Celtic Phoenix or Leprechaun Economics? The Politics of an FDI-led Growth Model in Europe

Abstract

In this paper we argue that Ireland's post-crisis economic recovery in Europe was driven by foreign direct investment (FDI) from Silicon Valley, and whilst this growth model was made possible by Ireland's low corporate tax rates, it was also a result of these firms using Ireland to directly access the European labour market. We evidence this contention via sectoral and geographic analyses while simultaneously showing that Irish fiscal policies have not redistributed gains from the recovery to the broader population. As a result, the economic recovery has been most actively felt by those in the FDI sectors, including foreign-national workers from the EU and beyond. We suggest that this experience indicates that Ireland's FDI-led model of economic development has created clear winners and losers, with significant distributional implications. The FDI growth regime been made possible by inward migration and European integration, but given the unequal distribution of the economic benefits that this generates, it is unlikely to be politically, or electorally, sustainable.

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“…However, the GMP needs to further engage with the transnational sources of economic performance. The massive role of foreign direct investments in the DME model suggests the existence of an FDI-led growth model (Bohle 2018, Regan andBrazys 2018). By highlighting transnational investments, it transgresses the traditional focus on singular national economies and allows for the identification of economic and political linkages between different capitalist types, for example by addressing the importance of Chinese FDI for a potential transformation of the Hungarian DME towards an SME (Rogers 2019).…”

Employee Relations in Context: Globalization, Uncertainties, and Dynamics of Change

“…Nonetheless, very large MNCs are more likely than other firms to benefit from increased globalization. They have the financial resources to invest or relocate to countries with lower labour costs and/or low corporate tax; moreover, some of them have special tax arrangements with local governments and benefit from transfer pricing (able to declare their profits in countries with low corporation tax, such as Ireland) (Regan and Brazys, 2018). Furthermore, a significant share of their exports of goods and services is intra-firm and, therefore, determined by internal decisions, not external market prices (Lansbury, 2018).…”