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Second, under Prime Minister Seán Lemass, the protectionist Irish government began opening itself up. Even so, as late as 1979, David McWilliams notes in his lively book The Pope's Children: Ireland's New Elite, kids on the country's east coast could not buy iconic brands of candy (like Opal Fruits) that they saw advertised on English TV--not because the sweets were bad for their teeth but because the government was determined to prop up domestic confectioners. Gradually, import restrictions were lifted, corporate tax rates were lowered--from 50% in the 1980s to 12.5% in 2003--and the government began to pursue outside investment in earnest.

From a U.S. multinational's point of view, these policies augmented other attractive qualities. At the time, U.S. firms believed that doing business in Fortress Europe was going to require a physical presence there. Relatively high wages and plentiful red tape made France and West Germany unappealing. By contrast, Ireland's English-speaking workforce, surfeit of engineers and relatively low wage costs were a magnet. Still, "it took quite a bit to persuade Intel that Ireland could do it," recalls Sean Dorgan, chief executive of Ireland's Industrial Development Agency. "Part of that persuasion was showing them how many Irish electronics engineers were in places like Eindhoven and Munich with Philips and Siemens."

That argument, lubricated by tax incentives worth millions, persuaded Intel, along with other tech firms, to choose Ireland. The Celtic Tiger was born. And it wasn't just computer- and Internet-related companies but a whole range of firms that needed a skilled workforce. Most of them were from outside (such as Procter & Gamble and Georgia Pacific), but there have been homegrown flyers as well, like Elan Pharmaceuticals, a biotech and drug company based in Dublin.

The ferocious expansion of the economy allowed Ireland to gloss over some of its weaknesses, like a very patchy infrastructure. Nearly every aspect of Irish life has been affected: more cars, more tourists, better restaurants, fancier homes. "We are richer than any of us imagined possible 10 years ago," says McWilliams. While many Continental European countries struggle to juice their economies, Ireland keeps racking up wins--and jobs. Last fall the pharmaceutical giant Wyeth officially opened a 1.2 million-sq.-ft. biotech manufacturing facility in South County Dublin. The plant, known as Grange Castle, represents a $1.5 billion investment and will employ 1,000 people.

Such continuing successes have not prevented a chorus of doubters from warning that the good times will end. Troubling signs are easy to find. There's no way that foreign direct investment (FDI) was ever going to maintain the rocket-fueled pace of the 1990s. In recent years, U.S. Treasury and tax officials have been trying to rein in corporate cost-sharing plans that allow multinationals to transfer revenues on intellectual-property assets--such as software licenses--to low-tax countries like Ireland. Moreover, new E.U. countries like Poland and the Czech Republic are winning the eye of foreign investors. As a result of these factors, plus the continuing strength of the euro, FDI in Ireland peaked in 2002 and has declined since.