Politicians, the bureaucracy and economic policymaking over two crises: the 1950s and today

Abstract

Recent reports into the performance of the Central Bank, the Financial Regulator and the Department of Finance in the lead-up to the current crisis identify three key weaknesses: the pressures towards `group think? within each institution, an unwillingness or failure on the part of the institutions to challenge each other?s analysis and conclusions, and an attitude of `deference and diffidence? that kept them from rocking the boat. Each of these weaknesses reduces the scope for the clash of ideas that drives progress. The 1950s was a decade of dramatic institutional experimentation that laid the foundations for the emergence of the modern Irish economy. The Industrial Development Authority and Coras Trachtala ? a forerunner of today?s Enterprise Ireland ? took shape at the beginning of the decade. The export profits tax relief introduced in 1956 represented the origins of today?s low corporation tax regime. The debate on trade liberalisation was triggered by the imminent establishment of the European Free Trade Association, EFTA. The key elements of the economic policy bureaucracy challenged each other?s analyses vehemently, and guarded their independence jealously. In light of this review of the 1950s and the thinking it provoked at the time, the paper considers how the weaknesses identified by the recent reports might be addressed.