Understanding the Changes to Irish Policy During the 1980s Using a Discursive Institutionalist Approach.

• Date: 01 January 2015
• Author: Hogan, John

Introduction

In the current context of global financial crisis, which has seen the Irish banking sector effectively collapse and the Irish economy plunged into crisis, we examine how earlier Irish governments, also confronted with challenging economic circumstances, sought to alter the country's industrial policy. During the second half of the 1970s the economy performed relatively well, after weaker performance following the first oil shock. However, recovery proved transitory, as pro-cyclical fiscal policies fed inflation. By the 1980s, the economy shrank, and unemployment and emigration returned, much as now. This led to a questioning of industrial policy's focus on foreign direct investment (FDI) in place since the 1950s. What changes were made to this policy during the 1980s? And what lessons might this hold for contemporary policy makers?

We use the CJT to investigate these questions. According to Hogan (2006) a critical juncture is a multistage event that sets a process of policy change in motion. However, this understanding of critical junctures was linked to historical institutionalism, path dependence, and increasing returns. Drawing upon the CJT work of Hogan and Doyle (2007), which employs ideas and agents, a discursive institutionalist approach in understanding critical junctures, we argue that a crisis can create a situation where extant policies and associated ideas are called into question by change agents (political and policy entrepreneurs). Any subsequent displacement of the extant paradigm by a new set of ideas on how policy should operate can lead to radical policy change (Hogan and Howlett: 2015). But, without ideational change, policy change will likely be relatively minor--the hierarchy of goals underpinning a policy will remain unaltered and extant policy will soldier on. Through using the CJT we can gain a deeper understanding of the nature of the changes in Irish industrial policy during the 1980s, pinpoint key events and actors, and identify why these changes took the form they did, and what role ideas played in this process. In employing this theory, we are adding to our understanding of policy change in a discursive institutionalist context.

Case study: Testing the nature of change in Irish industrial policy during the 1980s

There is a longstanding debate in the literature on the relationship between crisis and policy change (Haggard and Kaufman 1995: 3). A crisis implies prevailing policy cannot be sustained without deterioration (Boin, 'tHart, Stern and Sundelius 2005). An economic crisis, calling into question existing policies, can influence a variety of alternative policy preferences and trigger change--as governments, political parties and their policies are exposed to the impact of economic fluctuations (Tilly 1975).

From the 1950s onwards, Irish industrial policy moved away from protectionism, seeking to attract FDI as a stimulus for growth and skills transfer (Girvin 1994: 125). A significant policy entrepreneur at the time, advocating export led growth and economic openness, was T. K. Whitaker, Secretary of the Department of Finance (Donnelly and Hogan 2012). His ideas, as set out in Economic Development (Department of Finance 1958a)--a transition to free trade, stimulation of private investment, introduction of grants and tax concessions to encourage export manufacturing, and the inducement of direct investment by foreign, export-oriented manufacturers--were influential on Taoseach Sean Lemass. Economic Development proved the genesis of a new paradigm with which to manage the economy and formed the backbone of the 1958 White Paper First Programme for Economic Expansion (Department of Finance 1958b), which established a coherent set of ideas based on an outward-looking strategy (Horgan 1997). Since then Ireland achieved international recognition for its success in attracting foreign firms and investment (Barry and Kearney, 2006). AndreossoO'Callaghan et al., (2014) have referred to this policy as industrialisation by invitation, a policy domain that saw all other policies made subservient to it.

This fundamental policy change, prompted by dire economic performance, constituted a critical juncture in industrial policy. In the midst of a macroeconomic crisis, the protectionist policy, having been undermined by previous failures, was overcome by change agents consolidating around ideas of economic openness (see Donnelly & Hogan, 2012). The result was that Ireland became 'one of the first countries in the world (along with Puerto Rico and Singapore) to adopt an FDI-oriented development strategy' (Barry, 2009). Also, in terms of its size, Ireland is close to the world median population for a country, making it a fascinating case to examine (Barry and Kearney 2006).

From the late 1950s onwards, the outward orientated industrial policy remained unaltered, due to recognition that protectionism did not work in the context of seeking membership of the European Economic Community (EEC) and that an increasing number of jobs depended upon FDI. In this context, we employ Barry's (2009) definition of Irish industrial policy: 'the actions of the IDA [Industrial Development Authority]--which is tasked with attracting foreign industry to the country--and of its sister agencies whose remit covers export-oriented indigenous industry.'

However, between 1981-1986, Ireland again experienced severe economic difficulties. This economic crisis was on a par with that of the 1950s in terms of its impact upon the political economy. Throughout the 1950s, unemployment stood at close to 10 percent (Donnelly and Hogan 2012); this level would have been higher except that half a million people emigrated, resulting in t the population falling to its lowest level since the first half of the 18th century (Haughton 1995). At the beginning to the 1980s unemployment stood at 9.3 per cent and would almost double by 1987 (NESC 1981: 1). In 1985-1986 net emigration was 31,000 (Brunt 1988: 34) and for the first time in a quarter of a century the population decreased (CSO 2015). Additionally, the national debt spiraled out of control during the 1980s. Once more, Irish society, and its policy makers, experienced great uncertainty. Industrial policy, focused as it was upon FDI as a stimulus for growth and skills transfer since the late 1950s, was increasingly questioned (Girvin 1994: 125). What we would like to examine here is whether this economic crisis in the 1980s had a similar impact upon industrial policy's reliance on FDI, as the crisis of the 1950s had upon its reliance on protectionism and import substitution. Or did the state continue to rely upon FDI as its engine for growth, despite the failing economy? And if so, what might explain this policy continuity despite a severe economic crisis?

The critical juncture literature

Critical junctures result in the adoption of an arrangement from among alternatives. Thereafter, the pathway established funnels units in that direction (Mahoney 2003: 53). For some, a critical juncture constitutes an extended period of reorientation (Collier and Collier 1991; Mahoney 2003), while for others, it is a brief period in which one direction, or another, is taken (Garrett and Lange 1995; Hogan 2006). Flockhart (2005), employing a social constructivist perspective on ideational change, used critical junctures to explain the gap between Danish voters and their politician's attitudes towards the European Union (EU), while Wolff (2012) examined the development of an EU counter-terrorism policy through critical junctures. Slater and Simmons (2010), in addressing the problem of infinite regress in path dependence and critical junctures (a problem Mahoney (2001) and Pierson (2004) had previously grappled with), focus on 'critical antecedents', while Soifer (2012) focuses on the permissive and productive conditions that cause critical junctures. However, this literature is generally inconsistent in how it differentiates critical junctures from other forms of policy change--such as incremental change. Also, the literature often examines critical junctures from the perspective of crises (exogenous shocks), and contingency, emphasizing the tensions that precede the important events that set policy change in motion, while ignoring those events themselves.

However, Hogan and Doyle (2007) sought to resolve these issues by setting out a revised CJT and developing a framework capable of testing for critical junctures, but also capable of identifying other forms of policy change when critical junctures did not occur and with the capacity to produce consistent findings (see Hogan and Hara 2011; Hogan and Cavatorta 2013). Their attention to entrepreneurial agency, and the primacy of ideas and discourse, constituted an effort to 'endogenize' policy change (Schmidt 2010), making the contingent events, generative cleavages and exogenous shocks, so important to historical institutionalism and path dependence, less significant. If we want to understand policy change we must take account of what actors do to produce it (Zittoun 2009).

According to Hogan and Doyle (2007), a critical juncture consists of three discreet, but interconnected elements: crisis, ideational change (extant ideational collapse, new ideational consolidation) and radical policy change. Thus, CJT uses ideas in a form of 'discursive institutionalism' to overcome the limitations of 'traditional' new institutionalist approaches (see historical institutionalism) in explaining policy change specifically their static and overly determinist nature, with their focus on path dependence in the wake of exogenous shocks (Howlett 2009; Schmidt 2008, 2010). Discursive institutions are not rule following structures of the older institutionalisms that serve as restraints on actors, but are internal to agents as constraining structures and enabling constructs of meaning (Schmidt 2010). Hogan and Doyle (2007) argue that, in the wake...