Ireland’s Multinationals-Dominated Economy in the Pandemic: Did Big Tech and Big Pharma Save the Day?

Abstract

Similar to the Eurozone crisis, Ireland engineered a more successful bounce back from the COVID-19 shock than crisis-hit peers. This article argues that the Irish path is less of a product of a generalizable export-led growth strategy, but, rather, can be explained by a set of idiosyncratic features. Using a wide array of macroeconomic indicators, the analysis assesses the opportunities and risks associated with Ireland's distinct path. It shows how strong ties to the United States, and emergence as the European hub for the world’s fastest growing firms sets Ireland apart from European peers. The US is a reliable “spender of last resort,” countercyclically spending and borrowing, boosting growth prospects of trading partners. Irish sectoral specialization in pharmaceutical manufacturing and digital services was also a boon in this crisis. The pandemic created opportunities for health-related industries; reliance on digital technologies helped digital firms. The article also finds, however, that banking on tech and pharma giants has significant limitations. First, multinationals’ accounting tricks artificially inflate economic statistics, and these two sectors are most affected. Second, to the extent that there is job-sustaining activity, it is not straightforward how the success of these sectors is transmitted to the rest of the economy. In the aftermath of the Eurozone crisis, the hospitality industry played a significant role as a “‘transmission belt,” receiving spillovers from the high value-added export sector. Since lockdowns hit hospitality the most, the social insurance function of fiscal policy is of paramount importance to ensure a more broad-based recovery.

Keywords:

• Globalization
• international political economy
• tax evasion

JEL Classifications:

• F5
• H26
• F6

Acknowledgements

I thank Samuel Brazys, Niamh Hardimann, Manuela Moschella, Gergő Motyovszki, Aidan Regan and two anonymous reviewers for very helpful comments and discussions. All remaining errors are mine.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 Using the latest available data, that is 2015

2 Covering NACE codes B to N, ex K

3 Data: finance.yahoo.com

4 Data: World Bank

5 Data: OECD TiVA, Variable: Foreign value added embodied in domestic final demand, deflated by: import deflator

Additional information

Notes on contributors

Palma Polyak

Palma Polyak is a final-year PhD candidate at the Scuola Normale Superiore, Faculty of Political and Social Sciences in Florence, Italy. Her dissertation research focuses on the politics of Eurozone members’ export-reliance and current account surpluses, from both global and domestic perspectives.