September 26, 2007

Why rural Ireland is still such a power in the land

Posted in Celtic Tiger · 30 comments ·
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The ploughing championship gets into full swing today and, together with the extraordinary popularity of inter country GAA, it shines a light on the thriving nature of rural Ireland. Sometimes with all this talk about how the economy has changed and how Ireland is unrecognisable, we forget that certain things are permanent. Not only is the rural economy permanent but it has strengthened in recent years. This is evidenced by the fact that the President opened the Championship.

The power base of rural Ireland is still strong and despite all the chatter about new commuter towns, immigration and whither the soul of Ireland, the place will be full of glad-handling politicians.

The reason is quite simple. This is one of the most extraordinary constituencies in the country. A few years ago, two economists Damian Hannan and Patrick Commins wrote a paper called the ‘The Significance of Small Scale Landholders in Ireland’s Socio-Economic Transformation’. If anyone wants to understand the economics and the social patchwork that is Ireland today, this paper is invaluable.

The writers chart the extraordinary success of the sons of Ireland’s small farmers in the social revolution of the past few decades. The contrast between the fortunes of small farmers and the industrial working class could not be more stark.

The small-scale farming structure emerged as the system in rural Ireland as a result of the great class transformation that followed the end of the landlord oligarchy in the final decades of the 19th century.

These small farmers experienced a significant increase in their living standards up to the late 1920s. From 1870 to 1930, the economic system was based on one son getting the farm and the rest emigrating. If they couldn’t emigrate, they remained around the place, but landless and single. A few found job in the towns or in Dublin.

In the 1930s this system broke down. America closed its doors to migrants in the early 1930s, and De Valera’s self-sufficient economy collapsed, meaning there wasn’t a sniff of a job away from the farm and there was only England left to absorb indigent Irishmen.

Between 1950 and 1960, 500,000 of us emigrated to Britain — the country which the mullahs who ran our Banana Republic told us was the Great Satan.

The most interesting social development at the time was how small farmers — De Valera’s foot-soldiers — adapted to the changing Ireland of the 1960s much better than the urban working class.

Amazingly, in 1950, after 30 years of independence, Ireland was more dependent on agriculture than it had been in 1870. This startling figure is either a damming indictment of De Valera’s dingbat economics or evidence of the success of this rural fundamentalist movement.

The small farmers, or more accurately, their Irish Mammy, saw this dead-end coming. She realised that the game was up and that the only way out for the sons who didn’t get the farm was either emigration or the public service. The rallying cry of Irish mammies went up: “Sure, where you be without your education?” A new class was born which took took full advantage of the free secondary education introduced in the mid 1960s.

Hannan and Commins found, amazingly, that the single most important determinant of a county’s educational achievement in the 1960s and 1970s was the number of small farmers. This is quite extraordinary and unique to this country.

De Valera’s foot soldiers were on the march, sliotar in one hand, ‘Latin for Today’ in the other.

Compared to their urban, working-class counterparts, 30pc more children of small farmers did the Leaving Cert and 50pc more went on to third level education in the 1960s.

They turned into the teacher aristocracy, bringing with them to Dublin a love of the GAA, squeeze boxes and Farah slacks. Their success in education catapulted them into the public service in great numbers when the government went mad and started handing out civil service jobs like miraculous medals in the 1970s.

Now, they are the best-paid public servants in Europe and, if they haven’t opted for early retirement, are earning on average 46pc more than their mates in the private sector.

They engineered this through shams like benchmarking and social partnership which saw them having the same success in wresting cash out of the State as their great-grandfathers had prizing land from landlords.

But that’s not all. They had an ace up their sleeves. The same forces that propelled them into education also left them with an inheritance. This inheritance of farming land has been re-valued by the housing boom and the land frenzy, with the result that they have been enormously enriched.

While many thousands left the land, they did not sell it. Today only 6pc of the workforce works on the land, yet a quarter of all households still own land.

One of the hangovers from the past in Ireland is a reticence to sell land. No one wants to be landless again. So if there is land in a family it gets handed down long after the last sons have stopped farming.

EU subsidies had enormous ramifications for the new rural landed class. It allowed them to hold on to the land in the 1980s and early 1990s, leaving it fallow at no cost. As the price of land soared in the mid-1990s, they have been sitting on goldmines. They have been selling sites ever since.

If you could have planned an agrarian revolution, you couldn’t have done it better. This was a Marxist revolution without bloodshed and today, these same children of small farmers run large parts of the country.

As Hannon and Commins conclude: “not only have the smallholders succeeded in retaining their property and relative income position, but they have also succeeded in capturing a significant proportion of local off-farm employment. They have been more effective than working-class families in utilising the education system to gain access to off-farm opportunities for their children.”

The success of the sons of small farmers — many now in their 50s — due to their enormously revalued property portfolios, explains the recent provincial chic phenomenon.

It explains the explosion of French restaurants with misspelt names, organic food shops, Botox parties, Versace handbags and Manolo Blahnik shoes in places like Thurles, Roscommon Town and Abbeyleix — places you’d have spotted tumbleweed in 10 years ago.

It also explains why no politician worth their salt will miss today’s jamboree in Tullamore.


  1. Amazingly, in 1950, after 30 years of independence, Ireland was more dependent on agriculture than it had been in 1870. This startling figure is either a damming indictment of De Valera’s dingbat economics or evidence of the success of this rural fundamentalist movement.

    Partly the former. DeV’s self-sufficiency dream was to rely heavily on argiculture as the engine of the economy. None of the latter. And there are two other major factors. Ireland was more industrial and less agricultural in 1870 (than 1950) because it included the North which was the only part of the Island which was industrialised in any meaningful sense. And second, both world wars provided an enormous boost to Irish agriculture as Irish food products found a captive market in Britain’s post was surges.

    This was a Marxist revolution without bloodshed and today, these same children of small farmers run large parts of the country. This is way too dramatic. First in large parts of rural Ireland the small holdings became unviable and by the end of the 80s many small famers had sold off the bulk of their land to bigger ones who consolidated. This before the land had any huge value. People like this just melted back into the pot of rural workers or were educated and left (or were educated and stayed, say as teachers. But by now they possessed no goldmine.

    In the rural Ireland that I know, very few people possess the land banks noted here. Instead, its a landscape peopled for the most part by ordinary folk who drive diggers, teach, work in small factories, run B&Bs, and so on.

    The point that the farmers seized the opportunity of free eduction is spot on. Regarding third level they could do this by getting grants that were based on income – and we all know how farmers can conceal or play with cashflow to pass the means test which excludes assets.

  2. Great history lesson David, in laymans language too.
    Quote:
    “It explains the explosion of French restaurants with misspelt names, organic food shops, Botox parties, Versace handbags and Manolo Blahnik shoes in places like Thurles, Roscommon Town and Abbeyleix – places you’d have spotted tumbleweed in 10 years ago”
    I spent much of my childhood summer months in Thurles and passing through it a few years ago it seemed a much more dead town than it was 50 years ago when vibrant farmers cattle markets and cowpats filled the town square every week.I will take your word for it that the town is today full of shops selling Versace handbags! So much for the legend of the “poor” farmers..
    Quote:last post,
    “The point that the farmers seized the opportunity of free eduction is spot on. Regarding third level they could do this by getting grants that were based on income – and we all know how farmers can conceal or play with cashflow to pass the means test which excludes assets.”

    And they paid about 2% of the tax Revenue of the state for the past 40 years…Some of this money foregone, might also have provided better schools in the working class Ghettos of Dublin.

  3. John, in fact most of the income the farmers earn entirely comes from subsidies (98% according to a recent Teagasc report). Imagine how many schools all of that would build!

    The Greedy Farmer:
    http://fichefocal.blogspot.com/2007/08/according-to-teagascs-national-farm.html

  4. well, Tomaltach milk costs almost a Euro a litre and dairy farmers complain they only get a fraction of this money.Yet they own the milk processing plants, so presumably the value of their shares has risen 1000% and more in the last 15 years.Dairy farmers with any kind of a decent holding are very wealthy people indeed.They are currently investing their spare cash in property developments across Europe.
    Beef is so expensive it is no longer on the working class familys shopping list. Likewise lamb.Farmers constantly moan about the price they get so why dont they buy the meat processing plants if thats where all the profit is going.?
    As David said ,if they need a few bob they just sell a site or two.
    All “small” farmers have second jobs and many of them are married to teachers etc and they are not short of a bob.Community statistics indicate that 80% of EEU subsidies to to the largest (20%) farmers, many of whom are multi-millionaires. The Department of Agriculture refused to provide me with a list of the monies paid to all but the “top twenty” earners (such as Larry Goodman),so I could publish it on my web site.No “freedom of Information”here..! They claim its not the business of the taxpayers who provide the money in the first place.
    Why, for example is a farmer allowed to sell assets to the value of 750,000 Euros on retiring, without paying a penny in capital gains tax when no ordinary worker or businessmen has that privilege.?
    Why for that matter are our lakes and rivers cesspools of pollution and Cryptosporidium?As you say why can we not even tell tourists that they have the freedom of our mountains and boglands.The only region in Europe I have visited with as little facilities and freedom of movement (inland) for tourists, was Brittany in France.

  5. John, about the release of information and the grants to the top 20% etc I’m in full agreement. But I think you are harsh on the small farmer. Your quotes around small suggest you scarcely believe that any farmers are really operating in a small way. I think there are many genuinely small farmers (I know several) whose holding barely makes them a few grand a year. They always did it and, in many cases they enjoy it, and so they are reluctant to give it up. It’s not that they have second jobs – their off-farm jobs are their main income. And that their spouses may also be working deserves no more comment than it does for anyone else. In short, there are many genuinely small farmers who make little profit off their land despite considerable toil. Some are in a position to sell sites, but many are not owing to increasingly tight planning guidelines. But where they sell they should have to pay tax like anyone else. I wasn’t aware of an expection for them. Can you let me know how they can sell without paying tax?

  6. Correction “wasn’t aware of an exemption“!

  7. if I remember correctly it was announced in the last budget/finance bill.It is a one off benefit for “retiring”farmers of 55 years or more.Not sure how they prove their entitlement.Probably have to sell or hand over the farm to the eldest son or whatever.Another special perk to add to the plethora of grants, subsidies and beneficios already availible.

  8. john

    another excellent article, in what other country would you see it where every politician must be seen to pander to the rural lobby. Farmland is so expensive in ireland because alot of farmland has been opened up for development in this country which would not be allowed in most other countries. In the UK for example farmland is zoned strictly agricultural with not a hope of this being rezoned therefore its value is capped at its agricultural value.
    However overall farmers have had a pretty raw deal over the last 20 years with the prices they have been receiving for their produce. Up to recently agricultural commodities have been at their lowest prices since the great depression. Customers may not have seen this in the shops because processors and retailers had been creaming off the extra margins.If farms were run by businesses farmland would simply be taken out of production until prices rose enough to justify bringing it back into production. Of course farmers did not do this they kept producing even when it was below cost of production. Subsidies merely kept the whole thing going an awful lot longer than if subsidies did not exist and food prices would be an awful lot higher than they are today. The current situation in irish agriculture is that farmland is way too expensive and this will fall, food is still way too cheap and this will continue to rise

  9. Philip

    Is Ireland a nation of small farmers, with their offspring running the place? A veritable closed shop to any upstart innovation that could disrupt the interests of the landed few. Explains a lot. Excellent article.

  10. MK

    Hi David,

    I think the rural/urban divide and evolution thereof needs to be analysed more in-depth. It is true that the land price explosion of recent years has made some rural land-owners (farmers) very wealthy, especially those that had plots on the edge of towns. But likewise, the value of land in cities has increased and also at a much higher rate, and therefore land price increases have made city land/property owners much more wealthy on average. Land price increases are subject to demand and supply factors and in an open market, like we have generally, the pricing has been ‘economically fair’. Not so fair if you didnt have the land in the first place mind you as you point out in the Generation Game.

    Ireland as you know is far from a built-up nation so there are many thousands of acres which are of little value. Maybe in 3007 they will be worth a lot more, as like most countries, we aint building any more of it.

    The other key thing to think about are the changes in centralisation and urbanisation in Ireland over the last century or more. The population of Dublin 100 years ago was, what, 200k, less even? A direct result of this is that most of the population in Dublin, if you go back 1 or 2 generations, is ‘culchie’. The real Dubs are in fact a minority in the GDA. Perhaps even smaller than the nmber of immigrants.

    The reasons for the ‘invasion’ of rural people into urban areas is the same in Ireland as it is in India, China, UK and the US and everywhere. That centralisation is in many aspects more economically efficient, if people, live, work, produce and consume all beside each other. Without any significant government policies to compete against this, concentration in cities happens as a natural phenomenon. The ‘leveller’ in centuries gone-by was bad health, illnesses, death and ‘plagues’. That kept people out of cities and large towns. But as health systems have improved, as food production and supply-chain methods have improved, city and town growth, urban growth is a global explosion phenomenon, and Ireland is far from unique in that aspect.

    Although some people may think that there are lots of ‘cute hoors’ at the ploughing mudfest who may seem to have plotted their course through life with cunning, the reality is that it is more circumstance and large-scale global trends, so the ‘cute hoor’ term shouldnt be prescribed to either the farming folk or the smiling (and some would say coniving) politicians.

    MK

  11. Conor

    David,

    This article typifies much of your commentary Рwhile there are some valid insightful points but there is a tendency to put whole swards of the general populous into homogeneous stereotypical sub-cultures, thankfully in this case without a being given a clich̩d name. These sub-cultures are anything but homogeneous.

    A farmer with a small holding in Mayo is very different to small holding in Co. Dublin, the definition of small even changes. They operated in a different economy.

    In urban Ireland of the era you refer to; when the “small farmer” took advantage of the advent free education, there was a culture of an inherited job for life within working class communities whether it be CIE, Guinness, Ford, Dunlop, Sunbeam, Ranks, Irish steel or dare I say it even Harland and Wolff. These were closed shops to outsiders; it’s not what you know but who you know in these firms that made the difference. It was not until these firms “restructured” in the late 70′s and 80′s the urban working class to educated class divide became apparent. The choices for industrial employment to the rural population were limited, the education route was the best route available.

    Not all small farmers families became successful civil servants many of them filled the ranks of “McAlpine’s Fusiliers” in England during the 50′s and 60′s and have since become the poorest faring migrant populations in the UK in terms of health and economic status. There are many unmarried bachelor farmers living with siblings now in their 50′s, 60′s and 70′s in rural Ireland.

    Farming in general has fared badly since the 1980′s. The cost of cereals/milk/meat has not kept pace with inflation. If an acre of agricultural land were traded as a share in the stock market it would have a yield of ~Euro 150 for a cost price of E20,000. This is a P/E of 133. Today Irish bank stocks have a P/E of 7 to 7.35. Economies of agriculture are not setting the price of land. Farmers that have re-zoned land close to towns cities are selling out to property developers and buy agricultural land at inflated prices elsewhere.

    Agriculture contributes far more to Ireland that is evident in GDP terms or in tax take terms, Pepsi/Coca Cola concentrate exports from Ireland outstrip the Dairy Industry exports but the ecosystem for supporting the dairy industry is far more important economically and socially to Ireland. Cola Concentrate probably at most support 1000 jobs in Ireland whereas the dairy industry supports 10′s of thousands between farming, dairy co-ops, feed producers, Vets, Agri-machinery, milk processing plants, refrigeration, transport, farm buildings etc. Profits from the industry are remain in Ireland rather than get re-patriated abroad. The importance of this eco-system is important and pulls is more than just farming this is why politicians are still keen to embrace the ploughing and trade show.

    Poor returns, limits on expansion by CAP based quota schemes, alternative employment opportunities and improved productivity efficiency of farming practices means full time farming is in decline. This has implications for the future of the ecosystem that is lynchpin for.

    Many of the indigenous and innovative Irish companies that make a mark on the world stage have started in this eco-system whether it be Kerry Group, Quinn Group, IAWS or Glanbia.

  12. Dan Hayes

    David & Co.:

    In America, Jefferson placed his bets on the farmer / yeomanry.

    If he had done so in Ireland, he would have won big.

    Dan

  13. john

    “Farming in general has fared badly since the 1980’s. The cost of cereals/milk/meat has not kept pace with inflation. If an acre of agricultural land were traded as a share in the stock market it would have a yield of ~Euro 150 for a cost price of E20,000. This is a P/E of 133. Today Irish bank stocks have a P/E of 7 to 7.35. Economies of agriculture are not setting the price of land. Farmers that have re-zoned land close to towns cities are selling out to property developers and buy agricultural land at inflated prices elsewhere.”

    an excellent point here, however this ludicrous situation of a P/E of 133 will not continue, firstly the huge money chasing farmland will stop which will cause its value to drop maybe by 50% to around 10,000 per acre in todays money, secondly the price of food will rise maybe doubling in the next few years which will mean that the earnings of farmland will rise which will bring the P/E ratio back to sensible levels

  14. “Tough negotiations” by Fianna Fail, on the taxpayers behalf with farming associations have resulted in much of the new road programme budget ending up in farmers pockets. When so called “little hope” farmland is purchased by the government for 50,000 euros an acre,it sets a marker which enormously increases the cost of new infrastructure to the taxpayer, so why should the price of farmland drop in the future particularly as beef or dairy products will continue to rise in price due to crazy schemes producing petrol substitutes.Tropical countries have an inbuilt advantage in this area-but no doubt massive subsidies-or tariffs will stop them competing with european farmers. A new C.A.P.,to be called the “C.F.P”.(Common Fuel Policy) no doubt.!

  15. John

    They have been more effective than working-class families in utilising the education system to gain access to off-farm opportunities for their children.”
    We know that because non-declaration of income by farmers allowed them to secure educational grants. This non-declaration was not available to PAYE workers. Tell us something we dont know.

  16. Conor

    John,

    Since the late 90′s all third level education has not been means tested in Ireland. Prior to that all RTCs (now institutes of technology) were not means tested for non-degree programs.
    David cited Hannon and Commins leaving cert completion rates in working class and farming populations which has been free since the the Donough O’Malley Education ministry in the 1960′s. It is not means tested.

    I would dispute the fact that agricultural economic activity is a black economy. EU Grants, milk cheques, cereal payements, Cattle sales have paper trails. If you want a black economy, try getting a plumber on a nixer and ask him for an invoice?
    Barbers, Taxi-drivers, plumbers, electricians, tilers, plasterers can conceal extra income much better – its a cash transaction no invoice no receipt.

  17. Yes, happily the farmers are (at last) now tax compliant.Even the fishermen.Even the builders.! All their grants depend upon accurate paperwork.
    A new dawn rising.You have to give a little-when you are getting a lot!.

    http://www1.soldiersofdestiny.org/ataxingsituation.htm
    Enjoy.

  18. Conor – spot on. I know a small-scale building contractor (3 employees). He told me that he puts about half of his work through the books. In fact, he told me that in many cases his competitors are much worse – which means they can put in more competitive bids then he can. The result is a race to the bottom in terms of compliance (in the absence of more intense inspection). There is no way a farmer would get away on this scale. For example, animal tracability is pretty rigorous now, for reasons not related to tax or subsidy, and so it’s quite hard and risky to defraud the system. And as you rightly say, other subsidies also leave paper trails.

    By the way, I visited a GP recently in Dublin (not my own GP). The receptionist stated up front that they take cash only. I wonder why?

  19. MK

    You’ve made some good points there Conor.

    David, perhaps the ‘black’ (non-tax paying) economy is a useful topic for you to discuss.

    Does a country’s overall economy lose out or gain with a burgeoning ‘black’ economy?
    Are businesses that follow the regulations to the letter of the law just being mugs and destined to do worse than their competitors?
    Should we have a more regulated environment, more checks, inspectors, more audits, etc, more roadblocks asking people not for car tax, but for PPS numbers, nature of their business, id checks, etc?

    Obviously, regulation comes at a price of some inefficiency, and there is an economic cost. The current systems in place some would argue are very voluntary and way too burdensome. But is Ireland at the perfect level of financial/tax regulation? Is there a better, fairer and non-impacting way?

    Surely there is.

    MK

  20. MK,

    There is a misperception that corruption ‘oils the cogs’ of the capitalist system. i.e if we eradicate corruption (or attempt to, for it never can be fully eradicated) it will hurt competitiveness. The most recent studies show that this is not the case. Furthermore, emprical measurements show that this is not the case. Here are the least corrupt countries as measured by Transparency International:

    1.Iceland
    2.Finland
    3.New Zealand
    4.Denmark
    5.Singapore
    6.Sweden
    7.Switzerland
    8.Norway
    9.Australia
    10.Nederlands
    11.UK
    (US .20)

    And here is the list of the most competitive countries according to the World Economic Forum:

    1.Switzerland
    2.Finland
    3.Sweden
    4.Denmark
    5.Singapore
    6.US
    7.Japan
    8.Germany
    9.Nederlands
    10.UK

    Not a one to one mapping, but clearly the least corrupt countries are among the most competitive. The issue of regulation is that it has to be sensible, clever, and assessed as cost benefit. Regulation can strangle business if done badly, but if done well at least the rules are clear and fair.

    Corruption has a cost too. Take the planning pattern in Dublin. Clearly the corrupt decisions (which were rife in the period ’75-95) resulted in a city which is less efficient economically. Moreover the one thing business likes is stability and predicability. But as Tom Gilmartin and Owen O’Callaghan found out, it was never clear who was going to wind the game to rezone west Dublin. The rules of the game weren’t even clear. That’s never good for business.

  21. jimmy bond

    great article , the comments that followed were by and large stereotypical rants against farmers , the usual gripes about farmers recieving the so called cheque in the post etc , let me tell you something about the cheque in the post that is not often mentioned , the cheque in the post is merely compensation for the fact that the cost of producing beef in this country is well above the actual price farmers recieve for producing it
    were farmers to recieve an adequate price for such produce , i assure you they would perfer not to recieve and such cheque in the post , the reason being , in order to recieve the afforementioned annual payment , farmers must comply with a rigorously beauracratical set of rules and regulations that would terrify your average pen pusher in the civil service , and now on to my main point , the people in my opinion who benefit most from the cheque in the post are the public servants at the dept of agriculture , there is a massive public service industry built around this cheque in the post , jobs that are so pointless and non descript , were they outisde the public sector they would be deemed unreal or made up professions
    were the cheque in the post to cease in the morning , it is not the irish farmers association who would be most up in arms , but the public service unions shouting that there jobs for the boys and girls had gone

    david mc williams mentioned how those in the public service are paid on average 46% more than the average person in the private sector but yet in internet forums and the like , its the farmer who gets it in the neck and is accused of being greedy , of course i forget that its not possible for someone in the public sector to ever be greedy

  22. Bob

    If farming is so lucrative, why don’t investors buy agricultural land?

  23. [...] McWilliams has written about this effect in Ireland back in the 60’s and 70’s and how 30% more farm kids went to college compared to going city kids, and the effects it had on the tie of…: The small farmers, or more accurately, their Irish Mammy, saw this dead-end coming. She realised [...]

  24. sinead a. warren

    hello!
    I am considering selling my farm this year.I am now afraid that because of all the house prices dropping that this is going to affect the land prices too????I would love to hear everyones comments please ,good and bad!!!!!!
    looking forward to hearing from you all.

    thank you.
    ms.Sinead A.warren….

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