Sowing the seeds of success

With the passage of time it becomes easy to forget how grim it was; how gloomy the public dialogue; how low the national morale. Civil servants reportedly murmured at their coffee breaks about the International Monetary Fund coming in to take over the direction of the economy. Bankers feared for the liquidity of their institutions. The money of many of the rich, as we have learned, courtesy of the Dublin Castle tribunals, flowed from the country. The long-term unemployed thronged the dole offices. At the embassy in Ballsbridge lines of mostly young, well-educated people, queued for visas for the United States. And for each lucky candidate a dozen simply went and worked illegally.

At the end of 1986 the Fine Gael-Labour Cabinet found it could not formulate an agreed budget. The Labour Ministers handed in their seals of office and a minority Fine Gael administration with Garret FitzGerald as Taoiseach staggered on to the general election which was to bring Charles Haughey back to power.

Ray MacSharry and Padraic White have set out to chronicle the remarkable tale of Ireland's rise from this nadir of despair to become Europe's wonder-economy; a land of plenty, where new millionaires seem to be created almost daily and where there is work and opportunity for all. Both men are well-placed to do it. MacSharry, as former Minister for Finance, is synonymous with the application of the new policies which preceded the beginning of the economic turnaround as the 1980s turned into the 1990s. White was managing director of the Industrial Development Authority (IDA) for nine long years - from 1981 to 1990, a period which saw the economy lurch from one crisis to another until the uplift of the late 1980s.

In reality this is two books with two distinct narratives, within which each author presents his own account of the period. Ray MacSharry traces the political and governmental processes. Padraic White sets down what is little less than a compacted history of the IDA - a chronology of the far-reaching strategic decisions which laid the foundations of today's high-technology industrial base.

There may be more immediate interest from historians, politicians and others in Ray MacSharry's account of his stewardship in the vital years at Finance. But Padraic White's narrative of the evolution of the IDA is an important contribution to the understanding of how today's Ireland has been formed and shaped. The decision to switch the focus of industrial development from so-called "screwdriver industries" to high-technology enterprises, with high added-value, has been fundamental to today's prosperity. White took over from the late Michael Killeen just as the strong inward investment pattern of the late 1980s was about to peak and fall. The United States economy faltered and most of the industrially-advanced world went into recession. At home, high inflation raged and the unemployment figures began to climb steadily upwards.

The IDA has had its fair share of criticism over the years. It has too often appeared to allow itself to function as an instrument of ministerial propaganda and its value-for-money to the State came under close scrutiny in the Telesis and Culliton reviews. But it has shown a remarkable resilience and adaptability to changing conditions and new challenges. It remains one of the exemplars of modern Irish patriotic endeavour.

As the world recession deepened, the competition for overseas investment became even more intense. The response was the IDA strategy document for the decade 1982-1992 which set the organisation's focus on "attracting industries that could achieve high output growth using the best technology available, while maximising their spending on Irish services and materials". The new strategy, in White's words, "provided a logic for the IDA to favour companies with the most advanced production facilities, even if these were not the most labour-intensive in a sector . . . electronics, computer software and special emerging opportunities in biotechnology and healthcare were the foreign industries I listed as meeting the high-growth criteria".

From this policy base, led by White and his successor, Kieran McGowan, the IDA began to win investments for Ireland which were to become the jewels in its crown - companies such as Intel, Motorola, Fujitsu, Sandoz and others. There is a tale of drama, strategy and calculation in this, with a plot potentially as exciting as a political thriller, to be taken up and fully detailed one day by a lively historian-economist.

Ray MacSharry's narrative, by definition, takes a much broader focus than Padraic White's. From the beginning he acknowledges that the economic leap forward of the 1990s cannot be viewed in isolation. "Ireland's remarkable success at the end of the 20th century lies as much in the wise decisions taken many decades ago in the fifties and sixties," he says, "- in abandoning protectionism, encouraging foreign investment, opting for membership of the EEC and investing in education - as it does in those made in more recent times." Nor does he allow Civil War politics to spin the story to the exclusive benefit of Fianna Fail. He acknowledges the inability of the first Cumann na nGaedheal government to do much by way of economic development, since it was preoccupied with the more immediate issue of stabilising the new State. He pinpoints nonetheless the significance of the creation of the Electricity Supply Board in 1927 and the development of the Shannon power scheme at Ardnacrusha. Later, he recognises the "inspired choice" of Fine Gael Finance Minister, Gerry Sweetman, in promoting out of turn a young civil servant of "outstanding abilities" called Ken Whitaker.

MacSharry places today's economic achievement in context, not merely historically but also relative to the altered sense of social contract in Irish public life and, of course, within the framework of Europe. He locates the development of a new social partnership between government, unions, employers and farmers, after years of confrontationalism, at the very centre of events. The four successful centralised agreements have helped to produce a "remarkable transformation" in the economy, he says. "Social partnership could well be regarded as the crowning achievement of the Celtic Tiger economy," he concludes.

A JOINT chapter, co-authored by MacSharry and White, presents an overview of the EU's role in Ireland's economic transformation. A second chapter, by MacSharry alone, deals specifically with the achievement of cohesion and convergence within the EU. In a very brief, third chapter, Padraic White sketches out how Ireland's membership of the EEC acted as an aid to foreign investment during the later 1970s and 1980s. In rounding off his account of the EU's contribution to Ireland's economic performance, he quotes a Goodbody Stockbrokers' estimate that without European support the Irish national debt to GDP ratio would have peaked at 147 per cent in 1987 rather than the 115 per cent it did. With something of an understatement, he adds: "It would have made social partnership - underpinned by tax cuts - harder to achieve." And he concludes, "In that event, the defiant roar of the Celtic Tiger might never have been heard in recent years".

For contemporary commentators, perhaps the valuable core of Ray MacSharry's story is his account of the period beginning in March 1987 when he was appointed as Minister for Finance in Charles Haughey's minority administration.

He is matter-of-fact about his own role and the restrained and modest style in which he describes his considerable achievements is refreshing. MacSharry identifies the 1986 report Strategy for Development - 1986-1990 from the National Economic and Social Council, under the chairmanship of Padraig O hUiginn, as the seminal document. And with scrupulous fairness he acknowledges that the social partners had "not only diagnosed the problem but had prescribed the remedy . . . the NESC members were also ready to support the report's tough recommendations . . .".

Haughey gave his Minister for Finance his head in applying the necessary stringencies. The former Taoiseach is given due credit for the support without which MacSharry could certainly not have executed the range of expenditure cuts which were the first step towards stabilising and ultimately reducing the debt ratio. Haughey had a clear and fairly simple set of policy devices in mind when he came to office. At the centre of these was the reduction of interest rates as a means of stimulating demand and growth. He had the idea of developing two or three national success stories in order to revive national morale. And he believed that by emphasising Ireland's developing cultural life it would be possible both to raise the national spirit at home and to attract acclaim from abroad.

I recall a dinner at Kinsealy one night in the freezing January of 1987, arranged by the late John Healy, at which Haughey conversationally set out the notion of a new international financial services centre for Dublin. The idea had come from a young man called Dermot Desmond, lately returned from abroad. Haughey spoke of the potential of the Temple Bar area as a centre for cultural development. He mused about the stimulation of the export trade if interest rates could be brought down by two or three percentage points across Europe. It was Fianna Fail's and Charles Haughey's good fortune that within weeks of coming to office international interest rates were on the way down. Not very long afterwards, work was beginning on site at the IFSC and at Temple Bar.

Ray MacSharry gives Charles Haughey his credit. He also unhesitatingly acknowledges the contribution made by Alan Dukes with the Tallaght strategy initiative. The then Minister for Finance read "with a mixture of bewilderment and delight" the accounts of Dukes's mould-breaking speech at Tallaght, undertaking to support the thrust of Government economic policy as long as it would go "in the right direction". There was, no doubt, an element of political calculation in Dukes's demarche but "on balance", MacSharry concludes, "Fine Gael put the national interest in restoring financial stability ahead of any short-term political advantage". It is a generous acknowledgment across the political divide.

This book represents a unique contribution to the historical record and will be required reading for future students of the period.

But the changes which are narrated here represent only one aspect of the transformation which has been wrought in Irish society since the end of the 1980s. Ireland of the 1980s was the Ireland of the Kerry babies, of Anne Lovett and her dead child and of the most bitter divisions on issues of personal freedoms. It was an Ireland, as we now know, where financial and political corruption was hidden under a patina of respectability. And it was an Ireland where news bulletins, two and three times a week, led off with reports of bullet-riddled bodies found on country roads, of bars and bookie shops sprayed with gunfire, of streets and villages devastated by bomb-blasts.

In so many respects we live in better - or at least more open times.

Conor Brady is editor of The Irish Times