THE DECADES immediately following independence were marked by efforts to define a distinct Irish identity in political, cultural, and economic spheres (Foster 516, 1988). The process was marked by tension between the ill-defined ideals of the cultural and revolutionary nationalists and the realities of life in twentieth century Ireland. However, the ensuing compromises were rarely formally announced; instead a gulf frequently opened between rhetoric and reality, and historians writing on issues such as partition or the Irish language refer to “ambiguity,” “contradictions” (O’Halloran 1987), or “schizophrenic attitudes” (T. Brown 1981, 274). Phrases such as “a deep-seated schizophrenia” (Hederman and Kearney, 94, 1977) “evasiveness” (de Paor 1979, 354), or the more prosaic gap between the “potential and performance of sovereignty” (J. Lee 1989, 361) crop up in contemporary discussions of Irish identity. Such language is readily applicable to the story of industrial development, which was marked by commitments to self-sufficiency, native control, decentralization, and male employment—all poorly fulfilled. However, these critics ignore the role of such compromises and ambiguities in forging consensus in a country riven by civil war and the dislocation consequent on independence, though this was achieved by largely excluding the Protestant/unionist identity.
While the formal political divisions resulting from the civil war survived, by the eve of World War II the wide ideological gulfs that had existed between the two major political parties had virtually disappeared. Both supported wartime neutrality, greater independence from Britain, legislative support for Catholic social teaching and, it would appear, the new-style Irish economy consisting of a protected industrial sector coupled with a dominant cattle-exporting agriculture and subsidized minor agricultural enterprises, closely linked to Britain by trade, banking, and currency.
The basic equilibrium reached by Irish society in 1939 remained intact until the late 1950s when a major economic and psychological crisis forced a reorientation towards a more open economy. The socioeconomic criteria of the thirties—domestic ownership of industry, decentralization of factories, and male employment—also survived into the postwar years. The priority of native industrial ownership, which was always heavily compromised, was partly undermined in 1949 by the establishment of the Industrial Development Authority to promote foreign investment and was ended in 1958 with the easing of the Control of Manufactures Act. Decentralization of industry and male employment remained part of Irish industrial policy until the 1970s when the effects of major urban unemployment and feminism forced retreat on both fronts.
The evolution of industrial policy had long-term consequences, both for the performance of the Irish economy and for the broader shaping of Irish society. Efforts to dismantle the protectionist/nationalist model failed in the years immediately following World War II because of the strength of the late 1930s accommodation and the absence of major challenge either internal or external. Thus what one writer has termed “our first self definition” was dependent on the acceptance of the 1930s socioeconomic model; its rejection in the fifties and the apparently increased reliance on foreign capital has been regarded as the factor that triggered a modern identity crisis (Fennell 1983, 30, chap. 2). Most of the shortcomings of Irish industry that were revealed in the fifties, such as lack of dynamism and inability to export, were inherent from the beginning.
Despite official rhetoric favoring native industry, a majority of output and employment was probably derived from firms that were dependent on foreign expertise, capital, or trademarks. This dependence may have been inevitable if an industrial structure was to be developed as rapidly as Irish needs dictated; however, the camouflaging of this problem postponed an awareness of the inherent drawbacks. Foreign control meant that decisions such as export expansion frequently lay outside Irish hands and guaranteed that most companies would never compete on the export market. That Irish wages and working conditions equaled or exceeded British levels also militated against international competitiveness.
The long-term efficiency of protected firms was further circumscribed by the dominant attitude of noncompetitiveness. Both Lemass and his officials appear to have sought a situation where output, supplemented perhaps by import quotas, precisely met market demand, and official directives organizing companies into noncompeting specializations were common. The tolerance of noncompetitiveness was increased by the priority given to social criteria such as decentralization, which raised costs and afforded industrialists a potent argument in favor of higher prices and greater protection. This could have been rectified by stronger price regulation, but as much inefficiency stemmed from government action, this would only have exposed the contradictions inherent in official policy.
Alternative policies could have been followed, though options were limited in the difficult economic circumstances of the twenties and thirties. The Cumann na nGaedheal approach of continuity with the policies followed under the Union does not seem a serious alternative unless Irish ambitions to reverse postfamine population decline, end emigration, and increase industrial employment were to be totally abandoned. State intervention has been assumed essential to successful economic transformation in this century (Rueschemeyer and Evans 1985, 45). Government intervention was consequently almost essential. However, it could have followed the lines suggested by Industry and Commerce officials in the twenties. Devaluation of the Irish currency against an over-valued sterling would have reduced deflation with considerable benefit to agriculture while offering a measure of protection to industry. This could have been coupled with selective subsidies for investment and exports, vocational training and export promotion. However, such a program would have entailed major intervention in banking and financial matters, something that even Fianna Fail fought shy of doing.
An alternative scenario would have substituted increased state investment for many of the larger private monopolies or quasi-monopolies such as flour, cement, and the oil refining. This move would have been in keeping with the actions of many other late-industrializing countries, exemplifying Gerschenkron’s thesis that the later the industrialization, the greater the need for state involvement (1966, 44). It would have reduced the level of foreign industrial control and might have ultimately led to a more effective Irish managerial class. If combined with restructuring of the banking and financial system, such investment could have been funded by reinvesting money previously invested abroad.
The exploration of such hypothetical scenarios reveals the conservative nature of Irish economic policy, even under Fianna Fail. While its policies resulted in a new economic elite, the existing elite was not attacked, with the temporary exception of the Irish cattle farmer during the economic war. Although there was a widespread if vague desire for industrial development, the combined forces of beer, biscuits, and cattle interests, a British-oriented trading and financial system, and a Catholic, peasant mentality proved formidable obstacles to change. The late nineteenth-century stirring of Irish nationalism through language revival and the adulation of traditional peasant society was explicitly antimodern in its approach and saw a new Ireland as rejecting the materialism of an urban industrialized society. The Cumann na nGaedheal government subscribed to these values by endeavoring to focus Irish economic destiny on agriculture; however, this vision was doomed by postwar deflation and by unfavorable price and cost structures.
International depression and the ending of emigration forced a major rethinking of economic strategy, but the initiative still rested in agrarian hands. It is questionable whether the 1932 self-sufficiency experiment could have been attempted if difficult conditions had not created sufficient agricultural support for protection to remove the implicit farming veto over industrial tariffs that had existed throughout the twenties. The heightened sense of Irish nationalism, the international economic crisis, British protectionism, and the virtual ending of emigration also favored such an experiment, while the conservative tone of the new policies with their emphasis on nationalism and peasant values helped diffuse fears of socialism and modernization. Fianna Fail offered a blueprint for the economic crisis that seemed fully compatible with the maintenance, perhaps even the strengthening, of traditional Irish values.
By the late thirties international collapse had been averted, emigration had resumed, and government programs were not producing the promised revitalization of Irish rural society. Consequently the attack on cattle farming, reflecting a deep-seated antagonism in Irish radical agrarian traditions, was ended, and cattle farmers regained their dominant position, though this time they were harnessed to protected rather than export manufacturers. The 1938 agreement reflected a new alliance of conservative forces in Irish society: owner-occupying farmers, protected manufacturers, and equally protected industrial workers. The social patterns imposed on Irish industrialization by Fianna Fail and the 1938 accommodation ensured that industry would remain a secondary force in the economy with limited capacity for growth and that emigration would persist. A fundamental industrial revolution would have required what Gerschenkron has termed “a New Deal in emotions” (1966, xx, 25). While Fianna Fail attempted a new deal, it was not one conducive to the creation of a modern industrial society.
While the economic program initiated in 1932 involved substantial intervention in the economy, key economic initiatives and profits remained in the hands of private enterprise. Many Irish historians have drawn attention to the innovative nature of Irish semistate bodies such as the Electricity Supply Board (ESB), the Agricultural Credit Company (ACC), and the Industrial Credit Company (ICC). More striking are the relatively small numbers involved and their noncompeting status vis-à-vis private business. Both the ESB and the Irish Sugar Company were set up to avert fears of private monopoly and consequent large profits. The ACC and ICC were structured to avoid impinging directly on the private banking system, while both the Industrial Alcohol Company (Monarchana Alcoil na hEireann Teoranta) and the Turf Development Board (Bord na Mona) were established to achieve social goals that no private company would have tackled. Cumann na nGaedheal hoped that the ACC would be taken over by the cooperative movement, while some elements in Fianna Fail wished to place both the sugar company and the ICC in private hands.
The absence of an ideological role for the state in either Cumann na nGaedheal or Fianna Fail and the legacy of the British civil service tradition are reflected in such attitudes and in the uncertainty about how to run a state company typified by Gordon Campbell and John Leydon, both of whom were exhausted by the trivia of the ESB and the Industrial Alcohol Company. It would have been somewhat surprising if Cumann na nGaedheal had articulated such a role, given its gradual evolution of a conservative economic line; Fianna Fail’s ambiguity is more puzzling. The party came into office committed to reducing the burden of government—a promise it singularly failed to keep. Fianna Fail’s apparent reluctance to advocate greater government involvement reflects some of the pressures of Irish society. Given the dominance of a Catholic, rural, property-owning population, an active state conjured up fears of socialism and threats to private property. In 1931 De Valera explicitly announced his respect for private property. Socialism and a centralized, bureaucratic state were equally anathema to Catholic social teaching, which preferred a state containing self-contained, largely self-organizing interests (Cahill 1932, 472–73). The Commission on Vocational Organisation criticized the Department of Industry and Commerce on the grounds of excessive regulation, though industrial profits were free from control. Such criticism would have been more vocal and more widely supported if government had been seen to take potentially profitable enterprises from private hands. The CBC Commission attacked state enterprise both for competing with the private sector in potentially profitable areas such as agricultural and industrial credit and for subsidizing nonprofitable projects, denouncing both profitable and unprofitable activities.
The British legacy of a weak state (Skocpol 1985, 3–28; Cronin 1988, 199–231) without a significant tradition of government economic intervention was of crucial importance. The Irish public service inherited the British practice of stringent Treasury spending control coupled with a profound distaste for government involvement in the economy. Such attitudes were poorly suited to Irish needs; in contrast, the Japanese colonial legacy to Taiwan and Korea included an entrepreneurial and interventionist public service ethos (Amsden 1985, 79).
The weak-state model was acceptable to Irish banking and financial interests and to agricultural and industrial exporters, yet it contradicted a deep-seated Irish belief in the efficacy of state action. Consequently it did not meet the expectations of many Irish citizens who, despite being ruled by a weak British state, had developed a strong dependence on government assistance for everything from famine relief to land reform. In 1817 Sir Robert Peel, then chief secretary for Ireland, reviewing the efficacy of his famine relief efforts in the previous season, commented that “the people attributed their relief in a much greater degree to the intervention of the Government than they ought to have done” (quoted in Jenkins 1987, 132). Britain pandered to such dependence by doling out lollipops in the form of roads, drainage schemes, fishery development, or light railways without evolving any clear economic role for the state beyond the vague doctrine that Ireland, or at least rural Ireland, was different from England.
The new state inherited the contradictory strains of widespread popular expectations of state assistance and a civil service to whom this was anathema. One consequence of such contradictions was to restrict the state to quasi-social or philanthropic duties that had been deemed acceptable under the Union, as opposed to a more positive entrepreneurial function. The allocation of industrial alcohol factories, which was primarily determined by social rather than economic criteria, is an example of government intervention in the direct tradition of nineteenth-century spending on piers and light railways.
The division of opinion on the role of the state is evident at both civil service and governmental levels. While the Department of Finance upheld the Treasury attitude, Industry and Commerce appears to have been more sympathetic towards government intervention. However, even within Industry and Commerce conflicting attitudes emerge. Opinions also varied within the cabinet, though the positions of key individuals often lacked consistency. Lemass favored a strongly directive industrial policy with mandatory licensing and control over all firms, both native and foreign, and over exports and imports, measures that his colleagues were not prepared to accept. At the same time he seems to have been prepared to concede considerable monopoly powers to foreign industrial interests, as in the case of cement. Colleagues who opposed some of Lemass’s more authoritarian proposals seem on occasion to have sought similar powers for their pet projects such as the development of Gaeltacht industry.
Most attitudes were pragmatic responses to departmental needs or to individual political or constituency wishes, rather than the consequence of any clearly articulated position on the role of the state. Ministers and officials grappling with such issues received little guidance from the economics profession, which appears to have adopted a position of universal opposition to any minor divergence from the canons of free trade and neoclassical economics. While John Maynard Keynes (1933) saw some merits in the Irish espousal of protection, native economists did not. George O’Brien, whose economic histories constituted a strong argument in favor of government intervention and protection in the past was either unable or unwilling to apply these arguments to contemporary issues. The upshot was a program of state involvement that was largely ad hoc and occasionally contradictory and that evolved without any clear ideological or intellectual rationale.
One major legacy of the thirties was the institutionalization of an Irish dependence on the state, and on politicians, for economic benefits. This reliance had evolved during the nineteenth century under British rule, and although Cumann na nGaedheal appears to have attempted to break it, Fianna Fail policies brought a considerable extension. Decisions on tariffs or quotas, allocations of quotas and duty-free import licenses, the location of factories, and numerous other matters became largely discretionary decisions determined by ministers and officials. In consequence, lobbying and deputations were seen as essential to attract an industry to a particular town or to the profitability of a new concern. Farm incomes came to depend on the outcome of Anglo-Irish trade talks or on price and subsidy levels set by the state.
Some increase in dependence on the state was inevitable given the decision to expand protection. However, it could have been reduced by standardizing levels of assistance, by making them publicly known, and by refraining from government involvement in trivial decisions. Tariff levels could have been set automatically at two or three different rates instead of being individually negotiated. Instead of awarding discretionary duty-free import licenses to favored manufacturers, licenses for the import of machinery could have been automatically granted, or machinery could have been left free of tariffs. Decisions on location could have been left to industrialists, with differential tariff rates available as a regional incentive. Such options would have reduced the cost of government without loss of efficiency, though they might have reduced the potential to influence industry for social ends and would have deprived the government party of potentially beneficial political support.
While industry became heavily dependent on government for profitability and often for survival, the government proved either unable or unwilling to use its powers to bring about a more efficient industrial sector. In the 1920s McElligott of the Department of Finance argued against protection on the grounds that once granted it would prove difficult to withdraw (Fanning 1978, 203–4), a concern that proved all too correct in the Irish case. Officials were aware of the shortcomings of protected firms but appear powerless to remedy them, perhaps because a government could not be seen to directly bring about the collapse of a particular firm.
Whether efficiency could have been achieved by making the industrial sector—both employers and employees—responsible for itself by establishing consultative, corporate institutions remains problematical. While Katzenstein (1985) has lauded the recent economic performance of small European democratic states that have a high level of government assistance and strong corporate institutions, he emphasizes that the economies in question are heavily exposed to international competition and sees this as essential to their efficiency. The Irish economy of the thirties lacked this vital ingredient. In addition the corporatist institutions of the continental economies had evolved over a long period. Ireland was in the process of both a political revolution and a revolution in elites, from a nineteenth century where these were dominated by the Anglo-Irish and primarily oriented towards links with Britain to a new, Irish-centered, nationalist elite. Such transitions among employer and worker organizations and the absence of corporatist traditions made the emergence of mediating institutions unlikely even had the political will to favor them existed.
Ultimately the power of government was mediated not by formal institutions, but by informal links between government and key individuals—a process made easier by Ireland’s small size. Business figures such as Arthur Cox or Vincent Crowley retained close contact with the Industrial Credit Company’s J. J. Beddy—a transitional figure between the state and private sectors—and Sean Lemass; similar relations may have existed with trade unionists.
The most fundamental question to be faced about Irish industrial policy concerns the economic ambitions of both governments and people. Criticisms concerning the efficiency of new industries and the adequacy of the growth in employment and output presuppose a commitment to modern targets of economic growth that cannot be assumed. The Irish desire for self-sufficiency and industrialization under native control without the incursion of the modern world set targets not capable of being judged by conventional criteria such as growth of GNP. There is little doubt that the unduly ambitious aims of Fianna Fail and of earlier generations of nationalists were not met: emigration did not end; self-sufficiency was not achieved; the numbers living on the land declined; dependence on Britain for exports and imports remained strong; Dublin grew rapidly despite official wishes to the contrary. However, the country achieved the first sustained growth in industrial employment for a century at a rate not yet surpassed, and while growth of GNP was lower than the British rate, the economic crisis of the thirties was significantly less acute than in most European countries, perhaps because of the structure of the Irish economy. Hunger marches and social unrest were avoided, and the poor and unemployed were better cared for than in previous decades. Increased taxes on income and high protective duties meant a transfer of resources from sectors such as public service, transport, trade, retailing, and finance, which had escaped the worst effects of free trade, to welfare recipients and industrial workers.
The emergence of a new economic elite dependent on government helped redress the largely unionist sympathies of the dominant Irish business establishment in 1922 and brought an increase in Irish industrial expertise. The failure of Craig Gardner, Dublin’s largest accountancy firm, to gain government business or significant work from new protected companies reflects the shift in the political and religious composition of the Irish business elite (Farmar 1988, 133–34). While the attempted economic break with Britain in 1932 was an extreme move of doubtful benefit, it ended any tendency to view the Irish economy in terms of union with Britain. Even those who had yearned to return to the pre-1922 patterns were grateful for the new political and economic relationship as defined by the 1938 agreement.
For men and women forced to emigrate from Ireland in these years, for families condemned to survive on inadequately small land-holdings unable to find alternative employment, for young people who were incapable of marrying in Ireland because of inadequate employment and income, the failure of government policies in both the twenties and thirties is not in doubt. However, as we have seen, industrialization was viewed with considerable ambivalence by many elements in Irish society. Opposition criticism of the “new plutocracy” of industrialists that had emerged and De Valera’s lament in 1939 over his failure to prevent the flight from the land and his speculation whether the spread of radio might have given country people “ideas about town life” (PDDE 7 July 1939) suggest that even the relatively modest social changes of the thirties aroused fears that the fabric of Irish society was threatened.
More rapid or more extensive industrialization would have aroused considerably greater tensions, with the loss of rural dominance and the threat of changes in Irish family patterns and political attitudes. Irish society was still recovering from the stress of the civil war, striving to establish itself as an independent state. In the 1920s Ireland fastened on Catholicism and the Irish language to define the country’s separate identity (O’Callaghan 1984, 226–45). Fianna Fail successfully extended this identity into the economic sphere with its commitment, however compromised, to native control, decentralized industry, and women staying in the home. The political scientist Karl Deutsch wrote of the need to build up national strength and of integration:
On the first “tack” when power must be organized, or a community must be built, the prime need is for cohesion, for the close complementarity of parts to force them into one dependable whole. Here we meet the builders of states and nations, the princes, the revolutionists, or the nationalistic spokesmen, as the great simplifiers, the destroyers of diversity and localism on the one hand, and at the same time the great “narrowers”, as the eliminators of foreign influences, as the relative isolators of their developing communities from much of the rest of the world. Only the most carefully screened and selected influences from the outside world are henceforth to be admitted to the budding nation, and usually they are to be confined to narrowly technical, economic or scientific matters, in regard to which the foreigners are to be “over-taken and surpassed” without admitting any broader foreign values, habits, or culture patterns to consideration. (1966, 83)
If the rapid economic growth of the sixties and the growing materialism, urbanism, and internationalism led to an apparent identity crisis in recent decades, such strains would have been even greater on a new and insecure nation. Given the strong wish for stability it can be argued that the modest and perhaps slightly confused economic achievements of the twenties and thirties met the dominant needs of Irish society. That these needs also dictated the emigration of a significant proportion of the youth of Ireland merely reflects a fundamental continuity with postfamine decades under the Union.