The background to the emergence of social partnership lay in the economic crisis of the 1980s. In 1980 wages increased by 23 per cent, and our inflation rate was pushed up to a similar figure - almost twice the inflation rate of neighbouring Britain, with which our price level had previously kept closely in line, writes Garret FitzGerald.
In turn, this led to a unsustainable rate of external spending, with imports exceeding exports by 15 per cent. Moreover between 1977 and 1981 the public sector borrowing requirement rose by two-thirds. And between 1977 and 1982 the national debt was trebled.
Getting this dire situation under control was a painful business, which during the following five years inevitably reduced economic growth - to one-half of one per cent a year - and also cut employment by 5 per cent, doubled unemployment, and led to the re-emergence of net emigration, which had been temporarily eliminated during the 1970s.
That was the price that had to be paid to secure by 1987 a halving of the excessive rate of public borrowing; elimination of the external payments deficit; and a dramatic fall in inflation from over 20 per cent to 3 per cent, associated with a reduction in the level of pay claims by three-quarters.
The latter achievement had been helped by a growing recognition on the part of employers, unions and farming interests, meeting together in the National Economic and Social Council, that recovery in employment and the creation of conditions favourable to renewed economic growth required much greater co-operation by the social partners with each other and with the government than had existed during much of the previous quarter of a century.
Much credit for recognition of the fact that, in the words of the council's November 1986 report, "the continuation of existing policies is not a viable option" was due, amongst others, to trade union members of this council, like Peter Cassels and Donal Nevin, and to employer and industry leaders such as Tom Toner and Liam Connellan, as well as to farmer leaders such as the recently deceased Joe Rea.
The 1987 election followed three months later. When in the course of the election results programme it emerged that my government would not be re-elected, I offered the support of Fine Gael in Opposition to the Fianna Fáil minority government that seemed likely to emerge, if that new government would commit itself to completing the recovery programme upon which we had been engaged - an offer that was later confirmed by my successor, Alan Dukes.
It was against that background, and aided by the emergence of trade union statesmen such as Bill Attlee and Des Geraghty, that the social partnership process was initiated by the new government, launching a Programme for National Recovery in October 1987. That document reflected agreement on pay increases not exceeding 2.5 per cent in each of the three following years, and linked to a cumulative income tax reduction of 8 per cent during this period
This set the pattern for the Celtic Tiger years, during which the actual rate of pay increases in both the public and private sectors was held at an average of 4 per cent a year until the end of the 1990s, and prices rose by only 2.3 per cent a year - and by as little as 1.7 per cent a year between 1992 and 1999.
Economists argue that this pay moderation was a consequence of the low rate of inflation achieved in this period rather than of agreement on tax and pay trade-offs within the social partnership process, because the level of pay increases in the private sector is ultimately a function of firms' ability to compete, which in turn is determined by the rate at which costs rise. And, despite quite marked short-term fluctuations in the relationship between private and public pay increases, in the long run both of them tend to rise at the same rate.
Over the whole period since 1987 it can be said that almost half of the improvement in workers' purchasing power has come from tax reductions and just under one-half from actual pay increases.
However, at this stage there may be little further room for further tax/pay trade-offs of this kind, because reductions in income tax since 1987 have reduced its yield from almost 17 per cent of national output to less than 9 per cent, and its share of total tax revenue from 41 per cent to 29 per cent.
Since its initiation 20 years ago, the scope of the social partnership arrangement has been greatly extended and the current programme, covering the 10 years from 2006 to 2016, but with provision for pay increases over an 18-month period only, runs to some 100,000 words - as against 12,000 in 1987. It covers almost every aspect of public policy.
In the almost total absence of any serious debate on economic policy in the Oireachtas, discussions between the social partners in NESC, followed by the negotiation of successive social partnership agreements, have become the preferred method through which we try to make economic and social progress. This method of policy formation and implementation has served us well - albeit at the expense of a partial substitution of a kind of corporativism for an important element of parliamentary democracy.
Eleven years ago the social partners were joined in this process by a group of almost a dozen NGOs concerned with a wide range of social issues. This has extended the social aspect of policymaking, but in this as in some other policy areas it is difficult to resist an impression that what emerges from the process consists more of policies that the government would in any event have been introducing, rather than new ideas emanating from civic society.
In particular, social reforms emanating from this process have tended to be those involving improved social benefits rather than better services. Many of the problems of inequality and poverty that still afflict our society reflect persistent failures to target social needs that can be eliminated only by major, well-directed reforms in the provision of services for the young, the old and the ill and disabled. It seems to me that, in this respect, the social partnership process has yet to perform effectively.