Ireland’s Wars: The Economic War

Even while his government was dealing with the more political aspects of the Anglo-Irish Treaty in terms of tearing them down, and establishing its relationship with the IRA, de Valera was involved in a showdown with the United Kingdom that would be one of the defining elements of this period of his leadership. It began with one of Fianna Fail’s promised examples of dismantling the Treaty and progressed into a full blown diplomatic dispute of enormous significance. Most importantly, it would end with an agreement that was absolutely pivotal in determining Ireland’s strategic position on the eve of the greatest conflict Europe and the rest of the world would ever see.

The core of the matter was land. It’s a topic I haven’t dedicated as much time to as I could have in light of the Irish revolutionary period, but it was something that had enormous importance. In some ways a war within a war, something akin to the Land War of the previous century, it was a recurring undercurrent of those years. Ireland remained an agrarian society to a significant degree, with a mixture of larger holdings and smaller tenant farmers: many people had expectations of large-scale changes to nature of land ownership during and after the War of Independence, with the expected break-up of larger farms and re-distribution of that land to a greater body of farmers. The final outcome of that war, and the subsequent Civil War, meant that Ireland retained a fairly conservative outlook on the matter: the Farmer’s Party largely represented the interest of larger farms, and Cumann na nGaedheal had little interest in any radical programme of re-distribution.

And there was the issue of land annuities, as agreed in the Anglo-Irish Treaty. Article Five provided for the Irish Free State continuing to pay such annuities, loans to tenant farmers granted in the 1880’s under the Land Acts, to the British exchequer, essentially meaning that Ireland continued to pay taxation to London for land that London no longer controlled. While far from the most sensitive issue at the time that the Treaty was signed, the annuities were deeply unpopular, and remained one of the most consistent sticks to beat W.T. Cosgrave’s governments with in the first ten years of the Free State’s existence, especially given the deal to eliminate Free State contributions to the British national debt with the Boundary Commission outcome. One of Fianna Fail’s central planks of their 1932 manifesto was a commitment to get rid of the annuities, which de Valera did in 1933 after bad-tempered negotiations with London went nowhere. This was hardly surprising, given that de Valera insisted that Britain owed Ireland huge sums for over-taxation over the previous 50 years.

De Valera was adopting an economic policy of protectionism, so the cessation of payments was more than just part of his parties sovereignty-seeking ideals. He wanted a better deal for Irish produced goods, and more self-sufficiency in the Irish economy: to that end he introduced tariffs on imported goods, especially from Britain. In line with a drive for greater industrialisation led by Minster of Industry Sean Lemass, Fianna Fail was determined to bring down the national debt and to correct an imbalanced trade relationship with Ireland’s closest neighbour. To be clear, the annuities were still collected by the Irish government, but the money was then put into government and local budgets.

The British, then under the leadership of Labour’s Ramsey McDonald, was hardly going to do nothing in response to the tariffs, and put a 20% import duty on all Free State agricultural products entering the United Kingdom. Given that 90% of Ireland agricultural exports went to the UK, this was a devastating financial penalty. De Valera’s government escalated by extending their own tariffs to things like British coal imports – Fianna Fail would quote Johnathan Swift in the campaign, saying to “Burn everything English except their coal” – but it was easy to see that the Free State would suffer far more under the effects of such a financial conflict.

And those were severe. The Great Depression was already producing a miserable situation, with high unemployment and with the usual avenue of emigration not as useful as it had been in previous economic crises. For the same reason “remittances” were not as forthcoming from abroad. Government efforts to frame the Economic War as a national effort fell on more and more deaf ears as time went on, especially from smaller farmers. Some of these refused to pay rates, or the annuities, leading to the impounding of cattle, then the blockading of auctions and violence between farmers and police, sometimes to the point of death. Government figures consistently used militaristic language around issues related to the Economic War, and government policy seemed to follow that tack as well, with a lack of sympathy to the suffering of Irish farmers, labourers and others evident: there’s was a sacrifice necessary to secure the position of the nation.

Though de Valera had plenty of political room – a snap election in 1933 followed by some favourable by-elections had given Fianna Fail an outright majority – the agitation could not be tolerated forever, especially given the overtones it had of the unrest during the Land War. Combined with the moving of major businesses in the Free State – including Guinness – abroad and discontent in Britain with the tariffs from those used to replying on Irish exports, and it was clear a solution eventually would have to be found. The 1937 election, where de Valera’s party were again reduced to having to operate as a minority government, may have been the last straw, though for de Valera the deaths of ten Irish migrant workers in a shed outside of Glasgow as a result of a fire also played heavily on his mind. The Economic War had to be brought to a close.

Over time, the conflict began to ease. A Coal-Cattle Pact was agreed between the rival governments in 1935, whereby the Free State agreed to import more British coal in exchange for Britain importing more Irish beef, was the first major step, before more concerted talks too place between de Valera and Lemass on the one hand and the new Conservative British Prime Minister Neville Chamberlain on the other.

From these talks, which were extensive and frequently ground to halt as de Valera tried and failed to make “movement” on partition a prerequisite, came a new Anglo-Irish Trade Agreement, signed in April 1938. The tariff rates of the previous five years were abolished by both sides, with Ireland making a once-off £10 million payment to settle the land annuities question once and for all. This was only a modest saving on what the Free State had owed if the annuities had been paid to their extent, and the British had already taken in plenty of extra money on account of their tariffs on Irish goods, but de Valera’s government were quick to play up the agreement as a triumph of their willingness to stand up to London and protect Ireland’s financial interests and sovereignty. In essence, they claimed to have “won” the Economic War. A snap election called a few months after the agreement bore out the popularity of the final settlement, with Fianna Fail returned as a majority government again.

There was another aspect of the final agreement that was absolutely critical for Ireland’s future. The Treaty Ports – Lough Swilly, Berehaven and Queenstown – that had been retained by the British for the use of the Royal Navy after the signing of the Anglo-Irish Treaty had been a sticking point for many in the years after, though far from the biggest one. Many resented the loss of territory that they represented, and the continuing British military presence on the Free State landmass. The idea of retaking the ports via military means was nonsensical – any such effort was liable to fail in the first place, and would have provoked a larger, essentially unwinnable, conflict with Britain – and diplomatic avenues were few and far between. But the outcome of the Economic War gave de Valera the chance to facilitate their handover. British government figures had been gung-ho about keeping the ports up to 1938, owing to the increased tensions on the continent, and were only willing to go so far with de Valera as to suggest giving them up if they could re-take them in the event of a declaration of war. But Chamberlain took a different tack, proclaiming that the maintenance of positive relations with Dublin could justify the giving up of the ports on a permanent basis, and stated his own beleif that, for all of his bluster, de Valera should not be considered an enemy of Britain.

The move was not hugely popular in Britain, especially within certain Conservative circles. Winston Churchill, never a man to take concessions to Irish representatives lying down, was outraged, claiming that Chamberlain had undercut Britain’s strategic position on only the word of de Valera, a man Churchill had little regard for. He put on record his fears that de Valera could put a price on use of the ports in a time of war equal to the removal of partition, but his view was of a minority when it came to legislating for the Agreement. By October 1938, the British military had departed from all three of the ports, with de Valera and his government able to claim a huge triumph in their re-taking.

And it was a greater one than he realised. Less than 12 months after the last of the ports saw its final Royal Navy vessel depart, Britain would be at war with Germany, a war that would see a huge facet of its outcome determined by control of the sea lanes that went by Ireland and into the Atlantic. Churchill’s fears were somewhat well-founded, though the fall of France in 1940 would have largely negated the usefulness of the Treaty ports as a western bulwark. From the Irish perspective, control of the ports was key in allowing the country to maintain neutrality in that conflict. British military presence in those ports would almost certainly have provoked German attack, whether from the air or sea or both, and any such attack could have had the potential to drag Ireland into the wider conflict not entirely of its own will. We will reach the Irish experience of the Second World War soon, but for now it is enough to say that if the Economic War cost Ireland a great deal in terms of financial hardship and societal pressure, its outcome perhaps saved the country from what could have been a great deal of destruction.

But from this international stage, we must move back to internal affairs. In a previous entry we explored the IRA’s state of existence under the early years of the Fianna Fail government, part of which involved an escalating serious of violent encounters with those who identified themselves as being on the opposite end of the political spectrum. As it sent Europe on the path to an apocalyptic conflict, so too did fascism spread its ugly roots to Ireland, and the Irish experience of this ideology will be the focus of the next entry.

To read the rest of the entries in this series, click here to go to the index.