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The Industrial Development Authority, 1949–58: establishment, evolution and expansion of influence

  • Frank Barry (a1) and Mícheál Ó Fathartaigh (a1)

Established in 1949 in the face of Fianna Fáil hostility, and greeted with suspicion by both the department of Industry and Commerce and the department of Finance, the Industrial Development Authority within ten years had carved out a powerful position for itself within the bureaucracy. By the early 1950s, while Seán Lemass was still wedded to the concept of import-substituting industrialisation, the I.D.A. was formulating its vision for ‘industrialisation by invitation’ and lobbying internally for the introduction of export profits tax relief. The adoption of this measure in 1956 initiated the low corporation-tax regime that remains in place to this day. Though frequently conflated, the reorientation of industrial policy in the 1950s and the dismantling of tariff barriers in the 1960s were quite separate initiatives. That the establishment of the I.D.A. and the adoption of export profits tax relief were opposed by the department of Finance and enacted by inter-party governments clearly distinguishes them from the later trade-liberalisation initiative associated with the partnership of T. K. Whitaker and Lemass. The present paper explores the circumstances surrounding the establishment of the I.D.A. and traces its evolution and expanding influence over the first ten years of its existence.

Corresponding author
aSchool of Business, Trinity College Dublin,
bSchool of Business, Trinity College Dublin,
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1 Fanning, Eugene P., ‘United States investment in Ireland’ in Vanderbilt Journal of Transnational Law, xvii, no. 3 (Summer, 1984), p. 573.

2 On the first restructuring see speech by Jack Lynch, minister for Industry and Commerce, 30 July 1959, Seanad Éireann deb., li, 656. On the second, see MacSharry, Ray and White, Pádraic, The making of the Celtic Tiger: the inside story of Ireland’s boom economy (Cork, 2000), pp 190191 (White was managing director of the authority from 1981 to 1990).

3 Lee, J. J., Ireland 1912–85: politics and society (Cambridge, 1989), p. 343, and Fanning, citing Ronan, The Irish Department of Finance, 1922–58 (Dublin, 1978), p. 509. See also Garret FitzGerald (writing as ‘Analyst’), ‘Economic expansion 1: the White Paper and the Economic Study’, Irish Times, 25 Nov. 1958.

4 For an extreme example, see Walsh, P. P. and Whelan, Ciara, ‘Hirschman and Irish industrial policy’ in Economic and Social Review, xli, no. 30 (2010), pp 283299. O’Hearn rejects the conventional technocratic view of the shift to outward-orientation, portraying both initiatives as being conditioned by dominant external forces: O’Hearn, Denis, ‘The road from import-substituting to export-led industrialization in Ireland: who mixed the asphalt, who drove the machinery, and who kept making them change directions?’ in Politics and Society, xviii, no. 1 (1990), pp 138. In contrast to O’Hearn, we view the inter-party initiatives as examples of local policy experimentation. (See Rodrik, Dani, ‘Institutions for high-quality growth: what they are and how to acquire them’ in Studies in Comparative International Development, xxxv, no. 3 (2000), pp 331.) As a consequence of this local policy experimentation, the structural changes associated with Irish trade liberalisation in the 1960s were very different from those seen in Portugal and Finland, for example – two other small peripheral economies that liberalised around this same time.

5 There is a dearth of archival evidence on how the strategic priorities of the I.D.A. were established over this period. The issue is not addressed directly in the documentation held at the National Archives and no pre-1969 records were found in the warehouse in East Wall (Dublin 3) where early I.D.A.-Ireland material is currently stored. Accordingly we have had to attempt to reconstruct developments from the evidence we have found.

6 The bureaucratic, national and international politics associated with the introduction of export profits tax relief have been explored in a recent companion paper: Barry, Frank, ‘Foreign investment and the politics of export profits tax relief 1956’ in Irish Economic and Social History, xxxviii (2011), pp 5473.

7 Gallagher, Michael (ed.), Irish elections 1948–77: results and analysis (London, 2009), pp 4142.

8 Data on land holdings come from Rouse, PaulIreland’s own soil: government and agriculture in Ireland, 1945 to 1965 (Dublin, 2000), appendix 5.

9 Daly, Mary E., Industrial development and Irish national identity, 1922–1939 (Syracuse, 1992), p. 170.

10 Gallagher, Michael, Political parties in the Republic of Ireland (Dublin, 1985), p. 107.

11 Sinnott, Richard, Irish voters decide: voting behaviour in elections and referendums since 1918 (Manchester, 1995), appendix 2.

12 Gallagher, (ed.), Irish elections, pp 4142.

13 Lemass would admit only that ‘it was not until our second period in opposition that we really got down to thinking in a serious way about the post-war economic problems of the country’: Bew, Paul and Patterson, Henry, Seán Lemass and the making of modern Ireland 1945–66 (Dublin, 1982), p. 86.

14 Departmental conference no. 151, 27 May 1949 (N.A.I., DIC 2000/13/2).

15 Beddy, J. P., ‘Industrial promotion 1’ in Administration, x, no. 4 (Winter, 1962), p. 327; Dáil Éireann deb., cxxxviii, 545–6 (23 Apr. 1953).

16 Daly, , Industrial development, p. 178. Cormac Ó Gráda concurs: Ó Gráda, A rocky road: the Irish economy since the 1920s (Manchester and New York, 1997), pp 111–12; idem, , Ireland: a new economic history (Oxford, 1994), p. 409.

17 Daly, , Industrial development, p. 178.

18 Garvin, Tom, Judging Lemass: the measure of the man (Dublin, 2009), p. 130.

19 Daly, , Industrial development, p. 39.

20 Cullen, L. M., An economic history of Ireland (2nd ed., London, 1987), p. 174; Meenan, James, The Irish economy since 1922 (Liverpool, 1970), pp 140, 323.

21 See for example Lee, , Ireland, pp 309310; Jackson, Alvin, Ireland 1798–1998: war, peace and beyond (2nd ed., Oxford, 2010), p. 305.

22 O’Hearn, ‘Export-led industrialization’.

23 Horgan, John, Seán Lemass: the enigmatic patriot (Dublin, 1997), pp 133134.

24 Interview with Bill Kingston, head of market research firm Nielsen (Ireland) in the late 1950s, Dublin (17 Oct. 2011).

25 Ryan, Louden, ‘Irish manufacturing industry: the future’ in Studies, xliv, no. 173 (Spring, 1955), pp 5772; see also idem, , ‘Protection and the efficiency of Irish industry’ in ibid., xliii, no. 171 (Autumn, 1954), pp 317326.

26 Interview with Bill Kingston.

27 Irish Press, 21 July 1949.

28 Daly, , Industrial development, p. 29.

29 Fanning, , Department of Finance, p. 457.

30 Barry, , ‘Export profits tax relief’, pp 6063.

31 Daly, , Industrial development, p. 32.

32 Letter from Patrick Hogan, minister for Agriculture, to Patrick McGilligan, minister for Industry and Commerce, 22 Oct. 1929 (U.C.D., McGilligan papers, P35c/166).

33 ‘Department of External Affairs. Statement for the Government’, 6 Jan. 1949 (N.A.I., DIC IND/E13/13/1).

34 Manning, Maurice, James Dillon: a biography (Dublin, 1999), p. 287.

35 Irish Times, 21 Jan. 1949.

36 Ibid., 22 Jan. 1949.

37 Meenan, James, George O’Brien: a biographical memoir (Dublin, 1980), p. 197.

38 Seanad Éireann deb., xxxvii, 1204 (29 Mar. 1950). McGilligan and George O’Brien were in turn said to have been major influences on Alexis FitzGerald, Costello’s economic advisor (Fanning, Ronan, ‘Memoir of Alexis FitzGerald’ in Patrick Lynch and James Meenan (eds) Essays in memory of Alexis FitzGerald (Dublin, 1987)).

39 Irish Trade Union Congress, Fifty-fifth annual report, 1948–49 (Dublin, 1949), p. 28.

40 Undated memorandum on proposed I.D.A. (U.C.D., McGilligan papers, P35b/75(4)).

41 Ibid.

42 Ibid.

43 ‘Department of External Affairs: memorandum for the government: Industrial Development Authority’, 9 Nov. 1950 (N.A.I., Department of the Taoiseach [DT] S 14474 A).

44 John O’Brien, secretary of the Federated Union of Employers, apparently turned down the offer of membership.

45 Pauric J. Dempsey and Shaun Boylan, ‘Beddy, James Patrick’ in D.I.B.

46 Ibid., p. 410; Whitaker wrote the obituary for Beddy in the Irish Times, 1 Oct. 1976.

47 Angela Murphy, ‘Duffy, Luke J.’ in D.I.B.; Fanning, , Department of Finance, p. 566.

48 On McCourt, see report of a speech to the annual conference of the Chartered Institute of Secretaries in Irish Independent, 18 May 1956.

49 Dáil Éireann deb., cxix, 1586 (9 Mar. 1950).

50 Seanad Éireann deb., xxxix, 11 (6 Dec. 1950).

51 Ibid., 56 (6 Dec. 1950).

52 FitzGerald, Garret, Planning in Ireland (Dublin, 1968), p. 212.

53 Farmar, Tony, A history of Craig Gardner & Co.: the first 100 years (Dublin, 1988), pp 178179. We have been unable to trace the memorandum, but John A. Costello also later ascribed the idea to Shott (‘Costello Remembers – 4’, Irish Times, 7 Sept. 1967). A similar account is provided in Ronan Fanning, ‘Memoir of Alexis FitzGerald’.

54 Seanad Éireann deb., lxxxiii, 564–5 (18 Dec. 1975).

55 Dáil Éireann deb., cxix, 1618 (9 Mar. 1950).

56 Quoted in Ronan Fanning ‘Lemass, Seán’ in D.I.B. See also Patterson, Bew and, Lemass, p. 12.

57 Facsimile of memorandum from the secretary of the department of the President, Seán Ó Muimhneacháin, to the parliamentary secretaries of the minister for Industry and Commerce, James Dolan, and of Finance, Séamus Burke, 31 May 1932 (N.A.I., DT S 6283). On the later operation of the Industrial Development Branch, see N.A.I., DT S 11987 A.

58 Horgan, , Lemass, pp 144145.

59 Dáil Éireann deb., cxxvi, 1514 (12 July 1951).

60 Irish Times, 7 Sept. 1967. As will be seen below, it appears that the secretary of Industry and Commerce had come by this time to see the value of the I.D.A. as an ally in the department’s battles with Finance. This would have been an important consideration for Lemass as well.

61 Draft department of Finance reply to department of External Affairs memorandum to government, 7 Jan. 1949 (U.C.D., McGilligan papers, P35b/47(4)).

62 MacBride, Seán, That day’s struggle: a memoir, ed. Caitriona Lawlor (Dublin, 2005), p. 183.

63 Roche, Desmond, ‘John Leydon’ in Administration, xxvii, no. 3 (Autumn, 1979), p. 242.

64 Farrell, Brian, Seán Lemass (Dublin, 1983), pp 8283.

65 Lee, , Ireland, pp 309310.

66 Browne, Noël, Against the tide (Dublin, 1986), pp 123125.

67 Manning, , Dillon, p. 233.

68 Andrews, C. S., Man of no property (Cork and Dublin, 1982), p. 199.

69 Seanad Éireann deb., lxxxiii, 564–5 (18 Dec. 1975).

70 Letter from John Leydon, secretary of the department of Industry and Commerce, to Muiris Ó Muimhneacháin, secretary of the department of An Taoiseach, 26 Jan. 1950 (N.A.I., DT S 14474 A).

71 Internal minute to taoiseach, 11 Nov. 1949 (N.A.I., DT S 14474 A); ‘Interim report of the Industrial Development Authority regarding industrial exports’, 27 Sept. 1949 (ibid., DT S 11752 A); ‘Report of the Industrial Development Authority regarding industrial exports’, 14 Dec. 1949 (ibid.).

72 Whelan, Bernadette, Ireland and the Marshall Plan, 1947–57 (Dublin, 2000), pp 318319.

73 Ibid., p. 342.

74 The full membership is reported in N.A.I., DT S 14818 A.

75 The department had been arguing for some form of tax relief for exporters since 1945; the September 1949 interim report of the I.D.A. surmised that financial inducements – which might take the form of tax remission on the profits of export trade – were needed ‘to attract products to the export pool’. The second report of the D.E.A.C., issued in August 1950, recommended the granting of a tax concession on all profits earned by exports or re-exports which earned dollars for the country: Barry, ‘Export profits tax relief’.

76 Inter-departmental conference on the reports of the D.E.A.C., 5 Oct. 1950 (N.A.I., Department of Finance [DF] F49/1/51/10 C).

77 Ibid.

78 ‘Extension of the activities of Córas Tráchtála Teoranta’ memorandum, 9 Sept. 1954 (N.A.I., DT S 14818 C). Peter Murray notes that its promotional activities were extended to non-dollar areas in 1954: Murray, , Facilitating the future: US aid, European integration and Irish industrial viability, 1948–73 (Dublin, 2009), p. 208.

79 The Consultative Committee of C.T.T., meeting on 25 October 1956, ‘welcomed the announcement of a concession to exporters which had long been advocated’: N.A.I. DF 200/10/56.

80 Dáil Éireann deb., cxxvi, 1544–5 (12 July 1951); ibid., 1672 (17 July 1951).

81 Dáil Éireann deb., cxxvi, 1515 (12 July 1951); ‘Report of Meeting: Technical Assistance’, 11 Sept. 1951 (N.A.I., Department of Foreign Affairs [DFA] 305/57/226).

82 Departmental conference no. 288, 23 Feb. 1953 (N.A.I., DIC 2000/13/8).

83 Dáil Éireann deb., cxlii, 821 (28 Oct. 1953); departmental conference no. 322, 30 Nov. 1953 (N.A.I. DIC 2000/13/9).

84 Irish Independent, 23 Feb. and 22 Aug. 1953, 14 Sept. 1954 and 15 Apr. 1955; Seanad Éireann deb., xlv, 1747 (22 Mar. 1956).

85 Ryan, Louden, ‘Protection and the efficiency of Irish industry’ in Studies, xliii (1954), p. 319.

86 Irish Press, 5 Mar. 1949.

87 The undeveloped areas were Donegal, Leitrim, Sligo, Roscommon, Mayo, Galway and Kerry, and the districts of west Cork and west Clare. The ‘command and control’ mechanism included restrictions being placed on the location of firms applying for licences under the Control of Manufactures Acts: Daly, Mary E., ‘An Irish Ireland for business?: the Control of Manufactures Acts, 1932 and 1934’ in Irish Historical Studies, xxiv, no. 94 (1984), pp 246272 at 261. Firms had also been offered monopoly positions if they agreed to establish in particular areas (Irish Times, 20 July 1935).

88 Facsimile of report of meeting between J. C. B. MacCarthy, secretary of the department of Industry and Commerce, and J. P. Beddy, 29 Mar. 1958 (N.A.I., DIC IND/INDC/4/244).

89 White, MacSharry and, Celtic Tiger, p. 246.

90 ‘Memorandum for the Government: Industrial Development in Undeveloped Areas’, 20 Oct. 1951 (N.A.I., DT S 11987 B); Barry, Frank and Daly, Mary E., ‘Mr Whitaker and industry: setting the record straight’ in Economic and Social Review, xlii, no. 2 (Summer, 2011), pp 163164.

91 (Handwritten) minute to N. S. Ó Nualláin, assistant secretary at the department of An Taoiseach, 12 Nov. 1951 (N.A.I., DT S 11987 B); (handwritten) minute from Muiris Ó Muimhneacháin to Ó Nualláin, 13 Nov. 1951 (ibid.); facsimile of memorandum from Ó Muimhneacháin to Risteárd Ó Foghlú, private secretary to the minister for Industry and Commerce, 23 July 1957 (N.A.I., DT S 11987 C).

92 Girvin, Brian, Between two worlds: politics and economy in independent Ireland (Dublin, 1989), p. 181.

93 I.D.A., Principal new industries with foreign participation (Dublin, 1971).

94 Irish Times, 27 May 1954.

95 ‘Interim report of the Industrial Development Authority regarding industrial exports’, Sept. 1949 (N.A.I., DT S 11752 A).

96 Letter from W. H. Taft, member of staff of the E.C.A. mission in Ireland, to J. R. Nelson, of the E.C.A. headquarters in Washington D.C., 26 Nov. 1949 (National Archives and Research Administration (U.S.A.), Record Group 469, Box 2), cited in Murray, Facilitating the future, pp 22, 205.

97 Ibid. The controls on foreign investment had never been strictly policed (Daly, ‘Irish Ireland for Business’). As to why they remained on the statute books for so long, see Barry ‘Export profits tax relief’.

98 Beddy noted that from 1956 ‘the quickest and most advantageous course was to interest foreign industrialists in the establishment of manufacturing units in Ireland’: Beddy, J. P., ‘Industrial promotion’, Administration, x, no. 4 (1962) p. 327.

99 Department of Finance response to reports 1, 2 and 4 of the D.E.A.C., 27 Sept. 1950 (N.A.I., DF F49/1/51/9 A). Italics added.

100 Memorandum (and summary of memorandum) from department of Industry and Commerce to department of Finance, 8 Nov. 1950 (ibid.). Italics added.

101 ‘Department of Industry and Commerce: memorandum for submission to the government on paragraph 7 (industrial development) of statement of government policy’, 22 Oct. 1951 (N.A.I., DT S 11987 B).

102 Dáil Éireann deb., cxxxiii, 441–2 (9 July 1952).

103 Ibid.

104 Amusingly, given that ‘hardware other than hollowware’ was one of the sectors he asked them to concentrate on, one of the foreign firms that established in 1957 was a producer of enamelled hollowware.

105 Murray, , Facilitating the future, p. 22 (based on documentation held at N.A.R.A. – the National Archives and Research Administration, U.S.A.)

106 These recommendations received the strong endorsement of the secretaries of External Affairs and Industry and Commerce, and of Morrissey, the minister for Industry and Commerce, who described it as ‘the first sensible suggestion on the industrial side which had come from the ECA’: correspondence between Daniel Morrissey, minister for Industry and Commerce, and F. H. Boland, secretary of the department of External Affairs, 10 Mar. 1950 (N.A.I., DFA 305/57/112, i).

107 Murray, , Facilitating the future, p. 23 (based on documentation held at N.A.R.A.).

108 I.B.E.C. Technical Services Corporation, Industrial potentials of Ireland: an appraisal, 1952, p. 70.

109 Whelan, , Marshall Plan, pp 345350; Murray, , Facilitating the future, pp 6, 28, 36.

110 This raises the intriguing possibility that the reference to Puerto Rico was inserted at the behest of the I.D.A., which (as the report states) had been furnished with – and had responded to – an earlier draft. Unfortunately no files detailing the interactions between the I.D.A. and the report’s authors have come to light.

111 N.A.I., Fin/F200/10/56.

112 Barry, ‘Export profits tax relief’. On the Lemass trip to the U.S.A., see particularly ‘ Mr Lemass offers an Irish welcome to U.S. investors’, Irish Times, 6 Oct. 1953.

113 Morrissey speech to the Waterford Chamber of Commerce, (U.C.D., Costello papers, P190/418(4)).

114 Seanad Éireann deb., xlv, 1747 (22 Mar. 1956).

115 Dáil Éireann deb., cxlix, 525–6 (23 Mar. 1955).

116 Irish Independent, 21 June and 6 July 1956.

117 ‘Attractions of Ireland as a location for industries: facilities granted to industrialists’, Nov. 1956 (N.A.I., DT S 15293 A).

118 See Irish Times, 14 Sept. 1955 for information on Faber-Castell; Irish Times; 27 May 1954 for Sligo Models; and Irish Times, 30 Nov. 1957 for Couper Works.

119 Brock, Catherine, ‘Public policy and private industrial development’ in J. A. Bristow and A. A. Tait (eds), Economic policy in Ireland (Dublin, 1968), p. 160. See also Dáil Éireann deb., clx, 2373–80 (13 Dec. 1956), and Kennedy, Kieran A., Giblin, Thomas and McHugh, Deirdre, The economic development of Ireland in the twentieth century (London and New York, 1988), pp 6263.

120 Barry, , ‘Export profits tax relief’, pp 6768.

121 Ibid.

122 Ibid.

123 Department of Industry and Commerce memo: ‘Attraction of American capital investment in Irish industry’ (N.A.I., Fin F 200 10 56).

124 ‘Attractions of Ireland as a location for industries’, Nov. 1956 (N.A.I., DT S 15293 A).

125 Donnelly, , ‘Industrial Development Authority’, p. 145.

126 Dáil Éireann deb., clxvi, 794–6 (25 Mar. 1958); ibid., clxxv, 568 (27 May 1959).

127 Lipsey, Robert, ‘Discussion’ in idem and Heinz Herrmann (eds), Foreign direct investment in the real and financial sector of industrial countries (Berlin and New York, 2003), p. 209.

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