HOW WAS it that over the last nine years, policies were pursued that increasingly undermined our economic viability? asks Garret Fitzgerald
Our two post-1997 governments are primarily to blame, but the damage done by the policies they pursued might have been limited if three key societal forces - the business community, the media and the Opposition - had challenged the inflationary policies that eventually destabilised the economy.
Let me deal first with the role of business. Throughout this decade, Irish business as an economic force was at best ineffective, and at worst dangerously misguided in its attitude to fiscal policy. It seems to me that the stances adopted by Ibec, the employers' group, and by businessmen since 1997 - especially when asked by the media to contribute their views on the economy - were very narrowly focused.
During these years, I never got the impression that businesses expressed serious concern about the increasingly dangerous thrust of economic and budgetary policy. Instead, they perversely welcomed the erosion of the tax base, especially income tax.
After business, the media. Even our more responsible newspapers ignored or played down the implications of fiscal policy, preferring to focus attention on the less important individual tax or social welfare changes made in every budget. It is not an excuse to assert that such changes are what interest the general public, who are believed not to care about economic issues until they start losing their jobs or in some cases their homes.
Since we joined the single currency, the economic significance of budgetary decisions has hugely increased.
With the disappearance of domestic control over interest rates and the exchange rate, the only economic weapon remaining to our government has been budgetary policy. Yet it is notable that the dangerous pursuit of pro-cyclical and inflationary budgetary policies over the past decade failed to evoke the kind of critical media comment that might have helped to restrain such unwise policies.
Let me give a concrete example. In relation to the 2007 budget, the Economic and Social Research Institute's advice had been that the surplus secured in the previous year should be increased slightly by keeping the rise in spending a little below the expected increase in revenue. Instead, the Minister did the exact opposite, running down the surplus by an amount that turned out to be no less than €3.2 billion.
However, this newspaper allocated a mere 1 per cent of that year's hundreds of column inches of budget coverage to its economic implications.
So much for business and the media. What about the Opposition? The Government's unwise budgetary policies since 1998 offered the Opposition an opportunity to discredit its mishandling of the economy.
However, these parties failed to do their job on the curious grounds that Fianna Fáil's reputation for economic competence was such that - especially given the public feel-good mood of the time - any criticism would have proved counter-productive for the Opposition.
As a result, the undermining of our competitiveness by a succession of ill-judged budgets was never adequately indicted by the Opposition. Instead, in the last election, the Opposition decided to dispense with economic criticism of the Government, choosing instead to compete with Fianna Fáil in making unrealistic promises of higher spending and tax cuts.
The failure of all concerned - the Government, the Opposition, business leaders and the media - to seriously address these issues has left our economy ill-equipped to face into a most complex crisis.
Another key issue is that while the ESRI and some responsible commentators endeavoured to draw the public's attention to the dangers of this situation, their voices were drowned out by the more numerous commentators working for banks, stockbrokers and other business and property interests - most of whom felt they had a short-term interest in keeping the boom going for as long as possible.
The media has made no attempt to distinguish between economists in the ESRI, the universities and some of their own economic columnists on one hand, and on the other, larger bloc of commentators who are tied into vested interests.
Due to the human instinct to prefer to hear good news rather than warnings of trouble, the self-serving views of many interested parties were allowed to dominate the media and to obscure the growing dangers.
Is it possible that we can learn from these errors? Can we develop a healthy, well-informed core of economic opinion, with business, the media and the Opposition checking mistakes made by whatever government is in office? Or are we condemned to repeat indefinitely the same pattern of irresponsible financial excesses, inadequately challenged by a society that seems incapable of addressing economic issues?