The Celtic TigerThe Celtic TigerA Macro and a Micro ViewA Macro and a Micro View

Dr. Joseph McFaddenDr. Joseph McFadden

University of Saint ThomasUniversity of Saint Thomas

Houston, TexasHouston, Texas

The Celtic Tiger – A Macro LookThe Celtic Tiger – A Macro Look

In 2000, Ireland was selected as the In 2000, Ireland was selected as the most global nation in the worldmost global nation in the world

Two strong categories: economic Two strong categories: economic integration and personal contact with integration and personal contact with internationalisminternationalism

Ireland also ranked #1 on a recent Ireland also ranked #1 on a recent survey on a happiness scalesurvey on a happiness scale

A successful combination of A successful combination of globalization and happiness!globalization and happiness!

The Celtic TigerThe Celtic Tiger

Ireland began to flourish in the 90sIreland began to flourish in the 90s Positive response to the criticism of Positive response to the criticism of

the Whitaker Reportthe Whitaker Report Consultants had three strong Consultants had three strong

recommendations: break recommendations: break dependence on Britain, stop being dependence on Britain, stop being economic illiterates, and create a economic illiterates, and create a more favorable economic more favorable economic development climatedevelopment climate

Economic Progress in IrelandEconomic Progress in Ireland

The nation represents a true The nation represents a true economic miracleeconomic miracle

Is Ireland a model?Is Ireland a model? A pattern of dynamic economic A pattern of dynamic economic

success can be seen when success can be seen when comparing the pre-Celtic world with comparing the pre-Celtic world with the Celtic Tiger Worldthe Celtic Tiger World

Ireland – 1973 and pre-Celtic DaysIreland – 1973 and pre-Celtic Days

GNP – 59% that of the European GNP – 59% that of the European Community average!Community average!

Per capita income among the lowest Per capita income among the lowest in Europein Europe

61% of exports went to the UK, only 61% of exports went to the UK, only 9% to other European nations9% to other European nations

Agriculture: limited electricity and Agriculture: limited electricity and tractorstractors

Economic isolationEconomic isolation

Ireland – 1990s and BeyondIreland – 1990s and Beyond

GNP – grew by 73%, an average of GNP – grew by 73%, an average of 9% growth per year in a decade!9% growth per year in a decade!

Unemployment holding at 5%; Unemployment holding at 5%; Ireland imports workers, and 10% or Ireland imports workers, and 10% or more of the population is foreign more of the population is foreign bornborn

Exports – 68% to EU (22% to UK) and Exports – 68% to EU (22% to UK) and 15% to US15% to US

Irish middle class grew by 25%Irish middle class grew by 25%

Factors of Economic ProgressFactors of Economic Progress

Transnational ApproachTransnational Approach Laws and IncentivesLaws and Incentives EducationEducation TargetingTargeting Societal SupportSocietal Support National Partnership AgreementsNational Partnership Agreements European UnionEuropean Union

Transnational ApproachTransnational Approach

Welcoming companies that Welcoming companies that manufacture in Ireland for European manufacture in Ireland for European markets and beyondmarkets and beyond

New money is brought in, and New money is brought in, and companies borrow little or no money companies borrow little or no money from Irelandfrom Ireland

An explanation as to why Ireland’s An explanation as to why Ireland’s GDP is 25% larger than its GNPGDP is 25% larger than its GNP

Laws and IncentivesLaws and Incentives

Very attractive corporate income taxVery attractive corporate income tax Lowest corporate tax rate in the EU!Lowest corporate tax rate in the EU! Permits and protects a high rate of Permits and protects a high rate of

profitprofit Fiscal restraint to hold down inflationFiscal restraint to hold down inflation Minimal restrictions on business Minimal restrictions on business

operationsoperations Maximum integration into European Maximum integration into European

economyeconomy

EducationEducation

Heavy investment especially in Heavy investment especially in Secondary and third level education Secondary and third level education with paid tuition for all enrolledwith paid tuition for all enrolled

Emphasis on science and technologyEmphasis on science and technology Students earning admission have Students earning admission have

funding to support themfunding to support them Educational attainment established Educational attainment established

as a national priority!as a national priority!

TargetingTargeting

Ireland has targeted key business Ireland has targeted key business areas that are likely to remainareas that are likely to remain

Used tax and other incentives to go Used tax and other incentives to go after the markets they desiredafter the markets they desired

Key targeted areas: Computers, Key targeted areas: Computers, Pharmaceuticals, Electronics, Pharmaceuticals, Electronics, Telecommunications, and the most Telecommunications, and the most recent International Logistics and recent International Logistics and ShippingShipping

Societal SupportSocietal Support

Progress could not be achieved Progress could not be achieved without the people’s supportwithout the people’s support

High income taxesHigh income taxes Irish provincialism and ambivalence Irish provincialism and ambivalence

regarding capitalism have been regarding capitalism have been overcomeovercome

Globalization does not necessarily Globalization does not necessarily conflict with national valuesconflict with national values

National Partnership AgreementsNational Partnership Agreements

National agreements are negotiated National agreements are negotiated and voted on by the Irish Congress of and voted on by the Irish Congress of Trade Unions (ICTU)Trade Unions (ICTU)

A “National Partnership Agreement A “National Partnership Agreement Towards 2016” is in progressTowards 2016” is in progress

It places specific emphasis on social It places specific emphasis on social justicejustice

European UnionEuropean Union

Especially in the areas of agriculture Especially in the areas of agriculture support, infra-structure projects, support, infra-structure projects, transfer funds, and standardizationtransfer funds, and standardization

The kind of planning that other The kind of planning that other nations did under the Marshall Plannations did under the Marshall Plan

Throughout Ireland one can see the Throughout Ireland one can see the blue flag of the EUblue flag of the EU

Ireland identified as the Mississippi of Ireland identified as the Mississippi of the EU, and funds flowed inthe EU, and funds flowed in

ConcernsConcerns

Persistence of poverty, income Persistence of poverty, income disparity, acquired debt, and high disparity, acquired debt, and high unemployment among some unemployment among some segments of Irish societysegments of Irish society

How is economic progress affecting How is economic progress affecting Irish values?Irish values?

General EU concerns regarding unfair General EU concerns regarding unfair tax advantage that Ireland enjoystax advantage that Ireland enjoys

Contrast IR with NIContrast IR with NI

The Celtic Tiger – A Micro LookThe Celtic Tiger – A Micro Look

How did economic development work How did economic development work on the ground?on the ground?

Targeted industry: Logistics/Maritime Targeted industry: Logistics/Maritime ShippingShipping

Creation of the Irish Maritime Creation of the Irish Maritime Development Office (IMDO)Development Office (IMDO)

Purpose: to attract companies of the Purpose: to attract companies of the highest operating standards to highest operating standards to IrelandIreland

The Strategy in PracticeThe Strategy in Practice

Ireland conducted a thorough study Ireland conducted a thorough study of the history of the industry in of the history of the industry in questionquestion

They found archaic nationalistic They found archaic nationalistic requirements and a muddled requirements and a muddled Shipping Tonnage Tax situationShipping Tonnage Tax situation

As a response, Ireland avoided As a response, Ireland avoided restricting requirements and devised restricting requirements and devised an attractive Shipping Tonnage Taxan attractive Shipping Tonnage Tax

The Strategy in PracticeThe Strategy in Practice

Education is promoted in order to Education is promoted in order to stimulate careers in maritime stimulate careers in maritime industryindustry

Ireland has also attracted a small but Ireland has also attracted a small but highly qualified dedicated staff of highly qualified dedicated staff of young professionalsyoung professionals

This team tries to meet the real This team tries to meet the real needs of potential operators and needs of potential operators and develops relationships with clientsdevelops relationships with clients

Benefits for CompaniesBenefits for Companies

Lower corporative tax rateLower corporative tax rate Pro-business environmentPro-business environment English speaking Euro global economyEnglish speaking Euro global economy Open-minded, well educated Open-minded, well educated

employeesemployees Emerging maritime knowledge Emerging maritime knowledge

environmentenvironment Educational system geared to serving Educational system geared to serving

international companiesinternational companies

Benefits for CompaniesBenefits for Companies

New maritime college to provide New maritime college to provide skilled workersskilled workers

Opportunities to teachOpportunities to teach Assistance in infrastructure facility Assistance in infrastructure facility

needsneeds Office space in Dublin at attractive Office space in Dublin at attractive

ratesrates Attractive labor rulesAttractive labor rules Positive working environmentPositive working environment

Conclusions and CommentsConclusions and Comments

Having no strong history as a maritime Having no strong history as a maritime nation, Ireland is working hard to nation, Ireland is working hard to overcome the disadvantageovercome the disadvantage

Ireland provides the four requirements Ireland provides the four requirements for business abroad: security for for business abroad: security for employees, fairness in the playing employees, fairness in the playing field, a qualified work force, and field, a qualified work force, and business incentivesbusiness incentives

Conclusions and CommentsConclusions and Comments

Exportation of the Celtic Tiger model Exportation of the Celtic Tiger model is highly unlikelyis highly unlikely

Struggling nations can learn from Struggling nations can learn from Ireland, but the model must be Ireland, but the model must be adapted to specific conditionsadapted to specific conditions

Irish case study represents a Irish case study represents a remarkable improvement that has remarkable improvement that has placed Ireland in the forefront of placed Ireland in the forefront of globalization in the 21globalization in the 21stst century century