Economic, Political and Social History, 1945–1990
Ireland emerged from the Second World War in better condition than many European countries, having been spared direct involvement in the war and with an income per capita higher than that of most belligerent countries. Ireland also benefited from a loan under the Marshal Plan; $36 million, at 2% interest. The money was spent on an extensive housing and slum-clearing project and a successful campaign to eradicate tuberculosis
However, whereas most European countries experienced a sustained economic boom in the 1950s, Ireland did not, its economy growing by only 1% a year during the decade. Ireland as a result experienced sharp emigration of around 50,000 per year during the decade and the population of the state fell to an all-time low of 2.81 million. The policies of protectionism and low public spending which had predominated since the 1930s were widely viewed to be failing.
Fianna Fáil's political dominance was broken in 1948-51 and in 1954-1957, when coalitions led by Fine Gael (descendants of Cumann na nGaedheal), and including the Labour Party and Clann na Poblachta won elections and formed the government. However, the periods of coalition rule did little to radically alter government policies. An initiative by Noël Browne, the Minister for Health, to introduce the Mother and Child Scheme, providing free medical care to mothers and children, came to nothing when opposed by the Catholic Church and by private medical practitioners.
Poor economic growth and lack of social services led Sean Lemass, who succeeded the veteran Éamon de Valera as leader of Fianna Fáil and as Taoiseach in 1958, to state that if economic performance did not improve, the very future of the independent Irish state was at risk. " has got to be done now... If we fail everything else goes with it and all the hopes of the past will have been falsified".
Lemass, along with T. K. Whitaker as Secretary for the Department of Finance set specific plans for economic growth, including planned investment in industrial infrastructure and dropping of many protective tariffs and giving tax incentives to foreign manufacturing companies to set up in Ireland. Attracting foreign direct investment has remained a central part of Irish economic planning since that time. The economic plans of the Lemass era yielded economic growth of 4% a year between 1959-1973. A result of having more public revenue was more investment in social infrastructure - free secondary education, for instance, was instituted in 1968. Emigration fell as living standards in Ireland went up by 50% and began to catch up with the European average.
However, in the 1970s, the world energy crisis - where OPEC countries withheld supplies of oil - resulted in rising inflation and a budget deficit in Ireland. From 1973-1977 a coalition government of Fine Gael and Labour tried to keep spending under control by imposing a series of cuts in public spending.
The period of economic crisis of the late 1970s provoked a new economic crisis in Ireland that would endure throughout the 1980s. Fianna Fáil, back in power after the 1977 election, tried to reactivate the economy by increasing public spending, which by 1981 amounted to 65% of Irish GNP. Irish national debt in 1980 was £7 billion or 81% of GNP. By 1986, it was over £23 billion - 142% of Irish GNP.
This massive public debt hindered Irish economic performance throughout the 1980s. The governments of Charles Haughey (Fianna Fáil) and Garret FitzGerald (Fine Gael/Labour) borrowed even more, and income tax rates went up to between 35% and 60% of wage earners' income. The combination of high taxes and high unemployment caused emigration to pick up again, with up to 40,000 leaving the country each year in that decade. Power alternated between the Fianna Fáil and Fine Gael, with some governments not even lasting a year, and in one case, three elections in a period of 18 months.
Starting in 1989 there were significant policy changes with economic reform, tax cuts, welfare reform, an increase in competition, and a ban on borrowing to fund current spending. There was also a "Social Partnership Agreement" with the trade unions, whereby unions agreed not to strike in return for gradual, negotiated pay increases. These policies was started by the 1989–1992 Fianna Fáil/Progressive Democrat government, with the support of the opposition Fine Gael, and continued by the subsequent Fianna Fáil/Labour government (1992–1994) and Fine Gael/Labour Party/Democratic Left governments (1994–1997). This was known as the Tallaght Strategy, where the opposition promised not to oppose certain necessary economic measures brought in by the government of the day.
The Irish economy returned to growth by the 1990s but unemployment remained high until the second half of that decade.
Read more about this topic: History Of The Republic Of Ireland
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