Celtic Collapse, or Celtic Correction?: Ireland's Recession in Historical Perspective

The recent economic downturn in Ireland has led many to question the validity of the Celtic Tiger experience, including serious interrogations of whether there was ever a "Tiger" in the first place; numerous commentators believe that the recession confirmed the insustainability of Irish prosperity based on dependence of foreign markets and capital. In general, popular accounts accentuate the losses and problems created by the collapse of the Celtic Tiger.¹ Less frequently heard are analyses that contend that Ireland's economy is in the midst of a correction, not a long-term collapse. And yet, detailed comparisons of key measures of economic conditions in a comparative framework—including unemployment, inflation, and measures of economic growth, as well as demographic data—do suggest that, when placed in a wider historical perspective Ireland's current (and in some sectors, very severe) economic problems do not represent a return to the historic problems associated with the Irish economy. The causes of the current recession are concentrated in the construction and financial sectors, which experienced an unsustainable bubble in the past decade; other sectors, critical to future prosperity continue to thrive.

Ireland, like other states experiencing rapid economic growth in recent years, has increasingly come to rely on exports as the basis of its economic expansion and national prosperity. The development strategy lying behind Irish growth stresses the expansion of high-tech exports as a crucial component in achieving and sustaining a high standard of living. This requires both an inflow of foreign capital or direct investment, as well as increasing markets for Irish exports. Both of these factors have been threatened by the global financial crisis and recession, but the long-term strategy seems fundamentally sound, given Ireland's small internal market for both capital and sales. For Ireland, the key is to focus on a strategy that attracts foreign investment and produces items that have a growing global demand with high profitability. In the Celtic Tiger period, the two sectors that best accomplished this have been computer software and the often-overlooked pharmaceutical industry and chemical products.² Along with tourism, construction, and—in the latter years of the Celtic Tiger—financial services, these sectors account for much of the growth associated with the Tiger phenomenon.³ The latter sectors have been hurt by the recent economic downturn, but an export strategy based on the information technology sector as well as pharmaceutical products and medical devices continues to be a sound basis for future economic growth in Ireland.

The success of the Irish economy in the Celtic Tiger period, 1995 to 2007, is especially noteworthy when one considers the history of the Irish economy.⁴ Because of the role Ireland played as an internal colony of Britain, its economy was oriented to produce agricultural products for the English market.⁵ Marxist-inspired analysis has questioned whether the Irish economy could ever escape the dependency created by British colonization; according to some, the history of exploitation as a colony of Britain made it impossible for the Irish economy ever to develop and achieve higher levels of prosperity.⁶ After Independence, the Irish Free State experienced little economic growth, and the Irish economy remained primarily agricultural with few exports outside of this traditional sector. To the extent independent Ireland sought industrialization, it tended to follow an import substitution strategy, there by minimizing its dependence on Britain for trade.

While some may seek to explain Ireland's economic development employing traditional class analysis, Irish autarky, or self-sufficiency, is better explained by focusing on the political culture of Ireland as it emerged as a postcolonial state. Under the influence of a potent, if somewhat mythical, dream of restoring a Gaelic nation, the Irish in the early years of de Valéra's era were happy enough with "frugal comfort." An autarkic economic policy was intended to sever the historical economic relationship with Britain. This was the means by which the Irish sought to, in Tom Garvin's memorable phrase, "prevent the future" that they saw as inauthentic and corrupted by British cultural practices. This political...