Charles Haughey may have eventually redeemed himself in his handling of the economy, but he left a culture of policy favouritism which still haunts us, writes Marc Coleman, Economics Editor
Just after taking over the reins of state, Roman emperor Claudius was begged by his officials to tackle the chronic economic decline and corruption gripping the empire. Declining to act, Claudius responded with the words, "Let all the poisons that lurk in the mud hatch out."
We can't do justice to the economic legacy of Charles Haughey unless we understand that phrase. Like Claudius, he took over a jurisdiction whose finances were ruined. And like him, his early years in power were too unstable to permit the remedies that were needed. By the time Haughey ousted Jack Lynch, the short boom achieved under the Lynch administration had been revealed for what it was; fool's gold based on unsustainable borrowing.
Haughey promised to correct the government's course, and gave a special television broadcast one month into his new role, disowning Lynch's policies and promising tough remedies.
For a brief moment in early 1980, his bold promises and record as a successful minister for finance made him a messiah. His popularity soared and even Fine Gael politicians worried that their clothes and voters would be stolen. The fears were unfounded. Bitter divisions caused by his personality and style deprived him of the political and moral backing for hairshirt policies.
And perhaps, like Claudius, he decided that things were not quite rotten enough. If so, it was a cynical and self-fulfilling calculation. In his first two years as taoiseach, he did nothing to contain spending or Exchequer borrowing, which averaged just under 16 per cent of Gross National Product (GNP) during his first term. National debt rose from 85 per cent of GNP to 102 per cent in that period, while inflation stayed close to 20 per cent.
In 1981, with his image as an economic messiah destroyed, he was kicked out of office. But the two governments that followed were both dependent on Independent TDs and too short-lived and weak to tackle the economy's deep-seated problems.
A majority Fine Gael/Labour coalition was finally elected in November 1982. But Independent TDs were replaced by ideological differences as a source of paralysis and inaction. Where that government should have cut spending, it raised taxation to levels that choked the life out of the economy.
In 1987 unemployment rose to 232,000, its highest level in modern political memory. Far from being reined in, national debt had risen further to 125 per cent of GNP.
It took a situation like this to make Haughey look electable. He won the election of 1987 but remained two seats short of a majority. Far from promising to tackle the economy's problems, his election campaign was opportunistic. He opposed any cuts in spending and even opposed the Single European Act, a precursor to the Maastricht Treaty and the euro.
But the Claudian moment had finally arrived. With unemployment heading for a quarter of a million and 40,000 people leaving the country annually, the moral imperative for action was irresistible. Alan Dukes, the new Fine Gael leader, committed his party to supporting Haughey's minority administration from opposition - the so-called Tallaght strategy. With Ray MacSharry by his side as a tough minister for finance and a co-operative opposition, Haughey saw that, at last, enough poison had hatched out of the mud.
Haughey would not have been as noble as Dukes, were the shoe on the other foot. But what he lacked in moral courage he compensated for in decisiveness, innovation and his genius for deal-making. In what became a half-decade of redemption between 1987 and 1992, Haughey clinched a series of deals that laid foundations for the Celtic Tiger. The first and most important was undoubtedly social partnership. By getting employers and trade unions together around a table he brokered a deal that brought wage moderation and stability to the labour market.
The second was the establishment of the International Financial Services Centre, which attracted international financial institutions to Ireland with special tax treatment. Another was the ditching of his party's opposition to the Single European Act upon entering government, which laid the foundations for that vital pillar of the Celtic Tiger - structural funds.
The most painful deal of all came in 1989. Haughey went prematurely to the country in search of a majority. He had only himself to blame when Fianna Fáil lost seats and found itself in government with its bitter rivals the Progressive Democrats. But by blending social partnership and his coalition partners' fondness for tax cuts, Haughey turned a virtue out of necessity. Economic growth had returned to the economy since 1987, but was largely jobless until 1989.
Haughey, the great stroke-puller, finally pulled a few strokes for the nation. And it worked.
But in one respect his legacy is haunting. It is the culture of policy favouritism which he cultivated at every twist and turn. The formation of his first minority administration in 1982 is perhaps the most famous example. To gain support from Independent TD Tony Gregory, Haughey committed £91 million in spending to Gregory's Dublin Central constituency.
It signalled that political support could be traded for local favours, and mixed with Haughey's questionable involvement in controversial land deals, encouraged an unhealthy approach that still blights government today on issues such as planning, decentralisation, health reforms, transport policy and the spatial strategy.
Haughey left office in 1992, just before he could reap credit for the nascent Celtic Tiger. Perhaps that is divine justice.
Without the decade of cross-party incompetence between 1977 and 1987, to which he contributed, the Celtic Tiger might have come much earlier. The Haughey era was definitely the worst of times. But it did lead to the best of times.
Perhaps, as Claudius observed, people get the government they deserve and, knowing this, politicians wait until things hit rock- bottom before risking action.
On becoming taoiseach in 1980, Haughey boasted of being the last minister for finance to balance a budget, a feat he attributed to his skills as a former accountant. Perhaps the fairest comment of all might be that Haughey ended his career with all his books in balance.