The Republic of Ireland is often described as a case of impressive economic growth and recovery. However, it is better understood as a lesson in the political risks that accompany growth and the potentially significant distortions introduced by dominant economic measurement tools.
As the UK government refocuses its growth agenda, the Republic of Ireland stands out as a comparative case that yields strategic lessons. The literature on economic growth measurement in Ireland, and qualitative research on the lived experience of inequality, provide insight into the political consequences of getting growth wrong.
There is a tale of two Irelands: On the one hand, Ireland has achieved impressive economic recovery and growth after a tumultuous financial crisis, and the government is now enjoying an enviable surplus. And yet if you speak to many Irish people, especially those who aren’t knowledge economy workers but live in expensive cities like Dublin, they will insist that prosperity remains fleeting. So how to explain this gap? And what lessons might it yield for the UK government, as it aims at growth and places housing, investment and the knowledge economy at the heart of this strategy?
This gap can be explained by the distinctive approach Ireland has taken to housing financialisation, Foreign Direct Investment (FDI) and the tech and pharmaceutical sectors over the last several decades. Ireland has experienced impressive economic growth and social liberalisation since the 1990s. However, this economic success was due to fast and loose property-backed lending, which led to the financial crisis beginning in 2008. After suffering one of the worst downturns in the eurozone, Ireland then made an impressive economic recovery. And yet, the government’s current surplus is due to a ‘corporation tax bonanza’ that leaves the country uniquely exposed to Trump’s tariffs and locked in a volatile dependency with the United States. (Indeed, Ireland would be in deficit without corporation tax windfalls.) Additionally, as in cities like Cambridge, growth in Dublin has focused on expanding the knowledge economy, attracting skilled workers in the creative, tech and biotech sectors—all workers who tend not to be classed as ‘left behind.’
Directly related to this, the last decade has seen a rise in support for nationalist parties and movements in Ireland, tracking similar shifts in the UK. My recent book argues this is a consequence of uneven investment in the knowledge economy versus housing delivery. It follows activist movements critical of the state’s response to 2008. Based on a year of fieldwork and qualitative research in Dublin between 2016-2017, it unpacks why the housing issue was uniting working- and middle-class voters in campaigns for social and affordable housing. It also analyses ESRC-funded research undertaken in 2022 to examine support for Sinn Féin, the left-wing nationalist party that has placed housing and the cost of living at the heart of its messaging. This was shortly after the party won the most first-preference votes in the 2020 General Election, buoyed by support from working-class voters and young people. Though some insist the public has cooled on Sinn Féin since, and while the immigration issue has posed a challenge for the party, that 2020 election sent a stark message to centrist parties, one that continues to be relevant today. Recent polling by Irish Times/Ipsos B&A places the party firmly ahead of Fianna Fáil and Fine Gael, and indicates it continues to grow its young and working-class base.
The current government is now spending and building to make up for lost time, and while this may be reassuring some voters, deep fissures in Irish society remain. Many continue to lament the cost of living and housing crises, and the immigration issue remains incendiary. Ireland is therefore not usefully understood as a simple growth success story. Rather, it reveals that growth comes with strings attached.
It also yields at least a few concrete lessons:
First, GDP and GNI are imperfect indicators of how people understand their quality of life. This is a fact increasingly emphasised by economists and social scientists, including at the Bennett School. Growth measurements that hinge on GDP and GNI mask underlying complexities that shape how people make electoral decisions. Long-term fieldwork data of the sort social anthropologists collect is an essential part of the solution, as fine-grained, qualitative research provides a fuller picture of whether gaps exist between the economic data and how people experience inequality. This matters because it is the latter that impacts political preferences.
In Ireland, the distortions introduced by GDP are particularly clear and obscure who benefits from economic growth. Patrick Honohan’s work is instructive. As Governor of the Central Bank of Ireland during the years after 2008, Honohan has consistently provided cautionary evidence about how we conceptualise and measure economic growth. As Honohan notes, Ireland’s GDP has consistently placed it at or near the top of European league tables. Yet its GDP is significantly due to the activities of multinational corporations (MNCs), especially the IT and pharmaceutical sectors.
The distortions were particularly clear during the pandemic recession, when these figures were also overshadowing a significant drop in employment. GNI to some extent corrects for these distortions, but conceals the influence of large capital assets, like intellectual property, and MNCs redomiciling in Ireland without necessarily contributing significant economic activity, often attracted by highly permissive tax regimes. This led to Ireland’s Central Statistics Office to propose a modified measurement, GNI*, which aimed to adjust for these factors. GNI* and data on consumer prices demoted Ireland from first to between 8th and 12th in the EU, pointing to the extent of the potential measurement gap. Data on active individual consumption, household savings and other indicators of household living standards also explain why individuals insist they struggle to afford housing and the cost of living.
Second, growth strategies that place upwardly mobile, skilled workers in the knowledge economy at the heart of the strategy stand to exacerbate class divisions. In cities like Cambridge – home to an elite global university but the most unequal city in the UK – this is particularly significant. So while courting workers in the creative, tech, and biotech sectors is part of a robust growth strategy, serious consideration needs to be given to integrating other workers into the narrative, and they need to stand to make economic gains. Making home ownership more accessible must be a key pillar of this strategy, as home ownership continues to be tightly associated with class background and a determinant of social mobility.
Finally, attracting FDI is not a risk-free approach to financing infrastructure, growth and development. As recent events have demonstrated, FDI can become a poisoned chalice. The Irish government’s fiscal strategy could unravel if certain MNC’s withdraw, meaning its surplus comes at the cost of transatlantic dependency.
And related to this, there is a much more fundamental question about the political risks of housing financialisation. There are different degrees and kinds of financialisation in the property market, and Ireland has gambled on a relatively radical type. This approach has raised public concern about who stands to benefit from housing financialisation and growth. For instance, the outsized dominance of institutional investors as landlords in Ireland is a source of significant controversy, as the inflationary consequences of this dominance continues to lock young and low-income renters out of home ownership. Recent scandals around building regulations have also generated suspicion and in some cases great costs to the state, as in the case of the Priory Hall and mica and pyrite building blocks debacles.
Ireland stands to remind us, then, that growth comes with pressing political risks that must be carefully managed. If the public perception takes root that ‘growth’ is a byword for enriching knowledge economy workers and foreign investors while making life more expensive for the majority, one could give no greater gift to right-wing, nationalist movements.
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
