Marc Coleman: "Celtic Tiger" Era Not Monolithic
When economic historians come to tell the story of the Celtic Tiger, they will not treat it as a single, cohesive era. Not one, but two such animals roamed our land in those times, they will say.
As historians do, they will argue over precise dates. But most of them will agree that it was preceded by a gestation period of roughly six years (1987-1992) and was born in 1993.
Excluding 2005, for which full-year statistics are not yet available, the subsequent 12-year period should be split into two separate periods. The year 1999 is admittedly somewhat arbitrary but has the advantage of creating two periods of equal length. Let's call the period 1993-98 the Celtic Tiger. The period since then, 1999-2004, shares the genetic ancestry, the colour and prosperity of its predecessor, but it is different. Let's call it the Celtic Garfield.
After the dismal years between 1977 and 1987, a prolonged fiscal consolidation between 1987 and 1992 reduced the burden of interest payments. This laid the foundation for tax cuts in return for which wage moderation was secured by social partnership (whatever its present faults, let's not begrudge it its past successes). This was the infamous era of jobless growth when emigration was high and dole queues long.
And then it happened. After decades when it seemed things could only go wrong, everything went right in one glorious year - 1993. The United States, Germany and Britain - our three largest trading partners - emerged from recession.
In 1992 and for our own good we had been spat out of the Exchange Rate Mechanism, putting our exchange rate and monetary policy on a sane and manageable footing. So when we voted for the Maastricht treaty the following year, world investors were watching. As well as getting a crack at entering EMU, we secured a generous tranche of structural funds. Then the US high technology sector began to boom, taking our foreign direct investment with it thanks to years of spadework by the IDA Ireland. A vicious circle became a virtuous one and the Celtic Tiger was born.
Both periods have had similar growth rates. Between 1993 and 1998, GDP growth has averaged 7.6 per cent. Between 1999 and 2004 it averaged 7 per cent. One difference to note is that, at the end of the first period, unemployment was close to 10 per cent. By 2004 it had fallen to just over 4 per cent. But that is where the second period's advantages end.
Celtic Tiger growth was based on sustained competitiveness and a surge in exports and tourism. Unit labour costs grew by only 3.2 per cent between 1993 and 1998. Exports increased by a massive 128 per cent. This was dominated by multinational activity but indigenous exports performed creditably during the period. And an entirely indigenous industry - tourism - saw visitor numbers rise by 72 per cent.
As historians do, they will argue over precise dates. But most of them will agree that it was preceded by a gestation period of roughly six years (1987-1992) and was born in 1993.
Excluding 2005, for which full-year statistics are not yet available, the subsequent 12-year period should be split into two separate periods. The year 1999 is admittedly somewhat arbitrary but has the advantage of creating two periods of equal length. Let's call the period 1993-98 the Celtic Tiger. The period since then, 1999-2004, shares the genetic ancestry, the colour and prosperity of its predecessor, but it is different. Let's call it the Celtic Garfield.
After the dismal years between 1977 and 1987, a prolonged fiscal consolidation between 1987 and 1992 reduced the burden of interest payments. This laid the foundation for tax cuts in return for which wage moderation was secured by social partnership (whatever its present faults, let's not begrudge it its past successes). This was the infamous era of jobless growth when emigration was high and dole queues long.
And then it happened. After decades when it seemed things could only go wrong, everything went right in one glorious year - 1993. The United States, Germany and Britain - our three largest trading partners - emerged from recession.
In 1992 and for our own good we had been spat out of the Exchange Rate Mechanism, putting our exchange rate and monetary policy on a sane and manageable footing. So when we voted for the Maastricht treaty the following year, world investors were watching. As well as getting a crack at entering EMU, we secured a generous tranche of structural funds. Then the US high technology sector began to boom, taking our foreign direct investment with it thanks to years of spadework by the IDA Ireland. A vicious circle became a virtuous one and the Celtic Tiger was born.
Both periods have had similar growth rates. Between 1993 and 1998, GDP growth has averaged 7.6 per cent. Between 1999 and 2004 it averaged 7 per cent. One difference to note is that, at the end of the first period, unemployment was close to 10 per cent. By 2004 it had fallen to just over 4 per cent. But that is where the second period's advantages end.
Celtic Tiger growth was based on sustained competitiveness and a surge in exports and tourism. Unit labour costs grew by only 3.2 per cent between 1993 and 1998. Exports increased by a massive 128 per cent. This was dominated by multinational activity but indigenous exports performed creditably during the period. And an entirely indigenous industry - tourism - saw visitor numbers rise by 72 per cent.