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Investment in Quality1.4.2 Understanding Ireland’s Long-Run DevelopmentBefore 1960 the Irish economy can be usefully thought of as aregional economy based on agriculture or a resource-based SOE(NESC, 1989; 1996a; Mjøset, 1992; Barry, 1999; Nolan and Nolan,1991). Agriculture provided virtually all of the export earnings.There was a small industrial sector, that had been fostered throughprotectionism. This can be considered as expanding the size of thenon-traded sector. This economy was able to achieve some productivitygrowth, mainly through growth of agricultural productivity.Labour supply contracted as emigration occurred. Agriculture couldnot provide a basis for employment growth. Productivity growth inagriculture did underpin some income growth in the economy.However, this was insufficient to provide much growth in the nontradedpart of the economy (NESC, 1989). It was difficult toachieve either extensive or intensive growth.There was a marked improvement in performance in the 1960s, asnoted above. Freer trade provided a basis for improving efficiencyand productivity. The decline in employment was halted and wagesbegan to converge steadily with the UK (Fitz Gerald, 1999). Thestabilisation of employment and growth in wages implies that thedemand for labour was increasing. FDI was a critical factor ininitiating this stronger growth in labour demand. There was rapidgrowth of manufacturing employment during the 1960s and as wellas an expansion of non-traded services that had been declining.The improvement in performance did not imply much convergencewith average incomes in Europe. GDP per worker, or productivity,was converging from the 1970s. GNP per worker was convergingsince the mid-1980s (Duffy et al., 2001).Long Term Successes and FailuresIn its 1996 Strategy report the Council summarised Ireland’ssuccesses and failures in the decades after 1960 (NESC, 1996a).The outward looking strategy had four significant successes from1960 to 1987. First, after a century and a half of virtual stagnation,Ireland achieved relatively strong economic and demographic46