It’s a bitter wake-up call for Ireland, and another example of Trump settling scores on the money front.
My latest on American Thinker.
For those of us not particularly versed in the secret workings of international economics and finance, but moved by simple intellectual curiosity, until just a few days ago, it was both a mystery and a source of deep wonder to see how a country once as poor as, if not poorer than, Southern Italy had managed in just a few years not only to climb into the middle tier of the world’s economic ranking, but to leap straight into the very top positions.
I’m talking about Ireland, a country that in my tourist memories from what feels like a geological era ago is forever linked to the strong smell of burning peat, old smoky pubs, and countless sheep clogging impossibly narrow country roads.
Then, suddenly, the mystery dissolved, exactly when The Economist recently published its annual ranking of the world’s richest countries. This year, Ireland was excluded because its GDP per capita data turned out to be “polluted by tax arbitrage” — that is, the practice multinational corporations adopt of declaring income, capital gains, and transactions in the country that offers the lowest or most advantageous tax rate. Yet the overwhelming majority of those profits do not remain in Ireland; they are immediately shifted to parent companies or other tax havens (often via dividend or royalty payments), a phenomenon known as “profit shifting.” In short, the profits artificially moved by multinationals to Ireland inflate its economic statistics.
The Economist’s annual ranking doesn’t just look at GDP per capita. It also considers two additional measures: the impact of prices or cost of living, and how many hours people work to earn their wealth. Using all three, Forbes explains, provides “a more realistic overview of a country’s wealth in relation to its inhabitants.” With these corrections, The Economist ranked Norway, Qatar, and Denmark as the top three richest countries. Belgium and Switzerland came in fourth and fifth, while the United States placed sixth.
Ireland’s economic mystery has a year of birth: 2015. That year, Ireland implemented new international accounting rules (known as the “Double Irish” phase-out). The result was an unprecedented event: GDP grew by 26.3% in a single year — an impossible growth rate for a developed economy without extraordinary events. It was then that American economist and Nobel laureate Paul Krugman described the phenomenon by coining the term “leprechaun economics” (the leprechaun being a popular figure in Irish folklore, belonging to the family of fairies, gnomes, and sprites — depicted as a tiny, bearded old man dressed in green, notoriously cunning and a master of trickery). He highlighted how GDP and tax revenue were distorted by the fact that a handful of giant corporations, including none other than Apple and Microsoft, were declaring their massive profits in Ireland. That “miraculous” growth, then, was due not to an explosion of productivity or domestic consumption (a bit like Italy’s “miracolo economico” of the 1950s and 1960s), but rather to corporate inversions and relocations of intangible assets (such as patents and intellectual property) by multinational giants (mainly American ones) lured by favorable tax policies. In practice, enormous amounts of financial and intellectual capital were legally booked in Ireland to benefit from low taxation, artificially inflating GDP without bringing real benefits to the local economy.
By the way, President Trump has repeatedly criticized that practice, calling it a “scam” that hurts U.S. taxpayers and arguing that Ireland has “stolen” U.S. pharmaceutical and tech firms by offering them a tax haven. According to Trump, past American leaders were “stupid” for allowing this to happen. That’s why he is now combining tariffs, tax cuts — he is pushing to lower the U.S. corporate tax rate to 15%, close to Ireland’s — and reshoring policies to pull corporate profits back to America, posing a serious challenge to Ireland’s economic model. Irish economists warn that if Trump’s measures succeed, Ireland could lose billions in corporate tax revenues tied to American multinationals. The Irish government, in turn, admits that it faces major risks, especially with housing and cost-of-living crises already straining the country.
What we’re seeing now with Trump and his team targeting Europe, and singling out Ireland in particular, is a classic case of his administration’s “America First” doctrine in action. It’s not just a broad grievance; it’s a targeted, multi-front attempt to settle what they see as old scores and rebalance deals in America’s favor and a deliberate tactic to highlight what the administration sees as the core of the problem: a Europe that expects American protection while simultaneously undermining American economic interests.
The Economist’s decision was, of course, methodologically sound. Including Ireland in standard rankings based on GDP per capita would have been misleading and would have distorted comparisons with countries where GDP more faithfully reflects domestic economic activity.
Within Ireland, most economists, financial journalists, and informed citizens welcomed the decision. It was an argument that had been circulating there for years. Many were embarrassed by rankings that artificially placed them above countries like Luxembourg and Switzerland. They knew those figures didn’t reflect the reality of everyday life, where the Irish face a severe housing crisis and high cost of living. The Economist’s move put an end to this embarrassing paradox.
Bitterly, The Irish Times notes that successive governments over the years have done almost nothing to prepare for the shock the inevitable correction will bring to the economy. “Do we feel ‘truly rich,’” the country’s leading newspaper asks rhetorically, “when our kids can’t afford to buy — or even rent — a home, and now can’t even afford college accommodation and are emigrating in droves? No, we don’t. ... As the storm clouds gather, we might do well to scrutinize how successful countries use and develop their key resources, because we may very soon have the rug pulled out from under us and realize that the deficit between tax and spending can no longer be avoided.”
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