Finance and Economy 1923 - 1932

Cumann na NGaedheal Economic Policies divided into five categories: 1. Problems they faced 2. Imports and Exports – this is the buying and selling of products in the country 3. Agricultural policy – this is how CNG handled and encouraged their biggest export - farming 4. ESB – Electricity Supply Board – how this was important for providing alternative to relying of coal 5. Social Policies – how CNG dealt with pensions etc.

Before the Free State What positives and negatives did Ireland’s connection with Britain have before the emergence of the state? Positives – currency, free trade, pension benefits. Negatives – wages weren’t as high as Britain (75% less), emigration, no control over taxes, poor standard of living (slums), counties outside the Pale neglected.

Problems CNG faced What problems do you think the newly formed government would encounter? 1. How would they run their finance department? They looked to experienced civil servants and the British system of Treasury (allocating fund to each department). 2. How would they create funding to pay for things like healthcare and pensions? They taxed goods such as alcohol and cigarettes but it only raised 20million. Only 6 thousand could pay income tax. 3. How would they deal with takeover from the British system? They were lacking a young, working generation. They had too many dependents. They would have to think about their policy of free trade with England. 4. What would they do about the loss of the North? Loss of industry, had to look to agriculture and luxury exports to maintain their quota.

Who were the men responsible? Ernest Blythe – former IRB member, he became Minister for Trade and Commerce under the first Dail. He then became Minister for Finance under CNG Department of Finance JJ McElligott - worked for British civil service but was fired after taking part in 1916 Rising. Was economic journalist and then assistant secretary to Ernest Blythe. Joseph Brennan – worked for Dublin Castle treasury ,advised Collins on economic issues. Became secretary of Finance.

2. Dealing with imports and exports Ireland need to strike a balance between their imports (produce they brought into the country) and exports (produce they sell to other countries). Too much exports equals a disaster. Problem was Irish exports were down. Brennan and McElligot wanted to revert back to the high quotas before the war – to do this 1. maintain free trade between Britain and Ireland 2. link Irish pound to rate of the sterling 3. keep taxes and costs low for farmers.

McElligot and Brennan Both believed in Free trade and cautious spending. Both believed in concentrating on agriculture to boost exports. Cumann na nGaedheal’s economic policies concentrated on maximising agricultural trade at a time when 53% of the working population was employed in the agricultural sector.

Luxury goods CNG needed to prioritise their main source of exports and so didn’t worry too much about their luxury exports such as Jacobs’ biscuits and Guinness. The flow of these exports remained steady throughout the 1920’s.

Problems for CNG Problems: Irish farms too small Farmers too old. Irish food had got a bad reputation in WW1

Patrick Hogan was Minister and tried to improve things by: Setting standards for production and presentation Appointed advisers. Set up the ACC Land commission bought land and divided it among small farmers. Up to the great depression, exports improved.

Protectionism Big companies like Guinness, Jacobs and Ford lobbied for free trade (feared retaliation). Blythe agreed, but did introduce some tariffs to protect shoes, clothes, soap and furniture.

Shannon Scheme

Shannon Scheme The Shannon Scheme completed in 1929 by Siemens was a success. The civil servants were against using foreign investment for big projects however the Shannon Scheme was an exception . They believed the state should not be involved. The ESB was set up to distribute electricity and became the model for future Semi-state bodies.

In August 1925 one of the most important under-takings for the economic and social life of the country was begun when the first sod was cut at Ardnacrusha, Co. Clare, for the construction of the Shannon Hydro-Electric Scheme.

The scheme was the beginning of the electrification of the country and led to the establishment of the Electricity Supply Board (ESB). The Shannon Scheme was one of the largest civil engineering projects of its type in the world at the time it was built, and was regarded by many Irish people as ‘The Eight Wonder of the World.’

Overview To help farmers, the government cut their taxes by 40% but it only really helped the big farmers not the small ones. CNG ended up protecting small companies from taxes when they set up the Fiscal Inquiry Committee to look into protecting small firms. They ended up placing tariffs on smaller good like boots, clothes etc under the Tariff Commission in 1926.

There was a high degree of poverty; the census of 1926 revealed that 800,000 people in the Free State were living in overcrowded conditions. The British had introduced OAPs and social welfare but they could afford it. Blythe cut the OAP by 1 shilling and made the means test more difficult.

They did little to replace the city slums. When the Depression hit, they cut the pay of public servants. The Depression stopped emigration and unemployment increased

C na G prudent (balanced the books) but politically naive. Had done little to help the poor while protecting their richer supporters. Wide open to attack from FF.

In the 1920s, Cumann na nGaedheal was in government and followed a conservative economic strategy. This involved supporting big farmers and encouraging exports of agricultural produce by improving standards and encouraging farmer education, very much in the way in which successive British administrations had done since the 1880s.