Ahern took care to nurture biggest boom in State's history

ECONOMY: Taoiseach presided over an economy which nearly doubled in size and a workforce that grew by 700,000 in 10 years

ECONOMY:Taoiseach presided over an economy which nearly doubled in size and a workforce that grew by 700,000 in 10 years

IN HIS 11-year term as Taoiseach, Bertie Ahern has presided over the biggest economic boom since the State was founded.

On Ahern's watch, the Irish economy almost doubled in size, while the numbers at work increased by one-half.

Between 1997 and 2007, the size of the economy, as measured by real Gross Domestic Product (GDP), increased by 90 per cent.

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Even last year, as turbulence hit global financial markets, real GDP in Ireland grew by 5.3 per cent.

Sustained economic growth over the past decade provided a platform for continuous employment expansion.

Between 1997 and 2007, the numbers of people at work in Ireland increased by one-half, rising from 1.4 million to 2.1 million.

The scale of employment growth has forced down the rate of unemployment to historically low levels.

The unemployment rate - the numbers out of work as a proportion of the labour force - declined from 10.4 per cent in 1997 to 4.6 per cent last year. Moreover, the rate of long-term unemployment - those unemployed for more than a year - fell from 5.6 per cent in 1997 to 1.3 per cent a decade later.

Buoyant economic conditions led to the end of involuntary emigration and triggered large inflows of immigrant labour.

In the 10 years from 1987 to 1997, net emigration - emigrants less immigrants - amounted to 83,000 people. This migratory experience was wholly transformed in the succeeding decade, when net immigration replaced net emigration. In the 10 years to 2007, the net immigration inflow into Ireland reached 392,000.

Sustained high rates of immigration in recent years have triggered a minor population explosion. The population has swelled from 3.626 million at the time of the 1996 census to 4.339 million in April 2007. Thus, in the space of 11 years, the numbers residing in the country have risen by 713,000 or by 20 per cent.

The exceptional growth in employment over the past decade, together with the population expansion it helped to induce, caused two of the hallmarks of the Ahern years: the consumer boom and the housing boom.

The annual volume of Irish consumer spending on goods and services - excluding house purchases - has risen by four-fifths since 1997. To the extent that real consumer spending volumes are an accurate barometer of material living standards, average per capita living standards have risen by some 50 per cent over the past decade, even when allowance is made for the additions to the population.

Even though the fizz in house prices has gone flat over the past year, the scale of the price increases seen over the past decade has been remarkable.

In summary, new house prices in Ireland tripled in the decade to 2007, with second-hand house prices rising even faster.

In 1997, new house prices nationwide averaged €102,222, with second-hand house prices being marginally higher, at €102,712. Despite some price slippage during the course of last year, by the third quarter of 2007 new house prices in Ireland averaged €319,214, with second-hand houses fetching an average of €374,392 across the country in the same quarter.

Population growth, rapid rates of household formation and exceptional advances in house prices prompted a major house-building boom. The total number of housing completions increased from 38,842 in 1997 to a peak of 88,000 in 2006.

Even with the downturn in house-building last year, total housing completions in 2007 numbered 78,027, more than twice the level of housing output a decade earlier.

Thus, Ahern can look back on an extraordinary record of economic achievement during his years as Taoiseach. But was it the man or was it the times? In truth, it was a combination of both.

As Taoiseach, Ahern did not create the Irish boom; it was already emerging from its chrysalis when he assumed office. Three fundamental factors underpinned the economic boom which has now drawn to a close.

First, the minority Fianna Fáil government of 1987/1989 began the process of putting the public finances back on a sound footing. This restored credibility to Irish public policy, removing a key obstacle to foreign industrial investment.

Second, a wave of foreign direct investment materialised from the early 1990s, providing a platform for the launching of an export boom which carried the economy forward until 2001.

Third, Ireland's participation in European economic and monetary union induced a "convergence" boom. Low interest rates and easy credit provided by entry to the euro stoked the fires of consumer spending and house purchases which provided the dynamic to Irish economic growth as export growth decelerated after 2001.

But if Ahern did not create the boom, he nurtured it carefully, and often politically. Despite his often hesitant delivery in public, Ahern possesses the keenest economic brain in the Cabinet and can sniff the way economic winds are blowing faster than most.

He prepared himself well for the top job. He served his apprenticeship as minister for labour, where he was present at the creation of social partnership, and as minister for finance, where he devalued the Irish pound by 10 per cent in January 1993.

Essentially a dirigiste social democrat, he is committed to centralised policy-making in which government has a strong, if not a decisive, hand. Hence, his continuing support for centralised pay-bargaining, social partnership agreements and national development plans.

But, above all, he has been a practical politician, and practical politics is about winning elections. In capturing the tenor of the times, he suppressed his own social democratic instincts in appointing a dedicated tax-cutter in Charlie McCreevy as minister for finance.

More tellingly in terms of political results, he presided over large increases in public spending prior to the general elections of 2002 and 2007.

Winning three in a row does not come cheap

"Ahern possesses the keenest economic brain in the Cabinet and can sniff the way economic winds are blowing faster than most. He prepared himself well for the top job, serving his apprenticeship as labour minister, then minister for finance"