by Gary Murphy
For Amy, Aoife and Jack
MERCIER PRESS
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© Gary Murphy, 2009
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Glossary of Abbreviations
CAP*
Common Agricultural Policy
CII
Confederation of Irish Industry
CIO
Committee on Industrial Organisation
CIU
Congress of Irish Unions
ECA
Economic Co-operation Administration
EEC
European Economic Community
EFTA*
European Free Trade Association
ERP
European Recovery Programme
EU
European Union
FII
Federation of Irish Industries
FIM
Federation of Irish Manufacturers
FUE
Federated Union of Employers
GATT*
General Agreement on Tariffs and Trade
IBEC
Irish Business and Employers’ Confederation
ICMSA
Irish Creamery Milk Suppliers’ Association
ICTU*
Irish Congress of Trade Unions
IDA
Industrial Development Authority
IFA
Irish Farmers’ Association
ITGWU
Irish Transport and General Workers’ Union
ITUC
Irish Trade Union Congress
NATO*
North Atlantic Treaty Organisation
NFA
National Farmers’ Association
NIEC
National Industrial and Economic Council
OECD
Organisation for Economic Co-operation and Development
OEEC
Organisation for European Economic Co-operation
PPF
Programme for Prosperity and Fairness
PUTUO
Provisional United Trade Union Organisation
UCD
University College, Dublin
UN
United Nations
WTO
World Trade Organisation
WUI
Workers’ Union of Ireland
* acronym
Governments of Ireland, 1923–2009
Election
Government
Head of Government
27 Aug. 1923
Cumann na nGaedheal
William T. Cosgrave
9 June 1927
Cumann na nGaedheal
William T. Cosgrave
15 Sept. 1927
Cumann na nGaedheal
William T. Cosgrave
16 Feb. 1932
Fianna Fáil
Eamon de Valera
24 Jan. 1933
Fianna Fáil
Eamon de Valera
1 July 1937
Fianna Fáil
Eamon de Valera
17 June 1938
Fianna Fáil
Eamon de Valera
23 June 1943
Fianna Fáil
Eamon de Valera
30 May 1944
Fianna Fáil
Eamon de Valera
4 Feb. 1948
Inter Party
John A. Costello
30 May 1951
Fianna Fáil
Eamon de Valera
18 May 1954
Inter Party
John A. Costello
5 Mar. 1957
Fianna Fáil
Eamon de Valera to 1959
Seán Lemass from 1959
4 Oct. 1961
Fianna Fáil
Seán Lemass
7 April 1965
Fianna Fáil
Seán Lemass to 1966
Jack Lynch from 1966
18 June 1969
Fianna Fáil
Jack Lynch
28 Feb. 1973
Fine Gael/Labour
Liam Cosgrave
16 June 1977
Fianna Fáil
Jack Lynch to 1979
Charles J. Haughey from 1979
11 June 1981
Fine Gael/Labour
Garret FitzGerald
18 Feb. 1982
Fianna Fáil
Charles J. Haughey
24 Nov. 1982
Fine Gael/Labour
Garret FitzGerald
17 Feb. 1987
Fianna Fáil
Charles J. Haughey
15 June 1989
Fianna Fáil/
Progressive Democrats
Charles J. Haughey to 1992
Albert Reynolds from 1992
25 Nov. 1992
Fianna Fáil/Labour/
Fine Gael/Labour/Democratic Left
Albert Reynolds to 14 Dec. 1994
John Bruton from 15 Dec. 1994
6 June 1997
Fianna Fáil/
Progressive Democrats
Bertie Ahern
17 May 2002
Fianna Fáil/
Progressive Democrats
Bertie Ahern
24 May 2007
Fianna Fáil/Progressive Democrats/Green Party
Bertie Ahern to 6 May 2008
Brian Cowen from 7 May 2008
* Change of Government without an election
Introduction: The Promised Land?
In December 2008 the Fianna Fáil (FF)/Green Party/Progressive Democrats coalition Government presented to the public its blueprint for dealing with the increasingly grim economic crisis. The Plan for Economic Renewal was the Government’s response to six months of catastrophic economic news after more than a decade of boom, during which the twin processes of social partnership and European Union (EU) membership were seen as pillars of the country’s economic success. Amongst a number of initiatives, the plan called for heavy investment in research and development so as to incentivise multinational companies to locate more capacity in Ireland, thus ensuring the commercialisation and retention of ideas that flowed from that investment. Two months earlier Minister for Finance Brian Lenihan had issued the budget for 2009, which he described as nothing less than a patriotic call to action in the face of a deterioration in the state’s fiscal position. The budget, Lenihan said, was introduced during one of the most ‘difficult and uncertain times in living memory’, where the global credit crunch had created turmoil in the world’s financial markets, and after steep increases in commodity prices had placed enormous pressures on economies across the globe, including Ireland’s.1
The financial position in 2009 was completely different to that which any Irish Government had faced in a generation. The dark days of the 1980s had been replaced by a period of economic boom which had pretty much lasted through the two terms of the Fianna Fáil/Progressive Democrats Government from 1997 to 2007. There were significant decreases in both personal
and corporation tax rates, and substantial increases in the numbers of people at work, with the creation of 600,000 jobs in that ten-year period, leading to over two million people at work. Moreover, by the late 1990s the Government was in the ‘black’ for the first time in thirty years, with the exchequer able to meet day-to-day spending without recourse to borrowing.
The attraction of foreign direct investment, together with social partnership and EU membership, was central to the boom in economic development in modern Ireland. The Irish Government was able to advertise itself to investors as an ideal location due to its low corporation-tax rates, membership of the EU, a stable partnership process and a young, educated workforce. In recent surveys, Ireland was considered to have one of the most open economies in the world. The A.T. Kearney/Foreign Policy Globalisation Index – an annual empirical measure of globalisation and its impact – ranked Ireland first in 2002, 2003 and 2004, and second in 2005.2Moreover, the 2006 Index of Economic Freedom – compiled jointly by the Wall Street Journal and the Heritage Foundation – found Ireland’s was the world’s third-freest economy, and the freest in Europe. In 2008 Ireland was ranked third in the Heritage Foundation’s index of economic freedom and was fourth in 2009.3
Yet by the end of 2008 both EU membership and social partnership were in troubled waters. The rejection of the Lisbon Treaty in June 2008 – the second such Government defeat in seven years in referendums concerning Europe – reopened the debate about Ireland’s role within the EU. The 83 per cent ‘yes’ vote from a turnout of over 70 per cent in 1972 for entry into the European Economic Community (EEC), seems but a distant memory now, as the Irish electorate grows increasingly sceptical about European treaties, tending to view them as threats to Irish interests. It was noticeable that the two major opponents of the Lisbon Treaty – Sinn Féin and Libertas – both campaigned specifically on the basis that it was bad for Irish interests, whether of a capital or social nature. The EEC – seen as the panacea to Ireland’s economic ills during the 1972 referendum – had by 2008 become a victim of its own success, at least where the Irish electorate was concerned. The rejection in 2001 of the Nice Treaty (subsequently approved in a second referendum on the subject) and the Lisbon Treaty in 2008 suggests that the Irish electorate no longer views European treaties as entities to which it must sign up. The public needs to be convinced of the merits of a project much more so than in the past, and the days when ‘yes’ campaigners believed that approval of European treaties could be achieved by faith alone are well and truly gone.
Involving the main interest groups in the policy-making process has been a central element of the Irish economic success story. Yet the centrality of the social partners in economic policy-making has differed over time. The relationships established between the social partners in the early and late 1970s had been based largely on terms defined by the Government, and then brusquely terminated when a new economic strategy of fiscal restraint in the early 1980s required it. Thus, policy-making in the economic sphere remained both flexible and adjustable. The process of social partnership put in place by the Fianna Fáil minority Government in 1987 differed markedly from the pay agreements of the 1970s. Upon its return to office in 1987, Fianna Fáil faced a grave fiscal crisis, and sought an agreed strategy with the social partners to overcome Ireland’s economic difficulties. Interested actors such as farmers’ organisations, trade unions and business groups were invited to negotiate with the Government in what might be called a process of economic governance – something that continues to the current day. It has evolved into a system that aims to keep the major interest groups reasonably happy by giving them a role in defining the broad economic approach of the state, thereby perpetuating a national economic and social coalition of sorts. Social partnership binds these ‘social partners’ to a coherent and consistent policy framework. This consensual approach mirrors that of northern European social democracies such as Sweden, Norway and Denmark; indeed, since the mid-1990s Ireland has experienced the kind of economic success that was previously associated with such countries.
The social partnership in place since 1987 has been somewhat flexible and adjustable but in a significantly different manner to that of the 1970s. It has on occasion been reworked, most notably in December 2000 when the 2000–03 Programme for Prosperity and Fairness (PPF) was renegotiated in response to a sharp rise in inflation and increasing strains on the terms of the pay agreement in some sectors. This resulted in the unions securing an upward revision of the pay terms of the PPF.
The most significant aspect of social partnership is that it has given both the Government and the social partners a remarkable twenty years of continuity in economic macro-management, and certainly helped in abating the dire economic crisis of the mid-1980s. As the then Taoiseach, Bertie Ahern, pointed out in June 2006 in his introduction to the Towards 2016 agreement:
Social partnership has helped to maintain a strategic focus on key national priorities, and has created and sustained the conditions for remarkable employment growth, fiscal stability, restructuring of the economy to respond to new challenges and opportunities, a dramatic improvement in living standards, through both lower taxation and lower inflation, and a culture of dialogue, which has served the social partners, but more importantly, the people of this country, very well.4
Nevertheless, it is important to note that this type of partnership agreement has the tendency to be only as good as its last deal; significantly, each successive agreement has been increasingly difficult to negotiate. For instance, the linked-pay deal of September 2008 was only agreed after mammoth negotiations that were described as the toughest in the twenty years of pay talks since social partnership began. By the time the Government published the Plan for Economic Renewal, the voices demanding a reworking of the deal had reached a pitch unheard of since the first agreement in 1987. The very semblance of a threat from any of the social partners to withdraw from an agreement usually precipitated intense discussions to ensure that the demands of the aggrieved sector were met without jeopardising the remit of the agreement as a whole.
Social partnership, for all its success, was showing significant signs of wear and tear as the economy went into its downward spiral in late 2008. Nevertheless, in the Plan for Economic Renewal, the Taoiseach, Brian Cowen, renewed his Government’s commitment to social partnership, noting that it was the Government’s intention to work with the social partners on the development and implementation of the plan using the well-established mechanisms of the social-partnership process, which was consistent with the principles and vision underpinning Towards 2016.5
Back to the future?
Social partnership, foreign direct investment and membership of the EU have their origins in post-war Ireland. The aim of this book is to show how Irish isolationism in the late 1940s and 1950s has been overstated and misunderstood, and how the factors that have shaped the success of modern Ireland can be traced back to the period between the end of the Second World War and the beginning of the 1960s. This period saw Ireland first tentatively and then wholeheartedly explore the option of joining a European trading bloc. It is also the period when Governments began to contemplate the inclusion of economic interests in the charmed circle of power. Both changes in policy can be attributed primarily to economic considerations.
The dismal economic conditions of the post-war period brought with it significant political uncertainty. The fluidity of politics during this period saw successive changes of Government in the four elections between 1948 and 1957. Momentous shifts in thinking at both Governmental and non-Governmental level led to the adoption of an interdependent approach to economic policy-making – symbolised by the most famous economic plan in Ireland’s history, T.K. Whitaker’s Economic Development of 1958, published a full fifty years before the Plan for Economic Renewal. On the fiftieth anniversary of Economic Development, the Minister for Finance, Brian Lenihan, spoke of how it remained highly relevant as a vision for Ireland’s future. More significant
ly, he noted that it was the political class that took the decision to implement Economic Development.6While some policy-makers were reluctant to accept any form of multilateral trading arrangements that would alter protected industry and the country’s privileged access to British markets, the severe economic crisis that affected Ireland throughout the 1950s led to the development of fresh economic thinking both within and beyond the civil service. Such thinking led in 1961 to the Government seeking entry into the EEC, and to eventual membership twelve years later. In that context, the Irish policy-making community was much more acutely aware of events in Western Europe and how they would impact on Ireland than previously thought.
It has long been assumed that the culture of isolationism in foreign affairs fostered by Fianna Fáil since 1932 was continued by successive Governments up to the time when Seán Lemass’ minority Fianna Fáil Government applied for entry into the EEC in July 1961. This assumption is manifested in the belief that the years between 1945 and 1961 saw a strong sense of public complacency, while elite opinion maintained that the depression, war and post-war recovery justified the continuation of isolationist policies that had been in place since 1932. Ireland’s refusal to join GATT (General Agreement on Tariffs and Trade) in 1948 and NATO (North Atlantic Treaty Organisation) in 1949 is seen as a further reflection of isolationism and the conviction that national solutions were the most appropriate in Ireland’s case. This is also perceived in domestic politics, where the reliance on protectionism since Fianna Fáil first took power in 1932 is taken as evidence that the Irish state was most comfortable with conservative, insular policies that would provide an acceptable living standard for at least most of the population. Yet all political parties in this period were acutely aware that Ireland did not exist in a vacuum – either political or economic – where events in Western Europe could be ignored and where the better standards of living on offer in Britain and the United States would not entice Irish people. This awareness was spawned by the realisation that without an improvement in the state’s economic fortunes, there could be no certainty as to the intention of voters at the ballot box.