SCEPTICS, not to mention begrudgers, must be rubbing their eyes in disbelief. Can a 7 per cent growth rate in Irish GNP be really true? Can this poor old nag of an economy, so berated for its stumbling performance over the decades, so derided for trundling along well behind the main European field, have really produced a spurt that is rapidly closing the gap with the former pacemakers and threatens to leave other stragglers floundering in her wake? What on earth can have happened to have transformed the carthorse into a thoroughbred?

Sceptics may console themselves with the reflection that this is not the first time this has happened and that normality was soon restored on earlier occasions.

Did we not have exceptionally fast growth in 1978, and again in 1989/90, leading, indeed, to premature talk of an "Irish miracle"? Although we have closed the gap with both Britain and the EU, are we not still lagging 20/30 per cent behind the per capita income of north western Europe, even though our own levels are bolstered by transfer payments from Brussels?

Are there not, in addition, special, once off factors contributing to this surge, whose impact is bound to decline shortly? Have not the structural funds of Delors 11 begun to make an impact? Has not the peace process stimulated tourism and generally contributed to a more buoyant investment climate?

All this is true, or mostly true. But it does not suffice to discredit what must remain an exceptional performance in historical and comparative terms. 1995 has not been a once off spectacular like 1978, or even 1989. It follows more than two years of impressive growth which looks set to continue for at least another year.

A four year growth surge cannot be reduced to a blip on the screen. On the face of it, this record seems to require reconsideration of some explanations for a disappointing long term economic performance.

How often have we been assured that our "peripheral" location condemns us to lag in the European stakes, particularly once the Channel Tunnel was completed and poor shivering Kathleen Mavourneen was the only contestant obliged to contemplate a waterjump? Instead, our fastest ever economic growth has happened to coincide with the completion of the Channel Tunnel. (I am not suggesting a correlation).

Some transport costs have certainly fallen in recent years, thanks to increased competition and improved port management, but no seismic shift has yet been recorded in Ireland's "peripheral" location.

How often have we heard that our taxation levels inhibit enterprise "and suffocate potential growth, or that our education system, likewise, stifles enterprise, having the temerity to produce "academic" as distinct from "practical" graduates?

How often have we heard that our growth rates are essentially determined by British rates, that we should deem ourselves simply a regional economy within "these islands", and that it was pure presumption to think that the mirage of political independence could ever overcome the "reality" of economic dependence?

It should have been already clear as far back as the 1960s that our growth rates had largely decoupled from Britain, but any lingering doubts must be dispelled by the sharp divergences of the past 15 years.

HOW often have we heard since 1979, most vociferously only three years ago, that a hardening exchange rate against sterling heralded the "destruction of the small business sector? Yet the groans of those affected (and firms sourcing their raw materials mainly from hard currency areas, including Ireland itself, and selling disproportionately in the British market, must certainly be suffering at present) have been drowned out in the end of year hallelujah greeting the 7 per cent growth rate.

We are, in short, regularly reproached for our lack of competitiveness. If lack of competitiveness means a 7 per cent growth rate, maybe we should continue to indulge in our follies and let others worry about the elusive concept of "competitiveness".

What has changed? Have we suddenly got everything right, even if, perhaps, a shade inadvertently?

What has happened since the nadir of the mid 1980s to yield so startling a reversal of form?

The economic climate has certainly changed. The improvement in the public finances in the past decade has been quite extraordinary. The sharp fall in the rate of inflation, in Government current spending as a percentage of GNP, in the EBR, in the debt ratio, in the debt service ratio, and in virtually every other indicator, testifies to a remarkable reversal.

What was so striking about the rumpus in the Dail before Christmas over next year's borrowing target was how small were the differences involved.

Industrial relations have improved, with the national wage agreements introducing a reasonable degree of stability of expectations, fostering, and fostered by, expectations of relatively low inflation and, God and the Bundesbank, willing, reasonable interest rates.

Our learning capability has greatly improved. We have, for the first time begun to learn systematically from the experience of other small countries in Europe and beyond - indeed as far away as New Zealand. The difference between the quality of our thinking in this regard compared with even a decade ago reflects one of the most striking changes to have occurred in the mind sets of policy makers mince the creation of the State.

But a benign climate does not in itself guarantee a rich harvest. Indeed, were we solely dependent on the response of indigenous industry in even so improving a climate, we would be facing a disastrous situation now.

We would have only a derisory manufacturing export base, with indigenous industry still accounting for only 25 per cent of manufacturing exports. The employment situation would be even more unfortunate. Employment in indigenous industry has actually fallen" by more than 10 per cent since 1986. This is not the stuff of boom and bloom.

In fact, four factors deserve particular notice in the current circumstances.

Firstly, the boom partly reflects the fact that virtually all sectors - multinational and indigenous industry, construction, agriculture, land a wide variety of services, especially tourism - have prospered together, in happy but most unusual unison.

Secondly, within this fortunate, conjunction, the computer/electronics sector holds pride of place. It has been well positioned to take full advantage of the worldwide boom. The computer industry tends to be a highly cyclical one and it is now in a sharp up swing.

We are reaping the dividend of along term IDA strategy in identifying this sector, more than 20 years ago, as a major growth prospect in the late 20th century. This is bound to suffer from cyclical swings but around a sharply rising trend.

THIRDLY, despite its still modest contribution to exports, indigenous Irish industry, consisting overwhelmingly of small and medium enterprises, has been improving, if too slowly, its performance in recent years. It is crucial to our long term growth prospects that this sector captures increased market share.

Expanding market share, firstly in Britain, where Irish owned firms still sell a disproportionate amount of their exports, and increasingly in the rest of Europe and beyond, has to be a key policy objective.

This is a matter of long term slog. The gains here are bound to be less spectacular than in the multinational sector. But they are essential to lay a firmer foundation for sustained employment growth. This can come both through creating new jobs and reducing job losses, which remains one of our main problems despite some improvement last year.

The quality of management is the single most important factor in saving jobs, as well as in creating them.

There is now no lack of enterprise in the SME sector. But the management skills to sustain small firms - have often been lacking.

As we have few big, native firms, this means that management ability must be widely diffused throughout the economy if the upward trend is to be sustained. We cannot rely on the entrepreneurial genius of a small number of exceptional people.

The wide diffusion, both of a competitive ethos and of management skills, is essential. Growth in firms, not establishing them in the first instance, has now become the real test of management ability. Forbairt is playing a key role here. ,Mr Ruairi Quinn should introduce a more favourable tax regime for this sector in the Budget.

Fourthly, it is at last coming to be realised, however belatedly, that the service sector has a key role to play. "It already employs nearly 60 per cent of the labour force. It is high time that it was treated as seriously as manufacturing industry.

Services cover a multitude of activities. Tourism is one of the biggest single hopes for major employment growth, but virtually every service has development potential. It is crucial for the entire economy that services, whether traded or non traded, be competitive.

We ought to welcome this, if only because we ought to flourish in services. However highly technological some services have become, like telecommunications, the human touch remains crucial. Irishmen, to say nothing of Irishwomen, can surely take on the world in terms of personality and intelligence.

Can it last? We are unlikely to sustain a 7 per cent annual growth rate. But there is no reason why we should not achieve a higher rate of growth on trend than ever before.

The problem with Irish economic growth, historically, was not that it was low. Low growth may be perfectly respectable if the objective potential is simply not there. Critics of our economic performance have concentrated on the perceived gap between performance and potential. That gap still exists on trend, even though it has, happily, been narrowing in recent years.

What is particularly encouraging is that many of the sources of future growth still lie largely within our own control, however much sovereignty may be sliding to Brussels. Sustaining responsible policies in public sector finance, and in labour relations, diffusing management skills on a broad basis, continuing to improve the contribution of our education system, of our public administration and our policy agencies, all depend largely on our own intelligence and willpower.

WE are not in these respects prisoners of impersonal global forces. We are, of course, always in danger of being buffeted by global waves. But we can continue to learn the skills to ride the waves if we want to,

Thinking about economic growth should involve asking what economic growth is for, That depends on our values. To me, economic growth in itself means little unless it translates into improved prospects for the most vulnerable members of our society. Ritualistic references apart, the unemployed have come to be largely marginalised in much current economic discussion.

We now have the resources to build a truly civilised, caring society in this country if we really want to, The irony is that we may be losing the will to create this type of society, just when it is becoming possible, as we succumb increasingly to the ethos of rampant individualism.