David McCullagh is a journalist and author. A graduate of University College Dublin where he studied history and politics – McCullagh has a PhD in politics – he was RTÉ News Political Correspondent for 12 years before being appointed presenter of Prime Time in 2013. McCullagh has written two books – The Reluctant Taoiseach, a biography of John A. Costello (Gill and MacMillan, 2010) and A Makeshift Majority, a history of the first Inter-Party Government (IPA, 1998) and he recently returned to UCD to record a 6-part podcast series on the life and career of John A. Costello specially for History Hub.
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Episode 6 – Second Term (Ep 6/6)
Transcript: Second Term (Ep 6/6)
The Second Inter-Party Government has a reasonable claim to being the worst Government in the history of the State. Which, when you think about the competition, is quite a claim to make.
But I think it’s a fair accusation, not because the coalition failed to deal with the economic crisis facing it – but because the Government, and especially Taoiseach John A. Costello, knew what needed to be done, but failed to act until it was too late.
One of the main problems was protection. The Control of Manufactures Act, introduced by the new Fianna Fáil government in 1932, was a creature of its time. It prevented foreign investment by insisting that firms by Irish-owned, and was a vital part of the attempt to make Ireland self-sufficient.
Whether it worked in the 1930s – when protectionism was all the rage internationally – is debateable; by the post-war period, it was clearly past it’s sell by date. The lack of competition left consumers paying inflated prices for inferior goods; the lack of reciprocal trade agreements prevented the growth of new export oriented industries; and in any case clever lawyers – like John A. Costello’s old pal Arthur Cox – were able to find loopholes to allow foreign capitalists get what they wanted from Ireland.
Costello recognised this during his first term as Taoiseach. The Minister for External Affairs, Sean MacBride, was pushing for a commercial treaty with the United States, but Dan Morrissey, and more particularly his Department of Industry and Commerce, bitterly opposed any alteration to the existing regime of protection. Costello told an American Embassy official that the Control of Manufactures Act was “outmoded and outdated”, and that it was “as much humbug” as the External Relations Act.
But he well knew that any suggestion of change would be strongly resisted by protected Irish industrialists, and by Fianna Fáil’s Sean Lemass, who in Opposition claimed to believe that protection had to be – well – protected. In private, and especially when he was in Government, Lemass had different views, but politics is politics.
So protection stayed – although the first Inter Party Government could at least point to the IDA as one contribution towards economic progress. By the way, Lemass bitterly attacked the IDA when it was established – when he was back in Government, of course, it was a different story.
That Fianna Fáil Government, from 1951 to 1954, is also a serious contender for the title of worst government in the history of the state. Faced with a massive balance of payments deficit, Finance Minister Seán MacEntee introduced a viciously deflationary Budget in 1952. The Opposition, led by Costello, claimed this would be counter-productive, and that the balance of payments would correct itself. They were right on both points.
Costello also had positive ideas, delivered in an Ard Fheis speech and later published by Fine Gael as a pamphlet titled Blueprint for Prosperity. It called for investment, increased production, economic expansion, a Capital Investment Board, and changes to the Control of Manufactures Act.
Costello was elected Taoiseach again in 1954; his Tánaiste, Labour leader Bill Norton, took over the Department of Industry and Commerce; many of his Ministers were young and progressive. Surely he would move to introduce his Blueprint for Prosperity?
He didn’t; in fact, his Government did very little of anything. He claimed, apparently as a good thing, that they had “given the country quiet”; but what the country needed was a kick up the… well, let’s just say, the country needed a more dynamic approach.
Part of the problem was Norton, who had gone native in Industry and Commerce. In June 1954, shortly after returning to the Taoiseach’s office, Costello asked Industry and Commerce to examine changes to the Control of Manufactures Act. Norton replied in September that no changes were required, and warning that allowing uncontrolled access to foreign capital would be “a grave threat to existing and future industrial development”.
Some months later, when his private secretary mentioned that nothing had actually been done, the Taoiseach said that given the attitude taken by Industry and Commerce, “no further action was called for”. It was an extraordinary admission of helplessness by the Taoiseach.
The other problem was sitting in Merrion Street. Gerard Sweetman, Costello’s choice for the key Finance portfolio, was brilliant, but extraordinarily conservative: he was once described as having one of the most brilliant minds of the 19th Century.
When further problems emerged on the Balance of Payments, Sweetman adopted exactly the same approach as Sean MacEntee in 1952 – the approach that had been so strongly criticised by Costello in Opposition.
At the start of 1956, he insisted on introducing import levies and new taxes on consumer goods to choke off demand. The result, predictably, was more unemployment, and more emigration.
Emigration was a growing problem; in fact, it was about the only thing that was growing. On the 1st of June, 1956, the preliminary results of that year’s Census were released. The population was just 2.9 million, the lowest ever recorded. Despite the highest natural increase in population in 75 years, the State’s population had actually decreased by 66 thousand since the last census in 1951. People began to seriously question whether Ireland had a future.
The Suez crisis added to the misery; it was clear something had to be done. Health Minister Tom O’Higgins urged the Government that it was time to take action to reverse the slide.
At last – too late – Costello came up with the goods.
His policy initiative, the Policy for Production, was outlined in a speech in October 1956 to TDs supporting the Government. Outlining his plans to the Cabinet, he observed that “The people want a tonic and unless we can give it to them there can be nothing but disaster.”
The proposals included a 50 per cent tax break on profits from extra exports; grants for new factories; tax relief for hotels; a campaign to encourage savings; a Capital Investment Committee; and, he stressed, Ireland would welcome capital investment from abroad.
Perhaps most important of all was his attempt to shift the mood of the country. Pessimism, he said, was neither warranted nor helpful; faint hearts were no use in solving immediate problems or ensuring future prosperity; the people could face the future with calm resolve, with confidence, and with hope.
There was a standing ovation from the assembled TDs in the Engineer’s Hall in Dawson Street. Even Sean MacBride, the somewhat detached leader of Clann na Poblactha, was impressed – it was a pity it had taken so long, he said, but it was better late than never. Jim Larkin Junior, seen as the conscience of the Labour Party, praised it as a “positive, constructive programme” and urged early implementation.
At last, the Government – and especially the Taoiseach – seemed to have overcome the inbuilt conservatism of the system; at last, a plan was in place; at last, there appeared to be some hope of stopping the Irish from disappearing.
And then, along came the IRA.
It’s important to remember that MacBride, increasingly disillusioned by the Government’s performance, had been brought back on board by Costello’s October speech. In November, he wrote to the Taoiseach with what he called some brief suggestions about economic policy. His “brief” suggestions ran to nine pages, but he ended the letter by offering to get more information if required, telling Costello: “I shall be entirely at your disposal”.
As late as the 12th of January, 1957, MacBride was sending advice to Costello on how to cope with unemployment. There was no apparent reason for Costello to have any fears about MacBride’s continued support – but that was about to change, and the change had nothing to do with economic policy.
The political dynamic was changed by the opening of the IRA’s Border Campaign. On December 30th, 1956, a 23 year old, Catholic, RUC constable, John Scally, was killed in an IRA raid on the barracks in Derrylin in County Fermanagh.
Two days later, in the same county, IRA men Sean South and Fergal O’Hanlon died during an attack on the Brookeborough RUC barracks.
Costello addressed the nation on Radio Éireann on Sunday the 6th. Three young Irishmen had died, he said, and the Government was resolved to use the Gardaí and the Army to prevent further attacks.
Clann na Poblachta was only one step removed from the IRA, and its Executive was dominated by republican activists. In the heat of the moment, they insisted that the party’s three TDs put down a motion of no confidence in the Government. MacBride warned that the IRA would be worse off if de Valera got back into power, but he was overruled.
The party’s motion of no confidence stressed the economy, but nobody was fooled, particularly when the Clann Ard Comhairle accused the Government of “acting as Britain’s policeman against a section of the Irish people.”
Costello was always bitter that the election was provoked before his new economic policy had had a chance of working; with more time, he – rather than Ken Whitaker – might have been remembered as the architect of Ireland’s economic rebirth.
But then, if he had acted in 1954 instead of 1956, if he had implemented the policies he knew to be necessary before he was forced into it, the Border Campaign wouldn’t have made any difference.
The sad reality is – as we have found in recent years – that it’s only when the depths have been plumbed, that vested interests can be tackled and necessary reforms introduced. It may have been the worst government in the history of the state, but it holds lessons for all of us.
Image: The Second Inter-Party Government, 1954-1957 (via ‘The Irish Labout Party’ on Flickr).