by Gary Murphy
At this stage, Finance was still insisting that Ireland’s recession was ‘solely a monetary crisis’.15This was not the case. The parliamentary secretary to the Government, John O’Donovan, wrote to Sweetman on the perils of persisting with Finance orthodoxy:
It is almost past understanding how arguments which have been proven wrong time and time again are still produced for the purpose of conditioning the members of Governments of this country to agree with courses which are contrary to their own firm convictions and their political advantage, and which experience has shown to be contrary to the good of the community in Ireland.16
In October 1956, Costello, under pressure from Norton and from some within his own party – including stalwarts such as McGilligan – launched a plan for national development covering every aspect of the Irish economy. For McGilligan, such a plan was essential, as without it the next election would be lost to Fianna Fáil, and the fortunes of the state depended on ‘continuing control of Government by the present Inter-Party group’. He explained:
It would be calamitous to allow Fianna Fáil again to be in control. They have been rejected by the people three times. In 1948 the electors did not so much vote for any specific party Government – there was no pre-election cohesion between those who opposed Fianna Fáil – but they did vote against Fianna Fáil. In 1951 the people still showed their antagonism to Fianna Fáil, and in 1954 there was as significant a landslide as is possible under proportional representation. This was accomplished against heavy odds – the Irish Press, The Irish Times, and many provincial papers, an industrialist section corrupted by tariff and other favours, the boosting by Radio Éireann (which still continues in subtle ways) and the favouring influence upon their employees and again with some producers of Boards such as the Insurance Corporation, the Sugar Company, Bord na Mona, all built up in the likeness of Fianna Fáil clubs and left so to this day. There is, however, a danger that Fianna Fáil may come back not because the public really desire them but because those now in power have failed to come up to popular expectation.17
This was the context in which Costello announced a series of grants, tax reliefs and other incentives to industry and agriculture that were to become the hallmark of the new system of foreign-led industrial-isation under free trade. The spur for this development was a paper entitled ‘Capital formation, saving and economic progress’ delivered by T.K. Whitaker to the Statistical and Social Inquiry Society of Ireland. Whitaker argued that national product in Ireland had to be enlarged and a greater proportion of it devoted to capital formation in order to avoid losing ground in incomes to other countries, particularly Britain. Failure to keep pace with Britain was a significant stimulus to emigration, which had blighted Ireland throughout the 1950s.18Furthermore, he argued that saving and production should be encouraged, and excessive consumption discouraged. This would stimulate capital development of a productive nature. He maintained that there should be a liberal attitude towards profits so as to encourage industrial expansion, arguing that assistance to agriculture should be directed specifically towards the development of productive capacity.
Whitaker voiced the belief that ‘something had to be done or the achievement of national independence would prove to have been a futility’.19In this, we have an implicit assertion that by the mid-1950s conservative economic approaches undertaken since the foundation of the state were outmoded for a new generation.
On the industrial front, Costello’s plan included a special incentive to encourage exports by a remission of 50 per cent on profits derived from increased exports – to be used for expansion of production – even more generous Government grants for certain types of new factories, tax exemptions for much of the profit of the mining industry, the immediate appointment of a Capital Investment Advisory Committee to advise on the best methods of financing new enterprises, and the establishment of an Industrial Advisory Council composed of industrialists and trade unionists to secure informed opinion on matters of welfare and development that did not come within the scope of existing bodies such as the Factories Act Advisory Council.20Costello also announced that the IDA had begun efforts to interest continental and US industrialists in the establishment of factories for the manufacture of goods outside the existing range of Governmental activity.
‘A Challenge to our Manhood’
Despite these measures, Fine Gael lost ten seats in the March 1957 general election. The economy was the main issue in what was generally a lacklustre campaign, with Fianna Fáil claiming that the Inter-Party Government had failed to deal with the deteriorating economic situation, was responsible for the high level of unemployment, had no policy for recovery and, indeed, could not have had because its membership was divided. This division was not only at an inter-party level; Fine Gael itself was deeply divided over Sweetman’s cutbacks, particularly his intention to eliminate food subsidies in the upcoming budget. Four members of the party’s elite threatened to resign: the Minister for External Affairs, Liam Cosgrave, the Attorney General, Patrick McGilligan, the parliamentary secretary to the Government, John O’Donovan, and the Minister for Health, Tom O’Higgins.21Yet Sweetman himself fought a vigorous campaign. He claimed that Fine Gael had a progressive policy that ‘built on the national solvency ensured by my tenure as Minister for Finance’, and which would ‘create an expanding economy with greater production and exports, particularly in agriculture and will enable us to have a higher standard of living’.22
Sweetman, however, did not have the opportunity to implement another budget, as people voted against the Government and the bleak economic situation. The electorate, weary of the harsh economic climate, chose Fianna Fáil as the party most likely to ease economic severity. Fianna Fáil, however, was equally divided. Lemass kept a low profile during the campaign, as the Fianna Fáil platform offered nothing in the way of a growth-oriented programme. If anything, it preached the old traditional patterns of economic organisation, particularly in agriculture, and offered no alternative policies. In reality, it mirrored a speech de Valera had given in Cork the previous July:
Our past successes should be an inspiration to us. The whole doctrine of faith in ourselves, self reliance, self discipline and self support is today as energising nationally and as fruitful as ever in the past. The present difficulties should be regarded as no more than as a challenge to our manhood, our national character and determination, to our ability to organise, to work and to make good.23
MacEntee was the main spokesman for Fianna Fáil during the 1957 election. In typically caustic fashion, he accused Costello of having been an Irish Nazi who had ‘studied Hitler’s Mein Kampf and sat at the feet of the late Dr Goebbels’.24This bizarre attack was in response to an assertion by Costello that, with the exception of 1946, this was the first occasion in peacetime in over twenty-five years that Ireland’s international-payments account was about to be brought into balance. This, according to MacEntee, was a shameful lie, as Fianna Fáil had a credit balance of over £2 million on the external account in 1938 despite the fact that it had been obliged to pay the British Government £10 million in liquidation claims with which the Irish Government had been saddled ‘under secret arrangements which Costello’s associates signed in 1923’.25MacEntee launched similar verbal assaults on Fine Gael throughout the campaign, but what is most interesting is that, to some extent, he sympathised with Sweetman’s performance as minister. Showing his true conservative colours, MacEntee talked of supporting Sweetman:
In the bitter struggle which I suspected he was waging with many of his colleagues to get them to accept the principle of a balanced budget. But I made it clear that the present burden of taxation was oppressive and that expenditure should be reduced so that the burden might be lightened. Such support that I gave Gerard Sweetman obviously annoyed his leader.26
This, claimed MacEntee, was in stark contrast to the position Costello had taken to the 1952 budget:
Despite having reservations and with many doubts as to the wisd
om of the measures which the Government was taking to deal with the grave situation which it had created, Fianna Fáil had given it such support as thought justified in doing in the nation’s interest.27
While MacEntee could claim, with some justification, that he had the nation’s interest at heart in his pursuit of a conservative economic policy, and would support such policies no matter who was in Government, there were others in Fianna Fáil who had a different economic agenda. A number of people had left the party in disgust after the 1952 budget, while others transferred their allegiance to Lemass’ constituency of Dublin South-Central in the belief that he represented the authentic voice of Fianna Fáil and would eventually win this policy battle.28
Lemass himself was strangely subdued during the 1957 campaign. It may be that he felt the IDA was becoming more powerful, and that, even in Government, his influence would be curtailed at Industry and Commerce. Furthermore, he had clearly lost the economic-policy battle with MacEntee during the previous Fianna Fáil administration, and could well have feared that if MacEntee was reappointed Minister for Finance, the same would happen. MacEntee was highly critical of Lemass’ ‘Clery’s 100,000 jobs speech’ of 1 October 1955, and of a preceding memorandum on financial policy that Lemass had prepared for Fianna Fáil’s central committee in mid-April 1955, which advocated greater Government intervention in the economy, and called for full employment.29In fact, Lemass originally submitted his Clery’s speech in the form of a memorandum to the party, with a meeting of the party committee deciding that:
Mr Lemass could speak in public in general terms on proposals set out in his memorandum but that reference to the Central Bank should be omitted; it could be pointed out, however, that our resources are ample to finance agriculture and industrial development.30
It would appear that the party was anxious not to get involved – or let Lemass become embroiled – in a public squabble with the Central Bank, as had happened in 1951. The Clery’s speech was nothing less than a call for full employment. In part, it was based on the 1954 Italian Vanoni plan for post-war reconstruction, and was a public reiteration of Lemass’ view that the state would be the primary driver in the quest to end Ireland’s unemployment problem.
For its part, Fine Gael was scathing of Lemass’ proposals, and noted that if a Fianna Fáil Government was returned to power at the next election, the taxpayer would be faced with additional tax burdens of up to £20 million:
Deputy Lemass is so enthusiastic about his proposal that he has stated that, if necessary, the budgetary surplus should be achieved regardless of the taxation measures found to be necessary. Private industry, as well as the ordinary taxpayer, has good reason to be dismayed by the deputy’s proposal. It is undeniable that compulsory savings of this order, devoted to the state capital programme, would completely dry up the already inadequate pool of savings available for the financing of private industrial investment. Deputy Lemass has elsewhere shed some crocodile tears over the inadequacy of the capital funds available to industry. His present proposal would make sure that no capital funds at all would be available to industry.31
While Lemass was given a somewhat guarded go-ahead by the party for his speech, MacEntee took something of a back seat. In late 1954 Fianna Fáil had asked members of its central committee to submit memoranda on areas of major policy. While Lemass quite naturally focused on industry, it was Frank Aiken rather than MacEntee (who was recovering from illness) who undertook the task of attempting to shape Fianna Fáil’s financial policy in opposition.32Nevertheless, by the time of the 1957 election, MacEntee had re-emerged as the main Fianna Fáil financial spokesman, and could reasonably have expected reappointment to Finance in any Fianna Fáil Government. This was not to happen.
‘No easy expedients’
De Valera’s decision not to reappoint MacEntee to Finance upon Fianna Fáil’s return to power in 1957 undoubtedly left MacEntee disappointed. His diary entry for 8 March records that de Valera ‘had already seen Ryan and Aiken before me. He was apparently committed to both.’33Finance actually went to Dr James Ryan, who had performed with distinction in Health after Noël Browne’s problems with the ‘mother and child scheme’. Aiken was appointed to External Affairs. Lemass returned to Industry and Commerce, with MacEntee being effectively demoted to Health. The ‘Chief’ – as de Valera was called in the Fianna Fáil parliamentary-party minutes of this period – had spoken.34
MacEntee was discredited by previous economic failure. Although his policies were in tune with de Valera’s own beliefs, the electoral fortunes of Fianna Fáil were paramount. De Valera – astute politician that he was – had undoubtedly realised that Fianna Fáil had gone to the country in 1948 and 1954 with conservative economic records and had been defeated on both occasions. The economic crisis facing the Fianna Fáil Government in 1957 was so severe that there was every likelihood that a conservative approach would only exacerbate the problem, and, more importantly, return the party to opposition at the next election. De Valera thus decided that change was necessary – a change brought about by electoral fortunes, not a deliberate break with traditional Fianna Fáil economic policies. As Whitaker has speculated:
First of all one must see that Dev recognised, through the eminence he gave to Lemass, the deficiency in his own viewpoint. De Valera was supplementing his idealistic view of things by a practical go-getter person in Lemass. Dev was still Taoiseach when they decided to publish this piece of official advice … One is left thinking that it was his political instinct – it was a way out, a brilliant way out from being imprisoned in the old policies. Dev presumably had the perception to see that change was necessary.35
By the time Fianna Fáil won the 1957 election, de Valera was remote from much of the debate within the party. Yet he did recognise that the policies of economic retrenchment had resulted in defeat for his party twice in the previous nine years.
With Lemass at last having overcome the financial orthodoxy of MacEntee, what could Irish industry look forward to as the ideology of free trade began to take a foothold within the Irish civil service and body politic? Restored to Industry and Commerce, he immediately accelerated the process of opening up the state to new foreign investment, though without as yet removing tariff barriers. The economic instability that plagued Irish policy-makers throughout the 1950s led to serious unemployment and mass emigration. The relative success of the British economy at this time, and its labour shortage, provided a strong pull for emigration. Nearly 60,000 people left the country in 1957 alone, a quarter of a century after de Valera had first taken Fianna Fáil into Government.36Wage rates in Britain moved far ahead of those in Ireland, as did overall standards of living, facilitated by the developing welfare state. Historically, Ireland had compared its living standards with those of Britain, and the gap between them increased during the decade. Ireland’s historic association with Britain caused mental as well as practical problems. Todd Andrews, for example, argued that a psychological sense of inferiority pervaded the country, and the farming community in particular. This was an important observation by one of the prime public servants and industrialists of the era. For Andrews and the policy-making community in general:
The keynote of the national economy is agriculture and until we have fully utilised our national resources in agriculture nothing further in the way of substantial development is likely … I feel if the farmers want help they should get it if for nothing else than to show the goodwill of the country towards them and disabuse them of distrust.37
Policy-makers of all political hues and from across the civil service were at one with Andrews’ description of the importance of agriculture to the economy. Yet one of the most significant features of the 1950s was the virtual collapse of the small-farming sector, leading to the demise of agriculture as a focus for employment or growth.
It is possible to identify a significant difference between Ireland and Europe up to the late 1950s. For the most part, Ireland restored its protectionist framew
ork for industry after the war, while import substitution remained the policy goal for most political parties and successive Governments. Though industrial protection had brought limited success, its continuation contrasted sharply with policy in most other European states.38Lemass had never shared de Valera’s dream of a small-farmers’ utopia, and recognised that the sustenance of de Valera’s pastoral society was heavily dependent on Ireland’s privileged access to the British market, an objective which had been realised in the 1948 trade agreement and maintained subsequently. In comparison with its continental competitors, such as Denmark and the Netherlands, Irish farming was relatively high cost and inefficient. Its position in the British market was secured not through competitive advantage but was due to political negotiations between the two states and agreements that excluded continental competition. There was a well-founded fear in Ireland that any opening of British markets to European competition would lead to the weakening of the Irish advantage. Thus, the newly returned Fianna Fáil Government knew that it had to develop a strong industrial policy that could stand side by side with agriculture in developing the Irish economy.
By 1957 Fianna Fáil realised that it had to travel along a different economic path than it had previously taken while in Government. Lemass had hinted at this at a parliamentary party meeting in January 1957, where he made a statement dealing ‘with certain short term proposals involving Government expenditure and retrenchment, which he felt were required to deal with the grave immediate problem of unemployment’.39In his first budget speech, Ryan unequivocally spelled out the economic objectives of the Government:
It is clear that we have come to a critical stage in our economic affairs. The policies of the past though successful in some directions, have not so far given us what we want. Further progress on a worthwhile scale calls for a comprehensive review of our economic policy. The direction and rate of our future advance will depend on the decisions we take now. There are no easy expedients by which our difficulties can be solved.40
