Parties laying claim to the economic miracle

IN the arguments in recent days over who can best manage the Irish economy, each side has been making claims about the last 10 years which do not stand up to scrutiny.

On the one side, Fine Gael has been claiming credit for low interest rates and a stable currency and saying that, in the words of the Taoiseach, "the last time there were problems with the currency was when Fianna Fail and the Progressive Democrats were in office and interest rates on mortgages were twice as high as they are today".

Fianna Fail meanwhile has been claiming the real credit for the economic boom on the basis that the minority FF administration that came into office in 1987 set the ball rolling with Ray MacSharry's programme of cutting back on public expenditure.

On the first of these contentions, it is not true to say that the last time there were problems with the currency was when Fianna Fail and the PDs were in office. The great currency crisis of 1992-1993 actually spanned the collapse of the Fianna Fail PD coalition, the November 1992 election, and the coming to power of the Fianna Fail Labour coalition.

It is difficult lo see how the PDs can be blamed for it unless it is assumed that Des O'Malley and Mary Harney could have prevented German reunification, British withdrawal from the ERM and the decision by international currency speculators to attack the Irish pound. Or, to look at it another way, if Fine Gael can claim credit for today's relatively low interest rates, then Bertie Ahern should be credited with almost halving interest rates between the end of 1992 and the end of 1993.

But Fine Gael is not in any case on very strong ground in claiming credit for today's relatively low interest rates and relatively stable currency. It is now widely accepted that one of the central reasons why Irish interest rates started to come down in the late 1980s and early 1990s was that the Programme for National Recovery and the Programme for Economic and Social Progress ensured moderate wage growth and economic stability.

As Dr Rory O'Donnell, then director of the National Economic and Social Council, put it last year, "The social partnership agreements underpin the credibility of ... exchange rate policy, by enlisting support for it as a long term policy and ensuring that the fixed exchange rate gives the right signal".

Yet Fine Gael was, at the time, trenchantly opposed to such social partnership agreements. As recently as late 1993, when it published the report of its Commission on Renewal, opposition to them was a core party value. Corporatism," it said. "is a key area where the message from the 1980s is instructive. We refer here to the practice of involving trade unions, employers and other interest groups in direct negotiations with government on comprehensive package agreements embracing wages, taxes, government spending and so forth."

These were, the party insisted, deals which seem designed to perpetuate the position of unaccountable interest groups, as exemplified by the rapid increase in public sector pay levels. Fine Gael must continue to highlight this damaging encroachment on democracy.

John Bruton is, of course, perfectly entitled to change his mind even on such a fundamental issue, but to claim credit for the achievements - of a policy which he condemned is a bit much.

Fianna Fail, meanwhile, continues to claim that it was its "courage" in forcing through cutbacks in public spending in the late 1980s that turned gloom and doom into bloom and boom. It has, however, been notably reluctant to remind voters of the joys of some of those cutbacks, such as larger primary school classes, public sector redundancies and huge hospital waiting lists.

The sharp cutbacks in public spending in the late 1980s undoubtedly did contribute to the strength and stability of the public finances. But the fact that the start of impressive economic growth coincided with the cutbacks does not mean that it was caused by them. "Irish policy makers," as the ESRI puts it in its recent Medium Term Review, "were just lucky that their necessary fiscal adjustment was carried out at a time when world interest rates were falling and world growth became unexpectedly buoyant."