Concurrent Irish Perspectives on the Great Depression

This is about the 1930s!  UCD historian Mary E. Daly and I have just concluded a draft of our paper examining how the Great Depression was perceived in Ireland at the time.  The paper is purely historical and makes no attempt to draw any parallels with the current situation.  It might nevertheless be of interest to some readers.  It is available here.

56 replies on “Concurrent Irish Perspectives on the Great Depression”

Professor Barry,

Thank you for your fascinating paper. What a hot-button surprise to learn that way back in the 1930s the Austrian school had a couple of missionaries as far west as Ireland! And to think that approx. 70 years later it was the Austrianist ‘tin foil hat brigade’ who were the first to predict Great Depression II. Krugman, DeLong et al. sneered. But it was the ‘wackos’ at the Ludwig von Mises Institute and the Peter Schiffs and Mike Shedlocks who got it right:

http://www.youtube.com/watch?v=EgMclXX5msc&feature=player_embedded

Now back to your paper …

@ CG

Krugman rightly warned about deregulation, so I don’t know what your beef is there. I don’t follow what DeLong says, so no idea on that one.

@Carolus Galviensis

What about Nouriel Roubini? Or George Soros? Neither subscribes to the “Austrian” viewpoint; as a plus, the kind of policies they would suggest wouldn’t turn a financial crisis into a general depression.

The problem with the financial crisis in general and Ireland’s role in particular was not that it took genii to forecast it, it was the blizzard of misinformation produced by vested interests, economists lack of faith in their own discipline and a near universal incapacity to hold an opinion without the support of some ideology, movement, religion, party or whatever.

Most money types share the same prejudices. When it came down to it, all the analyses and projections served one purpose only: to reinforce those prejudices. Contrary data was ignored. For years the USA, Ireland, Spain etc were like Wile E Coyote after he ran off a cliff. As soon as they realised there was nothing holding them up, they were bound to fall.

A fascinating review. It’s always funny to see details like the govt revenue figure for 1931….21.2 million pounds.

The discussion of abandoning the sterling link in the depression was a new one to me too.

Austrians are the most accurate, but Steve Keen is refining their model further. Economic historians are of course far better than any school.

The situation is simple: eventually, credit expands so that all who can borrow have borrowed and none are borrowing any more. Their possible revenue eventually reaches the risk’gain limit, but before that, the informed can see what is happening.

Let us keep this a secret and teach it to our grnad children who can make use of it!

http://finance.yahoo.com/news/Report-Chinas-banks-stop-real-apf-1420556531.html?x=0&sec=topStories&pos=3&asset=&ccode=

This might be George Ure’s tipping point for the second round of insolvency?

“The collapse in emigration may have contributed, through supply-side pressures, to an overall increase in employment.”

This is aka “a nation’s true wealth is its people”!!!!!!! GFF please note, you bunch of #%#&&##%^*%^$*$@#$@^@^@$%$%&#%&#$!!!!!

It appears that “concurrent” went out of use immediately after the report!!!

We would use “contemporary”?

Fascinating, but way too short! George Duncan puts it well that vested interests bury the truth about what needs to happen in a “slump” as he calls it. Johnston was correct then, i arguing for capital works, a remedy that can be used this time around only once prices have fallen adequately in respect of land etc.

Ireland appears to have gotten off very lightly then, compared to what it must now undergo?

De Valera was insightful, as depressions are now acknowledged to destroy whole occupations as the malinvestments of the past concomitant upon the bubble, tended to subsidize old tech and at the expense of new tech, depriving it of the capital that it requires. The new tech takes off, once the factors have reached low levels and as scarce capital recognizes that a yield is possible.

Three cheers for the Spanish $%#$%&#$&#$!

Joseph Connolly was prophetic and correct in arguing for new policy to develop industry. It appears he was innovative in arguing for this. Pity FF abandoned this approach for gombeenism. FG being useless presumably. A lot of lip service to independence, as the idea of independant currency is a step too far! Blythe appears to be unaware of the concept of accrual in accountancy! Clearly his officials are unburdened also.

McEntee appears to have been bold in pushing extra state spending against some opposition. An early adopter of Keynes? Keynes has his place, the man was a genius. Krugman et al misuse his policies. Ireland’s economy in the thirties required development and thus structural changes were defensible, if properly invested. Quite a daunting task! The UK gained factories/brewery from Ireland due to protectionism!

“the classical optimality argument in favour of free trade is valid only when the factors of production are fully engaged” G Duncan and agreed by implication by Keynes!

Very true then and now! Economic warfare trumpets free trade, neglecting this.

“and, above all, let finance be primarily national.” Keynes

A supporter of the Oxford comma after “and”! That is the main point that warfare is made so easy when others enslave with debt! The remedy for that is to default!!!!

Thanks!

@Pat Connolly

Austrians are the most accurate, but Steve Keen is refining their model further.

Sorry, forgot ‘Debtwatch’ — but SK at least respects the Austrian school. Hard to put him in any specific category other than ‘wow if only we’d listened to that guy five years ago’.

http://www.debtdeflation.com/blogs/

@EWI
Krugmann dissed the Austrians as adherents of the ‘phlogiston’ theory etc. Cheap hits are his forte. I’ll return to DeLong on some other occasion.

@Adrian Kelleher
OK there were a number of insightful non-Austrianists, point taken.
Can hardly disagree with the common sense enshrined in your second and this paragraphs. Spot on, in other words.

Money was defined by weight at the time… The GD was in order to redefine money in order to loosen reserve policies… so to control economies… so to rob people.

“President Roosevelt closed down all the banks throughout the
nation for an entire week, from March 6 to 13, with many banks
remaining closed even longer.8 It was a final stroke of irony that
Roosevelt’s only semblance of legal ground for this decree was the
Trading with the Enemy Act of World War I! Restrictions against
so-called “hoarding” were continued afterward, and much hoarded
gold returned to the banks following a Federal Reserve threat to
publish a list, for full public scorn, of the leading “gold hoarders.”9
It soon became clear that, with the advent of the Roosevelt administration,
the American gold standard was doomed.”

Interesting to note the reference to university economists back then:

Fanning (1938) notes their ferocious hostility to Fianna Fail …, which was “shared with other university economists of the generation”.

Plus ca change, plus la meme chose.

Nothing new about Morgan Kelly.

Despite a further 78 years of ferocious hostility emanating from the same sources, that is based, not on economic policies or results, but on cultural factors, despite a further 78 years of daily predictions of imminent economic ruin, that is the product of that ferocious hostility, and not the result of any powers of analysis of economic statistics, the Irish people have ignored them totally. Fianna Fail has won 16 general elections since then, been in power for 60 of the 78 years since then, and is primarily, although not exclusively (FG have also played a part), responsible for the fact that the Irish economy is 16.5 times as large in REAL terms as it was then, a record no other western European country comes close to matching.

The present whipped-up phoney crisis is not about economics, but about trying to bring that 78-year era to an end, something that they have craved since the day it started in 1932. It will fail. Who now remembers the Morgan Kelly’s of those days? Who now remembers the economists who were ‘ferociously hostile to Fianna Fail’ back in the 1930s? No one. It will be the same this time.

@JtO

People remember well the trade war with the UK, 30 years of economic decline, barefoot children and mass emigration however

Autumn Journal by Louis MacNeice has some wonderful poetry that looks at 1938 FF Ireland from the perspective of an insightful Ulster protestant living in London.

@Adrian Kelleher

People remember well the trade war with the UK, 30 years of economic decline, barefoot children and mass emigration however

JTO:

Fantasy.

As the paper that Professor has posted shows, Ireland did realtively well in the 1930s. Then came World War 2, which FF ket us out of. Growth resumed post-war. One severe recession in late 50s, when inter-party government was in power. Almost continuous high economic growth since then, with a couple of brief interruptions, includin the one that lasted from 2007 Q4 to 2009 Q4.

If people were so upset at the trade war with the UK, why did they vote FF to power so often?

@JtO

Ireland’s economic performance: Agricultural economies were less badly hit by the depression because demand for agricultural products was less cyclical anyway. Plus the UK, our main export market even then, wasn’t so badly hit by the depression as it had spent most of the 20’s in the doldrums due to Churchill’s adherence to the gold standard.

Ireland’s aggregate economic performance from 32-59 was dismal, and most of it owed to FF policies. De Valera does get some credit for his last cabinet which prefigured Lemass’ first one.

FF’s electoral success: FF vs Blueshirts. Question answered.

Guys

Does anyone have any references which could give me a brief overview of the Austrian school.

I hear a lot about them…

@JtO
I don’t know if FF have been such a universal good, or if Irish economic performance was that fantastic.

Read much of O’Grada, or the first few pages of this book (http://books.google.com/books?id=zVHgO4-nkhkC) and it doesn’t seem as if Ireland was such a wonderful place to invest for most of the 20th century.

I have no idea what O’Grada’s views of FF are, but the financial statistics are not partisan in any case.

Niall

The Austrians try to describe the money machine we use today and for the past 2000 years or so. Romans did not print money, but they did debase currency! Inflation and deflation are crucial concepts.

I calls ’em “squeeze and release”. Credit as it is controlled at the moment, inevitably grows “out of control” (as the liars say!) and then the false credit based economy collapses, with debt deflation following.

Fabians called economics into existence and the US Fed tries to fight their tendencies, (they say!) so the left have massive influence on what governments and those who control governments, do. Those who control governments are the super capitalists who organize capital supply to capitalists and the banking system. You might say they are the “right”, but in fact these labels mean nothing. Their adherents change over time. As the super capitalists have other non money interests there are national differences in social policy, science and religious belief. To the extent that money can influence these, it does! The CIA/industrial complex in the USA reacted to the UK pop invasion with Laurel Canyon, establishing a new industry. Pop art was another invention of this group. All designed to copy/compete with others making money.

@Niall

The ‘Austrian’ approach — an American title mostly — is simply not held to be valid by the mainstream. In the crude terms, you have the Austrians on one end, the Keynsians on the other and the monetarists in between.

The Austrians reject Keynes outright. Most people regard Keynsian thinking as central to handling collapses in demand as caused by financial panics and the like, even if they reject the activist Keynsianism as was central to economic management in the 40s-70s.

Austrian economics isn’t really taught because it’s generally felt to be simply incorrect.

@Pat

Thanks.

Who says this is not a depression?

Answer: the clueless establishment economists who didn’t see GD2 coming in the first place.

They won’t recognise it until the sky falls in.

Niall
Essentially, all prices have been distorted, with those supported by credit the most affected and the most likely to fall too far. Wages etc will fall too, so pension shortfalls will not be so bad for anyone. Those who drank too deeply of the poison of debt however……

The rich have just had a civil war and the rest of us are casualties? Some of the rich will survive richer than ever, but many will not instantly equalizing to a small degree, income and asset distribution “more fairly”!

@Adrian

For the non-experts (i.e. 99.99% of the population), advanced economics is a number of black boxes.

What matters is: which black box makes the more accurate forecasts?

I think there the Austrians have a pretty clear lead.

@JTO.

The present whipped-up phoney crisis is not about economics.

The above remark is beginning to get personal especially to somebody working in the private sector.
There is nothing phoney about this crisis for hundreds of thousands of people.

There is an awful lot of ball being fired into the Fianna Fail backline today. Will they be able to get up the field and score?

“Herman Van Rompuy, president of the European Council, raised the stakes ahead of this evening’s showdown talks between finance ministers in Brussels. With Ireland and Portugal both on the brink of seeking a bailout, Van Rompuy warned that there is a serious risk of contagion spreading across the continent. “We’re in a survival crisis,” Van Rompuy said in a speech in Brussels. “We all have to work together in order to survive with the eurozone, because if we don’t survive with the eurozone we will not survive with the European Union.”

http://www.guardian.co.uk/business/2010/nov/16/ireland-bailout-government-says-no-need-to-panic

Carolus Galviniensis

Economics is deliberately made obscure. Economic history is readable and can demonstrate what actually happens. Read two or three descriptions of each event, remember that many try to deceive as to what happened! Read enough about events and patterns become apparent. I think you may agree?

A Kelleher and
Niall

Austrians describe what happens with money. The other schools are used by political combatants to justify tax cuts or state spending. No politician uses the Austrian school, because they say that credit creation inevitably distorts prices and that those closest to credit creation benefit most, as they get first dibs at the Ponzi scheme! Once Austrian school money theory is more widely known, people will shun those who say that Austrians are wrong.

@Pat Donnelly

You’ve neatly if inadvertantly hit the nail on the head.

During times of crisis like this, it’s only understandable that fringe theories come to the fore — Marxism will do as well as Austrian economics for that. During good times, Austrian economics survives thanks to the devoted attention of cliques of conspiracy theorists, ranging from the mild to the crazed. Roosevelt is the focus of any number of conspiracy theories relating to his taking the USA off the gold standard.

@Carolus Galviensis

That’s more than debatable. First of all, the Austrians do their sniping from the margins of policy and government; this leaves them freer from the “opinion managers” more closely involved with policy. Secondly, a great many non-Austrians predicted the crash. Thirdly and finally, the Austrians’ ideas were tested by history and found wanting. The gold standard was a disaster in ’29-’32.

@ Carolus Galviensis

Krugmann dissed the Austrians as adherents of the ‘phlogiston’ theory etc.

I know nothing about that. I have heard the term “goldbugs” used, though, of the people who believe in this sort of stuff (i.e. US Libertarians like Ron and Rand Paul).

@Adrian

Thirdly and finally, the Austrians’ ideas were tested by history and found wanting. The gold standard was a disaster in ‘29-’32.

A true Austrian would actually claim that their ideas are a priori truths and are untestable, since historical events can always be interpreted to fit the historian’s prejudices. In practice of course they are hard-headed empiricists.

As to the gold standard, let’s just say that the opinions of intelligent people differ. I haven’t a clue myself.

Thanks for your thoughtful comments anyhow.

@EWI

There are wacko libertarians and there are common-sense libertarians. I would contend that Ron Paul belongs to the latter category — the wackos tend to lose their deposits.

Rand? After Ayn? OMG.

Carolus Galviensis,

Rand Paul is not named after Ayn Rand … his first name from his parents was Randall.

Does not stop him from being wacko, though. And, no doubt, he corners the Objectivist vote.

I did not read the paper in great detail. I am not sure if it gets right the political represcussions of the Economic War.

I do have a certain bias from having grown up with two people who lived through the Economic War. Both my parents were from the middling-to-strong farmer class from different parts of the country. Both remembered the times with a mixture of horror and anger. I recall my mother talking about “farmers shooting animals they could not sell”. Certainly, the Economic War contributed to the prolongation of Civil War politics, as it seemed like De Valera’s vengance on a pillar of the Free State. Did Dev have any other choices?

@ Adrian Kelleher and Toby,

Thanks for the reminders of how tough the 1930s were. My father’s stories of the time were the prime motivating factor behind my interest in the subject. Times undoubtedly very bad for those in agriculture, particularly after the first few years, but I was surprised to find how well some other sectors performed. Income distribution across classes must have changed substantially, but of course no hard data on this.

@ others:
Re ‘contemporary’ versus ‘concurrent’, I’ve vacillated between the two but have gone for the moment with the somewhat more archaic one!

By Post Author

This is a sterling piece of work and I’m generally sparing of praise and frugal with superlatives.

It’s interesting that after 1933 and the end of prohibition, Irish distilleries allowed Scotch counterparts a relatively free run in the reopened US market.

Ford had 7,000 working in Cork in 1930; the nearest a modern FDI project has got to it is Intel.

I recall my father talking about a payment for calf skins as a sop to farmers by De Valera. He referred to it as ‘the skinning of the calves.’

Terence Dooley in Land for the People; The land Question in Independent Ireland, 2004, UCD Dublin, wrote: “In October 1933, the new Fianna Fáil government introduced its own extensive and complicated act, which provided the catalyst for record acquisition division statistics 1934-5 and 1935-6 and was very much as Patrick Hogan contended, a ‘political act’ that pandered to the small farmer and labouring classes in an attempt to secure votes. After the terms of the act became known, there was a rather dramatic growth in the number of Fianna Fail cumainn from 1,265 in 1932 to 1,679 in 1933. This growth was partly the result of more organized and sustained efforts by Fianna Fáil organizers in the rural constituencies but it also owed much to the stimulus provided by the 1933 Act and the widely held belief that one would have to be a member of a cumann in order to benefit from division.”

Existing farmers in Galway and Mayo who were Fianna Fáil supporters, were given prime land and subsidised housing in West Dublin, Kildare and Meath.

Emer Ó Siochrú wrote in her 2004 paper,Land Value Tax : Unfinished business: “It is astonishing to see just how much of the early State’s revenue – 5.4% in the early 1930s- was used to placate land hunger in rural areas to the relative neglect of pressing urban problems. This rural focus extended to providing subsidised housing for farm migrants from the West to the more fertile midlands and the rural labourer. Rural areas got more than ten times the social housing investment of urban areas. Local authority housing tenants moreover, were given the right to buy their house from the outset – a right only offered to urban flat tenants this year of 2004.”

Mary Harney’s family moved from a farm in Galway to West Dublin in the 1950s.

There would have been some justice in that Land Commission system if the vacated land was allocated to a labourer or ‘a cottage person’ as they would have been termed.

Someone told me in UCC that John Busteed used to often turn up at lectures drunk; that of course wouldn’t have been unusual in his day.

@ seafoid:
MacNeice is one of my favourites. Obviously too long since I read Autumn Journal; my main memories are of the sense of impending doom in Spain. Will reread. Thanks.

Also thanks to Michael Hennigan. Lots more work to be done on the 1930s. Confined to 8000 words for this paper. Hope to do something big on the land question sometime (over next decade!), but I’m generally with Bill Kissane, that the C19th/early 20th redistribution was the bedrock of democracy . Mary Daly’s book on the Dept of the Environment makes the same points as you’ve drawn above from Ó Siochrú.

By Post Author

@seafoid

Thanks a lot for the MacNeice recommendation. Now that we’re in the poetry corner, allow me to give you mine — one particularly fitting poem, I think, in the light of the second ‘Great Depression’.

It’s Oliver St John Gogarty’s ‘The Ship’, which I reproduce here below:

A ship from Valparaiso came
And in the Bay her sails were furled;
She brought the wonder of her name,
And tidings from a sunnier world.

O you must voyage far if you
Would sail away from gloom and wet,
And see beneath the Andes blue
Our white, umbrageous city set.

But I was young and would not go;
For I believed when I was young
That somehow life in time would show
All that was ever said or sung.

Over the golden pools of sleep
She went long since with gilded spars;
Into the night-empurpled deep,
And traced her legend on the stars.

But she will come for me once more,
And I shall see the city set,
The mountainous, Pacific shore —
By God, I half believe it yet!

BTW the poem ‘An Long’ which many of us learnt at secondary school is a translation by Padraig de Brun. The legend that it is an ‘Irish original’ still persists.

A wonderful article on a trip to Valparaiso and ‘An Long’ by John Mulholland (who also falls for the legend) in The Observer (2004):

http://www.guardian.co.uk/travel/2004/jun/06/chile.observerescapesection

Excerpt:

Come to paradise, said the poem. So I went
As a 13-year-old languishing under the grey, misty skies of Ireland – and Dublin in the Seventies was not the vibrant, continental city it is now – the poem swept me away on a tide of daydreams to a place of promise, sun, heat and light. A place that didn’t rain all those dark days. A place that wasn’t Ireland.

I never forgot that poem. The word ‘Valparaiso’ was so evocative, magical, rich in potential. It was years before I found out that it meant ‘valley of paradise’ but it didn’t matter because that’s exactly how it sounded to me.

The Brother read those lines in Gaelic as if he himself was swollen with a sense of lost opportunity, of missed boats, of a life half-lived. Sitting there listening to him I knew that, one day, I’d go to Valparaiso.

Full circle.

@ carolus and seafoid,

Many thanks for Valparaiso, which is beautiful. For heartbreak though, there are few cities to match MacNeice’s “Dublin”…

Grey brick upon brick,
Declamatory bronze
On sombre pedestals –
O’Connell, Grattan, Moore –
And the brewery tugs and the swans
On the balustraded stream
And the bare bones of a fanlight
Over a hungry door
And the air soft on the cheek
And porter running from the taps
With a head of yellow cream
And Nelson on his pillar
Watching his world collapse.

This never was my town,
I was not born or bred
Nor schooled here and she will not
Have me alive or dead
But yet she holds my mind
With her seedy elegance,
With her gentle veils of rain
And all her ghosts that walk
And all that hide behind
Her Georgian facades –
The catcalls and the pain,
The glamour of her squalor,
The bravado of her talk.

The lights jig in the river
With a concertina movement
And the sun comes up in the morning
Like barley-sugar on the water
And the mist on the Wicklow hills
Is close, as close
As the peasantry were to the landlord,
As the Irish to the Anglo-Irish,
As the killer is close one moment
To the man he kills,
Or as the moment itself
Is close to the next moment.

She is not an Irish town
And she is not English,
Historic with guns and vermin
And the cold renown
Of a fragment of Church latin,
Of an oratorical phrase.
But oh the days are soft,
Soft enough to forget
The lesson better learnt,
The bullet on the wet
Streets, the crooked deal,
The steel behind the laugh,
The Four Courts burnt.

Fort of the Dane,
Garrison of the Saxon,
Augustan capital
Of a Gaelic nation,
Appropriating all
The alien brought,
You give me time for thought
And by a juggler’s trick
You poise the toppling hour –
O greyness run to flower,
Grey stone, grey water,
And brick upon grey brick.

By Post Author

@Frank

Many thanls. MacNeice also wrote a wonderful poem about my own native city:

The poet was back in Galway again on that fateful day September 3 1939; the day war was declared against Germany. The poem he wrote that day, The Crossbones of Galway, is now on a plaque on Nimmo’s Pier.

[…]

O the crossbones of Galway

The hollow grey houses,
The rubbish and sewage,
The grass-grown pier,
And the dredger grumbling
All night in the harbour:
The war came down on us here.

Salmon in the Corrib
Gently swaying
And the water combed out
Over the weir
And a hundred swans
Dreaming on the harbour:
The war came down on us here.

http://galwayhistory.info/index.php?option=com_content&view=article&id=189:fr-rhatigan-strikes-a-blow-for-rome&catid=36:galway-people-and-families-&directory=1&Itemid=1&lang=en

@Carolus Galviensis:
“A ship from Valparaiso came ….”

The romance is slightly lessened by the realisation that it may have been carrying a cargo of bird droppings.

bjg

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