The Performance of the Economy of Ireland before 1922

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The Performance of the Economy of Ireland before 1


Ireland is a small country, an island to the west of Britain, which in turn is a somewhat larger and much more densely populated island to the west of mainland Europe. The island consists of two political units, the Republic of Ireland and Northern Ireland, which is part of the UK. The division of the island into two political units, and hence two economies, dates from 1. This piece will provide a broad historical background to the economy from the late seventeenth century to 1.


.1. Growth and Early Industrialisation 160-1815


The Economy in 160





At the time of the Battle of the Boyne in 160 the Irish economy was predominantly rural, although it was no longer a ‘woodland’ society. Population stood at a little under two million, roughly double the level of a century before. With the spread of population the forest cover was rapidly disappearing, giving way to both grazing and tilling. The largest town, Dublin, had a population of around 60,000 inhabitants.


The country was an important exporter, especially of grain, beef, butter, wool, and to a lesser extent, linen. Earnings on these exports were spent on items such as coal and tobacco, with a surplus on the current account of the balance of payments amounting to perhaps 10 per cent of exports. It was observed that Ireland was not significantly poorer, and was possibly better off than most of continental Europe at that time, although less affluent than most of England. Income was distributed unevenly. Land was owned by perhaps 10,000 landlords, and six-sevenths of the land was held by Protestants. Much of this was let out to farmers, who in turn frequently sublet small plots to hired casual labour.


Growth and Structural Change


The essential features of economic growth during the period 160-1815 were a rapid recovery after the war, a period of relative stagnation (1700-0), twenty five years of crisis which included two famines (170-45), and a long wave of sustained and relatively rapid economic growth (1745-1815). The evidence for these is indirect, since few economic statistics were collected at the time.


The seventeenth century saw rapid changes in the structure of the Irish agricultural economy. Cattle exports gave way to beef; sheep exports fell and never recovered; butter and pig production soared; and the country turned from being a net importer, to an important exporter of grain. At the same time Ireland became a major producer of textiles, notably linen. Two explanations have been offered for these structural changes.


The first focuses on English laws. In 1667 the Cattle Act excluded Irish cattle, sheep, beef and pork from England, forcing the country to export wool rather than sheep and to search for new markets for meat. More positively, the granting of duty-free access to England for linen helped that industry. However, the significance of the English laws for Irish economic growth is a matter of controversy. Writers in the nationalist vein have stressed the ways in which English handicapped Irish growth. The Woollen Acts are viewed as stunting the development of the Irish woollen industry. Cullen (17) argues that in response to the Cattle Acts the country successfully developed other outlets for cattle, and switched for other activities. The Acts may have provided more jobs than would otherwise have been the case by forcing the country to turn from ranching and orienting it towards tillage and dairying.


The second explanation for the structural change in agriculture rests on the response to an increase in the relative price of agricultural commodities, especially grain. In part this reflected the increasing urbanisation of Britain and the resultant growing demand for food. This improvement in the terms of trade increased the incomes of farmers. Ireland continued to export grain until the late 1860’s, when the falling costs of shipping, coupling with the opening up of the American Mid-West, brought cheaper grain to Europe.


Industrial change was dominated by the rise of the linen industry, which Cullen calls ‘perhaps the most remarkable instance in Europe of an export based advance in the eighteenth century’. From a low base in the 160’s linen exports rose rapidly, accounting for a quarter of all exports by 171. Other industries also expanded and modernised, notably those based on the processing of agricultural products, such as brewing, distilling and flour milling. This was due in part to the Industrial Revolution. The organisation of many industries was radically changed, with the establishment of breweries, textile factories and glass works large enough to benefit from economies of scale. The road network was greatly improved and the first canals were built.


Eighteenth century Ireland experienced occasional recessions. The trigger was typically a poor harvest, which led to reduced exports without a similarly large reduction in imports. The resulting balance of payments deficit was financed by an outflow of money (gold and coin), reducing the money supply and leading to tighter credit. In the short run this tended to depress economic activity, although in the long run domestic prices simply fell, stimulating exports and restraining imports until the balance of payments deficit was erased.


Distribution of Income and Wealth


The benefits of economic growth in the late eighteenth century were not equally spread. The most evident rift was that between landowners and the large rural proletariat. Under the Penal laws Catholic tenants were supposed to pay rent equal to two thirds of the ‘annual value of the land’ but rents of a third of gross output were more normal. Thus a relatively few landlords, and the middlemen and farmers to whom they rented, and who in turn rented subplots to casual workers, extracted a large surplus from the poor majority.


A second divide was between Catholic and Protestant. The Penal Laws placed restrictions on the right of Catholics to purchase land, to worship, to run schools, to vote, to take public office, to enter the professions, to take long leases, and to bequeath property. Barred from the professions and politics, able Catholics often turned their energy towards commerce, and the expansion of trade helped create a significant Catholic middle class.


The third divide was between town and country. Dublin grew to be the second town of the UK by 1800, with a population of about 00,000. Cork had 80,000 inhabitants, Limerick 0,000, while Belfast was still a minor town. That the country was able to support such a significant urban population, and to export increasing quantities of food, reflected a growing agricultural surplus and rising agricultural productivity.


.. Rural Crisis 1815-1850


The period of 1815 to 1850 was one of rural crisis, culminating in the disaster of the Famine. This crisis was reflected in rising emigration. This was also the period when Ireland most clearly failed to participate in the Industrial Revolution, which was, then in full spate in Britain.


Population


The census of 1841 enumerated 8. million people in Ireland, a higher level than any measured before or since, and over half the level of Great Britain. Since 1750 the population had risen at an average rate of 1. per cent per year, which was well above the rates recorded in England or France. Yet, by the 180’s the growth rate had fallen to 0.6 per cent, due almost entirely to massive emigration, which probably absorbed about half a per cent of the population annually after 180. A majority of the emigrants went to North America, and they accounted for a third of the free transatlantic migration of the period. Most of the rest went to Britain, which absorbed perhaps half a million Irish between 1815 and 1841. Once the flow of migration became established it created a momentum of its own, as early emigrants sent back money to pay the way for other family members, and helped to get new migrants established in America.


The elevated population growth was largely due to high marital fertility. There is no entirely satisfactory explanation for the high martial fertility. The age at which women married and the proportion of women who married were in line with contemporary European experience. It is possible that it was due to a good diet, a weak tradition of birth control, or a desire to have children, whether for pleasure or to help face old age. Life expectancy at birth was 7-8 years, lower than in Britain or Scandinavia, but high than in most of the rest of Europe.


Growth and Incomes


On the eve of the Great Famine, Ireland was one of the poorest countries in Europe. Per capita income was about 40 per cent of the British level, and half of it was generated in agriculture. Yet if the country was poor, it was also well fed, on grain, potatoes and dairy products. If equitably distributed, there was ample food for good health, but problems arose when the potato failed, as it did in the South-West in 18, in Mayo in 181 and in Donegal in 186.


It has been common to consider the 1815-1850 period as one of general ‘deindustrialisation’, during which the importance of industry in the economy fell. This is only partly correct. For the island as a whole industrial output appears to have increased. Large scale and more efficient production methods were applied in many industries, the road system was improved and banks were organised. Despite these changes, rural industry declined.


The first cause of rural deindustrialisation was that the woollen and cotton industries wilted in the face of competition from Britain after 184 when the last tariffs on goods from Britain were removed. A second blow to rural industry was the invention of a method for mechanically spinning flax, which made hand-spinning redundant, thereby depriving large numbers of families of a supplementary source of income.


Despite a rapid fall in prices after 1815, agricultural exports continued to rise, notably livestock and butter and, most dramatically, grain and flour. By the 180’s Ireland exported enough grain to feed about two million people annually, which testifies to the dynamism of the agricultural sector, which increasingly used new technologies such as improved seeds, crop rotations, better ploughs and carts.


The most traumatic event of the period was the Famine. After a wet summer, blight arrived in September 1845 and spread over almost half the country, especially the East. Peel’s Westminster government provided funds for maize and meal; relief works were set up, and when these proved inadequate more funds were made available. Famine was largely avoided. However, the potato crop failed completely in 1846, and by December about half a million people were working on relief works, at which stage they were ended. The winter was harsh. By August 1847 an estimated three million people were being supported by soup kitchens, including also three quarters of the population of some western counties. The 1847 harvest was not severely harmed, but it was small because a lack of seed constrained the area planted to a sixth of the pre-Famine level. The blight returned in 1848 and in 184 over 00,000 people were in the workhouses at some time or another. After 1847 the responsibility for supporting the poor had increasingly been shifted from the government to the local landowners, who by and large did not have sufficient resources to cope. Noting that a few years later Britain spent £6 million on the (futile) Crimean war, Moykr (18) argues that for half this sum ‘there is no doubt that Britain could have saved Ireland’. It is also unlikely that an independent Ireland could have done so without outside support.


As a direct result of the famine about one million people died. Three fifths of those who died were young (under ten) or old (over 60), although they constituted just one-third of the population. Serious famines were not uncommon in Europe until the seventeenth century; what was so unusual, and shocking, about the Irish Famine was that it occurred so recently.


The output of potatoes fell by three-quarters. In response, exports of grain, and pork (which used potatoes) fell by two-thirds, the use of potatoes for animal fodder ceased, and food imports rose very rapidly. As a result the amount of calories available for direct consumption barely fell, on a per capita basis. This gives credence to Amartya Sen’s contention that famines are rarely caused by an absolute lack of food, but rather by a change in the food entitlements of major groups in society. Thus labourers were unable to find employment when blight reduced the need for harvesting and planting potatoes; without income they could not buy food, and so became destitute. It follows that what is usually needed during a famine is income support rather than mere injections of food. This view forces us to turn to the sources and distribution of income, and not on crop failures alone, as part of the explanation of famine.


Distribution of Income and Wealth


Pre-Famine Ireland probably had a ‘very unequal distribution of income by West European standards.’ According to the 1841 census, 6 percent of the population has access to less than five acres of land, or were ‘without capital, in either money, land or acquired knowledge’. A further per cent were artisans, or had farms of between 5 and 4 acres. The remaining per cent were professionals and rentiers, and included approximately 10,000 proprietors, or 0.1 per cent of the population who owned at least 100 acres.


There is evidence that the largely rural proletariat, who constituted somewhat over half of the total population, became worse off during the thirty years prior to the Famine. This vulnerable group was ravaged by the Famine; between 1845 and 1851 the number of small farms, of between one and five acres, halved.


Why did Ireland Remain Poor?


There is no shortage of hypotheses as to why Ireland remained poor, and hence uniquely vulnerable by European standards to the chance failure of the potato crop. Nor does a single clear cause emerge. Ireland was not unique in undergoing rural deindustrialisation and depopulation. It is possible that the appropriate question is why some areas did industrialise, for in the early nineteenth century this was the exception rather than the rule.


A Malthusian explanation. ‘The land of Ireland’, wrote Malthus in 1817,’is infinitely more peopled than in England; and to give full effect to the natural resources of the country a great part of the population should be swept from the soil’. If population growth persists in surpassing the growth of food production ‘gigantic inevitable famine stalks in the rear, and with one might blow levels the population with the food of the world.’ Although consistently popular, the Malthusian explanation has been sharply questioned.


Even before the Famine Ireland had more cultivable land per person than Belgium or England and Wales, although less than France or Denmark. Given the rise in food exports, it is unlikely that population was outstripping food supplies in pre-Famine Ireland. Malthus himself late changed his mind, and by 186 considered that, given enough inputs, Ireland could develop ‘prodigious wealth, perhaps even surpassing England in income’.


Insecurity of land tenure. In pre-Famine Ireland most farmers were tenants, and some of them had short leases. If they were to undertake fixed investment in their farms they ran the risk that the landlord would raise the rent. So, the argument goes, farmers invested too little in agriculture, except perhaps in Ulster, where thirty-year leases were more common.


Agricultural growth was not hampered in earlier or later periods because of the system of tenancies, and did not increase as a result of the shift to owner-occupancy in the early twentieth century. Most annual tenancies were quite secure, and routinely renewed without significant rent increases.


Natural resources. One of the most common explanations for Ireland’s failure to industrialise is that it lacks extensive deposits of coal. In England, 85 per cent of the textile industry was located in coal-mining areas.


In England coal costs came to about four per cent of the total cost of manufacturing textiles; coal was perhaps two and a half times as expensive in Ireland, thereby increasing costs by six per cent. This was easily offset by lower wages in Ireland. The fact that some industries did succeed suggests that coal was not the indispensable missing ingredient for industrialisation.


Lack of capital. It has sometimes been argued that Ireland lacked capital, and that this hampered its ability to industrialise. However in the aggregate capital does not seen to have been lacking. In 1860 Irish residents held £40 in British government stock, and £0 million in Irish banks, a total value approaching the value of national income.


Despite adequate amounts of savings, there may still have been shortages, because of the system of intermediation, which matched savings with investors, may have been inadequate. Many industrialists appear to have become landowners rather than reinvest in their businesses, victims of what Lee (18) terms ‘ the aristocratic cult’.


Human resources. Some commentators have argued that Ireland did not industrialise because it lacked key human resources. In this view there were not enough, entrepreneurs, the population lacked education, and emigration sucked out the best and the brightest.


In 1841, 54 per cent of men and 41 per cent of women could at least read, which was a respectable level of literacy given that all education was private before 181. The establishment if the National Board of Education helped ensure almost universal literacy by the end of the nineteenth century, although the improvement was gradual. Those who emigrated appear to have been slightly less literate than the population at large, and to have come disproportionately from the poorest strata of society. In some areas including linen, banking and other industries, there were a significant number of entrepreneurs, although not all of them were Irish. Moykr (18) argues that the landlord class failed as entrepreneurs, and that they should have been a major force for change and improvement, but too often were absent from the estates to be effective.


Competition from Britain. The industrial revolution in Britain made manufactured goods less expensive, and centralised production close to the main markets. Improvements in transport carried these goods to Ireland cheaply.


Some argue that Ireland could only have stood up to such competition if it had the ability to impose tariffs and imports. Others however have pointed out that Scotland managed to industrialise successfully. It is clear that the industrial revolution spelled an end to cottage production, but it is not obvious why this had to be due to competition from British rather than Irish manufacturers. This is why a search for other, deeper explanations of the Irish failure to industrialise is called for.


.. Fewer But Richer 1850-11


The seventy years following the Famine witnessed enormous changes in Irish society and saw the emergence of the modern economy. Over this period per capita income more than doubled, while the population fell by a third. A rural middle class emerged, replacing landlords and squeezing out rural labourers. Within agriculture tillage declined, and the production if dry cattle increased. The North-East became industrialised.


Population


The dominant demographic fact of the period is that population declined, from 6.6 million in 1851 to 4. million by 16. Without emigration the population would have risen, by about one per cent annually in the 1860’s, and by half a per cent annually at the turn of the century. Over the period 180 to 145 an estimated 4.5 million Irish emigrated to the US, comparable in magnitude to the flows from Italy, Austria and Britain.


Growth and Incomes


Astonishingly, between 1840 and 11 per capita incomes in Ireland rose at 1.6 per cent per year, faster than any other country in Europe. Where Irish incomes averaged 40 per cent of the British level in 1840, this proportion had risen to 60 per cent in 11. Part of the explanation of this is statistical. The Famine, and subsequent high levels of immigration, removed a disproportionate number of the very poor; even if those who remained experienced no increase in their incomes, average income would have been higher than before.


Income also rose because of dramatic increases in output per worker. The North-East became highly industrialised and in the rest of the country agricultural productivity rose rapidly. Textiles and shipbuilding, as well as their upstream activities such as the manufacture of boilers for linen mills and rope-making and engineering for Harland and Wolff, increased dramatically at the end of the 1th century.


It is sometimes wondered why the North-East industrialised while by and large the rest of the country did not. There was no lack of capital, and indeed from the 1880’s on Irish residents were net lenders of capital to the rest of the world. The primary school system expanded rapidly, enrolling 8,000 in state-subsidised schools in 1841, and 1,07,000 by 1887. Enterprise may have been lacking, although clearly not in the Lagan valley. Some ascribe the growth of industry in the North-East to the role of the Protestant ethic, however industrial development in Europe was not in general tied to Protestant areas. Government investment had a small role, although the efforts of the Belfast harbour board to clear a deepwater channel and reclaim dockland for industrial use turned out to be a key factor in attracting shipbuilders. Perhaps the explanation rests on chance, the idea that once Belfast grew as an industrial centre, accumulating skills, capital and infrastructure, then it became an increasingly attractive location for further investment.


Distribution of Income and Wealth


As late as 1870, 7 per cent of all land was owned by landlords who rented it out to others to farm. Just 750 families owned 50 per cent of the land in the country. However, between 1870 and 15 the landed proprietors ‘surrendered their power and property’ in one of the most extensive, and most peaceful, land reforms in history.


The Land League maws founded by Michael Davitt, and forged a link with Parnell and the Irish party in parliament. Their efforts resulted in the Land Act of 1881, which established land courts to hear rent appeals. Further efforts prompted legislation which provided tenants with government loans with which to purchase their land. Under the Ashbourne Act of 1885 and the Wyndham Act of 10 nearly 400,000 tenants bought their land. By 117 almost two-thirds of tenants had acquired their holdings.


In 1841 1. million classified themselves as ‘farm servants and labourers’; by 111 the number had fallen to 0. million. Despite problems of definition, it is generally accepted that this period saw the virtual disappearance of the hired labourer from Irish agriculture. Not only did many farm labourers die during the Famine, but they were particularly prone to emigrate, as wages were batter elsewhere


The distribution of income can be considered in other dimensions too. Protestants maintained their share of national income. This largely reflected the growth of the industrial North-East, which was dominated by Protestant interests, and the fact that Catholics were more likely to emigrate (and more died in the Famine). The small towns stagnated, and so did Dublin until late in the century. Dublin’s tenement slums were notorious, and probably contained a third of the inner city population. In 110 the average weekly earnings of a family in Dublin were between a quarter and a third lower than in Britain. In contrast to the rest of the country Belfast and Derry grew rapidly. Real wages in Belfast trebled in the sixty years from 1850. The zenith of Belfast’s prosperity came during and immediately after World War I, with a boom in shipbuilding and engineering. Another cleavage was apparent between the poorer western fringe and the rest of the country.


.4. Conclusion


The significant events of Irish economic history have been marshalled to support a number of different interpretations.


Nationalists emphasise the ways in which the links between the Irish economy and Great Britain have worked to Ireland’s detriment. Writers in this vein have stressed the damage caused by the plantations, the Navigation, Cattle and Woollen Acts, the solid growth during the years of Grattan’s parliament, the lowering of tariffs in the years after the Act of Union, the ineffectiveness of relief efforts during later years of the Famine, and the costs of Ireland’s inability to protect its industry from British goods during the second half of the nineteenth century. This approach has typically been used to lead to the conclusion that Ireland would be better of economically with independence.


Marxists stress the role of the conflict between different classes within the country. Thus, for instance, the Famine and subsequent emigration swept away the greater part of the rural proletariat, paving the way for the emergence of a rural bourgeoisie, which in due course wrested control over the land from the aristocracy. In this view the labouring class, whether agricultural or industrial, never achieved enough strength to effect significant social or economic change, and the indigenous capitalist class failed in its mission of creating a dynamic industrial base.





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