In the time available to me I hope to cover 11 areas which are worthy of some examination during this debate. I intend, first, to look at the underlying long-term problem of employment that has existed for more than 50 years. Secondly, I wish to look at some new developments in the context of that problem regarding, particularly, changes in our population, the impact of free trade and our relationship with the UK economy. Thirdly, I wish to analyse the impact of the world depression on our own economy. Fourthly, I shall deal with the Government's short-term response to that situation; fifthly, and arising out of that, the budgetary situation and, sixthly, what I believe to be necessary—a short-term economic plan followed by a long-term plan. I wish to look, too, at the Green Paper and at the Fianna Fáil policy document and to analyse the impact of the sterling link on our rate of inflation. Lastly, I shall look at the current economic situation and some of the underlying trends which have appeared lately.
In a debate of this nature it is important to emphasise that there has been always an unemployment problem, that no Government have proved capable of solving that problem. In 1926, on the occasion of the first census, there were 1,250,000 at work. Fifty years later the figure is in the region of 1,050,000. This failure to increase the working population is without parallel in Europe. It has not been confined to any one phase during the past half century for most of which time Fianna Fáil were in office. The problem has been a persistent long-run characteristic of the Irish economy. Even if we might dignify some of the goings-on of Governments with the title of strategy we have failed to absorb into the work force the natural increase in our population. There has been the problem, too, of those who have been leaving the land.
It is well to remember that other small and relatively unendowed economies such as some of the Scandinavian countries which at the time of the accession to power of Fianna Fáil in the early thirties had GNP's comparable with ours now have standards of living twice or three times greater than ours and at the same time have been able to provide work for those who wish to stay in their own countries. In terms of the EEC our GNP per head is only half the average. Our economic record involving all parties in all Governments has been one of long-run failure. We know how the problem was solved in the past. The surplus population was forced to emigrate. Today some one million people born in this country are now registered in the UK and registered in the census of that country's population. These people, when taken in conjunction with the hundreds of thousands elsewhere throughout the world, give some idea of the dimension of the problem and how we solved it year after year. Emigration was the implicit economic variable which solved the intolerable limit of unemployment but it was a solution which had terrifying consequences socially and culturally—consequences which most of the time we are prepared to admit privately, if not publicly. The heavy unemployment of the fifties specifically left us with a very imbalanced pay structure and, consequently, with a very high dependency ratio which naturally affects the budget not only in terms of taxation but in regard also to the social services which must be funded from a very narrow taxation base. We have proportionately high numbers of young and old in our population and these categories are the heaviest consumers of social services. That situation imposes a heavy taxation burden on the active section of the population.
I know it can be argued, and will be argued, from the Opposition benches that the problems I am describing are problems of the past. Certainly the thirties were terrible. The forties were a particular set of circumstances because of the war. In the fifties we had high emigration. Our own economic miracle began in the sixties. It is true there has certainly been a remarkable change and it is right to say so. A quarter of a century ago only 5 per cent of our exports were manufactured goods. Today over 50 per cent of our exports are non-agricultural. In 1960 the total number of workers was 1.005 million. In 1970, the end of the decade, the total was 1.053 million. During the 15 years, 1960 to 1974, the total number engaged in industry rose by only 50,000, an average of just over 5,000 per annum. At the same time service employment grew by 60,000 but agriculture dropped by about 9,000 per year. These are hardly statistics of success. They indicate a static situation.
I believe we should define economic success in human terms and not in terms of statistics. That period from 1960 to 1974 could be presented as a period of spectacular growth because the annual growth rate was 4 per cent. Exports rose by 6½ per cent a year in real terms and the industrial sector expanded at just over 6 per cent. Nonetheless, during that period the number at work was virtually unchanged at about 1.005 million. As I indicated, the numbers leaving agriculture balanced out increases in industry and in the service sector. That was the reality of our economic performance. We continued during that period to export surplus population and this was the way we managed to keep unemployment figures within tolerable limits.
I was one of those temporarily exported during that period. I know the agony of emigration, having experienced it at first hand and having lived amongst Irish emigrants. It was a reality to which, of course, our society blinded itself and one would, and particularly the Opposition, rather describe the period of the sixties as a period of great economic success. Yet, even during the period of the Third Programme there was a decrease of 17,000 in the total numbers at work from 1969 to 1972 compared to a target of increase of 16,000, which was modest enough. The result was a shortfall of 3,000 jobs and more recently, of course, because of the world crisis, there has been a further drop in employment and we know of the particularly distressing performance of the economy last year. Unemployment went up. We lost about 13,000 jobs last year in manufacturing industry alone despite the best efforts of the IDA.
But something else has happened in addition to this long-run problem. We are now aware that something profoundly important is happening to our population structure. We have now in our possession a demographic study prepared by Professor Walsh of the ESRI published last year by the National Economic and Social Council which indicates that we have entered into the first stage of a population explosion making itself evident now in the number of those seeking work. This is a situation which will continue for the next decade at least. Professor Walsh reckons that the industrial and service labour force will increase by approximately 300,000 between 1971 and 1986. This means we will require about 25,000 new jobs a year over the long run if we are to absorb an expanding population and also the continued drift from the land.
Last November the OECD in a report, which was not widely commented upon in the Press, the media generally, or here, pointed out that this figure does not include extra new jobs to re-employ those made redundant because of the world crisis over the last two years. The Minister for Finance at the tail-end of his budget speech earlier this year accepted the forecast and estimated that by 1980 the population would rise to 3.3 million with a work force of 1.18 million. He foresaw the need for creating 155,000 new jobs in manufacturing industry during the period 1976 to 1980, which is an annual average of over 30,000 and, in an uncharacteristic understatement, he described it as a massive challenge to manufacturing industry. It certainly is, given the performance of this economy in the past.
This is a challenge I cannot visualise being accepted or being met if we simply continue with current policies; 31,000 new industrial jobs each year every year is self-evidently beyond the capacity of existing policies even in the most favourable economic conditions. In 1973, and it is quite immaterial to me as to which Government, the former or the present, claims credit for that particular year, once the point is established, that it could be claimed as our own economic miracle, output went up by 8½ per cent in manufacturing industry but employment rose by only 7,800 and over the whole economy by 12,000 to 13,000. How then can we expect in face of a world recession to get from that sort of base up to a figure of 31,000 new jobs if we continue with past policy centred around the IDA and based on private enterprise?
As I said, unemployment has always been a problem for Irish Governments which Irish Governments persistently have failed to solve. The solution in the past has been that those of us who stayed at home took all the growth in our own interest and forced the rest to emigrate. During the sixties, which Fianna Fáil have used and will continue to use in this and other debates on the economy, GNP went up by 50 per cent. Yet the total labour force remained static. The population rose and we know there were approximately 150,000 people exported from this country during that period. That is how unemployment figures were kept within tolerable limits. No wonder the dole queues did not grow. Those who should have been on the dole queues were abroad, mostly in the United Kingdom.
Let there be no doubt about it and here it is instructive to look at the employment record of the three former Fianna Fáil Ministers for Finance who now grace the Opposition benches and who have lectured the nation and this House on the management of the economy. Let us look at them, each in turn. Let us take Deputy Lynch during his sojourn as Minister for Finance during a period of relative economic tranquillity, not only here but throughout the world, from 1965 to 1967. During that period manufacturing industry employment went up by 3,000. All industry went up by 1,000 and the total number of workers fell in fact by 9,000. He was succeeded by Deputy Haughey. Between 1967 and 1970 manufacturing industry went up by 15,000—that was a better record— and all industry went up by 17,000. Services went up by 15,000. Yet the total numbers at work fell by 5,000 and there were 5,000 fewer at work when Deputy Haughey left office. Deputy Colley was the last of the triumvirate and during his period in office, manufacturing industry employment went up by 1,000 and all industry went up by only 1,000. In fact, the total numbers at work fell by 7,000.
There is one persistent characteristic there. Each of these former Ministers for Finance presided over a drop in total employment during a time when the world economy and international trade grew at a rate never before experienced, a rate that possibly will never be equalled in the rest of this century. Not a very edifying performance. During the total period covered by those three Ministers, 1965 to 1972, total employment fell by 21,000. The statistics are those published by the Department of the Taoiseach and they are available in the Library to every Member. I do not think that any one of these three cases provides the Opposition with justification for acting either in the role of critic of existing policies or in the role of proponent of new ones with any creditability.
The situation in the seventies has dramatically changed from that of the sixties. As I said earlier, and as the study of Professor Walsh indicates, we are now in a situation of demographic normality. For example, the population over the last five years has gone up by 185,000, whereas in the previous ten years it went up by only 160,000. Therefore in the last five years our population has grown in the aggregate more than it did in the previous ten years and emigration has ended. It has, in fact, reversed itself in the last five years. From 1971 to 1976 there was an immigration of 12,000 compared, in the previous five-year period with an emigration of 54,000, which is a turn-about of 66,000.
We know that something profound is happening to our employment structure which I believe has the most awesome consequences for economic policy. Those figures have been analysed and presented in a study by Professor Walsh. It is important to understand the uniqueness of our current population situation. Over the next decade the growth in the active population in the country will be approximately 17 per cent. Yet the percentages for roughly the same period for other EEC countries are: The Netherlands, 16 per cent, which is very near; Italy, 11 per cent; France, 8 per cent; Belgium, 6 per cent; UK, 3 per cent; Denmark, 3 per cent; and West Germany, just over ½ per cent. With the exception of the Netherlands our growth potential is significantly higher than any of our EEC partners.
As Professor Walsh has indicated, this growth will be very unevenly distributed by age group, the younger ages experiencing a very rapid growth, the older ages experiencing a contraction. The male and female labour force over the age of 44 will decline by 1986, but there will be a very rapid expansion in the younger labour force, amounting to over 2 per cent annually for males. The total labour force is projected as rising at over 1 per cent. In addition to experiencing a major change in age distribution within the working population, younger age groups becoming more dominant, there will also be a change in the total numbers at work and looking for work. This is fuelled, in the main, by a rapid expansion in the younger age group.
This growth is of an order of magnitude never previously experienced in the country and for which, I believe, we are as yet unprepared. I believe we will pay the economic and social cost of very heavy emigration during the fifties. We had in the past what I described as a situation of static equilibrium: that those who left the land and the natural increase in population were balanced off by certain low level increases in the service industries and the manufacturing industries and the rest were forced to emigrate. It looks as if that is an avenue of escape no longer available to this economy.
We should therefore look at the figures of Professor Walsh and accepted by NESC very closely indeed, because one set of figures will hammer home the enormity of the problems ahead. During the period from 1966 to 1971 the actual annual average growth rate in numbers at work outside of family farming was 1 per cent, and yet the estimate is that the labour force will grow at an annual rate of a minimum of 2.1 per cent and at a maximum of about 2.4 per cent. Therefore, putting it very crudely, we will have to double the numbers in new jobs each year outside of farming simply to take account of increasing numbers in the depletion in agricultural labour force but not taking industrial redundancies into account. NESC have put the figure at 25,000. This has been accepted by OECD. The Minister for Finance in his budget speech indicated that the figure is of the order of 30,000 per year. The OECD say that unless the pattern of migration is reversed a total of 25,000 new jobs per year will need to be created each year over and above the recovery of employment from the present recession, a figure substantially greater than that which was achieved in the past when real GNP was rising at an average annual rate of about 4 per cent. A similar rise of activity over the medium term would apparently not be enough to provide sufficient employment opportunity.
That is a pretty ominous conclusion. The situation would be bad enough if we did not have to cope at the same time with the impact of free trade and simultaneously deal with the most severe world recession since the thirties. Structural changes have been occurring during the sixties, which I have indicated. This economy is now an industrial economy in terms of employment, output and exports. Free trade, either through the Anglo-Irish Free Trade Area Agreement or through our membership of the European Economic Community, plus the world recession, have come at a time when we were more dependent than ever on world trade and therefore had a bigger effect on us now than it would have had in a situation comparable with the fifties.
The coincidence of the Anglo-Irish Free Trade Area Agreement, the EEC and the depression could not be worse for our economy, coming on top of the increase in population. My belief in respect of free trade is that redundancies caused by the Anglo-Irish Free Trade Area Agreement and by the EEC are far greater than was anticipated or is currently realised. I believe that policy was one of grave miscalculation by the previous Fianna Fáil Administration, the effects of which are being cloaked at the moment by the effects of the world depression but which I know many professional economists in the country now believe is a factor at work on our unemployment as serious as that of the world depression. I believe the impact of free trade on our manufacturing sector has been profound. In addition to that we have had the unlucky conjunction of a very poor performance in the United Kingdom economy, not only in terms of inflation, but in terms of unemployment and, of course, depressed demand. In reality this country is linked with the weakest economy in Europe.
All of these factors would individually have caused us great difficulty. Collectively, the increase in the population, the impact of free trade, adjustment to EEC conditions would have posed the biggest set of economic problems outside of war time; but, added on top of all that, we have been confronted with the most serious world depression since the thirties. We are aware of the origins of that crisis, the tripling and indeed the quadrupling of oil prices in 1973, constituting the greatest transfer of wealth in the history of the world, with shock effects on world trade, world employment, and on world inflation. It is true that when it happened most countries, most governments and most economic institutions underestimated the severity and indeed the duration of the crisis. It is also true that in the inital stages most governments concentrated on dealing with the inflationary aspects of the problem when the real problem was one of depression because of the impact which the transfer of wealth would have on world trade and consequently on domestic production in each country.
The real problem as it emerged was the question of unemployment. There are now five million people unemployed in the EEC. We saw in the recent presidential campaign in the United States that Governor Carter, the now President elect, consistently hammered President Ford with one particular statistic, that there were two million more Americans unemployed at the time of the debates than when President Ford took office, and in the last six months 500,000 more Americans had gone on the unemployment register. No country escaped the impact of the world depression and to pretend otherwise is asinine. The world crisis created our current spate of economic difficulties. We did not create the world crisis.
There is nothing more depressing at a time of economic depression than Fianna Fáil economic propaganda which ignores the very existence of the world crisis. There is no reference to the external world economy in the recent Fianna Fáil policy statement and there is no reference to the difficulties created by the world crisis in the budget speeches of the Fianna Fáil spokesmen earlier this year.
Only the most fleeting reference was made by Deputy Lynch in his opening remarks on this debate to the impact of the world recession. Deputy Lynch's attitude is either dishonest or unbelievably ignorant of the outside world. Fianna Fáil have cast aside all standards of decent debate in an attempt to pin our current economic difficulties on the Government. On the other hand, the world depression is implicitly recognised by Fianna Fáil when they state that other countries are doing far better than we are at the moment. That is untrue. Nobody could argue that the economy across the water is signally improving, that it is an example which can be offered in terms of policies which work in respect of employment or inflation. In France we know of the Prime Minister's plan to tackle inflation. In Japan inflation has once more taken hold and Germany is also in trouble.
We are more dependent than ever before on world trade. In 1975 when world trade fell by 4 per cent, was it surprising that our industrial exports fell by 4 per cent? When OECD output fell by 3 per cent, was it surprising that ours fell by 1 per cent or was it surprising that unemployment rose by 20,000 during that year? The Government did not create the world crisis but they have the responsibility of dealing with it. The area of contention is in relation to how it is to be handled not in relation to who was responsible for the crisis. Given the past economic policies in this country, the Government's response in relation to budget deficits was a courageous and an enlightened response despite inane and ignorant attacks launched upon it. It saved jobs, the level of social services and it protected the poor. What has been achieved in this area has not yet been recognised. While current expenditure went up by £1,000 million or by 260 per cent, revenue only went up by approximately £700 million which left us a shortfall in the region of £300 million. That could have been handled either by cutting services thereby increasing unemployment or it could have been handled by the policy of budget deficits which was pursued by the Government. The deficit is greater than the expenditure on health, the expenditure on social welfare, the expenditure on education and it is greater than the expenditure on economic services and security and that gives us an idea of the magnitude of this expenditure. The Government's response was the best response for the country.
It can and it has been argued with justification that we are at the end of the depression, we are now in a transition period and we require a period of adjustment so that we can accommodate ourselves to a more healthy external environment. In terms of budgetary policy the improvement can be seen in the fact that the Exchequer figures have improved dramatically. This was a fact hidden by the bank strike but by the end of September it became evident that the deficit would be in the region of £60 million less than was originally anticipated due to buoyancy in revenue. On current figures, I believe, the deficit will be somewhat below that anticipated. Control of public expenditure has been exemplary. Revenue is up by about one third and the budgetary situation is much more healthy than would have been forecast at the beginning of this year because of the correct policies and because of an underlying trend of improvement in the economy. This gives us an opportunity to get away from any commitment to phase out the deficit over a period of four years because the economy will handle the situation itself. We will also have an opportunity to avoid further recourse to indirect taxation which would fuel increases in the consumer price index.
At the moment we need a short-term economic plan. Discussions are going on at tripartite level and also in the context of the Employer/Labour Conference. The Employer/Labour Conference concept is now redundant. The difficulties in reaching agreement on incomes at a central level proved almost insurmountable last year and this year proved practically insuperable until the Government invited social partners to the tripartite talks. We should now place discussions on centralised bargaining with respect to incomes within the context of a national short-term economic plan which would be overseen by a national economic council consisting of the parties now engaged in the tripartite talks involving not only income but income tax, social welfare, profits and investments and, therefore, employment. At the moment there is no conjunction between what is being discussed at the Employer/ Labour Conference and what is being discussed in the councils of the Government in respect of budgetary policy, and yet one has an immediate and obvious impact upon the other. Nothing could be of more importance to the Government in respect of their budgetary policy than agreement reached on pay and the impact that that will have on public service pay. For that reason, we should accept that the Employer/Labour Conference, which was designed in totally different economic circumstances, should now be superseded by a national economic conference at which the Government is an open and explicit participant.
The Employer/Labour Conference was established prior to the oil crisis in a time of relatively low inflation and extremely high world economic growth but, since 1973, inflation has doubled and, indeed, trebled, while unemployment has increased by about 50 per cent and GNP until this year has been static. I do not believe the Employer/ Labour Conference is equipped to deal with economic issues other than pay. Yet its decisions affect employment, prices and Exchequer finances. These considerations, particularly Exchequer finances, are directly influencing the content of the national agreement proposals, yet the parties to the agreement have no explicit way of putting these issues onto the agenda of the Employer/Labour Conference, since their only mandate is to deal with incomes and with costs.
The big economics issues at the moment are precisely those which are affected by the agreement, but cannot as yet be incorporated within it, employment, inflation, Exchequer financing and budgetary policy. It is almost impossible to expect from workers a response to cries for restraint, if they do not see that restraint translated into extra employment. There is no guarantee that restraint, resulting in increases in profits, will be channelled into investment and, therefore, into more employment. For that reason, the only possibilities for success are within the context of a short term economic plan which would involve budgetary policy.
As a corollary and a supplement to that, we need a real economic development plan because of the dimension of our employment problems which, as we have demonstrated, are way beyond the capacity of present or past policies, which mainly have been centred around the IDA and completely dependent upon private enterprise. We need a commitment to full employment, using whatever means are open to us to generate employment. I do not mean by a plan the control of public expenditure, which is a viewpoint often held by certain people, but we require a plan in the full meaning of the direction and control of investment. Also we need to liberate, within the context of this plan, the State sector from the confines to which it has been restricted by past ideological attitudes. In that regard, the publication of the Green Paper is to be welcomed specifically, because of its commitment to a plan which it described as a clearly defined plan and, on page 38, to effective economic and social planning, because of its commitment to a planned system to ensure social justice, because of its commitment to job creation as the overall national priority.
Because of its commitment to new institutional arrangements to carry out effective economic and social planning, a commitment contained on page 38, as a Deputy of the Labour Party I welcome this aspect of the Green Paper wholeheartedly and see in it a real hope for the future that, as distinct from programming, we can have the emergence of real economic planning. I welcome, too, the Green Paper's short-term response to reduce unemployment and the various means outlined in it. I also welcome the commitment to mobilise the potentialities of the existing public enterprises, contained on page 37 of the Green Paper, and the prospect of the creation of an industrial development corporation which would supervise and co-ordinate other semi-State bodies and which would also be charged with the identification of new opportunities for productive investment, either public or joint ventures. That is one of the most important and significant policy innovations contained in the Green Paper.
I welcome, too, the commitment to regenerate Mianraí Teoranta so that it will undertake directly on behalf of the State exploration and the development of our natural resources. I welcome the commitment to the establishment of a zinc smelter which has, as we know, a guaranteed supply of concentrates, and the anticipation within the Green Paper of downstream industries involved in processing products of the smelter. I also welcome the consideration of a development bank, the planned changeover to co-operative enterprises, the sponsoring of co-operative projects, the encouragement of worker participation and profit sharing, the national development bank and the incomes related to pensions schemes which lately has been the subject of a Green Paper. All of these are to be welcomed. They are contained within the Green Paper and make it a very worthwhile prelude to planning indeed. It will not have any response from me other than a positive welcome. I believe that on the basis of it we can look forward to a White Paper and to a plan based on consensus.
I believe the Fianna Fáil policy document to be dishonest since it does not mention the existence of a world crisis which must, in itself, be a record. I believe its job creation targets to be unrealisable. Specifically, given that in 1973 a 7 per cent increase in GNP only led to 13,000 jobs, I am quite at a loss to see how a similar increase in GNP is projected in 1978 and 1979 to give 25,000 new jobs, given that in those two years the public capital programme contained within that plan is to remain constant. I also believe it to be unrealistic in respect of inflation. A flexible exchange rate would be the only way in which we could prevent this economy from suffering the worst ravages of inflation.
I do not believe we can have a meaningful comprehensive economic response to the existing situation unless we also incorporate in it a major review of the link at par with sterling. This year we celebrate the 150th anniversary of that link. No currency has been linked with any other currency in the world for so long. It is a situation which is totally and absolutely unique. It may have had some justification in the 1920s and the 1930s, the last occasion on which it was examined at the behest of this House and of the Government. We must now have a re-examination of that link. It is the automatic means for importing inflation, something which is recognised now not only by academic economists, but by the Government and by the Central Bank and, implicitly, yesterday by Deputy Lynch, and yet not acted upon. I believe inflation in the UK will increase next year, not diminish. We face the prospect, at a time of economic recovery, of importing a very high rate of inflation. We have seen its impact.
For example, it is affecting mortgage rates. It inhibits investment. It raises food cost. It creates social chaos and imbalances.
This is a taboo which should be subjected to the light of discussion, not only in this House, but preferably by a Government commission. I hope the Government will undertake to establish a commission along the lines of that set up by the Fianna Fáil Government in the 1930s when this matter was last analysed.
