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Philipp Fink, Dichotomous Irish Industrial Structure in:

Philipp Fink

Late Development in Hungary and Ireland, page 218 - 218

From Rags to Riches?

1. Edition 2009, ISBN print: 978-3-8329-4173-4, ISBN online: 978-3-8452-1720-8 https://doi.org/10.5771/9783845217208

Series: Nomos Universitätsschriften - Politik, vol. 168

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218 4.4.4 Dichotomous Irish Industrial Structure As shown, the Irish state displayed a large capacity in attracting high technology FDI. It marketed Ireland as a stepping stone for TNCs to produce for the Single European Market. The resulting large levels of FDI inflows into the manufacturing sector had large positive primary effects. Indeed, the Irish economy is a far cry from the dismal situation of the 1980s. However, the positive development of the aggregate economic figures mask the duality of the Irish industrial structure. Contrastingly, in regards to the secondary effects of the high inflows of FDI, the state displays a low level of capacity to ensure a sufficient integration of TNCs into the Irish economy by forging substantial linkages between foreign-owned and indigenous firms. As a result, indirect and direct spillovers are small. The described performance differences between foreign-owned and indigenous firms lead not only to the conclusion that the recovery of the Irish economy was mainly the result of inflows of FDI, it also questions the developmental capacity of investing TNCs (Kirby 2004: 219). Again, the low level of linkages is related to the nature of the TNC, which is interested in safeguarding its knowledge-assets in order to defend its firm-specific and quasi-oligopolistic competitive advantages. Furthermore, despite the high technology nature of TNC products, the majority of affiliates located in Ireland are not involved in strategic high value operations classified by a large degree of R&D. Additionally, the possibilities for increased co-operation in previous TNC manufacturing strongholds are becoming increasingly slight, as global cost competition effects are transforming the respective sectors and the prompting relocation of foreignowned production plants to lower cost locations. Likewise, indigenous unattractiveness as TNC suppliers demonstrates the lack of state capacity to cater for the development of Irish enterprise. They are faced with continued barriers-to-entry into profitable operations due to their small scale and low endowment with capital and lack of cutting-edge production technologies and products. Hence, Irish industrialisation is Janus-faced (Ó Riain 2000: 183) and characterised by a growth process, which is heavily dependent on external inputs in form of demand for exports and foreign productive capital (O’Hearn 2001: 192-193). 4.5 Irish Open Inequality In the case of Ireland, social inequality has been a historic occurrence (Breen et al. 1990: 99-100). However, the high levels of economic growth in the 1990s have not led to a reduction in inequality. Rather, social inequalities have persisted, as the large inflows of high technology FDI induced a labour market demand shift in favour of highly qualified staff. Consequently, skilled remuneration levels increased, driven by rising educational pay differentials, and resulted in a dispersion of earnings and direct market incomes. Welfare and tax regulations have further exacerbated market inequalities, leading to a pronounced social dichotomy. Similarly, Irish

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Zusammenfassung

Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.