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Money with Morals

Seán Byrne

Gombeens at the Gate: Renewing the Rising through Ideals, Character and Place, by Finbarr Bradley and James Kennelly, Teacht Aniar, €15, ISBN: 978-0995462601

Until the middle of the twentieth century, economists believed that a country’s economic development largely depended on its natural resources. As it became clear that some countries with limited natural resources, such as Japan, developed while countries such as the Republic of Congo, despite a superabundance of resources, remained mired in poverty, violence and chaos, it became clear that institutions such as the rule of law, non-corrupt governments and social cohesion were more important for development than the availability of resources. Institutions in turn were seen to be a reflection of more basic cultural traits of norms, values and attitudes. Max Weber argued in The Protestant Ethic and the Spirit of Capitalism that the Protestant belief that material success in this world was an indication of virtue and therefore to be worked for was conducive to economic development. The importance of cultures that emphasise hard work and the deferral of gratification can be seen in the success of the immigrants with Lutheran cultural backgrounds in the USA and the Chinese in Asia. But modern banking began in Italy before the Reformation and Italy and France, both predominantly Catholic countries, became wealthy.

The importance of the link between culture and enterprise in Ireland is the theme of Gombeens at the Gate: Renewing the Rising through Ideals, Character and Place by Finbarr Bradley and James Kennelly, who are distinguished scholars in the areas of finance and business policy. They have explored the links between culture and enterprise in two earlier books, The Irish Edge: How Enterprises Compete on Authenticity and Place (2013) and Competing on Difference: Innovation, Learning and a Sense of Place in a Globalising World (2008). In Gombeens at the Gate, published to coincide with the centenary of the Rising, Bradley and Kennelly argue that 1916 was partly inspired by the ideals of the Irish Revival, which began in the 1890s and which in addition to seeking to revive the Irish language, also fostered economic self-reliance as a basis of national identity. The authors argue that the economy created by the Irish state after independence was not based, as the leaders of 1916 envisioned, on native resources and enterprise and that there is an urgent need to replace Ireland’s overwhelming dependence on multinational companies with an industrial structure based more on indigenous industry which the authors believe must essentially be rooted in authenticity, sustainability and a sense of place.

The leaders of the Rising no doubt had a vision of the republic they wished to create and the proclamation is enlightened for its time in asserting the rights of women two years before they were given the vote, but apart from an assertion of the right of the people of Ireland to control of the country’s resources, there is no indication that, if the Rising had succeeded and the leaders survived, they would have radically changed the economic status quo. The much quoted promise to “cherish all the children of the Nation equally” was an attempt to reassure Protestants that they would be welcome in the new republic and not a commitment to better the lot of the hungry barefoot children who looted the shops of central Dublin during the Rising. The only 1916 leader who had a clear vision of the kind of economy he wished to see in a united Ireland was James Connolly and none of the other leaders shared his socialist vision.

Bradley and Kennelly, in their chapter on the period 1922 to 1966, call this a time of “vision without capability”. The survivors of the War of Independence and the Civil War who formed the first government were an uninspiring group of men. Apart from the Shannon Hydroelectric Scheme the first government of “Saorstát Eireann” did little to foster economic development. Kevin O Higgins, Minister for Justice , advised Cosgrave “you will never rule this country by adopting idealistic principles, nothing but the ruthless application of the Iron Hand will heal its ills”. So much for George Russell’s misty-eyed vision of a co-operative economy.

With the success of Fianna Fáil in 1932, the party of the “men of no property” came to power and remained there almost continuously for the next eighty years. De Valera at least recognised the need for the state to promote economic development but feared that industrialisation and urbanisation might lead to materialism and the loss of the supposed “spirituality” of the Irish peasantry. He therefore emphasised improving the economy of rural Ireland and fostering indigenous firms while resisting integration into the global economy, a policy which Tom Garvin called “Denmark comes to Knocknagow”. Heavy tariffs were imposed on imports but the firms that emerged to serve the domestic market could not absorb the numbers fleeing subsistence farming so the population continued to fall due to mass emigration. By the end of the 1950s the failure of De Valera’s policies was so obvious even to his supporters that a new direction was required. When he was succeeded by Lemass the “big idea” of self sufficiency, which had been a spectacular failure, was replaced by the “big idea” of foreign direct investment which eventually was a spectacular success.

But Bradley and Kennelly argue that reliance on multinational investment puts Ireland in the demeaning position of having to constantly adapt to the changing needs of multinational companies so that we can attract the next wave of technology. Our fiercely defended low rate of corporation tax is our main competitive strategy and is under severe threat now that the UK, our main ally in defending it, is leaving the EU. Unlike other small open economies such as Finland and Denmark Ireland has failed to develop a strong indigenous industrial base, a fact which Bradley and Kennelly attribute to a failure to value and build on our culutural heritage and sense of place. This failure cannot be attributed to a lack of entrepreneurial ability. The Irish are the second wealthiest ethnic group in the USA, after the Jews, which suggests that there are factors at work in Ireland which discourage entrepreneurship. One of these is what economists call “rent-seeking”, which the authors surprisingly do not discuss, although it is implied in the word “gombeen” in the title. Rent-seeking involves putting energy into acquiring a share of existing resources, particularly those controlled by the state, rather than creating new resources. Gombeen capitalism, rather than establishing new enterprises and creating new wealth, tries, often by corrupt means, to get a cut of wealth created by others or of state resources.

Another factor inhibiting indigenous industrial development was the neglect of technical education from independence until the 1970s. De Valera’s first government established technical schools but the Catholic Church ensured that since those schools would be outside its control, only two years of purely technical education (woodwork and metalwork for boys, domestic science and typing for girls) would be provided. An ironic contrast to the Irish Catholic church’s hostility to technical education is the experience in the Basque country of the hugely successful Mondragon Corporation which is the largest enterprise in the Basque country, employing 75,000 people. That great enterprise was initiated by a Catholic priest, Fr Arizmendiarrietta, who before establishing the famous co-operative, set up a technical school to teach young people the skills needed in the enterprises he planned to establish. In Ireland the Glencolmcille co-operative founded by Fr James McDyer might have been as successful as the Mondragon venture if it had received the same level of support as the foreign firms that were being attracted to Ireland at the time.

The experience of the Basque country is relevant to Bradley and Kennelly’s central thesis that arresting the decline of the Irish language and the cultivation of rootedness and distinctiveness are essential for the development of sustainable indigenous industry based on a distinctive sense of place. The Basques retained their language despite the efforts of Franco to stamp it out and the success of their indigenous industries had made the Basque country one of the wealthiest regions in Spain. Despite being persecuted by various Spanish regimes, the Basques were never colonised and their identity, of which their impenetrably unique language is the main expression, remained intact. The Basque experience certainly supports the thesis of Bradley and Kennelly that preserving culture and language can be a catalyst in economic success. In The Price of Prosperity: Why Rich Nations fail and How to Renew Them, (2016) Todd Bucholz agrees with Bradley and Kennelly that patriotism and entrepreneurship are linked. Bucholz argues that America’s decaying work ethic and the decline in new business start-ups are linked to a cynicism about patriotism symbolised by the fact that in many schools the pledge of allegiance has been replaced by affirmations of self-esteem.

While some of the Mondragon enterprises have been victims of globalisation, many have survived. In Ireland, most of the small indigenous industries that emerged during the protectionist era from the 1930s to the 1970s quickly succumbed to foreign competition when Ireland opened up to foreign trade. Apart from micro-enterprises serving local markets, of which there are many thriving examples in the food and handcraft areas, it is questionable whether locally rooted companies can long remain local if they are to thrive. TK Whitaker, writing in Economic Development (1957), had recognised that most of the domestic firms set up behind tariff protection had failed to achieve a viable scale to become exporters. James Kennelly, one of the authors of this book, has written the history of the Kerry Group (The Kerry Way, 2002). Kerry is one of Ireland’s few indigenous multinational companies, but its creation involved the loss of many jobs in small creameries throughout the south of Ireland. When Denis Brosnan became manager of one of those creameries in the 1970s, he quickly understood that small creameries producing only pasteurised milk and butter for a local market were not viable and he set about amalgamating them, achieving economies of scale and developing new products. Under Brosnan’s leadership, Kerry became the world’s largest food ingredients company and now employs more people in the USA than in Ireland. But it remains an Irish-rooted company and has established a huge research centre in Co Kildare.

The entire focus of third level education in Ireland is now on “innovation” and “enterprise”, yet Bradley and Kennelly point out that the amount of money a country spends on research is not strongly related to its prosperity because “research centres on thinking and reflection while innovation is about doing and valuing”. Apprentice education has been scandalously neglected in Ireland, with only a narrow range of skills being defined as qualifying for apprenticeships. As the economy recovers, skill shortages are emerging, while many young people, particularly early school-leavers, remain unemployed because the Irish education system is directing too many students into an academic education for which they are not suited, while providing too few apprenticeships.

Gombeens at the Gate is an admirable attempt to focus attention on the unrealised objectives, in terms of economic and cultural development, of the 1916 Rising. Finbarr Bradley, who teaches in the Smurfit Graduate Business School in UCD, previously worked in DCU, where he established Fiontar, an interdisciplinary school which taught courses in business and entrepreneurship through Irish. Several graduates of the Fiontar programmes have established their own businesses, which supports the hypothesis in the book that language and culture can support enterprise and innovation. Given their wide experience in teaching on enterprise-related courses it is surprising that Bradley and Kennelly do not consider the issue of whether entrepreneurship can be taught. The experience of Prof Tom Cooney of DIT, Ireland’s leading scholar of entrepreneurship, suggests that it can. He has for some years been teaching a course on new enterprise development in degree programmes in the School of Business in DIT and an encouragingly, a number of graduates of those programmes have set up their own businesses.

It is encouraging that Finbarr Bradley, who established the first Masters in Investment and Treasury Management in DCU in 1990, and who could have made a fortune in finance had he been motivated by money, should co-author a book which as the authors say “injects morality into the province of business and commerce”. The damage wrought by the gombeen capitalism of Ireland’s economic boom will have to be paid for by Irish taxpayers for many years to come. Gombeens at the Gate should be essential reading for government policy-makers and students of business. They will learn that businesses and policies for developing business not based on sound cultural and moral foundations are built on sand and may be blown away by the winds of globalisation.

1/11/2016

Sean Byrne lectures in economics at the Dublin Institute of Technology. His main areas of interest are international economics and globalisation.

Space to Think, an anthology bringing together more than fifty of the best pieces to have appeared in the Dublin Review of Books since its foundation ten years ago, was published in October. Selling in the shops at €25, it is also available to order online at a special price of €20 (to collect in Dublin) or €20 + post and packing charges as appropriate for shipping to addresses in Ireland and internationally. To buy online, follow the steps from the home page of our website.

One piece featured in Space to Think is Maurice Earls’s “One Onion, Many Layers”, a review of a study by Ciaran O’Neill of education and Irish Catholic elites. Here is an extract:

The modern Catholic elite took its initial form in the wake of the final military defeat suffered at the end of the seventeenth century. Under Protestant hegemony, Catholic behaviour became pragmatic and unassertive. However, as the century neared its end and the urge in Westminster to penalise Catholics abated, anti-Catholic penal measures were gradually disbanded, leading to the partial opening of the restricted profession of law, and even of Trinity College itself, to Catholics.

In response to these changes there was a huge release of pent-up Catholic energy, which ultimately manifested itself politically in the O’Connellite movement. The ultimate objective of this new political phenomenon was to position property-owning Catholics at the heart of government and administration in a transformed Ireland, an Ireland characterised by an organic relationship between the social classes and a shared anglophone culture. It was a hugely ambitious programme, which among other things envisioned an Irish industrial revolution. Indeed, its heyday was perhaps the only time when elements of the Catholic elite came close to resembling a modern bourgeoisie.

When the O’Connellite movement collapsed, the vision and ambition of its tentative bourgeoisie declined correspondingly. But the erosion of Protestant dominance in the legal and administrative worlds continued, and this occurred at a time when the modern growth of the professions had begun. So, if there was to be no substantial Irish industrial bourgeoisie drawn from the Catholic elite, there was to be a growing and confident middle class and elite Catholic professional and administrative class.

The cultural politics which evolved and which were embraced to advance this process essentially involved a continuation of the O’Connellite tactic of appealing to centres of power in London over the heads of the existing and defensive possessors of privilege in Ireland. But this time the objectives were the micro advantages of position rather than legislative autonomy, an objective which did not focus attention again for a generation following O’Connell’s defeat. And when it did revive, in O’Neill’s estimation, the desire for autonomy did not centrally engage this elite.

Choice of school, as many a parent will perhaps grudgingly admit, is the first decision affecting status to be made in relation to a child. In the eighteenth century the children of privileged Catholic families were educated abroad. Like many upper class Catholic youths of his time, O’Connell attended school in France. Indeed, his was the last generation for whom the educational journey to France was de rigueur. The relaxation of the penal laws not only enabled O’Connell to study law at Trinity, it also enabled the Jesuits, the Holy Ghost Fathers, the Vincentians and others to establish schools for elite children in Ireland. O’Connell’s own sons attended Clongowes. Indeed the Liberator contemplated retiring there when he reached sixty-five.

Catholic elite education was about succeeding in a world shaped by British interests and culture, a culture which was residually anti-Catholic and negative in its perception of the Irish. In this demanding environment privileged Irish Catholics sought parity of opportunity within the empire. Clongowes Wood College was set up in 1814, Castleknock in 1835, and Blackrock College in 1860. These schools offered an English public school-style education, with cricket, rugby and a powerful internal culture which encouraged students to place the school towards the centre of their identities throughout their lives. The idea was that graduates could pass muster in the company of the English elite, who would therefore not be ill-disposed to granting them appointments.

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