THE IRISH ECONOMY IN THE 1990’s

Killian Beashel, Ben FlanaganMax 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 1996• 1998: 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 2000.• Industrial Produce exports grew by a total of 413% between 1990 and 2000.

MERCHANDISE EXPORTS

1990 1994 1998 20000

10000

20000

30000

40000

50000

60000

70000

80000

90000

Total Merchandise Exports Industrial Produce Agricultural Produce

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

1990 20000

5

10

15

20

25

30

35

40

Ireland France Germany Italy Spain

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

1987 1990 1995 20000

20

40

60

80

100

120

140

National Debt as a Percentage of the GNP

National Debt as a Percentage of the GNP

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

1988 1992 1995 20000

2

4

6

8

10

12

14

16

18

Rate of Unemployment (%)

Rate of 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 19359 but in 1999 there were 46512 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

1988 1992 1995 20000

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150000

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Property Prices (including apartments) in Ireland

National Average House Prices House Prices in Dublin House Prices in Cork

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.