independent

Wednesday 16 April 2014

How six-month bank strike rocked the nation

Donal Buckley recounts how people survived the crisis in 1970 ONE of the major disruptions to the economy during the 20th century was the six-month bank strike of 1970.The level of fraud afterwards was reported to have soared 10 times as 750 cases were investigated. Although no precise figures are available, the strike appears to have contributed to inflation as the amount of net credit in its aftermath increased fivefold.

But the abiding memory of the event is of how people survived. Businesses and organisations had to divert staff to run around to shops and churches looking for cash to pay wages. As the strike continued, traders found themselves with increasing amounts of cheques.

In the days before alarms and iron shutters, small shopkeepers worried about storing these valuable pieces of paper. One publican in Dublin's Liberties stored a heap of them up his chimney in the summer and didn't tell his wife. She lit the fire on the first cold September evening when he realised his cheques had gone up in smoke he had a severe heart attack.

As the dispute dragged on, the supply of cheques dried up and people began to make their own, some attaching postage stamps as evidence of paying stamp duty. Ernie McElroy, a former bank official who was involved in processing the cheques after the strike, recalls seeing cheques made out on the backs of cigarette boxes and even on toilet paper. There were also stories of how some people furnished themselves with unofficial overdrafts.

For example, a certain racehorse trainer was short of money but wanted to buy a horse. He gave the vendor a cheque even though he knew he didn't have the funds to meet it. Fortunately for him the horse won a number of races so he had no trouble honouring the cheque and making a handsome profit without having to pay a penny interest for a very risky venture.

Similar stories were told about builders who bought pubs to get the cashflow they needed to run their building businesses. But not everyone was as trusting as the seller of the racehorse, as the Government investigation by economist Michael Fogarty pointed out. Property dealings of all sorts were blocked, not only by the difficulty of transferring funds but because many documents such as property deeds were kept by the banks either for safekeeping or as security against loans.

The Irish Stock Market also suffered severely. According to Fogarty, its level of transactions in equities fell by about one-third. Interest payments on Government stock could not be paid. £41 million of Government loans was due to be repaid in July, but pensioners and others holding the stock had to wait an extra five months as the redemption was postponed.

To retain the loyalty of their customers, businesses accepted cheques. But as credit-worthiness became harder to check, there were many instances of businesses being stung. ``Actual disaster in the form of bankruptcy or major loss resulted from the dispute for a limited number of mostly small concerns,'' found Fogarty.

One of the biggest insolvencies attributed to the strike was Palgrave Murphy, the transport company which also owned Limerick Shipping, although some questioned whether it would have survived anyway. To the surprise of many, imports were not severely hampered by the dispute. As Fogarty points out: ``The services of the clearing banks proved by no means as indispensable as would have been expected before the dispute, and many of the difficulties experienced was due to being taken by surprise.''

In the early days of the dispute, overseas suppliers allowed credit to their Irish agents but as the dispute dragged on they began to charge interest on the outstanding debts. In the autumn however the Government had to introduce an emergency scheme in conjunction with the Central Bank and the American and merchant banks which had remained open. The international media began to make fun of the Irish economy. One overseas commentator described it as a banana republic. As for the bank officials themselves, the strike impacted in a number of ways. As there was no strike pay, many of the junior officials emigrated to England and returned after the strike. There were stories of some, most notably the singer Christy Moore, who discovered talents which might otherwise have been lost in the conservative lifestyles of a bank official.

Some argued that between the `good money' they earned away and the bonuses, overtime, and pay increases they received on their return, they were financially much better off. The more senior officials were less fortunate. As the strike went on they experienced the resentment of the local community and even members of their own families, upon whom some had to depend to get by. Fogarty also believes that the extra time sorting out the huge backlog of transactions also took a toll on their family lives. The dispute did lead to more competition in the financial services market as it gave the building societies a major opportunity to build up their business, although a large portion of this did return to the banks.

In the end, was the dispute worth it? Fogarty colourfully answered this question: ``The mountain has laboured and out has come this ridiculous mouse; a plump well fed mouse if you like, a pleasure for a bank official to have around the house; but still a mouse of very much the same size and shape as all the other mice generated with far less fuss and bother in a range of other occupations, public and private, which did not need a five-and-a-half months stoppage to do it.''

Comparing the outcome to the outcome of the 1969 maintenance workers' strike, which had a major effect on inflation, Fogarty said the Irish Bank Officials' Association settlement ``amounted to no more than keeping up with the Joneses''.

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