Cumann nGaedheal Economic Policies 1923-1932

Cumann nGaedheal Economic Policies 1923-1932

Background

1. Cumann na nGaedhael inherited a backward economy, burdened by Civil War debts and an overwhelming depression in agriculture.

2. Economic realities included:

- Realisation that the Irish economy was enmeshed with the British economy.

- Few cabinet members had economic experience.

- The world economy was in recession.

- Ireland was a predominant rural economy and the major industrial area had been partitioned off.

Political considerations

1. Generate support for the new State and confidence among certain crucial classes - the bankers, the large farmers and the Anglo-Irish community.

2. Government adopted a conservative policy -

- Concentrated on agriculture (2/3 of the population lived in rural areas and half the workforce were employed in agriculture).

- There was a belief that industrialisation could not be engineered.

- Maintained the link with Sterling which left the Irish pound over-valued - which avoided problems with inflation in the 1920s.

- The government needed to avoid bankruptcy by a policy of low taxation, avoidance of borrowing and balancing the budget.

Agriculture – The Problems

1. Small farms who had no money for new technology.

2. Conservative and old farmers who did not relinquish their farms to their heirs until they were relatively old, cautious and conservative.

3. Ireland had supplied poor quality produce to England during the war so her reputation for quality was poor.

4. Britain adopted a cheap food policy in post-war period so the British market - traditionally the chief one - had to be competed for and this meant that prices obtained for Irish produce declined.

Agriculture – The Policies

1. Minister for Agriculture, Patrick Hogan

2. Set standards for production of butter, meat and eggs. 3. Advisory service to improve breeding stocks and crops.

4. Interventionist policy to improve standards in marketing.

5. Established the Agricultural Credit Corporation to make loans - few took advantage of it.

6 The 1923 Land Act completed the compulsory purchase of all land still held by landlords - but many farms were too small to be viable.

7. Income tax was kept low, cut from 25% to 15% between 1924 - 26.

Agriculture – The Outcomes

1. Limited success in the early years.

2. Little change in volume of output or the structure of exports.

3. Value of butter exports rose very slowly.

4. The number of cows actually fell a little.

5. The total value of exports reached a peak in 1924 at £51.6m, fell to £42m in 1926, recovered to £48m in 1929 and did not reach that figure again until 1948.

6. Loss of tillage and a new dependence on imported foodstuffs. Development of sugar beet as new cash crop - this was the exception to this.

7. Policies benefited the strong farmers, rather than the smaller ones.

Industry – The Problems

1. Not a priority for Government.

2. Home market was too small to cope with imports.

3. No source of power.

4. The government was convinced that industry could not be forced but it was unlikely that industry would emerge without the help of protectionism, bounties or special financial provision.

5. Larger industries opposed protectionism

6. The outstanding exception was the Shannon Scheme at Ardnacrusha and the establishment of the 'semi-state company', the ESB.

Specific Economic Measures

1. Cut wages of teachers, gardai and civil servants by 10% in 1923.

2. Cut in Old Age Pension by 10% in 1924.

3. Government used the building of the Ardnacrusha Shannon Scheme to drive down wages by up to 30%, provoking a nine month long strike in Limerick involving hundreds of workers.

Impact of Economic Policies

1. Economic growth was slow.

2. Unemployment never fell below 6% and could have been much higher than this official figure (perhaps 17% in 1926) and was deemed to be due to laziness of workers or restrictive trade union practices.

3. Emigration averaged 33,000 each year.

4. Income tax remained low, which meant that it was difficult to tackle intractable poverty and social problems.

How successful were Cumann na nGaedheal’s Economic Policies?

 

Cumann na nGaedheal was the political party in power in the new Irish Free State from 1922 to 1932. Led by W.T. Cosgrave and his conservative policies, the party focused on agriculture rather than industry, believing that you have to let industry come naturally. This later led to problems. In my essay I will discuss the economic policies of Cumann na nGaedheal and why I believe they were not successful. 

 

Cumann na nGaedheal inherited a backwards economy burdened by Civil War debts and a depression in agriculture. They had to find a way to deal with the fact that the Irish economy was enmeshed with the British economy. Very few of their cabinet members had economic experience. They were the ones who were head of the pro-Treaty side in the Civil War and so got a step up then to being cabinet ministers. The world economy was in recession so trade etc. was damaged as a result. Due to partition, Ireland’s main industrialised area (Belfast) was partitioned off and so the South of Ireland was left with a predominantly rural economy. 

 

Cumann na nGaedheal generated support for the state among certain key classes such as large farmers, the Anglo-Irish community and the bankers. The government followed a series of conservative policies. They concentrated mainly on agriculture, due to more than half the population living in rural areas and half the country employed in agriculture. Cumann na nGaedheal had this idea that industry cannot be engineered into a country, it had to come naturally. The Irish pound was over-valued due to its link with the Sterling. This avoided inflation in the 1920’s. The government needed to avoid bankruptcy and so adopted a policy of low taxes, avoiding borrowing and to balance the books to decrease expenditure. 

 

There were problems seen in agriculture in Ireland. Due to the lack of government expenditure there was very little money to use. This led to a lack of technology and machinery on farms. Many old, conservative farmers did not give their land to their heir until they too were old, cautious and conservative. This resulted in a lack of change in the general system. Because Ireland supplied low quality produce to Britain during the War, she had a reputation then for poor quality food. The prices obtained for Irish produce then declined after Britain implemented it’s cheap food policy after the War. However, in an attempt to raise standards, there were set standards introduced for produce such as butter, meat and eggs. An advisory service was also introduced to improve breeding stocks and crops. Cumann na nGaedheal implemented an interventionist policy to improve the standards of Irish markets. The Agricultural Credit Corporation was established to give loans to those involved in agriculture. Few, however, took advantage of this opportunity. The 1923 Lan Acts completed the compulsory purchase of the land that was still held by the landlords. Despite this many farms were too small to be viable. Income tax was kept at a low rate of 15% (cut from 25%) between 1924 and 1926. These were the agricultural problems Cumann na nGaedheal faced.

 

 

Agriculture went on to have a relatively limited success in the early years. This was due to a number of factors. These include the little change in volume of output or the structure of exports. The value of butter rose exceptionally slowly. For a little bit the number of cattle fell, obviously something that was failing with Cumann na nGaedheal’s economic policies. The total value for exports fluctuated between 1924 and 1948. In 1924 it reached its peak of £51.6 million. This figure fell in 1926 to £42 million, recovered to £48 million in 1929 and it did not reach this figure again until 1948. Ireland then became dependent on imported food as a loss of tillage was seen throughout the country. However, there was an exception. Sugar beet was being grown as a new cash crop. These policies were unsuccessful as they benefited large farmers rather than smaller ones, even though they were more common.

 

Industry also had its share of problems. To the government such an issue was not a priority. As well as having no local (i.e. in the country) source of power, the home market was too small to properly cope with imports. They believed that for industry to grow, protectionism or some special financial provision was needed. This would not work though, as the larger industries opposed protectionism. However, like agriculture, there was an exception to that general term. The exception was the ‘Shannon Scheme’ at Ardnacrusha, and the establishment of the ‘semi-state body’ the ESB.

 

The government introduced some specific economic measures in order to keep with their plan of cutting expenses and balancing the books. The wages of teachers, gardai and civil servants were cut by 10% in 1923, much to their dislike. A year later the already low old age pension was also hit with a 10% reduction. The government then used the building of the Ardnacrusha Shannon Scheme to drive down wages by up to 30%. However, doing this provoked a 9 month long strike in Limerick involving hundreds of workers. In my opinion this also shows how the economic policies of Cumann na nGaedheal were unsuccessful in practice.– (how did it show they were unsuccessful?)

 

All in all these economic policies were unsuccessful in my opinion. Despite the governments best attempts, economic growth was very slow. Unemployment rates never fell below 6%. They could have been much higher than that official (perhaps even as high as 17% in 1926). This high figure is blamed on the laziness of workers or the restrictive trade union practices. Emigration rates were also high, with an average of 33,000 a year. It was difficult to tackle intractable poverty and social problems due to the low income tax rate. This is why I believe the economic policies of Cumann na nGaedheal were unsuccessful.