THE POLITICS OF ECONOMIC REALIGNMENT, IRELAND 1948-1964 GARY MURPHY MA Dissertation submitted for the degree of Ph.D. under the supervision of Professor Eunan O’Halpin, Dublin City University Business School Dublin City University September 1996 I hereby certify that this material, which I now submit for assessment on the programme of study leading to the award of Ph.D. is entirely my own work and has not been taken from the work of others save and to the extent that such work has been cited and acknowledged within the text of my work. Signed: ID No.: 92701558 Date: < ? /< //9 £ Contents Page Abstract ii Acknowledgements iii Abbreviations iv Introduction v Chapter One: Financial Ideology and The Political Economy of Ireland 1948-1953 1 Chapter Two: Changes in the Political Economy 1954-1963 55 Chapter Three: The Evolution of Trade Union Influence in the Economic Policy Process 1948-1964 120 Chapter Four: State-Farmer Relations 1948-1964 156 Chapter Five: Ireland and a Wider Europe: The EFTA Negotiations 1957-1961 199 Chapter Six: The Final Move Towards Economic Interdependence: The EEC negotiations 1961-1964 247 Conclusion 285 Note on primary sources 293 Notes 299 Bibliography 349 ABSTRACT The politics of economic realignment, Ireland 1948-1964 This dissertation analyses the transformation of Irish economic policy formulation from the formation of the first inter-party government in 1948 to the breakdown of Ireland’s application to join the EEC in 1963 and its immediate consequences. Based on extensive research in departmental files, and the personal papers of politicians and other policy players, and interviews with officials, businessmen and others who were active during the period, the study has a dual approach. It offers a historical analysis of the route Irish policy makers took in moving economic policy from a protectionist framework to one in which interdependence with other economies was assumed. The study also discusses the influence of trade unions, employers’ groups and farmers’ organisations on policy and on each other and charts shifts in their thinking on key issues of economic management. It is argued that their dealings with government during this period marked the inception of a corporatist style approach to national policy making. This thesis argues that changes in thinking at both a governmental and a non­ governmental level led Ireland to adopt an interdependent approach to economic policy making. While some policy makers were reluctant to accept any form of multi­ lateral trading arrangements which would alter protected industry and the country’s privileged access to British markets, the severe economic crisis that affected Ireland throughout the 1950s led to the adoption of fresh economic thinking both within and outside the civil service. Acknowledgements I would like to take this opportunity to thank the various people who helped me throughout my research. Primarily I am indebted to my supervisor Professor Eunan O’Halpin for his guidance, insight and inspiration these past three years. His observant comments on various drafts improved the quality of the thesis and often forced me to redefine my argument in response to his queries. I am grateful to the Dean of DCUBS for granting me a research studentship which enabled me to carry out the research. I would like to thank all the people who granted me interviews for agreeing to speak with me about policy making in this period. I am also grateful to the following for allowing me to peruse the records in their possession; the staff of the National Archives, the National Library and the Irish Labour History Society, Seamus Helferty and the staff of the archives department at UCD, Philip Hannon of Fianna Fail and Pat Hickson and Colm Gallager of the Department of Finance. Thanks also to Professor Ronan Fanning of UCD, Professor Kieran Kennedy of the ESRI, Dr. Brian Girvin of the University of Glasgow, and David Jacobson and John Horgan of DCU for discussing elements of this period with me. I am grateful to a number of my colleagues here at DCUBS for commenting and reading earlier drafts of this dissertation, particularly Deirdre Lavin, Dr. Siobhain McGovern, Eileen Connolly, Dr. Joan Cullen, Breda Griffith and Serge Basini. Aengus Nolan was a great help at the finish as was Dave Hannigan at the start. A special thanks to Mandy. To all these I am very grateful; my biggest debt however is to my parents, who have encouraged and supported me throughout. Abbreviations CIO Committee on Industrial Organisation CIU Congress of Irish Unions EEC European Economic Community EFTA European Free Trade Area FUE Federated Union of Employers FII Federation of Irish Industry FIM Federation of Irish Manufacturers GATT General Agreement on Tariffs and Trade ICTU Irish Congress of Trade Unions ICMSA Irish Creamery and Milk Suppliers Association ITUC Irish Trade Union Congress IDA Industrial Development Authority NA National Archives NATO North Atlantic Treaty Organisation NFA National Farmers Association NIEC National Industrial Economic Council NL National Library OEEC Organisation for European Economic Cooperation OECD Organisation for European Cooperation and Development PUTUO Provisional United Trade Union Organisation TUC Trade Union Council UCDA University College Dublin Archives Department Introduction The decision of the Irish government to seek membership of the European Economic Community [EEC] in 1961 marked the climax of a transformation in Irish economic policy formulation. From 1948 when the first inter-party government took office, successive governments were plagued by a series of balance of payments crises and a general economic malaise which by the time Fianna Fail regained office in 1957 had reached epidemic proportions. It had become painfully obvious within the policy making arena that protectionism, in place since 1932, and the country’s over reliance on the British market offered no real future for Irish agriculture or industry. Yet this view was not unanimous within or outside the government and civil service. Some policy makers were reluctant to accept any form of multi-lateral trading arrangements which would weaken protected industry and the country’s privileged access to British markets. However, by the end of the 1950s this had become very much a minority view associated mainly with the Department of Industry and Commerce and sections of a number of interest groups, most notably parts of the trade union movement and segments of the protected industrial sector. Much has been written about the Irish economy in this period from both political and historical perspectives. While some commentators have written straightforward historical accounts of the process of the Irish economy from protectionism to free trade, others have written more polemical accounts and in many cases have come to the material with predefined ideological notions. This study is a historical account of changes in public policy and uses various archive sources to augment secondary material and interviews with prominent players in the period. Thus it is a political study of a historical change in public policy. Joseph Lee in the preface to his monumental study of modem Ireland warned of the dangers of the massive expansion of archival material available to researchers: The avalanche of archival material, only a small fraction of which has been excavated, not only threatens to obscure perspective beneath mounds of detail, but also to lull the historian, starved for so long of any archival sustenance, into complacency concerning the enduring quality of his necessarily provisional conclusions.1 While much of this thesis is archivally based I have attempted as far as possible to follow Lee’s dictum and place the arguments contained within it on a wider base. This is something that others working in the area have not aspired to. Brian Girvin for instance in his influential study of politics and economics in independent Ireland offers little analysis of the role of interest groups in the policy process.2 While he does shed some light on the relationship between trade unions and government in the period, as do Paul Bew and Henry Patterson in their work on Sean Lemass, none of these authors expand their analysis to include other economic players.3 On the other hand those writers who have examined the role of economic actors within the policy process such as Niamh Hardiman and John Gibbons do so from the perspective of the relevant participative interest group and for the most part avoid any engagement with government archives.4 Thus this thesis has two objectives. It aims to chart the route Irish policy makers took in moving economic policy from a protectionist framework to one in which interdependence with other economies was assumed. It also analyses why Irish policy makers chose to pursue one set of policy objectives over others. In particular it illustrates why the government decided to opt for entry to the EEC rather than the European Free Trade Area [EFTA] and it charts the Irish negotiations to join both organisations. The thesis also examines the role and functions of economic interest groups and their relations with the government as it moved from protectionism to economic interdependence during the period. Girvin, Hardiman and Charles MacCarthy have looked at the role of the trade unions in relation to the development of the economy and pay bargaining in the period. Basil Chubb has gathered together a collection of essays which traces the development of the Federated Union of Employers [FUE], while the farmers organisations have been the subject of a number of key articles.5 Yet none of these studies offer a satisfactory framework for analysing the influence that these groups had on government policy and on each other. Trade unionists, industrialists and farmers all had a recognisable input into the economic policy process. Within a decade of their formation in 1955 the National Farmers Association [NFA] had received formal open acknowledgement that in future the government would welcome regular and full discussions and consultation with them in the formulation of agricultural policy both broad and specific.