John FitzGerald: Joining EU has transformed Irish economic policy over past 50 years

The recently published history of the Department of Finance from 1959 to 1999, by economic historian Ciarán Casey, provides a fascinating account of the role of the department and its ministers in managing the Irish economy over this period. It takes the story on from Ronan Fanning’s book that charted the department’s history from independence to Whitaker’s economic development.

At the official launch of the latest history, all the panellists reflected on how membership of the EEC, now called the European Union, had transformed not only Ireland’s economy, but also how economic policy was formulated by the department.

Prior to EEC membership in 1973, Ireland’s external economic relations had centred on the United Kingdom. While Ireland had achieved its independence in 1922, in subsequent decades the economy had remained dependent on the wider UK economy, with a majority of the country’s exports destined for the British market. While Ireland had secured political independence, it largely continued to function as a satellite of the British economy and the main focus of trade policy was on securing and maintaining better access to the UK. While Ireland nominally had its own currency, it was pegged to the British pound. Our national reserves were almost exclusively held in sterling.

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From the outset, the Department of Finance had modelled its role on the UK Treasury. A number of treasury civil servants had been deployed to help establish the department in 1922 and some of them went “native”, staying on well after our Department of Finance was up and running. Fanning shows how close personal relationships established between finance officials and those in the UK Treasury helped Ireland reach a favourable deal to end the Economic War in 1938.

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One of my first jobs, when I started work in the Department of Finance in autumn 1972, was to put away files on Ireland’s external economic relations — primarily bilateral ones with the UK. These files were never again retrieved from the basement, as a new world opened up in January 1973 when we joined the EEC: the multilateral EU world took over from our narrow focus on London.

From the beginning of 1973, civil servants from the Department of Finance found themselves on the plane to Brussels, participating in a plethora of different meetings covering all aspects of economic life

The influence of the UK Treasury continued to run deep up to the 1970s, not just as our main trading partner but also intellectually. The advice of UK academic economists was also sought, with the department retaining a panel of such advisers up to EEC entry.

However, from the beginning of 1973, civil servants from the department found themselves on the plane to Brussels, participating in a plethora of different meetings covering all aspects of economic life. They participated as equals with the civil servants from the other eight member states rather than, as in the past, finding themselves mendicants in London.

I attended my first meeting in Brussels in September 1973 to discuss the forecasts for the EU economy. What I found fascinating was the range of different ideas and expertise around the table, rapidly broadening my own horizons. For example, the EU Commission and the other participants deferred to the expertise of the Dutch Central Planning Bureau on what was happening on world trade. At the forecasting meetings, the size of the country represented was less important than the expertise of the participant.

Over subsequent decades, the move to a multilateral world of equals within the EU opened the department to a much wider range of ideas and thinking than in the pre-EEC days. Networking over a beer, a very important skill, helped build relationships and deepen understanding of our EU partners.

New thinking arising from exposure to EU institutions had wider effects on how the Irish economy worked

In EU-speak, the “open method of co-ordination” involves sharing experiences and results by member states on different policy issues. This exposed Irish policymakers to a range of ideas and practice beyond the English-speaking world.

New thinking arising from exposure to EU institutions had wider effects on how the Irish economy worked. The development in the late 1980s of the partnership approach between the government, trade unions and employers, owed much to the experience that all the players had of how business was done in other EU countries. It helped them escape from the contentious and claustrophobic British industrial relations world of the 1980s and helped lay foundations for Ireland’s economic success in the 1990s.

Over 50 years of EU membership, UK civil servants became helpful colleagues in Brussels, rather than representatives of the former colonial power. A real impact of Brexit, one little commented on, has been the loss of this important channel, as fellow EU partners, for fostering mutual communication and understanding.