3. Cumann Na nGaedheal and the Economy

Many students do not favour this topic, but it is important within the unit, so it always helps to have a fair idea of how Cumann Na nGaedheal operated and what its policies were, both at home and abroad. This selection of key notes deals with its economic policies.

---

Cumann na nGaedheal's Economic Policy: Abandoning Protectionism and Promoting Laissez-Faire

• Cumann na nGaedheal, led by W.T. Cosgrave, adopted a conservative and cautious economic policy during their time in power from 1922 to 1932.
• Their approach was characterised by the abandonment of protectionism and the promotion of a laissez-faire economic model.
• This strategy reflected the government's commitment to creating stability and confidence in the new Irish Free State, which was recovering from the Civil War and still facing considerable economic challenges.
• Cumann na nGaedheal did not favour protectionism, which involves imposing tariffs and restrictions on imports to protect domestic industries.
• Instead, they believed a free-market approach would better integrate Ireland into the global economy and encourage foreign investment.
• The government maintained low taxes and minimised state intervention in economic matters, trusting that the market forces would drive economic growth.
• Cumann na nGaedheal's policies aimed to maintain fiscal discipline and a balanced budget, which they believed were essential for gaining international credibility and attracting investment.
• They focused on stabilising the currency, controlling public spending, and ensuring that the Irish Free State met its financial obligations, particularly the payment of land annuities to Britain.
• While these policies helped to stabilise the economy, they were also criticised for not addressing the underlying economic issues such as unemployment, poverty, and the needs of small farmers.

The Ultimate Financial Agreement of 1926 and Currency Act of 1927

• One of the key economic challenges Cumann na nGaedheal faced was land annuities—payments that Irish farmers were required to make to the British government as part of the agreements reached under the Land Acts of the late 19th and early 20th centuries.
• These payments were a source of tension between Ireland and Britain, as many in Ireland viewed them as an unfair burden on the newly independent state.
• The Ultimate Financial Agreement of 1926 was an important milestone in addressing these financial disputes.
• This agreement, reached between the Irish Free State and Britain, aimed to settle outstanding financial obligations, including the land annuities.
• Under the agreement, the Free State agreed to continue making the annuity payments but at a reduced rate.
• In return, the British government agreed to cancel certain debts and payments owed by the Free State, providing some relief to the struggling Irish economy.
• This agreement helped to ease tensions between the two governments and ensured that the Free State could maintain a stable financial footing.
• In addition to resolving financial disputes with Britain, Cumann na nGaedheal also took steps to stabilise the Irish currency.
• The Currency Act of 1927 established the Saorstát Pound as the national currency, which was pegged to the British Pound at par value.
• This move was intended to instil confidence in the new currency by linking it to the stability of the British Pound, which was a well-established currency in international markets.
• The Currency Act also created the Currency Commission, which was responsible for issuing the new currency and managing its circulation.
• The Commission was designed to operate independently of the government, ensuring that the currency would be managed based on sound financial principles rather than political considerations.
• These financial measures were part of Cumann na nGaedheal's broader strategy to build a stable, credible, and conservative economic foundation for the Irish Free State, prioritising international recognition and financial stability over more radical economic reforms.

Cumann na nGaedheal's Approach to Agriculture and Farms

• Agriculture was the backbone of the Irish economy during Cumann na nGaedheal's time in power, with the vast majority of the population involved in farming.
• Recognising the critical importance of agriculture, the government focused on policies that aimed to stabilise and support this sector.
• However, their approach was often conservative and cautious, reflecting their overall economic philosophy.
• The government's primary objective was to modernise Irish agriculture and improve productivity without resorting to drastic state intervention.
• Cumann na nGaedheal sought to achieve this by promoting agricultural education, encouraging the use of modern farming techniques, and supporting the development of agricultural cooperatives.
• These cooperatives played a vital role in helping farmers pool resources, access markets, and increase their bargaining power, particularly in the dairy industry.
• One of the key initiatives was the establishment of the Agricultural Credit Corporation (ACC) in 1927, which provided loans to farmers for land improvement, the purchase of equipment, and other agricultural needs.
• The ACC aimed to facilitate access to credit for small and medium-sized farmers, who often struggled to secure loans from traditional banks. This was part of the government's effort to modernise agriculture and make it more competitive.
• Despite these efforts, Cumann na nGaedheal's agricultural policies were often criticised for not going far enough to address the deep-rooted problems faced by small farmers.
• The government's emphasis on fiscal conservatism and its reluctance to engage in protectionism meant that many farmers continued to struggle with low prices for their produce and high levels of debt.
• The government also faced criticism for failing to implement land reforms that could have redistributed land more equitably, particularly in the west of Ireland, where many smallholders lived in poverty.
• Moreover, the government's decision to continue paying land annuities to Britain was deeply unpopular among farmers, who viewed these payments as an unjust burden.
• This issue became a focal point of opposition to Cumann na nGaedheal, particularly from Fianna Fáil, which would later use the land annuities controversy as a key part of its platform when it came to power in 1932.
• Overall, Cumann na nGaedheal's approach to agriculture was marked by a desire to modernise the sector and improve productivity, but their policies were limited by their conservative economic philosophy and their commitment to maintaining financial stability.
• This approach helped to lay the groundwork for future agricultural development, but it also left many farmers dissatisfied and struggling to make ends meet.

The Role of Minister for Industry Patrick McGilligan

• Patrick McGilligan, who served as the Minister for Industry and Commerce in the Cumann na nGaedheal government, played a crucial role in shaping the industrial and economic policies of the Irish Free State.
• Appointed to the position in 1924, McGilligan was a strong advocate for economic modernisation and was instrumental in several key initiatives aimed at industrial development during a period of significant economic challenges.
• McGilligan's tenure was marked by his commitment to a laissez-faire economic approach, which aligned with the broader economic philosophy of Cumann na nGaedheal.
• He believed that minimal government intervention in the economy would encourage private enterprise and attract foreign investment, which was vital for the nascent Irish Free State.
• Under his leadership, the government pursued policies that favoured low taxation, fiscal prudence, and the promotion of free trade.
• One of McGilligan's significant contributions was his support for the Shannon Scheme, an ambitious project to harness the River Shannon's hydroelectric potential.
• McGilligan recognised the importance of electrification for Ireland's industrial development and worked tirelessly to secure the necessary funding and support for the project.
• His efforts were critical in bringing the scheme to fruition, which in turn had a lasting impact on Ireland's infrastructure and economic growth.
• McGilligan also focused on developing the country's transport and communication networks, which were essential for supporting industry and commerce.
• He championed the road network's expansion and rail transport improvements, which facilitated the movement of goods and people across the country.
• His policies laid the groundwork for future industrial expansion, although they were often criticised for not addressing the immediate needs of the struggling rural economy and for being too reliant on foreign capital.
• Despite these criticisms, McGilligan's tenure as Minister for Industry and Commerce was characterised by a vision for modernising Ireland's economy, and his work had a lasting influence on the country's industrial landscape.

The Shannon Scheme and What It Was

• The Shannon Scheme was one of the most ambitious and transformative infrastructure projects undertaken by the Cumann na nGaedheal government in the 1920s.
• Officially known as the Ardnacrusha Hydroelectric Scheme, it aimed to harness the power of the River Shannon to generate electricity on a large scale.
• At the time, this project was not only the largest engineering undertaking in Ireland but also one of the most significant hydroelectric projects in the world.
• The idea for the Shannon Scheme was born out of the need to modernise Ireland's energy infrastructure, which was crucial for industrial development and economic growth. Prior to the scheme, Ireland relied heavily on imported coal for energy, which was expensive and unsustainable.
• The Cumann na nGaedheal government, particularly under Minister for Industry and Commerce Patrick McGilligan's leadership, saw the River Shannon's potential as a source of renewable energy that could power the nation's industries and homes.
• Construction of the Shannon Scheme began in 1925 after the government contracted the German engineering firm Siemens-Schuckert to design and build the plant.
• The project involved the construction of a massive dam and a power station at Ardnacrusha, near Limerick. The dam redirected the flow of the Shannon, allowing water to be channelled through turbines to generate electricity.
• At its peak, the project employed over 5,000 workers, and it required the use of advanced engineering techniques and machinery, much of which was new to Ireland.
• The Shannon Scheme was completed in 1929, and it marked a major milestone in Ireland's economic development.
• The hydroelectric plant at Ardnacrusha had the capacity to generate more electricity than the entire country had previously produced, providing a reliable and relatively cheap source of power.
• This had a profound impact on both urban and rural areas, facilitating the electrification of homes, businesses, and factories.
• The success of the Shannon Scheme demonstrated Ireland's ability to undertake large-scale infrastructure projects and was a symbol of the country's modernisation efforts.
• It also provided a significant boost to the national economy by reducing reliance on coal imports and creating opportunities for industrial expansion.
• The scheme is still regarded as a landmark achievement in Irish history, representing the early efforts of the Free State to build a modern and self-sufficient economy.

Economic Challenges Faced by the Cumann na nGaedheal Government (1928-1932)

• Despite the achievements of the Cumann na nGaedheal government, particularly in stabilising the new Irish Free State and modernising its infrastructure, the period from 1928 to 1932 was marked by significant economic challenges that strained the government's resources and tested its policies.
• One of the most pressing challenges was the global economic downturn following the Wall Street Crash of 1929, which triggered the Great Depression.
• Although Ireland was not as heavily industrialised as other nations, the economic downturn had a severe impact on its economy.
• The demand for Irish agricultural exports, particularly in Britain, which was Ireland's largest trading partner, plummeted. This decline in exports led to lower prices for agricultural products, which directly affected the income of Irish farmers, who made up the majority of the population.
• In response to these economic pressures, the Cumann na nGaedheal government, adhering to its conservative economic principles, continued to pursue fiscal austerity policies.
• The government maintained low levels of public spending and avoided borrowing, fearing that increased debt would undermine the Free State's financial stability.
• However, these policies, while maintaining fiscal discipline, did little to alleviate the economic hardship faced by many Irish people. Unemployment rose, and living standards for the rural population, in particular, deteriorated.
• Another significant challenge was the continued payment of land annuities to Britain, which was a source of growing resentment among Irish farmers.
• The annuities were payments that Irish farmers were required to make as part of the settlement of land purchases from British landlords, and many saw these payments as an unjust burden on the Free State's economy.
• The issue became a focal point of political opposition, particularly from Fianna Fáil, who argued that the money should be used to support Irish farmers rather than being sent to Britain.
• Political instability and social unrest compounded the economic difficulties. The government faced increasing criticism for its economic handling, particularly from Fianna Fáil and other opposition groups.
• Many saw the government's reluctance to implement protectionist measures, which could have shielded Irish industries from foreign competition, as a failure to address the country's immediate needs.
• By 1932, the Cumann na nGaedheal government was facing a public increasingly dissatisfied with its economic policies and the growing influence of Fianna Fáil, which promised more aggressive economic reforms and a focus on self-sufficiency.
• The culmination of these challenges contributed to Cumann na nGaedheal's defeat in the 1932 general election, marking the end of their decade-long governance and the beginning of a new era under Éamon de Valera and Fianna Fáil.