The Celtic Tiger - Irelan

The impacts of the "Celtic Tiger" on the Irish society.

1. Introduction

After years of economic underdevelopment, high unemployment and growing public debts, at the end of the twentieth century an economic boom had taken place in the Republic of Ireland. This economic boom began in the 1990s and lasted until 2001/2002 is known as ' The Celtic Tiger' alluding to the so called 'East Asian Tigers' which is the synonym for the rapid economic growth in Singapore, South Korea, Taiwan, Hong Kong and other East Asian countries in the 1980s and 1990s.

This essay will examine which impacts the Celtic Tiger provoked especially concerning the population of Ireland. As a first step one has to go back in time and concentrate on the history of the Celtic Tiger to understand the rapid developments in the 1990s.

2. The Pre-History of the Celtic Tiger

Ever since its independence from Britain in 1922 Ireland was considered as one of the poorest and economically weakest countries in Europe. This 'new state' had an economy like a Third World Country. There were only drink and food industries. It was a very agrarian society with very high rates of unemployment accompanied by mass emigration. This changed, however, in the early 1990s when Irish society started undergoing a huge transformation process. In this process Ireland was evolved into a modern country experiencing very high growth rates and significant drops in unemployment. Ireland turned from one of the poorest countries in the EU into one of the wealthiest. This transformation is known as 'The Celtic Tiger'.

The first crucial steps away from protectionism towards an open trade economy were made by the foundation of the Industrial Development Authority (IDA) in 1949 and the Anglo-Irish Free Trade Agreement in 1965, encouraging foreign investments in Ireland.

Since then, Ireland switched from an inward-looking to an outward-looking policy seeking to attract foreign direct investment (FDI) and encourage international trade in order to replace its dependence on the United Kingdom.

When Ireland became a member of the European Economic Community (EEC) in 1973, more and more multinational companies (MNCs) began to set up subsidiaries, allowing them to gain access to the European market, while benefiting from the country's low corporate tax rates.

But the oil crisis in 1973 made the economic activities difficult. Furthermore a major benefit for Ireland was due to the fact that the country is English speaking and culturally close to the US and therefore it 'attracts one-quarter of all US investment in the EU'.

3. Income and Housing

In general it is to say that the living standard of the majority of a nation may not have been improved if costs have risen faster than incomes.

In the 1990s there was a large increase in the per capita income in Ireland. Under the social partnership agreements with cut in taxes and low inflation the employees gross income and therefore also the disposable income increased. But it is also taken in account that since 1994 house prices have increased significantly. Especially in Dublin the house prices for which loans were approved, increased by 136% from 1994 to 1999. As a result home ownership decreased in availability for low-to-average income households and for an increasing number of middle-to higher-income households. Henceforth only the top earner can afford houses. This circumstance caused a significant growth, exactly by more than 250%, in personal credit and thus the personal debt also increased. A secondary action of this was that the interest rates went up which led to the fact that home ownership was more and more a 'vision' for non-top earners. In addition the greater demand for rental accommodations had driven up the price for these as well. That is why the most low-income families were forced to live in the cheapest and also worst residences. Adapted from higher incomes the private car ownership increased as well, but that pressurised the road infrastructure and the public transport system to improve because both were and sometimes still are in really bad conditions.

4. Taxation and Welfare

First of all it is to say that "the taxation and welfare system are key instruments through which governments can redistribute income and wealth". The fiscal policy of Ireland was another indicator which caused an increase in the income inequalities. The problem of the fiscal policy of Ireland is that mainly the higher income earners benefited most. Benefits of the top earners were for example reductions in tax for pensions and mortgage interest. The average earner and

even the low paid ones underwent an increase in average tax rate. Meanwhile the top earner underwent a decrease in the tax rate in a 15 years period. Therefore evaluating the redistributive effect of welfare payments it can also be seen that the fifth part of the poorest saw a decrease in their disposable income, because the wages increased on a higher rate than the welfare rates did. Thus the higher earners, which are already better-off, controversially benefited again from the fiscal policy of the state.

5. Employment

Employment is another indicator for measuring the living standard.

The fastest growing sectors between 1994 and 2000 were the service sector and the industry which have created the majority of new jobs. Industry presents a growth of 132.6% and the service sector presents an increase of 335.3%. It is also crucial to look at the sub-sectors of these two industries. A significant increase in jobs took place in the hotels and restaurant sector by 37.2% which is known for its low-wages. The minimum wage in Ireland is 8.30 euro per hour since the 1 January 2007.

6. Poverty

When examining