Proinnsias Breathnach
Microsoft headquarters in Dublin. Source: Google.
The concept of neo-colonialism
The concept of neo-colonialism emerged in the 1950s and 1960s from the dependency theory of underdevelopment. It refers to the way in which, following the achievement of formal independence, many former colonies continued to perform the subordinate economic functions which were imposed upon them by their overlords during the colonial period. While these functions mainly involved the export of food and industrial raw materials, in the post-colonial era, in many cases, additional functions were installed in former colonies which further enhanced their subordinate role vis-à-vis the dominant industrial powers. One of the most important of these was the diffusion of manufacturing branch plants by transnational companies to many ex-colonies in order to exploit the cheap labour available in these countries.
The case of Ireland
The experience of Ireland fits the neo-colonial model well. From the late 17th century, under the aegis of a landlord class of British origin, the Irish economy was reoriented to the commercial production and export of agricultural products, Meanwhile, almost all industrial production was eliminated (with the exception of the Northeast, where special circumstances applied).
When what is now the Republic of Ireland gained formal independence in 1922, the economy was overwhelmingly based on agriculture, with less than 5% of the workforce engaged in factory-based industrial production. This situation remained essentially unchanged up to the 1950s, when a major wave of emigration, driven mainly by a combination of low incomes in Ireland and the labour demands of a rapidly-growing British economy, produced a major threat to the very raison d’être of the Irish state.
The Irish government’s response to this crisis situation was to seek to create a new, export-oriented, industrial base by attracting to Ireland a share of the emerging flows of transnational investment which were developing in the late 1950s. The main incentives to achieve this included a very generous scheme of capital grants; what was, in effect, a zero tax rate on profits; and a plentiful supply of cheap and relatively well-educated labour. The consequent inflow of foreign investment grew gradually in the 1960s and then accelerated markedly after Ireland joined the European Economic Community (EEC) in 1973, which provided duty-free access to the very large West European market.
By 1977, 680 foreign manufacturing plants were in operation in Ireland, accounting for around 40% of all manufacturing employment[1]. The key areas of investment were in the modern sectors of electrical engineering, electronics and pharmaceuticals, but almost entirely involved low-skill (and low-paid) work such as assembly and packaging (typical of branch-plant industrialisation in underdeveloped countries generally).
As the 1970s progressed, a further factor attracting foreign investment to Ireland became increasingly apparent i.e. the concentration in Ireland of the global profits of many of the foreign firms located here. This involved Irish branch plants paying low prices for inputs supplied by affiliate plants of the same companies, and then charging high prices for outputs supplied to other affiliate plants, with the affiliate plants thereby making low profits, with the bulk of the firms’ overall profits being concentrated in Ireland. These profits were then, for the most part, transferred out of Ireland. By the beginning of the 1980s profit outflows amounted to about 10% of Ireland’s total GDP. These characteristics of inward investment to Ireland, namely, low-skill/low-paid work and large-scale exports of exaggerated and untaxed profits, were clear indicators of Ireland’s subordinate, neo-colonial, status in the global production structure created by (mainly American) transnational firms in the postwar period.
The Celtic Tiger
Then, in the early 1990s, and completely unexpectedly, Ireland began the alteration of economic fortunes which led to the so-called Celtic Tiger phenomenon. The headline indicator here was a rather sudden and pronounced acceleration in the rate of inward investment and associated employment. However, there were two key features of the new investment surge which marked it out as being profoundly different from that which had gone before.
The first of these was the much higher quality of the jobs being created, in terms of both skill and remuneration levels. The second was the emergence and rapid rise of inward investment in services activities as against the manufacturing activities which had accounted for the great bulk of previous inward investment. Initially, the key areas of services investment were financial services and software. Since then, other services activities have come to prominence, if not, indeed, dominance. One of these has been the growing use of Ireland (and especially Dublin) as a regional headquarters for central administration of the globally-dispersed field offices of major transnationals. These HQs provide services such as accounts, legal services, human resource management and IT support for their various operating units in their area of domain.
The other key area of services employment growth involves firms which mainly or completely undertake their business over the Internet – firms such as the Google, Meta/Facebook, X (Twitter), TikTok and Linked-In. The people who work directly for these firms are highly-qualified, with average remuneration levels typically in the range between €150k – €200k, including salaries and share-based payments.
In manufacturing, the main areas of investment in the early Celtic Tiger years continued to be electronics and pharmaceuticals, but with a very distinctive upgrading in the types of work being undertaken. In electronics, this period saw the arrival of world leaders such as IBM, Apple, Intel, Dell and Hewlett-Packard, all engaged in the manufacture of computers and related equipment. While most of the big pharmaceutical firms were already here from the earlier era of inward investment, they were now increasingly involved in process and product development.
There has also been a widespread pattern of manufacturing firms becoming increasingly diversified by adding on additional functions. Apple, for example, which originally located in Cork in 1980 to make computers, now employs 6,000 people there, involved in a wide range of services supporting the firm’s global operations.
The Celtic Tiger experienced something of a blip in the early 2000s when there was a major clear-out of the computer industry which largely relocated to East Asia, and especially China. However, investment in the other sectors continued unabated while the loss of the computer sector was largely counterbalanced by rapid growth in the medical devices sector. The inflow of investment was scarcely dented by the financial crash in 2008-11. Indeed, the continued wellbeing of the foreign sector played a key role in stabilising the Irish economy in the aftermath of that particular episode of woeful misgovernance.
Explaining the Celtic Tiger
Explaining what brought about the Celtic Tiger remains a subject of debate and controversy. It is this writer’s view that the Celtic Tiger phenomenon was largely driven by general developments in the advanced economies in the 1980s and 1990s, especially rapid technological change, and accelerating product innovation and differentiation. The need to adapt to the varying needs and rapidly-changing demands of different markets drove American firms to seek locations close to the huge and diverse European market, with Ireland being a particularly favoured location in this respect.
An additional key factor was the growing demand for workers with modern technological skills, and a growing awareness of the availability of such workers in Ireland which, at that point, was moving rapidly to its current position of having one of the highest education levels in the world. Not only did Irish workers have the required qualifications, but they were also prized by inward investors for their perceived attitude to work and problem-solving abilities.
Today, over 300,000 people are employed in firms brought to Ireland via the IDA. However, the actual amount of employment supported directly and indirectly by IDA-supported firms is almost twice that, with foreign firms now having much stronger spinoff effects that they did in the past. 70% of these jobs are in American firms, and two thirds are in service activities.
Assessing Ireland’s place in the contemporary global imperialist system
So, where does the Ireland of today sit in the global spectrum of neo-colonial economies? There is no doubt that Ireland has moved a long way from the kind of branch-plant industrialisation which typified the 1960s and 1970s. A high proportion of the employment provided directly by foreign firms here is of good quality and well-paid. For a significant proportion of foreign firms located here, Ireland is an important part of their global operations. Meta’s Irish office administers all of the firm’s operations outside the USA while Apple’s Cork office is responsible for all of that company’s operations outside the USA and Asia. Many of the big firms in pharmaceuticals, medical devices and software have Irish specialist units which are global centres for the development of certain products for the firms in question. And some foreign-dominated sectors have been generating substantial local spinoffs in terms of using local suppliers and research centres and spawning indigenous startups.
However, the fact remains that the foreign firms which dominate the Irish economy are all externally-owned and, while they may have very important operations in Ireland, ultimately their priorities lie elsewhere. The term “Celtic Tiger” was coined to indicate a similarity between Ireland’s strong growth in the 1990s with that experienced in the previous decades by four Asian countries which collectively had been styled the “Asian Tiger economies”, referring to the fact that the tiger is considered to be the most powerful member of the animal kingdom: Singapore, Hong Kong, Taiwan and South Korea. While there are definite parallels between the experiences of Ireland and Singapore, the developmental experience of Taiwan and South Korea in particular have been profoundly different from that of Ireland, in that their growth has been largely built around home-grown firms in high-tech sectors. These firms have developed their own home-based centres of research and development and have generated extensive networks of local suppliers. When making new investments, their first instinct will be to do this locally, and there is a high level of local reinvestment in the substantial profits these firms make from exports and overseas operations. In the light of the experiences of these countries, the term “Celtic Tiger” is not at all appropriate to Ireland’s recent developmental experience.
While Ireland does perform important global functions for a large range of transnational firms, its primary role in the contemporary global imperialist system is to facilitate tax avoidance on a massive scale by these firms. Many, if not most, foreign firms based in Ireland use creative accounting to transfer most of the profits which they generate overseas to Ireland, where they pay taxes which tend to be much lower than they would have to pay if declared elsewhere. Last year, Apple’s Irish operation reported revenues of over €200bn and pretax profits of €70bn. These figures were the equivalent of 36% and 12.5% of total Irish GDP – and that’s from just one company. Most of these revenues and profits were totally unrelated to the activities actually carried on by Apple in this country. Microsoft’s Irish operations had combined revenues of €172bn and pretax profits of €41bn in 2025. After paying tax, typically in the range 12-15%, these profits are then mainly repatriated to the USA (or to a tax haven somewhere).
However, that only tells half the story. Much of the transnational profit which passes through Ireland is never declared at all. This is particularly the case with IT-intensive companies which impose massive arbitrary charges on their Irish subsidiaries in the form of royalties from the use of the companies’ intellectual property (i.e. technology) and other services stated to be provided by the companies’ head offices, such as management and data-hosting services. Thus, in 2016, Facebook Ireland had revenues of $14bn – over half of the company’s total global revenue. However, the company declared a profit of just €200m – an extraordinarily low return on sales of 1.4%. Of the company’s income, 96% was taken up by so-called “administrative expenses”, the great bulk of which were charges of the aforementioned kind. The transfer of this income to the USA allowed Facebook to make an overall profit of 45% on its global revenues, despite making just 1% return on its Irish operation which accounted for one half of these revenues.
Measures of this kind are widespread among foreign firms in Ireland. Thus, in 2024, the outflow of royalty payments from Ireland amounted to €164bn, the equivalent of 29% of total GDP. Adding profit outflows gives a total outflow of royalties and profits of €374bn (66.5% of GDP). These are profits, the great bulk of which were generated outside Ireland and, if taxed as should be appropriate, would contribute significantly to the finances of the governments concerned and their ability to provide public services. And, while most of the profit is generated in richer countries, a significant amount comes from the poorer countries of Africa in particular, for whom the tax revenues forgone are a major loss. This is a particularly shameful aspect of Ireland’s role in the global networks of transnational companies.
[1] “IDA Ireland”. Supplement to Young Citizen, November 1977, Dublin.
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