In his article ‘The Irish Economic Prospect’, Patrick Lynch MRIA presents a comprehensive overview of the issues that faced the Irish economy as it stood in 1955. Many we are familiar with from our own time – the Irish as economic migrants, the position of foreign investment in governmental financial planning, and the primacy of the agricultural and tourism sectors to the Irish economy.
A staunch Keynesian, Lynch held the position that the state held a positive role in the promotion of economic and social development, while simultaneously warning against seeking economic growth for the sake of economic growth alone. For further information, we invite you to visit Patrick’s entry in the Dictionary of Irish Biography.
Patrick Lynch, ‘The Irish Economic Prospect’, Studies: An Irish Review, Vol. 44, No. 173 (Spring, 1955), 5-16. JSTOR link: https://www.jstor.org/stable/30098600
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The political soothsayers of the early 1920’s have, indeed, been confounded: the Irish have proved that they can govern themselves; political stability has emerged from disruption and disorder. But economic performance has not kept pace with political and administrative achievement.
The findings of successive Commissions have isolated the serious problems of the Irish economy; the Population Commission, more particularly in its second minority report, has done so with unusual clarity. The statisticians have assembled the facts; the experts have made their diagnoses; only the cure remains elusive. But many popular assessments of the economic condition are short-term ones; trends are often judged as encouraging only because they have been tested by arbitrary criteria; comparisons are invalidated by the use of a money standard which, itself, has varied over the period in which the comparison is made; attention is sometimes concentrated on sections of the economy in which expansion has taken place and diverted from paralysis or contraction elsewhere.
Politically, it may be useful to measure the results of the farmer’s efforts in money, but from the viewpoint of national economics monetary measurements can be treacherous. The growth of farm income is not a reliable guide to the volume of goods produced…This intractability of agricultural output is a threat to the nation’s standard of living; agricultural exports in one form or another account for over three-quarters of total exports, the proceeds of which, together with invisible earnings, provide the normal means of meeting current foreign payments. The improvement of agricultural output with a view to increasing the volume of exports is, therefore, the most urgent and formidable task facing the Irish economy.
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The intractability of agricultural output and exports should not lead to placing unjustified hopes on the export possibilities of manufacturing industry…Any significant expansion of industry must depend on the extension of the home market as a result of greater agricultural prosperity…Since the Treaty the value of net industrial output has more than quadrupled and the volume is now more than two and a half times as great as it was in 1926. This progress is certainly satisfactory for a country at a comparatively early stage of industrial development; but there are signs already of the limited capacity of the home market to absorb any further increase in industrial expansion. The development of industry has had a marked effect on the pattern of Irish international trade: imports which formerly consisted mainly of finished goods, now contain a growing amount of raw materials and capital goods which are used in the manufacture of consumption goods previously purchased abroad. The export trade in manufactured goods and raw materials, which represented about 8 per cent of total exports before the war, has increased by nearly two-thirds, but even this proportion is still a comparatively small part of total exports.
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The capacity to give employment rather than to raise productivity has been a feature of Irish industrialization especially in the decade before 1939 when productivity was consciously sacrificed to the social advantage of “creating work”. Between 1931 and 1939 industrial production rose by 48 per cent and industrial employment by 62 per cent. During the rapid period of industrial expansion since the war productivity improved: between 1946 and 1953 production increased by nearly 60 per cent and its employment content by about 30 per cent. Industrial growth in Britain over the same years was 43 per cent and the increase in the numbers employed in manufactures only 15 per cent. Thus Irish manufacturing industry faces a dilemma: if it is to equip itself to compete in export markets productivity must be increased; yet efforts to raise productivity may well impair its capacity to give employment and to help significantly in reducing emigration…
…It is often said “that any very considerable reduction of the rate of emigration must depend on the growth of industry.” But in one instance, at least, this statement has been prudently qualified by a recital of obstacles whose removal presents many difficulties. For over a quarter of a century industrial development has been helping to reduce emigration; but this social achievement of industry must be set in a wider economic context: the total number of persons at work in Ireland in 1951 was only 12,000 or 1 percent more than in 1926.
There was a net increase in non-agricultural employment of 159,000 and a decline of 147,000 in agricultural employment. The scope for employment on the land was falling; employment in other occupations was increasing; the total number of persons employed remained almost stationary; and all the time emigration continued at the rate of about 24,000 persons a year. The rate of industrial development was altogether insufficient to absorb the over flow from agriculture as well as the natural increase in population. In a period of unprecedented progress from 1946 to 1951 the economic system created new employment for only 800 persons a year: it offered jobs to one out of every thirty persons available for employment. Unless there are unforeseen developments of startling dimensions further industrialization cannot contribute much immediately to foreign trade or, indeed, to the problems of unemployment and emigration…
…To preserve and, if possible, to raise the standard of living an increase in foreign earnings must be secured…there is another revenue earner-the tourist industry, at present third in importance in the list of sources of external income. Tourism is an industry which makes comparatively little demand on imports of raw materials and it is widely recognized by foreign experts as one for which this country has advantages…The Irish Tourist Association has long been doing useful and constructive work, but it is only since the war that the potentialities of tourism as a national industry have been officially recognised. Even if unrecognized, however, tourists have always been an important source of revenue, and if their present contribution to the nation’s income, as shown in the balance of international payments tables, is a reliable guide, their significance must have been conservatively estimated in the decades before the war: in 1931, for instance, the income from tourism was shown as only £400,000!
In recent years there has been a continued decline in the tourist traffic. That decline is a matter of concern for the economy as a whole no less than for the transport organizations and the catering industry. The improvement in the food situation in Britain and the relaxation in practice of British regulations governing transfers of currency to the continent have diverted tourists who might otherwise have found it more economical to spend holidays in Ireland. This diversion of British tourists to other countries has been taking place in spite of incentives which, if effectively publicized, might have been expected to attract traffic here. Transport costs to Ireland from Britain are lower than those to continental countries; the rates across the Irish sea are little more than half those for journeys from Britain to the Continent. Such incentives, however, and the absence of language difficulties have been insufficient to offset the greater attractions of the continent for British tourists. In spite of expensive state assistance tourist traffic has failed to expand; the development of a potentially great industry requires more than the supervision of hotel standards and the publication of well-produced brochures…
…The possibilities of tourism in Ireland are clearly considerable. With efficient organization and imaginative promotion the responsible authorities should be able to check the recent decline in receipts and increase the earning capacity of a promising and remunerative industry.
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Since the Treaty, Ireland would have had difficulty in paying its way but for past saving and current emigration. To maintain its standard of living, output must now be raised through increased economic investment. This will call for the sacrifice needed to raise the level of domestic saving. The level of voluntary saving did rise in 1952 and 1953 but the volume available for investment still remains inadequate. If it cannot be increased substantially, the sacrifice may have to be imposed compulsorily through a budget surplus obtained by still heavier taxation; Irish economic progress, however it is to be financed, depends on the availability of an increasing volume of saving.
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