Post by dangeresque on Feb 15, 2009 17:55:05 GMT
THE CRISIS IN IRISH CAPITALISM NORTH AND SOUTH.
A Republican Socialist Analysis
Printed and Published by Starry Plough Publications
INTRODUCTION
This small pamphlet has been produced by the IRSP to provide some analysis of the current crisis in Capitalism and its economic effect on Ireland. We look at this crisis from a Marxist perspective for as Irish Republicans, our organisation has always maintained that the class and national questions are intertwined in Ireland. In this we are following the views and position of Ireland’s greatest Marxist, James Connolly. For many years Irish republicans while paying lip service to the memory of Connolly, almost totally ignored his many writings and his example as a trade unionist , a socialist, a republican, a writer and a thinker. Instead his life was only seen through the prism of his last days when he joined with fellow revolutionaries and stormed the GPO in Dublin in 1916. In over emphasising his involvement in armed action some republicans have elevated armed struggle itself as perhaps the only weapon in the arsenal of revolutionaries. As a result many republicans have ignored class struggles mass movements and day to day political struggles. We think this is wrong. No one who considers themselves a Republican can afford particularly in these days to ignore vital areas of struggle. Without the support of the working classes all radical or revolutionary movements are doomed to failure.
The Determining Factors of History
“For Karl Marx, the basic determining factor of human history is economics. According to him, humans — even from their earliest beginnings — are not motivated by grand ideas but instead by material concerns, like the need to eat and survive. This is the basic premise of a materialist view of history. At the beginning, people worked together in unity and it wasn’t so bad. But eventually, humans developed agriculture and the concept of private property. These two facts created a division of labour and a separation of classes based upon power and wealth. This, in turn, created the social conflict, which drives society. All of this is made worse by capitalism, which only increases the disparity between the wealthy classes and the labour classes. Confrontation between them is unavoidable because those classes are driven by historical forces, beyond anyone’s control. Capitalism also creates one new misery: exploitation of surplus value. For Marx, an ideal economic system would involve exchanges of equal value for equal value, where value is determined simply by the amount of work put into whatever is being produced. Capitalism interrupts this ideal by introducing a profit motive — a desire to produce an uneven exchange of lesser value for greater value. Profit is ultimately derived from the surplus value produced by workers in factories. A labourer might produce enough value to feed his family in two hours of work, but he keeps at the job for a full day — in Marx’s time, that might be 12 or 14 ours. Those extra hours represent the surplus value produced by the worker. The owner of the factory did nothing to earn this, but exploits it nevertheless and keeps the difference as profit.
In this context, Communism thus has two goals:
1/ it is supposed to explain these realities to people unaware of them; it is supposed to call people in the labour classes to prepare for the confrontation and revolution.
This emphasis on action rather than mere philosophical musings is a crucial point in Marx’s program. He wrote in his famous Theses on Feuerbach:
“The philosophers have only interpreted the world, in various ways; the point, however, is to change it.”
Economics, then, are what constitute the base of all of human life and history — generating division of labour, class struggle, and all the social institutions, which are supposed to maintain the status quo. Those social institutions are a superstructure built upon the base of economics, totally dependent upon material and economic realities but nothing else. All of the institutions which are prominent in our daily lives — marriage, church, government arts, etc. — can only be truly understood when examined in relation to economic forces.
Marx had a special word for all of the work that goes into developing those institutions: ideology. The people working in those systems — developing art, theology, philosophy, etc. — imagine that their ideas come from a desire to achieve truth or beauty, but that is not ultimately true. In reality, they are expressions of class interest and class conflict. They
are reflections of an underlying need to maintain the status quo and preserve current economic realities. This isn’t surprising — those in power have always wished to justify and maintain that power.”
atheism.about.com/od/hilosoph...n/a/marx_3.htm
The above rather long quotes give a simple introduction to basic ideas of Marxism. One key feature, if not the key feature, is that economics constitutes the base of all human life and misery Apologists for capitalism argue that economic crises are a result of an unchanging human nature, which is competitive, aggressive, exploitive evidenced by the persistence of wars through out history. But this does not explain that for more than a million years different species of humans have lived on the Earth without this so-called human nature. Our own species has dominated for over 200, 000 years with only evidence of competition, aggression and war within the last 6000 years. The major factor of change is economic.
“The materialist conception of history starts from the proposition that the production of the means to support human life and, next to production, the exchange of things produced, is the basis of all social structure; that in every society that has appeared in history, the manner in which wealth is distributed and society divided into classes or orders is dependent upon
what is produced, how it is produced, and how the products are exchanged”[1]
This Marxist view of history is directly opposed to the view of history as that of great people or learning of long lists of Kings and Queens. We argue that the determining factor of human history is economics. Basic study shows that even from an idealist perspective all these theories have an economic motive and cause. People in general are not motivated by grand ideas but instead by material concerns, like the need to eat and survive. [2]
Economists are in agreement that economics is not only an integral part of human development and history. When anthropologists and archaeologists look for change they primarily look to economic change. Indeed there is little dispute that the progress of the first three aeons of human social development;
1) savagery, 2) barbarism 3) civilisation
were consequences of economic need. In turn civilisation, our current period, can be divided into three main economic stages;
1) Slavery, 2) Feudalism 3) Capitalism.
Each period is revealed in terms of economic needs and the satisfaction of those needs. Internal to each economic system are contradiction, movement and change. Each system was not stationary; there was always continuous variation conversion and transformation.
Similarly today capitalism is not stationary. It is currently undergoing a crisis worldwide. But there is little or no guarantee that the system itself will collapse. People will have beliefs that with a little tinkering of the system or with the emergence of charismatic leaders like Obama, as President of the United States of America change will come. Part of that belief is the consequence of the control of ideas within society. The ideas of capital are the predominate ideas of society. It is no coincidence that one USA President[3] said that the business of America is business It is ingrained through the media and education system that capitalism is the highest level of human development; capitalism is the end of history.[4]
However as capitalism exhausts itself, people begin to look for other answers. Few if any of the proponents of the end of history nonsense saw this current crisis of capitalism coming. They should have done. Even a cursory reading of the Marxist classics would have given clues to the impeding crisis within capitalism. Even a cursory review of the history of the USA in the 20th century would have given clues.
The Great Depression
In 1929 1500 banks in the USA collapsed and the world economic system suffered a severe shock. Things were so bad that the crisis was known as the Great Depression. Practically every country in the world was affected.
At that time in Ireland North and South conditions were very bad for the working class. The partition of the country, the Civil war and mass emigration had sapped the strength of the working classes in Ireland. So bad indeed were the conditions that for a (unfortunately) short time workers in Belfast, regardless of their religious or political background, came together, organised by the Outdoor Relief Workers Committee. They marched lobbied and rioted against their economic plight under the political leadership of the Revolutionary Workers Groups, the only notable socialist group then existing. For a brief period the Falls and the Shankill were united together against the system. Unfortunately the poison of sectarianism was re-introduced by the Unionist ruling class and three years later in 1935 vicious sectarian rioting broke out in Belfast dividing bitterly the working class yet again.
During this period of the Great Depression there were widespread class struggles taking place throughout the world. The defeat of the German working class was facilitated by a poisonous combination of mass unemployment, German nationalism, infuriated by the crippling conditions imposed on Germany following its defeat in the 1st World War and wrong
strategies adopted by the leaders of the working class movement.
The Nazis exploited this nationalism of the German workers and middle classes starting a serious of events that then led directly to the 2nd world war.
But while actual physical battles were taking place on the streets another battle was taking place -the battle of ideas.
The Battle Of Ideas
We have already mentioned that the dominant ideas within society were the ideas of capital. But of course there is no uniformity of ideas. There are constant clashes as one school of thought challenges another school of thought. In the 1930’s there was the clash between the ideas of capitalism and communism. Within the broad communist movement there was also a clash of ideas between various trends with communism including what have become commonly known as Stalinism Trotskyism and Maoism. But similar disputes were occurring within the proponents of the capitalist way. One prominent economist John Maynard Keynes advocated state intervention during downturns in the economy. It was said of Keynes,
“Born in Cambridge, England, in 1883, the year Karl Marx died, Keynes probably saved capitalism from itself and surely kept latter-day Marxists at bay.”[5]
Previously economists generally felt that boom and burst in the economy were inevitable and little could be done. Indeed economists were regarded as
“gloomy naysayers” [6]
But Keynes advocated an interventionist policy. State investment in the infrastructure stimulates the economy and picks up the slack left by the decline in the private sector. This state intervention essentially, fine-tunes the economy, allowing space for the private sector to renew itself.
During the Great Depression in the United States President Roosevelt introduced the New Deal, which saw huge projects like the Grand Coole Dam initiated. These interventions gradually turned the USA economy around. The success of the New Deal was imitated by other countries and interest grew in Keynes’s ideas. These Keynesian ideas held sway from the 1930’s until the mid 1970’s when the ideas of Milton Friedman began to hold sway among the bourgeois intellectuals.
Friedman led the « Monetarist »
<http://cepa.newschool.edu/het/schools/monetar.htm <http://cepa.newschool.edu/het/schools/monetar.htm> > incarnation of the Chicago School <http://cepa.newschool.edu/het/schools/chicago.htm <http://cepa.newschool.edu/het/schools/chicago.htm> > against the Keynesian orthodoxy
<http://cepa.newschool.edu/het/schools/synthesis.htm <http://cepa.newschool.edu/het/schools/synthesis.htm> > . This school of thought also developed a form of economic imperialism, extending its ideas into other fields such as economic history, sociology, political science and legal studies. The two best political advocates of this field were Ronald Regan and Margaret Thatcher. But it was actually under the Labour government of James Callaghan in the 1970’s that monetarism began to take root. That government, operated in the belief that
“by controlling the money supply”[7]
that is bank deposits, they could control the rise of prices.
Speaking to a Labour party conference in 1976 James Callaghan said
’We used to believe that we could spend our way out of a crisis, but I tell you ... it is no longer possible.’[8]
From then until the year 2008 monetarism has held sway in Western Europe and the USA. During this time state assets were sold off and privatised. In Britain the Labour Government had nationalised a number of key industries and introduced the welfare state. These acted as a stimulus to the economy and capitalism recovered from the damages of the Second World War. But now both main parties in Britain were converted to the ideas of the Chicago School. Under both Tory and Labour Government controls were relaxed and the free market held sway. A huge increase in both private and public debt took place. Parallel with this was the ideological attack on the ideas of community. There was no such thing as society only individuals who pursued their own selfish ends and by so doing created the wealth that trickled down to the lower classes. Margaret Thatcher was the one who best expressed these ideas in a popular fashion.
The Credit Crunch
The current crash in the world economy began in the latter part of 2006. There has been an unprecedented collapse in confidence in the world banking system. Unregulated lending by the banks had run up enormous sums of money that couldn’t be redeemed leaving those same banks in crisis. Many have gone to the wall. Famous names like Woolworth’s have gone. Major names in industry have suffered huge losses as shares plummeted. Tears should not be shed for these companies but rather for the many working people who have lost their homes as those self same banks foreclosed on those behind on their mortgages.
As huge losses accumulated the USA and European governments stepped into take partial or complete control of the banks. State intervention is now back on the agenda. But no one should be under any illusion that this will lead automatically towards a socialist economy. State intervention in capitalist economies is in order to protect capitalism itself from
collapsing. It is a measure to protect the bourgeoisie and those who pay the highest price for this intervention are the working classes through unemployment, loss of homes rises in the cost of energy, wage cuts etc.
One political consequence of all this has been the opening up of an ideological debate about the ideas of Karl Marx and John Maynard Keynes. The sales of “Das Kapital” by Marx have boomed particularly in Germany and in 2008 the Times newspaper printed a portrait of Karl Marx with the heading “He’s back!!” But before anyone gets carried away and believes the dawn of a new socialist world is about to happen remember that Marx did not produce
any blueprint for a new society. He was well aware that the remedies to economic collapse arise out of the particular historical circumstances that pertain.
There are political implications in all this. In the USA the state of the economy became central to the election of the next president. The headlines in financial papers say it all
“Worst crisis Since 30s, With No End Yet in Sight”[9]
Many working class people registered for the first time to vote, particularly black working class due to the candidacy of Barak Hussein Obama. His eventual election as 44th President of the USA has raised hopes of radical changes in USA policies. Those hopes will almost certainly be dashed in the long run for Obama is wedded to the system of capitalism.
Indeed before his election he had been in contact with the Chicago School on economic policies.
In Britain there had been a swing back to Labour based on the belief that Brown can handle economic issues better than the Tories. However the differences, between Labour and Conservative are more apparent than real. Both leaderships are wedded to the present economic system and there is a consensus that there is no real solution to the crisis but only good and bad management of that crisis.
But what of Ireland North and South? What political impact will the economic crisis have? Will it change the relationships within the island will there be a response from the leaders of the working class to attacks on their living standards? Or will the class remain passive divided and prone to bouts of racism and or sectarianism that will prevent a unified class
movement threatening to change the status quo?
There are no easy answers to these questions. Marxists are not soothsayers or clairvoyants. We cannot for see the future. But we can come to an understanding of what is happening within society. We need to analysis, understand and then proceed to act.
Below we outline the current state of the Irish economy
Ireland
‘The global economic and financial crisis is unparalleled in our nation’s history.’
- Brian Cowen (10)
Recent news reports about Ireland have been dominated by the current economic crisis;
“a crisis intrinsic to the very functioning of the capitalist system”
admitted even the 26 counties ruling class daily newspaper The Irish Times. (11)
Former Taoiseach Garret FitzGerald has pointed that at the present moment,
“Ireland is suffering more severe economic difficulties than any other European country. The government has forecast an unprecedented drop in the volume of national output and there is a risk of an even sharper decline if the global economic situation deteriorates more than is thought likely.” (12)
The Irish social formation, North and South, will feel the negative effects of that crisis more sharply than other European countries due to a number of specific characteristics, which leave it more vulnerable.
The first weakness is the gap between Gross Domestic Product and Gross National Product, which generates a dual economy. Gross Domestic Product measures the total output of the economy in a period, i.e. the value of work done by employees, companies etc. This work generates incomes, but not all the incomes earned in the economy remain within the country as multinationals repatriate profits. The total income remaining in Ireland minus profit repatriation is the Gross National Product. (13)
The significance of the gap, between GDP and GNP in Ireland, has been noted by The Economist:
‘Any first-year economics student knows that national-income figures can be collected in three different ways, using income, output or expenditure numbers. Although the three are supposed to produce the same result, they rarely do. But the differences are tiny compared with a more obscure oddity that affects the Irish economy: the huge gap between gross domestic product (GDP) and gross national product (GNP). GDP is the more common measure of national income, to which GNP adds an item known as net transfers of factor incomes. This means adding the overseas profits of Irish companies that are repatriated to Ireland, and subtracting the profits of foreign multinationals operating in Ireland that are sent abroad. In most countries the two numbers will be small, and may also broadly balance out. But because of Ireland’s large FDI base, coupled with its enticingly low corporate taxes, lots of big foreign companies make (or at least report) big profits in Ireland, which they transfer back to their head offices. As a result, Ireland’s GNP is as much as 25% smaller than its GDP.’ (14)
Thus, official national income statistics show that in 2007, while GDP stood at 190 603 billion Euro, GNP stood at 161,210 billion Euro; the remaining 29,393 billion Euro being repatriated profits by transnational corporations. (15)
The gap between GDP and GNP reflects the fact that in the 26 counties, imperialist transnational corporations are more important to the accumulation of capital than the internally generated process of accumulation. Imperialist capital is the motor of industrial development, and Irish capital has a generally weak and subordinated role to it.
For example, out of the 141.9 billion Euro total 26 counties exports in 2006, foreign firms were responsible for 130 billion (91.54 percent). (16) Intel, Dell, HP, Pfizer are responsible for the bulk of exports. According to the 2007 World Investment Report (subtitled Transnational Corporations, Extractive Industries and Development) the 26 counties’ proportion of employment in foreign-owned affiliates, as a percentage of total international trade related employment, is the highest in the world. US capital is of particular importance: of IDA Ireland’s 972 client firms, 474 are from the US. When it comes to job creation, US companies punch above their weight, being responsible for 95,271 of the 135,471 jobs at IDA-backed companies at the end of last year. Joanne Richardson, chief executive of the American Chamber of Commerce Ireland, says another 220,000 indirect jobs are supported by US firms, which have invested more than $87 billion (€59.5 billion) - that’s more than the total US investment in the emerging BRIC (Brazil, Russia, India and China) economies. (17)
The reason for that is not hard to figure. Figures from the Bureau of Economic Analysis (BEA), a division of the US commerce department, indicate that the profitability of US subsidiaries in the 26 counties is second in Europe only to the Dutch subsidiaries of US firms. The BEA figures show that the combined net profit of US corporations in the 26 counties was $8.58 billion in 1997, rose to $13.39 billion by 2000 and reached $31.3 billion in 2003. The $48 billion net profit in the 26 counties in 2005, the latest period for which figures are available, compares with $37.01 billion in Britain and $74.06 billion in the Netherlands. In comparison, US companies in Germany made net profits of $11.22 billion in the same period, their French operations made $9.52 billion and their Italian operations made $8.58 billion. Revenue figures show US companies in the 26 counties had combined sales of $151.52 billion in 2005. American companies in the Netherlands had an average net profit margin of 37.88 per cent and 26 counties operations had an average net margin of 31.68 per cent. The average net margin in Britain was 6.97 per cent. (18)
This leaves Ireland much more vulnerable to the negative effects of the global economy and the US one in particular. Due to the dominance of imperialist capital and the subordinate role of the Irish social formation within the global economy, shocks to US economic growth would have ‘a much stronger effect’ on the pace of Irish economic activity than economic shocks of a similar magnitude in the Euro area or Britain, the IMF has found. A one percent drop in US economic growth translates into a 1.75 percent drop in the 26 counties. This is because the US is the 26 counties’ main source of foreign direct investment and largest single export market. (19)
Ireland is also much more vulnerable as the capitalist classes North and South are too weak to offer a way out of the crisis. The 26 counties bourgeoisie is in a position of relative weakness and its representatives are not in a position of equality with imperialist capital. They are not a strong and independent fraction of the global capitalist class and are not in a position to challenge or compete with imperialism.
Despite years of unprecedented growth, the Celtic Tiger failed to produce a strong Irish capitalist class. In the Celtic Tiger period, only a small number of Irish companies have succeeded in scaling the international platform of significant companies. CRH has become the biggest building materials supplier in the US; Ryanair has become Europe’s largest low-fares airline and Denis O’Brien’s Digicel, which operates in 22 markets, has grown to 3,000 employees since 2001. There are a handful of other companies that have had success in niche markets and at a regional level. C&C has had significant success with Magners Cider in the UK market. At an international level, Irish tech firms are small. One of the biggest IONA posted 2006 revenue of $77.8 million. No Irish company has floated on the US Nasdaq Stock Exchange since 1999 – an exchange that lists more than 70 Israeli companies! (20)
It is thus significant that in a recent article on the Irish bourgeoisie, the Ireland correspondent of the Financial Times could write:
‘The ranks of the super-rich include few manufacturers, partly because foreign-owned companies have dominated that sector –about 70 percent of Irish manufacturing exports came from US-owned companies.’
He also adds regarding the people who became millionaires thanks to the Celtic Tiger:
‘Some commentators complain that… the new moneyed class are just property speculators. One measure of this is the dearth of new listings on the Irish stock exchange. And the Irish boom has certainly been heavily concentrated in the property sector. About a third of the 80 000 individuals setting up businesses between January 2003 and June 2006 were in construction.’ (21)
As the Irish Times noted of the Irish stock market:
‘A particular difficulty for the Irish stock market, which helps explain why it has underperformed its international counterparts, lies in its make-up and its very small size. The ISEQ index is dominated by companies in the two areas most adversely affected by the credit crisis and the global economic downturn and most exposed to the bubble in the domestic property market. These are the financial and construction sectors. Just as the Irish economy has been too reliant on property related activity for growth, the Irish stock market mirrors this imbalance in its own composition. Foreign investors remain wary of a market that is small in size, narrowly based and where so many of its major companies operate in vulnerable sectors. Irish institutions and investors, who have been over-reliant on Irish shares for their portfolios, have already paid a price for their failure to diversify. Quite understandably they too are now reluctant buyers.’ (22)
Six Counties
Things are even worse for the Six counties, a failed economic (and political) entity. The state of the Northern economy is poor and unsustainable on all indicators; despite nearly three times as much per capita on industrial development as the United Kingdom average being spent there. The private sector pales next to the public sector, which makes up about 60% of the economy (compared to less than 30 percent in the 26 counties), with around 90% of private-sector businesses employing fewer than 10 people. Almost all its exports and company innovation come from just 4pc of its registered firms, and most of these are small and medium-sized firms with turnover of around £1m a year.
The Six counties still fail to impress when it comes to one of the most common measure of economic prosperity, gross value added per head, which is 81 percent of the UK average. With a low rate of productivity and the highest rate of economically inactive people in the UK (over 40 percent of working age population is inactive), the North remains an economic blackspot kept on the life support machine that is the British state subvention. For the North’s 1.7 million inhabitants, the British taxpayer forks out about 7 billion pounds a year (8.8 billion Euro); that is nearly 4000 pounds a head, and the figure is rising. (23)
In 2007, a Belfast Telegraph editorial warned:
‘Peter Hain long ago observed that the Northern Ireland economy is unsustainable as presently constituted. We lag behind Britain in terms of economic activity, productivity and wealth. With public sector cutbacks taking effect, it has been estimated that a total of 140,000 new jobs will be needed in the next 10 years. Constrained as it is, the private sector is unable to provide the sort of economic boost, which is required.’(24)
Now things are getting even worse, as with the current recession, at a regional level, the pace of the six counties’ private sector contraction is faster than any other UK region and the Republic of Ireland. Six counties private sector indices all reached fresh lows and continue to compare unfavourably with the UK. And things are set to continue deteriorating. (25)
The severity and speed of the economic downturn in the Six Counties has been ‘truly extraordinary’, Invest NI has admitted. The organisation also said
‘economic conditions are likely to worsen before they improve’. It said the number of projects due for completion this year and next, are down 45 per cent compared to two years ago. Foreign direct investment leads are being particularly hard hit and sales of land to facilitate growth, especially to locally owned clients, are dramatically down.
“The organisation is known for its careful and measured approach but it is clearly shaken by the downturn and the feedback it is getting. It also shows the green shoots of recovery are nowhere to be seen in the north’s economy with further job losses and company failures likely.” (26)
The Centre for Economics and Business Research in London says although the Six Counties will be “somewhat cushioned” from the worst of the downturn, they will not escape a major recession. The centre believes the public sector in the UK will emerge as the only growth industry in 2009 and, because of that, has moved the Six Counties to the top of the list of GDP growth ranking. But it warns that this is nothing to celebrate as the centre has also predicted economic output in the North will contract by 2.4 per cent over the coming year. (27) Some argue that the North will avoid the worst of the economic crisis due to the importance of its public sector. But leading economists have pointed that falling tax receipts will hit the region in the longer term; and the Stormont executive will have to make big cuts in pubic spending or seriously reform the public sector to balance the books. (28)
The Property Market
Most of the recent wealth North and South was fuelled by the property market.
“Ireland’s growth during the last decade was largely illusory, generated by a property bubble fuelled by reckless bank lending. In 2007 an incredible 20 per cent of our national income and employment came from building houses and commercial property.” (29)
This is where Irish capitalists played a key role and were able to make most of their money.
“In the last decade, Fianna Fáil came to see developers and the banks which funded them as the real heroes of the economic boom: the men whose drive and vision had given us an economy that was the envy of Europe. From bywords of ineptitude, Irish builders and bankers were transformed into masters of the universe. What was good for Anglo Irish Bank was good for Ireland.” (30)
Irish birth rates peaked in 1980, the so-called ‘Pope’s Children’ as David McWilliams famously called the current generation. This means that for the first time, since 1871, the population of the 26 counties exceeds four million people. More people meant more demand for housing, which pushed up house prices, which in turn fuelled the construction industry, which pulled in more immigrants, who needed more houses to live in, and so on in a seemingly endless cycle.
Overall housing output in the 26 counties increased from 30,575 in 1995 to 80 957 in 2005. Average house prices in the country as a whole increased from 77, 994 Euro to 276, 221 Euro between 1995 and 2005. In Dublin, prices increased from 86, 671 to 350 891 Euro. Thus over the period 1995-2005 prices increased by 254 per cent in the country as a whole and 305 percent in Dublin. (31)
These trends are quite exceptional, the Economist magazine index showing that the 26 counties had the highest rate of house price inflation in the developed world between 1995 and 2005. During that period, house prices rose by 124 percent in the US, by 180 in Spain, 194 percent in Britain, in the 26 counties they rose by 254 percent. (32) In 2006, the number of newly built homes jumped to a record 93 419 in 2006. This is a rate of more than 20 units per 1000 of population, while the European norm is 2 to 4 new homes per 1000 of population. About 88 000 new homes were built in the 26 counties last year, roughly half the number built in the UK for a population twelve times larger. (33) This is clearly unsustainable.
The 26 counties ratio of housing investment to GDP at 13.3 percent is more than twice as high as the average 6.5 per cent for OECD countries, leaving the 26 counties twice as vulnerable to depression in that sector than other OECD countries. On top of that residential investment had increased its share of GDP in the 26 counties from 7.8 per cent in 2000 to 13.3 per cent in 2006. (34) Celtic Tiger growth has been heavily dependent on construction, and is therefore extremely vulnerable to the rapid slowdown in that sector. Over the last ten years, the number of vacant houses has almost doubled to 216 000, indicating that return on property investments will not be as profitable as expected. Now, the property boom is over, and with it will go the main source of employment growth. (35)
In the Six Counties, most of the so-called recent growth was also based on real estate and the housing market. Figures from the Nationwide Building Society show that average prices in the North rose by 58% in 2006-2007, the fastest rate of growth seen in any region of the UK since the Nationwide started compiling figures in 1973. House prices have increased by 281% since the Good Friday Agreement in 1998, compared to the UK average of 179%. (36) However, since the housing bubble has burst, house prices in the Six counties fall at the fastest rate in the U.K. and building reaches a 12-year low.
Prices dropped by a staggering 34.2% in 2008, according to Nationwide. At the start of the year the average house price in the region was £224,816; by the end of the year it was £147,833. Perhaps unsurprisingly Belfast is top of the list of biggest fallers, recording a 33% drop over the last 12 months. Nationwide chief economist Fiona Earley said:
“Realistically one might expect Northern Ireland to remain the worst affected region in 2009, given the especially severe overshoot of house prices relative to earnings in the province during the boom years.” (37)
The outlook for the construction sector, where average employment in house building has fallen by 50 per cent and the average number of unsold dwellings has risen by over 65 per cent, potentially points to a sector in crisis. (38) Meanwhile, figures from the Royal Institute of Chartered Surveyors showed construction firms in Northern Ireland reported the biggest fall in workloads of any region. The over-reliance on the property market both in the Six and 26 counties mean that they are going to feel the effects of the crisis of that sector more strongly than other countries.
The growth of the property market was in turn fuelled by credit and the culture of ‘buy now, pay later’. People and businesses have borrowed massively from banks. Yet Irish banks get about one-third of their funds by borrowing from foreign banks. What precipitated the crisis, which forced Leinster House to bail out six Irish banks and four foreign ones at the tune of 485 billion Euros, was that foreign banks stopped lending to them. What caused foreign banks to stop lending to Irish banks while they kept lending to most other banks in Europe? The reason that foreign banks started to shun Irish banks is that international investors have gradually become aware of the scale and recklessness of Irish bank lending to builders and property speculators.
Irish banks are currently owed €110 billion by builders and developers. Of every €100 that Irish residents have deposited in banks, €60 has been lent for property speculation. (39) Most recent figures show that 80 per cent of Anglo Irish Bank’s €68 billion loan book, just under €55 million, is secured against Irish and British property. Anglo Irish is a particularly active lender to the commercial property sector. Bank of Ireland’s loan book stands at €135 billion, 71 per cent or €95 billion is secured against property. Of that figure, its Irish home loans come to €27 billion, while its British mortgages come to €34 million. This leaves it with an exposure of over €60 billion to other property loans in both the Republic and other markets. AIB’s loan book tops €150 billion, and 60 per cent of this is secured against property. The most recent figures show that loans outstanding in the Republic were €71.7 billion, with mortgages accounting for €24.5 billion, leaving a balance of €47.2 billion secured against other properties in the State. (40)
As the property bubble has burst, it is looking increasingly unlikely that banks will get back more than a fraction of this. Foreign banks know of these toxic loans and are frightened by them. That is why they stopped lending to 26 counties banks, and why Leinster House was panicked into taking their place.
“If we suppose that the current stock market valuations of Irish banks are a rough indicator of the true book value of their capital, then in the next year we can expect banks to write off more three-quarters of their capital as bad debts. This means that without immediate Government action to recapitalise the banks, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.” (41)
As for ordinary people, they are also in a bad position. Figures from the Central Statistics Office’s Statistical Yearbook of Ireland 2008 show that private debt in the 26 counties is at record levels. (42) National debt as a percentage of GDP fell from 87.7 per cent in 1990 to 20.4 per cent in 2006. However, in the ten years from 1996 to 2006, Irish residential mortgage debt rose by 522 per cent per capita; in the US, the same debt rose by 103 per cent. In terms of new debt, 26cos are five times more exposed than American people. (43) Personal debt also increased from 37 257 million Euro in 1995 to 258 810 million Euro in 2005. (44) Household indebtedness in the 26 counties, 81 per cent of gross domestic product, is the highest ratio of personal debt to GNP in the euro zone and about 80 per cent of personal credit is secured on property. (45)
“The boom of the last 15 years created a wave of irrational exuberance. Too many houses were built. Too much cash was spent. Too many prices were raised excessively. Too much money was borrowed. The culture of conspicuous consumption engendered by the boom was unsustainable.” (46) And now the question is who is going to pay for it?
The “most serious economic downturn Ireland has experienced in 87 years”, will see a negative growth rate of 4 per cent in 2009 with maybe worse to come in 2010.
“The social impact of this economic jolt will be devastating for well over a million of our citizens, probably over a million and a half. Thousands of businesses will go to the wall... The pensions of hundreds of thousands of elderly people have been or will be wiped out. Poverty will afflict over a million citizens. Maybe over 7,000 will die prematurely each year because of that poverty.” (47)
As a bourgeois economist admits: “As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year, and will not start to fall until recovery in Britain and elsewhere permits mass emigration to resume. The economy will not begin to grow until real wages fall to competitive international levels, a process that will probably take a decade. In other words, the Irish economy is facing a decade of stagnation and mass unemployment of the same magnitude as the 1980s, with the difference that the unemployed now have mortgages, car loans and maxed-out credit cards. Faced with an irreversible contraction on this scale, the Government will have grave difficulty borrowing to fund its ordinary expenditure, even after draconian cuts in spending and increases in taxation. In the view of international investors …(this) … could easily suffice to sink the Irish State into bankruptcy.”(48)
The Reaction
In Ireland however the reaction to the Fianna Fail led coalition budget in late 2008 showed a rising tide of opposition to the savage cuts proposed. Teachers, nurses' old age pensioners took to the streets in protests well controlled by the leaders of the trade union movement. Everyone on those protests was clear the economic downturn meant attacks on the living
standard s of the working class not only in Ireland but worldwide. Cuts in services, higher taxation, higher unemployment etc.
Saving the banks and closing the hospitals and schools and taking away the medical cards of the elderly doesn’t sit too well with an electorate used to having a populist Government. There is now a rising tide of discontent. Provisional Sinn Fein more so than the Labour party is well positioned to take advantage of it. Future elections could see a Fine Gael/Labour/
Independents coalition elected. Street protests in the interim could become the order of the day. The occupation by the workers of Waterford Glass when it was decided to close down was an example of the rising militancy of some sections of the class.
It could be expected that in both parts of Ireland the trade union movement would prove to be the backbone of any fight-back against the economic downturn. Sadly there is too close a collaboration between employers, unions and governments for the current leadership of the unions to be become the centre point of resistance.
But if the leaders of the trade union don’t lead a vigorous fight against the cutbacks who will? For years Republicans of all hues ignored or belittle the broad trade union particularly because of its close collaboration with the British Overlords at Stormont under direct rule who used the trade union movement as another weapon in their fight against those of us who wished to dismantle Imperialist rule in Ireland. Of course the Workers Party had a foothold by the end of the seventies in trade unions but they merely used that as a stick to beat Republicanism itself and manipulate the unions for their own selfish electoral issues.
But one should never confuse the trade union movement with its leadership. Republicans in particular should never do that. Republicanism itself has a long history of its leaderships taking a different road than the rank and file wanted to go. The result was always the betrayal of fundamental republican principles.
Now in the 21st century and following the latest defeat of Republican armed struggle there is now a chance of Republicanism to renew itself and become relevant to the lives of the majority of the working class. Just as in the past we embraced the mass movement around civil rights issues so now we must embrace the struggle in defence of the rights of the worker. Activists within the trade union movement must take their arguments into the streets.
As trade Unionists republicans must be in a position to argue on behalf of not only the organised working-class but also the unorganised. For example the homeless more than likely will be unemployed because employers will usually employ someone if they have a fixed address. We need to bring to the attention of the unemployed not only the policies of the trade union movement on unemployment and homelessness but also add that vital ingredient that revolutionises those policies
There is a trade union movement educational programme. It explains how capitalism is exploitive. We as republican socialist must explain how such exploitation can end. To explain the current capitalist chaos we must be educated politically so that we can explain how there are twice as many vacant homes as there are homeless. It is a human right not to be faced with any form of poverty, it is a human right to work, it is a human right for justice, and it is a human right to be politically active. People need advice on human rights We must be in a position to explain, to pursue motions, that human rights cannot be realised in a society governed by economic chaos! Therefore we must advise workers how to end such a system.
Those who caused the credit crunch should face higher taxes, not the people who have suffered. Workers and average families should not be paying for mistakes made by City bankers and financial firms.
In general terms trade unionists do not stand opposed to paying tax for the provision of public services such as education and health. But we are opposed to paying millions to individuals who already have millions. Two weeks after the Irish government bailed out Anglo Irish banks we learnt that there was a 46 per cent increase in pre-tax profits to €1.243 billion for 2007 the highest ever! Who profits? Why the shareholders themselves. Why are these ridiculous amounts not to be used as a bailout? Some trade unionists are calling for nationalisation. But nationalisation can and does work to protect the very system that created the economic chaos in the first place. We say nationalisation without compensation and place the leading sectors of the economy under workers control .
The OEDC (Organisation for Economic Cooperation and Development) in 16.April 2008 argued that current wage increases in the 26 counties would be undermined by the surging value of the European single currency, the euro. Contrary to the conditions of the social contract, the Irish Government failed to discuss this warning with the trade unions.
Because of the prominent role played by foreign investment by US companies in Ireland’s so-called Celtic tiger status, it is now clear that many US firms will follow Dell’s example and pull out as investment here is becoming increasingly expensive for them.
Trade Unions
Why did the trade union movement not demand restrictions on the money market? The Banks were permitted to continue playing roulette with Irish workers savings and pension funds for another five months. Why was there no agitation by the unions through the social contract or indeed use of the Labour Party? Perhaps it is accepted that the objects of the Labour Party have nothing in common with those of the trade union movement. Does that mean Trade unions will have no political voice? The reality is throughout the history of the trade union movement the Labour Party, which boasts it was founded, by James Connolly, was never there, when the working class needed them.
We take a clear view. Not only does it have a political voice, but the trade union movement is a political machine. What are required are political trade union activists to get this machine running.
Although mostly coming outside the ranks of the labour movement and having a generally limited collective experience of trade unionism, Irish republicans nevertheless can claim a proud history as trade union activists. (49) Connolly, Larkin, O ‘Donnell, Joe Mc Cann, Seamus Costello, Ta Power, Johnny White, were all trade union activists. Their commonality was that they all laid claim to be Republican Socialists. Costello, Power and White were
founder members of the I.R.S.P.
However as activists with in the wider trade union movement they had something else in common, they worked for a united trade union movement. Not only had they to struggle against trade union bureaucracy, but also Fine Gael in Ireland (and the Tory party in Britain) who worked at introducing anti-trade union legislation and indeed to split the trade union movement.
In Ireland as in many other countries socialists face a dilemma when considering what areas of work to concentrate on. Naturally the IRSP has no problems with trade unionism as such. However, the central question is: how do we operate within the trade union movement? In particular, should we support ICTU affiliated unions or non-ICTU affiliated unions? The Irish Workers Union for example has come to the conclusion that it is not possible to radicalise the ICTU from within and a radical trade union movement has to be built outside of and in opposition to the ICTU. Should we support the IWU strategy? This is not the first time our party has been faced with this question. (i.e. John Mitchell and ILDATU in the late 1980s)
There is nothing intrinsically progressive about workers in trade unions. Nor is there any thing necessarily progressive about the trade unions themselves. A lot depends on the level of consciousness of both rank and file and leadership. Many trade union leaders have had a background of socialist activism in “revolutionary” groups yet when they achieve power in the unions tend to gradually move to the right. This is not necessarily because they have “betrayed” their principles or become corrupt (although in some cases that
has been the case) but the consequences of the social and economic circumstances of the times.
The six counties, for example, have a very high trade union density, however (as the history of the last thirty years prove) is politically most backward, if not outright reactionary. The fact that there is a political left in the trade unions: is this likely to give us socialist trade unions, or will it only deliver trade union socialism? Can trade union consciousness organically develop into political consciousness?
How do we understand the connection between the economic organisation of workers (i.e. trade unions) and their political organisation? (i.e. political parties)? How closely connected are they? What does previous history tell us about that question? What historical or current examples are there to show that working ICTU is a successful strategy?
First, we need to have a concrete picture of trade unionism in Ireland today. New figures show that trade union membership is continuing to fall, and union members now account for just over 30% of employees. The 26 counties Central Statistics Office said 31.5% of workers were members of a union in the second quarter of 2007, continuing a downward trend, which began in 2003. 34.6% of full-time workers claimed union membership, but only 19% of part-time employees were union members. The CSO figures show that the highest level of union membership, 79%, was not in the strategic centres of the economy, but in the ‘public administration and defence’ category. This compares with rates of 8% in ‘hotels and restaurants’ and ‘agriculture, forestry and fishing’. The health and construction sectors showed the biggest falls over the last couple of years. (50)
The existing culture within the trade union movement is not conducive to militancy. The Irish Times noted recently:
“the widely forecast descent into industrial chaos is by no means inevitable. Ireland is a much different place in 2008 than it was in the mid-1980s. The culture of confrontation between employers and unions is long gone in most parts of the private sector, where workers don’t have the luxury of job security.” (51)
After the largest general strike in France for twenty years, the Irish Times contrasted the situation of French unions with those in Ireland:
“Yesterday’s events were stimulated by a radical new rank and file trade union movement influenced by a resurgent extreme left commanding widespread support among workers disillusioned with the existing union leaders. In response, that leadership took the initiative to organise a national action. Only a small minority of French workers in most industries and services are actually trade union members, but many more are willing to support them on these occasions. As a result direct action takes the place of the grinding negotiations between social partners we are used to in Ireland, where union membership is higher and national strikes more rare. “ (52)
The number of days lost through industrial disputes in the 26 counties in 2007 was the lowest on record and the downward trend has continued in 2008. (53) From this, on what basis can we think that trade unions are going to be central to the coming crisis? If so, how central are they likely to play a role? If unions have a limited role (i.e. predominance of public sector), what consequences does this fact have for out political strategy?
How central or important should trade union work be to our own programme, strategy and tactics? What programme should we use in trade union work? What weight do Republicans currently have within the trade union movement, and if there were a massive involvement of our membership within the unions, what increase would this bring to our weight? Would our movement carry more impact if we were involved in red unions outside ICTU than within it? Would this allow us to provide a catalyst for more radical union activity? What realistic chances do we have of transforming ICTU from within?
What To Do?
The purpose of the above series of questions relating to trade union work is to provoke not only republican socialist but also anyone else interested in serious left wing politics to think deeply about the issues rather that for people to come up with facile sloganising. Ideas are more powerful than guns for you can -not kill an idea.
The End of History school of thought believed the class struggle was over. And yet the following quote still has significance and relevance today
“We must systematically and persistently develop Communist activities within the trade unions, workers’ and works councils, the consumer co-operatives and other mass workers’ organizations. Within these organizations it is necessary to organize Communist cells the aim of which is to win the trade unions, etc. for the cause of Communism by incessant and persistent work. In their daily work the cells have the obligation to expose everywhere the
treachery of the social patriots. “(54)
At the Official Republican Movements summer school 1970 (QUB) Seamus Costello warned of the danger of genuine revolutionaries expressing hatred as opposed to constructive opposition to the practices of the trade union movement its bureaucratic leadership. His lecture was based on the premises that
“if trade union objectives are linked directly or indirectly to our political programme then we should be involved.”
Contrary to the belief amongst some sections of the left, Irish trade unions have both a democratic content and mechanism. The problem is rather than becoming involved in democratic procedures they prefer to do nothing. But many other sections and individuals of the left have done something. The argument is of course, one cannot notice the difference.
In Ireland, both North and South, due in part to law, to the desire of the Union to seek consensus and in the South to the social contract, the trade unions have been
transformed into semi-state institutions. According to the legislators, law is introduced in the interests of the workers in order to assure them of fair employment and an influence upon the Government and economic life. . Unfortunately many union leaders appear to believe this nonsense. Hence they feel that in order to maintain this so called influence they must sit down with employers and governments to discuss the sacrifices that the workers must make in order to shore up the current economic system and keep the bankers in the style to which they are accustomed. Of course, not all workers are fooled. They exert pressure on their leaders so that even the bureaucratic leadership have to come to terms with the need to reverse this situation. Ireland’s biggest trade union, which incidentally, has always opposed the social contract, recognises the danger of being a semi state body. Some of their trade union education programmes try to expose the illusion of worker friendly legislation. But as long as the trade unions remain aloof from direct political action such efforts will be partial, inconsistent and ultimately futile. The climate will increasingly become hostile to radical trade union activity. The rights so bitterly won over the centuries will and are being gradually whittled away
What are the objective chances of reversing this process of institutionalisation? Is an education programme sufficient or the way ahead? Are paper policies worth more than the paper they are being written on?
It has been said that trade unions are an organ of democracy. But can this remain under the current economic chaos. Will the state permit this if the trade unions implement their plans for agitation against poverty wage cuts and redundancies?
More than half of the population suffers from some element of poverty. The largest companies are announcing wage cuts. All over the country jobs are vanishing. Independent of the job losses reported in the media by the large companies such as Waterford Crystal and the Airlines a random look at the economy over a 24 hour period , 350 job losses in the Blackrock area of Cork, 200 job losses in Limerick 300 jobs in Tipperary.
That makes agitation length and breadth of the country more likely. This will require activists. But will the government permit increasing agitation, knowing that economic agitation takes a qualitative leap to political agitation. Are we as revolutionaries prepared for that?
The principal task of any revolutionary, regardless of what he/she calls themselves whether communist republican socialist, marxist is to wage a determined struggle to win the majority of the workers organised in the trade unions as well as those outside them.
We must not be disheartened by the present intransigent bureaucratic and reformist temperament of the trade unions, but must try to overcome all confrontation or divergence by enthusiastically participating in the workers day-to-day struggles to win them to a revolutionary perspective and away from a reformist perspective.
A small example indicates the possibilities. Two motions from Belfast and District Trades Council to the ICTU condemned Israel for its human rights abuses, its policy of ethnic cleansing and its war crimes. Actively and vigorously it promoted a boycott of Israeli goods amongst its members. Israeli goods bound for Belfast, Dublin and Cork were diverted to British ports. The campaign was so successful that the Ambassador to Ireland Zion Evrony intervened and condemned the trade union action. If we can do this on international issues we can do it on national issues. An obvious one is to campaigns on the same scale against the Banks!
In brief our task, during the current economic crises, is to develop revolutionary socialist consciousness amongst all sections of the organised working class. Republican socialists must be in a position to develop rank and file organisation, both inside and outside the trade union movement. Our objective is the creation and maturing of revolutionary
thought among workers and their respective organisations.
It must be said that even though many of these people may not be working together, their collective results are revolutionary. With the uncompromising changes within
A Republican Socialist Analysis
Printed and Published by Starry Plough Publications
INTRODUCTION
This small pamphlet has been produced by the IRSP to provide some analysis of the current crisis in Capitalism and its economic effect on Ireland. We look at this crisis from a Marxist perspective for as Irish Republicans, our organisation has always maintained that the class and national questions are intertwined in Ireland. In this we are following the views and position of Ireland’s greatest Marxist, James Connolly. For many years Irish republicans while paying lip service to the memory of Connolly, almost totally ignored his many writings and his example as a trade unionist , a socialist, a republican, a writer and a thinker. Instead his life was only seen through the prism of his last days when he joined with fellow revolutionaries and stormed the GPO in Dublin in 1916. In over emphasising his involvement in armed action some republicans have elevated armed struggle itself as perhaps the only weapon in the arsenal of revolutionaries. As a result many republicans have ignored class struggles mass movements and day to day political struggles. We think this is wrong. No one who considers themselves a Republican can afford particularly in these days to ignore vital areas of struggle. Without the support of the working classes all radical or revolutionary movements are doomed to failure.
The Determining Factors of History
“For Karl Marx, the basic determining factor of human history is economics. According to him, humans — even from their earliest beginnings — are not motivated by grand ideas but instead by material concerns, like the need to eat and survive. This is the basic premise of a materialist view of history. At the beginning, people worked together in unity and it wasn’t so bad. But eventually, humans developed agriculture and the concept of private property. These two facts created a division of labour and a separation of classes based upon power and wealth. This, in turn, created the social conflict, which drives society. All of this is made worse by capitalism, which only increases the disparity between the wealthy classes and the labour classes. Confrontation between them is unavoidable because those classes are driven by historical forces, beyond anyone’s control. Capitalism also creates one new misery: exploitation of surplus value. For Marx, an ideal economic system would involve exchanges of equal value for equal value, where value is determined simply by the amount of work put into whatever is being produced. Capitalism interrupts this ideal by introducing a profit motive — a desire to produce an uneven exchange of lesser value for greater value. Profit is ultimately derived from the surplus value produced by workers in factories. A labourer might produce enough value to feed his family in two hours of work, but he keeps at the job for a full day — in Marx’s time, that might be 12 or 14 ours. Those extra hours represent the surplus value produced by the worker. The owner of the factory did nothing to earn this, but exploits it nevertheless and keeps the difference as profit.
In this context, Communism thus has two goals:
1/ it is supposed to explain these realities to people unaware of them; it is supposed to call people in the labour classes to prepare for the confrontation and revolution.
This emphasis on action rather than mere philosophical musings is a crucial point in Marx’s program. He wrote in his famous Theses on Feuerbach:
“The philosophers have only interpreted the world, in various ways; the point, however, is to change it.”
Economics, then, are what constitute the base of all of human life and history — generating division of labour, class struggle, and all the social institutions, which are supposed to maintain the status quo. Those social institutions are a superstructure built upon the base of economics, totally dependent upon material and economic realities but nothing else. All of the institutions which are prominent in our daily lives — marriage, church, government arts, etc. — can only be truly understood when examined in relation to economic forces.
Marx had a special word for all of the work that goes into developing those institutions: ideology. The people working in those systems — developing art, theology, philosophy, etc. — imagine that their ideas come from a desire to achieve truth or beauty, but that is not ultimately true. In reality, they are expressions of class interest and class conflict. They
are reflections of an underlying need to maintain the status quo and preserve current economic realities. This isn’t surprising — those in power have always wished to justify and maintain that power.”
atheism.about.com/od/hilosoph...n/a/marx_3.htm
The above rather long quotes give a simple introduction to basic ideas of Marxism. One key feature, if not the key feature, is that economics constitutes the base of all human life and misery Apologists for capitalism argue that economic crises are a result of an unchanging human nature, which is competitive, aggressive, exploitive evidenced by the persistence of wars through out history. But this does not explain that for more than a million years different species of humans have lived on the Earth without this so-called human nature. Our own species has dominated for over 200, 000 years with only evidence of competition, aggression and war within the last 6000 years. The major factor of change is economic.
“The materialist conception of history starts from the proposition that the production of the means to support human life and, next to production, the exchange of things produced, is the basis of all social structure; that in every society that has appeared in history, the manner in which wealth is distributed and society divided into classes or orders is dependent upon
what is produced, how it is produced, and how the products are exchanged”[1]
This Marxist view of history is directly opposed to the view of history as that of great people or learning of long lists of Kings and Queens. We argue that the determining factor of human history is economics. Basic study shows that even from an idealist perspective all these theories have an economic motive and cause. People in general are not motivated by grand ideas but instead by material concerns, like the need to eat and survive. [2]
Economists are in agreement that economics is not only an integral part of human development and history. When anthropologists and archaeologists look for change they primarily look to economic change. Indeed there is little dispute that the progress of the first three aeons of human social development;
1) savagery, 2) barbarism 3) civilisation
were consequences of economic need. In turn civilisation, our current period, can be divided into three main economic stages;
1) Slavery, 2) Feudalism 3) Capitalism.
Each period is revealed in terms of economic needs and the satisfaction of those needs. Internal to each economic system are contradiction, movement and change. Each system was not stationary; there was always continuous variation conversion and transformation.
Similarly today capitalism is not stationary. It is currently undergoing a crisis worldwide. But there is little or no guarantee that the system itself will collapse. People will have beliefs that with a little tinkering of the system or with the emergence of charismatic leaders like Obama, as President of the United States of America change will come. Part of that belief is the consequence of the control of ideas within society. The ideas of capital are the predominate ideas of society. It is no coincidence that one USA President[3] said that the business of America is business It is ingrained through the media and education system that capitalism is the highest level of human development; capitalism is the end of history.[4]
However as capitalism exhausts itself, people begin to look for other answers. Few if any of the proponents of the end of history nonsense saw this current crisis of capitalism coming. They should have done. Even a cursory reading of the Marxist classics would have given clues to the impeding crisis within capitalism. Even a cursory review of the history of the USA in the 20th century would have given clues.
The Great Depression
In 1929 1500 banks in the USA collapsed and the world economic system suffered a severe shock. Things were so bad that the crisis was known as the Great Depression. Practically every country in the world was affected.
At that time in Ireland North and South conditions were very bad for the working class. The partition of the country, the Civil war and mass emigration had sapped the strength of the working classes in Ireland. So bad indeed were the conditions that for a (unfortunately) short time workers in Belfast, regardless of their religious or political background, came together, organised by the Outdoor Relief Workers Committee. They marched lobbied and rioted against their economic plight under the political leadership of the Revolutionary Workers Groups, the only notable socialist group then existing. For a brief period the Falls and the Shankill were united together against the system. Unfortunately the poison of sectarianism was re-introduced by the Unionist ruling class and three years later in 1935 vicious sectarian rioting broke out in Belfast dividing bitterly the working class yet again.
During this period of the Great Depression there were widespread class struggles taking place throughout the world. The defeat of the German working class was facilitated by a poisonous combination of mass unemployment, German nationalism, infuriated by the crippling conditions imposed on Germany following its defeat in the 1st World War and wrong
strategies adopted by the leaders of the working class movement.
The Nazis exploited this nationalism of the German workers and middle classes starting a serious of events that then led directly to the 2nd world war.
But while actual physical battles were taking place on the streets another battle was taking place -the battle of ideas.
The Battle Of Ideas
We have already mentioned that the dominant ideas within society were the ideas of capital. But of course there is no uniformity of ideas. There are constant clashes as one school of thought challenges another school of thought. In the 1930’s there was the clash between the ideas of capitalism and communism. Within the broad communist movement there was also a clash of ideas between various trends with communism including what have become commonly known as Stalinism Trotskyism and Maoism. But similar disputes were occurring within the proponents of the capitalist way. One prominent economist John Maynard Keynes advocated state intervention during downturns in the economy. It was said of Keynes,
“Born in Cambridge, England, in 1883, the year Karl Marx died, Keynes probably saved capitalism from itself and surely kept latter-day Marxists at bay.”[5]
Previously economists generally felt that boom and burst in the economy were inevitable and little could be done. Indeed economists were regarded as
“gloomy naysayers” [6]
But Keynes advocated an interventionist policy. State investment in the infrastructure stimulates the economy and picks up the slack left by the decline in the private sector. This state intervention essentially, fine-tunes the economy, allowing space for the private sector to renew itself.
During the Great Depression in the United States President Roosevelt introduced the New Deal, which saw huge projects like the Grand Coole Dam initiated. These interventions gradually turned the USA economy around. The success of the New Deal was imitated by other countries and interest grew in Keynes’s ideas. These Keynesian ideas held sway from the 1930’s until the mid 1970’s when the ideas of Milton Friedman began to hold sway among the bourgeois intellectuals.
Friedman led the « Monetarist »
<http://cepa.newschool.edu/het/schools/monetar.htm <http://cepa.newschool.edu/het/schools/monetar.htm> > incarnation of the Chicago School <http://cepa.newschool.edu/het/schools/chicago.htm <http://cepa.newschool.edu/het/schools/chicago.htm> > against the Keynesian orthodoxy
<http://cepa.newschool.edu/het/schools/synthesis.htm <http://cepa.newschool.edu/het/schools/synthesis.htm> > . This school of thought also developed a form of economic imperialism, extending its ideas into other fields such as economic history, sociology, political science and legal studies. The two best political advocates of this field were Ronald Regan and Margaret Thatcher. But it was actually under the Labour government of James Callaghan in the 1970’s that monetarism began to take root. That government, operated in the belief that
“by controlling the money supply”[7]
that is bank deposits, they could control the rise of prices.
Speaking to a Labour party conference in 1976 James Callaghan said
’We used to believe that we could spend our way out of a crisis, but I tell you ... it is no longer possible.’[8]
From then until the year 2008 monetarism has held sway in Western Europe and the USA. During this time state assets were sold off and privatised. In Britain the Labour Government had nationalised a number of key industries and introduced the welfare state. These acted as a stimulus to the economy and capitalism recovered from the damages of the Second World War. But now both main parties in Britain were converted to the ideas of the Chicago School. Under both Tory and Labour Government controls were relaxed and the free market held sway. A huge increase in both private and public debt took place. Parallel with this was the ideological attack on the ideas of community. There was no such thing as society only individuals who pursued their own selfish ends and by so doing created the wealth that trickled down to the lower classes. Margaret Thatcher was the one who best expressed these ideas in a popular fashion.
The Credit Crunch
The current crash in the world economy began in the latter part of 2006. There has been an unprecedented collapse in confidence in the world banking system. Unregulated lending by the banks had run up enormous sums of money that couldn’t be redeemed leaving those same banks in crisis. Many have gone to the wall. Famous names like Woolworth’s have gone. Major names in industry have suffered huge losses as shares plummeted. Tears should not be shed for these companies but rather for the many working people who have lost their homes as those self same banks foreclosed on those behind on their mortgages.
As huge losses accumulated the USA and European governments stepped into take partial or complete control of the banks. State intervention is now back on the agenda. But no one should be under any illusion that this will lead automatically towards a socialist economy. State intervention in capitalist economies is in order to protect capitalism itself from
collapsing. It is a measure to protect the bourgeoisie and those who pay the highest price for this intervention are the working classes through unemployment, loss of homes rises in the cost of energy, wage cuts etc.
One political consequence of all this has been the opening up of an ideological debate about the ideas of Karl Marx and John Maynard Keynes. The sales of “Das Kapital” by Marx have boomed particularly in Germany and in 2008 the Times newspaper printed a portrait of Karl Marx with the heading “He’s back!!” But before anyone gets carried away and believes the dawn of a new socialist world is about to happen remember that Marx did not produce
any blueprint for a new society. He was well aware that the remedies to economic collapse arise out of the particular historical circumstances that pertain.
There are political implications in all this. In the USA the state of the economy became central to the election of the next president. The headlines in financial papers say it all
“Worst crisis Since 30s, With No End Yet in Sight”[9]
Many working class people registered for the first time to vote, particularly black working class due to the candidacy of Barak Hussein Obama. His eventual election as 44th President of the USA has raised hopes of radical changes in USA policies. Those hopes will almost certainly be dashed in the long run for Obama is wedded to the system of capitalism.
Indeed before his election he had been in contact with the Chicago School on economic policies.
In Britain there had been a swing back to Labour based on the belief that Brown can handle economic issues better than the Tories. However the differences, between Labour and Conservative are more apparent than real. Both leaderships are wedded to the present economic system and there is a consensus that there is no real solution to the crisis but only good and bad management of that crisis.
But what of Ireland North and South? What political impact will the economic crisis have? Will it change the relationships within the island will there be a response from the leaders of the working class to attacks on their living standards? Or will the class remain passive divided and prone to bouts of racism and or sectarianism that will prevent a unified class
movement threatening to change the status quo?
There are no easy answers to these questions. Marxists are not soothsayers or clairvoyants. We cannot for see the future. But we can come to an understanding of what is happening within society. We need to analysis, understand and then proceed to act.
Below we outline the current state of the Irish economy
Ireland
‘The global economic and financial crisis is unparalleled in our nation’s history.’
- Brian Cowen (10)
Recent news reports about Ireland have been dominated by the current economic crisis;
“a crisis intrinsic to the very functioning of the capitalist system”
admitted even the 26 counties ruling class daily newspaper The Irish Times. (11)
Former Taoiseach Garret FitzGerald has pointed that at the present moment,
“Ireland is suffering more severe economic difficulties than any other European country. The government has forecast an unprecedented drop in the volume of national output and there is a risk of an even sharper decline if the global economic situation deteriorates more than is thought likely.” (12)
The Irish social formation, North and South, will feel the negative effects of that crisis more sharply than other European countries due to a number of specific characteristics, which leave it more vulnerable.
The first weakness is the gap between Gross Domestic Product and Gross National Product, which generates a dual economy. Gross Domestic Product measures the total output of the economy in a period, i.e. the value of work done by employees, companies etc. This work generates incomes, but not all the incomes earned in the economy remain within the country as multinationals repatriate profits. The total income remaining in Ireland minus profit repatriation is the Gross National Product. (13)
The significance of the gap, between GDP and GNP in Ireland, has been noted by The Economist:
‘Any first-year economics student knows that national-income figures can be collected in three different ways, using income, output or expenditure numbers. Although the three are supposed to produce the same result, they rarely do. But the differences are tiny compared with a more obscure oddity that affects the Irish economy: the huge gap between gross domestic product (GDP) and gross national product (GNP). GDP is the more common measure of national income, to which GNP adds an item known as net transfers of factor incomes. This means adding the overseas profits of Irish companies that are repatriated to Ireland, and subtracting the profits of foreign multinationals operating in Ireland that are sent abroad. In most countries the two numbers will be small, and may also broadly balance out. But because of Ireland’s large FDI base, coupled with its enticingly low corporate taxes, lots of big foreign companies make (or at least report) big profits in Ireland, which they transfer back to their head offices. As a result, Ireland’s GNP is as much as 25% smaller than its GDP.’ (14)
Thus, official national income statistics show that in 2007, while GDP stood at 190 603 billion Euro, GNP stood at 161,210 billion Euro; the remaining 29,393 billion Euro being repatriated profits by transnational corporations. (15)
The gap between GDP and GNP reflects the fact that in the 26 counties, imperialist transnational corporations are more important to the accumulation of capital than the internally generated process of accumulation. Imperialist capital is the motor of industrial development, and Irish capital has a generally weak and subordinated role to it.
For example, out of the 141.9 billion Euro total 26 counties exports in 2006, foreign firms were responsible for 130 billion (91.54 percent). (16) Intel, Dell, HP, Pfizer are responsible for the bulk of exports. According to the 2007 World Investment Report (subtitled Transnational Corporations, Extractive Industries and Development) the 26 counties’ proportion of employment in foreign-owned affiliates, as a percentage of total international trade related employment, is the highest in the world. US capital is of particular importance: of IDA Ireland’s 972 client firms, 474 are from the US. When it comes to job creation, US companies punch above their weight, being responsible for 95,271 of the 135,471 jobs at IDA-backed companies at the end of last year. Joanne Richardson, chief executive of the American Chamber of Commerce Ireland, says another 220,000 indirect jobs are supported by US firms, which have invested more than $87 billion (€59.5 billion) - that’s more than the total US investment in the emerging BRIC (Brazil, Russia, India and China) economies. (17)
The reason for that is not hard to figure. Figures from the Bureau of Economic Analysis (BEA), a division of the US commerce department, indicate that the profitability of US subsidiaries in the 26 counties is second in Europe only to the Dutch subsidiaries of US firms. The BEA figures show that the combined net profit of US corporations in the 26 counties was $8.58 billion in 1997, rose to $13.39 billion by 2000 and reached $31.3 billion in 2003. The $48 billion net profit in the 26 counties in 2005, the latest period for which figures are available, compares with $37.01 billion in Britain and $74.06 billion in the Netherlands. In comparison, US companies in Germany made net profits of $11.22 billion in the same period, their French operations made $9.52 billion and their Italian operations made $8.58 billion. Revenue figures show US companies in the 26 counties had combined sales of $151.52 billion in 2005. American companies in the Netherlands had an average net profit margin of 37.88 per cent and 26 counties operations had an average net margin of 31.68 per cent. The average net margin in Britain was 6.97 per cent. (18)
This leaves Ireland much more vulnerable to the negative effects of the global economy and the US one in particular. Due to the dominance of imperialist capital and the subordinate role of the Irish social formation within the global economy, shocks to US economic growth would have ‘a much stronger effect’ on the pace of Irish economic activity than economic shocks of a similar magnitude in the Euro area or Britain, the IMF has found. A one percent drop in US economic growth translates into a 1.75 percent drop in the 26 counties. This is because the US is the 26 counties’ main source of foreign direct investment and largest single export market. (19)
Ireland is also much more vulnerable as the capitalist classes North and South are too weak to offer a way out of the crisis. The 26 counties bourgeoisie is in a position of relative weakness and its representatives are not in a position of equality with imperialist capital. They are not a strong and independent fraction of the global capitalist class and are not in a position to challenge or compete with imperialism.
Despite years of unprecedented growth, the Celtic Tiger failed to produce a strong Irish capitalist class. In the Celtic Tiger period, only a small number of Irish companies have succeeded in scaling the international platform of significant companies. CRH has become the biggest building materials supplier in the US; Ryanair has become Europe’s largest low-fares airline and Denis O’Brien’s Digicel, which operates in 22 markets, has grown to 3,000 employees since 2001. There are a handful of other companies that have had success in niche markets and at a regional level. C&C has had significant success with Magners Cider in the UK market. At an international level, Irish tech firms are small. One of the biggest IONA posted 2006 revenue of $77.8 million. No Irish company has floated on the US Nasdaq Stock Exchange since 1999 – an exchange that lists more than 70 Israeli companies! (20)
It is thus significant that in a recent article on the Irish bourgeoisie, the Ireland correspondent of the Financial Times could write:
‘The ranks of the super-rich include few manufacturers, partly because foreign-owned companies have dominated that sector –about 70 percent of Irish manufacturing exports came from US-owned companies.’
He also adds regarding the people who became millionaires thanks to the Celtic Tiger:
‘Some commentators complain that… the new moneyed class are just property speculators. One measure of this is the dearth of new listings on the Irish stock exchange. And the Irish boom has certainly been heavily concentrated in the property sector. About a third of the 80 000 individuals setting up businesses between January 2003 and June 2006 were in construction.’ (21)
As the Irish Times noted of the Irish stock market:
‘A particular difficulty for the Irish stock market, which helps explain why it has underperformed its international counterparts, lies in its make-up and its very small size. The ISEQ index is dominated by companies in the two areas most adversely affected by the credit crisis and the global economic downturn and most exposed to the bubble in the domestic property market. These are the financial and construction sectors. Just as the Irish economy has been too reliant on property related activity for growth, the Irish stock market mirrors this imbalance in its own composition. Foreign investors remain wary of a market that is small in size, narrowly based and where so many of its major companies operate in vulnerable sectors. Irish institutions and investors, who have been over-reliant on Irish shares for their portfolios, have already paid a price for their failure to diversify. Quite understandably they too are now reluctant buyers.’ (22)
Six Counties
Things are even worse for the Six counties, a failed economic (and political) entity. The state of the Northern economy is poor and unsustainable on all indicators; despite nearly three times as much per capita on industrial development as the United Kingdom average being spent there. The private sector pales next to the public sector, which makes up about 60% of the economy (compared to less than 30 percent in the 26 counties), with around 90% of private-sector businesses employing fewer than 10 people. Almost all its exports and company innovation come from just 4pc of its registered firms, and most of these are small and medium-sized firms with turnover of around £1m a year.
The Six counties still fail to impress when it comes to one of the most common measure of economic prosperity, gross value added per head, which is 81 percent of the UK average. With a low rate of productivity and the highest rate of economically inactive people in the UK (over 40 percent of working age population is inactive), the North remains an economic blackspot kept on the life support machine that is the British state subvention. For the North’s 1.7 million inhabitants, the British taxpayer forks out about 7 billion pounds a year (8.8 billion Euro); that is nearly 4000 pounds a head, and the figure is rising. (23)
In 2007, a Belfast Telegraph editorial warned:
‘Peter Hain long ago observed that the Northern Ireland economy is unsustainable as presently constituted. We lag behind Britain in terms of economic activity, productivity and wealth. With public sector cutbacks taking effect, it has been estimated that a total of 140,000 new jobs will be needed in the next 10 years. Constrained as it is, the private sector is unable to provide the sort of economic boost, which is required.’(24)
Now things are getting even worse, as with the current recession, at a regional level, the pace of the six counties’ private sector contraction is faster than any other UK region and the Republic of Ireland. Six counties private sector indices all reached fresh lows and continue to compare unfavourably with the UK. And things are set to continue deteriorating. (25)
The severity and speed of the economic downturn in the Six Counties has been ‘truly extraordinary’, Invest NI has admitted. The organisation also said
‘economic conditions are likely to worsen before they improve’. It said the number of projects due for completion this year and next, are down 45 per cent compared to two years ago. Foreign direct investment leads are being particularly hard hit and sales of land to facilitate growth, especially to locally owned clients, are dramatically down.
“The organisation is known for its careful and measured approach but it is clearly shaken by the downturn and the feedback it is getting. It also shows the green shoots of recovery are nowhere to be seen in the north’s economy with further job losses and company failures likely.” (26)
The Centre for Economics and Business Research in London says although the Six Counties will be “somewhat cushioned” from the worst of the downturn, they will not escape a major recession. The centre believes the public sector in the UK will emerge as the only growth industry in 2009 and, because of that, has moved the Six Counties to the top of the list of GDP growth ranking. But it warns that this is nothing to celebrate as the centre has also predicted economic output in the North will contract by 2.4 per cent over the coming year. (27) Some argue that the North will avoid the worst of the economic crisis due to the importance of its public sector. But leading economists have pointed that falling tax receipts will hit the region in the longer term; and the Stormont executive will have to make big cuts in pubic spending or seriously reform the public sector to balance the books. (28)
The Property Market
Most of the recent wealth North and South was fuelled by the property market.
“Ireland’s growth during the last decade was largely illusory, generated by a property bubble fuelled by reckless bank lending. In 2007 an incredible 20 per cent of our national income and employment came from building houses and commercial property.” (29)
This is where Irish capitalists played a key role and were able to make most of their money.
“In the last decade, Fianna Fáil came to see developers and the banks which funded them as the real heroes of the economic boom: the men whose drive and vision had given us an economy that was the envy of Europe. From bywords of ineptitude, Irish builders and bankers were transformed into masters of the universe. What was good for Anglo Irish Bank was good for Ireland.” (30)
Irish birth rates peaked in 1980, the so-called ‘Pope’s Children’ as David McWilliams famously called the current generation. This means that for the first time, since 1871, the population of the 26 counties exceeds four million people. More people meant more demand for housing, which pushed up house prices, which in turn fuelled the construction industry, which pulled in more immigrants, who needed more houses to live in, and so on in a seemingly endless cycle.
Overall housing output in the 26 counties increased from 30,575 in 1995 to 80 957 in 2005. Average house prices in the country as a whole increased from 77, 994 Euro to 276, 221 Euro between 1995 and 2005. In Dublin, prices increased from 86, 671 to 350 891 Euro. Thus over the period 1995-2005 prices increased by 254 per cent in the country as a whole and 305 percent in Dublin. (31)
These trends are quite exceptional, the Economist magazine index showing that the 26 counties had the highest rate of house price inflation in the developed world between 1995 and 2005. During that period, house prices rose by 124 percent in the US, by 180 in Spain, 194 percent in Britain, in the 26 counties they rose by 254 percent. (32) In 2006, the number of newly built homes jumped to a record 93 419 in 2006. This is a rate of more than 20 units per 1000 of population, while the European norm is 2 to 4 new homes per 1000 of population. About 88 000 new homes were built in the 26 counties last year, roughly half the number built in the UK for a population twelve times larger. (33) This is clearly unsustainable.
The 26 counties ratio of housing investment to GDP at 13.3 percent is more than twice as high as the average 6.5 per cent for OECD countries, leaving the 26 counties twice as vulnerable to depression in that sector than other OECD countries. On top of that residential investment had increased its share of GDP in the 26 counties from 7.8 per cent in 2000 to 13.3 per cent in 2006. (34) Celtic Tiger growth has been heavily dependent on construction, and is therefore extremely vulnerable to the rapid slowdown in that sector. Over the last ten years, the number of vacant houses has almost doubled to 216 000, indicating that return on property investments will not be as profitable as expected. Now, the property boom is over, and with it will go the main source of employment growth. (35)
In the Six Counties, most of the so-called recent growth was also based on real estate and the housing market. Figures from the Nationwide Building Society show that average prices in the North rose by 58% in 2006-2007, the fastest rate of growth seen in any region of the UK since the Nationwide started compiling figures in 1973. House prices have increased by 281% since the Good Friday Agreement in 1998, compared to the UK average of 179%. (36) However, since the housing bubble has burst, house prices in the Six counties fall at the fastest rate in the U.K. and building reaches a 12-year low.
Prices dropped by a staggering 34.2% in 2008, according to Nationwide. At the start of the year the average house price in the region was £224,816; by the end of the year it was £147,833. Perhaps unsurprisingly Belfast is top of the list of biggest fallers, recording a 33% drop over the last 12 months. Nationwide chief economist Fiona Earley said:
“Realistically one might expect Northern Ireland to remain the worst affected region in 2009, given the especially severe overshoot of house prices relative to earnings in the province during the boom years.” (37)
The outlook for the construction sector, where average employment in house building has fallen by 50 per cent and the average number of unsold dwellings has risen by over 65 per cent, potentially points to a sector in crisis. (38) Meanwhile, figures from the Royal Institute of Chartered Surveyors showed construction firms in Northern Ireland reported the biggest fall in workloads of any region. The over-reliance on the property market both in the Six and 26 counties mean that they are going to feel the effects of the crisis of that sector more strongly than other countries.
The growth of the property market was in turn fuelled by credit and the culture of ‘buy now, pay later’. People and businesses have borrowed massively from banks. Yet Irish banks get about one-third of their funds by borrowing from foreign banks. What precipitated the crisis, which forced Leinster House to bail out six Irish banks and four foreign ones at the tune of 485 billion Euros, was that foreign banks stopped lending to them. What caused foreign banks to stop lending to Irish banks while they kept lending to most other banks in Europe? The reason that foreign banks started to shun Irish banks is that international investors have gradually become aware of the scale and recklessness of Irish bank lending to builders and property speculators.
Irish banks are currently owed €110 billion by builders and developers. Of every €100 that Irish residents have deposited in banks, €60 has been lent for property speculation. (39) Most recent figures show that 80 per cent of Anglo Irish Bank’s €68 billion loan book, just under €55 million, is secured against Irish and British property. Anglo Irish is a particularly active lender to the commercial property sector. Bank of Ireland’s loan book stands at €135 billion, 71 per cent or €95 billion is secured against property. Of that figure, its Irish home loans come to €27 billion, while its British mortgages come to €34 million. This leaves it with an exposure of over €60 billion to other property loans in both the Republic and other markets. AIB’s loan book tops €150 billion, and 60 per cent of this is secured against property. The most recent figures show that loans outstanding in the Republic were €71.7 billion, with mortgages accounting for €24.5 billion, leaving a balance of €47.2 billion secured against other properties in the State. (40)
As the property bubble has burst, it is looking increasingly unlikely that banks will get back more than a fraction of this. Foreign banks know of these toxic loans and are frightened by them. That is why they stopped lending to 26 counties banks, and why Leinster House was panicked into taking their place.
“If we suppose that the current stock market valuations of Irish banks are a rough indicator of the true book value of their capital, then in the next year we can expect banks to write off more three-quarters of their capital as bad debts. This means that without immediate Government action to recapitalise the banks, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.” (41)
As for ordinary people, they are also in a bad position. Figures from the Central Statistics Office’s Statistical Yearbook of Ireland 2008 show that private debt in the 26 counties is at record levels. (42) National debt as a percentage of GDP fell from 87.7 per cent in 1990 to 20.4 per cent in 2006. However, in the ten years from 1996 to 2006, Irish residential mortgage debt rose by 522 per cent per capita; in the US, the same debt rose by 103 per cent. In terms of new debt, 26cos are five times more exposed than American people. (43) Personal debt also increased from 37 257 million Euro in 1995 to 258 810 million Euro in 2005. (44) Household indebtedness in the 26 counties, 81 per cent of gross domestic product, is the highest ratio of personal debt to GNP in the euro zone and about 80 per cent of personal credit is secured on property. (45)
“The boom of the last 15 years created a wave of irrational exuberance. Too many houses were built. Too much cash was spent. Too many prices were raised excessively. Too much money was borrowed. The culture of conspicuous consumption engendered by the boom was unsustainable.” (46) And now the question is who is going to pay for it?
The “most serious economic downturn Ireland has experienced in 87 years”, will see a negative growth rate of 4 per cent in 2009 with maybe worse to come in 2010.
“The social impact of this economic jolt will be devastating for well over a million of our citizens, probably over a million and a half. Thousands of businesses will go to the wall... The pensions of hundreds of thousands of elderly people have been or will be wiped out. Poverty will afflict over a million citizens. Maybe over 7,000 will die prematurely each year because of that poverty.” (47)
As a bourgeois economist admits: “As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year, and will not start to fall until recovery in Britain and elsewhere permits mass emigration to resume. The economy will not begin to grow until real wages fall to competitive international levels, a process that will probably take a decade. In other words, the Irish economy is facing a decade of stagnation and mass unemployment of the same magnitude as the 1980s, with the difference that the unemployed now have mortgages, car loans and maxed-out credit cards. Faced with an irreversible contraction on this scale, the Government will have grave difficulty borrowing to fund its ordinary expenditure, even after draconian cuts in spending and increases in taxation. In the view of international investors …(this) … could easily suffice to sink the Irish State into bankruptcy.”(48)
The Reaction
In Ireland however the reaction to the Fianna Fail led coalition budget in late 2008 showed a rising tide of opposition to the savage cuts proposed. Teachers, nurses' old age pensioners took to the streets in protests well controlled by the leaders of the trade union movement. Everyone on those protests was clear the economic downturn meant attacks on the living
standard s of the working class not only in Ireland but worldwide. Cuts in services, higher taxation, higher unemployment etc.
Saving the banks and closing the hospitals and schools and taking away the medical cards of the elderly doesn’t sit too well with an electorate used to having a populist Government. There is now a rising tide of discontent. Provisional Sinn Fein more so than the Labour party is well positioned to take advantage of it. Future elections could see a Fine Gael/Labour/
Independents coalition elected. Street protests in the interim could become the order of the day. The occupation by the workers of Waterford Glass when it was decided to close down was an example of the rising militancy of some sections of the class.
It could be expected that in both parts of Ireland the trade union movement would prove to be the backbone of any fight-back against the economic downturn. Sadly there is too close a collaboration between employers, unions and governments for the current leadership of the unions to be become the centre point of resistance.
But if the leaders of the trade union don’t lead a vigorous fight against the cutbacks who will? For years Republicans of all hues ignored or belittle the broad trade union particularly because of its close collaboration with the British Overlords at Stormont under direct rule who used the trade union movement as another weapon in their fight against those of us who wished to dismantle Imperialist rule in Ireland. Of course the Workers Party had a foothold by the end of the seventies in trade unions but they merely used that as a stick to beat Republicanism itself and manipulate the unions for their own selfish electoral issues.
But one should never confuse the trade union movement with its leadership. Republicans in particular should never do that. Republicanism itself has a long history of its leaderships taking a different road than the rank and file wanted to go. The result was always the betrayal of fundamental republican principles.
Now in the 21st century and following the latest defeat of Republican armed struggle there is now a chance of Republicanism to renew itself and become relevant to the lives of the majority of the working class. Just as in the past we embraced the mass movement around civil rights issues so now we must embrace the struggle in defence of the rights of the worker. Activists within the trade union movement must take their arguments into the streets.
As trade Unionists republicans must be in a position to argue on behalf of not only the organised working-class but also the unorganised. For example the homeless more than likely will be unemployed because employers will usually employ someone if they have a fixed address. We need to bring to the attention of the unemployed not only the policies of the trade union movement on unemployment and homelessness but also add that vital ingredient that revolutionises those policies
There is a trade union movement educational programme. It explains how capitalism is exploitive. We as republican socialist must explain how such exploitation can end. To explain the current capitalist chaos we must be educated politically so that we can explain how there are twice as many vacant homes as there are homeless. It is a human right not to be faced with any form of poverty, it is a human right to work, it is a human right for justice, and it is a human right to be politically active. People need advice on human rights We must be in a position to explain, to pursue motions, that human rights cannot be realised in a society governed by economic chaos! Therefore we must advise workers how to end such a system.
Those who caused the credit crunch should face higher taxes, not the people who have suffered. Workers and average families should not be paying for mistakes made by City bankers and financial firms.
In general terms trade unionists do not stand opposed to paying tax for the provision of public services such as education and health. But we are opposed to paying millions to individuals who already have millions. Two weeks after the Irish government bailed out Anglo Irish banks we learnt that there was a 46 per cent increase in pre-tax profits to €1.243 billion for 2007 the highest ever! Who profits? Why the shareholders themselves. Why are these ridiculous amounts not to be used as a bailout? Some trade unionists are calling for nationalisation. But nationalisation can and does work to protect the very system that created the economic chaos in the first place. We say nationalisation without compensation and place the leading sectors of the economy under workers control .
The OEDC (Organisation for Economic Cooperation and Development) in 16.April 2008 argued that current wage increases in the 26 counties would be undermined by the surging value of the European single currency, the euro. Contrary to the conditions of the social contract, the Irish Government failed to discuss this warning with the trade unions.
Because of the prominent role played by foreign investment by US companies in Ireland’s so-called Celtic tiger status, it is now clear that many US firms will follow Dell’s example and pull out as investment here is becoming increasingly expensive for them.
Trade Unions
Why did the trade union movement not demand restrictions on the money market? The Banks were permitted to continue playing roulette with Irish workers savings and pension funds for another five months. Why was there no agitation by the unions through the social contract or indeed use of the Labour Party? Perhaps it is accepted that the objects of the Labour Party have nothing in common with those of the trade union movement. Does that mean Trade unions will have no political voice? The reality is throughout the history of the trade union movement the Labour Party, which boasts it was founded, by James Connolly, was never there, when the working class needed them.
We take a clear view. Not only does it have a political voice, but the trade union movement is a political machine. What are required are political trade union activists to get this machine running.
Although mostly coming outside the ranks of the labour movement and having a generally limited collective experience of trade unionism, Irish republicans nevertheless can claim a proud history as trade union activists. (49) Connolly, Larkin, O ‘Donnell, Joe Mc Cann, Seamus Costello, Ta Power, Johnny White, were all trade union activists. Their commonality was that they all laid claim to be Republican Socialists. Costello, Power and White were
founder members of the I.R.S.P.
However as activists with in the wider trade union movement they had something else in common, they worked for a united trade union movement. Not only had they to struggle against trade union bureaucracy, but also Fine Gael in Ireland (and the Tory party in Britain) who worked at introducing anti-trade union legislation and indeed to split the trade union movement.
In Ireland as in many other countries socialists face a dilemma when considering what areas of work to concentrate on. Naturally the IRSP has no problems with trade unionism as such. However, the central question is: how do we operate within the trade union movement? In particular, should we support ICTU affiliated unions or non-ICTU affiliated unions? The Irish Workers Union for example has come to the conclusion that it is not possible to radicalise the ICTU from within and a radical trade union movement has to be built outside of and in opposition to the ICTU. Should we support the IWU strategy? This is not the first time our party has been faced with this question. (i.e. John Mitchell and ILDATU in the late 1980s)
There is nothing intrinsically progressive about workers in trade unions. Nor is there any thing necessarily progressive about the trade unions themselves. A lot depends on the level of consciousness of both rank and file and leadership. Many trade union leaders have had a background of socialist activism in “revolutionary” groups yet when they achieve power in the unions tend to gradually move to the right. This is not necessarily because they have “betrayed” their principles or become corrupt (although in some cases that
has been the case) but the consequences of the social and economic circumstances of the times.
The six counties, for example, have a very high trade union density, however (as the history of the last thirty years prove) is politically most backward, if not outright reactionary. The fact that there is a political left in the trade unions: is this likely to give us socialist trade unions, or will it only deliver trade union socialism? Can trade union consciousness organically develop into political consciousness?
How do we understand the connection between the economic organisation of workers (i.e. trade unions) and their political organisation? (i.e. political parties)? How closely connected are they? What does previous history tell us about that question? What historical or current examples are there to show that working ICTU is a successful strategy?
First, we need to have a concrete picture of trade unionism in Ireland today. New figures show that trade union membership is continuing to fall, and union members now account for just over 30% of employees. The 26 counties Central Statistics Office said 31.5% of workers were members of a union in the second quarter of 2007, continuing a downward trend, which began in 2003. 34.6% of full-time workers claimed union membership, but only 19% of part-time employees were union members. The CSO figures show that the highest level of union membership, 79%, was not in the strategic centres of the economy, but in the ‘public administration and defence’ category. This compares with rates of 8% in ‘hotels and restaurants’ and ‘agriculture, forestry and fishing’. The health and construction sectors showed the biggest falls over the last couple of years. (50)
The existing culture within the trade union movement is not conducive to militancy. The Irish Times noted recently:
“the widely forecast descent into industrial chaos is by no means inevitable. Ireland is a much different place in 2008 than it was in the mid-1980s. The culture of confrontation between employers and unions is long gone in most parts of the private sector, where workers don’t have the luxury of job security.” (51)
After the largest general strike in France for twenty years, the Irish Times contrasted the situation of French unions with those in Ireland:
“Yesterday’s events were stimulated by a radical new rank and file trade union movement influenced by a resurgent extreme left commanding widespread support among workers disillusioned with the existing union leaders. In response, that leadership took the initiative to organise a national action. Only a small minority of French workers in most industries and services are actually trade union members, but many more are willing to support them on these occasions. As a result direct action takes the place of the grinding negotiations between social partners we are used to in Ireland, where union membership is higher and national strikes more rare. “ (52)
The number of days lost through industrial disputes in the 26 counties in 2007 was the lowest on record and the downward trend has continued in 2008. (53) From this, on what basis can we think that trade unions are going to be central to the coming crisis? If so, how central are they likely to play a role? If unions have a limited role (i.e. predominance of public sector), what consequences does this fact have for out political strategy?
How central or important should trade union work be to our own programme, strategy and tactics? What programme should we use in trade union work? What weight do Republicans currently have within the trade union movement, and if there were a massive involvement of our membership within the unions, what increase would this bring to our weight? Would our movement carry more impact if we were involved in red unions outside ICTU than within it? Would this allow us to provide a catalyst for more radical union activity? What realistic chances do we have of transforming ICTU from within?
What To Do?
The purpose of the above series of questions relating to trade union work is to provoke not only republican socialist but also anyone else interested in serious left wing politics to think deeply about the issues rather that for people to come up with facile sloganising. Ideas are more powerful than guns for you can -not kill an idea.
The End of History school of thought believed the class struggle was over. And yet the following quote still has significance and relevance today
“We must systematically and persistently develop Communist activities within the trade unions, workers’ and works councils, the consumer co-operatives and other mass workers’ organizations. Within these organizations it is necessary to organize Communist cells the aim of which is to win the trade unions, etc. for the cause of Communism by incessant and persistent work. In their daily work the cells have the obligation to expose everywhere the
treachery of the social patriots. “(54)
At the Official Republican Movements summer school 1970 (QUB) Seamus Costello warned of the danger of genuine revolutionaries expressing hatred as opposed to constructive opposition to the practices of the trade union movement its bureaucratic leadership. His lecture was based on the premises that
“if trade union objectives are linked directly or indirectly to our political programme then we should be involved.”
Contrary to the belief amongst some sections of the left, Irish trade unions have both a democratic content and mechanism. The problem is rather than becoming involved in democratic procedures they prefer to do nothing. But many other sections and individuals of the left have done something. The argument is of course, one cannot notice the difference.
In Ireland, both North and South, due in part to law, to the desire of the Union to seek consensus and in the South to the social contract, the trade unions have been
transformed into semi-state institutions. According to the legislators, law is introduced in the interests of the workers in order to assure them of fair employment and an influence upon the Government and economic life. . Unfortunately many union leaders appear to believe this nonsense. Hence they feel that in order to maintain this so called influence they must sit down with employers and governments to discuss the sacrifices that the workers must make in order to shore up the current economic system and keep the bankers in the style to which they are accustomed. Of course, not all workers are fooled. They exert pressure on their leaders so that even the bureaucratic leadership have to come to terms with the need to reverse this situation. Ireland’s biggest trade union, which incidentally, has always opposed the social contract, recognises the danger of being a semi state body. Some of their trade union education programmes try to expose the illusion of worker friendly legislation. But as long as the trade unions remain aloof from direct political action such efforts will be partial, inconsistent and ultimately futile. The climate will increasingly become hostile to radical trade union activity. The rights so bitterly won over the centuries will and are being gradually whittled away
What are the objective chances of reversing this process of institutionalisation? Is an education programme sufficient or the way ahead? Are paper policies worth more than the paper they are being written on?
It has been said that trade unions are an organ of democracy. But can this remain under the current economic chaos. Will the state permit this if the trade unions implement their plans for agitation against poverty wage cuts and redundancies?
More than half of the population suffers from some element of poverty. The largest companies are announcing wage cuts. All over the country jobs are vanishing. Independent of the job losses reported in the media by the large companies such as Waterford Crystal and the Airlines a random look at the economy over a 24 hour period , 350 job losses in the Blackrock area of Cork, 200 job losses in Limerick 300 jobs in Tipperary.
That makes agitation length and breadth of the country more likely. This will require activists. But will the government permit increasing agitation, knowing that economic agitation takes a qualitative leap to political agitation. Are we as revolutionaries prepared for that?
The principal task of any revolutionary, regardless of what he/she calls themselves whether communist republican socialist, marxist is to wage a determined struggle to win the majority of the workers organised in the trade unions as well as those outside them.
We must not be disheartened by the present intransigent bureaucratic and reformist temperament of the trade unions, but must try to overcome all confrontation or divergence by enthusiastically participating in the workers day-to-day struggles to win them to a revolutionary perspective and away from a reformist perspective.
A small example indicates the possibilities. Two motions from Belfast and District Trades Council to the ICTU condemned Israel for its human rights abuses, its policy of ethnic cleansing and its war crimes. Actively and vigorously it promoted a boycott of Israeli goods amongst its members. Israeli goods bound for Belfast, Dublin and Cork were diverted to British ports. The campaign was so successful that the Ambassador to Ireland Zion Evrony intervened and condemned the trade union action. If we can do this on international issues we can do it on national issues. An obvious one is to campaigns on the same scale against the Banks!
In brief our task, during the current economic crises, is to develop revolutionary socialist consciousness amongst all sections of the organised working class. Republican socialists must be in a position to develop rank and file organisation, both inside and outside the trade union movement. Our objective is the creation and maturing of revolutionary
thought among workers and their respective organisations.
It must be said that even though many of these people may not be working together, their collective results are revolutionary. With the uncompromising changes within
