When I first came to the United States from Ireland in the early 1990s, Americans thought of my home country as a land of green fields, bibulous peasants, and perhaps the occasional leprechaun. Once, on a bus from Ann Arbor to Detroit, a fellow passenger heard my accent and asked if she could touch me for good luck. But something changed over the course of the 1990s and 2000s, as Ireland started to enjoy remarkable levels of economic growth. Blather about Guinness and the Little People made way for a new story line: the success of the Celtic Tiger economy. Between 1995 and 2007, Irish GDP grew at an average rate of 6 percent every year. Housing prices rose by 270 percent between 1996 and 2006. A country that had long been notorious for its high emigration rates started to import people instead. Gorta tiny town in Galwayacquired a large population of South American immigrants, while Dublin supported no less than three Polish-language newspapers.
But the boom didnt last. Over the last eighteen months, Ireland has seen a devastating economic collapse. GDP fell by an estimated 7.25 percent in 2009, while unemployment rose to 12.6 percent and is forecast to rise to 14 percent this year. House prices have plummeted 30 percent since their peak, and are likely to fall much farther. The immigrants are going back to Poland and Brazil.
Irelands economic problems started, like Americas, in the real estate market. Just as in the U.S., free-market ideology and comfortable relationships between businessmen and politicians encouraged the creation of a housing bubble. As a recent report by three National University of Ireland economists emphasizes, Irelands financial institutions did not fall prey to exotic financial instruments, but to lax regulation and bad business judgment. The report is tactfully silent regarding the reasons why Irish regulators made “obviously flawed” judgments, although its mention of the fact that “most large property developers in Ireland have been very closely connected to the ruling political party, Fianna Fil,” offers some clues.