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In any event ireland wasn't too small to build the whole network in the first place, so i think that argument is nonsense.
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Remember there was no competition form the motor car or from trucks, both of which change the senario a bit. In actual fact the network was quite a lot bigger than it is now and a lot more places were connected, the rationalisation that occoured from the 2nd world war onwards was a result of several issues: Population loss, car growth, migration to cities, costs of running the railway. People seem to forget that this country was for all intents and purposes broke during the 70's and 80's, and it wasnt much better in the 40's, 50's (worse even) and early 60's. The fact we have a railway to be making such arguments over is purely by way of luck more then anything else.
Edit: thanks CCOS