The Marshall Plan was created to help stimulate European economies after the destruction of the second world war. America viewed the recovery of Europe as vital because healthy European economies, which were allies of the US, would also help the US economically, as well as politically in the ever-increasing tension surrounding the Cold War. “The Marshall plan rested squarely on the American conviction that European economic recovery was essential to the long-term interests of the United States.” Ireland was granted American aid despite the vast amount of American ill-will towards the country because of Ireland’s neutrality during the war.
The reason for this was that the US saw Ireland as being an essential part of the economic growth of Britain. “American policy-makers regarded Ireland as a potential supplier of much-needed food exports to Britain and other countries in Western Europe, reducing their reliance on imports from the United States.” Over the period of time from 1947-1952, Ireland received loans amounting to $128m, grants amounting to $18, and technical assistance (TAP) of around half a million dollars. The short-term impact of this aid is most easily comprehended by firstly examining the loan and grant payments and then examining and the TAP impact on the Irish economy.
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The first aspect of Marshall aid to be examined is the loans and grants received. It is important to first differentiate between the loans and grants. Loans would have to be paid back to America, while grants would not. This is important because by giving most of the aid in loans rather than grants, the US seriously degraded the amount of influence they actually had on how the money was to be spent.
This meant that the Irish government could use this money without US approval. “If loaned, then the recipient country’s government determined how the counterpart funds should be spent. If granted, the expenditure of counterpart funds had to be agreed between the recipient government and the US authorities.” The loan funds were used by the inter-party government primarily to fund five projects.
These were “the land reclamation project, expenditure under the 1949 Local Authorities Act, grants for harbour improvements, advances for mineral development schemes and investment in the stock of ACC.” Despite the Department of Finance’s preference of directing the funds towards debt retirement, the government decided that investment in the country’s infrastructure and natural resources was more worthwhile. “Between 1949 and 1952, 49.5% of the government’s capital expenditure programme was funded by the ERP. The substantial impetus was given towards supporting rural electrification, reforestation, land reclamation and the provision of houses and hospitals.”
The impact of this extra finance was that the economy expanded from 1950-1951. As well as this the government used the funds to import raw materials and machinery. The ratio to which ERP funding was distributed was two-thirds went into importing for agriculture and the remaining third into the raw materials and machinery needed for industry. “ERP-funded imports totalled 17% of total imports in the period 1948-1951.”
Ireland at this time was still dependant on agriculture. The impact of ERP funding over this time actually had a somewhat negative effect on Irish agriculture, in-so-much that the improvements in agricultural machinery, meant that unskilled workers on farms were not needed as much as in the past. This, in turn, led to increased unemployment and in turn emigration out of Ireland in the 1950s.
This is not to say that Irish agricultural exportation or production dropped during this period, however, it also did not rise to any significant degree. It was not the aim of the Irish farmer to become more efficient or competitive during this period, but rather to maintain income, despite the encouragement of the ECA to increase productivity. “ECA officials encouraged officials in the Department of Agriculture and farmers to improve productivity and output through modernizing production methods and domestic economy. But while the economic value of these messages was accepted, the limited resources of the ECA mission combined with its restricted influence with the Dublin government, resulted in a limited impact.”
Industry too was affected by ERP funding, however, because of Ireland’s unwillingness to embrace the European market, it did not significantly improve. “No consideration was given to liberalizing the industrial sector or to developing export industries.” Industrial output was expanding in the country at the time, but when compared to other European countries of similar economic size to Ireland, it was developing at a much slower rate.
Indeed by the end of the nineteen fifties, Ireland still remained one of Europe’s most unindustrialised countries. “Ireland in 1960 was still an agrarian society, one in which the industrial sector was weak and uninfluential.” It was also true to say that while there was an expansion in industrial output, it was not being produced for the foreign market, but was mainly destined for the domestic market.
The reality of the situation was that ERP was starting to have a positive effect on the industry in Ireland, through the TAP, until the funding was suspended in early 1952. “When US aid to Ireland was suspended in January 1952, the losses incurred took almost entirely the form of cancelled TA projects.” This programme was providing Ireland with American expertise and advice on how to be more productive and efficient in both agriculture and industry. There was a clear indication that the TAP was realizing that agriculture was too dominant in the minds of Irish decision-makers, and it started to emphasize the importance of an improved industrial sector. One tangible effect of the TAP was the creation of two influential agencies which would help instigate Irish economic growth in the future. These were the Irish Development Authority (IDA) and Coras Trachtala Teo.
The ERP’s short-term impact on the Irish economy was not of great significance. Unemployment and emigration soared throughout the 1950s. “Emigration soared; between the censuses of 1951 and 1961 it was at its highest level since the dark decade of the 1880s.” This gives an indication of how ERP aid to Ireland didn’t help stimulate sustained healthy growth. While there was a certain amount of growth between 1948-52, and some of that can be attributed to Marshall’s aid, but surely the level of growth that was experienced was inevitable considering it was only a few years after the end of the second world war. An important impact it had, was the creation of agencies such as the IDA and the Central Statistics Office (CSO).
This was laying the groundwork for future economic expansion, but in the short term had little effect. Marshall’s aid encouraged Ireland to break away from its isolated, agrarian position, and develop into being a more open, industrialized economy. However Ireland at this time was not interested in modernization and the financial assistance granted by the US was not used particularly wisely, so, therefore, had minimal effect on the Irish economy in the short term. “The Irish political elite, the electorate and the society valued continuity over the change promised by American involvement in Europe.”
Cullen, L.M., An Economic History of Ireland since 1660, London, B.T. Batsford, 1987.
Foster, Robert F., Modern Ireland: 1600-1972, London: Penguin, 1989.
Geiger, Till, ‘Why Ireland Needed the Marshall Plan but Did Not Want It: Ireland, the Sterling Area and the European Recovery Program, 1947-1948’, Irish Studies in International Affairs, Vol. 11, 2000, pp. 193-215.
Hogan, Michael J., The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947-1952, Cambridge; Cambridge U. P., 1987.
Kennedy, Michael & Geiger, Till, Ireland, Europe and the Marshall Plan, Dublin; Portland: Four Courts, 2004.
Mee, Charles M., The Marshall Plan, New York; London, Touchstone, 1984.
Murray, Peter, Facilitating the Future: US Aid, European Integration and Irish Industrial Viability, 1948-73, Dublin: University College Dublin Press, 2009.
Whelan, Bernadette, Ireland and the Marshall Plan, 1947-57, Dublin; Portland: Four Courts, 2000.
_______________, ‘Adopting the ‘American Way’, Ireland and the Marshall Plan, 1947-1957’, History Ireland, Vol. 16, No. 3 (May-June, 2008), pp. 30-33.
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