A recent history of the Department of Finance – ‘The Irish Department of Finance, 1959-99’ – charting the ups and downs of the Irish economy over a period of four decades was written by Dr Ciarán Casey, economic historian. The Department has been at the centre of the public governance process, having primary responsibility for setting economic policy throughout the period being examined. But Casey argues – “…that power ebbed and flowed through the decades and was highly contingent on political support” (Page 4).
The author Dr Casey made this point on the night his book was launched – “As the central Department of Government, the history of Finance is very much the history of the State and it was a fantastic opportunity to be able to access the records that detail how such a remarkable economic transformation was achieved, particularly in the final decade of the period of my research.” https://www.gov.ie/en/publication/bc543-culture-night-2022/
The writer had a tough task deciding what should be included in his book. The Department of Finance’s archive for 1959 through 1999 comprised something in the region of 100, 000 files. Whittling down the titles of interest left 5,000 files or well over a million pages. That led to judgements as to what should or should not be covered in the book. In turn, that allows this reviewer draw attention to issues he thinks are the most interesting, without in any way insulting the author.
This review starts with some discussion of key policy issues that Ciarán Casey brings to our attention. It finishes by taking issue with Casey’s criticism of the National Economic and Social Council and his omission of any reference to the Euro Changeover Board.
The box below shows where copies of the Ciarán Casey’s book can be acquired.
Department’s Central Role
As well as undertaking traditional finance functions, the Department of Finance oversaw a series of new economic and social policies in the period under examination. It was also charged with a swathe of other responsibilities in its role as ‘the Central Department’. Accordingly, Casey concludes that Finance Ministers and officials were key agents of the changes that transformed modern Ireland. However, the Department’s central role in government does not go unchallenged. The advent of T. K. Whitaker’s Economic Development illustrates this point. This document was published in November 1958 and has for long been regarded as the blueprint for Ireland’s development strategy in subsequent years. Not so, concludes Casey – “Claims that Economic Development acted as a major psychological stimulus sit uneasily with empirical evidenced “. He went on to state that the real significance of Economic Development was that it marked the reassertion of the Department of within Government, as it attempted to wrest back control of trade policy from the Department of Industry and Commerce (led by J. C. B. McCarthy). While this process took until 1963, the Department of Industry and Commerce won its share of Cabinet decisions along the way (Page 210).
Sound of silence
Ciaran Casey has an interesting criticism that emerged from the Department of Finance’s own files. It relates to the absence of any internal policy criticism in the files he examined. Specifically, he states that – “A significant limitation of the Finance files is the near absence of documented policy criticisms. On their own, the files give the impression of a department that was almost monolithic in its view” (Page 112). By contrast, a striking feature of Department of Finance activity was the amount time and energy consumed in responding to external events (Page 215). The only conclusion one can reach is that criticism, on paper, of a colleague next door would be uncomfortable. Much easier to criticise an overseas expert who is unlikely to visit Dublin.
National Economic and Social Council
There are several references to the National Economic and Social Council (NESC) in the book. The NESC was established in 1973 as an advisory and discussion forum. Dr Casey states that the Council – “…had a decidedly precarious existence in this period” and that – “One fair criticism was the Council’s prolific output of reports on a wide range of subjects. This distracted from the priority issues and made it all too easy for reports to fall into obscurity. Many were written by consultants, which absolved members from developing and articulating their own views” (Page 115).
In fact, these matters were addressed in NESC Report No 39 (June 1978) – “In almost every field identified…for study, either background studies were not available, or if they had been prepared in Government Departments, were not made available to the Council”,
Consultants were used in the preparation of twelve of the thirty-two reports prepared by the Council during 1974-76; in six cases of these cases the consultants were from outside Ireland”, and
“The use of consultants meant that first-rate expertise could be brought to bear on specialised problems, and this enabled the Council and its very small secretariat to accomplish a vast amount of work at minimal cost to the Exchequer.
(I should declare my position regarding the foregoing. I drafted successive drafts of the NESC report under the watchful eye of the NESC Chair, the late Professor Louden Ryan; a Report which was then adopted unanimously by the Council).
The Euro
Dr Casey devoted nine pages to the euro and the European and Monetary Union (EMU). And that is as it should be, entry into the EMU was an extremely important economic decision for Ireland. The book tracks the differing views of experts, as to whether Ireland should or should not join the EMU and so adopt the euro. For its part, the Department of Finance played a central role in this process. As well as its internal work on the issue, the Department engaged the Economic and Social Research Institute (ESRI) in 1995 to provide expert advice. It published its report in 1999 where it argued, on balance, that membership would be beneficial for Ireland, though both the potential costs and benefits would be relatively small compared to the gains associated with the Single Market. (Page 191).
However, considerable work had then to be undertaken by the Euro changeover Board Ireland (ECBI) to ensure all of the necessary groundwork was done for a smooth transition to the euro in Ireland. It was work well done. As John Kelly of the Central Bank records – “According to outside commentators, the final changeover to the euro in Ireland took place quickly and was remarkably smooth…” https://www.centralbank.ie/docs/default-source/consumer-hub-library/the-irish-pound-from-origins-to-emu.pdf
Surprisingly no mention is made in Casey’s book of the role of the ECBI.
Shifting sands
The author captures very expertly the institutional change and shifting power that took place over the decades. He shows that while the Department of Finance continues at the centre of power, it was a far more expansive organisation in the 1960s than it is today. By contrast, the Department of the Taoiseach has grown dramatically in both size and importance. And in more recent times, the Department of Public Expenditure and Reform has taken on functions that had previously been the responsibility of the Department of Finance.
The author lists the many areas of policy and action that the Department of Finance was central to in the period under review. They include not just fiscal policy, but also inputting on policy in relation to: –
- The 1960 Anglo-Irish Agreement.
- EEC application and unilateral liberalisation, 1961-1964.
- The Anglo-Irish Free Trade Agreement, 1965
- Foreign Direct Investment
- EEC Membership 1973
- European Monetary Union, and
- Advent of the Euro
Finally, Dr Casey concludes that notwithstanding the constraints under which the Department of Finance had to operate – “…a fair assessment of their overall contribution must be largely positive, as the experiences of many other countries, or Ireland of 1959, would attest.” (Page 219). The book should be read by those interested in how government evolved over the second half of the 2oth century in Ireland.
Tom Ferris, Consultant Economist.
Tom Ferris is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and blogs regularly for PAI. He was formerly the Senior Economist at the Department of Transport, Ireland.