From the beginning of January 1973, Ireland was a member state of the EEC. But for the following decade we were in the throes of despair. By the mid-1980s, Ireland was being crippled by political violence, mass emigration, mass unemployment, political paralysis and a sense of hopelessness.
Sometimes it is worthwhile recalling the failed structure of the Irish economy at that time. Most young people nowadays would hardly believe how dominant the State had become in the failing Irish economy.
By a system of semi-State enterprise and State monopolies, nearly everything of big economic significance was controlled and owned by ministers or State agencies under their departmental control.
The State owned the only airline, Aer Lingus, and participated in a high-price cartel arrangement with British Airways to make Ireland-UK air traffic the costliest in Europe. Legislation was actually introduced to criminalise price competition by travel agents that undercut air ticket prices. It did not proceed largely thanks to Des O’Malley, then an isolated backbencher.
The State owned two shipping lines, B&I Line and Irish Shipping Ltd. Irish Sea services were dominated by the State-owned B&I and Sealink, a nationalised UK operator until 1984. All ports other than Greenore port were State-owned.
All internal transport – bus, train and road freight – was subject to a State monopoly in the form of CIE. The State had a monopoly of mail and parcel delivery, An Post and a monopoly on phone services, Telecom Eireann. Both of those companies were hived off from the earlier Department of Posts and Telegraphs. No private competition was permitted.
All energy production in the form of electricity generation, mains gas supply and commercial turf production was owned by the State through the ESB, Dublin Gas and subsidiaries, and Bord na Móna.
In banking, there was competition but the State owned two banks, ICC and ACC. It also owned Irish Life, the biggest life assurance company. Health insurance was the monopoly of the State-owned VHI.
The State had a monopoly in radio and TV broadcasting called RTÉ. Privately run radio was illegal and was described as “pirate” radio. The only competition came from UK channels available in some parts of the Republic.
The State also established companies to manufacture fertiliser, Nítrigin Éireann at Arklow, and steel, Irish Steel at Haulbowline in Cork. It owned the sugar business, Comhlucht Siúicre Éireann, and entered the processed foods market with Erin Foods.
State investment and capitalisation of the State and semi-State economic sectors placed huge constraints on budgetary policy. Taxation was very heavy. The “standard” rate of income tax was 35 per cent, coupled with social insurance of 5 per cent on earnings, not to mention employers’ social insurance costs.
In the system of taxation of income in 1974, up to £1,550 was taxed at 26 per cent (the “reduced” rate); the next band of income up to £4,350 was taxed at 35 per cent (the “standard rate” paid by 71 per cent of taxpayers); the next band of income up to £2,000 was taxed at 50 per cent; the next £2,000 at 65 per cent and any further income at 80 per cent. The highest rate was later reduced to 60 per cent by 1980.
Needless to say, in a world where the State took more than 30 per cent of lowest earnings at the “reduced” rate of 26 per cent plus 5 per cent social insurance (31 per cent), and workers on the average industrial wage paid tax at 35 per cent plus 5 per cent social insurance, (40 per cent), tax evasion was rife and the black economy thrived.
In a new wave, gross emigration in the 1980s was 450,000. Unemployment rates fluctuated between 13 per cent and 18 per cent in the same decade. The undocumented Irish in the US are a reminder today of that era. Industrial unrest was widespread and crippling, featuring occasional ESB strikes with blackouts, postal strikes, rail and bus strikes, bin strikes and bank strikes. Interest groups often prevented inevitable sectoral reforms such as liberalising the taxi business or allowing the emergence of cafe bars.
Today’s younger generation never experienced and cannot imagine such a society – but it was our reality in the 1980s. The contrast between the Republic’s awful road system and that in Northern Ireland was colossal. Today the opposite is the case.
Ireland, in short, was backward, poor and stagnant, locked in a slow-burning social and economic crisis.
Those who challenged the existing consensus were routinely condemned as Thatcherite by commentators and union leaders who were comfortable with the failed status quo. They feared competition – even regulated competition, and even opposed having tax rates reduced to 20 per cent and 40 per cent, and they stridently demanded retention of State enterprises and monopolies. Amazingly, there are still politicians on the left who want to re-establish the State-dominated economy that failed us so badly. Even after the recent banking crash, Ireland is a better place for its liberal economics.
Our problems at the dawn of 2025 are very real – but very different from the dark past we left behind.