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The Rise and Fall of the Celtic Tiger

The Rise

What was the Celtic Tiger? It was a period of economic development and growth in the 1990s that had an impact on Irish society that reverberates to this day. As a country that has dealt with extreme poverty pre-20th century and moderate poverty in the 20th century, the Celtic Tiger was a stark anomaly in rapidly improving key economic performance indicators for both the macro and micro levels. Ever since this inflection point, the Irish consensus sanctified the policies associated with the Celtic Tiger. But what exactly were those policies? We know there was strong growth, but why was there strong growth?

The conventional story is that Ireland, after decades of isolationism and protectionism, finally opened its doors to the global community. It liberalized its economy. These circumstances flowered into a high growth economic trajectory. Low corporate tax rates, foreign direct investment (FDI), foreign free flow of capital, interconnection to global supply chains, and relaxation of protectionist schemes all produced this new economy. The results were higher access to credit, jobs, and customers, as well as inspiring Irish people to be more entrepreneurial. But is this story… correct?

Let’s review the timing of the alleged causes. First, the Irish low corporate tax regime was started in the 1950s. It continued to evolve over the years with the addition of T.K. Whitaker’s 1958 “Economic Development” liberalization plan. It attracted multinational corporations such as General Electric in 1963 and Apple in 1980. Second, Ireland joined the European Economic Community in 1973 which meant an increase in the integration of Ireland with the rest of Europe. These trends emerged in Ireland much earlier than the 1990s however we don’t associate any other period since the 1950s with the same transformative effects as the 1990s’ Celtic Tiger. So while the conventional reasons for the Celtic Tiger may be sufficient contributing factors, it is not conclusive that they were the necessary factors to stimulate the growth.

The main argument of this essay is that the Celtic Tiger was caused by: 1.) manufacturing 2.) manfuacturing in the right industrial sectors and 3.) manufacturing done by indigenous Irish firms. Starting in the 1980s, there was a deliberate policy to encourage manufacturing activities in the emerging information technology sectors. This meant Irish workers created computing hardware and software. As a case study, Intel — the world’s largest semiconductor chip manufacturer and supplier of computing components — came to Ireland in 1989, built a manufacturing plant, and produced its first chips in Ireland by 1993. Another case study, Havok was a software company founded in 1998 that pioneered computer generated graphics. Its technology is used across all major video game platforms and even in the movie world. Examples like the video game Halo and the film The Matrix wouldn’t have been possible without Havok’s technology. Coincidently, Havok was later acquired by Intel. These two examples were emblematic of the general trend of the Irish economy benefiting from manufacturing real goods in a new industrial sector.

The secret of economic growth is to continuously direct the economy towards activities that produce increasing returns to scale. This is important because for every additional input you get more output. These activities are usually related to novel, innovative, and rare technologies because competition is very low at the start of an invention cycle and thus naturally immune to competitive emulation. After a certain period of time, competitors figure out how to emulate and distribute the new technology across the global economy. At the tail end of this cycle, the returns are reduced as the new value has been appropriately absorbed. It is a well-established contention in economics that under perfect market competition, profits approach zero. Thus, the objective of any economist interested in understanding the catalysts of economic growth is to find windows of opportunity (as discussed by David Sainsbury) in new technology sectors that are by default imperfectly competitive. In his book, How Rich Countries Got Rich ... And Why Poor Countries Stay Poor, economist Erik S. Reinert wrote:

“the key mechanism to wealth is not manufacturing per se, but activities subject to increasing returns, technological change, and consequent dynamic imperfect competition under high barriers to entry…Generally increasing returns goes with imperfect competition; indeed, the falling unit cost is one cause of the market power under imperfect competition. Diminishing returns – the inability to extend production (beyond a certain point) at falling cost – combined with the difficulty of product differentiation (wheat is wheat, while car brands are very different) are key elements in creating perfect competition in the production of raw material commodities. The exports of the rich contain the ‘good’ effects – increasing returns and imperfect competition – whereas traditional exports of poor countries contain the opposite, the ‘bad’ effects.”

The growth of sectors with increasing returns to scale also has economic spillovers. An economic spillover is like a ripple effect in a body of water. The bigger the original value creation was the larger the subsequent ripples through the adjacent economic sectors will be. It creates synergies between itself and the other adjacent sectors. Those supporting sectors may even develop new technologies themselves with the increased division of labour, skill of labour, and availability of capital. This creates a virtuous cycle of economic growth.

Reinert is also no mere bystander but a unique contributor to the Celtic Tiger policies. In 1980, the globe-trotting Norwegian economist worked for the consulting firm Telesis and found himself of all places sitting in the office of Ireland’s Prime Minister Charles Haughey. Reinert was tasked with advising on a future Irish industrial plan. He paraphrased Haughey’s vision: “out there is a new [information] technology coming, and I want you to help Ireland be number one in that technology.” Reinert’s analysis and recommendations were published in 1982. It summarized:

“the creation of wealth in an open economy requires continual restructuring of industrial activities towards businesses which allow higher value added per employee, attaining higher productivity than others participating in these higher value added industries, and maintaining high levels of employment. Some industries are not subject to international trade. In the analysis a distinction is made between traded and non-traded activities. Non-traded business include services which are usually localized within a country or a region of a country, such as health care, goods distribution, public administration, and house improvements that can be achieved through increased production scale are not great enough to offset the increased costs of distributing the product to a foreign country…For an economy such as Ireland’s, which is small and very dependent on world trade, industrial policy must focus on traded goods and on the non-traded industries such as infrastructural activities, whose inputs are crucial to competitive success in the traded-goods areas…The goals of industrial strategy for traded businesses in a developed country trying to achieve high international income levels are to…continually restructure industry to phase out businesses which are becoming subject to competition from low wage countries…gain competitive productivity advantage in selected manufacturing businesses vis-a-vis other developed countries. (Wage rates or investment and tax subsidies can be used to gain advantage initially but they must be replaced by productivity advantage if incomes are to rise.)...Maximizing absolute productivity improvements is of prime importance…The keys to successful restructuring toward higher valued added businesses are a skilled white-collar workforce, a skilled blue-collar workforce, a sufficient number of indigenous] organizations which are internationally competitive and physical infrastructure.”

The report identified qualitative differences in economic activities. It suggested looking towards industries that could enable Irish firms to be internationally competitive. It placed importance on productivity enhancements that could outlive short-term financial incentives. It also placed emphasis on domestic industrial development. “Successful indigenously-owned industry is, however, essential for a high-income economy. No country has successfully achieved high incomes without a strong base of indigenously-owned resource-based or manufacturing companies in traded businesses.” It specified the type of sectors to focus on too. “The electronics industry in Ireland is growing rapidly and many of the companies are highly profitable. The industry ranks well in terms of viability in the near future.” Finally, its directives to the Irish government were to be more active and selective. It recommended supporting domestic firms in the productive traded activities that were strong rather than new or weak firms to build on existing success. It wasn’t a startup strategy, it was a scaleup one. The government was advised to create a variety of industrial support programs in financing, skills, labour, and more.

The Irish government considered Telesis’ advice carefully. For example, one can read through the Dáil debate transcripts in 1984 and 1985 that discussed the details. “Electronics”, “software”, “computing”, “information technology”, “telecommunications”, and “engineering” were all key sectors that the Irish policymakers prioritized. Manufacturing and domestic firm scaling were also highly mentioned. The trajectory of Irish economic policy followed along these lines through the rest of the 1980s and 1990s. In a 1996 report prepared for the European Commission, researchers from University College Dublin and The Economic and Social Research Institute corroborated Telesis’ impact on Irish economic policy. The 1996 report also concluded that Ireland’s tremendous economic growth was largely caused by a state-led industrial policy that emphasized domestic manufacturing in new sectors like electronics, computing, and information technology. They provided significant evidence to conclude that the Telesis-influenced industrial plan was successful:

  • Between 1988 and 1995, employment in indigenous Irish firms increased by 3% more than in most EU countries, whose industrial employment declined on average over the same period.

  • By 1992, 35.6% of indigenous Irish industry output was exported, which was up from 26.6% in 1986. The value of indigenous manufacturing exports, in dollar terms, increased by an average of 16.9% per year in the period of 1986-1992, compared with an average annual increase of 11% for the manufacturing exports of the EU.

  • Total Irish manufacturing employment has shown relatively strong growth, with an increase of 14% in the period 1987-1995, compared with an overall decline for the EU.

Furthermore, they centered the story of growth on the active participation of the Irish government in shaping the private sector with various selective support programs. This selective pressure, complemented by scale-up oriented resources, is what produced the Celtic Tiger. Foreign multinational companies played a part but not the same transformative role as the Irish government.

Other secondary sources provide further corroboration. Michael Taft — an economic researcher for the Services Industrial Professional and Technical Union (SIPTU) — wrote, “they targeted multinational corporations (MNCs) in very specific, high value-added areas (electronics, pharmaceuticals, chemicals, software, etc.)...This wasn’t a self-selection process — it was a deliberate targeting of sectors.” Maynooth University Professor of Sociology Seán Ó Riain described these policies as deliberately coordinated to induce growth in the information technology sector through programs like extensive grant-giving, multi-faceted startup resources, government-run Industrial Development Agency (IDA), government-run Enterprise Ireland, and the suite of benefits offered to multinationals to setup facilities in Ireland. According to Ó Riain, “the state was placed at center stage in industrial policy by its efforts to continually upgrade these ‘factors of production.’ It took on the role of ‘midwife’ to foreign investment. These policy and institutional changes had the desired effect of attracting extensive amounts of foreign investment, including such software firms as Microsoft, Lotus, Novell, and Corel.” New indigenous firms in the information technology sector also started to pop-up around the large multinationals. The state played a key role in providing funding and resources for these local firms most notably through the IDA and Enterprise Ireland. It must also be noted that the much glorified low corporate tax rate had a manufacturing emphasis. Ernst & Young’s Aidan Walsh pointed out that in 1981 Ireland introduced an effective corporate tax rate of 10% for “manufacturing activities.” This priority on manufacturing combined with the specific attraction and development of sectors with increasing returns to scale was clearly the unique driving factor of the Celtic Tiger rather than just the abstract and agnostic notion of economic liberalization. These conclusions don’t escape some of the Irish mainstream intelligentsia too. The New York Times celebrated Irish journalist Fintan O’Toole remarked in his book Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger:

“this was a new way for a country to get rich: Ireland became far more dependent on foreign investment for its manufacturing base than almost any other society. By 1999, half the manufacturing jobs were in foreign-based companies compared to 20 per cent for the EU as a whole. But it seemed to work. At the end of the 1990s, Ireland had become the largest exporter of computer software in the world. The overall value of exports more than doubled between 1995 and 2000. In the ten years to 2004, the growth of Irish national income averaged over 7 per cent, more than double that of the USA and almost triple the average growth rate in the eurozone.”

Taken together, all these scholars generally conclude the same thing. The Celtic Tiger was caused by the Irish economy shifting into high value added manufacturing, namely information technology, which was assisted in large part by a forward-thinking and entrepreneurial state which directed it.

We have established that the conventional story, that economic liberalization caused the Celtic Tiger, is incorrect. While the attraction of foreign direct investment (FDI) was helpful it was not exclusively related to the growth. If that FDI went towards activities with constant or decreasing returns to scale, there would be no growth. The conclusive and significant factor that drove the Celtic Tiger was state-led policy that put emphasis on domestic manufacturing activities in sectors with new innovations and increasing returns to scale. While the multinational provided technology, capital, and jobs, it was more so their helpful role as the initial tinder to light the spark of indigenous firms that was stimulating growth. Most highly developed countries have followed a similar path. In his book, The History of Japanese Economic Development, Kenichi Ohno wrote, “in the early twentieth century, a number of automobile and electrical machinery companies signed licensing agreements and technical cooperation contracts with Western firms. However, in such cooperation the Japanese partners quickly absorbed needed technology and often dissolved the relationship with the Western partner.” The 1990s for Ireland were the culmination of the Irish government’s direction of the economy into specific high tech sectors of manufacturing that leveraged applicable foreign multinational corporations as launchpads for indigenous firm development.

The Fall

Now, that the rise of the Celtic Tiger is properly explained, we can review its fall. The following sections will analyze data mainly compiled by Ireland’s Central Statistic Office (CSO). It will focus on Irish labour employment by sector. The changes in the composition of Irish sectoral employment from 1998 to 2022 highlight the role manufacturing activities played in the rise of the Celtic Tiger and, unfortunately, their diminishment explains why the Celtic Tiger fell.

Using this data, this essay will argue that in the late 1990s and early 2000s the Irish economy shifted from tangible growth (as described above) to intangible growth. Growth was stimulated through unproductive credit expansion in the property market. Although this illusion was revealed in the crash of 2008, the Irish mainstream continued to suggest the Irish economy was improving in step with precedents set by the Celtic Tiger. It was alleged to be improving so much that Ireland was really a knowledge economy of high-skilled service workers and that any manufacturing orientation was passée. In actuality, as those manufacturing jobs, that built the Celtic Tiger, were eroded only some palliative ones replaced them. Ultimately, only a minority of Irish elite workers gained from this deindustrial process by mostly metastasizing the tax incentive programs into a parasitical international financial tax laundering racket. Most Irish were stuck in low to no growth sectors with only the diminishing fumes of the Celtic Tiger propping up prosperity.

Today, many Irish people feel like the society is being hollowed out. There is a housing crisis, an energy crisis, a transportation crisis, a jobs crisis, etc. You name it, there is a crisis. The cause is that a minority of Irish elites sacrificed the broad Irish economy in order to make outsized profits for themselves. These elites could really be that selfishly corrupt but perhaps a more likely rationale is that fueled by neoliberal quasi-religious economic axioms these elites figured that one day their profits would trickle down to the rest of the Irish economy. Whether intentional or negligent, it is imperative that the Irish nation either constrain the selfish behavior of these elites or dispel the ideological haze they inhabit.

The CSO records for this subject only go back to 1998, so another source will be used to provide background context. The 1996 European Commission labour report, mentioned earlier, provided statistics shown in Figure 1. It showed Irish workers employed in the manufacturing sector from 1981 to 1995. The early 1980s show a decline in manufacturing that coincided with the Irish debt crisis and recession. However, the trend changed in the late 1980s as manufacturing increased. From the low of 1986 to 1995, Irish manufacturing increased by 11.54%. It also must be pointed out that the composition of manufacturing activities also changed. For example, the proportion of textile manufacturing declined while the proportion of information technology manufacturing increased. That is why the seemingly high level of manufacturing in 1981 wasn’t as optimal. Thus, in the late 1980s, the Irish economy transitioned into increasing manufacturing in information technology sectors with better growth potential. Relatively, manufacturing represented approximately 20% of those employed in the Irish economy through this period. As we can see from Figure 2, the 1998 starting point for industry (synonymous with manufacturing from Figure 1) also has a 20% value. It is currently at 13%. This decline was camouflaged by the early increase in construction employment related to the property boom. The bust can be clearly seen and construction has remained stagnant since.

In Figure 3, the broader sectors are broken up into more precise categories using the European Union’s NACE schema. One can easily see that agriculture was also a big loser dropping from 9% to 4%. Knowledge service jobs were a low percentage of employment to start with and increased. Information and communication (tech) went from 4% to 7%. Professional, scientific and technical activities went from 5% to 7% (lawyers). Financial, insurance and real estate activities (accountants) went from 4% to 5%. Support services, shown in Figure 5, also saw growth. Human health and social work activities drastically grew from 8% to 13%. Education grew from 6% to 8%. Finally, those employed in the commerce services like retail and food services remained very constant but showed a dip in response to the Covid lockdown years. Using Figure 6, we can see the top and worst performing sectors. The top two were information and communication with 70% growth and human health and social work activities with 63% growth. The bottom two were agriculture with a 51% decline and industry with a 38% decline. It appears that manufacturing took a drastic hit but the knowledge services along with other support services replaced it. However, we must inspect the validity of sacrificing that much manufacturing, the tangibility of those sectors that grew, and any anomalous population shocks to Irish society.

A healthy economy has a general mix of the three big sectors of agriculture, industry, and services at 5%, 25%, and 70% respectively. These levels vary depending on what developmental stage a given country is at. A very poor country would have a higher amount of agricultural workers employed while a very rich country would have a very low percentage employed. As a country develops it will seek to add more services but there will usually be a floor of around 20% of the economy still manufacturing. As we can see from Figure 7, countries like Japan and Germany maintain services at both 72% and industry at 24% and 27%. Countries like South Korea and Taiwan may be more appropriate parallels to a small country like Ireland. They maintain services at 70% and 60% and industry at 25% and 35%. Ireland comes in at a whopping 77% for services and 19% for industry (when measuring across these three broad sectors industry includes construction which augments the previous 13% manufacturing value seen in Figure 2). These are very much outlier values. The EU average for services is 71% and for industry is 25%. Ireland is anemically below where it should be for manufacturing and overextended into services. This is even more significant because Ireland did not develop as early as many other countries. Ireland really only started catching up to the rest of its peer countries in the late 20th century. Thus it never built up a substantial industrial foundation to then advance to more services. Countries like the United States are able to have such a high level of services and low level of manufacturing because they’ve been very rich for so long from intensive manufacturing. Ireland very prematurely shifted its economy from developing a foundation of manufacturing to deindustrializing itself into an unhealthy dependency on services.

While this imbalance is clearly shown in the data, it might be possible to explain it away because Ireland is a small economy and was able to master knowledge services in the global market. It’s incumbent upon us to explore that contention. Information and communication is the formal term used to describe the tech economy. The tech economy has been heralded as Ireland’s comparative advantage. If you listen to Irish politicians too much you may think every Irish person is a computer scientist. There are unfortunately key problems that are observed when looking closer at this tech economy in Ireland.

Information and communication or tech is a broad term to describe a sector for employment. There are many different types of roles that work in tech. Not all of them are computer scientists. Editor of the Finfacts business blog, Michael Hennigan wrote “many of the new jobs in foreign-owned tech companies have been in the areas of sales and general administration, and call centre support.” Much of the employees of multinational tech companies in Ireland are not actually performing tech-related activities. This is important because the actual creation of new tech hardware or software is where the value creation starts. If the critical job functions of research and building aren’t occurring in Ireland than less value is being created. According to World Bank data, Irish domestic value added as a share of gross exports has actually declined from 60% in 1998 to 51% as of 2014 (shown in Figure 8). This makes it one of the lowest in the world. This transition from value creating manufacturing jobs to ancillary service jobs has actually led to a situation where there is less Irish value being produced.

Additionally, without tech-builders there are less opportunities for economic spillovers. A computer programmer can work 5 years at a tech multinational company and then quit to start their own firm with high growth potential. The service jobs that Hennigan described have a much harder time doing that. Hennigan further suggested that the lack of R&D investment by the multinational firms in Ireland was evidence of this non-tech tech economy. As a case study, let’s just look at a recent high profile multinational firm that is seeking to setup an engineering hub in Ireland: Stripe. It must be said that while the American-founded and run company sees a business logic to this decision, the Irish-born co-founding brothers might be motivated by more emotional and cultural reasons (not that there’s anything wrong with that). So even in this case, where the company explicitly states they want to make an “engineering hub” and has a long-standing cultural affinity to inspire it, it still reveals Hennigan’s general point that Ireland’s tech sector is severely lacking real tech jobs. They plan to add “hundreds” of engineering jobs along with “1,000” non-engineering jobs on-top of their existing 400 person staff in Dublin. Assuming those 400 jobs are non-engineering, let’s say that Stripe will add about 300 engineering jobs with a total staff of 1,700. Thus, 17% of their staff will be engineer roles. This is a statistic from a company that is pushing to maximize engineering jobs in Ireland. We can imagine that for those multinationals that are not actively trying to locate their engineering talent in Ireland have even smaller shares.

Hennigan also wrote how the problem is compounded by the non-hiring of actual Irish labour. “Many positions have to be filled from overseas as multilingual skills are required.” This highlights how actual STEM-oriented skills are not the primary need for tech companies in Ireland. Instead, they need relatively low to medium skilled labour versed in foreign languages. If you’re a call center for the EU, then you need to speak all the languages of the EU. This has led to the importation of migrant labour from the EU to fill these positions. Henningan estimates that these tech firms’ staffs could be composed of 50-70% non-Irish labour. The New York Times’ chief European business correspondent, Liz Alderman, wrote:

“not enough people are qualified to fill all the jobs. In some cases, the companies have had to look outside Ireland to recruit candidates with the right skills…The issue peaked last summer, when PayPal’s chief executive in Ireland, Louise Phelan, stoked controversy by acknowledging that the company had recruited from 19 other countries for 500 positions in its operations center in Dundalk because of a lack of foreign-language skills among Irish nationals. This summer, Fujitsu, which employs 800 people in Ireland, revealed that it had to hire most of its Ph.D.-level experts from abroad. All told, around half of information technology jobs in Dublin were being filled with foreign workers, while around 4,500 information technology jobs in the country were going unfilled because of a limited supply of suitably skilled applicants”

A few astounding corroborations from this quote. Foreign-language skills are highly demanded. 50%+ of tech jobs in Ireland are filled with foreign-workers. There was still a shortage of qualified applicants for the tech jobs even though Ireland has one of the most educated workforces in the world. The share of 30-34 year olds in Ireland with a third level qualification is 53.5% compared to an EU average of 40% and almost 30% of students are enrolled in STEM courses.

The honest appraisal of the Irish tech sector is that it is largely a sham. It creates jobs in low to medium skilled activities and hardly employs actual Irish people to boot. While the tech sector derives value from having call-centers in Ireland, the real value for them is to launder revenues made in other countries into Ireland to avoid paying taxes. Nobel-winning economist Paul Krugman coined the term “leprechaun economics” to describe the phenomenon. It is simply multinational corporations performing legal and accounting tricks. This also explains the slight growth in professional, scientific and technical activities (lawyers) and financial, insurance and real estate activities (accountants), shown in Figure 4. The Irish government even admitted the superfluousness of the Irish tech sector when they, in response to international criticism, released a new metric called Modified Gross National Income (GNI*) to better measure the real Irish economic output as the regular GDP number was made erroneous by all the multinational tax laundering. The GDP/GNI* ratio stands at 179%, as of the latest data from 2020. Figure 9 shows how this trend has risen in the past few decades. It is expected to only increase for the past two years because the covid period produced massive multinational profits that will be laundered in Ireland as well as a sharp downturn in domestic economic activity due to lockdowns.

Do other more precise metrics showcase the hollowness of the Irish tech economy driving real Irish economic growth? Yes. According to Eurostat:

“actual individual consumption, abbreviated as AIC, refers to all goods and services actually consumed by households. It encompasses consumer goods and services purchased directly by households, as well as services provided by non-profit institutions and the government for individual consumption (e.g., health and education services). In international comparisons, the term is usually preferred over the narrower concept of household consumption, because the latter is influenced by the extent to which non-profit institutions and general government act as service providers. Although GDP per capita is an important and widely used indicator of countries’ level of economic welfare, consumption per capita may be more useful for comparing the relative welfare of consumers across various countries. AIC per capita is usually highly correlated with GDP per capita, because AIC is, in practice, by far the biggest expenditure component of GDP.”

Figure 10 shows a map of European AIC scores. In 2021, Ireland is below the EU average in AIC. While Ireland’s GDP per capita would position it as one of the richest nations of all Europe, its AIC places it far behind its western European neighbors and closer to peers like in lesser developed eastern Europe. Ireland also has the highest at-risk-of-poverty rate before social transfers, north of 30%, of all the EU. Figure 11 shows this distinction among the rest of the EU. These disappointing statistics are made worse by how grand the Irish economy is suggested to be by the Irish mainstream. The disparity between the lofty marketing numbers and hard measures of reality is gigantic.

Now that current iterations of the Irish tech sector and its adjacent sectors in knowledge services have been debunked, we should explore key contextual elements of Irish society during this period. Understanding certain population dynamics will better help elucidate trends in sectoral employment and in other economic indicators. The two main changes of this period are drastic increases in the female labour force participation rate and immigration.

In 1990, the female labor force participation rate for the EU was 42% while Ireland’s was 35%. As of 2021, Ireland now matches the EU rate of 46% from a growth rate of 31%. Figure 12 illustrates this catching up of Irish female labour force participation. This means that there was a tremendous influx of females entering the labor force. If we compare the growth of the female labour force participation rate, the sectors of employment that are dominated by females, and the sectors that received the most growth while also being relatively larger total shares of the labor supply, it becomes apparent that new female entrants were not uniformly entering all sectors. Figure 13 shows the gender breakdown of each sector. The human, health, and social work activities sector is 13% of the Irish labor supply and grew from 1998 to 2021 by 63% (as shown in Figure 6). Females make up 80% of that sector. In an adjacent sector, education is 8% of the Irish labor supply and grew by 40%, and similarly is disproportionately 74% female.

As of 2019, the manufacturing industry was 70% male, agriculture was 86% male, and construction was 92% male. As noted earlier, the manufacturing industry took one of the biggest decline across all sectors. It decreased from making up 20% of the labour force in 1998 to only 13% in 2021. Additionally, agriculture went from 9% to 4%. Construction went from 7% to a high of 11% in the housing boom and settled at 7% again in 2021. Construction is unique because it had the ability to absorb those once in manufacturing while also accepting an influx of mainly Polish semi-to-low skilled workers. Figure 14 shows the increase in Polish applicants for Irish personal public service numbers as a measure of this growth. This means that the parity of 7% doesn’t reflect reality because construction became a destination for substitute blue-collar workers as other sectors declined while the supply of blue collar workers increased due to Polish migration. From a bird’s eye view, Irish males in the labour force were getting squeezed by the collapse of their main sectors of employment and increased competitive pressure from migrants.

Over the past 2 decades, Ireland has increased its population from 3.9m of 92% Irish to about 5m of 82% Irish. 512k more Irish and 588k more non-Irish were added to the total population of Ireland. The additional high immigration added more competition to the job market at the same time as certain jobs became more scarce. This push explains the above pressure in construction but also across the economy in general. As noted earlier, the tech sector in Ireland employs 50-70% non-Irish labour. Competitive pressure in the supply of jobs is not the only feature of this increased immigration. The large influx of non-Irish, that have a higher propensity to require social services, has created a demand for a larger portion of the population to be supplied to the social service and adjacent sectors. For example, the homeless population is composed of 75% Irish and 25% non-Irish. The total population of Ireland is composed of 82% Irish and 12% non-Irish. These observations tell us that non-Irish are 2 times more likely to be homeless while the Irish are less likely to be homeless. We can also extrapolate that non-Irish generally require more social services and state supports.

It appears to be that an economic structural change in Ireland was shaped by gender and migration. The major sectors of employment that declined the most were dominated by men and the major sectors of employment that grew the most were dominated by women. The displaced men were also more likely to be unemployed and face worse economic setbacks. This would lead to some of them and their families funneling into conditions of poverty like homelessness. The homeless crisis has emerged as one of the most critical issues facing Ireland. The Irish homeless population has gone from about 1,500 (Data collection was not collected precisely back then. Estimate can be drawn from Irish Times and Independent) in 1998 to 2,858 in 2014 and 7,014 in 2022. The homeless population increased by 4.6 times. We can also use this as a general heuristic for other growing social problems of desperation.

In a self-reinforcing feedback loop, the displaced men created the demand for more female social workers which provided a gender preferenced outlet for socio-economically emancipated women that were in need of work. This was combined with the introduction of non-Irish migrants that further reduced employment opportunities for the male Irish population as well as required even more support services like social work. The surprising conclusion of increased female labour force participation is that it did not evenly distribute across sectors of employment. Rather than equalizing the gender disparities across all sectors, females filtered into specific sectors. Those sectors, while important, are support services that don’t create significant value in traded business as earlier described by Reinert. To use an analogy, they are jobs that plug a leak in deteriorating boats, rather than jobs that build new boats. This is not the fault of Irish females, but the fault of Irish government asleep at the wheel. The newly working females should have been directed by the government into all sectors at more uniform proportions.


So what did we learn? The Celtic Tiger was caused by a state-led industrial development plan. This plan directed economic activities towards areas that were prone to increasing returns to scale and internationally traded business. The activities most appropriate for this agenda in the 1980s were in the electronics, computing, and information technology sectors. Foregin multinational firms in these sectors were financially incentivized to operate in Ireland. Those operations transferred capital, technology, and skills to Ireland that improved the Irish capital and labour pools. In addition, Irish firms began to startup and scaleup around these foreign multinationals. The Irish government was an active and selective nurturer of these proven Irish businesses.

Then that changed in the late 1990s. The industrialization plan was tossed aside for a deindustrialization one. Manufacturing activities were drastically decreased. The new solution was to move Ireland to high tech services but it proved illusory. Those knowledge service activities in the tech economy were low to medium skill administration, sales, marketing, and customer support activities. Very minimal critical R&D, engineering, and building of high tech software went on in Ireland. On top of that, of what jobs there were in this so called tech economy, 50-70% of them went towards non-Irish labour. A minority of elite accountants and lawyers in Ireland benefited from mutating the original intention of the foreign multinational aspect of the Celtic Tiger into one that only enriched their pockets at the expense of broader Irish society. The Irish economy was one in which there was the potential for Irish firms to rival the global tech giants. Where is the Irish equivalent of Apple, Amazon, or Uber? Furthermore, as the Celtic Tiger’s manufacturing base was eroded, labour supply shocks from the increased female participation and immigration rates distorted the employment structure of the Irish economy. Activities that created high levels of domestic value were traded for those that did not. Competitive labour supply pressure also exacerbated the main problem of deindustrialization.

This essay has satisfactorily described both the rise and fall of the Celtic Tiger. Further research needs to be done into the exact stimuli that motivated Irish elites to change course. Earlier in this essay, reasons such as selfishness or bad ideology were given. Other scholars might suggest that Irish wages simply got to high from the success of the 1990s. It was allegedly impossible to keep up competitive manufacturing in the global market with wages rising higher than other alternative lower wage countries. This is a worthwhile question to pursue for another essay but here are a few brief points on it. Every single developed country had to pass through the inflection point where wages were rising to uncompetitive levels. Those countries figured out how to keep their manufacturing and expand into high skill services. Why couldn’t Ireland? In fact, from the review of Irish success in the 1990s, it seems like Ireland was well on its way toward jumping over that hurdle. Furthermore, high wages wasn’t “the fundamental reason”, according to some thinkers. For example, "Mayo's Henniges plant…[moved] to Germany, one of the highest-wage economies in the euro zone. A more fundamental reason is the globalisation of the industry and the fact that Henniges…[was] a fast-growing company which…[introduced] state-of-the-art manufacturing to its German factories.” So while wages are an important piece of the puzzle, they appear to be another sufficient but not a necessary cause of the fall.

The key lessons of the Celtic Tiger’s rise and fall should be taken seriously to advance new policy solutions. Irish policymakers should return to the thinking of their predecessors in the 1980s. They should return to the advice that Reinert and Telesis provided them. But they should also synthesize new scholarship that has occurred since that period. Many scholars have matured economic development studies in the past decades with ideas that could fill the gaps in the original plan that allowed an opening for the fall to occur. The author of this essay has written a 10 point industrial development plan for this next chapter in Irish economic history. More work would need to be done to audit existing Irish private and public sector policies and develop precise new additions. It might not be possible to recreate the Celtic Tiger but there’s nothing stopping Ireland from ushering the Celtic Phoenix.


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