South Asian curiosity about the Celtic Tiger has made it necessary for me to write about our National Development Plan from a distance of 5,000 miles. Reading it while passing over the Indian Ocean, I have been brought to reflect on the relative inflexibility of our medium-term planning and on the likely growth of our workforce.
The inflexibility of our planning process has been influenced by the long planning cycles of EU structural funding upon which we have depended for a large part of the resources we have invested in removing bottlenecks to, and in stimulating, economic growth.
For the other much slower-growing states of the EU, time-scales of six to seven years for such plans may not cause serious problems of inflexibility. But for fast-growing Ireland, the fact that early in this decade we had to set in EU bureaucratic concrete our investment plans, right through to the end of the decade, has turned out to be disadvantageous - indeed damaging.
When if became clear in the middle of this decade that our growth rate was going to run at over twice the level upon which our deployment of structural funds had earlier been based, we could of course - and should have - re-jigged the domestic component of our investment programme to take account of this unexpected development. I suspect that our failure to do this on any substantial scale had a good deal to do with the fact that our domestic planning had become so tied into the EU structural funds cycle.
There were, I believe, two aspects to this failure.
First of all, even by the standards of the time when these plans were being prepared, the 3.5 per cent projected growth rate upon which they were based was unrealistically low.
And secondly, when in the aftermath of the early 1990s recession, our growth rate jumped to a 7.5 per cent average annual rate, that radical change of gear seemed to pass unnoticed for a number of years in our public administration and political systems.
Of course the unexpected more-than-doubling of our growth rate post-1993 was inevitably bound to create some bottlenecks in sectors such as housing and transport, and perhaps also electricity supply, even if we had responded promptly to this radical change of pace.
SOME administrators and politicians might be tempted to respond that shortage of resources made it impossible until very recently to accelerate the provision of adequate funds for such an accelerated infrastructural investment programme. I would, however, reject that thesis. The additional costs imposed by this delayed reaction are clearly greater than the additional costs we would have incurred if we had borrowed somewhat more during the couple of years before our public finances finally moved into surplus.
Moreover, the progress we were making between 1996 and 1998 in reducing our debt/GNP ratio for EMU entry purposes was, I believe, so rapid that we could have afforded the small slowing-down of this process that such an increase in borrowing for infrastructural investment would have temporarily entailed.
During the five or six years of the new plan we are unlikely to experience problems on quite this scale arising from an under-estimation of growth.
For we now have raised our sights from a 3.5 per cent growth rate to one of 5 per cent. And the emerging labour shortage makes it inevitable that our growth rate will fall back from its recent average of 7.5 per cent a year.
The room for error has thus been reduced. Nevertheless the average 5 per cent annual growth rate upon which this new plan has been premised is somewhat below the ESRI's recent projection and the institute has itself recognised that in certain circumstances growth might exceed its - as ever - cautious projections.
A problem that can arise with growth projections for periods of years is that where growth prospects as between periods are changing, there is often a tendency to assume that throughout the whole of the new period the growth rate will run at the average projected for the entire period.
The ESRI has made some provision to meet this problem, suggesting that over a couple of years our growth will decline gradually towards the new lower level.
What all this adds up to is that even if growth were to fall to an average of 5 per cent a year over the whole period 1999-2005, it is most unlikely to fall overnight from this year's probable 7 per cent to 5 per cent next year.
Now, since 1993 our national productivity (volume of output per worker) has risen on average by 2.8 per cent a year, reflecting a 3.5 per cent average annual rise in output per hour, partly offset by a 0.75 per cent average annual fall in the number of hours worked.
The National Plan projection of a drop from a 7.5 per cent annual output growth rate to a 5 per cent rate appears to assume that national productivity will continue to increase at about 2.8 per cent a year, sustained by a continued inflow of high-tech investment.
But it also assumes that employment will, from now on, rise at only 2 per cent a year - as against the 4.5 per cent a year employment growth achieved between 1993 and 1999. Now it is certainly true that the recent dramatic growth in our labour supply is going to diminish in the years ahead, probably falling over time, but not overnight, to around 2 per cent a year.
The two main factors likely to cause lower employment growth are, first, the advent of something like full employment and, second, the forthcoming decline in the inflow to the workforce from education, as the number of young people of school-leaving age diminishes.
It is certainly true that the flow from unemployment into work is likely to dry up in the near future, reducing by something approaching 25,000 the average annual flow from that source into the workforce. But the decline in the numbers moving into the workforce from education will be much slower. It will take three to four years for the number of school-leavers to decline by about 10,000 and a further decade will elapse before the full decline of about 25,000 in this age cohort - arising from the post-1980 one-third drop in the birth rate - will be completed.
As more than half the number of school-leavers now enter higher education, where they remain on average for about three years, the initial drop of 10,000 from this source will not have worked its way through the system until towards the end of the plan period in 2005. And even at that point the flow from education will still be adding over 1.5 per cent to the labour force each year.
There could, of course, be a continuation of last year's drop in the number of immigrant workers, which may have reflected the housing bottleneck.
And it is also possible that the inflow of women from home into the workforce, which has been adding about 0.75 per cent to the labour force each year, might not continue indefinitely at that rate, although in the immediate future it might be temporarily boosted by a Budget offering help for childcare.
WHEN one brings together all these factors that influence the expansion of our workforce, it becomes clear that a number of years are likely to elapse before the growth in the numbers drops back from an annual figure of 4.5 per cent to 2 per cent.
All this suggests that the forecast decline in our overall growth rate from 7.5 per cent a year to 5 per cent a year may come about more slowly than has been assumed for the purposes of the new National Development Plan and perhaps more gently even than the ESRI has allowed for.
This would mean that in the short run the human resources available to build up our infrastructure may be somewhat greater than the authors of the plan have assumed. But it would also mean that on the other hand the size of the workforce and population to be catered for by that infrastructure may ultimately be somewhat larger than is now being provided for.
Garret FitzGerald can be contacted at gfitzgerald@irish-times.ie