New Thinking for
Modernisation and social partnership
In recent years, the Republic of Ireland has been undertaking
an important experiment in policy-making, at both national and
The background to this experiment, which began in 1987, was a
combination of crises.
The economic crisis stemmed from the recessions of the 70s, adjustment
to membership of the European Community - which involved an enormous
change in the structure of the Irish economy, including the loss
of many traditional industries - and, in the early 80s, a fiscal
crisis, pushing the country almost towards insolvency.
That was combined with a political crisis. With no party able
to command anything like a majority, intensified political competition
lowered the quality of political behaviour, rather than improving
it. Political decision-making became worse - more expedient, more
short-term - exacerbating the fiscal crisis.
At the same time, in the early 80s, there was a social crisis.
There was deep despair in the face of an economy stagnant for
six or seven years in a row, falling real consumption, a doubling
of unemployment and intractable debates around fundamentally divisive
issues, like abortion and divorce.
The National Economic and Social Council is roughly similar
to the Northern Ireland Economic Council. Funded by the state,
it comprises the 'social partners' - representatives of trade
unions, business and farmers (in the NESC case, civil servants
are also included.) In 1986, the social partners, acting in the
NESC, put together a package to get out of this vicious, downward
It was a package to avoid insolvency, while protecting welfare
recipients and the unemployed, and envisaging fundamental changes
in public expenditure and policy. This programme, put together
voluntarily by the social partners - by a twist of fate, perhaps
- was adopted by government in 1987 and formalised in a three-year
agreement between it and the business, trade union and agricultural
An aspect of the agreement - explored in more detail below - was
the republic's adherence to the European Exchange Rate Mechanism
(ERM). Indeed, the initiative reflected an emerging perspective
on the republic's experience in the European Community.
Four main policy areas in the European Community influenced the
republic dramatically: the internal market, the common agricultural
policy, the monetary policy and structural (regional and social)
policies. Yet, after 10 to 15 years of experiencing these policies,
we discovered that the way they influenced the republic was dependent
on our approaches to them - on domestic economic structures, political
structures and firm structures.
This was quite surprising. The Common Agricultural Policy (CAP)
was always the most centralised and common policy of the European
Community, and yet the way it affected the republic was very much
influenced by elements of agricultural policy over which we still
had control, but had forgotten we had.
For example, there were fundamental structural problems in agriculture,
which couldn't have been addressed by the CAP, but we had neglected
making policy on them during those years. Similar comments could
apply to the other Euro-policy areas: the internal market, the
monetary policy and so on.
Borrowing from an American writer, I would describe this new understanding
as an 'interactive outlook'. We discovered that the way European
Community membership and, perforce, globalisation influenced the
republic was, in fact, via an interaction between that
globalisation and those larger European forces, on the one hand,
and the domestic structures and policies, procedures and norms,
on the other.
That interaction is much stronger than we first understood, having
assumed - perhaps reflecting a long line of Irish thinking - that
much in the republic was determined by some larger external force.
There are two versions of that view - that it is benign and that
it is malign; either way, it's a well - entrenched line of thought.
We had to abandon that view, that things were definitively externally
determined. Likewise, we had to abandon the opposite view - equally
mistaken - that
the republic is an organic entity and that one can apply principles
to it on its own, without taking account of its openness and its
interactions. (Although these two views are clearly faulty, it's
very hard to avoid them when one starts to generate policy advice.)
What emerged, after a dozen or so years of European Community
membership, was a quite different understanding of the scope of
domestic policy and institutions, in shaping the way membership
worked for and against the society. It's impossible to understand
what has happened to the republic, without seeing the enormous
impact of EC membership - not only through the state and high-level
policy makers but also upon the society, through autonomous activity:
people joining environmental groups, women s groups, local authority
groups, at European level, and involving themselves in the numerous
networks which really are what comprise the European Union.
There is also an interactive understanding of what happens at
home in the republic. In looking at those policy areas - the internal
market, the common agricultural policy, the monetary policy and
the EU structural funds - one needs new ideas to understand how,
in the European economy, a small region like the republic fares.
One has to draw on a range of ideas, from regional studies, business
studies, geography and so on all of which are moving in the same
direction: they're all saying that the outcome is not as predetermined
as we once thought.
An earlier body of geography and regional theory would have said
that, in the face of globalisation, the periphery of Europe would
definitely go in a negative direction. That deterministic view
has to be qualified now, and that same qualification has occurred
across a range of areas of expertise.
All this says to us that policy-making has to be different from
in the past, when expert knowledge and bureaucratic techniques
could put together a functioning policy fairly well. Whether policy
will work or won't work now is much more dependent on engaging
the main players in the society.
In sum, then, the notion of interaction - an interactive
framework between the republic and international events and forces,
and a more interactive view of what happens domestically - are
important backgrounds to the new experiment in social partnership.
Now to the experiment itself. The Programme for National Recovery
(PNR), agreed in 1987, was a three-year deal determining the evolution
of pay in both the public and private sectors, but it was much
more than a wage bargain. It involved an agreement on the state's
part as to the broad evolution of the tax system, and of health
and social welfare spending. The social partners and government
also committed themselves to adhere to the ERM: if the punt came
under pressure, neither employers, nor unions nor farm interests
would immediately call for devaluation, but would stick to the
policy for the medium or long term.
The PNR was successful and it was followed, in 1990, with a second
three-year programme, the Programme for Economic and Social Progress.
The PESP contained many of the same elements, but there was a
new focus on the long-term unemployed and an experimental, area-based
approach to addressing it.
In 1994, a third three-year agreement followed, the Programme
for Competitiveness and Work (pcw). That, again, had the same
key elements: wages, tax reform, expenditure on social welfare
and health, adherence to the Maastricht criteria for transition
to monetary union, as well as a further focus on employment and
unemployment, training and local economic and social development.
What is significant about those three agreements - which differ
from previous centralised wage agreements and other policy-making
- was the shared analysis of many elements of the economic and
social problem. That analysis was that, in a very volatile international
economy, a country which is small and extremely open - in terms
of its economic interactions - has to have three elements to its
policy, all of them consistent.
It needs a macro-policy which ensures the growth of demand and
low inflation. It needs distributional arrangements, which maintain
competitiveness in the international environment and reduce tensions
in the workplace and elsewhere, so that distributional conflict
does not disrupt the economy. And it needs an ability to make
structural changes - in firms, in the state, in the health system
and so on - because it has to compete in a very volatile international
environment which it can't influence that much; this calls for
flexibility and continuous adjustment of the economy, the society
and the public sector. It needs to achieve those three things.
The development, through various forums - like the NESC - of a
shared analysis of some of the key problems was thus a fundamental,
second element in this experiment.
Thirdly, there were institutional developments. A Central Review
Committee was established, to manage these agreements. Every few
weeks, the relevant ministers or senior civil servants meet the
unions, business representatives and agricultural interests and
monitor the programme, thus involving themselves in a continuous
dialogue on key matters of policy as they arise.
Another institutional innovation, again unlike previous wage bargains
- which were really put together by unions and business with
each then settling separately with the state - has been the much
more collective character of this experiment. In many ways, the
state has played a key role as a co-ordinator of the process.
Given this broad outline of the national programmes, which made
up this experiment, we must now consider a second strand of social
partnership, which has operated locally.
When the PESP was being negotiated, the unions pushed very hard
for a new initiative on long-term unemployment. The response was
12 pilot partnerships - local boards consisting of community
groups, unemployed representatives, the social partners themselves
in a given area, key state agencies (such as the training agencies
and the tourist board) - with links to government. These were
to attempt new ways of tackling long-term unemployment and reintroducing
the long-term jobless into the labour market.
Secondly, a set of initiatives coming from the European Community
were very significant. The Leader programme for rural development
had a very similar structure - local boards on a partnership model,
bringing together the key agents. (There, the focus was less on
social exclusion and unemployment than on business development.)
And there was Poverty 3, which operated in Northern Ireland as
well: the European Commission s input was very significant in
prompting the republic to experiment with local partnership in
Also, in managing the large transfers under the regional fund
and the social fund, the republic - a very centralised state -
was pushed by the European Commission towards some regionalisation
of the monitoring of those expenditures. There's debate about
how great and how genuine that regionalisation is, but it certainly
has been there.
Finally, the pcw embraces a more articulated approach to local
economic development - with partnerships established not only
to address long-term unemployment, but also commercial and employment
development, at a local level.
How should one assess and interpret this experiment? In
terms of economic performance, it has undoubtedly been extremely
successful. Between 1987 and 1993-4, the republic achieved one
of the highest rates of output growth in the OECD countries and
the second highest growth in employment.
The programmes played a key role in making the republic's macro-economic
strategy work. The early 80s saw a vicious circle, in which the
fiscal crisis was dealt with by raising taxes; workers then sought
those taxes back in pay bargaining. Business was squeezed, between
the state on one side and the unions on the other; this, in turn,
compounded the fiscal problem.
What these agreements have done - as against previous centralised
wage bargains - is to embrace in a common accord all the necessary
elements to break out of this vicious circle, including taxation
and the 'social wage', health and welfare expenditure. Only if
all these are managed in a consistent way, in a way that is essentially
agreed, can the policy hold together. In effect, inflation is
taken out of industrial relations and domestic politics.
After the first experiment, the NESC saw a connection between
the agreed understanding of some of the key problems, the consensual
approach to distribution - in terms of both pay and public expenditure
- and, interestingly, a distinct improvement in the quality of
public policy-making. The ability of government to take strategic,
non-pragmatic decisions seemed dramatically to increase under
It may or may not be connected, but the coincidence is striking,
and indeed it has continued. In a still very competitive political
environment - indeed, the instability of party support is even
greater than in the late 70s and early 50s - the quality of policy-making
is much more strategic, with hard decision-making where decisions
need to be made.
So, in terms of economic performance, the assessment has to be
There is also a renewed focus on development. One of the striking
features of a fiscal crisis is that it bleaches out any developmental
thinking. There was a strong strand of developmental thinking
in public policy in the republic, from the late 50s through to
the early 70s, but this was wiped out as policy-makers became
preoccupied with public expenditure. We have managed to reintroduce
- again, very much prompted by the European Commission - a developmental
element into policy-making and debate, at national and local level.
Thirdly, there has been a regeneration of local development and
involvement. The republic is not only centralised, but has a strong
tendency to perpetuate that centralisation. We have seen, under
this regime, a renewed recognition, both in society and in policy-making,
that local involvement is one of the wellsprings of both prosperity
and social solidarity. Local partnership has been a very distinct
achievement of this experiment.
There are, needless to say, severe difficulties in developing
partnerships at local level. The success of local social and economic
development, under this partnership model, seems to depend on
a very strong 'vertical' relationship with high levels of state
agencies, such as those responsible for training and industrial
development. So it isn't 'bottom-up' development in any simple
sense: it involves a strange mixture of bottom-up and top-down.
This experiment in policy-making is appropriate to a very
internationalised economy, partly because it allows us to focus
on those areas where a very small country - or, indeed, region
- can still have some influence on its economic prosperity. To
some degree, in the republic, it is a matter of getting clear
what limited autonomy we have in areas of macro-policy.
But, more and more around the world, there is a concentration
on the importance of 'supply-side' policies - education, training,
technology, science, infrastructure and developing a flexible
economy - to the prosperity of given countries and regions. All
such policies, which influence prosperity much more now than in
the past - and in ways which macro-economic policy or, indeed,
large-scale industrial policy simply can't any more - are dispensed
with great difficulty, and quite ineffectively, by state structures
on their own, particularly by bureaucratic administrative structures.
What they depend upon is the collaboration of all the parties
who are relevant to the policies. So it's impossible to imagine
a successful training policy which doesn't engage the involvement,
the willingness, of those whose skills are supposed to be improved.
And the same applies across the board - to technology policy,
infrastructure, communications and so on.
There is a lot of debate, internationally - and a little bit in
the republic - about how to understand this model of social partnership.
It's more than consultation: it's not a process whereby the state
simply consults the social partners, or local community groups
or whatever. It's more like negotiation or, indeed, shared authority.
Government shares its authority - its right to pass law and spend
public money - with those partners. It is addressing the limits
of legal regulation and bureaucratic administration to solve problems,
not only by consulting but also by sharing authority in a genuine
What are the challenges that remain? Two major challenges confront
this experiment in the republic. It has succeeded in getting the
macro-economy and macro-social issues into some balance, but it
hasn't successfully addressed the core, long-run problem of the
republic - weak indigenous economic development. So the question
is: can this process be pushed into industrial policy, training
policy, technology policy, finance for industry and so on?
Secondly, there is a challenge of long-term unemployment and social
exclusion. This has not been utterly ignored in these programmes,
but clearly it's an enormous challenge which requires continuous
A third challenge is that there is a challenge: there is
opposition to this experiment. Opposition comes very strongly
from liberal economists and from those at national level who are
quite unhappy with the notion of the economy being regulated in
a continuous dialogue between the state and the social partners.
At local level, too, there is a challenge to the notion of partnership,
from those with a more traditional notion of democracy - who say
it is quite inappropriate that public money be handled by voluntary
associations of community groups and so on, and who wish to see
all these programmes brought back firmly within the local authority
or central government structure. The NESC looked at this issue
very recently, and was not persuaded by such suggestions.
I am very reluctant to be prescriptive about what this
model might imply for Northern Ireland, except to say two things.
In thinking about this experiment in the republic, I've found
it useful to forget, temporarily at least, one question: how
much autonomy does the republic still have in a global economy,
or in the EU? (Because when you look at it, the answer seems,
on many fronts, to be really very little.)
Putting to one side the amount of autonomy at national
level - and this might apply at regional level as well - allows
us to look, instead, at policy-making and implementation. This
means not focusing on the quantity of power to be
mediated or the money to be spent, but rather on the patterns
of policy-making. That way of thinking seems to be useful
in the republic, at least up to a point, and it may have some
parallel in Northern Ireland.
A second parallel is the involvement of the EU. Its impact on
these processes may be very indirect, but it is very strong. The
republic has been thrown open to Europeanisation of everything,
and that seems to open up networks for ideas - finance, of course,
as well - which can be used in a variety of ways. These networks
are not determined entirely by high politics, by the Council of
Ministers, and indeed are simply not recognised in the conventional
debate about Euro-sovereignty versus national sovereignty:
that debate looks right over all the networks of influence and
misses much of what is relevant.
Globalisation is occurring worldwide, and with devastating and
sometimes beneficial effects. But the EU is the most remarkable
attempt to manage globalisation in the world: two years after
the North American Free Trade Agreement, by comparison, both Mexico
and Canada are in severe crisis. The EU model of internationalisation
involves far more accompanying policies, far broader and deeper
management of internationalisation.
It's to that process that the republic has been exposed. It did
not cope too well for a while, but it has begun to get a handle
on it. And, in diverse ways, it has let that influence the way
people make policy and implement it.