Will we be wary of the Pied Piper and deaf to the Siren’s Song?
Frank Flannery, former Director of Strategy, Fine Gael
Our State will soon be 100 years old. We’ll be getting the cheque from the President. And that State got off to a solid start. Though conservative, economically and politically, as was the orthodoxy of the day, it made significant progress in establishing a solid-functioning democracy. It also brought a spirited, even adventurous approach to economic development, as shown by the start of rural electrification, and the totemic Ard-na-Crusha project.
The politics of the State, though, were austere, dominated by civil war issues.
Like other countries, the infant state was buffeted by the international recession triggered by the Wall Street Crash in the late 1920s. But the state also saw a government taking the steps they saw necessary to limit damage and to control the situation, without much regard for themselves and the inevitable political fallout.
During the thirties, a more popular form of politics began to emerge. On the one hand, there were issues such as the Anglo Irish Treaty, the ports and Land Annuity Payments. On the social side, there were issues around relief of poverty and helping the unemployed. This was a new government – and well to the left of its predecessor. Its eye was more on what the voter liked –less on what needed to done. Unfortunately, its actions on the land annuities and its general rhetoric led to the disastrous so-called Economic War with Britain – a ‘war’ that intensified the isolationism that characterised Ireland during the thirties and forties and which itself derived from the thinking of Arthur Griffith and the early Sinn Féin – ourselves alone.
The Second World War copper-fastened this reality. It reinforced the policy of supporting often-inefficient native businesses, while imposing tariffs on imports, thus effectively pricing them out of the market when in competition with local products. For its part, the population at large accepted what was a harsh and frugal existence with remarkable stoicism and minimal expectation. This was their lot in life. They were assured by their leaders, political and clerical, that a better fate awaited them in the next. Provided of course they behaved themselves and did what they were told.
Until the late 1940s then, there was nothing like ‘a revolution’ on the streets or in the ballot box. In 1948, the voters rebelled, ejected de Velera after 18 years but failed to settle on any alternative.
The 1950s were boom time in the western world with post-war reconstruction everywhere. But Ireland? Still in the grip of protectionism, we scarcely noticed, except for the mass emigration of its people to build the infrastructure and industry of others. Our boats and sometimes planes were busy – but not much else – as many young men and women said goodbye. In their absence, political life was volatile with Governments changing in 1948, 1951, 1954 and 1957. And in many ways, circumstances in 1948 bear some similarities to the current situation; for example – a proliferation of parties and prominent independents.
It was in the 1960s that Ireland experienced its first hint of growth and prosperity. We did the Hucklebuck and undid, albeit belatedly, protectionism, starting with the signing of the Anglo Irish Free Trade Agreement in the early sixties and conclusively with our joining the EEC in 1972. Tax-free exports and the welcome for inward investment began to change the self-image and expectations of most people, strengthened further by the universal secondary education, better health services and housing that followed.
By the early seventies Ireland seemed set for long-term growth and better working conditions and living conditions. We were enthusiastic members of the EEC, money was flowing to our farmers. Social legislation, aided by the social fund, was rapidly changing our society for the better.
After sixteen years there was a change of government with many of the ‘best and brightest’ in our Parliament. We even discovered deficit budgeting. It was a time of optimism and growing confidence. What could possibly go wrong? Well, far away, something went very wrong – the Arab Israeli war. The war led to the first of the two world oil crises, which struck Ireland hard in the early 1970s. In the grip of the crisis, the government reacted resolutely, taking the strong action necessary – action that was right – but unpopular. The economy survived. It even grew. But the government didn’t. It was swept away in the most blatantly populist election the country had yet experienced. It was the wholly unrealistic 1977 Manifesto of Jack Lynch’s Fianna Fáil. The extravagant gifts and elaborate promises seduced the electorate, giving Fianna Fáil in turn a huge overall majority in Dáil Eireann.
Populist politics took over in the late seventies. Lousy management of the economy unleashed raging inflation and rising interest rates on homes and businesses across the country. The addiction to popularity and populism saw the government ignore doing what was right, in favour of doing what was pleasing to the electorate.
And for that political pleasure we settled into the pain and suffering of the protracted recession of the 80s, with until the second half of the decade, a government reluctant, even phobic, about taking corrective action. By the mid 1990s, another recovery was well underway. Budget surpluses reappeared and, with growing productivity, standards of living were rising. However, lower personal and capital taxes did not deliver wage restraint in general. After the year 2000, particularly, inexorable increases in the public cost base eroded our competitiveness and undercut the strength of our economy. Social partnership, instead of controlling the appetite of the public spending monster, tended to feed it. Productivity gains were replaced by a building boom that became a bust by 2008. In the period leading up to the elections in 2002, public expenditure increased by a quarter and by the same amount in the pre-election period of 2007.
For the second time in two decades, the government by commission and omission and addiction to populism, destroyed healthy growth, ultimately driving the economy into the cataclysmic collapse we have all experienced.
For their part, the public backed these disastrous policies in election after election. If there was a lot done, there was even more to do.
But even with the shock of the fall, the patience and forbearance of the Irish population kicked in. And now, eight years later, we see signs of real recovery in our economy. We see significant, even spectacular, growth in employment. We see again the prospect of improving living standards and quality of services. And we see again that we are facing a crucial general election. Only this time, what will we do? This time, will we look at our hard-won gains, our real recovery – more jobs in our families, in our communities and say goodbye to all that?
But there is another way of overviewing the management of the Irish economy in the last 90 years and that is according to the orthodoxies of the day. Initially, we embraced the Sinn Féin concept of protectionism which Eamon de Valera combined with the concept of a frugal, God-fearing existence. It had its uses in the 30s and 40s. But we held onto it too long and too enthusiastically and lost the 50s as a result. In the 60s, we embraced the then-orthodoxy of Keynesian economics, but employed the counter-cyclical strategy uncertainly.
The theory proposed borrowing and spending in recession to recover the economy but to replenish your resources by prudent policies when times were good. However, we tended to borrow and spend enthusiastically, even gleefully, on all occasions, leading to long and difficult recessions.
In the late eighties and early nineties we discovered another very useful orthodoxy in Social Partnership, which played a key role in planning and delivering the Celtic Tiger period of recovery. However, for whatever reasons, it failed to take any actions to avert – or possibly never recognised – the fatal flaws that had been built into our public policy. We took an enthusiasm best suited to The Famous Five and applied it to benchmarking. Like protectionism, we should have loved it enough to let it go. Only we didn’t. And the enthusiastic campfires and the ‘I say’ and ‘spiffing’ actually became a kind of napalm we applied to the public finances, the taxes collected from the people.
So what does history teach us about ourselves in Ireland? The signs are contradictory: that we are resourceful and entrepreneurial in building recoveries, that we keep our vengeance sharp, and particularly, for the political forces who manage us through recessions, whether they were responsible for the recessions or not, that we have an optimistic sense that the present recovery will last forever.
During the Tiger years we even began to talk about the ‘Irish model’ – a new and buoyant economic life-form – not only impervious to gravity – it is ignorant of what gravity is. We’ve learned that at elections, we develop a bit of a gra for the Pied Piper, a bit of an ear for the Siren’s Song. And we romp on to the next disaster. In fact, what our history tells us is that we do not learn from it, that we do not learn from our past. But perhaps it is different this time.
Perhaps, now that we have lost such a lot, and have had to suffer such a lot, we will be suitably wary of the Pied Piper and deaf to the Siren’s Song – and think twice before we enter another door into the dark!
My belief is that representative parliamentary democracy cannot function effectively without political parties and that parties must have agreed policies and an effective whip system to secure implementation.
We already referenced 1948 when there was a proliferation of new political parties and some splintering of old ones, together with interesting independents. Now we have movements, ventures, alliances. With principles. Without policies. With lots of bells and whistles but with no whips. With mostly no leaders – but dozens of potential leaders. There are also parties of the extreme left, hard left, social democratic left, green left. There’s one lonely right-wing ‘party’ struggling to register at one percent in the polls. There are flash mobs of independents gathering around any stray or passing issues, and sometimes any passing microphone or camera. How this can have anything to contribute to the kind of stable and tested government Ireland needs now is hard to see. They make Syriza seem as organised as the German Christian Democratic Union. We may have to rely on the traditional parties.
But culturally and socially, things are different now:
And in a strange way, things remain the same:
If history is a guide, it indicates that we will restart our little crush on the Pied Piper:
Or just for once, JUST FOR ONCE, will we listen to the past?
Investment is moving upward – I believe up by over 14 per cent last year. Government borrowing is falling markedly and steadily down from around 22 billion euro at its peak in 2011 to five billion euro last year. I know the Taoiseach has been saying we’re well on track to seeing the deficit go below 3 per cent of GDP this year. As a government they did all of that, and I believe that as we face the next election they are the only ones who can. Crucially for Ireland, they have the heart and the ability to do it all again.
But will the votes stay with them? Will we break the habit of a political lifetime? My guess and my hope is yes. That the votes will stay with them and yes we will learn from the mistakes of the past.
It is in the country’s interest, our children’s and grandchildren’s interest that we do. Because getting the country back on track will take more than the last election. Getting Ireland back on track is equally about Election 2016.
I believe that for Ireland General Election 2016 will be the most important election in the first part of the 20th century. People will be deciding do we want growth, do we want stability, do we want jobs, do we want the tried-and-tested pairs of hands who have essentially got the economy from bust to steady recovery in under five years?
Or do we want a bit of a ‘change’ for the sake of ‘change, a bit of ‘freshness’, a bit of ‘diversion’? The fact is, too, our current orthodoxy of 5-year governments may not even last.
But for now, as I look into the crystal ball that Joe Mulholland wrapped very badly in his invitation, I believe the likelihood remains that the real suffering of the past six years, the immense personal sacrifice of the last six years, will impel enough voters to go to the polls and choose stability, safety and security. The economic recovery is fragile but at the same time it’s probably strong enough to deliver this, particularly if the government goes its full term and has the election in Spring 2016
The question is – will we look back and learn? It remains to be seen.