Friday 26 April 2019

Independence: It's not just the economy, stupid

A 'Financial Times' article warning Scotland off independence and citing the Irish example of economic failure is a recklessly inaccurate analysis

Prosperity: Alex Salmond insisted an independent Scotland could build a ‘Celtic Lion’. Photo: Niall Carson.
Prosperity: Alex Salmond insisted an independent Scotland could build a ‘Celtic Lion’. Photo: Niall Carson.
Change: Ex-Taoiseach Jack Lynch and Finance Secretary TK Whitaker, who were key to Ireland’s development, board a plane for talks with then British PM Harold Wilson in 1966

Diarmaid Ferriter

During the crucial 1918 General Election campaign in Ireland, Sinn Féin not only promised its candidates would boycott the Westminster Parliament if elected and press for the establishment of an Irish Republic, but also insisted it would transform the Irish economy.

It claimed that as a result of the incompetence of the Irish Parliamentary Party (IPP), which had dominated politics for decades, "Ireland has lost half her wealth in manpower and her expenses have increased 17 times". Ireland, it maintained, was overtaxed, exploited and economically underperforming due to British imperialism and IPP collusion.

SF's promise, as underlined by one of its pamphlets with the title 'The Irish Republic Can Pay Its Way', was a transformed economy that would ensure "Irish sons and daughters will not fly from an impoverished Ireland into the Godless cities of the world".

Claims that Irish republicans would free the economy from foreign tyranny were common and popular almost a century ago (the IPP was decimated in the 1918 election), and the question of the economics of independence is now also a dominant feature for those campaigning on both sides of the Scottish independence debate, as the referendum draws nearer.

Those on the 'yes' side insist Scotland can keep sterling, make the most of its oil reserves, protect standards of employment, welfare and investment, and be self-sufficient. They also argue investment in health, education and social protection can be kept at a higher level than the rest of the UK.

Those on the 'no' side rubbish some of these claims, and they have also used the example of Ireland to bolster their argument that Scotland needs to remain a part of the UK and not be seduced by false economic promises.

Recently, in the Financial Times, Kevin Toolis, a Scot born of Irish parents, seemed to take great pleasure in milking this for all he felt it was worth, during an intemperate and very simplistic history lesson, under the title 'Scots should recall the poverty of the Irish Free State'.

Scots, he argued, should reject independence because of Irish failures; the Free State created in the early 1920s, he insists, was "a parochial disaster", "millions of Irish were forced to flee", "in all but name Ireland remained an economic vassal of the UK treasury", and "Irish prime ministers such as Charles Haughey almost openly looted the state's treasuries".

It is not difficult to highlight the dismal economic record of the 26-county Irish state in the early decades of its existence, but Toolis is selective and patronising in how he presents this.

Undoubtedly, there was little scope or appetite for economic radicalism in the 1920s. Cumann na nGaedheal's economic policies concentrated on maximising agricultural free trade at a time when 53pc of the working population was employed in the agricultural sector. 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. But budgets were balanced, Ireland was one of the few creditor nations in Europe, and a national loan was successfully floated.

The international meltdown as a result of the Wall Street Crash of 1929 created turmoil everywhere, and Fianna Fáil's protectionist economic policies in the 1930s did not succeed in achieving the self-sufficiency that was promised in the agricultural and industrial sectors due to reliance on imports for industrial raw materials and the dependence on Britain to export its agricultural produce. An active housing programme resulted in 80,000 houses (rural and urban) being built between 1932 and 1942, but disease and poverty remained rife.

By then, approximately 50,000 jobs had been created as a result of protection, suggesting some limited success at a time of international depression. But there were notable failures also, including inadequate investment in education, one of the main factors retarding the Irish economy.

Neutrality during World War Two further isolated Ireland, meaning it was not a part of the European post-war effort to rebuild, adapt and engage in a new type of economic management until later. Seán MacEntee, Fianna Fáil's Minister for Finance in 1952, described the Irish finances as "difficult almost to the point of despair". There was also a frightening level of emigration and over 500,000 people left the Irish Republic in the 1950s.

Towards the end of that decade, Ireland was increasingly exposed to outside influence. The development of Keynesian economics, as evident in Programmes for Economic Expansion, begun in 1958, finally put paid to any lingering attachment to economic and cultural isolationism. TK Whitaker, secretary of the Department of Finance, and the central architect of the new approach, is a curious absence from Toolis's article.

Due to an upturn in European trade activity and the reorientation of the Irish economy towards free trade, Gross National Product grew 4.5pc each year between 1959 and 1963, unemployment fell by one third and emigration declined. The prosperity that accrued in the 1960s and the decline in unemployment and development of a robust export trade indicated the merits of an open economy.

Ireland engaged in a successful game of catch-up with the economies of Western Europe, and was helped by joining the EEC in 1973, though there were to be further setbacks in the 1970s and 1980s. In 1983, one million Irish people were dependent to some extent on welfare payments.The following year, unemployment levels reached 16.4pc of the workforce, compared to an overall EEC figure of 10.3pc. While domestic mistakes were made, these were also the failures of a small open economy facing a volatile international climate.

Interestingly, the recovery of the Irish economy from the mid-1990s and the onset of the Celtic Tiger held a particular interest and attraction for Scottish nationalists. In the early stages of the quest for a referendum on Scottish independence, Scottish first minister Alex Salmond was quite vocal about the inspiration to be found in Ireland, as a result of its journey towards, in his words, "independence and prosperity".

An independent Scotland, Salmond insisted, could build a "Celtic Lion" to match the Irish "Celtic Tiger". His script has had to be altered since the scale of the Irish economic meltdown became apparent, and it is to those negative aspects of the Irish experience that opponents of Scottish independence are turning their attention, in the hope that the Scottish middle class will embrace fear of economic meltdown and play it safe by rejecting independence.

But independence is not just about the economy, stupid, and Toolis is guilty of framing a selective, cartoon history that depicts Ireland as a third world banana republic whose 20th century experience can be measured solely by its economic failures. It is also recklessly inaccurate to suggest that successive Irish Taoisigh "almost openly looted the state's treasuries".

He also ignores the wider context and the reasons a generation of Irish nationalists fought for independence. Irish economic failures abounded after independence, but it also became a remarkably stable and durable democracy, and it implemented an independent foreign policy in its early decades.

It might come as a surprise to Toolis to learn that for all the flaws of the Republic, independence generated a pride that was real. A state born in civil war, with an open economy thrashed by the Wall Street Crash of 1929 was hardly going to be a Celtic Tiger in the 1930s or 1940s, so why subject the challenges of the formative decades of independence to the values and judgements of over 80 years later?

A more measured conclusion has been reached by the renowned economist Douglas McWilliams, who has argued that initially, while a 'yes' vote will bring some economic benefits to Scotland, it can also expect to suffer an initial economic slump and a long battle to recover, until "finally, like Ireland in the 1960s, there might well eventually be an economic revival". But as he acknowledges, "I should point out that economics has its place – it is not the be-all and end-all. If I were an enthusiast for Scottish independence I would be quite prepared to pay the costs that I have estimated".


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