By embracing the wave of globalization sweeping the world in the 1990s, Ireland was able to nurture the fastest growing economy in Europe, dropping unemployment to 5% and raising per capita GDP to one of the highest in the world. But, as the recent collapse of the Irish economy demonstrates, this was not sustainable growth.
Much like South Korea and the Southeast Asian tiger economies, the Irish economy originally grew as a result of export-oriented growth in manufacturing and services. By the mid-2000s, Ireland had become the world’s leading exporter of computer software and the source of a third of all personal computers sold in Europe.
Unfortunately, also like the Asian tigers, Ireland was tempted by foreign speculative capital. It liberalized its financial sectors, flooding real estate and stock markets with hot money. This led to “a frenzy of overdevelopment,” as Irish banks borrowed heavily from EU markets.
At the advent of the global financial crisis, Ireland’s rotten finances were too far decayed for state initiatives to overcome. As a result, Ireland now faces an adjustment more savage than that imposed on Greece, including “the loss of about 25,000 public sector jobs… as well as sharp reductions in state pensions and minimum wage.” With debt among Irish households and companies at the highest level in the EU, many are left wondering if it “would ever be able to repay its debts.”
The collapse of the “Celtic Tiger,” following the fall of the Asian Tigers before it, leaves only one successful case of export-oriented growth. Though China’s non-liberalization of its financial sector has shielded it from the fate of the smaller tigers, it remains severely dependent on the ailing Western world for its exports. Perhaps disaster also awaits the biggest tiger of them all.
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