MISPLACED CONFIDENCE

The Celtic Tiger misplaced its confidence after coming second in a fight with the global economic downturn.  The scars can be seen in the unfinished housing that litters the countryside and the empty commercial premises that line the streets and new business and retail parks.

Despair is palpable in the eyes of the Irish. What started as anger in search of someone to blame when the crash happened has started to give way to resignation.  The ‘craic’ is as easily found as hobby-horse droppings.

Ten years ago, this small island on the edge of Europe was punching well above its commercial weight, attracting immigrants from poorer economies looking for better prospects and a better life.   The Irish had developed a swagger.  A decade before that, my generation and I had little option but to leave in search of something better somewhere else.

Ireland is enduring its first recession.  It was only getting into the swing of its first economic boom when the wheels and the axle fell out.  House building, new car sales and debt quickly became thriving industries.  It’s astonishing how quickly a nation gets comfortable with nouveau riches.

Two events coincided to transform the Irish economy.  The first was the Government’s decision to reduce corporation tax to 12.5% (10% for manufacturers) in the late 1990s (less than half the UK rate), which brought a mass influx of the world’s largest corporations keen to keep hold of a higher proportion of their profits.

The other was membership of the Eurozone. This brought significant investment in Ireland’s national infrastructure and scale to an otherwise sub-scale market. The lower tax rates continue to deliver benefits, while membership of the Eurozone is not seen as a universal success.

I’ve just returned and was asked, as someone looking in, on the prospects for the country.  Few found consolation in my views.

But I believe Ireland’s economy is stronger today than it was when I left its shores twenty years ago.  Living standards are higher.  Housing is better.  Services are better and choice is greater. The country has a national infrastructure today that, while imperfect, far exceeds anything we enjoyed in earlier years.

The employment base is more diverse than at any time in the country’s history.   The current generation have a skills base unrecognisable to my generation and are on first name terms with hi tech manufacturing, biomedical research and social media technology development.

In the late 199os, Bertie Ahern, then the Taoiseach or Prime Minister, explained that Ireland would be better off with a 12% tax take on a lot rather than a 30% tax contribution from a little.

That remains true today.  Corporate profits have remained relatively strong despite the global downturn and the Irish economy continues to benefit from what is essentially free money.   Until someone else decides to copy the model, it is likely to remain so.

Of course the Irish economy is suffering like the rest of Europe but the cost incurred in upgrading the country has all but been written off.  Yet in most cases, the assets and the infrastructure created during the boom years are still there.

As the Eurozone woes recede (as they surely must), and the global economy hits its stride again (as it surely will), the Celtic Tiger will be well placed to start smiling again.

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