The success of the Irish economy has been stunning over the last few decades. Ireland now has one of the highest GDP per capita rates in the whole world. In 2020 that number was a stunning $83,000. That puts this Celtic Tiger 5th on the global list only behind Bermuda, Luxembourg, Monaco, and Liechtenstein. Today we're going to explore just how Ireland's economy became so robust and whether everything is as it seems on the surface.
Before we go any further, let me tell you a little about Ling. Ling is designed to get you to speak Irish as quickly and efficiently as possible. It is an app in the same mold as Duolingo and Rosetta Stone but for lesser-spoken languages.
The good news is that if you're doing business in Ireland, everybody speaks English anyway. However, showing that you've taken some interest in the culture and especially the language could be the difference between you languishing in some low-paid job or finding employment at the upper echelons of a multinational firm.
The first thing to say is that Ireland is part of the European Union and uses the Euro as its currency. There are numerous advantages and disadvantages to this, but chief among the disadvantages is that traditionally the stronger economies have to shoulder the burden of economies that are performing poorly, as we saw with the Greek bailout.
So how was Ireland able to weather the storm of a turbulent Eurozone?
Ireland has been good at raising alternative sources of income, and the most famous is perhaps the most morally dubious.
Do you ever check your Apple Music and see that, for some reason, the money is being sent to a headquarters in Ireland? It's this kind of foreign investment that has allowed Ireland to grow so big. Numerous multinational enterprises and areas of the financial sector locate their headquarters in Ireland because they gain massive tax breaks.
Note: In 2020, this loophole was closed, although suspicions remain that companies will find more ways to exploit the system.
The simple answer is no. As we mentioned earlier, multinational corporations have trillions of dollars siphoned away in Irish bank accounts, which skews the data. If we take median income instead of GDP per capita, we see that, on average, Irish people are poorer than the United Kingdom.
However, the loophole has benefited the country in other ways. The government of Ireland knew that when these companies came to remove their money from Irish banks, they'd have to pay tax on it in the U.S., so Ireland offered breaks for those who invested money in Ireland itself in fields like research and development and hi-tech manufacturing, which provides Irish people with jobs.
Modern Ireland is still benefiting from a legacy tied to free trade. Before companies like Apple set up headquarters, other manufacturing firms like Sony established factories in places like The Shannon Airport Free Zone, a giant business park established in the 1950s that allowed companies to manufacture products in Ireland without paying tax.
There are many cheaper alternatives now available, but large companies are not naturally conservative, and what's more, Ireland still has a lot going for it; including its location between the U.K and U.S, a highly educated and highly skilled population, as well as being a stable English speaking democracy.
Short of some kind of natural disaster or political upheaval, Ireland will probably remain the place for financial services and hi-tech manufacturing.
Covid 19 left the Irish government with many challenges, such as balancing public health safety with a robust plan to secure Irish business and the Irish stock exchange. Although it may seem logical to place precedence on public health over economic development, telling people they can't socialize increases rates of depression, anxiety, and suicide.
As with every country, the pandemic affected older Irish people the most. 90% of people who died from the coronavirus in Ireland were over 65.
The economics are a little more complicated. Consumer spending dropped massively and Irish households saved more than double what they had saved in the 9 months before the pandemic.
Amazingly the Irish economy actually grew by 3.4% in 2020, which was entirely at odds with the global trend. The Irish central bank has predicted that Ireland's economy will recover to pre-pandemic levels by 2022. However, as we've seen earlier, just because the financial sector and hi-tech industry rebound easily doesn't necessarily mean people working in fields like hospitality see much of the recovery money.
Ireland's economic statistics remain more than impressive, and it has a highly competitive economy that has seen it go to the top of OECD rankings.
Ireland's GDP is about $418 billion; however, as we've seen, because of its small population, its GDP per Capita is huge.
As we've also discussed, that figure is slightly misleading because wealth finds its way into the hands of the narrow few. In some ways, Ireland is in real danger of being a two-tier economy where those working in finance and manufacturing reap all the rewards, and anyone outside it is left with a significant reduction in living standards.
Ireland has been able to attract multinationals primarily because of its stability. If investors thought that the Irish public was suddenly going to institute communism, all those trillions of dollars would not be sitting in Irish bank accounts. Even with the political problems of the 1980s, firms still remained confident in Ireland.
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Thanks for reading.