Contracts and cooperation: The relative failure of the Irish dairy industry in the late nineteenth century reconsidered

New EHES working paper

Eoin McLaughlin is a Leverhulme
 Early Career Fellow at University 
of St. Andrews

Ireland was one of the major dairying exporters on the London market in the early nineteenth century but lost its position of pre-eminence to Denmark by the close of the century. The question Henriksen, McLaughlin and Sharp seek to address is why the establishment of cooperative creameries in Ireland failed to halt the relative decline of her dairy industry. Henriksen, McLaughlin and Sharp compare the Irish experience with that of the market leader, Denmark, and shows how each adopted the cooperative organisational form, but they show that an important difference was institutional. Specifically, the two countries differed regarding the enforcement of vertically binding contracts, which are considered to be of vital importance for the successful operation of cooperatives.

Henriksen, McLaughlin and Sharp trace key court cases involving cooperatives in Ireland that were sued by their members. They find continuing uncertainty regarding the validity of these contracts up until Irish independence.

Cooperative and non-cooperative creameries in Ireland 1908

Another key difference between Denmark and Ireland was the existence of a strong proprietary sector which was strongly opposed to cooperation (map 1), this led to increased competition for scarce milk supplies in the Irish countryside. This, combined with the inability to enforce vertically binding contracts and poor social capital, ultimately led to the relative failure of the Irish dairy sector.

This blog post was written by Eoin McLaughlin, Leverhulme Early Career Fellow at University of St. Andrews
The working paper can be downloaded here: http://www.ehes.org/EHES_71.pdf