Fianna Fáil – After the Fall: Restoration or Oblivion?

Historian; his latest book, 'Sins of the Father: Tracing the Decisions That Shaped the Irish Economy', is published by History Press Ireland

The image of Fianna Fáil as ruthless and politically brilliant has a long tradition within Irish journalism. The rise of the ‘mohair suits’ in the 1960s – the party’s post-revolution generation – and the apparent sophistication of its most controversial leader, Charles Haughey, brought a new lexicon into play that helped to define the organisation in the public eye. Haughey was a republican who lived an aristocratic life. He had silk shirts flown in from Paris and made speeches of stoic patriotism. His party knew him as The Boss; his media advisor, P. J. Mara, referred to him as Il Duce.

The image of Fianna Fáil as ruthless and politically brilliant has a long tradition within Irish journalism.

Similar pretensions spilled over into the newspapers. Haughey was not crass and ambitious; he was Napoleonic and statesman-like. His corrupt dealings were not a tawdry failing; they were the stuff of Greek tragedy. His protégé, Bertie Ahern, was described by the master as ‘the most skilful, the most devious, the most cunning of them all.’ When faced with accusations of corruption of his own, Ahern became the Teflon Taoiseach, a description borrowed from that of John Gotti, the Teflon Don. The language and imagery of Hollywood gangsters saturated the descriptions of the party in power. At every election, it seemed, Fianna Fáil made the Republic an offer it could not refuse.

In all of these portrayals, though, the inference was that the head of the party was akin to a godfather who ruled through a mixture of patronage and (political) assassination. He was Marlon Brando, slowly rubbing his cheek while plotting a murder, immaculately dressed with manicured nails.

However, the proper analogy is not with Vito Corleone or his cold, calculating son, Michael; it is with Fredo, the middle son, who is sent to Vegas to make sure all the high rollers are kept happy. It is Fredo, sweaty and unsure, desperately trying to please the powerful, who best fits the role of Fianna Fáil in Ireland. The party spent decades in service to particular business interests in this country, while doing just enough to convince the electorate to return it to office. The level of concession to the Irish people was not set by Fianna Fáil, of course, but by the opposition. The party needed only to offer more than Fine Gael and Labour. It was this balancing act between the electorate and the party’s financial backers that was fatally undermined by the bank guarantee and the creation of the National Assets Management Agency (NAMA), leading to the party’s greatest defeat in February 2011, when it lost seventy per cent of its representation in the Dáil at the general election.

The proper analogy is not with Vito Corleone or his cold, calculating son, Michael; it is with Fredo, the middle son, who is sent to Vegas to make sure all the high rollers are kept happy.

The obvious questions set by the recent election relate to whether Fianna Fáil has been dealt a fatal blow. Can the party bounce back? Does it have a future? What role does it now have within the political system? These questions cannot be addressed without an understanding of the history of the party and its relationship to the changing dynamics of the Irish economy. The links between Fianna Fáil and the business world go back to the 1930s, when the party emerged as the largest political force in the state. It achieved this on the back of significant support from urban and rural working class communities, and it was its ability to be the party of the people and the boardroom that lay at the heart of Fianna Fáil's success.

When Fianna Fáil came to power in 1932, Ireland was a country where cattle ranching and banking set the economic agenda. The party initially formed a minority government with Labour Party support, but gained an overall majority after the snap election of 1933. It promised small farmers and urban workers significant changes and a positive difference in their lives. Policies included a campaign to encourage tillage; to break up the large grazier farms and destroy the rancher class; to divide the big farms among the small farmers and landless labourers; to introduce a general policy of protection; and to break the country’s commercial dependence on Britain.

Seán T. O’Kelly was made Minister for Local Government and almost immediately began work on providing social housing for the working classes and agricultural labourers. Seán Lemass, as Minister for Industry and Commerce, was equally enthusiastic and set about introducing a series of protectionist measures to encourage indigenous industry. Éamon de Valera, as Taoiseach, withheld land annuities to the British government and sparked off a tariff war, which led Britain to place twenty per cent duties on all Irish livestock and livestock products, and de Valera, in retaliation, to impose duties on British coal. The tit-for-tat measures put a dent in Fianna Fáil's limited economic reforms.

De Valera freely admitted that this particular brand of protectionism – great effort for little growth – would involve sacrifices. His response was to counsel the people to ‘forget, as far as we can, what are the standards prevalent in countries outside this.’

The most striking aspect of Fianna Fáil's economic policy, though, was not that the Free State had finally caught up with the rest of the world and was using tariffs to protect and encourage domestic industry, but that, having committed itself to tackling the structural deficiencies in the Irish economy via tariffs, it then decided to fight with one fiscal arm tied behind its back. There was no move to create an independent Irish currency and no move to break the crippling parity with sterling. Furthermore, Fianna Fáil embraced protectionism as a means of creating industries that would produce for the needs of the Free State, and it alone. They were not expected to compete internationally or create goods for export. De Valera freely admitted that this particular brand of protectionism – great effort for little growth – would involve sacrifices. His response was to counsel the people to ‘forget, as far as we can, what are the standards prevalent in countries outside this.’

Despite the cap on export activity, Irish industry did expand as a result of Fianna Fáil policy. The number of new industrial jobs generated between 1932 and 1936 was at least forty thousand. The increase in jobs, along with the substantial increase in house construction, meant that southern Ireland saw not only the first sustained growth in employment since the famine but also a modest increase in prosperity in urban areas.

Land redistribution was another key element of Fianna Fáil’s plans to transform rural Ireland. The chief inspector of the Land Commission, J. J. Waddell, argued that the minimum requirement for sustainable farming was 32.5 acres. However, the size of new farms created by the government was limited to 22 acres, not enough to provide anything more than feeder farms for the ranchers. Any move to make small farmers economically self-sufficient would affect the supply of calves to graziers and fatteners, not because the small farmers would automatically switch to tillage but because such redistribution would allow them to fatten calves past the time that their present holdings would allow. The pressure to sell a calf after one to two years would lessen, and graziers and fatteners might be compelled to pay more for the product. The ranchers did not just want small farmers to produce calves for them: they wanted poor small farmers who were not in a position to feed calves for much longer than a year.

By 1938, Fianna Fáil had all but abandoned the land annuities ‘war’ with the British. Irish graziers were once again at the forefront of Irish economic policy, but the structural problems remained in place. The Irish livestock export trade to Britain was not capable in itself of achieving economic wellbeing for the country, but, at the same time, neither was Fianna Fáil willing to weaken the hold on exports that the livestock industry maintained. ‘Again, following an iron precedent,’ writes Roy Foster, ‘the basic pattern of Irish agriculture showed little sign of change.’

Fianna Fáil's economic plans saw the expansion of tillage and redistribution of land as taking place alongside the cattle industry not in conflict with it. The decision by the government to limit new farms created out of Land Commission acquisitions to twenty-two acres (later expanded to twenty-five acres) all but guaranteed that the old system of production remained in place, that is, small farmers as breeders, middle-sized farmers as fatteners, and graziers as finishers and exporters. ‘It is most surprising that a Land Commission which for thirty years is [sic] committed to a policy of increasing the number of small farms’ wrote the Irish Farmers’ Journal in 1952, ‘has never applied itself towards developing a system of farming that would give the twenty-five to thirty-five acre man a decent living.’

The size of new farms created by the government was limited to 22 acres, not enough to provide anything more than feeder farms for the ranchers.

Fianna Fáil’s aim was to make life on an uneconomic farm that bit more bearable by providing seasonal work for the small farmer and his family. It developed supplements to the income of small farmers and labourers, while bowing the head in deference to the primacy of cattle as the main cash crop. Fianna Fáil wanted to develop a home market to supplement the income of the working class and agricultural labourers, and to maintain an export market that would benefit the breeders and exporters. Yet, it was not possible to square this economic circle, as, in order to create an economy with employment levels high enough to sustain the population, the nature of the cattle trade would have had to be changed. The problem was not so much one of an imbalance of livestock but the fact that livestock were the end result. Ireland was still exporting its main raw material to Britain, not only because of the graziers and their hold on the economy but also because livestock, particularly store cattle, was what Britain wanted.

In terms of banking, Fianna Fáil established a commission in 1934, which took four years to produce a report. Its main recommendation, the creation of a central bank, was not implemented until 1943 – even then, the parity with sterling was kept in place. It led to accusations that the banks, rather than Fianna Fáil, were setting economic policy. ‘It is all nonsense to say that we are merely creatures of the banks,’ said de Valera in 1939. ‘We can pass a law at any time to control the banks or to sever parity with sterling. We can do all these things. It is merely a question of whether it is wise or unwise to do them.’

Fianna Fáil’s aim was to make life on an uneconomic farm that bit more bearable by providing seasonal work for the small farmer and his family.

However, with the punt tied to sterling, Ireland had an overpriced currency and limited room for credit expansion. The situation was exacerbated after the war because the Republic was unable to buy dollars with sterling in order to combat its trade deficit. Any move to expand Irish credit to the level needed to develop the economy would have put pressure on the sterling parity link, as such capital formation would have weakened the ‘value’ of the Irish pound. The encouragement of foreign investment was related to keeping the banks happy. It would allow the economy to expand, but without any need to change monetary policy.

Despite the popular perception of Ireland as a closed, backward economy until the arrival of Seán Lemass as Taoiseach, the state had always had a relatively open economy. Even in the 1950s, the value of its imports and exports was between sixty-six and seventy per cent of GDP. The problem was the nature of those exports and their destination: Ireland exported, but it exported mostly livestock and mainly to Britain. The gradual rise in exports became a stampede after 1965, however, and, by the early 1970s, merchandise exports exceeded livestock exports for the first time in the state’s history. The Anglo-Irish Free Trade Agreement of 1965 gave Irish-based German and American companies tariff-free access to British markets, on top of already existing generous tax allowances for expenditures and repatriated profits. The idea that exports needed to be linked to the wider Irish economy in order to help expand that economy was slowly and methodically pushed to one side.

Despite the popular perception of Ireland as a closed, backward economy until the arrival of Seán Lemass as Taoiseach, the state had always had a relatively open economy.

The change in the composition of exports reflected a change in the type of employment: there were fewer people working in agriculture and more people in services and industry. But the true growth in employment occurred not so much in export-led industry, which in employment terms remained somewhat modest, but in construction, banking, and administration – the indigenous areas of support for the foreign capital that arrived in droves in the lead-up to and after the implementation of the 1965 Free Trade Agreement. Ireland experienced an export boom, but, for the most part, the jobs that were created were related to the dynamics of the local economy. The lack of a strong relationship between the new industries and Irish-sourced materials all but guaranteed a cap on growth in industrial jobs. The main developments in Irish business as a result of foreign investment took place in construction and services.

The expansion in financial investment, construction, and land sales gave rise to a particular type of Irish capitalist entrepreneur.

The expansion in financial investment, construction, and land sales gave rise to a particular type of Irish capitalist entrepreneur. There was money to be made by providing services to foreign investors: construction, banking, insurance, property, road haulage, and legal services – these were the areas of commercial activity that gained a commanding presence in the Irish economy, all of which directly benefited from the influx of American, German, British, and Dutch companies. At the same time, there was also money to be made by speculating on the benefit to the economy that foreign investment brought. In the 1960s and 1970s, Fianna Fáil started to provide these entrepreneurs with a similar range of grants and tax incentives to those offered to multinationals. In the case of office blocks in the 1960s, Fianna Fáil made sure that the state not only funded the speculation but also acted as tenant. The PAYE system, first introduced in the late 1950s, became a cash faucet for the party’s tax-break incentives. The revenue generated through the direct taxation of ordinary workers was fed directly to speculators and foreign investors via the myriad of tax havens that propped up these new industries. Such was the lack of concern about developing indigenous growth that the country’s natural resources were sold off wholesale by Fianna Fáil without a second thought. In Ireland, the handshake did not secure the deal, the handshake was the deal. The middleman, or comprador, class remained the dominant force in modern Irish capitalism. The type of local business interests that expanded on the back of foreign finance were all about making the deal happen. Construction, finance, land, and law: this was the four-leaf clover, the new lucky charm for the modern Ireland of Fianna Fáil and Lemass.

In the late 1980s, the widening of Ireland’s tax relief schemes to include financial services helped to turn the state into a glorified offshore bank.

By the 1970s, the trick of foreign investment and speculation on it was running out of steam. Growth in the Irish economy relied more and more on construction, both commercial and residential. The notion that exports needed to be linked to the wider economy was given lip-service but little else. The growth in building societies and the entry of banks into the private mortgage market took place alongside moves to strangle public housing as a viable option for working people and the increased use of tax incentives to bolster owner-occupancy as the only real option open to families. Housing was increasingly portrayed as a cure for all social ills: a bulwark against inflation, a nest-egg for retirement, and a foolproof pension plan for the honest worker. It was also a multi-billion punt industry, where standards and security played a very minor role. The 1974 Kenny Report into the price of land for development was shelved by successive Irish governments because it threatened to upset the speculation machine – it threatened the livelihoods of the various politicians, bankers, builders, and landowners who profiteered from the rezoning game. By the mid-1980s, only eight per cent of all materials used by foreign companies in Ireland was sourced from Ireland. This was in spite of repeated calls by foreign companies for the development of secondary industries to act as feeders for production.

In the late 1980s, the widening of Ireland’s tax relief schemes to include financial services helped to turn the state into a glorified offshore bank. Incredibly, it became a tax haven for Irish financial and commercial businesses: Ireland had become its own tax haven. The decision by Fianna Fáil in 2008 to guarantee almost the entire deposits and liabilities of the Irish banking system was everything people saw it to be at the time: a bailout for well-connected bankers, speculators, and builders – the dominant strands of Irish economic and political life. Fianna Fáil’s role in all of this was to facilitate and protect those power blocs, but it cost the party its electoral support. Whether it can regain that support depends on a number of factors, few of which are within the party’s control.

The warm embrace of Ireland’s comprador class by Fine Gael and Labour would suggest that Fianna Fáil’s access to campaign finance will be severely limited in the future.

The warm embrace of Ireland’s comprador class by Fine Gael and Labour would suggest that Fianna Fáil’s access to campaign finance will be severely limited in the future. At the moment there are twenty-five constituencies with no sitting Fianna Fáil TD, including eleven of the twelve constituencies in Dublin. There is a strong possibility that Micheál Martin will be the first Fianna Fáil leader who will never be Taoiseach. The party may form part of a coalition government, but whether it will be as the majority partner is far from certain. And who gives money for a Tánaiste?

Within electoral politics in the south, Sinn Féin has finally broken through with regard to transfers. It gained the majority of its seats in February 2011 through second and third preferences. Similarly, the formation of the United Left Alliance opens up a strong left flank, enabling Sinn Féin to take a more centrist stance. It would be unwise to write off Fianna Fáil completely, but with limited financial resources and an angry electorate opening up to the possibility of Sinn Féin as a party of government, it is hard to see where there is a future for the Fredo Corleone of Irish politics, now that all the drinks have been served.



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The Citizen, Issue 4
September 2011

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