Ireland-An economy in crisis
Some 170,000 Irish workers took industrial action on Wednesday April 13, to protest against the slashing attacks on their living standards in the budget presented by the coalition Fine
Gael/Labour Party government on February 9.
The action was supported by the two major unions, southern Irish Transport and General Workers Union, and the all-Ireland Amalgamated Transport and General Workers Union,
The focus of the protest was the sharp rise in income tax, which the Financial Times of February 15, 1983, estimates will bring a 10 per cent cut in real living standards this year for wage earners, even for married couples who are treated more favour-
This action has been preceded by other protests against the taxation of the employed in
Ireland, who are among the most heavily taxed workers in the
Their taxes have been used to provide incentives for
This has not been the only form of Irish workers protest against the efforts of all the major political parties in the South to make them pay for the economic crisis. There have also been a number of important industrial struggles, and the number of days lost in strikes has been rising continually.
In 1981 the then Fianna Fail government threatened to close down the nationalised sugar production plant in Tuam as well as the teachers union.
able than single people.
many world.
foreign capital to set up operation in Ireland.
near
This would have affected not
Limerick in the west of Ireland.
only the workers in the plant but those in other plants owned by the company which engineered machinery for the sugar
'Are you going back to school next year, or straight into redundancy?
processing, as well as the local small farmers who had been encouraged to grow sugar beet, and the local people who found
However, the trade union bureaucracy concentrated the seasonal work in the harvest or in the plant — in all, probably struggle on the release of the jailed workers, and not the fact some 60 per cent of the local population were involved in the that the redundancies were the direct effect of imperialist sugar processing industry.
intervention in the Irish economy - dumping cheap flour on
The local population, led by the workers, mobilised against the Irish market by the British company. In this struggle there the proposed closure - which had been proposed by an all-party was a degree of involvement from Sinn Fein activists, which government committee which had never as much as visited the is another indication of the increasing involvement of the plant - and won a stay of execution for one year, later extend-
Republican movement in social and economic struggles.
The article below, which was published by People's Democed for another year, and government subsidy.
The workers at the Clondalkin paper mills went into an 18
1982 protesting against the run month long occupation in phlet, Ireland for Sale down of one of the last indigenous industries, and the proposals
1982, explains the context in which these determined strugto close the mills, despite the continuous election promises by gles by Irish workers are taking place, and outlines the type of both Fine Gael and Fianna Fail to keep it open.
economic policies that the anti-imperialist movement could put
Fine Gael government nationalised the mills and kept them an alternative to the present pro-capitalist and
The response to the Day of Action on April 13 indicates that
The third of the more significant recent struggles in
South of Ireland was that by workers at Ranks Dougall Hovis
Irish workers are looking for an alternative, and a strategy for action. Much of their anger was directed at the Labour Party,
The workers occupied the in Dublin against redundancies.
factory to prevent the management removing the machinery which as part of the present coalition government supported the before their redundancy payments were made.
anti-working class budget introduced in February.
Matt Merrigan, Southern Area Organiser for the ATGWU, for won from other unions and workers, organised mainly through the Dublin Trades Council, put the possibility of a general strike independent political action, and rolling industrial action to-
But the management backed down and the wards a general strike workers were released.
racy (Irish section pro-imperialist parties.
of the Fourth International) as a pam-
- the roots of the economic crisis, in was received enthusiastically at that
Economic crisis is nothing new to Ireland. for an artificial economy other than high not obstruct them. On the contrary, ParFormal independence for the South has done nothing to create a viable economy which can afford a reasonable standard of living for Irish people. Today we have one million poor. And according to EEC sources, practically every economic indicator shows Ireland continuing to fall
The depth of the present crisis raises a number of basic questions: is there any other course open to the Partition except crippling dependence on foreign banks? What alternative is there unemployment and low living standards? In short, the present crisis raises once again the question of Partition and national unity.
Partition itself raises another question. While the Irish people are divided between Catholic and between Northern Catholic and Southern Catholic the rich and powerful elite which owns and controls the wealth of the nation is not divided. The banks, the stock exchange and the multinationals are all 32 County institutions. Partition does tition helps them keep Ireland, North and South, a weak dependent economy; Partition thereby facilitates and justifies their parasitic links with Britain, Europe and American imperialism.
The struggle for national unity, therefore, can only succeed by organising the working people of Ireland against the rich and privileged clique which rules the two statelets of Ireland. The only form that Irish unity can take is that of a Republic governed by workers and their allies: a Workers Republic.
17
these 77,000 potential jobs, only 28,900 High Wages. Perhaps the most persistent
Between 1974 and claim by supporters of government
### IRELAND FOR SALE
The 26 County state is in a deep economic crisis. The State's foreign debt amounts to f4 billion, which means it owes more money, per head of population, than does Poland. Business repreconservative economists for huge cuts in public expenditure and for the reduction of real wages, a view supported by all three major parties. The economists charge successive governments with mismanagement and overspending. Fianna Fail, Fine Gael and Labour, needless to say, blame
Both the conservative economists and the politicians treat the State's financial debt in isolation, whereas large scale public borrowing is part and parcel of a whole economic strategy, which has been in operation since the late Fifties. This economic strategy centred around 'opening up' the Irish economy to foreign capital. This occurred at three levels:
(1) Investment: jobs were to be created in Ireland not by developing native industries but by attracting multinationals to invest in Ireland and establish factories there.
(2) Trade: protective tariffs around Irish industries were gradually removed
(3) Borrowing: from foreign banks to help create a "social infrastructure'.
The policy of borrowing from foreign banks was, and is, part of an economic package which was meant to make the country prosperous. It has certainly succeeded in creating prosperity, but only for a minority of the population. For the majority of working people and youth, it has proved a dismal failure.
second world war most countries in the West and the Third World have sought to expand their economies through borrowing heavily from the banks. Ireland only began borrowing in the mid-Fifties. This delay was not because the Irish government declined to
'Ireland has the significant advantages of political stability, and plentiful and adaptable labour supply, ample power resources and an extensive transport system. Dividends, interest and profits on all investments may be freely transferred to the foreign investor's country in the appropriate currency.'
Stated this way, it is clear that the policy of foreign borrowing was, from the beginning interlinked with, and dependent upon, the 'opening up' of the econo. my to foreign capital.
The cornerstone of the new strategy was to make Ireland attractive to investment by foreign companies. The Industrial Development Authority (IDA) was established to entice industries to Ireland. A number of factors assisted: Wages were and are low by European standards, and the grants available to companies setting up here are exceptionally high. Export profits are tax free. In addition,
Free Trade Agreement (1965) and entry into the EEC (1973) opened up the British and West European markets to companies based in Ireland.
THE 'BENEFITS' OF FOREIGN INVESTMENT
The IDA receives great praise for its success in attracting foreign companies, so it is worth examining the actual effect of its endeavours. There are four basic ways in which a 'host' benefit from having foreign industries based upon its territory: Employment. The IDA speaks about having created 80,000 new jobs by bringing foreign companies to Ireland. But this does not mean that today 80,000 more people are working in manufacturing industry than there were 20 years ago. The true increase is about a third of that number.
1980, £1,688 million was pumped through the IDA and other agencies to fund industrial growth. The modest growth in industrial employment in the Sixties and early Seventies came nowhere near to absorbing the tens of thousands forced off the land by the 'opening up' of the economy. Taxation. A host state might, in theory, benefit by imposing taxes upon foreign industries; the revenue raised could be used to finance growth in other sectors, and improving social services. In reality this is not possible. The Telesis report commissioned by the Irish government points out that tax incentives are a main reason for companies locating here. they are taxed they will take their leave. Linkages. Government planners hoped that foreign industries would become integrated into the Irish economy. The expectation was that by purchasing raw materials and other imports, these industries would create a chain effect which would both stimulate indigenous growth in the economy and reduce the likelihood of foreign companies pulling out once the state grants and the tax free holidays
A report commissioned by the IDA itself reveals very clearly that this just has not happened. Only one-sixth of raw materials and other imports used by multinationals in Ireland are actually purchased here. The rest are imported. The reason for this is simple. Most foreign companies which set up in Ireland are part of large multinational corporations based in the major capitalist countries, in particular the US, the UK, West Germany
While retaining the key sections of the industries (management, engineering, research and development) in their home countries, these multinationals have ask for loans, but because international TOTAL IN MANUFACTURING EMPLOYMENT banks were unwilling to lend money while Ireland discriminated in favour of Irish industries. In 1956 the secretary of the Department of Finance, Ken Whitaker, prepared a report which advocated the 'opening up' of the Irish economy. The report was accepted in principle by the government, and in 1957 a memorandum was sent to the US-controlled World Bank which outlined the case for Irish financial aid:
'The expansion of the Irish economy in the last 30 years has depended on and been financed in the main by national savings. These savings have not been sufficient to cope with the requirements of an underdeveloped economy ... The rate of progress could be considerably accelerated by an inflow of external capital directed to types of development which would increase the country's productive capacity and which would bring with them new techniques and methods. The Irish government would welcome such investment. 18
YEAR 1951 (000's) 177 Employment in manufacturing industry has not risen at all since our entry into
Such failures are not because the IDA has not attracted new industries to Ireland. Rather, the number of new jobs created by foreign investment has not been equalled by the number lost. Traditional companies have been unable to compete against much larger British and Western European companies.
A recent report casts doubt on IDA claims. Between 1970 and 1978 'Of the 96,000 jobs approved in the period, only companies committed to 77,000 jobs came to Ireland despite public announcements of their agreement to come. Of currently exist?
1971 1974 1979 214 222 205 found it more profitable to farm out later stages of production, which involve less skills to countries with lower wages. In a considerable number of cases - approximately a third - the Irish branch of the corporation is engaged only in an intermediate stage of production. The product is then 'sold' to an affiliate of the same corporation in another country.
In other words, the bulk of foreign industries established in Ireland are part of transnational operations, and are not linked with other industries in Ireland.
Accordingly, there is little or no overspill of capital into other sectors of the eco-
TOTAL EMPLOYMENT IN 26 COUNTIES!
economic strategy is that the new industries have led to higher wages. It is certainly true that multinational companies have generally paid better wages than traditional industries, but this is only one side of the story. For one thing, the closer integration of the Irish economy into the British and West European markets has greatly increased prices, especially for basic items like food, drink and and has considerably deepened tion system means that there has been no
Real wages in Ireland are further reduced by exceptionally high income tax rates. Not only is income tax higher than in most European countries - especially for low paid workers - but it is not compensated for by an adequate welfare system. Instead, a major cause of the high income tax rate here is the huge sums of money which the State pays out to subsidise foreign investment. Moreover, so long as Irish economic growth is dependent upon attracting foreign companies there is a very definite ceiling to real wages here which prevents them catching up with the rest of the EEC. explained earlier, one of the major attractions of Ireland for multinationals is its low wages relative to other BEC countries. If wages here were on par with France, Holland or West Germany then foreign countries would find Ireland much less profitable and much less attractive for investment.
The picture of foreign capital entering Ireland to modernise its economy and enrich its people is one which bears little relation to reality. The usual IDA grant to foreign companies is 30 to 35% of its capital costs and can be as high as 60%. It is estimated that another third of capital costs is raised by borrowing from Irish banks. Bearing in mind that US manufacturing companies in Ireland have an annual profit rate of 25 to 30% (two and a half times the EEC average), then it becomes apparent that they recuperate these initial costs within a couple of
The truth is that foreign money is not flowing into Ireland. Irish money is flowing out. What has occurred over the last couple of decades is not industrialisation of Ireland, but the restructuring of the Irish economy under the domination of the multinationals.
AGRICULTURE IN A DEPENDENT It is not only Ireland's industrial structure
Between 1960 and 1970 output rose by 17%. Between 1968 and 1976 prices of These may have benefitted all farmers, but it has not benefitted them all equally. Farm sizes vary considerably.
Small holdings are usually on the least fertile land in the West or in upland regions and vice versa. Furthermore, while the proportion of holdings over 200 acres is small they account for about 18%
The increase in output has resulted from the mechanisation of farm work. For the most part, it is only large and middle-size farmers who could afford to buy new machinery. Even as regards borrowing, banks are reluctant to lend to small farmers, regarding them as a greater risk. Where small farmers could borrow they generally paid higher interest rates because smaller amounts of capital were involved. It is significant that over a third of Irish holdings have not increased their
State subsidies go mainly to farmers producing for export, and in the case of cattle they invariably go to big farmers. Small farmers who produce young cattle that are later fattened by large farmers, receive minimal subsidies. Similarly, State policy is directed towards the 'rationalisation' of agriculture, which means funding those farmers who already tracts of land, and who wish to invest in more machinery or buildings.
Since our entry into the EEC $2,000 million has been invested in agriculture, return to State revenue from the enrich. ment of large farmers. Instead of assisting cultural boom produced by entry into th
CEC has actually impeded development
BEHIND THE BORROWINGS
The major growth in employment over the last couple of decades has been in the services sector.
There is nothing exceptional about this. In most EEC countries the services sector accounts for between 55% and 60% of total labour force. The major component in the growth of services has been the expansion of the State sector: health, education, welfare, transport, communications etc. Again this is not exceptional. Quite the contrary. Public expenditure in Ireland per head is lower.
than any EEC country. With the possible exception of Greece, our social services remain the most backward in the Common Market.
### FARM EMPLOYMENT
YEAR 1951 1961 1971 (000's) 485.8 368.3 262.3
What is unique about Ireland is that the expansion which has occurred in the public sector has not been financed by the growth of industry and agriculture.
Although the State ploughs vast sums of money into foreign industries and into agriculture there is little return to the
State on this investment because these sectors are subject to only minimal taxation.
Consequently, in order to expand economy and to maintain its apparatus,
State has had to borrow amounts from foreign banks. It relies almost exclusively upon taxing incomes of PAYE workers and consumer goods to pay back its debt to foreign banks. That subsidising agricultural incomes by about i debt has grown until the situation has which has been distorted by increased dependence of the Irish economy. The a third. But despite having the largest closer integration of Ireland into the
British and West European economies has effected major changes in the agricultural
TOTAL UNEMPLOYED
1976
1982
YEAR 1971
(000's) 65
108
146 agricultural sector in the EEC, Ireland imports not only its farm machinery but most of its fertiliser. No attempt has been made to finance industries directly linked to Ireland's major sector of production,
Briefly, the huge rise in agricultural prices and output since entry into the ĐEC has enriched a layer of large farmers. It has not overcome disparities in income between large and small farmers. Indeed,
Furthermore, the absence of any kind of serious taxabeen reached that the State is now borrowing just to pay back its interest. The prospect is that the international banks may refuse to lend any more while of course still demanding repayment of ear-
The conservative economists' solution to this is to force down further the standard of living of working people through lowering real wages, increasing tax on consumer goods and cutting the social
The three major parties accept the need for such austerity, although unlike the economists they have to face the
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1971 1976 1,055 1,035
EMPLOYMENT IN MANUFACTURING INDUSTRY (in thousands)
distasteful task of periodically confronting the electorate. The effect of such austerity measures will be to drive hundreds of thousands of Irish people below the poverty line.
This is not a temporary situation. There is no light at the end of the tunnel. Austerity measures only abate the immediate financial crisis of the State. In the long term they solve nothing.
A RETURN TO PROTECTIONISM?
Somewhat belatedly the conservative economists admit that the 'open economy' policy is riddled with problems, but they insist that there is no viable alternative. The protectionist policy of De Valera, they argue, proved disastrous. Ireland by the mid-Fifties was economically stagnant.
The figures show that the policy of protectionism enabled industrial employment to more than double in the two decades following De Valera's coming to power. Yet, by the mid-Fifties, Irish industry was in crisis. Many companies went bankrupt. There were recurrent balance of payment crises. The conservative economists suggest that this failure was inevitable given the small size of the Irish market, strategy for industrialisation which sought to base itself upon was doomed.
This argument is essentially superficial because it fails to take into account the overall socio-economic context within which protectionist policies were pursued.
The real weakness of De Valera's protectionist programme was that it sought to modify, rather than fundamentally alter, the neo-colonialist character of the Irish economy.
THE ECONOMICS OF NEO-COLONIALISM
The withdrawal of British troops from the 26 Counties and the establishment of a separate state was not accompanied by
1931 1936 63 101 tegrated into, and dependent upon, the financial institutions of the City of
A leading official in the Department of Finance wrote in an internal memorandum in 1923: 'apart from the banks we have no big financial institutions, and the banks are largely influenced by opinion in London where they keep their reserves, their floating balances and practically all their investments.'
The Cosgrave government (1922-1932) was dominated by big farmers and businessmen who were heavily reliant upon trade with Britain. Their economic policies were virtually indistinguishable from those pursued by Westminster prior to the achievement of 'independence'.
The Fianna Fail government took office in 1932 was much more distanced from big business. The bulk of their electoral support came from (and still comes from) urban workers and small farmers. Their policies were largely designed to placate their electoral base. The introduction of tariffs to protect existing industries and to build up new ones was opposed by big farmers and commerical strata because it threatened retaliation from Britain. They went as far as organising a mass fascist movement, but lost their nerve when they saw it provoking an uncontrollable backlash from republican workers and small farmers.
De Valera was not, however, prepared to preside over the social transformation hoped for by many of his supporters. His very first act upon being elected was to reassure all the leading civil servants that their employment was quite secure. The right of large property, including the
1946 1956
116 154 banks, was likewise respected. By failing to confront the power of large capital, the De Valera government deprived itself of the real economic levers which could have enabled Ireland to break its mic dependence on Britain, and to overcome underdevelopment.
The basic problem with protectionism is not that it went too far, but that it
(1) Only a small part of capital available in Ireland was invested in industry. A was invested abroad, mainly on the London money
(2) Until the late Fifties, no Irish government engaged in large scale borrowing to stimulate economic expansion. This was partially because of the reluctance of Department of Finance officials, fundamentally because the money was not forthcoming from the
(3) Ireland has never possessed a capital goods (ie machine making) industry. Even during the protectionist industries had to import the machinery. As a general rule the capital goods sector is the most dynamic and profitable part of an economy; productivity and prices tend to rise most rapidly. Industries in countries lacking a capital goods sector their import costs increase more rapidly than domestic costs. They are consequently pressed to reduce profits or force down wages.
only modified Ireland's dependence. It did not break it.
Irish workers have the highest cost of living in the EEC (DR)
any significant changes at a social level.
The new state left the colonial administration and the existing property relations intact. This effectively ensured that the deformations in Ireland's economic
WE MUST HALT THIS structure which colonial rule produced continued to impede industrialisation. In banking capital, as opposed to
NO ONSETOF POVERTY industrial capital, was the Irish economy.
(2) the Irish banks were completely in-
EMPLOYMENT IN SERVICES SECTOR
AS % OF TOTAL EMPLOYMENT
1960
1970
1979
43.0%
39.0%
47.1%
20
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WARY MACRA JE H
By the mid-Fifties protectionist policies had reached their limits. Irish industry was stagnant and unemployment rates soared. The Fianna Fail party had become enmeshed with big business and were only too willing to further subordinate the Irish economy to international capital in return for short term growth and easy profits.
### TOWARDS ECONOMIC
INDEPENDENCE
The present crisis is a symptom of Ireland's deepening dependence upon foreign capital. It can only be overcome by winning economic independence and placing the Irish people firmly in control of their own economy. An anti-imperialist government would have to introduce a radical economic programme along the following lines: Nationalisation of Irish banks, insurance companies and major industries This is a vital prerequisite in order to direct the economy towards the sort of growth that can benefit the people, and The answer is socialism, but Irish workers do not believe the Labour Party can bring it (DR) not just provide quick profits for the elite, and to ensure that money made in Withdrawal from the EEC Control of our own economy is incompatible with having major decisions made by a bureaucracy in Brussels, which is itself dominated by high finance and indusState monopoly of foreign trade All imports and exports should be prowould prevent industrialists hostile to national control of removing plant and machinery from Ireland. On a more long term basis it would establish a pattern of trade that would be most beneficial to balanced growth. A national plan of development A national plan should be drawn up to coordinate economic activity and direct new investment. This plan should not be the exclusive work of economic technicians acting in isolation, but should be the culmination of a full debate involving not only producers at every level but conwould be the development of our national resources, the building up of industries linked to them and servicing them, and the redirection of agriculture so that its primary objective would be the production of food for people living in Ireland.
SUBSCRIBE TO INTERNATIONAL VIEWPOINT
Workers' self management Nationalised industries should function under the control of a body democratically elected by all those working there. Workers' control would not reduce productivity but would increase it, because workers would know that any innovations made to improve output would be to the collective benefit, and not just be in the interests of an elite. In privately-owned industries democratically elected workers' committees should have full access to all company books and should coordinate production with management. Any industry whose owners attempted to sabotage production would be nation-State aid for small farmers cooperatives The State should encourage small farmers to work their land cooperatively by promachinery or by making loans available to them at minimal inte-
This would greatly improve agricultural productivity. Nationalisation of big farms If their response to De Valera's protectionist measures in the Thirties are anything to go by, an anti-imperialist government would face bitter opposition from big farmers who would kill livestock and destroy crops before producing food at a reasonable cost for working people. This should be pre-empted by nationalising large farms and placing them under control of those who work them. A public works scheme to reduce One of the first tasks of an anti-imperialist government should be the introduction of a crash programme of public works (eg building hospitals, schools etc to provide work for the unemployed.
Any government attempting to introduce such a programme, or any movement campaigning for it would meet ferocious opposition from the propertied elite in Ireland and from international capital. To succeed it would have to rely wholeheartedly upon the strength and enthusiasm of Irish working people, urban and rural, mobilised to the fullest and determined to fight for what is theirs by right.
This is not an abstract question. If the present economic strategy is not radically changed then in the coming decades we are going to experience more social inequality, more poverty, more unemployment, more children hungry, more emigration, more crime, more despair. All this and a lot more repression to maintain law and order. The border is not just a political entity. It has an economic importance. The major banks and companies quoted on the stock privately owned across the Border. To leave the Border intact would leave major assets of these companies intact. It would mean that important resources which rightfully denied them in their efforts to build a society for working people.
The time has come for anti-imperialists to link the struggle for political independence in the North with a new struggle for economic independence throughout the whole of Ireland. We must bring that message into every arena of Irish life and we must be present wherever working people resist the attacks upon their living standards and their rights.
We must offer a clear alternative to the corruption and bankruptcy of Fianna Fail, Fine Gael and Labour. Towards that alternative we must subordinate our diffe rences to the common goal. There is too much at stake to do otherwise.
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answeris Socialism NABOUR