THE IRISH ECONOMY IN THE 1990’s Killian Beashel, Ben Flanagan Max Geoghan and Sean Kirwan

POLITICS 1990’s: Decade of change Death of Communism Germany reunified Russia becomes capitalist Eastern European countries gain independence China is a new superpower and embraces free enterprise Ireland changed rapidly Homosexuality is decriminalized Unemployment drops Peace in NI GNP grows

IRISH POLITICS Coalition governments Haughey steps down due to beef industry scandal Albert Reynolds replaces him Beef Tribunal brings down FF-PD coalition 1992: Labour gets unprecedented number of votes Still has to enter into a coalition with FF (unpopular) 1994: Rainbow Coalition (FG, Labour, Democratic Left) 1997: FF and PDs back in power Bertie Ahern is Taoiseach

IRISH ECONOMIC POLICIES Stayed the same throughout the 90’s. Low corporation tax (12.5%) Social Partnership Foreign Direct Investment (FDI) is encouraged NI Peace Process 1985 Anglo-Irish Agreement falls to pieces 1994: IRA ceasefire, broken in : Good Friday Agreement Lasting peace Most important treaty in NI

INDUSTRIAL DEVELOPMENT AND INTERNATIONAL TRADE Successive governments focused on attracting FDI (foreign direct investment). Low rate of corporation tax. Focused on high-growth sectors that needed highly skilled workers.

THE FIGURES Increase in merchandise exports. 1990: €18203 billion 2000: €83888 billion 360% increase in merchandise (manufactured goods) exports. Huge increase in industrial produce exports, much greater than any other sector. Agricultural Produce exports grew by a total of 62% between 1990 and Industrial Produce exports grew by a total of 413% between 1990 and 2000.

MERCHANDISE EXPORTS

COST OF EMPLOYING SOMEONE IN IRELAND In 1990 it was cheaper to employ someone in Ireland (average wage per hour was €20.1) than in Germany (€23.3), France (€26.6), Italy (26.8), Japan (€28), the Netherlands (€26.2) and several other European countries. This made setting up in Ireland more attractive for MNCs. Social partnership=wage increases. In 2000, the average wager per hour in Ireland had increased to €30.1. This was still cheaper than many of the countries listed above, notably Germany (€31.5) and France (€34.8). These figures show that attracting FDI in the 1990s had a very positive affect on the Irish economy. Exports increased, the Balance of International Payments was a surplus for the first time in decades, unemployment decreased and Ireland’s GNP grew dramatically.

COST OF EMPLOYING SOMEONE IN IRELAND

NATIONAL DEBT Leftover debt from the 80s. Unemployment up, income tax revenue down. Government can decrease spending (EG., cut wages) or borrow money Burden of servicing national debt is dependent on GNP.

NATIONAL DEBT GDP: total output of companies, employers and employees based in Ireland. Includes profits that end up abroad. GNP does not include this. GNP gives a more accurate reflection of Ireland’s economic state as so many foreign companies are based here. In the 90s the quickly growing GNP meant that the national debt was not an issue. EG, in 1987, the national debt was 116.3% of Ireland’s GNP, but in 1999 it was only 51.7%, despite the fact that Ireland actually owed more money in the 90s than the 80s. Therefore, the cost of servicing the national debt was less of a burden in the 90s than in the 80s as it was a lower percentage of the GNP.

GNP vs NATIONAL DEBT

UNEMPLOYMENT Huge unemployment in the 80’s and the beginning of the decade. As FDI in Ireland increased and more factories were set up unemployment dramatically decreased. People had more disposable income = more purchasing power = greater demand for products and services = more employment.

UNEMPLOYMENT

PROPERTY PRICES As the rate of employment increased people had more disposable income. Social partnership led to wage increases. Thus, there was a greater demand for houses (EG, in 1990 the number of houses built was but in 1999 there were houses built. These figures include both social and private housing.). As there was a greater demand for houses, prices increased dramatically, especially in urban areas such as Dublin and Cork.

PROPERTY PRICES

INFLATION As people had more disposable income the demand for goods and services increased. This meant that products became more expensive (demand-pull inflation). Between 1990 and 2000 the there was an average year-on-year rate of inflation in Ireland of 2.61%.

THE CELTIC TIGER All of these factors added up to what was named the ‘Celtic Tiger’. This was a time of rapid economic growth in Ireland. It came about as a result of new economic policies (social partnership, attracting FDI etc.). Ireland’s GNP increased dramatically and would continue to expand well into the 2000’s until the property bubble, which had been created in the 90’s and had become a lucrative industry, burst, sending Ireland into a recession.

BIBLIOGRAPHY How Ireland Became The Celtic Tiger by Sean Dorgan. Used to help us understand the economic policies that led to the Celtic Tiger economy. Reeling In The Years. Useful for gaining an understanding of Irish politics in the 1990’s. Budgetary and Economic Statistics December 2013 by the Department of Finance. This was used to source all of the figures in the project.