Ireland in 2004

Abstract

Ireland has emerged as one of the most globally competitive economies in the world. A combination of factors has turned the Irish economy into a 'Celtic Tiger'. These include tough cuts in government spending since the late 1980s, 'National wage partnership programmes' which fostered co- operative industrial relations, reduction in taxes, targeted Irish government programmes to attract foreign direct investment and financial support from the European Union. The return of the Fianna Fail (soldiers of destiny) and progressive democrats to the coalition government after the May 2002 parliamentary elections is seen by many as a vote of confidence in the centre-right policies of the previous administration. Economic growth slowed in the first nine months of 2003, compared with 2002. Investment, exports and imports showed negative growth. The manufacturing sector was the hardest hit. But Irish equities rebounded strongly in 2003, in line with developments elsewhere in Europe and north America. A surge in revenue towards the end of 2003, combined with stricter expenditure control, has ensured that the budget almost balanced for the full year.

INTRODUCTION

In the early 2000s, Ireland was considered one of the most globally competitive economies in the world. Despite its small size (population of just 3.7 million), Ireland had emerged as an attractive investment destination. A combination of factors had turned the Irish economy into a "Celtic Tiger". These included tough cuts in government spending since the late 1980s, "National Wage Partnership Programs" which fostered cooperative industrial relations, reduction in taxes, targeted government programs to attract Foreign Direct Investment (FDI) and financial support from the European Union (EU). One of the most open economies in Europe, Ireland had also developed a solid reputation for its quality of life.

Galvanized by the leadership of Charles Stewart Parnell , the party was able to force the British government to introduce several home rule bills after 1885.The turn of the century witnessed a surge of interest in Irish nationalism, including the founding of Sinn Féin (meaning 'We Ourselves') political party. British attempts to smash Sinn Féin ignited the Anglo-Irish War of 1919-1921.

The war resulted in the Anglo-Irish treaty of 1921, leading to Ireland's independence from Britain. In 1932, Eamon de Valera, the political leader of the forces, which were initially opposed to the treaty, became the President of Ireland. A new Irish constitution was enacted in 1937. The government formally declared Ireland a republic in 1948. Subsequently, two parties, namely "Fianna Fáil," and, "Fine Gael", became the country's largest political parties.

The Irish economy was in a bad shape at the time of independence. Protectionism discouraged foreign trade and foreign investment. As exports fell, living standards declined. Per capita income growth lagged far behind other countries in Western Europe.

During World War II, 99% of Irish exports went to the UK. Heavily dependent on British markets, the Irish economy relied on agriculture, which the British government actively encouraged. But the government's unimaginative economic policies worsened Ireland's plight.

From the 1950s, Ireland's economic recovery began as restrictions on foreign ownership were removed. In 1956, tax-free status was granted to export oriented firms. The signing of the Anglo-Irish Trade Agreement in 1965 led to a rapid growth in foreign investment. By the late 1960s, Ireland had become an industrialized nation, largely due to foreign investments. Growing competition led to a shakeout and many Irish firms collapsed. Car assembly was wiped out and the clothing, textile and chemical industries suffered badly, leading to thousands of job losses.

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        Case Code   ECOA117
   Case Length    19 Pages
              Period    2004
 Organization    
        Pub Date     2004
Teaching Note    Not Available
     Countries    Ireland
      Industry   

Issues

Ireland, Country Report, Case Study.

Irish economy; European Union; Celtic Tiger; Foreign direct investment; Ango-Irish treaty; European economic community; Labour reforms in Ireland; Fianna Fail; Progressive democrats; Irish government; Irish industry; Foreign trade in Ireland; Irish Chambers of Commerce; Foreign investments in Ireland; Software industry in Ireland.

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.