by Gary Murphy
Thus, the post-war period up to the early 1960s can be classified as a search for the promised land of economic fulfilment. The promised land did not appear as soon as the Fianna Fáil Government of Seán Lemass decided in 1961 to apply for membership of the EEC, after it had persuaded the economic interest groups to support the application. Nor did it become a reality when the Government actually entered the EEC in 1973 after the overwhelming ‘yes’ vote of 1972. Indeed, by the mid-1980s – when Ireland was the EU’s worst performing economy and emigration rates began to mirror those of the 1950s – the EEC as a gateway to the promised land looked very much like a mirage. Yet few policy decisions have had such a profound impact on life in Ireland as the decision to apply for entry into the EEC, and then entry itself.
A second instrumental policy development in Ireland’s economic success was the decision in 1987 to underwrite pay agreements through social partnership. The process of social partnership implemented in 1987, coupled with the support of EU structural funds and the wider market that the EU gave Irish and multinational companies access to, laid the foundations for the ‘Celtic Tiger’ of the late 1990s and 2000s. This could not have happened without the developments in both domestic and foreign policy that began in the post-war period.
Whilst the recession of 2008–09, amidst a global economic downturn, has again raised fears about Ireland’s economic future, it is well to remember that the search for the promised land of economic success in Ireland is ongoing. It may be an unattainable utopia, but it is one that can only be brought closer by active economic engagement between Governments and social partners.
Opening the annual European Construction Industry Federation Congress in June 2008, Brian Lenihan noted that he had the misfortune to become Minister for Finance as the building boom was coming to a shuddering end, the effects of which had been exacerbated by the international credit crunch.7In many ways, this might also be seen as a bad time to be writing a book about economic development. Yet it is a very good time, because what the post-war period in Ireland shows is that political will is necessary to lead the Irish state through lean times, and political decision-making is what counts. In Preventing the Future: Why was Ireland so Poor for so Long – one of the celebrated works of Irish history of recent years – Tom Garvin comments that Ireland, ‘faced with the conditions and circumstances that pertained in the changed world of 1945, made a series of “non-decisions” that in the short to medium term were disastrous to the country’s development prospects’.8The current book, however, argues that it was Irish politicians, and not the nebulous concept of Ireland itself, who actually did take significant decisions to move the country out of the economic morass that it found itself in. Politicians must make decisions, and policy-making cannot be left to the dismal science of economics nor the invisible hand of the market. Such political decision-making is the lesson of post-war Ireland that current politicians and policy-makers need to be aware of.
1 http://www.budget.gov.ie/2009/financialstatement.html
2 See ‘A.T. Kearney/Foreign Policy Globalisation Index’, measuring globalisation: the global top twenty for the years 2002–05 at www.atkearney.com
3 http://www.heritage.org/index/Country/Ireland
4 http://www.taoiseach.gov.ie/attached_files/Pdf%20files/Towards2016PartnershipAgreement.pdf
5 http://www.taoiseach.gov.ie/index.asp?locID=582&docID=4148
6 Address by the Minister for Finance to IPA conference, ‘Economic Development 50 Years On’, 19 Sept. 2008, http://www.finance.gov.ie/viewdoc.asp?DocID=5465&CatID=54&StartDate=1+January+2009&m=p
7 http://www.irishtimes.com/newspaper/breaking/2008/0620/breaking60.html
8 Tom Garvin, Preventing the Future: Why Was Ireland so Poor for so Long? (Dublin, 2004), p. 4.
1. The War was Over, but the Emergency was Not
During the war years, maintaining supplies was of one of the greatest problems facing the Government. The promotion of industry and commerce was secondary to making sure that the people had food to eat and that there was sufficient fuel to keep at least some services in operation. Eamon de Valera’s decision to move his most capable lieutenant, Seán Lemass, into the new Department of Supplies was proof of its importance. Under the stewardship of ‘half-ounce’ Lemass (so-called after the weekly tea ration), the standard of living in Ireland was ‘relatively high’, although it was an especially hard time for the poorer sections of Irish society.1Between 1940 and 1944, the official cost of living increased by 50 per cent (the cost of goods on the black market was significantly higher), but the introduction in 1941 of the Wages Standstill Order meant that those lucky enough to be in employment saw their purchasing power all but collapse as their wages failed to rise in conjunction with rising prices. A survey conducted in Cork city in 1944, for instance, found that 45 per cent of households were living in poverty.2
One apparently positive economic development during the war was the fall in the live register, from 15 per cent to 10 per cent, although this was due largely to the ‘significant increase in Irish migration to Britain together with the expansion in the total number employed in the Irish defence forces’.3With conscription in Britain creating demand for emigrant labour in its factories, ‘taking the boat’ became increasingly popular during the war years: between September 1939 and March 1944 (when travel restrictions were introduced prior to D-Day), 188,254 travel permits for employment outside the state were issued. Even if not all of those issued with permits actually travelled to the UK,4the figure was colossal nonetheless, with Delaney estimating that at least 100,000 people left Ireland for civilian employment in Britain during the war.5
Safety-valve against revolution
While acknowledging that an exodus on such a massive scale could have serious implications for national morale, the benefits of emigration were all too obvious to policy-makers: significant reductions in Government expenditure on unemployment benefits, together with revenue from emigrants’ remittances (estimated at between £100,000 and £150,000 per week). Perhaps even more importantly, emigration was regarded in some quarters – including at the highest level in the Department of Finance – as ‘a safety-valve against revolution’.6With would-be malcontents (that is, the unemployed) kept busy in another country, the chances of social upheaval at home were diminished, for the time being, anyway. It was only towards the end of the war that these same bureaucrats began to wonder what fate would befall the country when these men and women returned from their sojourn in godless England, having imbibed the teachings of welfarism while there. However, most of these emigrants did not return home.
Foremost of the Government’s priorities during the Emergency was the maintenance of the country’s neutrality and its safety, followed by the provision of supplies. Clearly, changes to economic policy at this time were neither advisable nor feasible, but as the fortunes of the Allies turned for the better, attention began to focus on post-war economic reconstruction, and specifically the question of national economic planning. The need for planning had been one of the key policy planks of the labour movement since the mid-1930s at least, with the Irish Trade Union Congress (ITUC) producing a document entitled Planning for the Crisis at the beginning of the war. Beyond the labour movement, however, the attitude towards planning – with its Stalinist connotations – remained hostile. Nevertheless, over time there had been something of a shift in some quarters regarding state intervention, in large part due to the increase in state activity during the war. Although individuals such as George O’Brien, the Victorian-minded professor of economics in University College, Dublin (UCD), remained avowedly opposed to ‘welfarism’, their reflexive opposition to state intervention in the economy was no more. Writing in the Jesuit journal Studies in 1942, O’Brien argued that laissez-faire was a thing of the past, and that in common with other small nations, Ireland would have to develop a planned economy.7
The publication in Britain of Beveridge’s Full Employment in a Free Society (1944) proved a great
influence on Seán Lemass, whose interventionist views on the economy and planning had reached a zenith between 1942 and 1945 that was never to be surpassed.8In April 1945 Patrick Lynch and T.K. Whitaker, both young officials in the Department of Finance at the time, addressed a meeting of the Statistical and Social Inquiry Society on the ‘problem of full employment’;9the meeting was held against a backdrop of the British White Paper on employment policy (1944) and Beveridge’s response, Full Employment. During his contribution, Lynch made a similar point to that of George O’Brien in Studies:
It is clear that a proper direction of the Irish economy will imply increased state intervention. We have had state intervention in this country, as in other countries, for a great many years. What will be needed to develop a policy of full employment is controlled and planned state intervention. Unless intervention is co-ordinated in a unified pattern no lasting result can be achieved.10
The extent of the shift towards Keynesianism and planning ought not be exaggerated, however. The speaker following Lynch that evening was J.P. Colbert, former chairman of the state-controlled Agricultural Credit Corporation, and at that time chairman of the state’s Industrial Credit Corporation; he was adamant that the terms ‘full employment’ and ‘free society’ were mutually exclusive.11Furthermore, while tyros such as Lynch and – to a lesser extent – Whitaker were advocating a new approach to national economic management, their bosses in the Department of Finance were very much wedded to the old school of thought. Still, among the contributions to the debate – as the chairman, George O’Brien, noted during his summing up – there were a number of commonalities: one was the acceptance that the differences in the Irish and British economies (not least, the dominance of agriculture here) meant that the suggestions outlined in both the White Paper and Beveridge’s Full Employment could be applied in Ireland. Another was the dearth of usable statistics, thus making planning near impossible. However, O’Brien noted, of all the solutions for creating full employment, one that had not been put forward by any of the speakers was that being pursued at the present time:
There is a further thing we could do, and have been doing for the last 100 years, and that is just to let them go. That solution has not been mentioned in this evening’s discussion. We have solved our unemployment problem for the last 100 years in the most expensive and most defeatist manner. We have exported the unemployed. Are we going to continue to accept that solution? If a country is prepared to let everyone who cannot find work at home to go away without protest, that would be one way of solving its unemployment problem. Just put them on a boat and let them sail away. The question is, can we find another solution.12
In December 1945, a book entitled Full Employment in Ireland was published. Written by the headmaster of Drogheda Grammar School, Arnold Marsh, and others, its arguments were similar to those of Beveridge (although the authors were at pains to point out that they had written their draft before Beveridge’s Full Employment had been published).13Marsh and his colleagues saw the solution to Ireland’s unemployment problem as lying with increased capital investment. Somewhat bizarrely, they ignored the impact that protectionism might have on Ireland’s ability to trade. As Bew and Patterson and (separately) Horgan have observed, the war years had seen Lemass become increasingly disenchanted with the use of tariffs, but he had not yet reached the stage when he could abandon them.14The idea remained unthinkable in his Department of Industry and Commerce, and as far as Irish commerce was concerned, things would have to get much better before the protectionist safety net could be eliminated. The debate on employment was ultimately inward looking, and sought solutions in planning and capitalisation rather than changing the terms of trade through liberalisation. However, as the new economic order began to emerge in the post-war period, it was increasingly obvious that Ireland would have to broaden its horizons a great deal if it was to prosper.
Economically, Ireland emerged from the war relatively unscathed. As the cultural historian Clair Wills has pointed out, the rhetoric of surviving the Emergency turned not only on patriotism but also on the need for self-sufficiency. While the poor experienced severe hardship, the experiences of shortages did not lead to intolerable suffering among the masses, and, indeed, the ‘apparatus of rationing lent neutrality a much-needed epic tone’.15More fundamentally, Eunan O’Halpin has noted that, apart from isolated German bombings and an occasional explosion caused by drifting mines, the independent Irish state suffered not at all, and unlike continental neutrals, the Irish ‘were largely shielded from any sight or sound of the catastrophe that had befallen most of Europe. The intervening bulk of the United Kingdom ensured that there had been no streams of importunate refugees at border crossings or seaports pleading for their lives’.16The extraordinary trading conditions engendered by the war meant that Ireland was exporting more than it imported, so that by the time the conflict had ended, the country had built up large reserves of sterling. Judged by its external assets and on the basis of population, Ireland was one of the wealthiest countries in the world;17judged by less theoretical measures, Ireland’s wealth was a chimera. At a very basic level, judging wealth per head of population in a country with mass emigration was a poor gauge of national wealth. Moreover, the external reserves belied the structural problems in the economy. Irish agriculture was overly reliant on the British market; the cattle sector had failed to recover from the self-inflicted wound of the Economic War in the 1930s, while production in tillage was hindered by a lack of fertilisers. Even if output had increased somewhat during the war, the numbers employed on the land had, in fact, fallen. Industrial production had also decreased as a result of shortages of manufacturing materials, while securing spare parts for machinery was often difficult as they could only be bought from the United States and for dollars.18This remained a significant problem when the war ended, since external reserves were largely held in sterling. During the ‘dollar crisis’ of 1947, which saw the suspension of sterling-dollar convertibility in August of that year, this problem became all the more acute.
Once the war was over the Government was faced with a number of economic problems. In the short term, unemployment was not one of them, however, since the rate of emigration to Britain increased after the war. Between road and house building and the Attlee Government’s new National Health Service, Britain had become a magnet for Irish men and women, many of whom had low-paid, low-status and irregular employment at home. Though it was widely accepted in the post-war world that the solution to emigration lay in improving economic and social environments, things were different in Ireland. While the principle might have been accepted, the view that the Government could do anything about it was not commonplace. As the Department of External Affairs noted in December 1947:
If it is agreed that the solution of the emigration problem lies primarily in the constant creation of new employment outlets in industry, commerce and other fields of non-agricultural economic activity, what has been and is being done is as much – particularly having regard to the circumstances of the wars – as anyone could hope to do … Emigration could only have been prevented, therefore, if the Government had succeeded not only in maintaining industrial and commercial employment at its pre-war level throughout the war years, but in increasing it over the period by creating 150,000 new employment outlets. To blame the Government for not having been able to do that during a period in which, as everybody knows, raw materials and equipment were virtually unprocurable, is, of course, ridiculous.19
For those who did remain, it was not employment but rising prices that caused greatest resentment, together with the ever-increasing regulation of Irish society as more areas of life came under the control of Government. The cost of food, in particular, was rocketing, and with the Wages Standstill Order coming to an end in 1946, the Government faced the prospect of large-scale industrial action across the economy. The Government’s primary concern, then, was keeping the cost of living stable and making sure that wage claims were kept under contro
l. With regard to the latter, the Labour Court was established by Seán Lemass in 1947, while the Government attempted to alleviate the cost of living through food subsidies. Even then, bread rationing had to be introduced when a terrible winter across Ireland and Britain in 1946–47 led to severe wheat shortages. In the Department of Industry and Commerce, Lemass was effectively alone in Government in wanting to push economic policy in a more expansionist direction. His policy initiatives included developing the areas of electricity, turf, aviation and tourism, but progress was slow and he was resisted on each occasion by the Department of Finance. Ultimately, by focusing on urgent tasks to the detriment of important tasks, the Fianna Fáil Government failed to address the fundamental backwardness of both the industrial and agricultural sectors.
‘Put them out’
A general election in February 1948 resulted in Fianna Fáil being ‘put out’ (in response to Clann na Poblachta’s slogan, ‘Put them out’), having been in Government for sixteen years. Many factors led to its losing power, but unhappiness at the cost of living was perhaps the most important. A supplementary budget in October 1947 – which had increased income tax and taxes on items such as cinema seats – proved fatal for Fianna Fáil, even though much of the income derived from these taxes was spent on food subsidies, thus robbing Peter to pay Paul. The Fianna Fáil estimates had included an increase of expenditure of £6 million, of which most was spent on food subsidies, rural electrification and the treatment of tuberculosis.20Nevertheless, as Joe Lee put it, ‘many people could not, or would not, understand why the hardship should continue’.21
