealth has been unusually unevenly distributed, among them economist and journalist David McWilliams. He cites Eurostat figures which indicate that Ireland is just above average in terms equality by one type of measurement. However while it is better off by this measurement than generally less developed and/or more free market countries like Britain, the Mediterranean and the new accession states; Ireland is still more unequal than the Scandinavan countries, Germany and France.

Moreover, Ireland's inequality persists by other measurements. according to an ESRI report published in December 2006 is the 22nd best out of the 26 richest countries in terms of the level of its child poverty; and the 2nd most unequal country in Europe.

Downturn and ESRI forecast

In an economic analysis, the Economic and Social Research Institute (ESRI) on June 24, 2008 forecast that there was a possibility the Irish economy would experience marginal negative growth in 2008. This would be the first time since 1983. Outlining possible prospects for the economy for 2008, the ESRI said output of goods and services may fall that year—which would be the Irish definition of a mild recession. It also predicted a recovery in 2009 and 2010.

In September 2008, Ireland became the first eurozone country to officially enter recession.The recession was confirmed by figures from the Central Statistics Office showing the bursting of the property bubble and a collapse in consumer spending terminated the boom that was the Celtic Tiger.

The figures show the gross domestic product (GDP), which measures the value of all the goods and services produced in the State, fell 0.8% in the second three months of 2008 compared with the same quarter of 2007. That was the second successive quarter of negative economic growth, which is the definition of a recession.This is the first time since 1983, that the economy has been hit by falling growth, or recession.

In a November 2008 interview in Hot Press in a grim assessment of where Ireland stood, Taoiseach Brian Cowen said that many people still did not realise how badly shaken the public finances were.

By 30 January 2009, Ireland’s government debt had become the riskiest in the euro zone, surpassing Greece’s sovereign bonds, according to credit-default swap prices.

In February 2009, Taoiseach Brian Cowen said that Ireland's economy appeared on course to contract by 6.5 percent in 2009.

Aftermath

Former Taoiseach Garret FitzGerald has blamed Ireland's dire economic state in 2009 on a series of "calamitous" government policy errors.Between the years of 2000 and 2003 the then Finance Minister Charlie McCreevy boosted public spending by 48% while cutting income tax.A second problem occurred when government policies allowed, or even encouraged, a housing bubble to develop, "on an immense scale".

Nobel laureate Paul Krugman had a bleak prediction ,“As far as responding to the recession goes, Ireland appears to be really, truly without options, other than to hope for an export-led recovery, if and when the rest of the world bounces back.”

The International Monetary Fundmarker in mid April 2009 forecasted a very poor outlook for Ireland. It projected that the Irish economy would contract by 8 per cent in 2009 and by 3 per cent in 2010 – and that might be on the optimistic side.

Unemployment in Ireland is forecasted to rise almost 17 per cent in 2010, the Economic and Social Research Institute (ESRI) stated in a report published on 2009-04-28

The ESRI also suggested that:Our forecasts suggest that Ireland’s economy will contract by around 14 per cent over the three years 2008 to 2010. By historic and international standards this is a truly dramatic development.

See also



References


Embed code:
Advertisements






Got something to say? Make a comment.
Your name
Your email address
Message