Taoiseach Micheál Martin has emphasised the importance of being honest with people about the scale of the difficulties that are being and will continue to be generated by the inflation crisis. He is one of the few members of Government old enough to remember the political and social consequences of rampant price increases, when Ireland grappled with international inflation that in 1974 US president Gerald Ford labelled “public enemy No 1”. The problem had been apparent from the mid-1960s and caused some unease within Fianna Fáil, in power throughout that decade, to the extent that in 1969 tánaiste Erskine Childers wrote to Taoiseach Jack Lynch: “The members of the government may feel that because we have failed to arrest inflation in the past, no purpose is served by giving warnings. In my view we have a responsibility to tell the truth.”
Of course, contexts change, but delving into the archives reveals correspondence and perspectives that seem especially relevant to our current plight. Consider, for example, the warnings outlined by economist Peter Neary in relation to that decade: “The danger that we would neglect the external constraints facing our small open economy, the danger that we would not be flexible enough to respond to changes in these constraints and the danger that we would build up expectations of continued growth which could not be realised. All these dangers became real.”
By 1972 the government had signed off on a 21 per cent national pay agreement, well above the level of inflation, which was hardly unrelated to the expectation of a general election the following year, which Fianna Fáil lost. Much of the inflation was imported and was running at 11 per cent before the war in the Middle East that year exacerbated the problem and led to rocketing fuel prices as oil-producing Arab countries cut off supplies in protest at the West’s support of Israel. There was much talk of Ireland’s economic vulnerability to external threats but also how to manage domestic wage and price issues, industrial relations and control of borrowing.
The archive of Richie Ryan, held in UCD, is filled with memoranda on inflation, as he sought, when Fine Gael minister for finance in 1973-77, to rein in colleagues he regarded as spendthrift but also to introduce wealth, capital gains and acquisitions taxes. TK Whitaker, as governor of the Central Bank, sent increasingly stern letters to Ryan, and in December 1973 told him increases under a new wage agreement were “a prescription for galloping inflation”. When Ryan came to office the expected average annual rate of inflation over the five years 1974-1978 was 16 per cent. Ryan understandably talked up “the great buoyancy in external trade”, but he did not pretend he knew what was coming; in his budget speech in 1975, he said, “of all the tasks which could engage my attention, the least realistic would be the publication of a medium- or long-term economic plan based on irrelevancies in the past, hunches as to the present and clairvoyance as to the future”. There was also discussion at government level about the possibility of introducing fuel rationing. While the economy continued to grow by about 4 per cent a year, there was alarm at the rise in budget deficits and there was increasing sectoral conflict, most obviously between farmers and PAYE workers in relation to the tax burden.
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The overall rise in inflation was 17 per cent in 1974 and 21 per cent in 1975 and in November 1976 the EEC estimated inflation in Ireland was at 18.9 per cent, the highest in the bloc. The Irish Congress of Trade Unions insisted that workers’ real incomes were effectively being eroded by price increases and this was the reality of the pain that was being experienced and understandably resented. Consider the letter written to the government by a Dublin resident in 1977, referring to RTÉ’s satirical show Halls’s Pictorial Weekly that depicted “Richie Ruin, minister for hardship” telling viewers of his skill in the art of austerity. “Is it any wonder that Frank Hall on RTÉ calls one of the ministers the minister for Hardship? As I see it, I would call it the government for hardships … I have £7 per week, and I don’t smoke. I can’t afford to. Of course, we had to give up meat long ago.”
Ryan was wary of expansionist gambles, but the electorate was much more attracted by Fianna Fáil’s giveaway election manifesto of 1977, which bought them political supremacy but, economically, spectacularly backfired. A second oil crisis in 1979 was another wallop. Inevitably, the current Government will be constantly warned of the dangers of chasing price increases with wage increases or subsidies, while at the same time the insistence that it aggressively intervene will get louder. Both options are loaded: the only certainties are that, whether the coming upheavals relate to war, fuel or climate change, they will all be bad news.