AT the end of last week's article on the Irish presidency of the EU, I mentioned in passing that during the eight years from 1988 to 1996
we will have halved the long-standing differential in net disposable income between Ireland and the rest of the EU.
This is an astonishing economic performance, and I am unaware of any parallel in industrialised countries in the past 30 years.
The disparity between our growth rate recently and that of the rest of western Europe is best compared with what happened in Germany, Italy and Greece in the post-war period - but only in Greece did that catching-up process extend beyond the start of the 1960s.
A question that must arise, however, is why was it not until the late 1980s that our living standards started to catch up on those of our EU partners? After all, we have been benefiting from membership of the Community for the past 23 years.
So far as the period up to 1978/1979 is concerned, the reason for this was quite simply demographic. During the 1960s, the improved growth rate had reduced Irish emigration from almost half of each age cohort to less than 20 per cent.
The consequent increase of 60 per cent in the proportion of each young generation who remained here boosted our population both directly and indirectly - the birth rate rose sharply as these young people began to start families.
Moreover, with jobs more readily available here during the 1960s, and with some skills temporarily in short supply, many Irish emigrants returned home with a spouse and children. This further increased our population during the 1970s.
This meant that although our economic growth rate was significantly higher than the rest of the Community in our early years of membership, this margin of advantage was absorbed by our exceptional population increase. Thus, in terms of resources per head, we only just managed during these years to maintain our position relative to the rest of the Community.
In the first half of the 1980s, economic growth in Europe slowed further. In Ireland it came to a virtual halt and while our population increase slowed after 1983, per-capita resources were actually slightly lower in the mid 1980s than at the start of the decade. This meant we had lost considerable ground on the rest of the EC.
The cause of this major setback was that, by the early 1980s, the Irish economy was near bankruptcy through a disastrous combination of a huge increase in spending and the abolition of taxes, such as domestic rates and road tax. By June 1981 this lethal combination of policies faced an incoming government with a looming 1982 Exchequer borrowing requirement of 21.5 per cent of GDP, almost ten times that which all would accept as prudent today. ECONOMIC growth was, inevitably, slowed by the fiscal measures - higher taxes and spending cuts that were required to reduce this borrowing level, to reduce inflation from 22 per cent to under 4 per cent and, to eliminate a massive external payments deficit.
Powerfully reinforced by even more drastic spending cuts during Ray MacSharry's subsequent period as Finance Minister, these measures created the necessary conditions for a period of renewed rapid economic expansion.
However, because 1986-1988 was also a time of rapid growth elsewhere in the Community, this new and sustained cycle of growth did not lead instantly to Ireland catching up on the rest of Europe.
In fact, the catching-up process, with all its remarkable effects, only began in 1989 when the Irish economy accelerated further at precisely the time the general European economy began to slow dramatically. Indeed, what might have been a minor European recession was greatly intensified by the economic consequences of German unification.
The end to the Cold War increased immigration to the EU, boosting the rate of increase of the Community's population above the much-reduced pace of Irish population growth. This factor intensified the speed at which relative living standards in Ireland began to catch rip on those of the rest of the Community.
The narrowing of the gap between Irish and European per-capita resources since 1988 reflects the fact that the purchasing power of our net disposable income has risen during this period by almost half as against a 17 per cent increase for the rest of the EU.
How have we utilised these increased resources? Because the proportion of available resources used up by the public authorities to run the country will be about the same this year as it was in 1988, the amount available for private consumption and saving has risen by almost 50 per cent - in line with the overall resource increase.
However, because a large share of these, extra resources have been saved in real terms savings have virtually trebled from the inadequate level of the 1980s to a more than sufficient proportion of our output - the rise in personal consumption during this period has been much smaller. Consumption per head has, in fact, risen by just over 25 per cent.
However, this is still almost double the rise in material living standards which has taken place during this period in the rest of the EU. This year, our level of private consumption per head is up to 74 per cent of the EU average.
How likely is it that we shall continue in the years ahead to catch up on our partners in Europe? There seems to be general agreement that, although our current rate of growth is quite exceptional, we have the capacity to maintain a growth rate of 4 per cent to 5 per cent for the foreseeable future.
In contrast, our European partners clearly have difficulties in achieving a sustained growth rate of even 3 per cent. This would mean that, in terms of national output, we should continue to gain ground on the rest of the EU at a rate of rip to 2 per cent a year in the years ahead.
And as our savings ratio is now at a higher level than is likely to be necessary or sustainable, the whole of this output increase - rather than just 60 per cent of it as in the past eight years will be available to narrow the remaining gap between Irish and European levels of personal consumption.
INDEED, if the annual rate of growth of public consumption - goods and services used up by the public authorities in running the country - is held at the present 2 per cent to 3 per cent and if as seems likely, our current high savings ratio declines somewhat, our rate in catching up on the rest of Europe in private consumption could even be somewhat faster than 2 per cent a year.
Even allowing for some rise in our recent rate of population increase as net.a emigration is constrained by the improved employment situation here, by the year 2001 our material living standard in terms of private consumption could well approach nearly 85 per cent of the EU level.
Finally, just why is our economy performing so well? There is no easy answer to this. But white many factors are probably at work - including, of course, our success in attracting high-tech industrial investment - I have a suspicion that one thing running particularly strongly in our favour is the enduring impact, both on the national psyche and on our political class, of the bitter lessons learnt in the early 1980s.
Precisely because we made such an appalling mess of our economy in the late 1970s, we seem to have developed a stronger commitment than most other countries to controlling inflation and to keeping budget deficits and borrowing under control.
Like the Germans after their hyper-inflation earlier this century, we are now reaping the benefits of this restraint which, happily, extends right through our society from the trade unions to the political parties.
Just how the much-increased resources to which we can now look forward are to be shared amongst our people is, of course, the major domestic political issue to be faced during the rest of this decade.
Because no other country in Europe is experiencing growth on such a scale, we shall have to find a solution of our own to this problem if we are avoid our society becoming dangerously divided and polarised. This is an issue to which I shall return in this column.
