From Socialist Voice, September 2010

Developing the case for state-led approaches


The present crisis, a product of unregulated accumulation and speculation, has, in its aftermath, brought the state back into the management of the economy. Admittedly this has been reactive, unplanned and unanticipated and is more about using the state’s resources to protect and bolster the financial and speculator classes through massive transfers of wealth from working people. Yet to a degree, one offshoot of the economic crisis has been a partial undermining, ideologically, of purist neo-liberal orthodoxy.
     A realisation has emerged in some quarters that an over-reliance on unregulated market forces in Ireland led to bank failure, a structurally weak indigenous private sector, and a poorly planned housing system, among many other problems. In this context, an opportunity has arguably arisen for broad democratic forces to make a stronger case for the role of the state in facilitating long-term strategy and planning.
     There are, of course, forces along a broad leftist spectrum that have been advocating such a turn in a positive and impressive manner. For example Unite, Sinn Féin and a number of social-democratic economists have made a strong case for a state-led stimulus as a means of delivering not only a return to economic growth but more balanced economic development.
     Often missing from such approaches is a view of what the state actually is in Irish society. Is it simply some benign apparatus that was “misled” down a particular developmental road by property speculators and bankers and that can in turn be enlightened towards alternative economic models? Whose interests does the state serve?
     Leaving this matter aside for the present, there is mounting support for the argument that the state can often do a far better job of balanced economic development than the private sector can. For example, apart from the reactive forms of nationalisation that we have witnessed in the West, there is evidence of a more evolved form of state-led development in Russia, China, and Latin America. In these countries the state, and not the markets, is managing the outflow of capital.
     China and Russia, for example, are interesting examples of states which have been operating—albeit in contradictory and inconsistent ways—outside the parameters of neo-liberal orthodoxy. Although neither state could be characterised as socialist, both countries illustrate a number of interesting features about state involvement in attempting to ensure co-ordinated and balanced economic growth.
     Chinese state companies are being utilised strategically by their government to spread their investment widely, sectorally and geographically, to buy technology through ownership and control, to control vast natural resources in many areas, to grow their state companies and generate wealth and employment, and to train Chinese management to the highest levels and in the widest areas of skills.
     The Russian state is at present playing a leading role in developing and planning corporate bodies in fertilisers, oil, and gas, among other industries. Somewhat similar, albeit more radical, initiatives appear to be under way in parts of Latin America.
     Arguably there are lessons here for Ireland on a number of levels, where, on a somewhat similar though lesser scale, Irish state companies could be harnessed, with elements of the private sector, to play a role in developing the economy. Instead of the passive, small-scale approach, as has been the weak Government policy on state companies up to now, a bolder and more innovative approach could be taken, for example in retaking control of natural gas supplies from foreign ownership, or expanding marine and wind power, among other policies.
     In making these arguments we already have strong evidence that, in comparison with the Irish private sector, the state has been a steady performer and has contributed significantly to the national capital stock. The performance of state companies has been very good for two decades. They employ about forty thousand people directly and many more indirectly. They have a turnover of approximately €10 billion and generate profits in the region of €500 million annually. They generate substantial dividends in normal times to the taxpayer.
     At a basic level, undoubtedly, a reform of operating structures is necessary. The way in which people are appointed to the boards of state companies, and the way in which their strategies are determined by the Government and by the elite civil servants in the major governing departments in some areas, is a problem, as was outlined by the Communist Party’s pamphlet on CIE, Public Transport: Keep It Public or Lose It to Private Profit (2004). But the argument that the left needs to advance is that this should be more than just a question of governance structures narrowly defined and should have wider political and democratic ramifications about how key structures in our society are administered and controlled.
     Arguing the case for a defence and expansion of state-led development, however, is not simply a theoretical pursuit. In the light of the Review Group on State Assets and Liabilities, recently established by the Minister for Finance, “the proper stewardship of State assets” is under serious threat. The group, led by a motley crew of neo-classical economists, is considering drawing up a list of asset disposals in the public sector, including commercial state bodies.
     At this time, what the left needs to put forward among Irish workers is the question whether they would like to see national state-owned enterprises and productive assets, some naturally monopolies, sold out in a fire sale to foreign transnationals. While the state will obtain financial assets in exchange for real assets, these financial assets will simply go to servicing Government borrowing or debt.
     This exchange will be costly. Firms such as Goldman Sachs, Merrill Lynch and Price-Waterhouse Coopers will again be paid large fees. The state’s net balance sheet will remain the same, but the policies privatised companies may pursue will be very different and in many respects malign to the national infrastructure. For example, the operations of the former state-owned Irish Sugar company, now Greencore, are now focused largely outside Ireland and make a negligible contribution to the development of agri-business within the country.
     Both at a theoretical and practical level, of course, in advancing the case for the protection and enhancement of state-led responses to Irish economic development none of this really implies, or leads to, the kind of state-led socialist planning the likes of which has been outlined in a series of articles by our comrades in the Communist Party of Greece. (See Current Issues of the Communist Movement, 2010.) There is a debate to be had, of course, over how the left might conceptualise state-led development within particular national contexts, and whether such developments are little else than state-monopoly, managed capitalism or are a first step on the road to socialism. In this regard a fuller dialogue between the traditionalist views of the Communist Party of Greece and the more recent vogue “socialism of the twenty-first century” might be necessary.
     Nonetheless, the important shortcoming of most existing defences of state-led development (see, for example, Paul Sweeney in the Irish Times, 3 August 2010) is the tendency to present the argument as a neutral technical economic one rooted in some notion of efficiency in the “national interest.” Marxian perspectives need to be clear that something more is needed and that in advancing the case for state-led development it should be principally a political project, intending a broader institutional reconstruction that advances and secures working people’s interests in Ireland.
[NC]

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