Ireland's Economic Recovery Quiz

MG4031 Management Principles - Development of the Irish Business Sector

• Learning Objectives: Understand the roles of Irish governments in industrial development, explain Ireland's unique industrial development pattern, and identify/discuss major business sectors in Ireland and their future prospects.

Key Milestones

• 1907: Census of Production in Ireland
• 1922: Irish Free State
• 1932: Self-sufficiency & protectionism
• 1958: Free Trade and FDI
• 1973: EEC Membership
• 1980: Recession
• 1993: The Celtic Tiger
• 2008: Financial Crisis
• 2013: Towards Recovery

The Early Years

• Ireland was largely unaffected by the industrial revolution in the early years.
• In 1907, industry employed 20% of the population.
• Key industries were linen, shipbuilding, brewing (including Guinness), and distilling (e.g., Harland & Wolfe).

The Irish Free State

• 1922: Ireland gained political and economic independence, but remained tied to the UK's currency and export market.
• The loss of the industrialized North had a significant negative impact.
• By the 1920s, the industrial labor force was around 100,000, only 7% of the total.

The Irish Free State (Focus on Agriculture)

• Agriculture was a major focus in this period and the success of agricultural was equated with success for the entire country.
• There was insufficient entrepreneurial tradition due to Ireland's colonial status
• This limited business opportunity for the populace, with most bright individuals entering the Civil Service.

Self-Sufficiency & Protectionism (1932-1958)

• This period witnessed a strong belief in self-sufficiency for economic growth and independence.
• The Control of Manufacturers Act (1932) mandated that new firms had to have 50% Irish equity.
• Domestic industries were protected from foreign competition with tariffs (sometimes up to 45% of the price of imported goods).
• The period of 1932-37 also saw an economic war with the UK impacting agriculture and industry.
• Semi-state enterprises like Aer Lingus (1936) and CIE (1944) were established to offer essential services and utilize natural resources. Bord na Mona (1946) & Industrial Credit Corporation (1933) also played a part.
• High emigration rates (400,000 from 1951-1961) are also noted during this time period.

The Move to Free Trade & Foreign Direct Investment (FDI)

• Protectionism was replaced by free trade and greater market access, seen as a significant policy change.
• The Anglo-Irish Free Trade Area Agreement (1965) was a key step.
• The IDA actively promoted FDI (foreign direct investment) to boost job creation and exports.
• Industries like Waterford Glass and Youghal Carpets started to develop, driven by this new approach.
• Industry became an important part of the economy, reaching 35.7% of GNP in 1969.
• Manufacturing exports grew significantly, reaching 70% of total exports by 1969.

EEC Membership (1973)

• Opened up opportunities for Irish companies to enter the Continental markets and reduce reliance on the UK market.
• EEC membership was a significant selling point for attracting FDI, particularly in the USA (e.g., Apple, Verbatim).
• Financial benefits included the European Social Fund, Regional Development Fund, and later Structural and Cohesion Funds.

Recession & Recovery (1980-1993)

• FDI was negatively impacted by a U.S. recession, with competition from other countries becoming stronger.
• The IDA implemented a new strategy to attract high-output firms and multinational companies using the most modern technologies, capable of creating links across the Irish economy.
• A new focus on promoting human capital became apparent in Ireland.
• Social Partnership Model (1987) was a critical piece of architecture for recovery.
• The IDA capitalised on the start of recovery by encouraging foreign direct investment; for example, Sandoz, Motorola and Intel came into Irish markets.
• The 1991 Culliton Report offered recommendations for industrial policy which were subsequently gradually implemented.

Emergence of the Celtic Tiger (1993-2007)

• The Programme for Competitiveness and Work, implemented in 1994, promoted pay moderation and tax concessions.
• Corporation tax was reduced to 12.5% in 1994.
• Significant investment came through the European Structural Funds (between 1989 and 2000, totaling €9.52 Billion).
• The Euro currency was introduced in January 2002.
• Partnership 2000 (1997) fostered social developments, similar to previous social partnership arrangements, including efforts to reduce unemployment.
• Between 1994 and 1999, Ireland saw 5 years of rapid economic growth at ~9% per annum.
• The Programme for Prosperity & Fairness (2000) encouraged Ireland to catch-up with other successful economies during this period.

Demise of the Celtic Tiger (Mid 2000s Onwards)

• Growth steadied in the early 2000s, but was related to cheap credit and increased property speculation.
• The construction sector became disproportionately large in the economy.
• Globalisation trends saw a shift in investment from developed countries to emerging economies (e.g., BRIC countries).

Financial Crisis and Post-Celtic Tiger Ireland

• Early warnings of the financial crisis were evident in the USA in 2007, relating to the sub-prime mortgage market.
• Negative flows into Ireland resulted in a property bubble and unsustainable borrowing by Irish banks.
• The 2008 banking and financial crisis led to the Irish government's guarantee of the deposits and debts of the largest Irish banks.
• Ireland sought a bailout from the IMF and EU in 2010, totalling €85 Billion to keep the country afloat and maintain essential public services.
• Government debt increased – by 2013, the ratio of gross debt/GDP rose over 120%.

Financial Crisis and Post-Celtic Tiger Ireland (Continued)

• The crisis resulted in significant debt and tax burdens, affecting economic growth, employment and migration.
• Ireland's competitiveness in 2012/2013 ranked low on the Global Competitiveness Report.
• There were significant challenges in recovery, including large losses in the construction sector leading to housing shortages.

The COVID-19 Pandemic and the Future?

• The impact of the pandemic as an exogenous shock is yet to be fully determined.
• The COVID-19 pandemic underscored the volatile/uncertain/complex/ambiguous (VUCA) circumstances for businesses.
• Developments like de-globalization, supply-chain disruptions, health & safety management, remote/flexible working arrangements, and global virtual collaboration were important.

Test your knowledge on Ireland's economic recovery post-2008 financial crisis. This quiz covers government actions regarding non-performing loans, international rankings, bailout amounts, and challenges faced during recovery. See how well you understand the impact of these events on Ireland's economy.