David McWilliams astutely analyses the flaws in Ireland's recent economic miracle. But his more eccentric speculations on Irish identity and the future of the diaspora should be treated with cautionby John Kelly / May 24, 2008 / Leave a comment
Published in May 2008 issue of Prospect Magazine
The Generation Game: Boom, Bust and Ireland’s Economic Miracle
by David McWilliams (MacMillan, £20)
In the 1970s the Irish Republic was as dependent on agriculture as it was in the 1850s. For the landless, emigration continued to be the only option: people left at a rate of over 60,000 a year well into the late 20th century. The “luck of the Irish” was deeply ironic, until the Irish discovered they were Europeans.
In 1973, the republic joined the EEC. As one of the poorest countries, it enjoyed generous subsidies and grants which it put to good use attracting investment, mainly from the US. Domestic spending was kept tight by draconian personal taxation, while foreign capital was magnetised by generous tax holidays and Europe’s lowest corporation tax regime. The farmers’ kids worked hard at school, got MBAs and became entrepreneurs. Years of pain were rewarded by double-digit growth in the late 1990s. Then came the boom and the inevitable spending spree. It is this loosening of belts which David McWilliams claims to be the cause of the current trepidation afflicting Ireland’s economy. “We’ve convinced ourselves that we’re some kind of economic miracle,” he writes, “but the reality is that we’re a large overdraft… sitting on top of a giant pyramid scheme.”
McWilliams is an economist, social commentator and veteran Celtic tiger sceptic. He sees in the global credit squeeze the beginning of the end for Ireland’s economic honeymoon, mainly due to the impact on house prices—against which a lot of Irish debt is secured. He points out that, unlike its US and British fellow travellers in the property bubble, Ireland is trapped in the high-value European single currency, with no independent means of devaluation. Its rise has been vertiginous; its fall may be precipitous.
While he allows that immigration, mainly from Poland and the Baltic sta…