Right wing libertarian politics have never really caught on in Ireland. Part of this is due to the memory of the Great Famine of 1845-8. The Famine, though caused by blight, was made worse by the prevailing conservative doctrine of laissez faire. This was the prime example of politicians believing the free market will solve everything, that it would be unethical for the government to intervene and that helping the poor would only make them lazy and dependent. This was an experiment of a world with only minimal government, of free market principles in practice, the result was so disastrous that a million people died.
The normal market is governed by supply and demand. Goods are sold to whoever will pay the highest price. However while this works when times are good, it breaks down in times of trouble. The Famine was exacerbated by basic economics. For example say you could get a price of 3 by selling your good in Ireland but a price of 5 by selling your good in England. Obviously you will export it even if Ireland is starving and England isn’t. This was the case during the Famine because the starving peasants didn’t have money to buy food and therefore starved. As Amartya Sen described it, it is not lack of food that causes starvation but rather a lack of money to buy food.
A common tactic during a Famine is to ban exports of food. This way food is kept within the country and the increase in supply will offset some of the decrease caused by the blight. Prices will drop which will help the poor but harm merchants. This was done in the last major famine in 1781-2. However the government refused to intervene in the economy this way. They believed that the free market was sacred and would solve all problems if left alone. The government put their rigid ideology above the lives of millions. They put the interests of the merchants above those of the starving poor.
The most contentious issue in Anglo-Irish relations is the allegation that food was exported during the Famine. This was a source of hatred for generations of nationalists, who remembered English soldiers protecting food as it was brought to ships for export as the people starved. John Mitchell claimed that there was enough food in Ireland to feed its people. A common saying was that “God sent the blight, but the English sent the Famine.” Cecil Woodham-Smith (who wrote one of the definitive accounts on the Famine) wrote that “the indisputable fact that huge quantities of food were exported from Ireland to England throughout the period when the people of Ireland were dying of starvation.” While it is true that food was exported even at the height of the famine, it is also true that food was imported. It has not yet been determined which was larger. It would not be right for me to comment on such a controversial issue without proper evidence and I am unable to find such data (quite likely detailed records weren’t kept).
The government did take some action but it was always half hearted and limited. In 1846 100,000 pounds worth of corn was bought by the government. While this helped it was a drop in the ocean compared with the fact that the blight had wiped out 3,500,000 pounds worth of potatoes. It was also determined that the corn would not be handed out but rather sold as near to market prices as possible. The government was obsessed with fears of damaging local businesses and of creating dependency among the Irish. However most peasants paid their rent with part of their crop and survived on the remaining potatoes. This meant they did not use money and therefore could not buy food or access credit.
According to Peter Gray, the government spent £7,000,000 in famine relief between 1845 and 1850 which represented 0.5% of GDP, hardly the response needed to tackle one of the worst disasters of the 19th century. This was compared to the £20,000,000 paid in compensation to slave-holders in the West Indies in the 1830s and £76,000,000 spent on the Crimea War.
The government also set up public works schemes but these too were of an extremely limited nature. The government believed it would be an abuse of the government’s role to create anything productive or useful that might help people. It was viewed as unethical for the government to help an individual so no money was invested in productive enterprises or in improving the land. They therefore built roads that lead nowhere and had no purpose. They also insisted on paying wages below the market rate. The workers were not provided with winter clothes and were so under paid that they died in huge numbers from under nourishment. These schemes were marked by corruption, late payment of wages and a massive death toll. The government based its actions on tight-fistedness, penny-pinching, excessive obedience to laissez faire ideology and faith in the market.
These schemes too were wound down and emphasis shifted to the workhouses. These were a hated and detested place in Irish folklore. People would do literally anything, even die before going into a workhouse. For a proud people workhouses reeked of the stigma of handouts and the loss of independence. Here too the government was more concerned with saving money and avoiding the age old conservative fear of lazy dossers living off the state rather than alleviating mass starvation. To ensure only the “deserving poor” (in other words the most desperate and those closest to death) received help it was required that everyone receiving assistance must live in the workhouse. To enter the workhouse they had to give up all property and most possessions. They were separated from family and give the bare necessities to live. The workhouses were vastly overcrowded and disease was rife. For many they were a place to die. They are an example of when the focus is on saving money rather than saving lives.
The Famine is also remembered for the policy of evictions. This is remembered in folklore as a cruel and heartless policy that caused great suffering and death. From a purely laissez fare economical view it is logical. If tenants are not paying the rent then they shouldn’t be allowed to keep the land. It should be given to someone who will pay the rent. Landlords were also afraid of moral hazard, in which allowing some tenants to stay despite not paying the rent would lead to no one paying the rent. Whatever the theoretical validity of this argument, it completely failed to take account of local factors. Tenants couldn’t pay the rent but this was no fault of their own. It was not their fault their crops were struck by the blight. Eviction meant either emigration or starvation. For generations Irish people cursed the landlords for forcing tenants onto the side of the roads to die, all for the sake of making more money.
Of course there are always ideologues who will stick to their beliefs no matter what the evidence. Modern day advocates of laissez faire argue that the famine was caused by too much government interference. Like the argument that the Financial crash of 2008 and the resulting depression was caused by too much government interference, this is a position based on pre-conceived opinion rather than any evidence. Therefore there is little need or point in refuting it.
Current Republican Vice-President candidate Paul Ryan’s ancestors left Ireland during the Famine. It is ironic that his views on welfare are strikingly similar to those of Charles Trevelyan the man in charge of Famine relief. Trevelyan main priority was cost cutting and avoiding creating dependency or granting aid to undeserving people. Ryan recently declared that the welfare system “lulls able-bodied people . . . into lives of complacency and dependency, which drain them of their very will and incentive to make the most of their lives.” If Trevelyan was around today he would undoubtedly echo those words. Both are guided by the belief that the free market will solve all problems and that government intervention only makes things worse.
It is popular nowadays to argue for limited government and leaving it to the free market. It is argued that the government is the cause of most problems. The free market is proclaimed an untouchable sacred cow. Famines are natural disasters that cannot be helped or avoided. However the case of the Great Famine shows this is not the case. The free market will not solve our problems. When times are bad we need the government. Laissez faire in principle resulted in left to die in practice.
I fail to see what you would have had the government do. Also, you didn’t refute anything from the article that you linked to. Example from article: The role the Bank Act of 1844 played in the contraction of money or the fact that the Irish poor laws retarded the free markets best weapon to help the needy. Charity. (All things imposed by government)
I do find it interesting that you cite all the failures of government during the famine, like: Roads to nowhere, workhouses, purchasing corn and selling it, yet your solution seems to be that they just didn’t do enough.
You mentioned the 2008 crash. How come for years and years the home mortgage loans were the safest loans around? They managed to make sensible loans with very low rates of foreclosure. What happened? Did every financial institution in America all of the sudden decide to start doing risky loans? Obviously not. It was governments desire for “everyone to own a home.” It was regulations brought forth by the goals cited in the community reinvestment act that forced lending institutions to not only consider lower income applicants, but actually approve lower income applicants. The regulators imposed lending quotas forcing the institutions to make loans to people who normally wouldn’t have qualified for them. So what did the lending institutions do? They came up with creative ways to meet the government quota.They did sub prime loans(High interest loans to risky people), Adjustable rate mortgages, and no money down loans. This was doomed for failure.
Enter Fannie Mae and Freddie Mac. These two are GSE’s or government sponsored enterprises. Notice the word government in the last sentence. Fannie and Freddie get their directives from department of housing and urban development. People like Barney Frank knew that they could have Fannie and Freddie buy loans from the banks, therefore freeing up the banks books to make more loans. They started to buy the toxic mortgages from the banks. Fannie and Freddie get low interest loans because lenders know the tax payers will bail them out if they lose.
As the High interest sub primes and Arm’s start raising. People start defaulting on the loans. Leaving Fannie and Freddie and banks with billions of malinvestment on the books.
This is government nonsense at it’s worst. The banks would have never made the risky loans if the government wasn’t imposing loan approval quotas. It was the desire of people in the government like George W. Bush, Barney Frank, and Chris Dodd, who wanted everyone to own a home, that lead to this perfect storm. If the government wouldn’t have involved itself, this wouldn’t have happened. Banks would have continued their high lending standards that had worked for years.
The reason I didn’t refute the argument made in the article was that it was completely wrong and based on arguments that no historian in Ireland has made. Banking is irrelevant as the people who starved were subsistence peasants who at little or no access to money let alone credit. The poor laws were a very light tax by modern standards and arguably racism and snobbery was a greater deterrent. Charity alone could not possible cope with the enormous crisis. Remember we are dealing with a population of 8 million whose principal food source has just failed. The article also argues that both protectionism and the removal of protectionism (in the form of the Corn Laws) in 1846 were a major cause. I felt the self-contradiction was criticism enough.
It is true that there were some government intervention but it was extremely limited, half-hearted and eventually closed down, leaving people to starve. I criticised the selling of corn because the desire to avoid moral hazard outweighed the desire to save lives by giving it for free or at least heavily subsidised. Workhouses was gross underfunded and insufficient for the problem. Their main aim was to stigmatise the poor rather than help them. The public works were only a drop in the water compared to what was needed.
What the government should have done was ban exports of food as was done in other famines. It should have had a massive food relief program based on preventing starvation rather than humiliating the poor. For example in some cases people had to stop tending their fields in order to receive aid, an obviously counter productive plan. There should have been grants of seeds because there were some years where blight did not strike but there was still famine because farmers had eaten their seeds. Essentially the government should have put the starving poor ahead of penny-pinching.
This thing with the banning of exports, you keep pushing it as if it is a clear argument. Wouldn’t that cause loss of revenue, and thus weaken the economy even more, causing more famine? How does stopping economic activity help those at the fringe?
And this: “For example in some cases people had to stop tending their fields in order to receive aid, an obviously counter productive plan” You keep finding government failures, and yet you blame the market…
Banning exports would have meant less revenue for merchants but also less starvation. I suppose its a question of a trade off between what you value more. Personally while merchants would not have made as much money, far less people would have died which I consider a price worth paying, but that’s me.
“You keep finding government failures, and yet you blame the market”
You must have seriously misread the post to reach that conclusion. Do you not see that it was libertarian arguments that convinced the government not to intervene to provide relief? Do you not see the complete failure of private charity to deal with the problem? You are looking straight at market failure and are still trying to blame the government.
Your moralistic posturing aside (what, I want the merchants to make money and you want to save the poor?), my comment is that banning exports hurts the whole economy, not just exporters. Consider: if you work as a farmer on a export driven plantation, of bananas say, your salary can buy you food stuffs more nutritive then if you would just eat the bananas. Banning exports is a forced interruption of economic activity that hurts everyone, not just owners of capital.
Anyway. The famine was a massive failure of government, because it is a legitimate function of government to intervene and protect it’s people, in this case under national security. The affliction was as destructive as a war, so there was motive for intervention.
As to what the British government did, just because they preached “libertarianism”, it does not mean they actually followed suit. Some in the gov. also said the Irish are lazy bums deserving of their fate, I assume you don’t believe that was the case. Why do you then believe them when they summon supposed libertarian reasons for their actions?
It is interesting that you consider the idea of not exporting food during a famine “moralistic posturing” and that you mean that as an insult. The problem is that Irish food exports have traditionally be comprised of cattle and livestock which is not labour intensive. Crops were grown by smaller farmers to pay the rent but rent is not a productive activity, so payment for it should not be prioritised ahead of starvation.
“The famine was a massive failure of government, because it is a legitimate function of government to intervene and protect it’s people, in this case under national security. The affliction was as destructive as a war, so there was motive for intervention.”
If I understand you correctly, you believe the famine was a case of government failure because the government did not intervene when it should have? This is quite different to the normal use of the term, but I would agree that the government should have intervened more (though if you are to use this definition, the recession is an example of government failure because it did not intervene when it should have).
“As to what the British government did, just because they preached “libertarianism”, it does not mean they actually followed suit.”
What makes you think they did not follow suit? When Lord Russell became Prime Minister in 1847 he criticised relief efforts using a libertarian argument and then dramatically scaled them back. Soup kitchens were closed, workhouses were made more restrictive and outdoor relief was ended. To me that sounds like they meant what they said.
The British in charge were hypocritical in justifying their actions. If they believed in a free market there would have been no Corn laws, with their boom effect in population. No political rights for the Irish and property for the English absentee landlords do not a free market make. Soup kitchens were not a solution, a solution would be to release the country decades or a century before, to build a strong economy not one of landless serfs growing one subsistence crop. Workhouses were too a typical top down solution: lets build roads to nowhere, on local taxes.
About food exports bans, let me put it this way:
Irish farmers worked potato and cereals on their rented lots. The potato they consumed, the cereal they sold to British owned farms to grow export live stock. If the British banned the export of live stock, wouldn’t the owners stop buying cereal, thus depriving Irish farmers of revenue, of larger value to them then direct consumption of the cereal? It’s a technical question, not a moral issue that I raise with you here.
Well the Corn Laws were repealed in 1846 and they kept the price of wheat high so would have lessened the boom in population rather than contributed to it.
“property for the English absentee landlords do not a free market make.”
So the government should have intervened and redistributed the land? What are you, a statist?
“Soup kitchens were not a solution, a solution would be to release the country decades or a century before, to build a strong economy not one of landless serfs growing one subsistence crop.”
How? How could they build a strong economy without intervening?
I’m not sure why you think the cereal was solely used for cattle, it was also exported to be eaten. Sure the merchants would have lost revenue but people would have food to eat. There’s no reason to think that all the cattle farmers would have gone bankrupt and stopped producing. The government could also have bought the food if you are that worried about market distortions.
“So the government should have intervened and redistributed the land? What are you, a statist?”
“How? How could they build a strong economy without intervening?”
You’re asking how could the Devil have behaved better. I say there should be no evil doing. Ireland was essentially a feudal colony, with freedom for the Irish only to work as serfs on land they did not own. To suppose the British masters could have behaved according to laisser faire is to assume there was a free economy in Ireland, and there was not. Letting slaves die of hunger is not laisser faire, Robert. Freeing them is.
“So the government should have intervened and redistributed the land? What are you, a statist?”
Redistribution of land under national legislation voted by a national assembly in condition of national independence is not just a solution for Ireland, it is what freed most of Europe. This is not a statist position, it is the replacement of autocratic feudal power with democratic institutions. Surely you can see how this is a step towards individual empowerment not statist control? I never said change towards more freedom is independent of political action, but that doesn’t make me a statist. Consider the American Revolution and the American Constitution, political acts of renewing the state that vastly expanded individual power in the US.
In some countries the transitioning from feudal to democracy happened by revolution (Ireland, US) in others by peaceful change (say Denmark), but transition you must before you speak of any vices of the free market in these countries.
If I had more time I would have explained the Federal Reserves role in the 2008 crash, as it was extensive.
I think the 2008 crash is an argument for another time. I will just say that you are seeing what you want to see. It was a free market crash but if you want the government to be at fault I suppose you will find whatever crumb of evidence to support your view. The community Reinvestment Act was a minor law that did not hugely change the banking sector. Most new financial devices were designed to avoid regulation and to make profit, not to help the poor. It was the rich and middle class who were most caught up in the boom. Freddy Mac and Fannie Mae were private banks not under the personal control of Barney Frank (who was not in power for almost the entire period). The banks caused the crash and as hurtful as that may be to your ideology you have to accept it and move onto a fight you can win.
True the community reinvestment act was a minor law in itself, but like all things in government, it grew. That’s why I said politicians cited “Goals” of the act to push for more home ownership. There’s no way around the fact that for so may years home mortgage loans were the safest contracts around. Like I said in the comment, why all of the sudden did every lending institution decide to start engaging in high risk loans? Your right, banks were the ones to give out the loans. It was to meet governments lending quotas.
I’m not seeing what I want, I’m seeing facts.
Fact 1. Fannie Mae and Freddi Mac are GOVERNMENT sponsored enterprises. Direction and regulation coming from department of housing and urban development.
Fact 2.The community reinvestment act directed all federal financial supervisory agencies to make lending institutions to meet the needs of more people in the community by lowering lending standards. (hint..hint.. Not everyone who wants a house can afford a house. What’s wrong with renting? The people who sought the loans, knowing they couldn’t afford them are culpable as well)
Fact 3. Department of housing and urban development pushed Fannie and Freddie make more loans to the “underserved” [sic] population
Fact 4. In 1992, after the department of housing and urban development became a regulator of Fannie and Freddie they imposed ” low income” “affordable housing” quotas on the them. In practice that means the government regulators were pushing them to make more sub prime loans
Fact5. According to the Washington Post, department of housing and urban development allowed Fannie and Freddie to count billions of dollars in sub prime loans as “public goods.” In short the government regulators qualified risky loans as good loans, just to push more lending.
Fact 5. Banks are federally regulated enterprises. They need government permission to conduct much of their business. Government regulators often would delay or deny permission depending on the banks compliance with the community reinvestment act. Yet more reason for banks to meet lending quotas. EXAMPLE: In 1999 legislation was pending to permit banks to diversify into selling investment securities. Banks given unsatisfactory ratings under the community reinvestment act were delayed enjoying the new diversification privileges from the legislation. That will teach them to next time meet the government lending quotas.
Fact 6. The department of housing and urban development often brought legal action against banks that declined a higher percentage of minority applicants than whites, regardless of the minorities financial status. Again, a reason for banks to give out risky loans.
Fact 6. In 1996 the department of housing and urban development set a 42% target for mortgages bought by Fannie and Freddie were to be financed for people with incomes below the median income in their areas.
Big government advocates can ignore this stuff all they want. Like you said, they see what they want to see, but the fact of the matter is, the things I listed above are the reasons why the banks did what they did. That’s why I ask the question above.(why did the banks, collectively all the sudden decide to take on risky loans? Do you think that all of the sudden, after many years of high lending standards, all the banks got together and said ” Hey lets make risky loans? ” That’s absurd.
Do you think anything that I listed above, had anything at all to do with the home mortgage crisis? I mean even just a tad bit?
Your side is obviously winning the battle of ideologies. We’re certainly living in a big government, John Maynard Keynes world. Most of the countries in the developed world are operating their governments and economies according to John Maynard Keynes and not Milton Friedman or Ludwig Von Mises. No wonder why we have so many problems in the world! Remember Nixon said “We’re all Keynesians now.”
It’s amusing at times to watch big government Keynesians in action. It’s always more government. The government causes a problem or government regulations fail, and they run out and say “well, we need more government, more regulations.” It’s like trying to cure alcoholism with more booze. Why is that? Can politicians not be corrupted? Are they not paid for by big corporations? To quote Milton Friedman “Just tell me, where in the world do you find these angels who are going to organize society for us”
Alright the debate over who caused the financial crash is an argument for another time. I don’t like getting in technical arguments without first doing some reasearch. I will just say this. Here in Ireland we also had a financial crash. However we had no equivalent to the Community Reinvestment Act. There was no government policies to force the banks to lend to the poor, nor were we greatly affected by the sub prime crashes. Without going into too much detail banks did decide to make risky loans. The answer is more pschological than economical. Think “irrational exuberance” and “animal spirirts”. Bankers basically lost the run of themselves and became convinced property prices would always rise. They got greedy and were pushed by competition (not always a good thing) because if they didn’t give a risky loan someone else would and they wouldn’t make the money.
Like I said that’s an argument for another time, but housing bubbles and financial crashes were caused by the unregulated free market, not by the government.
hi Robert
Just a general comment….quite a substantial blog, interesting, informed and informative.
The European Central Bank creating an artificial expansion of credit-which lead to risky loans being made in Ireland-is hardly free market. Ditto for the federal reserve here in the US.
So although Ireland has no price controls, a vibrant market, low taxes, lax regulation and relatively few state firms, it still isn’t a free market? By that criteria, there has never been a free market in history.
Bu Ireland is a small economy, easily influenced by global trends.. Even if it did everything right, the fall in demand and investment from US is enough to seriously damage your economy. So you can have a small functioning market economy go into a recession, by interventions committed by gov. in another country.
One example of this dynamic is the real estate market in Singapore: economist there have found that main reason prices are surging is because of the Fed OE2. So they are creating a bubble by remote!
And by the way, Ireland has indeed a free market..up to a point. The share of gov spending/gdp was increasing before the recession. Welfare spending as well, in fact it is STILL increasing. http://www.cso.ie/en/statistics/healthandsocialconditions/expenditureonsocialwelfare/
Actually spending was more or less holding steady and we had massive tax cuts. Also the reason welfare spending increased was due to automatic stabilisers caused by the recession (as more people were unemployed) not any government decision.
Are you trying to be obtuse? Do you not see in that graph that welfare spending is increasing way before 2007?
Here is another one on gov. spending, from 1998 to 2013:
http://www.tradingeconomics.com/ireland/government-spending
In the same period you had some mitigating factors like immigration, but the simple fact is there was money coming into the economy and the government tapped it big time, with the concourse of voters.
In nominal terms spending rose by a lot but in real terms and as a percentage of GDP it roughly held steady (depending on what you use as you starting date).
I’m not being obtuse as the chart you linked me showed that welfare spending was 8.9% in 2001 and 9.5% in 2007, in order words roughly holding steady. It was only after the recession began that it rose.
I can’t reply to your lower comment so I’ll write here:
So you agree there was significant welfare spending, in nominal terms?
The fact that gov spending and welfare spending were trending with gdp, and as the same time you had reasonable inflation and some immigration, still means that for at least a decade before 2007 more money was being spent/ capita by government, on welfare. Now, if Irish taxpayers want this, no problem, but when capital stopped coming into the bubble, all of a sudden benefits cannot contract even a bit without massive outcry from the left? Business and households can do with less but not government?
Your description ff the Irish economy as vibrant is correct, but this was not a country devoid of significant government involvement (centralized control of money supply, large gov. budget, high minimum wage, significant regulation (less then in the UK but still considerable), large income tax).
On the whole, it was a largely free market, under pressure from external capital going into a construction boom, which the Irish gov. did not see or consider, and as such did not maintain their expenses at sustainable levels into the bust. The basic tenet of Keynes of saving in the bubble to be ready for the bust, was not followed, as with most Western countries, and indeed Eastern Europe.
The thing is that welfare spending is and should be counter cyclical. That is, there should be highest when people are most in need, such as in a recession. There is also the fact that far more people are unemployed and dependent on welfare due to the recession so its not reasonable to cut it now.
“Business and households can do with less but not government?”
There is so much wrong with this statement, I don’t know where to begin. The government does not resembles a household in any shape or form. I don’t have to go through it all, but see here https://robertnielsen21.wordpress.com/2013/09/06/the-most-important-lesson-of-economics/
“(centralized control of money supply, large gov. budget, high minimum wage, significant regulation (less then in the UK but still considerable), large income tax).”
Well every country has centralised control of the money supply. Ireland has low taxes and spending compared to the rest of Europe. Funnily enough it turns out that we didn’t have enough regulation rather than having too much.
But counter cyclical it was not. Spending in the western world has risen for decades, along with debt, even in good times.
As to the household comparison: so what if they are not the same? A gov. that can only live by increased takings is not sustainable, it is a mafiotic enterprise.
“Well every country has centralized control of the money supply. Ireland has low taxes and spending compared to the rest of Europe.”
So what if every country does it? Every country did slavery 500 years ago, is that a good idea? I say again: Ireland, even with having a largely free economy after de Valera, still managed to simply spend too much in good times, so now that the bad ones are here the problem is getting worse, with more pressure on the economy. Ireland (like most countries) would have been better prepared even if they acted to Keynesian prescription: save in the boom, spend in the bust. Not spend, then spend some more.
Starving for Historical Accuracy
I would disagree with the letter. While it is true that Britain did treat Catholics terribly, that was not a cause of the Famine nor the driving force of the response to it. The letter mentions discrimination, but most of that happened in the 1700s, with most of the Penal Laws repealed by the 1780s (I had to write an essay on this topic).. Catholic Emancipation had been achieved by 1830 so overt discrimination was no longer a major issue.
While it is true that small farms predominated, productivity did not stagnate. Instead it grew enormously and sustained a massive growth in population. The Corn Laws are likewise irrelevant.
The letter misses the central point that the government failed to do anything to help the starving population. There is also the point that while the famine was raging food was being exported. I’m sure Hayek would approve of merchants earning a profit by responding to incentives. As the starving Irish had no money, merchants made more money by exporting food. This was the free market in action and it lead to people starving. That is why laissez-faire is blamed for the deaths of millions. In fact the letter ends its story years before the famine and does not even discuss the government response or lack of it.
The argument used against intervening to help the starving were the same ones used by critics of the welfare state. It was claimed it would make people lazy and dependent on the state. They would lose all incentive to work and instead be a permanent burden on the state.
BSGEE GANG… laissez fair was not the root cause and it never will be. Long live the free market!