A “shining example” of capitalist collapse

Tourists to Ireland are invited to explore a land of myths and legends. Over the last fifteen years imaginative tales about the state of the Irish economy have added enormously to the available mythology.

From the mid 1990s there was the tale of the Celtic Tiger, the story of how Irish prosperity was becoming so entrenched that even perpetual emigration was being reversed. As George Osborne put it in 2006 “Ireland stands as a shining example of the art of the possible in long-term economic policymaking.”

But since Ireland became the first country in the eurozone to go into recession there has followed, from the emergency budget of October 2008, an escalating series of austerity measures and funds pumped into banks during 2009 and 2010. Far from leading to a happy ending the spending cuts and tax rises have only led to the latest round of cuts and the €85billion bailout from the IMF, EU and ECB.

There was nothing substantial in the ‘prosperity’ and the imposition of austerity will bring only suffering, offering no solution to the crisis of the capitalist economy.

The latest round of attacks

The most recent measures proposed at the end of November are by no means the last: more are expected in the budget of 7 December. What we have already seen over the last two years are the loss of thousands of jobs and the cutting of services that the majority of the population relies on. One in seven is already officially out of work and workers in the public sector have already seen their wages cut. In the latest package the minimum wage has been cut by 1 euro per hour (that’s 12%). The income tax threshold has been brought down from €18,000 to about €15,300, bringing more of the lowest earners into the tax regime. Pensions have been frozen for the next four years. Pension age will gradually be increased to 68. There will be cuts in a variety of welfare payments, including unemployment benefit, but the details will not be revealed until 7 December. VAT will go up in 2013 and also 2014. Carbon tax is going to be doubled. A brand new water tax is going to be introduced, as well as a property tax that will affect all households. The government’s calculations rely on 100,000 people emigrating by 2014.

In response to each round of government attacks there has been a major demonstration organised by the unions. This time round the Irish Congress of Trade Unions made sure it got over the message that the austerity measures were unfair and too harsh and it was a pity that Corporation Tax hadn’t been put up. Many protesters insisted that the government were ‘puppets of the EU and IMF’. Even government ministers complained that Ireland, like Portugal, was being pressured into accepting EU/IMF conditions. While financial support came from the IMF, various EU bodies and also the UK, Sweden and Denmark, the Irish state was compelled to make its contribution to the bank bailout by taking €17.5billion from the National Pension Reserve Fund.

There is no secret in the role of the IMF and EU bodies. After Greece, the bourgeoisie internationally was anxious that the collapse of the economies of Ireland and Portugal would have an impact on the stability not just of the eurozone, but far beyond. The UK is not part of the eurozone, but the government judged its €7bn contribution as a necessary step to take, ultimately in the interests of the British economy. All economies are interrelated; none can function in isolation from the rest of the world economy. After the latest bail-out there was still concern about the possibilities of success with the Irish economy, as well as speculation about whether it would be Spain, Italy or Belgium that would be the next country in need of emergency treatment.

False alternatives

As for the harshness of each round of attacks, the critics might disagree on details, but, as in the UK, there is agreement on the need to deal with the deficit. Sinn Fein, for example, have recently produced a document entitled ‘There is a better way’, which they boast “is fully costed and endorsed by independent economists.” In it they claim that greater taxing of the rich and big corporations will generate billions, and if the government were to “take €7 billion from the National Pension Reserve Fund for a three and a half year state wide investment programme” it would “stimulate the economy and create jobs.” The deficit would be reduced because the stimulus to the economy would bring growth. The experience of the capitalist economy over the last hundred years has shown that whether resorting to debt, investment, spending cuts or tax rises, no government has found a way of escaping the reality of the capitalist economic crisis.

Socialist Worker (27/11/10), writing about the Irish crisis, has a solution that will suit all countries. “Governments could take the banks under full control—taking any profits, sacking the bankers and using the cash for projects society needs... Taxes should be massively increased on the rich and business [...] The expenditure on imperialist war and the military should end tomorrow. Governments such as Greece and Ireland could defy the International Monetary Fund and the European Union’s demands for cuts.”

The nationalisation of the banks is already very far advanced in Ireland, as it is in the UK and elsewhere. Following the latest bailout the government stake in the Allied Irish Bank is more than 96%; in the Anglo Irish Bank it’s 100%; in the Bank of Ireland (so diminished that it’s now a smaller financial institution than Paddy Power the bookmaker, but it is still a bank) it’s more than 70%; in the Irish Nationwide it’s 100%, as it is with the EBS. The intervention of the capitalist state in every aspect of economic and life has been a major trend over the last century and in no way represents any gain for the working class. The Socialist Workers Party does talk about the need for a “powerful mass movement” but only as a way of backing governments. To say that Greece or Ireland could ‘defy’ the IMF and the EU is a denial of the reality of the capitalist economy: beggars can’t be choosers. And, if there were to be a foolish show of ‘defiance’, then the renunciation of military expenditure would be unwise, as capitalist powers very readily resort to military ways of enforcing their will.

As for the increased taxation, behind this lies the idea that if only capitalist society was organised in a different way it could be made to function without exploitation and economic crises. A year ago, in December 2009, Irish Finance Minister Brian Lenihan said: “We have turned a corner . . . If we work together now and share the burden, we can deliver sustainable economic growth for all.” A year later we can see that no corner was turned and that, far from sharing the burden, the poorest are the biggest victims. As for growth and sustainability, wherever they are shown to exist in the world you can be sure it’s at others’ expense.

The large demonstrations that have accompanied each wave of announcements have shown that there is widespread anger in Ireland at how the exploited have to pay for the crisis. In opinion polls 57% think the government should default on all its debts. This would produce no more gain than has resulted from the union controlled demos. As elsewhere the needs of the working class can only be met through workers organising themselves, from discussing the means and goals of their struggle, and fighting for their own interests. To put any confidence in governments or unions is fatal for workers’ struggles. The history of the workers’ movement shows that government reforms and union processions offer the working class nothing, as the only reliable perspective lies in massive struggles culminating in the revolutionary overthrow of capitalism.

WR 1/12/10