Celtic Tiger: Dead, Sleeping or Getting Ready to Pounce?
The things that Ireland did right during expansion are many. Starting with the EU, Ireland now had access to trade throughout Europe on a level it had only enjoyed before with the UK. This lead to a large trade surplus by the time of the crash putting many to work, standards of living to rise to second place in the European Union and an economy hungry for construction. At the same time Ireland pursued a program of promoting itself as a scientifically smart nation which was ready to take on the high tech demands of the world’s most sought after companies – which it succeeded in coaxing in; IBA, Apple, Dell and others all sought to relocate to Ireland. These US companies liked the fact that labor was cheaper, language barriers did not exist and there was a highly technical workforce waiting and willing. Good times continued to roll.
But therein may lay a couple of answers as to what went wrong. First of all was that Ireland may have become too anxious to adopt US standards particularly when it came to banking risks. Poor risk management on the part of banks led by the popularity of credit default swaps set Ireland up financially for disaster as soon as the balloon burst in the United States. At the same time Irelands government, some would suggest, placed all too much emphasis on the success of the construction industry and did not diversify enough of its assets. Hind sight is always 20/20 but it will be some time before construction comes back, leaving many without work or other training.
While the banking and construction crisis were bad enough the problem of the economy was not contained to Ireland so Irish export demand suffered greatly. At the same time that companies using Ireland exports halted demand they also began to search for cheaper alternatives. Ireland’s wages had also grown to second in the EU, leaving many to wonder if it could ever be competitive again as users of Irish goods began outsourcing to places like China were wages were and still are drastically cheaper.
Without being able to stand on its exports, in aligning its banking industry with that of the United States and with a huge reliance on one industry, namely construction, Ireland will be slow to rebound. Certainly it is not ready to pounce. It will recover at a rate much like the United States, certainly not a world leader at this point.
The Celtic Tiger is far from dead, however. Ireland does have a sound environment for the tech industry, one that is showing signs of rebirth. It is the tech industry that spawns creativity and historically the largest entrepreneurial spirit of all sectors. This, with the fact that Ireland has now experienced the appetite of a Tiger, means it is only a matter of time before pent up demand leads to at least a partial resurgence in the economy. Whether the Celtic Tiger awakens from its sleep with a voracious appetite will depend on how diversified it can become, how actively it can seek new markets for its exports, how well it can become competitive again in a global economy and how far it can distance itself from United States banks and their lack of regulation.
