THE 1920s WERE NOT the most opportune decade for a newly independent nation. Wages and prices fell after wartime inflation; agriculture was depressed; unemployment, external competition, and technological change affected hitherto stable industries; the British economy was in decline, and the neoclassical certainties of free trade and laissez-faire were being questioned. Ireland’s chronic problems of emigration, overdependence on agriculture, and a weak industrial sector were accentuated by partition, which removed the most prosperous region and two-thirds of the industrial work force. Add to this the costs of civil war plus the requirement that, unlike British colonies gaining independence in the 1960s who received financial assistance, Ireland was to repay money to Britain, and a difficult scenario emerges.
The Political Background
Economic policy was constrained by political difficulties. The civil war that erupted in the summer of 1922 caused a split in Sinn Fein, removed many leaders from office, and ensured that security and status dominated the agenda at the expense of socioeconomic questions. The war ended in April 1923 with a victory for pro-treaty1 forces, however defeated republicans continued to boycott the institutions of state until 1927 when the Fianna Fail party entered the Dail. While the civil war was fought over nuances in the treaty, it led to a polarization between those desiring change and supporters of the status quo; ultimately the republicans gained their greatest support among the small farmers of the west of Ireland. The Cumann na nGaedheal government was forced to adopt a pro-British attitude on political matters and a conciliatory economic policy. These pressures were reinforced within Dail Eireann where opposition ranks consisted of ex-Unionists, a conservative Farmers party representing larger farmers, and the Labour party. Pressure within the Dail was more likely to come from the right wing; outside the Dail groups favoring the status quo such as bankers, cattle farmers, and export industries proved more coherent than those wanting change.
The Cumann na nGaedheal government that took office in January 1923 was without any policy save to ensure the survival of the state. It had come into existence by an almost random factor, the remnants of the leadership of the first Dail who had accepted the treaty and survived the civil war. The death of Arthur Griffith in August 1922 removed, in the words of Irish writer George Russell, “the only political leader whose name was associated in the Irish mind with a definite economic policy” and led to uncertainty about the country’s economic future (Irish Statesman 19 Aug. 1922). His successors were not famed for their economic expertise: the leader, W. T. Cosgrave, had considerable experience in local government; Minister for Finance Ernest Blythe was an Ulster Protestant nationalist interested in Irish language revival; three of the younger members—Home Affairs Minister Kevin O’Higgins, Agriculture Minister Patrick Hogan, and Patrick McGilligan, who became minister for industry and commerce in 1924—had all sat in the same economics class in University College Dublin. The administration was dominated by men who had run the country under Britain and who retained British values and procedures: financial probity, Treasury control, and distaste for economic intervention (Fanning 1978, 57). Civil war gave them increased authority during the formative months of the new state and created long-term financial problems as a consequence of reduced revenue and increased security costs.
In 1923 the state was forced to seek accommodation from Irish banks, who only came to their rescue when ordered to do so by the British Treasury. The Irish Department of Finance subsequently sought to minimize dependence on the banks by minimizing borrowing (Fanning 1978, 88), and this meant an effective veto on new expenditure. The government was forced to befriend a commercial and economic establishment that was dominated by men who had prospered under the Union and who were loath to change.
The continuity of elite in both the private and public sectors reflects the absence of a social revolution and the lack of alternative expertise. While the ranks of former British civil servants contained men such as Joseph Brennan, first secretary of the Department of Finance, who were from Catholic and nationalist traditions, problems with nineteenth-century Catholic university education meant a dearth of such talent. An inquiry from Gordon Campbell, secretary of industry and commerce, to J. G. Smith, professor of commerce at Birmingham University (an Irishman), asking for the names of Irishmen capable of initiating economic development yielded no names (McG Papers P35b/5). With the exception of J. J. McElligott, a former civil servant who left his position as editor of The Statist to join the Department of Finance, and T. A. McLaughlin, who masterminded the electricity service, few such men materialized.
The Irish Economy in the Early Twenties
The economy of the new state remained closely integrated with Britain. Transport and banking links were unchanged, and Britain and Northern Ireland accounted for £50.59 million of total export sales of £51.58 million in 1924. Agriculture employed 670,000 in a total labor force of 1.3 million and agriculture, food, and drink products accounted for 86% of exports in 1924. The economy was, however, depressed following a wartime boom; farmers who had borrowed to buy extra land were saddled with crippling repayments, and net agricultural output by 1924 was 12.6% below the 1914 level (O’Connor and Guiomard 1985,95). Industry was equally unhealthy, though its status is more difficult to document. The 1912 British Census of Industrial Production recorded 66,693 workers in manufacturing industry in the area that became the Irish Free State (C. Prod. 1926; C. Prod. 1929, iii, xxi). Britain provided virtually the sole export market for the small number of export firms while British firms competed in the Irish market. Postwar readjustment proved difficult for Irish industry. Firms struggled to reduce wages and other costs, an adjustment exacerbated by the wartime growth in trade union membership from 100,000 to 300,000 by 1920 (Irish Trades Union Congress Report 1920, all-Ireland figures). By 1923 wages in most Irish industries were higher than those in Britain (FIC 1923, app.). The depressed state of British industry and its loss of overseas markets meant increased British competition on the Irish market. Industries such as flour milling and woolens that had operated profitably before 1914 found themselves under acute pressure by the early twenties.
The Economic Blueprint
The broad sweep of economic policy was determined not by the government but by commissions of experts: the Commission on Agriculture (Agr. 1924), the Fiscal Inquiry Committee (FIC 1923) and Banking Commission (BC 1927). The experts favored the status quo. Ireland would maintain parity and financial links with sterling, produce food for Britain, and retain a free-trade industrial sector.
The critical role was allocated to agriculture. In a memorandum to the cabinet in January 1924 Agriculture Minister Patrick Hogan emphasized that “national development in Ireland for our generation at least is practically synonymous with agricultural development” (McG Papers P35/b/2), an approach which was accepted by his colleagues. In opting for export-led agriculture, Cumann na nGaedheal accepted the supremacy of market pressures and the need to maintain competitiveness. To this end Hogan urged curbs on local government spending to reduce taxes on farmers, advocated cutting the wages of local authority road workers to prevent pressure on farm laborers’ wages, pressed for lower tax levels to increase competitiveness, and urged that farmers be compensated for cost increases consequent on protection (PDDE 23 Jan. 1924). Large farmers were favored at the expense of smallholders and increased spending on unemployment, housing, or industrial development was ruled out.
Hogan’s emphasis on financial rectitude and the existing social order held attractions for the Department of Finance and larger farmers. Given that it paralleled the deflationary policies being pursued in Britain it also met the wishes of the Anglo-centric financial establishment. Such a viewpoint led to the decision in 1924 to reduce old-age pensions to permit a reduction in income tax, which was paid by only 60,000 people (Kennedy, Giblin, and McHugh 1988, 36). Hogan’s policy entailed an emphasis on cost cutting, education, and quality control. It offered little to those facing emigration or inadequate living standards.
The Currency Question
This strategy was made more onerous by heavy deflation. The agricultural price index fell from 288 in 1920 to 160 by 1922 and 110 by 1931 (1911–1913 = 100) (Kennedy, Giblin, and McHugh 1988, 36). Deflationary pressures were increased by the decision of the Banking Commission in 1926 that Ireland should retain parity with sterling, a decision that was based on the assumption that Ireland would remain part of the U.K. economic unit (BC 1927), which committed Ireland to an overvalued currency. In a 1924 memorandum to the Cabinet, Joseph Brennan, secretary of the Department of Finance, explained that in the event of Britain returning to the gold standard “on the pre-war basis” the link with sterling would mean deflation and entail surrendering Irish monetary policy into British hands. Brennan questioned whether the country was prepared to accept the consequent depression and unemployment and suggested that agricultural exports and industry would benefit from an Irish currency stabilized at its current depreciated level (S5896, 14 Aug. 1924). While Brennan eventually recommended parity with sterling because of the volume of trade with Northern Ireland and because the First National Loan was denominated in sterling, he suggested that the decision should be reviewed, which was never done.
The 1927 Currency Act established a Saorstat (Free State) pound at parity with sterling, backed by sterling assets. The only criticism of this policy came from the Department of Industry and Commerce. In evidence to the Banking Commission, J. Barrington argued that the deflationary pressures imposed by parity with sterling were more damaging for an agricultural country than for an industrialized economy. Barrington’s case was reiterated by Industry and Commerce Secretary Campbell on the occasion of the passing of the 1927 Currency Act where he noted the effect of U.S. deflation on American farmers, adding that “the Saorstat is a country of farmers” (McG Papers P35/a/26).
The Unemployment Problem
Industry and Commerce were less committed to a policy of continuity than were other economic departments. The Department of Agriculture predated the state and had worked out a role within the British economic model, and Finance had a mission of prudent housekeeping. Industry and Commerce’s role was less clear, though its brief included unemployment, the issue which first provoked their dissent. Ireland had inherited the British system of unemployment insurance, which was not designed to cope with long-term unemployment. By the end of 1922 the system was in disarray as insured workers exhausted their benefits and others had not accumulated sufficient credits to earn benefits. Gordon Campbell, secretary of industry and commerce, proposed establishing a reconstruction commission to determine the true level of unemployment and to recommend means of tackling it with a substantial budget of £2 million. The Cabinet approved his report, but the question of allocating extra funds was referred to the Department of Finance and subsequently withdrawn (S1906). An interim report by the Commission on Reconstruction in 1923 recommending a five-year program of road works to relieve unemployment was dismissed by the Cabinet as impracticable (Gaughan 1980, 243). Industry and Commerce’s concern with unemployment continued, however. The department estimated that by February 1924 there would be 80,000 workers with “no work, no benefit and little or no prospect of any private employment,” a figure that excluded many republican prisoners about to be released (McG Papers P35/b/1). A similar crisis in London led British Prime Minister Stanley Baldwin to call a general election in an abortive effort to gain a mandate for protection, an event whose outcome was anxiously watched in Dublin (S3439). Industry and Commerce proposed introducing protection to relieve unemployment plus a Trade Facilities Act to provide government guarantees for long-term loans to industry, a measure operating in Britain since 1920 (S4278 10 Dec. 1923).
The Introduction of Tariff Protection
Fiscal independence would have held few practical consequences before 1914 as Britain was a free trade country; however, during World War I the British government introduced selective protective duties. In 1922, Britain, the Irish Free State, and Northern Ireland had operated as a fiscal unit with taxation divided proportionately, and protection first emerged as a political issue with the threatened onset of Irish fiscal independence in April 1923. Fiscal separation from the United Kingdom meant that Irish exports to Britain of protected commodities became subject to British import duties, and all imports into Ireland became dutiable at the same rates as goods imported into Britain. These duties made the option of continuity that existed for both agriculture and banking considerably less feasible for trade and industry.
With civil war still in progress, the Irish state was forced to decide on a protective policy to which it had given no prior thought. The Department of Finance apparently accepted the British schedule of duties but objected to granting preferential rates to the empire. Both Industry and Commerce and the North East Boundary Bureau2 urged using tariffs as a tool for industrial development. Lionel Smith-Gordon of the North East Boundary Bureau argued for adopting a different schedule of duties from Britain’s, believing that “unless we take an independent line from the beginning we shall rapidly become an ‘economic suburb of England’” (S2402). Several of the industrialists directly affected such as distiller Andrew Jameson, George Jacobs of the biscuit firm, brewer George McArdle, and tobacco producer J. E. Carroll were members of a Chamber of Commerce delegation that sought to postpone the customs barrier (IT 2 Mar. 1923). Their objections were read by Kevin O’Sheil of the North East Boundary Bureau as politically motivated, reflecting the views of “the old reactionary and anti-national elements” (Blythe Papers P7/c/156). However, Shell’s estimate ignored Irish industry’s traditional free access to the British market and industrialists’ awareness that minimal fiscal changes would result in major disruption.
Such negative consequences were most evident in the case of the Ford plant in Cork, which was part of the company’s U.K. operation, built on the assumption that parts and equipment could move freely between the two countries (Jacobson 1977, 23). By 1923 Ford employed 1,600 workers and paid weekly wages of £10,000. Irish fiscal independence meant that cars or parts imported from Britain faced a duty of 22.2%, and a similar duty was payable on exports from Ireland to Britain. For Ford, the solution was simple. The manager in Cork pointed out the consequences of closing the plant, adding that “we feel quite sure that when the government realise the magnitude of the issues involved they will take the necessary steps to negotiate some form of trade treaty with England that will provide for the termination of the prohibitive duty on our manufacturing goods entering England” (S4427). But, such a move would involve abandoning all pretense at fiscal independence, a point recognized by most speakers in a Senate debate on the Ford problem (PDSE 21 Mar. 1923) and expressed more forcibly by government advisor Joseph Johnston who noted that “any argument based on the effect of the Customs barrier on Messrs. Ford’s activity in Cork would be arguments in favour not of a temporary postponement of the barriers but of abandoning it and our fiscal freedom forever” (S2405).
Faced with conflicting advice the government opted to retain all British duties unchanged. This decision resulted in a ragbag of duties that bore no relation to Irish needs, hardly the hallmark of a government exercising economic independence. The decision may have been influenced by the British announcement that imperial preference would apply to imports from Ireland; however, the absence of taxation changes in the Irish budget some weeks later was viewed by the Economist as “marking time” (28 Apr. 1923), and it was presumably unease about the decision that prompted the establishment in June of the Fiscal Inquiry Committee to report on the effect of the existing fiscal system on industry and agriculture and on any changes intended to foster industrial and agricultural development.
The Fiscal Inquiry Committee
The Fiscal Inquiry Committee was subsequently described by one of its members, economic historian George O’Brien, whose brief was limited to agricultural issues (S3107) as “heavily in favour of free trade” (Meenan 1980, 128). It was dominated by C. F. Bastable, professor of economics at Trinity College Dublin and “a survivor of the great days of Victorian liberalism when free trade was regarded by British economists as a religion rather than a policy” (Meenan, 1980, 128). Whereas the reports of the Commission on Agriculture and the Banking Commission reflected the thrust of the evidence, the Fiscal Inquiry Committee’s recommendation of free trade was at variance with the overwhelming majority of witnesses who demanded protection. The only exceptions were the maltsters, jute manufacturers, Jacobs (the biscuit firm), printers, and Cork Teachta Dalas. A. O’Shaughnessy and Prof. A. O’Rahilly who argued the interests of Ford.
One supporter of protection subsequently noted that “close on forty Irish manufacturing industries gave evidence before the Fiscal Inquiry Committee in support of protective tariffs, and each one of these, with one trifling exception, were prejudiced or damnified by the Report, not upon the merits of each case, but upon general principles” (PDDE 15 Feb. 1924). The absence of the banks, chambers of commerce, Ford, and Guinness was viewed by the committee as signifying approval of the status quo, and their unvoiced opinions received considerably greater weight than did the opinions of those who attended. On this basis it was concluded that “the volume of industry which is anxious to obtain a protective tariff is small compared with that which desires no change in the existing system.” Tariffs were condemned as raising prices and costs with adverse impact on exports and employment (FIC pars. 119–20). There was no minority report, so the message of free trade and the priority afforded to agriculture and export industries was not challenged. In retrospect, George O’Brien conceded that “in regard to manufacturers, some concession might have perhaps been prudently made to sentiment…. There was a widespread desire, not only among the businessmen who would have duly profited, but among the public generally for some attempt to revive Irish industry. If the Committee had indicated the directions in which such an attempt could be most safely and least expensively made, its reports would probably have received more respect and would have led to positive action” (Meenan 1980, 129).
The apparently partisan report led to increased pressure for protection. Many of the lobbyists had been pioneers of local industrial development associations and members of Sinn Fein, and this increased their bitterness. One contributor to the government newspaper, The Gael, asked “is advocating Arthur Griffith’s policy treason to the Free State?” (Blythe Papers, P7/c/56). Individual industries presented their case in isolation and the Fiscal Inquiry Committee criticized the lack of cohesion in the protectionist camp (FIC par. 66).
The Dublin Industrial Development Association (DIDA) did not give evidence but elected to help individual groups prepare their case, a decision that reflected a split within its ranks. It refused to join the protectionist Federation of Irish Industries on the grounds that neither was it a “free trade body” nor was it “committed to indiscriminate protection” (National Agricultural and Industrial Development Association 1905–1935, 29). The arbitrary dismissal of protection by the Fiscal Inquiry Committee tilted the balance of opinion in the DIDA. Its annual report for 1923 condemned “the non-judicial and extraordinary manner in which the great weight of evidence in favour of some form of protection was brushed aside by the Fiscal Inquiry Committee while all who abstained from tendering evidence were, for no very cogent reason, assumed to agree with the present system of free imports” (DIDA minutes 10 Aug. 1923, report Dec. 1923). DIDA endorsed protection in February 1924 and urged others to follow suit. However the Irish Industrial Development Association (IIDA), the body responsible for the Irish trademark, refused, arguing that it would alienate their Northern Ireland trademark users, a decision that deprived the protectionist camp of access to the IIDA’s substantial income (DIDA minutes Feb. 1924, report 1924–1925).
The government distanced itself from the criticism directed at the report because W. T. Cosgrave had stated that “the committee is not expected to advocate policy. That will be a matter for the people and the government when they have the facts before them” (PDDE 15 June 1923). The unofficial response was a search for a middle ground. This was signaled by the minister for industry and commerce, Joseph McGrath, in the Dail when he promised limited protection that would not injure agriculture with the emphasis on products with a large domestic market. However, he added that “the onus of proof” lay with “the advocates of Protection,” ruling out any prospect of “a fiscal revolution” and denying that Ireland’s destiny lay in becoming “a concentrated industrial region” (PDDE 21 Jan. 1924).
Tariff Policy 1924-1926
McGrath’s policy was apparently endorsed by the cabinet, though not by J. J. McElligott, assistant secretary of finance. His memorandum to Finance Minister Blythe in response to McGrath’s speech argued that protection once granted could never be reversed and would inevitably entail further protection, “a medicine that needs to be taken in large doses” (Fanning 1978, 203–4). McElligott suggested that the government concentrate on reducing wages.
On 29 February Industry and Commerce submitted a paper on tariffs for cabinet consideration. In a covering letter Campbell prophesied “a consistent fall in the volume of manufacturing industry,” with consequent impact on banks and shopkeepers and potential “danger to the well-being of the State if a progressive remedy be not speedily applied.” The accompanying report provided a bullish account of the potential benefits of protection. It rejected the argument that industries that were compelled to import raw materials were not “natural” industries worthy of assistance—citing Belfast shipbuilders Harland and Wolff, Guinness, and Lancashire cotton as arguments to the contrary. The case against tariffs on cost-of-living grounds was dismissed by providing that tariffs be withdrawn in the event of abuse, while increased customs revenue could be used to reduce other taxes. The report envisaged tariffs leading to the establishment of factories by “some of the best organized external manufacturing concerns” with benefits to employment, taxes, and national standards of manufacture and argued that protection would ultimately generate new exports and better shipping. Detailed information was appended on fifteen industries that could be protected without serious impact on the cost of living.3 The report concluded with the cry, to be repeated by Campbell on many future occasions, that “a bold, well-conceived policy, which would result in extending industrial activity in this country, is essential if the state is to prosper. Otherwise, we must remain dependent on agriculture to keep the State afloat. This latter alternative means putting all our eggs in one basket, the bottom of which is by no means secure” (F22/11/24). The timing of this memorandum is significant. By this time Joseph McGrath, the minister for industry and commerce, was in fundamental disagreement with the majority of the cabinet over army demobilization and was to resign on 7 March (Fanning 1983, 48). In consequence the report never reached the cabinet.
McGrath’s replacement by Patrick McGilligan appears to have led to a cooling of protectionist ardor. On 19 March Campbell wrote to both McElligott and to the secretary of the executive council disengaging from the explicitly protectionist stance but requesting that the matter be debated by the cabinet, taking account of unemployment, the effect on prices, and “all counterbalancing advantages to be secured from industrial development.” No such debate occurred though the matter was referred to government officials. In a letter to Blythe dated 9 April 1924, Patrick Hogan, minister for agriculture, noted recent discussions with Gordon Campbell concerning a proposal to impose tariffs on two or three items. Campbell had complained that he had made several abortive efforts to initiate a discussion on tariff policy, and he felt “without having some definite policy, it is quite impossible to pick out three or four items and say we will protect them.” As an alternative he proposed establishing a Tariff Commission. Unlike the Fiscal Inquiry Committee “this Commission would start with the presumption that tariffs were to be imposed, and important tariffs, examine the question, show the results in detail, and the Government could then make up its mind.” Hogan endorsed Campbell’s proposal, but it received short shrift from McElligott, who claimed that it was “rather absurd that after one Government Committee turned down tariffs, another Committee should be set up to establish them” (F22/11/24). Campbell’s request for a policy debate was evaded.
The 1924 budget imposed tariffs on boots and shoes, confectionery, soap and candles, bottles, and commercial motor bodies; in Hogan’s opinion “unimportant things” as opposed to “things that really matter such as textiles, clothing,” and tariff levels were below those suggested by Industry and Commerce. The impact of tariffs on the cost of living remained a major concern, and to compensate for the anticipated increase the duty on tea was reduced (PDDE 25 Apr. 1924).
The 1925 budget brought tariffs on clothing, blankets, furniture, and bedsteads. Blythe reiterated government opposition to a general tariff, justifying the new impositions on the grounds that the tariffs of the previous year had offered too limited a basis for determining fiscal policy. He also announced that no further tariffs would be imposed before the country could express its opinion in a general election. The threat to agriculture from higher prices was advanced as an argument against further protection (PDDE 22 Apr. 1925).
External pressure kept the tariff debate alive. In February 1925 the Dublin Industrial Development Association organized a Joint Industrial Council of manufacturers and trade unionists, which passed a resolution demanding that imports in a wide range of industries be restricted to 50% of their current level, with a 25% tariff on the balance (DIDA minutes, 23 Feb., 11 Mar. 1925). Labour party leader Tom Johnson suggested the establishment of a committee or commission to inquire into the effect of tariffs, prompting a commitment from Blythe to establish a “formal tribunal” “in the course of a year or so” (PDDE 23 Apr., 24 Apr. 1925). By June officials were contemplating draft proposals for a Watchdog Committee on Tariffs and scrutinizing Dail statements in an effort to interpret ministerial intentions. Initial proposals provided for a large committee representing agriculture, labor, banking, commerce, and industry to “consider” the effects of tariffs. The proposal aroused instant hostility among Finance officials who criticized its vagueness and objected to a committee reporting to the executive council rather than to a minister (F22/44/25). The idea lapsed until mid-1926 when it was reconsidered in response to renewed pressure from both agriculture and industry.
Industrial demands were channeled through the Department of Industry and Commerce, which held regular meetings with committees representing more than thirty industries (ITJ Nov. 1925). Nineteen requested tariffs in 1926. The applications had a common theme: owing to international depression, dumping, and increased British competition, the collapse of industries that had prospered and often exported before 1914. Tanning had declined from twenty factories before 1914 to six that mostly worked part-time. Both margarine and agricultural machinery had lost substantial export markets. Allegations of prejudice against Irish products were common: the Woollen Manufacturers Association claimed that “all the sentiment in the country which favoured the Irish article is dead and the Irish Manufacturer has suffered in consequence.” Industry and Commerce distanced itself from such representations. A letter to Finance pointed out that the applications originated from the industries, and their role was limited to scrutinizing figures and summoning meetings of advisory committees.
Applications were considered by an interdepartmental committee representing Finance, revenue commissioners, Agriculture and Industry and Commerce. Procedural objections from the revenue commissioners were common, and the Department of Agriculture lodged formal objections in all cases save mineral oils, brushes, and corsets—a possible insight into farmers’ consumption habits. For items such as rosary beads, briar pipes, and down quilts Agriculture noted the possibility of “some increase in the cost of living without any compensating benefit to the farmer”; in cases such as agricultural machinery their objections were more detailed. They condemned a proposed tariff on woolens because of farmers’ needs for good, strong, quality clothing “to withstand the hard wear on the farm” and their fear of “a tendency on the part of the agricultural community to buy unsuitable materials or low priced ready-made suits” (F39/6/26). Finance adopted an almost neutral attitude but sought guidance from the government. Joseph Brennan told his minister that “it would be useful at this stage if an indication could be given as to how far the Government think it worthwhile pursuing further investigations of any of these proposals.” He was particularly concerned about the political implications where the industry consisted of a single firm, such as agricultural machinery. This plea for political direction was again left unanswered.
The campaign for protection was not limited to discreet applications from industrial groups. While the Department of Agriculture presented a solid case against protection, the balance of opinion within the farming community was shifting. Agricultural depression and disastrous weather (O’Connor and Guiomard 1985, 95–97) led some farmers to seek protection in the hope of averting a steady fall in grain acreage. In August 1925 a conference held by Kildare County Committee of Agriculture recommended a tariff on wheat, oats, and barley and experimental trials to extend wheat acreage. A deputation sought meetings with the ministers for finance and agriculture: both refused, and the chairman of Kildare County Committee of Agriculture, J. J. Bergin, established a Grain Growers Association to campaign for tariffs on grain products. The adjoining county of Laoighis passed a resolution demanding a tariff on barley (F22/65/25), while the Wexford branch of Cumann na nGaedheal sought a tariff on cement (F22/63/25). The protariff campaign of the Cork Industrial Development Association was supported by Senator James Dowdall and by J. J. Walsh, minister for posts and telegraphs (IT 23 Mar. 1926). While Hogan refused repeated requests to meet with the Grain Growers Association, Walsh remained in close contact with it (F22/57/25). By 1926 he was chairman of the party and consequently a figure of some influence. Nor was he an isolated figure. It appears from their contributions in the Dail that several other T.D.’s, notably Dublin deputies Denis McCullough and Prof. Michael Tierney, were also sympathetic towards protection.
Public opinion was divided. The announcement by the minister for finance in January 1926 that he was considering extending protection to agriculture resulted in a resolution from the annual meeting of the Irish Farmers’ Union reminding the government that it had no mandate for such action (IT 26 Jan., 18 Mar. 1926). The budget submission from the Association of Chambers of Commerce sought further reductions in income tax, an end to corporation profits tax, and a “Geddes-style” committee to curb government spending (F39/2/26). In the face of competing demands Blythe’s 1926 budget imposed only one tariff on oats, which may have been a symbolic gesture to agriculture. He explained that under present “abnormal” conditions some manufacturers were unlikely to survive for a further two years, by which time the government might have a mandate for protection, and announced the establishment of a Tariff Commission to investigate proposals for further protection (PDDE 21 Apr. 1926).
The Tariff Commission
The announcement brought a division in government ranks, with Walsh speaking in favor of protection both in the Dail and elsewhere (IT 26 May 1926), though he ultimately voted for the measure, while Minister for Home Affairs Kevin O’Higgins countered with a speech endorsing the status quo. Prof. William Magennis (PDDE 30 July 1926) alleged in a speech that the matter had been the subject of heated discussion at the party conference in May 1926 (of which Walsh was chairman), and although newspaper coverage of this event is scant, divisions of opinion over tariffs are not in doubt (IT 12 May 1926). O’Higgins was undoubtedly hostile to protection, as was Hogan, who was concerned with export competitiveness of agriculture. The attitude of McGilligan is less obvious. In a debate on Industry and Commerce estimates in 1925 he stressed that “it is not the function of the Dail directly and immediately to provide employment. Certain pressure could be put on people, and certain tendencies could be developed, and then certain adjustments in the fiscal system could be made so as to ensure as far as we can ensure without interfering directly with trade or enterprises that there would be more employment; but beyond that we cannot go; we cannot enter into the field of state interference or state control of industry” (PDDE 31 Oct. 1925). It may seem paradoxical that these views were expressed by the man who masterminded the major economic intervention of the Cumann na nGaedheal government—the Shannon electrification scheme and the state-owned Electricity Supply Board. McGilligan had a fear of private monopoly, which led him to favor the lesser evil of a state electrical monopoly. However, the same fear of monopoly or lack of competitive discipline led him to mistrust protection. By 1926 the proposed Tariff Commission held the attraction of depoliticizing the issue.
The initial draft of the Tariff Commission bill emanated from Industry and Commerce on 17 April, four days before Blythe’s Dail announcement. The minister for finance was given the sole power of referring applications to the commission and the right to nominate both secretary and chairman. The commission was to report to him, and he would impose tariffs in the light of its recommendations, subject to Dail resolution. We can only guess at the motives behind Industry and Commerces self-denial with respect to tariff policy. McGilligan may have regarded the successful completion of the Shannon scheme, which had been undertaken in the teeth of Finance’s hostility (Fanning 1978, 178–86; Manning and McDowell 1984, chaps. 3, 4), as a higher priority. Campbell excluded himself from serving on the Tariff Commission on the grounds that the Shannon scheme was taking the greater part of his time as he was “the only person available who has sufficient knowledge of the scheme and can effectively be made responsible for the necessarily centralised supervision” (McG Papers P35/39). The outcome was a downgrading of Industry and Commerce that was to last until 1932.
The proposal to cede control to Finance was greeted with less than enthusiasm by the recipient. Joseph Brennan viewed the establishment of commissions substituting for “efficient Departmental advice” as “a distinctly retrograde step.” He was aware of the political dimensions of the controversy but saw the commission as subjecting civil servants’ policy making to public gaze. “Advice to Ministers on matters of administrative policy is shielded from publicity. Apart from the advantage this ensures that in matters which lend themselves to party controversy Ministers are not embarrassed if the official advice tended to them conflicts with party interests for the time being. It is probably inevitable that the larger tariff questions should form party issues in this country for some time to come and it seems inevitable that civil servants should be put in a position where they could be publicly recognised as forming or opposing the intentions of a particular party.”
Blythe ignored Brennan’s objections and requested that he suggest “any clauses for a Bill setting up a Tariff Commission which would give the maximum of direction to a Commission consistent with what I said in the Budget statement.” Brennan’s reply exposed the proposed commission and lack of government policy to merciless scrutiny. He noted that before clauses could be drafted it was “necessary to reach a clear understanding of the substance of the policy.” He toyed with the option of directing the commission to follow precedents established in existing tariffs but decided that “such a form of word would scarcely convey any real guidance owing to the difficulty, not to say impossibility of tracing a clear principle in those enactments.” He concluded that Blythe’s budget speech appeared to imply that tariffs should only be granted to preserve existing industries, which if extended beyond antidumping measures “would seem to open the door for the most questionable of all cases of protection, i.e. when an industry is not nascent but decaying” (F22/44/25).
The Tariff Commission came into existence without political guidance under legislation closely modeled on the British Safeguarding of Industry Act, drafted to prevent applications by bodies such as the DIDA or the Council of Saorstat Manufacturers. Only persons substantially representative of those engaged in or proposing to engage in an industry could apply. Campbell informed Brennan that McGilligan considered this restriction important. Hogan proposed that the ministers for agriculture and for industry and commerce could initiate applications; he also felt that the measure should allow for the prospect of assisting industries by other means such as export bounties. Such extensions were rejected, and the measure was virtually identical to the first draft save for the deletion of the proposal that tariffs could be introduced by administrative order—a proposal denounced by Joseph Brennan as “without parallel so far as I know in the practice of at least any of the better governed states of the world”; each tariff was to be the subject of specific legislation. The ambiguity of the government’s approach was evident in Blythe’s speech on the second reading of the bill, which he began by stating that with the bill’s passage “we shall have said good-bye to doctrinaire free trade,” adding that “for the future applications or proposals for the imposition of tariffs would be examined more minutely and in a more formal and deliberate way than has been the case in the past.” Most deputies saw the measure as a delaying tactic pending a general election (PDDE 30 June 1926).
The Triumph of Exporting Agriculture
Following the Tariff Commission’s establishment the major economic intiatives appeared to be directed towards assisting agricultural interests, as articulated by Patrick Hogan. Hogan’s belief in the overriding interests of agriculture and his antipathy towards state aid for industry appear to have hardened during his years in office. In 1925 he and McGilligan contemplated a joint program for state-assisted credit for both agriculture and industry. A partly state-financed Agricultural Credit Corporation was established, but assistance to industry was limited to the 1923 trade loans guarantee scheme (Daly 1984a). By 1927 he had evolved a justification of state aid for agriculture on the grounds of agriculture’s central position in the economy, while demanding that farmers be compensated for any assistance given to industry. This was explicitly stated in a memorandum to the executive council in January 1927 when Hogan obtained substantial funds to restructure the dairy industry, expenditure justified in terms of national interest. The memorandum stated that tariffs imposed a burden on agriculture for which farmers should be compensated, a view that appears to have gone unchallenged within the cabinet, but one that aroused strong objections from Industry and Commerce Secretary Gordon Campbell.
In a memorandum to McGilligan, also dated January 1927, Campbell criticized Hogan’s espousal of “mixed farming” as “a form which supports a low proportion of persons, which produces a relatively small volume of wealth, and which is very sensitive to conditions in other countries on which it is necessarily dependent. It may be an inevitable con-comitant of land division at its present stage. But it will not increase the population nor produce the maximum wealth possible nor be stable unless conditions in Britain are stable” (McG Papers P36/b/9). Campbell proposed assisting agriculture by protection, subsidies, or guaranteed prices to encourage domestic processing of agricultural products. While this strategy was seen as carrying inherent risks, he felt that it would increase rural population and produce increased wealth and greater internal stability. Campbell was endeavoring to reconcile the interests of agriculture and industry by weaning agriculture from doctrinaire free trade. His reasoning reflected the interests of aspirant Irish industry and his innate scepticism about the effectiveness of a development strategy that relied on agriculture. On another occasion he argued that undue dependence on agriculture tied the Irish economy to a life of instability; agricultural countries tended, he argued, to be impoverished and gave little scope for talented individuals such as university graduates. These memoranda were followed by Campbell’s attack, already noted, on the 1927 decision to adopt parity with sterling.
Although it can be argued that Campbell was stepping beyond the normal functions of a civil servant and attempting to formulate policy, the point is moot. His arguments were too late. The institution of a Tariff Commission under Finance control had removed the most critical policy area from Industry and Commerce. Campbell’s proposals would have required the abolition of the Tariff Commission within months of its constitution. There is no evidence that McGilligan accepted Campbell’s arguments, or that they ever reached the cabinet. By 1927 Cumann na nGaedheal’s economic policy was committed towards continuing the postfamine pattern of close trading connections with Britain with consequent emphasis on agriculture and food-based export industries—a beer, biscuits, cars, and cattle coalition—and on a continuing sterling link. Tariff protection had been depoliticized and was no longer on the agenda.
This state of affairs is evident from the Cumann na nGaedheal platform in the 1927 general election. Despite earlier commitments to put the issue to the electorate, the party’s campaign advertisements in June 1927 avoided commitments on protection and emphasized their record in reducing taxation, increasing agricultural rates relief, improving the quality of agricultural produce, and investing in roads and housing. They also mentioned the construction of the largest sugar factory in Europe, the potential of the Shannon scheme to revolutionize Irish industry, and the help given “as far as lay in its power (to) many struggling industries in their fight against foreign competition. Over thirty new factories had been established giving employment to 10,000 workers.” Future commitments to industry were limited to promises to promote “industrial and commercial development through confidence of investors” (IT 1 June, 4 June 1927). In the June 1927 election Cumann na nGaedheal returned 47 members, one more than the new Fianna Fail party, compared with 63 in 1923.
The electoral rebuff brought no change in industrial policy. Contentment with the status quo and a dearth of new ideas are the hallmarks of McGilligan’s speech on the estimates for Industry and Commerce shortly after the convening of the new Dail. He reported that his officials had been investigating the possibility of establishing new industries, had initiated contacts between foreign firms and Irish businessmen, and had toured the country to promote local initiative. There is no evidence that these measures had borne fruit, and his claim that “in every possible way that a Government department can intervene there has been intervention with a view to getting local capital and enterprise joined to start new industries” (PDDE 30 June 1927) was not endorsed by Campbell.
In a memorandum to McGilligan written shortly before the above speech and perhaps designed to influence its tone, Campbell argued that given Irish disabilities such as a small home market, lack of industrial training, and an absence of indigenous resources, industrial development or even a “better balance between agriculture and industry” was impossible without substantial government involvement.
Stimulation there must be and it will inevitably take forms open to objection if measured solely by the criteria current in prosperous countries with large resources and established manufactures. Unless therefore it is definitely decided as a cardinal point of policy that industrial development must be earnestly attempted it is no use undertaking the difficult and often tedious and disappointing inquiries and negotiations required to devise effective means of stimulation. If comparative heterodoxy (judged by British standards) is to bar every proposal made with this object from serious consideration it would be a waste of time thinking out proposals. Unless assured that the Government was prepared to pay a price for early industrial development there is no incentive to work out a basis for it in the certain knowledge that every such basis must, in the existing circumstances of the country, involve payment of a price in the form of a tariff, subsidy, bounty, special credit or other fiscal adjustment. The contiguity of Ireland to Great Britain should not obscure the fact that in all the smaller countries it has been, since the war, a recognised necessity for Governments to take a greatly increased share of responsibility in measures for the direct promotion of industry.
Campbell suggested that the department hire industrial investigators who would negotiate with foreign industrialists with a view to establishing Irish plants. New export markets should be investigated, state funding should be provided for a “buy Irish” campaign, while conferences should be held with Irish industrialists. He proposed inquiries into the difficulties of locating factories outside the major towns, the initiating of tariff proposals by Industry and Commerce, and the establishment of a standing committee of the executive council responsible for industrial development “not merely to consider proposals put before it but to call itself for proposals and see that it gets them” (McG Papers P35/b/10).
Export promotion was already being funded on a modest scale. That Campbell’s other proposals were not considered is not surprising as they were never brought before the Cabinet. McGilligan’s speech implicitly rejected Campbell’s views, with his optimistic account of the department’s activities and the statement that “the whole matter of Government initiative of industrial development in this country is not one I should like to pronounce upon at this time.” The only proposal endorsed by McGilligan was a “buy Irish” campaign to be organized by an outside body such as the DIDA (PDDE 30 June 1927).
This speech marks the final occasion when McGilligan was wholly preoccupied with Industry and Commerce. In July 1927 Kevin O’Higgins was assassinated; emergency legislation forced Fianna Fail to take its seats or lose them to also-rans; and the government called a general election in which Fianna Fail and Cumann na nGaedheal increased their representation at the expense of smaller parties, leaving Cumann na nGaedheal with a small majority. The election brought the departure of J. J. Walsh, whose letter of resignation announced that he would not be contesting the forthcoming election because of the government’s stance on protection. Walsh accused the Tariff Commission of being determined “to produce arguments in favour of Free Trade” and alleged that Cumann na nGaedheal “has gone bodily over to the most reactionary elements of the state who will henceforth control its policies. Followers of Arthur Griffith’s economic teaching will now be forced to subordinate their life-long conviction to the dictates of people whose only concern appears to be the welfare of England.” Walsh charged that the election should be concerned with “a disappearing population, disappearing trade and rapidly sinking bank reserves,” matters necessitating “vigorous and sweeping economic change” as opposed to “oaths, loans and what Mr. So and So did or said in such and such a year” (S5470). Walsh was an isolated figure. His departure removed one of the most entrepreneurial spirits from the party, though he had been preceded, albeit for noneconomic reasons, by Joe McGrath, minister for industry and commerce, who was to establish one of the largest business empires of the new state. It would appear that Cumann na nGaedheal was ill at ease with those who sought to build private fortunes in the new state. The government rejected proposals from some of its supporters for the establishment of a private broadcasting service in favor of the state-controlled Radio Eireann and opposed efforts by commercial interests to build a hydroelectric station on the river Liffey in favor of the state’s Shannon scheme (Manning and McDowell 1984, 29–30).
Richard Mulcahy, who had left the cabinet with McGrath in 1924, though he returned in 1927, claimed in later years that the loss of McGrath, Walsh, O’Higgins, and himself had “left the directing force, in the parliamentary party and in the government completely denuded of those people and names who stood for the Griffith approach and policy, in relation to industrial development (Fanning 1983, 102). However, Griffith’s policies had never been dominant in Cumann na nGaedheal nor had they been supported by O’Higgins, and they had lost out partly because of the power of established interests but also because no occupant of a key economic ministry, save possibly Joseph McGrath, articulated them. Continuity triumphed because of this vacuum. Joseph Brennan’s repeated pleas for some direction on tariff policy remained unheeded. Protectionist forces were weak and disorganized, leaving free trade interests with no serious competition.
1. The Anglo-Irish Treaty, which was signed on 6 Dec. 1921 by representatives of Dail Eireann and the British government, provided for the establishment of the autonomous Irish Free State. Although Dail Eireann voted to accept the treaty by a narrow margin, civil war broke out between the government and anti-treaty forces in the summer of 1922 and continued until Apr. 1923, ending in government victory.
2. A government body established to make propaganda for the largest possible transfer of territory from Northern Ireland to the Irish Free State by the Boundary Commission. Under the terms of the 1921 Anglo-Irish Treaty the Boundary Commission was to determine the boundaries between both parts of Ireland. In 1925 the British and Irish governments agreed to suppress its findings and to accept existing borders (O’Halloran 1987, xiii; Lee 1989, 140–51).
3. F. 22/11/24. Tariff proposals for the Saorstat. Soap, soap powders and candles, glass bottles, boots and shoes, apparel, hosiery and woolen textiles, furniture, railway rolling stock, cars and wagons, commercial motor bodies, bicycles, cement, horn beads and combs, margarine, and sugar confectionery.