Fourthwrite ..........................Issue No. 12

Demise of the Celtic Tiger

By Maureen Gallagher

For a number of years the Republic of Ireland was hailed as the ‘Celtic Tiger’ – a west European version of the booming economies of South East Asia, with growth rates the highest in Europe. However behind the impressive façade there always lay a more mundane edifice. The actual economic structure that supported the phenomenal growth was in reality weaker than most other EU states. The crisis in the US economy now is having a huge knock-on effect here, exposing the true status of Ireland as a dependent economy.

The southern Irish economy grew in the first quarter of 2002 after plunging to near negative growth at end 2001. Pharmaceutical exports provided the major stimulus in this expansion, with Viagra production one of the few sectors of the economy thriving at present.

By comparison output in the electronics industry is down by almost half. This year 5,200 jobs have been lost in the ICT sector, which is dominated by foreign multinationals (especially US). Electronics firms such as Flextronics, Solecton, Sanmina, Braun, Tellabs have all cut jobs or closed down, many moving operations to lower-labour cost Asia.

Recent years of Tiger growth had seen a consumer frenzy with more disposable income in people’s pockets due to tax cuts and wider tax bands. New malls and shopping centers built in the late 90’s were well set to take advantage of this increase in spending. UK retailers began to look to Ireland to expand. Boots, Debenhams and Dixons all made their appearance while Marks & Spencer opened up new outlets outside Dublin.

Cars also exploded in the 1990’s. More BMW’s and Mercedes Benz were being registered. By 1999 the figures were 2600 and3500 respectively. There were no new Porsches registered in 1995. In 1999 there were 30. People have been building up a debt mountain with more and more credit card users coming on stream.

Inflation in Ireland is running at double the EU average, and these figures do not take into account the prohibitive cost of housing. Due to tax incentives adopted by the last government, investment landlords have kept the housing market prices high, with the result that many middle income people who in the past could afford to own their own house now cannot afford to do so. Many people are buying houses in the Dublin hinterland counties thereby creating huge traffic problems not to mention social changes in the communities they settle in.

There will be a budget deficit of almost one billion Euros or more with income tax receipts down due to job losses. Already the government has signaled its plan to cut in public services and has begun the surgery already in the Western Health Board.

The cost of third level education has been increased so much that it has brought thousands of students onto the streets for the first time in years. A winter of discontent looms large.

It was easy for the southern Irish semi-colony to survive and prosper in the context of a long upward cycle of development dominated by the most dynamic sectors in the most dynamic imperialist country (the USA). But a country’s status in the world economy is revealed by how it reacts to contraction. With the already saturated computer and semiconductor industries now retrenching and withdrawing to cheaper locations especially in unskilled and semi-skilled jobs, the Celtic Tiger has become a threatened species along with the Asian variety.

The sobering truth is that Ireland remains a semi-colony. It is a country whose economy is fundamentally at the mercy of patterns of investment, finance and trade, the shape and direction of which are determined by the small group of countries that monopolise the world’s reserves of capital and are home to the dominant multinational companies, i.e. the big 7.

The loser in the growth and rise of the Celtic Tiger, was the Irish working class whose sacrifices in terms of lower wages, erosion of union rights, a declining rate of industrial action enabled massive profits of the bosses and contributed in creating an ever greater gap between rich and poor. It must ensure it does not lose out in the downturn.