The Government of Ireland Act which was passed by the British Parliament in 1920 provided for devolved parliaments in Dublin and Belfast, with the latter in control of 6 counties in the north-east of the island to be known as Northern Ireland. The Irish Free State was established in 1922 with jurisdiction over the remaining 26 counties and faced challenging economic conditions with national income per head at 56% of Great Britain's — 35 years later the ratio was at 49%.


Despite declining population following the devastating potato famine of the 1840s, the Irish economy had recovered well in the second half of the nineteenth century. However, the development of the industrial base was concentrated in what would become Northern Ireland.

Research by Andy Bielenberg, senior lecturer at University College Cork (UCC), shows that by 1907, the 6 counties of the north-east accounted for two-thirds of Irish industrial output and two-thirds of industrial exports originated in Belfast, Ireland's biggest city by 1911, which had grown from a population of 75,308 in 1841 to 386,947 in 1911. The linen industry was for long teh biggest exporter and shirt-making alone in the Derry area employed up to 80,000 full and part-time staff while in 1911 Dublin accounted for half of the industrial production of what would become the Irish Free State.

Dr Bielenberg wrote:

the agro-based industries which had emerged in the south were capital intensive, rather than labour intensive. They also yielded extremely low added value. The net benefits of these industries to the economies of the southern cities were therefore much less intense than linen production in Ulster which was labour intensive and yielded a relatively higher added value. Shipbuilding and engineering also yielded high added value, further intensifying the dynamics of industrialisation in the north-east [ ] Brewing was a capital intensive industry with low levels of employment per unit of capital employed. Of Guinness’s income for example between 1871-6 (taken together), more than £600,000 went to the partners, less than £400,000 was reinvested, and only £300,000 went to pay wages and salaries.  

Harland and Wolff Ltd., founded in Belfast in 1861, had in the first decade of the 20th century won orders for 3 giant 'Olympic Class' liners from the White Star Line. Employing about 15,000 people on a 300-acre site, the nearby Belfast College of Technology provided vocational education for the firm's apprentices.

The "unsinkable" RMS Titanic — then the largest ship in the world — was launched in May 1911 from one of the Queen's Island slipways, as about 100,000 people cheered.

Brewing and malting was the most important industry in the south of Ireland according to 1907 data.

There were 1,680 employed by Arthur Guinness, Son & Company Ltd.  at its Dublin St James’ Gate brewery in 1886 when the firm was floated on the stock exchange. That number had risen to 3,460 by the early 1900s.

The Guinness Archive at the National Archive notes:

The size of the Brewery workforce began to swell towards the end of the nineteenth century and for nearly a century, could contain between 3,500 to 4,500 employees at any one time.

House of Commons papers published in 1911 note that a director of Arthur Guinness, Son & Company Ltd. had told the Royal Commission on the Poor Laws and Relief of Distress:

Dublin is a city of 300,000 inhabitants, in which the only large industries are brewing, distilling, and biscuit-making. The company of Arthur Guinness, Son and Company, Limited, is the largest employer of labour.

According to the 1911 census, Protestants accounted for 26% of the population of the island. Dr Bielenberg noted in a separate paper:

The areas where Protestants were most over represented were shipbuilding, engineering and textiles, all of which they accounted for at least 60% of the workforce. Moreover, in the case of shipbuilding the figure was over 84%. The occupational returns of the 1911 census imply that Protestants accounted for almost 40% of Ireland’s industrial workforce. In Ulster, this figure was obviously higher. The implications of this are beyond the scope of this paper. However, it seems probable that industrial employment and urban settlement resulting from industrialisation in the preceding half century or more, was a more important structural variable in the formation of the core conflict zones in Belfast and Derry in the twentieth century, than generally assumed.

The ratio of the workforce across the island in manufacturing in 1911 was significantly below the level in the United Kingdom as a whole.

According to the National Archives, in 1911 the percentage of the workforce employed in the sector was down to 20% from 33% in 1841. This compared with 36% in the UK according to the Office for National Statistics. In 1841 36% of the UK workforce was in manufacturing and by 1901 the rate had increased to 38%.

The population of the 26 county area was at 6.5m in 1841; 4.0m in 1871; 3.5m in 1891; 3.1m in 1911; 3.0m in 1951; 3.0m in 1971; 3.5m in 1991 and 4.6m in 2011.

The period 1871-1913 was the longest period of peace among major powers in Europe since the Peace of Westphalia in 1648 ended 30 years of religious wars. The fragile peace boosted economic growth across the continent as did technology, in particular in transport.

The British-Irish real wage gap had narrowed more than the output per capita gap by the end of the 19th century.

Séan Connolly of UCC commented on post-famine developments:

Overall, then, the 1850s and 1860s were a period in which a declining Irish population enjoyed the fruits of substantially increasing national wealth. With greater prosperity came accelerated social change. The proportion of persons able to read and write rose from 47% in 1841 to 75% by 1881. The proportion able to speak Irish, already only 23% in 1851, fell further to 18% thirty years later. The number of newspapers published in Ireland rose from less than 100 in 1852 to more than 140 by 1871. The great symbol of the modern age, the railway, had made small beginnings before 1850, with just over 400 miles of track. By 1870 there were almost 2,000 miles, and the number of passengers carried annually had risen to over 14 million. By this time, equally, over 400 Irish towns had telegraph offices linking them to the outside world: the intensely local, inward-looking society of the past was disappearing rapidly. Folklorists and antiquarians commented disapprovingly on the disappearance of a whole range of popular traditions and beliefs. But the political history of the 1870s and 1880s was to demonstrate the extent to which rising prosperity, education, and awareness of the world beyond one’s immediate vicinity had combined to produce a new capacity for organisation and self-assertion.

The CSO says that in 1915 there were 359,700 farms over one acre in Ireland and by 2010 this had declined to 139,860 farms over one hectare (equal to 2.5 acres), a reduction of over 60% in the number of farms over the century — still many small holdings survive and Ireland was the only member country of the EU28 to have experienced a rise in farm numbers in 2003-2013. This is likely related to EU subsidies/ welfare.

There were 21,133 one room dwellings in Dublin City in 1911 housing 69,796 people, or 23% of the population of Dublin City.

William Butler Yeats, the Irish poet, had written his poem 'September 1913,' lamenting the bourgeois materialism of Dublin Corporation in refusing to build a public municipal gallery to house a collection of mainly impressionist paintings belonging to Sir Hugh Lane — Yeats' poem was originally published in The Irish Times in September 1913, with the title 'Romance in Ireland.'

‘Fumble in a greasy till,’ ‘add the halfpence to the pence,’ 'Romantic Ireland’s dead and gone/ It’s with O’Leary in the grave,' are lines that also had resonance later in the Ireland of the Celtic Tiger.

Materialism or not, in the second decade of the 20th century, there were huge economic challenges ahead for a post-independent Ireland.

Finfacts 2015: Scotch whisky exports at £3.9bn; Irish whiskey exports at €365m

Developments from 1922

Angus Maddison (1926-2010) the late renowned British economic historian, called himself a chiffrephile — a lover of numbers — and he even produced an estimate for world GDP (gross domestic product) in 1 AD!

Using what are termed 1990 International Geary-Khamis dollars Maddison's data for GDP per capita in 1922 in Ireland was $2,598; UK $4,637; Greece $1,918; Portugal $1,290; Sweden $2,906; Netherlands $4,599; Denmark $4,166.

Maddison's data for GDP per capita in 1990 is Ireland at $11,818; UK $16,430; Greece $9,988; Portugal $10,826; Sweden $17,695; Netherlands $17,262; Denmark $18,452.

In more recent times Irish GDP and GNP (gross national product) per capita have been seriously distorted by the foreign-owned sector, in particular because of significant tax avoidance.

A proxy for standard of living is actual consumption per capita (AIC), adjusted for price differences and including both public and private goods and services.

In 2014 Ireland's level was below the EU and Italy's average, 83.5% of the UK and Denmark's levels, and 78% of Germany's level.

The small manufacturing base in 1922 is still reflected in OECD data today which show that the number of manufacturing firms including foreign-owned, is second lowest in the EU28.

Denmark with a population of just 1m more than Ireland's, has over 15,000 firms compared with 4,200. Services of course are also important and Denmark has about 30,000 exporters (manufacturing + services) compared with Ireland's 4,000.

The first Irish government after victory in a civil war made a bold move in 1924 by issuing a contract to Siemens of Germany to build a major hydroelectric plant on the River Shannon. The full development cost almost £7m and in July 1924, the London Daily Mail warned: “German Intrigue in Ireland − Bid for Economic Control.”

Before independence, Henry Ford, the American motor tycoon whose father had emigrated to the US from famine-stricken West Cork in 1847, decided to open a tractor assembly plant in Cork City. By 1930 he employed about 7,000 — a record for a foreign-owned exporting firm since 1922.

In 1932 the new Irish government announced the cancellation of annual land loan repayments of £5m to the British government, that related to loans that had been advanced to buyout landlords in the late 19th and early 20th centuries.

According to Prof Kevin O'Rourke of Oxford University, the payment compared with annual GNP of about £150m. A tariff war began with the UK, which imposed a 20% duty on two-thirds of Irish exports to the UK in order to recoup the lost annuity payments. "In response, on the 23 July 1932, the Emergency Imposition of Duties Act empowered the Free State government to retaliate."

The Irish Free State's Control of Manufactures Act 1932 resulted in Arthur Guinness, Son & Company Ltd. moving its headquarters to London. In 1935 the company opened a new brewery in Park Royal, London. Meanwhile, Henry Ford & Sons moved many of its Cork workers to Ford's plant in Dagenham, east London, which had opened in 1931.

The policy of Éamon De Valera's government was self-sufficiency and in April 1933 he and his senior ministers had attended a lecture in Dublin by John Maynard Keynes, the renowned British economist, who warned on the plans:

if for a complexity of reasons, good or bad, idealistic or political, I were to reject this, and were deliberately to decide to work out the economic destiny of the country on other lines, having made, so to speak, my moral decision, I should sit down to the problem with the best brains I could command to work out a slow series of experiments. No one has a right to gamble with the resources of a people by going blindly into technical changes imperfectly understood. 

By 1938, Maddison's GDP per capita estimate put Irish GDP per capita at 49% of the British level, down from 56% in 1922.

Ireland, grim 1950s, Whitaker, Cormac Ó Gráda

The cover of the July 1956 issue of 'Dublin Opinion' from
the slides of the 2011 Whitaker Lecture by Cormac Ó Gráda,
emeritus professor of economics, UCD.

The ratio was also at 49% in 1957 when TK Whitaker, Ireland's top civil servant, warned the incoming finance minister:

In the political field the primary national objective is the reunification of the country. Until that is achieved, however, and no doubt after it has been achieved, the principal economic problem of the Irish Government will continue to be the safeguarding of political independence by ensuring economic viability. Without a sound and progressive economy, political independence would be a crumbling facade.

He added that the government should stop sheltering “behind a protectionist blockade.”

In the previous year a tax exemption on export profits was introduced and that was the genesis of the policy to attract foreign direct investment (FDI).

Ireland economy President Kennedy

Time cover July 12 1963, after President Kennedy's visit to Ireland

Can Ireland reduce its reliance on FDI by boosting Irish firms?

Irish income per capita indpendence 1922

OECD's The World Economy, Angus Maddison — WEC (West European Countries)

Why Sweden?

Angus Maddison's data show that Sweden was not far ahead of Ireland in the early 1920s but by 1968 Sweden was the world’s third-richest country.

Sweden had suffered a severe recession in 1921 and the country had a long tradition in mining iron ore, which gave it an industrial and innovation base.

Relatively low corruption, transparency, cooperation between a social democratic government and private business, good worker relations and the Wallenberg family which had been in banking since the 1850s investing directly in companies that could become exporters, were factors in the growth. Avoiding military involvement in two wars also helped.

The Swedes are also good at exporting and the focus of companies has been to avoid using distributors where feasible by establishing sales companies overseas even though the start could be on a small-scale.

Sweden had sunk to 17th richest country by the early 1990s and was prepared to reform in response to changed times.

Pic on top: The cask yard, St. James's Gate Brewery, Dublin c. 1906-13 Source: Guinness Archive