Ireland Economy Part II 2

Ireland Economy Part II

In the age of long-distance transport, a tourism industry slowly grew. However, this was not particularly pronounced in the first half of the 20th century: foreign investment in the domestic market was essential for Ireland’s economic survival after 1949. The economic experts of the Irish governments recognized this after 1949 and tried to integrate Ireland into the international financial markets: In 1957 Ireland became a member of the World Bank and the International Monetary Fund. In addition, a favorable legislation created within the framework of the so-called Foreign Direct Investment(FDI) strategy many financial advantages for foreign companies to settle in Ireland. But first the global developments in the technology market, and especially in information technology(IT) should make little Ireland an important location for computer software development in the 1990’s. Ireland’s relationship with the USA, which has developed over centuries, is gaining in importance here: many Irish people or descendants of Irish immigrants live there, so that the bond with the economically strongest country in the world through a shared past and a resulting and not to be underestimated (financial) US benevolence towards Ireland is quite strong. In addition, at the end of the 20th century Ireland, unlike other EU countries, offered American companies in particular a great potential for highly qualified, English-speaking workers, so that communication was not a problem. There was also a low tax rate, relatively low wages and government grants for foreign companies. For software manufacturers in Ireland, the island experienced an economic boom within a very short time, the extent of which is only comparable to that of some East Asian countries. The economic boom for Ireland, known there as the Asian Tiger, was quickly renamed the Celtic Tiger.

The Celtic Tiger: Consequences, Interruptions, and Problems

Thanks to the Celtic Tiger, Ireland developed into one of the richest countries in Europe within a few years. With the creation of new jobs and rising wages, not only did the number of unemployed drop by a considerable amount, the consumer behavior of the Irish also changed drastically: a decade before, expensive cars or designer goods had been unaffordable for most, but now many Irish could afford them. The inflation rate rose within a very short time while the national debt continued to decline. The Irish government was now able to invest in improving the infrastructure, because the narrow streets, especially around the capital Dublin, cannot offer enough space for the many cars.

And the face of the larger cities was also modernized. As a result, the domestic industry experienced an enormous upswing, especially in the construction sector, not only in the field of road construction, but also in buildings and houses, because buying a home, in Ireland for historical reasons, was particularly pronounced for many Irish now become possible. The Irish government is trying to counteract increasing urbanization, especially in the Dublin area, with a targeted development of rural regions (National Development Plan).
Due to the development of the software industry (now Ireland has the highest export worldwide, even ahead of the USA), the country made itself dependent on global economic events. The global downward trend in information technology at the end of the 1990’s and the resulting stock market crash also affected economic growth on the Emerald Isle. Many factories were closed or radically cut jobs. After September 11, 2001, Ireland’s tourism industry was also hard hit by the aftermath of the New York terrorist attacks. American tourists, the main source of income in the industry, largely stayed away for fear of long-haul flights.

Also missed the foot and mouth disease outbreaka few months later the tourism industry suffered an additional setback and contributed significantly to the considerable loss in sales.

In terms of software production, Ireland had lost its competitiveness due to steadily rising wages and insurance premiums: some countries in Eastern Europe and China offered many investors more favorable conditions.

Since the economic recovery of the USA and the IT industry worldwide from 2004 onwards, the Irish economy has been on an upward trend again. Nonetheless, the government has learned from the years of the recession: more investment should be made in domestic industry. There is another positive development in the relations between Northern Ireland and the Republic: Peace negotiations have not only made southern Ireland an interesting business location for foreign investors. Gradually the entire island is starting to benefit from the economic boom.

However, Ireland has been one of the worst hit countries in Europe by the financial crisis since 2008. As a result of the burst housing bubble, many Irish households are heavily indebted.

Ireland Economy Part II 2

About the author