Why should we pay foreigners for products that locals could be employed making? Why shouldn’t governments subsidise companies and sectors of the economy that are strategically important? Why should countries put themselves at risk of having supplies of vital goods cut or curtailed at the whims of other governments?
These questions have often been posed. They are being raised in the western world today more than at any time since the 1930s. They were big issues in the debate around this State’s founding, both before 1922 and for decades afterwards.
Striving to maximise a country’s self-sufficiency is not without logic. The more insecure the world is, the more it makes sense for countries to prioritise securing supplies of vital goods — such as food and fuel — even if that means higher prices for consumers.
There is, too, a case to be made for nurturing home producers. By protecting them from more efficient foreign competition, with import taxes and subsidies, home-owned businesses can get a leg-up the competitiveness ladder. In Europe, Airbus has long been held up as an example of successful state intervention — in its case by breaking the near global monopoly on civilian passenger jets that America’s Boeing once enjoyed.
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Ireland’s experiment in becoming more self-sufficient and nurturing infant industries after independence was ultimately a failure. But it did have some success, academic economist Frank Barry notes in his new book on the Irish economy over half a century from the time of exiting the union with Britain to entering what is now called the European Union.
Pushing back against the increasingly common narrative that everything about Ireland during much of the 20th century was uniquely and unendingly grim, Barry correctly states that the Irish economy performed relatively well in the 1920s and 30s. That is particularly true when compared to the many newly created European states which emerged after the first World War.
Often in history catastrophes that could have happened, but didn’t, are overlooked. Barry observes that most of the new states at the time endured hyperinflation and currency crises. More than a few suffered banking collapses. Successive Irish governments in the decades after independence were generally prudent and therefore avoided such crises (though the tendency for prudence in economic management began to wane from the 1950s).
For those more interested in the history of Irish business than in policy matters, this book delivers. It surveys the biggest employers in the economy at independence and intervals over the next 50 years. These surveys, and what is made of them, are among the most detailed histories of Irish business yet written. Anyone who wants to understand how the Irish corporate world has evolved over the past century will learn a lot from this book.
This volume makes another useful contribution to understanding Ireland’s economy over the past century and who influenced its evolution. TK Whitaker is often considered the finest civil servant since independence. Unlike many figures from the mid-20th century, his standing has risen over time to the point that his influence on the big political decisions taken while he was in office has become overstated.
Without explicitly seeking to do Whitaker down in any way, Barry’s mentions of the civil servant are more in keeping with the reality of his influence and contribution than more recent hagiographers would have it. The commonly held view that Whitaker’s Economic Development report in 1958 turned the economy around does not accord with the facts; he opposed the sort of tax breaks for multinational companies that were arguably the most affecting single economic policy in the history of the State; and rather than being a radical, Whitaker “largely subscribed to the traditional Department of Finance orthodoxy”.
This book is hard to fault. One possible criticism is that it has little to say about how vested interests — protected businesses and trade unions — were won around to opening the economy to foreign competition. Ending the protectionist experiment, which was long past its sell-by date by the 1950s, has proven to be hugely beneficial but not for those companies and workers who could not compete in the international marketplace.
One explanation for the limited opposition to changing course is that job losses in protected industries were not expected to be high. As it turned out, and as Barry notes, they were far higher than anyone predicted, one of the factors that made the 1980s such a depressed decade. One can only assume that if voters in Ireland’s EU accession referendum in 1972 could have foreseen the economic hardships to come over the next two decades, opposition to joining would have been higher than the mere 17 per cent who voted No.
- Dan O’Brien is chief economist at the Institute of International and European Affairs and a former economics editor at The Irish Times
