Irish bank strikes 1966-1976

by on March 21, 2013 at 2:28 am in Economics, History, Uncategorized | Permalink

That is the title of this Wikipedia entry:

The Irish bank strikes between 1966 and 1976 were three strikes of about a years total duration which closed down all the clearing banks in the Republic of Ireland. The strikes provided economists a unique opportunity to study the functioning of a modern economy without access to bank deposits.[

The strikes affected all the associated banks which comprise of the Bank of Ireland, the Allied Irish Banks, the Northern Bank and the Ulster Bank. The strikes lasted from:

  • May 7 – July 30 1966
  • May 1 – November 17, 1970
  • June 28 – September 6, 1976

The longest strike was of six months in 1970. The Central Bank made limited facilities available to non-associated banks to issue cash. Not just financial transactions were affected, many property deals were also affected because the documents were kept in the banks. The country came through reasonably well in business terms despite the bank strike, a large firm Palgrave Murphy failed when the strike ended and settlements were made but its failure was probably inevitable anyway. The strike had little effect on the main economic concerns which were unemployment and industrial unrest caused by inflation.

Of course in contrast to current-day Cyprus, these were not banks otherwise attacked by runs and subject to insolvency.  So it is far from obvious that this Irish success (relatively speaking, that is) would be repeated.  Still, it is one example of how an economy copes once its banking system is shut down.

Here is further information about Ireland, note that “a highly personalized credit system without any definite time horizon for the eventual clearance of debits and credits substituted for the existing institutionalized banking system.”  Furthermore “Public houses and shops emerged as a substitute banking system.”

ChrisA March 21, 2013 at 3:00 am

I suspect that the majority of the working class people who were using the informal credit system via pubs and shops never had bank accounts anyway. From my memory of those days in the UK which was probably similar to Ireland most people were paid in cash at the end of the week. Savings were long term. Borrowing from the bank was scarcely possible for most people. It was strictly business’s. Borrowing for most individuals was always at the pub or shop level.

In this strike, what was the role of building societies and postal savings – did they also shutdown? I am guessing that most businesses and richer individuals could easily go to the UK to deposit or borrow, the currency was the same in those days.

Ray Lopez March 21, 2013 at 3:03 am

I’m confused: does the last line “public houses and shops” refer to IOUs? How does that work? I rarely keep more than $200 with me, so I doubt I could live for six months. Like ChrisA says, perhaps those people in the black market who don’t use banks anyway could survive (in Greece, lots of Albanians are construction workers who make good money but store all their money at home, outside of banks). BTW in today’s news: “The president of Cyprus will later present political leaders with a “Plan B” for funding the controversial bailout, state TV has reported. Cyprus’s banks, which have been shut all week to prevent mass withdrawals, are to stay closed until next Tuesday.”

anon March 21, 2013 at 8:34 am

Ireland = Catholics, so I read this line:

“these were not banks otherwise attacked by runs and subject to insolvency”

as

“these were not banks otherwise attacked by nuns and subject to insolvency”

And I was wondering why nuns were attacking banks….

JP Koning March 21, 2013 at 2:22 pm

Uncleared cheques were made negotiable and pubs served as credit verifiers. I’ve blogged about the Irish bank strikes here. I also provide a link to Antoin Murphy’s “Money in an Economy Without Banks” which is the seminal paper on the topic. Tally ho.

The Anti-Gnostic March 22, 2013 at 10:40 am

Still, it is one example of how an economy copes once its banking system is shut down.

As a libertarian (according to the NYT anyway), I assume this doesn’t surprise you.

Banking is a business, just like shoeing horses, replacing knee joints, teaching, etc., is a business. It’s actually a pretty simple business. You clear checks, guard deposits, loan dear and remember cash is king. No wonder bankers used to lock the doors at 3 p.m. and head for the country club. Really, the only way to fuck that ride up is to be stupid and greedy.

The Fed, its member banks, and the economists they employ are like everybody else: their first task is to convince everyone they are irreplaceable. And, they’re stupid and greedy.

Andrew M March 23, 2013 at 8:11 am

The world was a much larger place in those days, so it’s hardly comparable with today. There wasn’t the threat of savers transferring their money overseas at the click of a button. Also, by the time the second and third strikes came round, people knew what to expect and so were better prepared.

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