Convention offers chance to reset our political system
The performance of this economy has been uniquely volatile relative to peer countries since the middle of the last century. Why?
Before attempting to answer that question, consider the evidence over six decades.
In the 1950s after a hugely destructive war Europe was rebuilding rapidly and experiencing the beginnings of mass prosperity. Ireland – despite being one of the few countries not to suffer extensive war damage – not only failed to benefit from that boom, but its economy went backwards.
Economic indicators from that period are patchy, but reliable demographic data illustrate just how bad the relative performance was. Ireland was the continent’s only country to have a smaller population in 1960 than 10 years earlier. That was caused by mass emigration as a reaction to a protracted slump.
In the 1980s mass unemployment returned. While most economies recovered from the oil crisis-induced recession of 1979-81, Ireland endured yet another miserable decade. As late as 1991 there were still fewer people at work than in 1979. Among the 34 nations who comprise the OECD, only then-communist Poland had a worse record over those dozen years.
If those two episodes of slump were unmatched by any peer market economy, the 1994-2002 period was as also exceptional, but, in that case, for all the right reasons. No already-developed economy has ever experienced more rapid growth in output and employment over such a sustained period. Ireland went from being northwest Europe’s perennially poorest nation to being comfortably above the average of one of the world’s most prosperous regions.
For the past half-decade, things have been dreadful even by the standards of the most severe economic crisis in the western world in living memory. Job destruction has been greater than anywhere else in the OECD, public indebtedness has grown by more than any other country in that organisation and the banking crisis is – by many measures – is among the worst in world financial history.
So what accounts for this very unusual record?
Around the world economic failings are sometimes attributed to political instability and the absence of basic institutions, such as enforceable property rights and the rule of law. But these factors very clearly don’t explain Ireland’s failings as we have enjoyed a well-functioning legal system and a high degree of political stability since the 1920s.
Internationally, there appears to be some link between geographic peripherality and prosperity and this was often cited in the past as a factor explaining Ireland’s back marker position among peer economies. But other European economies overcame this, as did Ireland during the Celtic tiger period, so it, too, can be ruled out.
Another reason economies can be held back is the capture of state institutions by those who prey on wealth creators . The Irish political system is sometimes criticised for being highly corrupt, but by European standards, never mind those of the rest of the world, it is relatively clean. Multinational companies do not flock to jurisdictions where the agents of the state are predatory and parasitic.
The only common theme in the three disastrous decades over the past 60 years is not destructively bad government, but damaging government inaction.
After the second World War successive governments stuck with self-sufficiency long after it had clearly failed. In the 1980s, an unwillingness to act proportionately to stabilise the public finances was the main factor in prolonging the slump.
Drift, complacency and inaction kicked in again during the recent bubble years. Despite more warning lights flashing as each year passed, the Government and most State institutions became less rather than more concerned.
The very unusual incentive structures facing Irish voters and elected representatives are the reason for the bias towards inaction in the political system. If these structures were made more similar to those of other countries there is every reason to believe that the quality of governance would improve.
Tomorrow 100 people will meet for the first time to examine the Constitution. They have a once in a generation chance to propose such changes. If they do not take that chance, prospects of fundamental reform will disappear.