OPINION:TK Whitaker's study of the Irish economy 50 years ago provides vital inspiration for today, writes Frances Ruane
LISTENING TO the media, to politicians and to informed commentators over the past weeks, we hear a growing recognition that we have major problems to face - that these are substantial and not merely ones of "confidence". As a society we have to face up to the painful fact that these problems are partly of our own making and that the burden of solving them will be borne by the whole of the society and not just by those who benefited from the boom.
But solve them we must. As inspiration, politicians and policy makers could benefit from looking at the messages in Economic Development, the famous study of the Irish economy that was published half a century ago this year, and is synonymous with the name of TK Whitaker. Its publication marked a turning point for Ireland and started with something we need today - a public recognition that previous economic policies have been wrong.
The first message is that competitiveness really matters for economic survival and prosperity. This message is echoed time and again in the document, in statements like: "If we do not expand production on a competitive basis, we shall fail to provide the basis necessary for the economic independence and material progress of the community." This translates into a simple message - Ireland cannot succeed if it is not globally competitive. No one, neither government, nor employers, nor trade unionists, nor consumers can simply "wish away" that economic reality. If they try to do this, and allow the continuing erosion of our competitiveness, history shows that the country loses.
The second message anticipates the development of social partnership and the need for unions to operate in the national interest in their approach to wage demands at difficult times: "The success of any policy of economic development will depend on the effective and continuous co-operation of the trade unions in promoting increased productivity and in avoiding increases in wages and salaries which would injure export prospects." To help regain competitiveness, Ireland must start by adopting a pay policy that makes sense now - one that does not raise public sector costs or undermine output and employment in internationally-traded sectors. Then it must address the various other cost competitiveness challenges, if we are to secure a steady recovery.
The third message is that productive investment must take priority over social investment until the economy is back on a stable growth path. This means prioritising those investments in the National Development Plan which give the best returns.
The fourth message is that we need a responsible banking sector and appropriate financial regulation, recognising that "the exercise of financial responsibility may require unpopular measures of restriction as often as it admits of liberality and expansion". Had this message not been forgotten in recent times, would today's challenges be so great?
The fifth message is that flexibility and adaptability are essential, on the part of all employers, both public and private. Without adaptability in the competitive private sector, markets act ruthlessly and businesses collapse, as indeed they should. The governments role is to ensure that no parts of the private sector are protected from market competition. This requires tackling vested interests rather than supporting them. Since there are no market pressures in the public sector, the drive for adaptability and efficiency must come from government and senior management - the modest proposals in the recent OECD report should be seen as a starting point, and a serious commitment made to reform.
The final message is that, in making policy, our decisions should be informed by empirical evidence. As the Whitaker document puts it: "The mind needs the support of facts and figures." Without the evidence, we are reduced to cutting across-the-board, whereas what we need are targeted cuts. This requires a critical examination of all major programmes and projects to determine whether they meet the standards of evaluation that justify their claims on the public purse.
Economic Developmenthas a somewhat quaint style and form relative to the policy documents we produce today. Nonetheless the messages it contains deserve an audience now as they did then, and we must hope that the Government will have the courage to take the tough decisions that are needed.
•Frances Ruane is director of the Economic and Social Research Institute. This article draws on a paper prepared for a conference organised by the Institute of Public Administration to mark the 50th anniversary of the publication of Economic Developmenton September 17th