When the Irish Improvised a DIY Banking System

Just try to order a Guinness in a regular bank.


Patrick Cockburn remembers how the Irish got by while a strike shut down the country's traditional banks for six and a half months in 1970:

Does that bottle of bourbon say "fractional reserve"?

Undated cheques, often endorsed over to others but never cashed, became a form of currency. When the supply of cheques dried up, people wrote new ones on any available piece of paper, sometimes adding a postage stamp to give it an official appearance. There was talk of some cheques being written on beer mats and lavatory paper. It was a system that worked because it drew on local knowledge and trust. The people exchanging cheques and IOUs knew each other well, and if they did not, they could soon find the necessary information to assess each other's credit-worthiness. At that time there were 11,000 pubs in Ireland and 12,000 shops that became substitutes for the banks. Antoin E Murphy, who carried out a study on the strike's effects, found the public's ability to assess risk "was based on a vast pool of information available to transactors on the credit-worthiness of other transactors".

Indeed, their information was likely to be much better than a bank manager or his staff. The accuracy of their judgement was demonstrated when the strike came to an end with most pieces of paper turning out to be worth what was written on them. There were few insolvencies, the largest being a transport company called Palgrave Murphy, which was in trouble anyway. Overall, imports, which were expected to be badly hit, turned out largely unaffected.

Cockburn does note that "certain transactions, such as buying and selling property, became impossible or very complicated because essential documents proving ownership were locked in the vaults of strike-bound banks." His aim, he says, is to show that "the disaster that follows a bank shutdown is not total," not that "a home-grown people's banking system would grow up to replace commercial banks." But that home-grown people's banking system does sound rather more effective than you might expect.

Antoin Murphy's paper on the period can be read here. I enjoyed his brief account of how pubs came to take on some of the banks' old functions: "one does not after all serve drink to someone for years without discovering something of his liquid resources."

[Hat tip: Bryan Alexander.]

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  1. So, on a small scale people can trust one another and- almost always- have that trust pay off.

    Also, in the absence of central currency, people will find a way to continue to trade.

    1. Unpossible! You can’t have a civilized economy without a central banking cartel operating on fractional reserves to lend out unsound fiat money.

  2. But, but eventually such a system will fall prey to fraud and counterfeiting! Better to leave it to US.


    Your Average Central Banking System, the System You Can Trust ™.

    1. without legal recourse and/or some form of punishment, I imagine this would be an issue.

      I wonder, too, how fared those who had a past which relegated them into credit-unworthiness, but held regular employment?

      1. There is a form of punishment. People who welsh on their debts are beaten up and tossed out an airlock.

      2. Pass your employer’s paper. Trade it for a pub’s paper minus whatever you drank on payday. You can’t trust Paddy, but Sullivan’s cheques are good and so are the Spotted Dog’s. Just call over and make sure they issued a cheque to Paddy.

  3. Yeah, this is further evidence for my completely insane pet theory:

    The reason governments run the currency nearly universally without the economy collapsing isn’t because they’re better at it than at any other industry, or because currency uniquely requires government to take care of it.

    It’s because just about anything can be passable money, and work OK. Rocks, shiny metal, entries in a digital ledger, pieces of paper (with or without backing or government imprimatur). It’s so easy, that only the very shittiest governments mess it up massively.

    1. I wouldn’t say they’re “better at it”. Unless by better you mean they wield a monopoly with the power to literally kill the competition. True that private industry has a hard time competing in that situation. It’s also true that the death and mayhem of two world wars and others would not have been possible without a central banking system, so I guess they’re also better at stealing capital in order to re-purpose it for the destruction of other capital. So yeah, they’re “better” stewards of the currency.

      1. I believe you misread me.

        The result of complete government management in most fields is total collapse: Agriculture, steel industry, you name it. So if all the monetary systems nearly everywhere are managed by governments, why aren’t such disasters occurring?

        There’s three usual answers:

        1. Government’s actually acceptably good at some things, and this is one of them.
        2. Monetary systems can only be done by government.
        3. The current system is actually really bad, you just don’t notice it because the effects are subtle.

        But none of these are particularly satisfactory:

        1. We actually don’t see that in practice whenever we actually try privatization..
        2. We have many counterexamples run by anything from pre-agricultural societies in the Pacific to Irish bars, no government involved.
        3. We have inflation and somewhat weird currency behaviour, but frankly, considering central planning’s track record elsewhere, I’d expect Weimar-style collapses every couple of decades at least.

        So what gives? My answer is to flip the script: Monetary systems aren’t these incredibly complicated things that only the TOP MEN can manage (the usual statist line), or that can only be run according to very strict rules (the usual monetarist and/or gold standard retort). Instead they’re brain-dead simple things that humans figure out shortly after barter, and the only way to fuck them up is to try really hard (hyperinflation requires you to introduce new denominations every week, after all).

  4. “one does not after all serve drink to someone for years without discovering something of his liquid resources.”

    But your patron probably has a better notion of your liquid resources. Is this the first time information asymmetry has favored the borrower over the banker?

  5. Look,. its true that the Greeks and the Irish have some similarities – their both drunks for example – but the Irish are *hardworking* drunks wile the Greeks have a long history of sitting in a cafe all day and getting blitzed on ouzo instead.

    IOW, the Irish had a long history of being able to trust each other to not screw each other over, while the Greeks have a long history of unions and government being in bed with each other to screw everyone else over. There’s no way that the average Greek would trust his *brother* with a loan during a hard downturn with not banking, let alone the rest of the population.

    There’s a reason Greek tax evasion is so high.

    1. Yeah, this kind of system would not work in Greece. Most Greeks think that every other Greek is running a con and by and large they’re right.

  6. “Lemme have a couple bottles of whiskey and a hundred shares of Caterpillar.”

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