Sociology 373: Irish Society: The Celtic Tiger
Common Agricultural Policy (CAP) – This is a policy of the European Union (EU) that
provides subsidies for agriculture in each of the 27 EU nations. For example, farmers can
be given funds to raise livestock or grow specific crops. This policy emerged in order to
promote food security. In the last decade, greater emphasis has been given to measures to
reduce agricultural production, promote environmental issues and encourage farmers to
either leave agriculture or shift to new forms of production.
Corporatism and Social Partnership – Corporatism is associated with the role of
entrenched social groups (such as business and labour) in bargaining for wages and
benefits. This is usually presided over by the state. This is common in several European
Continental countries. In the Irish context, it is normally referred to as the ‘social
partnership’, a pattern of bargaining introduced by Fianna Fail (FF) in the late 1980s.
Some analysts attribute the rise of the ‘Celtic Tiger’ as being due to the role played by the
social partnership in reducing wage concessions in exchange for job protection. Critics
contend that this relationship benefits business more than it does labour and other social
groups.
Current Account – A country’s current account is the measure used to describe any
surpluses or deficits that emerge in a country’s trading relationships with other countries.
In the last decade and one-half Ireland has experienced a trade surplus with most other
nations. Export-led industrialisation (ELI) is usually viewed as a basis for promoting a
surplus in the current account.
Foreign Direct Investment – This refers to the location of the manufacturing subsidiaries
(also called branch plants) of a multinational corporation (MNC) in a country other than
the home country of the MNC. In the 1990s, Ireland experienced major direct investment
from companies in the information and technology and pharmaceutical industries. These
companies had home bases in places such as the US, UK and The Netherlands, among
other countries.
Gross Domestic Product (GDP) and Gross National Product (GNP) – These are two
measures used to calculate the wealth of a nation. The GDP is the total value of all goods
and services produced in a country. It is calculated on a yearly basis. The GDP also
includes any revenue that a MNC takes from a country and returns to either its
headquarters or to another country. In contrast, the GNP only includes the total value of
goods and services that remains in a country. Some argue that Ireland’s GDP vastly
exceeded its GNP in the 1990s.
Debt as a Percentage of GDP – In looking at the ‘economic health’ of a country,
international investors and institutions (like the World Trade Organisation [WTO] and
the EU usually consider its debt as a percentage of its overall GDP. The higher the
percentage, the more risky it is considered for investment.
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Macroeconomic Policy – The macroeconomic policy of a country includes the types of
economic expenditures (investments) a government uses to stimulate the economy. From
the standpoint of international business, a ‘sound macroeconomic policy’ is one that
fosters a good investment climate through a combination of low taxation and minimal
governmental interference in the economy. Business also favours economic policies that
facilitate the free movement of capital, in and out of a country, and lower wages.
Nevertheless, business also favours policies that support the education and health of a
population insofar as these can lower investment costs. Since the ‘Celtic Tiger’ period
promoted low taxation that favoured foreign investment, wage controls and a well
educated population it was viewed favourably by investors. However, critics contend that
the overall economic and social well-being of significant sectors of the population
declined during this period.
Monetary Policy – Nations have a central bank that attempts to maintain inflation or
promote spending through manipulating the money supply. During periods of low
inflation and economic recession, central banks tend to lower interest rates to promote
spending and investment. During periods of high inflation and economic growth, the
central bank attempts to ‘cool the economy’ by raising interest rates.
Structural Funds – These are funds used by the EU to promote the social and economic
well-being of it members. In addition to the CAP, these include: The European Regional
Development Fund (ERDF) and the European Social Fund (ESF). The ERDF is used to
promote regional development in the poorer EU nations and regions. All EU nations pay
an annual fee to the EU. The central bureaucracy (European Commission [EC]) based in
Brussels then allocates funds to EU nations on the basis of their overall economic wealth.
If a nation makes less than the EU average GDP per person, then it receives funding. This
can assist in areas such as new infrastructure and industries in rural regions. In some
cases, whole nations are considered eligible for ERDF funding. This was the case for
Ireland, Spain, Portugal and Greece when they joined the EU. In most countries the
ERDF is spent in specific regions (e.g. Southern Italy and Northern Finland). In recent
years, Ireland has exceeded the average GDP per person for the EU as a whole. As a
result, only certain parts of Ireland (Midlands, Western and Border Regions) are still
eligible for the ERDF. The ESF provides revenue for the training of disadvantaged
groups in order to enhance their labour market participation. This includes: women,
minorities and the disabled.