Ireland’s Celtic Tiger Era: Wealth Myths Debunked
The presumption that Ireland became wealthy during the boom is false, and Irish workers, by and large, wasted their high incomes during the Celtic Tiger years, a new report from Davy stockbrokers has said.
The Davy report says that while Ireland has moved up the income per capita table yearly since 1994, the country never became wealthy, as much of the money made between 2000 and 2008 was wasted.
The stockbroker’s report acknowledges that Ireland was still ranked eighth in the Eurozone in terms of wealth at the end of 2009 but said that years of high income were not enough for a country to become wealthy. To become truly wealthy, a country must invest its money “wisely,” the report noted.
The Davy report also says that Ireland’s capital infrastructure - things such as roads, rail, schools, telecommunications, and hospitals - is still inferior to EU countries of a similar size, such as Finland or Belgium.
The report notes that while Ireland’s net capital stock more than doubled in the eight years to 2008 from €222bn to €477bn, most of that went into housing, which Davy described as “an unproductive asset.”
It also pointed to under-investment in Ireland’s communications network and in software.
The report said that upgrading the nation’s road infrastructure was Ireland’s biggest triumph during the boom years, however, as it reduced journey times and increased productivity.
About The Celtic Tiger
The term "Celtic Tiger" refers to a period of rapid economic growth and development in Ireland that occurred primarily from the mid-1990s to the mid-2000s. During this time, Ireland experienced a remarkable transformation from one of Europe's poorest countries to one of its wealthiest. Several key factors contributed to the Celtic Tiger phenomenon:
- Foreign Direct Investment (FDI): Ireland actively pursued foreign investment through low corporate tax rates and incentives for multinational corporations. Many global tech and pharmaceutical companies, such as Google, Intel, and Pfizer, established their European headquarters or manufacturing facilities in Ireland.
- EU Membership: Ireland's membership in the European Union (EU) provided access to a large market and financial support for infrastructure development.
- Education and Workforce: Ireland invested in education and training programs, producing a highly skilled and educated workforce attractive to multinational companies.
- Economic Reforms: The Irish government implemented pro-business policies, reduced bureaucracy, and liberalized sectors such as finance and telecommunications.
- Construction and Real Estate Boom: A property and construction boom fueled economic growth with increased demand for housing, commercial properties, and infrastructure projects.
- Rise in Consumer Spending: As incomes grew, consumer spending increased, leading to a thriving retail and services sector.
- Technology and Innovation: Ireland embraced technological advancements and innovation, further attracting tech companies.
- Peace Dividend: The Good Friday Agreement in 1998 brought an end to decades of sectarian conflict in Northern Ireland, creating a more stable environment for investment and economic development on the island.
- Access to Finance: Improved access to financing, both domestically and internationally, facilitated business growth and entrepreneurship.
- Stock Market Performance: The Irish Stock Exchange experienced significant growth, reflecting investor confidence in Ireland's economic prospects.
However, the Celtic Tiger era was not without challenges. It led to rising property prices, speculative investments, and excessive borrowing, ultimately resulting in a property bubble. Ireland's economy suffered a severe downturn when the global financial crisis hit in 2008. The bursting of the property bubble and the banking crisis led to a period of economic contraction known as the "Celtic Tiger's Tail."
In the years following the crisis, Ireland implemented austerity measures and structural reforms to stabilize its economy. Despite the setbacks, Ireland's economic recovery and growth resumed, reaffirming its reputation as a dynamic and resilient economy within the European Union.