Nevertheless, we have learned from the shortcomings of the Second Programme but let me remind Deputies that the First Programme was highly successful. After many years of the economy tottering along slowly and making no progress or progress at the maximum of one per cent a year, we envisaged in the First Programme an increase of an average of two per cent a year. In the event, we achieved an annual increase of the gross national product of some four per cent. It was reasonable to assume, on the basis of that experience that we could maintain that kind of increase during the currency of the Second Programme. Unfortunately, we did run into the kind of difficulties in 1965-66 that are now threatening us at this stage. We took action against them that was timely— but not timely enough to ensure the maintenance of a four per cent growth rate. In the event, we had a two per cent growth rate in 1965 and one and a half per cent in 1966 but we came back again, mainly because of the temporary measures we took, to reach a growth rate of four per cent in the last two years, and we envisage maintaining that growth rate, if not a slight increase on it, during the course of the Third Programme for Economic Expansion.
Unfortunately, the world-wide inflationary trend has now set in against us but on this occasion we have taken timely action. We can envisage a maintenance of the growth rate that we now enjoy, something like four per cent right through 1969-70 and subsequent years. I agree entirely that it is difficult for businessmen to plan effectively their forward programmes, if they are not sure from one year to another that there may not be a second increase in taxation. I suggest that a second or supplementary Budget, a second increase in taxation, is far more beneficial to the country generally than to ignore the kind of trend that would lead us into an inflationary position from which we could not recover for some time. We would have only a few years of great effort and great hardship and a running down of employment generally.
It is not ideal that we should have supplementary budgets. But it is far better that we should take action of this nature rather than that the economy run down, rather than refuse to face up to the realities of the situation, rather than refuse to face whatever political unpopularity measures of this nature usually involve. Therefore, I suggest that the Government were doing what was right in the circumstances. Speaking of inflation, I do not accept at all the facile interpretation of Government policy which Deputy Dillon mentioned a few minutes ago— that we have accepted an annual inflationary rate of 4 per cent. I do not accept that at all. We recognise that inflation exists. Deputy Dillon expounded on the effects inflation has had in certain countries, and warned that, ultimately, serious effects could flow from continued inflation in this country. I agree entirely that they could, but there is not much point in Deputy Dillon berating the Government or anybody else unless he can come up with a satisfactory solution. Our alternative is to encourage as far as possible by any means we can, by inducements, by encouraging verbally and by practical measures, the increase in productivity of our various economic activities—mainly farming and industry —and trying to ensure, as far as possible, that increases in productivity will at least match the increases in costs of production, these increases being mainly taken in the industrial sector, by increased wages which the workers have won for themselves by free negotiation. Free negotiation will continue to be the means whereby our industrial workers can win for themselves increased benefits by way of increased wages or conditions, or otherwise. There is no other way the system can work properly and certainly, as far as we are concerned, we do not see any other way for doing it.
Deputy Dillon said that Germany was an example of a country that can make progress and ensure that inflationary trends do not follow in the wake of progress. The West Germans had a strong incentive. They had emerged from the Second World War with a divided country. They got assistance, admittedly, through the Marshall Aid Plan particularly and in other respects as well, but they used it wisely and in West Germany the circumstances made for an updated industrial system. We have, unfortunately, a rather outworn industrial system, one we inherited from Great Britain. We are left with some of the worst aspects of that system and it is up to our employers generally to improve our industrial relations system, which is possible, to ensure that there is better understanding between both sides, to ensure on the employers' side that they recognise the need for improved working conditions and on the workers' side that they recognise the difficulties of employers as well, difficulties in particular in relation to the maintenance of the competitiveness of the particular undertaking. That is the key point. If wages continue to outstrip productivity, this and the competitiveness of the particular industry in which the workers are employed will become less and less and then the output will become less and less because the industry will tend to become insolvent. With regard to our export markets, unless we produce competitively against other countries then our exports are bound to go down, our employment will not be maintained; on the contrary it will be reduced.
Deputy Sir Anthony Esmonde said that we have not been doing enough to ensure that we gain access to wider markets. I can claim that we are trying to do all that we can to encourage existing Irish manufacturers to seek export markets for their products in countries other than the United Kingdom. Córas Tráchtála have in recent years stepped up their activities through their representatives in different countries. Everywhere Ministers have gone, including myself, we have tried to ensure that increased outlets would be gained for our industrial products, and indeed agricultural products, in markets other than the traditional ones, the main one being Great Britain. We have been increasing our exports not only to Britain but to the Common Market countries and to the United States as well. These two are our second largest markets after the United Kingdom.
Yesterday I announced the initiation of negotiations for a trade agreement with Japan. We believe there are prospects in Japan for our exports once we get to know each other and know what the Japanese require and the standards of delivery they require as well. This will be worked out in the coming weeks and months to see to what extent we can come to an arrangement with them. At the same time, we are exploring the possibility of opening up markets in East European countries. In this connection the House will be aware of the visit of the Minister for External Affairs to Moscow to sign the NonProliferation Agreement some months ago, when he exchanged lists of commodities with the appropriate Ministers there of the products we can export to them.
It is unfair to suggest that because of the existence of the Anglo-Irish Free Trade Agreement we are concentrating only on the British market. It is true that 70 per cent of our exports go to that market. It is true also, no matter how we may see otherwise, that the great bulk of our exports will go to that market in the years to come. It is facilitated by the traditional pattern, by the existence of commercial dealings and other factors which are common to both countries and which will, therefore, facilitate a greater outflow of goods to that country than to any other.
In this connection, too, Deputy O'Higgins mentioned the traditional co-operation and constructiveness of Fine Gael in trying to encourage the expansion of our economy. I think the last effort in this area was not very conducive to objectivity or constructiveness or the encouragement of the best interests of our economy in that, when we very quickly introduced a system of assistance for our exporters to the British market in order to offset the effects of the deposit scheme, the Fine Gael Party derided these methods and were anything but helpful in ensuring that the action we took would be a success.
I was sorry that Deputy Tully did not get permission to expand because I had taken some notes on what he was about to say and I had some arguments ready——
