I was making the point yesterday evening that our main concern in regard to the forced consequences of devaluation must be the effect it will have on our employment and the whole progress of our economy in future years. The point this Party has been making is that the policy of this Government, its uncritical acceptance of utter dependence on the British economy, robs us of the benefits of a national monetary system which would give us a full employment situation. We have pointed out that, although it was necessary for Britain to devalue because of the problems of sterling throughout the world, our domestic needs did not call for such a course but that our dependence on Britain thrust such a course upon us.
If, in the future, we are to be given some manoeuvrability in this regard and not to be reduced to a sixty-second pursuit of a decision by the British Chancellor of the Exchequer, we must have a second look at our monetary policy and we must, if possible, give to the public authorities some say in credit formation and we must give some say to our central banking system. While the Central Bank, as at present constituted, has some say in latter years in regard to credit in the country it has not the same powers as central banks in other European countries. We cannot say that it has comparable powers when the bank rate and such matters as that are completely outside its control. Since we are in one money market with Britain, it is obvious our Central Bank can only follow and imitate policies in that country. Therefore, we impose at the very start a very severe limitation on the functions of our Central Bank.
When the British bank rate goes up, we must follow suit. It is no argument to say that, in two recent instances when the bank rate in Britain changed, we did not follow it fractionally. This cannot be claimed as an example of our independence of this policy in Britain. If we are one capital market with Britain, one money market with Britain, our bank rate must keep pace with the British bank rate because this is the only way we can avoid Irish investors transferring their money to more lucrative outlets in Britain. It is quite obvious that, when we accept complete mobility in money between Britain and here, we must keep parity even in our bank rate.
This must reduce the role of any banking or monetary policy. It must reduce it to keeping our interest rates in step with those of Britain. It must deprive us of one great weapon in monetary policy. The interest rates being charged by our banks have a very important bearing on the level of our economic activity. If we deprive ourselves of the influence the State could have on these, we deprive ourselves of a great national weapon.
It is time to consider once more the whole question of parity with the British £. If, because of our complete dependence on the British economy, we have been forced to devalue because of an uncritical acceptance of the procedure in Britain we should at least take a lesson from this experience and attempt to understand our dilemma. We are in this dilemma because of our complete dependence on British financial decisions and institutions. It is time to take from the filing shelves the Report of the Banking Commission of 1938. It is time to look at some of the minority reports of that Commission, the minority report of people like Professor Busteed, Professor O'Rahilly and Professor O'Brien. I know that some of the economists of our own day are somewhat critical of the economists of that period but it would not be an intelligent appraisal of our situation to ignore the possibility that we should look once more at the relationship of our £ to the British £ and consider whether the creation of a money market entails some new look at the parity of our £ with the British £.
While those minority reports may not be quite up to date in their realisation of all the limitations of our economic position, at the same time they point to very serious problems in this country. Overall, the report of that commission, accepted, too uncritically perhaps, the situation they had inherited of having a sort of follow-the-leader aspect in regard to British monetary policy. We should look at those minority reports and see what can be done. We must get some kind of control procedure to prevent capital movements out of the country.
In the minority report, one of the professors remarked that this was a weird country to live in and said:
Short of capital for ourselves, we have to keep £230 million invested in another country; and our economists turn pale with fear at the thought that they may be utilising some of these claims—accumulated from exports not paid for by imports—to develop our own country. We have on hands an immense work of development, long overdue after centuries of neglect and misrule; yet, by some inscrutable decree, we have to ship off our manhood to work as navvies for another country.
They point out the contradiction of large investments of money in Britain over which the Government have no control and the complete freedom to invest capital in Britain both on the short term and the long term. We could also look at no better authority than Progressio Populorum, the Papal Encyclical which referred to the social attitude of people who invest money abroad when their own country needs it. There is no need for any great ideological fervour to the right of the Left to claim that there should be control over capital movements but it is essential that some control should be held over the capital movement of money. There is an old economic decree that where the capital goes the labour follows and if we allow Irish capital to be invested in Britain we cannot be surprised if Irishmen and Irishwomen follow that investment. There must be some control over the right of capital to go to areas of highest return. We must ask our institutions which invest their surplus in Britain and elsewhere to consider that they have a social obligation to a larger community than their shareholders. They have an obligation to the entire community.
We need a cheap credit policy and if the position in Britain is that they need policies of deflation and have needed them over the past three years why should this country follow a course that does not suit our requirements? One can ask what is the use of esoteric exercises in economic planning if we ignore the large picture of our entire dependence on Britain. There is no point in having a National Industrial Economic Council if the State continues to accept this dependence on Britain. Obviously we cannot control our interest rates and obviously we lose our grip and our control over economic affairs when we continue to allow the situation of complete laissez faire to continue between this country and Britain. We need a massive injection of capital and not a further flight of capital from the country.
As I say, this does not call for any particular political commitment. Such a suggestion that we should do something about creating these institutional requirements has been recorded already in several economic exercises published recently by the Economic and Social Research Institute calling for such an arrangement for this country whereby the capital needed for short-term investment purposes would be made available by the State to bring about a situation in which people would not have to go to the money market to which most of our investors go, the City of London. The State should have some control over externally invested capital to make sure that some of this capital is channelled into investment opportunities at home.
The Minister mentioned that this was a businesslike decision and he was at pains to point out that it was not what we said it is, an action that followed automatically from our utter dependence on the British economic position. The Minister says it was a businesslike decision and he mentioned some other countries that took the same course. He neglected to say that, in the case of Spain, the Government had been considering devaluation and that the British Government did the Spanish Government a good turn by devaluing at this time. The position in New Zealand is exceptional because it is a storer of wool. A great deal of speculation against wool went on in recent months. Such a course was forced on them. The economic position of Israel has been cited for some time by experts as adding up to an artificial entity in economic terms. It was described by one journal as an economy chronically subject to devaluation. We will not go so far as the Fiji Islands or suggest what forced a devaluation on them.
In all cases these countries can cite valid domestic reasons as to why devaluation was a course they would be adopting. I would suggest that our own domestic reasons did not call for such a course and I would say that it is straining the logic of the situation to suggest that what the British Government did we can now quote as something that answered particularly our requirements.
We have pointed out that it will be extremely important in the situation arising from devaluation that we look at this cost of living that will certainly be figuring in a lot of discussions in the months ahead. We know that the British Chancellor and the British Prime Minister, in their discussions of this matter of devaluation and in their statements, have made quite clear their intention of freezing dividends at the pre-devaluation rate. I do not know if there are any such statements going to be made in this House or whether, again, since we are one money market with Britain, we are just leaving the situation to continue, willy-nilly, to take its own course but they have suggested that dividends will be frozen and that they would look very carefully at any rise in dividends.
The position as regards wages and the cost of living affecting the majority of the people in this country is that, even before devaluation, such has been the erosion in living standards, there would have had to be, devaluation or no devaluation, some compensatory increase given to the vast majority of working people in the early months of 1968 and, in fact, before devaluation was heard of, unions in this country were already consulting with their members up and down the country to determine what kind of movement should be made for increased wages. Therefore, it would be hypocritical to suggest, now that the cost of living is increasing quite artificially and as a result of measures beyond the control of this Government, that people up and down the country should accept even more sacrifices because of circumstances beyond their control when, in fact, they were moving towards a compensatory position in regard to their wages. It would be unrealistic to expect such a reaction from these people and it would be quite impossible for the unions at this time to call for restraint from their members. A movement on their part was inevitable at this time.
But we will have to keep a very sharp eye on the people best situated to profit from the present situation, the people whose profits in our situation are not subject to the controls that wage-and salary-earners are subject to One can tell to a "t" the amount of a wage or salary that the taxation people can siphon off, to the farthing what exactly is owed by each wage or salary earner, but, when it comes to business elements, they are not in a position to extract what should be got from these people in taxation. Nobody is better equipped to do well out of devaluation than the person of property and wealth in this country. In fact, it is no secret that there are quite a number of people in this country, possibly in the realm of a few thousands, who have made substantial sums of money out of the recent devaluation by the British Chancellor. I should like to know how many Irish nationals holding sterling in London have over the last few weeks transferred to another currency in expectation of speculation in sterling? How much money has been made by Irish nationals involved in this exercise of devaluation? In fact, it has been the "in" talk in Irish business circles in the last few weeks as to what switches they have made in their investments and how many thousands have been made by this or that individual.
We may well ask what crazy system it is that can reduce the standard of living of the majority of the people of a country while giving windfall fortunes to people who have merely to sign their names to a form transferring from one shareholder to another. What intelligence or rationality is there in a system which allows this kind of spendthrift speculation as a means for accumulating wealth? How can we call for planning when we see such windfall fortunes falling to people whose only exercise was to sign their name at the bottom of a form supplied by some broker? This is the situation we are talking about and this is the kernel of this crazy system that my Party believe we must bring an intelligent approach to bear on and subject to public policy and scrutiny.
In this situation, obviously, we cannot expect the majority of the people who now face a misfortune fallen from the skies through the agency of the British Chancellor of the Exchequer to accept a standstill or freeze in their wages over the next year or two. It would be unrealistic. The Minister has responsibility for economic planning. While we may be preoccupied in this debate with the matter of devaluation, he is responsible for employment and economic planning. The Second Programme at this point in time is, as we know, statistically in ruins on the growth rate, on the employment targets. This is a programme whose chief value now to us is in seeing by how much and by how many thousands we missed the targets and objectives. The most useful thing we can do is to attempt to learn what went wrong, why the programme did not achieve the targets expected of it, and start afresh. Accepting the limitations of our monetary policy and Government economic policy, if we accept the limitations of being, a secondary economy with that of the British and if we accept that our economy can only do well on a kind of surplus from the British economy, then, realistically, we can only hope for improvement to come at the end of a British boom every four or five years. I do not think we need take this forever as a constraint on our economic planning but, realistically, this would be the experience of recent exercises in economic programming. For the first year of that Second Programme we achieved a growth rate of 4.5 per cent. In 1965, we achieved a growth rate of 2.5 per cent.
