Photo by Jin Gong (Unsplash)
In 2023, Ireland’s GDP was €510 billion. By that measure, Ireland is one of the richest countries on Earth per capita.¹
The people living there didn’t feel particularly rich. That gap is the story.
The number said one thing, and daily life said another. When the lived experience stops matching the metric, the metric is usually the thing that’s wrong.
Ireland has experimented with low corporate tax rates for decades in an attempt to pull multinationals in from around the world. But it wasn’t until the 2015 surge, later attributed to Apple shifting intellectual property to Ireland, that the scale of the distortion became impossible to ignore. In fact, it was one of the largest profit-shifting events ever recorded, resulting in an increase in Irish GDP of 26.3 percent (the number is contested still today, with some claiming it was noticeably higher).⁵ By comparison, actual Irish economic growth in 2015 was estimated at only 4-6 percent.⁶ The difference was so divorced from reality that economist Paul Krugman coined the term “leprechaun economics.”⁵
Profit shifting is when companies record income in one location and ship profits to another. The activity that happens in a country and the income that stays in a country are not the same thing. And in Ireland’s case, they have come apart further than anywhere else on Earth. More than €219 billion of that €510 billion was output owned by people who live somewhere else. Forty-three percent of the headline never stayed in the Irish economy.²
Soon other companies followed suit by booking profits in Ireland that had nothing to do with Ireland. Intellectual property parked there for the tax discount. Aircraft leased through Irish subsidiaries. Global profits routed through Irish entities to capture the rate. All of it counted as Irish economic output, but much of it didn’t stay.
Ireland’s own statistics office noticed this gap, so they built a second number to measure what actually stayed. They created a modified gross national income figure called GNI*, designed to capture what GDP was not. It was unusual for a national accounting metric to be created specifically to correct for distortions in another national accounting metric.
That second number came out at 57 percent of GDP, down from 75 percent a decade earlier.² This identified a substantial gap between expectations and reality. It also made the debt burden clearer.
In 2023, Ireland’s debt was 43.3 percent of GDP. Comfortably below the eurozone norm, meaning Ireland should be a fiscally relaxed country.³ Measured against GNI*, the same debt was 75.9 percent. Near the European average, meaning Ireland is a country carrying a real load.³ Same country, different optics. A government, lender, or citizen reading only the GDP figure is planning against a number that may not describe the country they live in. A figure that, if GNI* is to be believed, overstates the country’s position by 32 points.
To be clear, this isn’t an inherent failing of GDP as a metric. The United States GDP in 2024 was roughly $29.2 trillion and its GNI is roughly the same.⁷ Money flowing out to foreign owners and money flowing in from American holdings abroad roughly cancel. GDP has anchored U.S. economic monitoring for decades, and for the country it was built to describe, it works fine.
Ireland reached for the same metric, probably for the same reason everyone does: it’s the one everyone uses. But Ireland is not the United States. Different countries, different structures, different ways money moves through them. They borrowed a tool built for one system and it broke in another.
So they built a better one. That’s the good news. They noticed the gap and corrected for it.
The bad news is that even GNI* is already showing distortion. Eurostat and Irish economists note that the corrected number is still warped by the same multinational tax planning it was built to exclude.⁴ Which means the income that actually stays in Ireland is likely even less than GNI* suggests. Even if they correct this with an updated or new metric, it doesn’t make the problem go away.
At the end of the day, GDP and GNI* are both trying to answer the same question: how much income is actually available to the country?
The whole story here, the debt swing, the diverging lines, the borrowed tool that broke, is an argument about what income belongs in the picture. GDP counts everything produced within Ireland’s borders. GNI* attempts to remove income that ultimately leaves. Swap one for the other and you get a clearer picture, but it is still only a partial picture.
To be clear, this article is not discourse on the effectiveness of the Republic of Ireland’s tax policies. If profit shifting inflated GDP but also genuinely grew the real economy, produced more jobs, more tax revenue collected, and more money in residents’ pockets, then the inflated headline could coexist with real gains. A lower tax rate brought real activity. Apple, Google, Pfizer, and others moved operations there, hired Irish workers, and generated tax revenue. So “the number is inflated” and “the country got richer” aren’t mutually exclusive. The harm we’re focusing on here isn’t “Ireland is poorer,” it’s “Ireland’s primary economic gauge is unreliable, and decisions made on it are decisions made on noise.”
Globally, income has become a proxy for a nation’s health. Somewhere along the way, the proxy became the goal itself.
Money flowing within a country doesn’t capture how that wealth is dispersed across its citizens. It also doesn’t count how many people are housed, healthy, secure, or able to live a decent life. GNI* confirms more of the money stayed. It says nothing about whether anyone is better off.
This is the same trap I see organizations fall into. They argue endlessly about which activity metric to optimize. Output or outcomes. Velocity or throughput. The hard part is that they might all matter. Or none of them might, if we’re not measuring the right thing in the first place. A country can grow its GNI* and hollow out. A team can hit every number and ship nothing that matters. The dashboards show green until the day they go dark.
Measuring well-being directly is harder than counting money, which is most of the reason almost nobody does it. It’s the oldest trap with metrics. The easier a thing is to measure, the more weight we put on it, whether or not it’s the thing we actually care about.
The lesson from Ireland isn’t that GDP is bad. It’s that every metric is a model of reality, not reality itself. The moment we forget the difference, we start optimizing the model instead of the thing we actually care about.
Sources
- Central Statistics Office Ireland, National Income and Expenditure 2023.
- Central Statistics Office Ireland, Modified Gross National Income (GNI*) Series.
- Department of Finance / National Treasury Management Agency, Irish debt ratios relative to GDP and GNI*.
- Eurostat and Central Statistics Office Ireland technical notes regarding the construction and limitations of Modified GNI*.
- Cliff Taylor, “Ireland’s GDP figures: Why 26% economic growth is a problem,” The Irish Times, July 15, 2016.
- BBC News, “Irish statistical agency to review reports after ‘leprechaun economics’ mockery,” July 12, 2016.
- U.S. Bureau of Economic Analysis, Gross Domestic Product and Gross National Income, 2024.