Creating an attractive environment for international corporations has largely been good for Ireland, and not the root cause of our current woes - that would be the ridiculous decision by our Minister of Finance to issue a blanket guarantee to our major banks, which were oversized relative to the size of our domestic economy. This has resulted in the current bailouts and humiliation.
The 'Celtic Tiger' (booming Irish economy) went through two main periods - c.1995 - 2001 (Celtic Tiger part 1), and 2003-2007 (part 2). The first period was fueled by foreign direct investment by American multinationals - if I recall correctly, American companies have more net investments in Ireland than they do in China. Ireland exported more computer services in 2002 than the US did, which is pretty mind-boggling. This export-led growth teed up the next stage, which was simply an out of control housing bubble. See this for more information:
I'm hoping our open nature, which leaves a country vulnerable in a global recession, will allow us to recover quickly. Iceland seems to be doing ok and they were worse off than we were. There are some signs of a recovery e.g. Facebook recently announced expansion in their Dublin office. Google and Apple are also expanding here, exports are up, and curtailing the out of control public servants wage bill will make us more cost competitive internationally.
I don't know much about the situation in Ireland. My understanding corresponds with what you wrote in your first paragraph. I wonder, though, if there was a perceived need to guarantee the banks in order to keep Ireland attractive to multi-nationals. Iceland, I believe, did not guarantee its banks' deposits outside of Iceland. Iceland has been able to recover much better than Ireland has. Iceland had no need to placate the business environment for multi-nationals though.
I'm interested in knowing your thoughts on Ireland still being part of the Euro. Do you think it's a good idea? Is it a good idea simply because it's good for multi-nationals?
"I wonder, though, if there was a perceived need to guarantee the banks in order to keep Ireland attractive to multi-nationals. Iceland, I believe, did not guarantee its banks' deposits outside of Iceland. Iceland has been able to recover much better than Ireland has. Iceland had no need to placate the business environment for multi-nationals though."
I don't think it was to placate multi-nationals that the banks were guaranteed- it was partly to keep peoples' confidence in the banks (preventing a run on the banks, see this for an explanation of a bank run: http://en.wikipedia.org/wiki/Bank_run) and partly to keep investor confidence up so that the banks could continue issuing bonds to investors in London and New York. The first part worked, I can still get cash from an ATM as normal, without fear that my current account will evaporate. The second part, investor confidence, failed spectacularly and now the government is pouring billions into the banks, as is the European Central Bank, which is into the Irish banks for well over a €100bn and no end in sight yet. It's necessary for government intervention because the markets won't touch the banks with a 10-foot barge pole at the moment.
The boys in Brussels and Berlin are getting completely fed up with this situation I'd imagine.
"I'm interested in knowing your thoughts on Ireland still being part of the Euro. Do you think it's a good idea? Is it a good idea simply because it's good for multi-nationals?"
Up until the current recession, I'd have said the euro has been good for Ireland. It's great for tourism, trade, it's very convenient and yes, it's good for multinationals too. It's easy to see how much you're getting screwed buying a meal in Paris, and lowers transaction costs from currency exchanges. However, what we really need now is more control over our fiscal policy, currently impossible due to ceding that power to the ECB - which is mainly concerned with keeping inflation under control in Germany, and keeping the whole Euro project from collapsing. The ECB doesn't really care about Ireland as such (our economy like a tiny bug on the hide of a massive elephant), but they need to keep us afloat due to contractual arrangements and to keep the euro alive. Currently, we really need to devalue our currency, something our government did in 1993, which would make us more attractive to investment and make us more competitive. We also need to keep interest rates low for a long, long time, so homeowners don't start defaulting on their mortgages in massive numbers like the US subprime situation. If the German economy starting picking up as people start buying Mercs and Beemers again, the ECB will hike up interest rates, which will be disastrous for Irish homeowners potentially leading to an even worse situation than we're in now. So it would probably be good for Ireland to not be part of the euro at the moment, but if the world doesn't fall apart and things get better (and the euro doesn't collapse, which is still a very real prospect) then the benefits of the euro will start to outweigh it's disadvantages once again.
I think there is a fine balancing act that governments need to do. Generally it's nice to have companies do business in your country (provided they don't engage in shoddy business practices or cause too much damage to the environment) but if it's done to quickly or there becomes too great a reliance on attracting large multinationals then problems follow. It's not good for a country to be beholden to multi-national corporations or for there to be regulatory capture.
Why do you believe Ireland's attractive business environment caused their current problems? Do you believe Ireland would be better off without Google and various others locating HQ in Ireland?
My own suspicion is that the high levels of inward investment to Ireland primed the asset bubble that developed there, Of course, the problem wasn't caused by the likes of Microsoft, Google etc. setting up their offices there but it probably did contribute to the irrational exuberance that keeps these bubbles growing.
