Inside the Celtic Tiger — The Irish Economy and the Asian Model
By Denis O'Hearn
Pluto Press, London
1998, 216pp.
Review by Garret Mullan
"Dublin is the new Paris" was the title of a recent article in the Observer newspaper. Ireland is a centre of cultural rebirth and renaissance, a "Celtic tiger". The Scottish National Party sees Ireland as a model for small countries in Europe. Ireland's prosperity and influence are seen to be far out of proportion to the size of the country. So goes the commentary about Ireland.
Inside the Celtic Tiger shows that the tiger exists for only a few; for most of Ireland's people, it has largely passed them by. Denis O'Hearn looks at how Irish economic policy has become centred on attracting multinationals.
Rapid growth in the economy has been overwhelmingly concentrated in sectors dominated by multinational corporations. This is largely due to the Irish Development Authority attracting key manufacturing projects, such as that by computer process firm Intel. Like all major companies, Intel was looking for a European base to gain access to the European Union market.
Scores of companies agglomerated around Intel. The south of Ireland has attracted 33% of US manufacturing investments in the EU. The top US pharmaceutical companies have located in Ireland, not just to be near the other firms, but also to take advantage of Ireland's tax haven status.
While economic growth has been primarily due to foreign-owned manufacturing, employment growth has been overwhelmingly in the service sector. The multinationals have created relatively few jobs, despite the publicity given to those they have created.
The quality of jobs created has been low; job security, conditions of employment and pay are at substandard levels. By European standards, Ireland had low levels of part-time and contract work before 1990. The proportion of such work is now the highest in Europe. After a decade of economic growth, Ireland still has one of Europe's highest unemployment rates.
Irish economic growth in the 1990s has produced strange results: high growth in production and exports without correspondingly high investment or job creation in manufacturing; a concentration of employment growth in services without rapid growth in service provision; a rapid overall growth with stagnant investment; and sluggish consumption levels. The Celtic tiger has also experienced rising levels of inequality.
O'Hearn suggests that, since Ireland's economic growth now depends more than ever on the state's ability to attract multinational corporations and, in turn, these companies' ability to export to Europe, Ireland has little room to move. Some economists argue that Asia's solution to its economic crisis is the crisis itself: falling exchange rates cheapen Asian goods and make them more saleable abroad.
Unlike Asia, Ireland has no such "fixes" for a demand crisis. Its exchange rate is tied to the EU currencies. The demand for products made in Ireland is at the whim of currency movements determined elsewhere.
In late 1997, Ireland's vulnerability was highlighted when the computer firm Seagate moved its major disk-drive manufacturing plant from Ireland to Asia, resulting in 1400 job losses in Ireland.
The vulnerability of the economy was further shown when the share price of its most important multinational investor, Intel, fell by 25% in less than one week.
Intel and the rest of the high-tech electronics companies were suffering from global structural problems. Prices and profits were falling rapidly. The computer companies that reported losses or drastically reduced profits in 1998 were those driving the Celtic tiger: Intel, Compaq, Motorola and Hewlett-Packard.
Ireland's ability to attract and maintain foreign projects could be restricted further with the possible expansion of the EU over the next few years. The new EU periphery in eastern Europe will provide highly educated, low-wage, work forces.
Study after study has found that without strong indigenous sectors, economic growth such as that in Ireland recently is unsustainable. With global economic contraction and the expansion of the EU, the Irish state will find it increasingly difficult to maintain existing multinational corporations in Ireland, never mind attract new ones.
Moreover, the rules of European Monetary Union and the Uruguay round of GATT have removed from states such as Ireland the very instruments that make effective economic intervention possible.
While the media barons and other friends of big business trumpet Ireland as the Celtic tiger, poverty levels have increased. Ireland's GDP grew by 80% between 1977 and 1994, yet a "social progress index", based on 15 factors ranging from infant mortality and drug use to housing needs and medical coverage, found that social progress had advanced by less than 1% over the same period.
Such statistics explode the myth of the Celtic tiger .