However, a tariff system inherited from the past was maintained: this was the so-called Imperial Preference under which when an item was available from a source within the British Empire and also from another outside it then an import duty was imposed on the latter.
The early rulers of the Saorstát had little interest in industry: their background was in commerce, being drawn largely from the gombeen class of traders, merchants, publicans, ranchers and dealers.
At the same time the Great Depression reduced job opportunities abroad and so emigration declined and there was no shortage of people anxious to find work. But the Saorstát had no enterprise culture. The bright, the able, the ambitious, the people with ideas, had tended to leave out of frustration: indeed had been encouraged to leave by those in power, to whom persons of ability constituted a threat. So, the expected industrial revolution failed to materialise. The State compensated to some extent by establishing State-owned enterprises like Bord na Mona and the Irish Sugar Company.
For over a century, England had been the world’s foremost industrial power. After 1945 a strange lethargy began to affect British industry: and growth was at only about half that of the West European average. In the Saorstát, growth was at about half that of Britain.
By about 1960 it was obvious that native Irish capitalism had failed to deliver the goods and the politicians and pundits began to look elsewhere. Two possible panaceas were identified: foreign investment and the ‘Common Market’.
The first multinational entering the Saorstát was the Ford Motor Corporation, which set up a manufacturing plant in Cork: a county from which the grandfather of the founder of the company had gone to America as a famine emigrant. But after a few years the Ford company requested some changes in the Saorstát’s labour laws and when this was turned down the company simply upped stakes and shifted the bulk of the operation to England. Around the same time Guiness’s Brewery, the state’s largest employer, moved its headquarters from Dublin to London.
The Industrial Development Authority, set up originally to try to get native industrialists to pull their socks up, was authorised to attract industry from abroad. The strategy was to persuade multinationals to set up manufacturing plants in the State, the attractions being government grants, tax holidays and cheap labour.
The strategy was successful; the multinationals did come in and jobs were created. Yet nothing seemed to change: unemployment remained endemic, native industry still stagnated, emigration continued as high as ever. A committee of investigation was set up and in February 1982 it finally published a report.
The report was the subject of lengthy but inconclusive public debate. On item three, the multinationals made the reasonable response that they had found native Irish firms incapable of working to the standards required by a modern enterprise.
To enter, the 1937 constitution needed to be amended and for this a referendum was necessary. All the main Leinster House parties endorsed entry, which was opposed only by Republicans and a few transitory groups. The basic selling point was that if England went in then the Saorstát had no alternative, it would have to join too or forfeit its only large market. Government advertisments opposing a NO vote showed hands pulling Ireland away from Britain. Another tactic was the promise of all sorts of grants and subsidies after entry. A few days before the referendum every voter in the State received a ‘personal letter’ from Jack Lynch pleading for a YES vote.
Entry to the EEC was duly passed and indeed some improvements in the economy were experienced for a while, but the beneficiaries were concentrated in certain areas: the larger farmers did particularly well. For the bulk of the population EEC membership made little difference to their lives.
One effect the Common Market did have was that grant money coming from Brussels did actually begin to produce tangible results: real roads were built, real drains dug, real power plants constructed. Previously grant money, once paid out, had tended to trickle away like water poured on sand, but the Eurocrats not only monitored how grant money was spent, they heavily fined misusers and defaulters.
One of the main inhibitors of private industry in Ireland was the habit of employing English managers. The background of most of them was upper class and they came from a tradition of the ‘splendid amateur’, they believed that if you went to boarding school and Oxbridge then you could do anything. To them management was basically an adversarial activity, and they also assumed the Irish to be lazy and stupid. Irish managers picked up similar ideas through attending courses in England, and the State even set up an Irish Management Institute staffed by English ‘experts’.
The most successful of the foreign industries brought in were in the area of electronics. Electronics is a new field and most of the firms were run by young engineers, persons without racial or other hang-ups. They found that, contrary to what they had been told, Irish employees were hard-working, intelligent and reasonable and their Irish factories profitable. Of course, like other multinationals, these firms had no loyalty to Ireland. One of the most successful, Digital of Galway, suddenly upped stakes and moved to Britain: it is said because of the promise of a large government contract there if they would move.
Another computer company, Dell of Limerick, initiated a new departure that has brought many jobs to the country. Dell’s customers found that if they had a problem they could phone up the factory in Limerick and usually somebody would talk through it with them. The Dell company recognised that this informal service was an asset and set up a customer help-line service. Several other firms followed suit and in the Dublin area ‘teleservicing’ has become a major source of employment.
Both countries rely on their own resources, not on foreign expertise or investment.
The real secret behind the Saorstát’s high growth rate is that the starting base was so low that there is plenty of room for improvement. Unemployment and emigration remain as high as ever, and the concentration of investment in areas like electronics, software, financial services and pharmaceuticals, which tend to produce a small number of high-pay jobs, has accelerated the trend towards creating a two-tier society.
They also had almost no natural resources. In Estonia there were deposits of shale-oil and phosphate and these became the basis of successful industries but otherwise the only resources were peat-bogs and forests, which in all three States were nationalised without compensation.
Timber had been used mainly for firewood and building (most people lived in log cabins). A small amount was exported for use as pit-props. It was a wasteful use of a valuable resource. First of all peat briquette factories were established to provide an alternate fuel supply, and also brick works to supply building material. Sawmills were opened to process raw timber, firstly into planks but evolving to make furniture, plywood, cellulose and paper. This was so successful that a large export market developed and the mills began to import logs from Russia.
Rural co-ops set up flax mills and textile factories. In Lithuania the Union of Flax-growing Co-operatives (Linas) became a major supplier of men’s shirts to the Co-operative Wholesale Society of Manchester. There were also co-operatively owned abbatoirs and tanneries, and meat-canneries, sausage factories and soap factories. Sugar beet was processed to make sugar and industrial alcohol was made from potatoes.
There were also factories producing such things as linseed oil, matches, tobacco products and pipes, condensed milk, railway carriages, artificial silk and other items.
Latvia became a major producer of glass and glass products and also manufactured radios and cameras. Latvian radios were of high quality and were sold all over Eastern Europe.
A classic example of such an economy might be Central America when it was under Aztec domination, shortly before the Spanish invasion. The Aztecs made the other peoples of the area supply them with gold, slaves and other goods and gave them in return parrot feathers, toys, whistles and a kind of snailburger. Here we observe the two basic features of neo-colonial type economics: the exporting of wealth and the importing of rubbish.
The submarine blockade of 1914-1918 had a beneficial effect on the Irish economy because it cut off much of the competition on the British market. By the time the Saorstát was established this advantage had vanished, competition was restored and a sharp drop in cattle prices resulted. It was not a good way to begin.
The economic policies of the Saorstát were devised by the new Department of Finance under the leadership of former Dublin Castle officials, many of whom were actually English. They were also people whose ideas about how an economy should be run dated from about 1870, any ideas appearing since the ‘Free Trade’ era of Gladstone being dismissed as fads.
The key element that was to lock the Saorstát into a neo-colonial relationship with Britain was the continued use of sterling as the currency. Because sterling was overvalued it was virtually impossible to sell into any market other than the British market, and even on the home market the Irish producer was disadvantaged: for example with the exchange rate fixed at five dollars to the pound then porridge oats could be imported from Minnesota cheaper than it could be milled in Donegal.
On the British market itself Irish produce had to compete with both lower-priced products from third countries and subsidised local goods.
A second element stunting the economic growth of the Saorstát was the chronic shortage of credit. The Irish banks invested almost entirely in British government bonds: payers of very low interest but ‘secure’. On December 31, 1929 the Bank of Ireland alone reported holding over a hundred million pounds worth of British government stock: almost their entire assets. Insurance companies and financial institutions in general followed the same trend: in fact the proportion of assets held in securities was by far the highest in the world. Private individuals with money tended it invest it via London stockbrokers.
One mysterious item appearing in the accounts of the Saorstát was ‘invisible imports’. This item, usually about 20% of total imports, actually accounted for money sent abroad for which nothing was received in return. About half of this consisted of payments to the British government under various pretexts, the other half being rents paid to landlords living in Britain.
One idea that was suggested was to introduce import duties as a means of raising more revenue. In the situation of the time this would have meant taxing British goods and the Department of Finance strongly opposed it. They asserted that such a move would have disasterous consequences: prices would rise, the cost of living would rise, leading to Wage Demands!! How well they knew how to strike terror into the hearts of the gombeen politicians of Leinster House, most of whom were small employers.
The civil service opposed almost every single advance or reform proposed on grounds of cost. Their hopelessly outdated Victorian economic ideas told them that, while the State had to pay for a few things like schools and prisons, public expenditure and thus taxation had to be kept to a minimum. The single achievement of the early Saorstát, the Shannon Hydroelectric Dam, they fought against to the bitter end.
In the case of a proposal to fix a minimum wage for agricultural workers they objected that this would bankrupt the country’s biggest farmers and would also drive thousands of Protestants out of the country. Protestants, of course, mostly voted Cumann na nGaedheal.
About 1938 De Valera began to suspect that a major war might break out in the near future. With this in mind he asked the various government departments to formulate a plan of action. He may have assumed they would sit down and draw up a list of critical materials that should be stockpiled and so on.
The civil servants did nothing of the sort, instead they did what they had always done: they went to the British and asked their advice. The British replied that in the event of a war there was a danger that Britain and the Saorstát would be in competition for commodities and for ships to carry them in and that this would put up prices. How the small requirements of the Saorstát could make any difference to prices compared with the needs of the British Empire was apparently not queried. The British suggested that resources be pooled: that things like tea, sugar, tobacco, petrol and the like be bought by Britain and the Saorstát’s requirements be obtained at the same time and passed on. Shipping resources would also be pooled.
It was a trap, and they walked straight into it.
The Saorstát did reasonably well for supplies for the first year of the war, but in the autumn of 1940 the British, at the instigation of the Ulster Unionists, began to put economic sanctions in place to try to extract concessions regarding naval bases and similar matters. Shipments of fertiliser and animal feed were cut off completely and supplies of petrol, coal, tea and many other commodities were drastically reduced, inflicting very great hardship on the ordinary people.
The Saorstát had to try to build up another merchant fleet. A few ships belonging to the Baltic States, which had just been over-run by Russia, were obtained by means that are to this day clouded in mystery.
One or two old Spanish Civil War blockade-runners were rescued from breaker’s yards and patched up. Thus Irish Shipping Limited was created. Whenever a ship came on the market in South America or wherever, it could only be bought with British permission because the Saorstát’s entire external reserves were held in sterling in London.
The British would release funds only if it was agreed that half of each cargo carried would be war material for Britain. Had the Germans found out, they could have justifiably sunk every single one of them. The courage of the Irish sailors ranging dangerous waters in assorted old tubs to bring vital supplies into the State is one of the few praiseworthy aspects of the whole sorry episode. Pleas to the British at least to return one of the oil tankers fell on deaf ears.
The politicians learned at last not to believe everything the bureaucrats told them: but it was a very costly lesson.
Almost nothing is known about these early practitioners. It is true that some medical books have survived but they are disappointing: they are merely translations of standard Latin or Greek texts.
In the 17th century ancient Irish medical knowledge was swept away with the rest of the old civilization and for a hundred years or more most of the population had no access to any kind of professional medical attention.
Gradually this changed. People went to medical schools abroad and a few medical schools were opened in Ireland. Medicine was one of the few professions open to Catholics and in fact before long Ireland was oversupplied with doctors.
Hospitals too began to be founded. There were ‘county infirmaries’ which were funded out of the rates and controlled by County Grand Juries (effectively by the big landlords). There were private hospitals established by charitable bequests: in theory non-denominational but in practice usually controlled by self-perpetuating boards exclusively Protestant in composition, and employing only Protestants. Finally there were hospitals run by Catholic religious orders.
There were a few lunatic asylums, though most insane persons were cared for by relatives.
Dispensary doctors were despised by their colleagues and regarded as the dregs of the profession, forced to work for a salary through inability to secure enough wealthy patients to make a living.
There were County Medical Officers who were in overall charge of the health services in a county. This was a political appointment in which professional ability was not an issue.
From 1863 the dispensary doctors were responsible for the registration of births and deaths. In 1911 the Liberal government at Westminster proposed a Health Insurance Act similar to the ones already in operation in many European countries. Under this act there would be compulsory health insurance of all workers based on a small weekly levy divided between employer and employee; who would pay four old pence each. Doctors would be employed by the scheme on a similar basis to medical officers in the armed forces.
The reaction in Ireland was a forewarning of things to come. The wealthier doctors campaigned against it as it would obviously reduce the pool of fee-paying patients. They were able to get the support of the Catholic hierarchy, and they put pressure on the Irish Party to oppose it. They claimed that the additional cost would put many firms out of business and increase unemployment and that when Home Rule came it would bankrupt the Irish economy. Thanks to their efforts Ireland was excluded from most parts of the scheme.
The problem of the workhouses was of immediate concern. These old institutions still survived all over the country; the inmates being mostly elderly domestic servants who had been thrown out in the street when they became unable to work hard enough. It was decided to phase out the workhouses as quickly as possible.
Straight away, the degrading workhouse uniform was abolished and inmates allowed to wear their own clothes. Rations were improved. Arrangements were made to board out inmates with relatives or other persons prepared to receive them. Workhouses were gradually shut down apart from a few that would look after the hard core of residual inmates.
Among the merchant class there was ferocious opposition to this policy. These institutions were valuable money-spinners, providing contracts to supply food, uniforms, fuel and the like: with the associated opportunities for fraud.
During the Civil War the Republican side resorted to the more drastic policy of burning down the workhouses.
In matters of public health there were other problems: the epidemic known as Spanish Influenza swept through Ireland and had a deadly effect on a population predominantly undernourished. And the end of the European war resulted in large numbers of men being discharged from the British armed forces and these brought back with them another unwelcome problem: an upsurge in venereal disease.
The new State had several major public health problems, which it tried hard to ignore. The principal ones were:
Old periodicals from that era carry many advertisments for patent medicines to treat digestive complaints. There were high rates of throat cancer, stomach cancer and bowel cancer. Country people grew their own food, which was plentiful but plain and badly cooked. Due to folk memories of famine and fear of tuberculosis thin people were objects of pity and fat people much admired, while fat children were a particular source of family pride.
It was not unusual to see an adult standing over a child with a rod, forcing it to eat. Already as a young curate in County Sligo the Republican priest Fr. Michael O’Flanagan had noticed the appearance of tooth decay among school-children, previously quite unknown, and he was able to correlate this with the consumption of the new breakfast cereals. Junk food had arrived, with the usual side effects.
The new state began with the second-lowest public health status in Europe (after Albania). In the next issue, how things developed from there will be described.