Worst of times, best of times: tale of two Irelands

Country A is drowning. A catastrophic recession has thrown a tenth of its workforce out of jobs in just two years. Firms are shutting, banks are barely solvent and the IMF has been called in to bail out the government from crushing debt. The standard of living is eroding, taxes are being hiked, state spending is being slashed, and the deeply unpopular government is being forced into an election it is certain to lose.

Country B has a huge and growing trade surplus. It is attracting a flood of international investment from global firms, building thriving hi-tech export industries. Exports grew this year by 6 percent and now amount to more than $50,000 per person. Taxes are low and staying low, and the English-speaking population is highly skilled.

Both countries are Ireland. And therein lies a tale, or rather two tales: of a domestic economy that is in tatters, side by side with a global export economy in the rudest of health.

In some respects, the success of Ireland's export economy obscures just how thoroughly ruined its domestic economy has been by the bursting of its property bubble in 2008.

Whole industries have completely vanished in a matter of months. Since government revenue depends mainly on domestic economic activity, the sudden fall in output has blown apart what were once exemplary public finances.

Once again, the Irish are leaving an island that seems unable to support them, a particularly resonant omen in a country that had finally reversed centuries of emigration.

But while all that misery has piled up, Ireland's "Celtic tiger" export economy has quietly continued purring.

TRANSFORMED

The story has been often told of how Ireland was transformed in the 1990s from one of the poorest countries in Europe to one of the richest by attracting exporters, especially American firms who turned it into their base for European operations.

U.S. firms have invested more in Ireland than in Brazil, China, India and Russia combined, says Joanne Richardson, CEO of the American Chamber of Commerce.

The clout of those businesses was on display on Thursday when Finance Minister Brian Lenihan, fresh from announcing 15 billion euros in spending cuts and domestic tax rises, addressed the American Chamber of Commerce's annual Thanksgiving lunch.

In between the pork and pheasant terrine and the roast turkey, he reassured a ballroom full of U.S. business chiefs that Ireland's 12.5 percent corporate tax rate was untouchable.

That tax rate, far lower than in the other countries of Western Europe, has been Ireland's calling card in competing for international investment. It infuriates European neighbors that are now funding Ireland's bailout and think it competes unfairly with their higher rates, but it remains popular in Ireland.

Ireland's main political parties are committed to keeping it, and even argue with each other over who will do a better job defending the low rate from outside meddlers that want it hiked.

With growth slowing in the United States and Europe, Barry O'Leary, head of Ireland's investment promotion agency IDA, has his eyes on attracting investment from Asia. The IDA has opened offices in Mumbai, Shanghai, Moscow and Sao Paolo, and is opening new ones in Shenzen, Singapore and Bangalore.