"The drb sustains a level of commentary on Irish and international matters that no other journal in Ireland and few elsewhere can reach. It deserves all the support that can be given it." X
Space to Think, a new book celebrating ten years of the Dublin Review of Books More Information 

From Prosperity to Austerity

A Socio-Cultural Critique of the Celtic Tiger and its Aftermath
Eamon Maher and Eugene O'Brien
Publisher
Manchester University Press
Price
£16.99
ISBN
9780719091674



EXTRACT COPYRIGHTED MATERIAL

Introduction

In August 1994, the UK economist Kevin Gardiner, an employee of the US investment bank Morgan Stanley, coined the term 'Celtic Tiger', to liken Ireland's unexpected economic take-off to the successes of the Asian tiger economies (Gardiner 1994). As so often happens with attrac­tive terms, it quickly became part of the lexicon, mainly because it was a flattering metaphor for the prosperity that seemed to flood into the Irish economy in the 1990s and the early years of the second millennium. Looking back with the benefit of hindsight, however, it is still seen as a time of prosperity and growth, but also of greed and of grand desires, a far cry from Robert Emmet's dream of an Ireland that had finally taken its place among the nations of the earth, at least in terms of material wealth. There were confident assertions that Ireland had confounded all existing economic theory and that, in the fashionable jargon of the period, growth would be exponential, 'going forward'. Gene Kerrigan makes the point that, in the mythology of the time, the culture of the entrepreneur was seen as all-pervasive:

Some time during the Celtic Tiger era, being in business became old-fashioned. There arose the concept of the entrepreneur - people with risk running in their veins, with minds hewn from solid blocks of ambition. You became an entrepreneur in the same way as you might have once become a poet - by declaring yourself to be one. (Kerrigan 2012, p. 36)

This was an example of the new confidence that was to be found in Ireland, a confidence that stemmed from the belief that a new economic paradigm had been born. Even in 2008, when glimmers of doubt were being cast as to the ongoing viability of the Celtic Tiger, the Economic and Social Research Institute, an independent research agency, gave the following prediction in its Medium-Term Review from 2008 to 2015:

While our understanding of the key factors driving the economy has evolved over recent years, our view of its likely medium-term growth rate has not. The forecast for the growth in GNP over the period 2007-2015 identical to what it was when we published the last Review in December 2005, an average of around 33/4% a year. (Fitzgerald et al. 2008, p.vii)

With such positive economic figures being announced on an almost weekly basis, perhaps there was a feeling that there would be plenty of time in which to discuss the macro-strategy of how best to spend the wealth. In the meantime, conspicuous consumption and production were the norm, and property prices increased annually as overly gener­ous tax-breaks were given to developers who, in turn, erected more and more buildings, shopping malls, apartment complexes and hotels. This process was seen as pro-cyclical in that tax-breaks were given to devel­opers, who in turn borrowed more money to develop more properties, and the banks, in their turn, borrowed from European banks in order to have sufficient liquidity to maintain this cycle of lending for property development. The tax paid on the resultant property transactions meant the exchequer was awash with money.

Contextually, it is important to remember that in the 1980s, Ireland had been in a deep recession, with savage cuts made to public services, hospital wards being closed down and infrastructural work at a stand­still. Emigration served as an economic tool which helped to keep the country afloat, but there was little sense of economic buoyancy. Allied to a very conservative political system, with the two main parties Fianna Fail and Fine Gael very much ideology-free zones, social liberalism in Ireland was not allowed to flourish; consequently the Zeitgeist of the late 1960s had never permeated the Irish mindset. The Catholic Church steered the moral conscience of Irish society through its hugely influ­ential role in the realms of health and education. It controlled the vast majority of schools in the country, while maintaining a strong presence on the governing boards of most of the universities as well. Socially and culturally, therefore, 1980s Ireland was quite a stagnant place.

However, in the broader global frame, change was afoot. Ireland had joined the EEC in 1973 and, from that point onwards, Ireland would benefit from the European structural funds to the tune of €17 billion.

This money was mainly targeted at infrastructural development, the impact of which was to become most apparent during the 1990s. The influx of significant investment in the building and construction sector, with the aim of providing a more sophisticated road and rail network, was the stimulus that kick-started a more consumer-driven culture. Another major turning point was the English pound leaving the European Exchange Rate mechanism in 1992. This placed severe pressure on the Irish punt, which forced the Irish government, on 27 January 1993, to devalue the punt by 10 per cent. This caused consternation in Irish financial circles at the time, but it had two long-term consequences. Firstly, a number of institutions and individuals who had seen the devaluation coming made a killing on trading of the currency in the financial markets, and this introduced the notion of speculation as a viable possibility for Irish financial institutions. Until then, it is fair to say that the Irish financial sector was quite insular, being governed by a sense of probity and conservatism in terms of global investment. Having long been in the giant shadow of the City of London financial services industry, it would take time for the Irish sector to come out into the light: devaluation was a significant initial factor in that process.

Secondly, the reduced currency made Irish exports significantly more competitive and this resulted in something of an export boom. So from the early 1990s, there was a lot more liquidity in the Irish economy, and construction and building had become very important aspects of Irish economic activity. In macro-economic terms, the trend was to espouse a neo-liberal economic model, which favoured light touch regulation and which saw the market as the key to regulating economic activity. In Irish politics, a new party, the Progressive Democrats, espoused this paradigm and began, with the aid of Fianna Fail, to introduce a low tax, high-spend economic model with significant privatization of public utilities. This meant more money in people's pockets and, with a huge increase in demand for houses and apartments, fuelled by the traditional Irish desire for home-ownership, the construction industry increased exponentially, and the Celtic Tiger was born.

Higher salaries meant that new apartment blocks, shopping centres, luxury gated developments began to dot the towns and cities of the country, while the gentrification of inner cities proceeded apace. Flexible financial and planning regulations, a low corporation tax, and a blind eye turned to white-collar crime and corruption between developers and planning agencies, provided huge opportunities for growth: 'the politi­cians kept the regulation light, they re-zoned like mad, they created tax-breaks' (Kerrigan 2012, p. 63). Irish property speculators, spurred on by the success they were enjoying at home, began to spread their wings abroad. Prestigious London properties were bought by newly wealthy Irish, which resulted in the term 'CRISPY' (Cash Rich Irish Seeking Property) being coined. While their grandparents and parents might have slaved as navvies or construction workers to build the imposing buildings of London, the Celtic Tiger generation of Irish investors were now buying these buildings. At the height of the Celtic Tiger, the Irish gross domestic product was the second highest in Europe, and this led to a transformation in the self-perception of the Irish, who realized to their satisfaction that they were no longer the poor relation of Europe or the colonized property of the UK.

To illustrate this paradigm shift, here is a (possibly apocryphal) story of one Irish property developer who walks into the marbled foyer of an opulent Mayfair apartment block:

'Who owns this place?' he asks the doorman in the top hat. 'Don't know, Paddy,' is the reply.

'Well, you do now,' says the Irishman and turns on his heel and walks jauntily away from his investment.

The almost non-existent regulation, generous tax incentives and the ongoing boom in the property market, facilitated by an aggressive banking system led by Anglo-Irish Bank, meant that in a sense Ireland had skipped the slow process of modernity, which involved the pains­taking build-up of a manufacturing base, and instead had moved to the postmodern model of financial services, investment and a seemingly never-ending property bubble.