Voz do Operário
Interview with Eugene McCartan
General Secretary, Communist Party of Ireland
During the 90s Ireland was appointed by the so-called experts the Celtic Tiger, as a comparison with the Asian countries that presented high economic growth, but it seems that the bank crisis reveals a totally different scenario. Was this a consequence of the economic model pursued by the several Irish governments or the direct action of the markets upon the weaknesses of the Irish economy?
This is a finance crisis, yes, but it is also a crisis of the capitalist system, and so it has exposed the weakness and superficiality not only of the Irish economy but of the global capitalist system. The particular sharpness of the crisis here, in the form of jobs and sovereign debt, is a direct result of the Irish state’s policy of subservience to the European Union and to monopoly finance capital. It cannot simply be attributed to a particular government’s policies and the media-backed ideology of individualism and greed that supported it: it must be seen in the context of Ireland’s position as a neo-colony or peripheral state within the European Union.
In the late 1960s the state deliberately abandoned any pretence of an independent economic policy in favour of foreign direct investment, in particular from American transnational corporations and then in subservience to Franco-German needs. Over time this manifested itself in two particular features. Firstly, domestic jobs and control over development were sacrificed for the lure of Intel, Dell, HP, Microsoft, Google, Pfizer, and others. And secondly, Ireland was flooded with the surplus capital created in the German economy that ultimately fuelled the property bubble, which was both the rise and the downfall of the so-called Celtic Tiger.
Globally, the crisis of over-production in manufacturing and the huge profits created by monopolies have created a crisis of over-accumulation. This accumulated capital requires an investment opportunity, and finance has played the central role of a pressure-cooker valve, first in stocks and shares and then increasingly in complex gambling tools known as derivatives and securities.
Globally, the financial economy is worth several times the real economy, and Ireland is a prime example of this. The banking industry grew to several times what it should have been, with Ireland boasting some of the largest banks in Europe, in such a small economy. The growing importance of this industry within the economy gave rise to speculative bubbles, such as the property bubble, as the primary source of economic growth. Consequently, the financial crisis that recently erupted exposed the particular vulnerability of the incredibly short-term and foolishly built Irish economy.
With the German economy running surpluses, the accumulated capital needed an investment opportunity. Peripheral countries in Europe were flooded with cheap credit, which was passed on to businesses and individuals and fuelled a speculative property boom and the bloated finance, insurance, legal and construction industries. The Irish economy relied on this bubble for jobs, tax revenue, and growth.
It was all superficial. Real development was sacrificed to underpin this speculative growth, which left a handful of people extremely wealthy. When the “house of cards” collapsed, the real state of Ireland was left exposed: poor health and education systems, a sub-standard IT infrastructure, a dismantled and neglected domestic manufacturing sector—and the list could go on.
Was there a reflection of the high growth rates in the salaries of average working people during that period or, on the contrary, the sacrifice of social benefits weren’t compensated by increases in the salaries?
The myth of “trickle-down” economics has been exposed. It could more accurately be described as “trickle-up” economics, as during the “good times” public services were dismantled to open up more profit-making avenues for the wealthy; tax relief was given to the wealthy, who paid the least tax; and wealth was increasingly concentrated in fewer hands. The much-vaunted rise of the “middle class” has equally been exposed as being based not on a real increase in wealth but on the irrational increasing value of their biggest debt: their home. With this collapsing and never likely to return to those irrational values, the so-called middle class now constitutes the bulk of working poor, indebted for the rest of their lives.
The so-called “social partnership” brought no social benefits or legislative benefits for workers and instead provided only inflation-rate increases. The increased consumption ability of working people was not based on increased wealth or an increased share of the pie: it was based on debt. Rising house prices enabled the owners to borrow more. The latest DVD player and flat-screen television was bought with shop credit; the car was bought with a car loan; the family holiday was paid with a loan from the credit union or the bank; and the credit card was used to pay utility bills and even to buy groceries.
There was no real or substantial trickle-down, nor a real growth in wages. The rise of the “middle class” was entirely based on debt and increasing indebtedness. In real terms, social wealth was privatised and transferred gradually to the rich. This is now being done on an unprecedented scale through the socialisation of banking debt, the recapitalisation of banks by the state, and an all-out assault on working people’s services, jobs, and terms and conditions of employment.
The loss of social benefits was criticised by the CPI, but this criticism doesn’t seem to have generated an echo in Irish society, at least until now. In your opinion, has this delay between the loss of the benefits and the gain in consciousness of the Irish people about the implications of this loss jeopardised in any way the struggle against these social cuts?
Milton Friedman correctly said that it is during times of crisis that the politically impossible becomes possible, and that crisis should be utilised to impose policies that ordinarily would be resisted. The establishment and European Union have seized this crisis with both hands, and—like the “shock doctrine” described by Naomi Klein—have implemented cuts and will impose privatisation that ordinarily would be politically unpalatable.
Until now the trade union movement, and in particular the Irish Congress of Trade Unions (the all-Ireland trade union centre), have failed to respond effectively to this national assault upon workers. They are too busy concentrating on the sectional “firefighting” of small disputes. Members, and workers generally, are still too wrapped up in individualism to demand a collective response from the union leadership. But this is beginning to change. The CPI produced a significant pamphlet on the crisis, and has been demanding the creation of a national-democratic economy to challenge the power of monopoly finance capital. This has been well received by some communities, trades councils (regional trade union centres), and indeed church groups, which have invited the CPI to address them.
There have been numerous small demonstrations in response to each attack and a number of larger ones, one with the participation of more than 100,000 people in late November organised by the Irish Congress of Trade Unions. This confidence needs to be built on in 2011 if we are to begin not only to hold on to what we have but to fight back and seize the advantage in this crisis.
In the face of this social setback how could you classify the role of the Irish unions?
Irish unions have for decades been incorporated as a pillar of the state through “social partnership,” their role being to manage workers’ expectations and to manage their members, in return for inflationary pay increases and a national profile for the leaders.
Union members, increasingly subject to bourgeois ideology, have demanded an individual service from their union rather than a collective organisation. Members expect the staff of the union to sort out their problem rather than participating and mobilising their colleagues to address all their issues and concerns. Trade unions stopped mobilising their members and ceased to collectively organise. Once the crisis hit, those unions that wished to mobilise found—not surprisingly—that you cannot just switch members on when you wish.
“Partnership” decapitated the trade union movement and demobilised working people. In some unions membership is declining sharply.
There are signs that the message of struggle the CPI has been making to unions is beginning to find an echo. A number of large unions have called for civil disobedience as well as for members to become politically active. They have begun to speak on our public platforms, which is a very significant break in the policy of Cold War anti-communism.
Before the crisis, what were the social problems affecting the Irish working class that remained disguised by the so-called economic miracle?
Like elsewhere, debt disguised the poverty of many working people and created the mirage of a “middle class.” This brought with it—stridently supported by the media and popular culture—an individualist ideology and the destruction of collective spirit and struggle (with notable exceptions, of course).
After the United States, Ireland is the most unequal country in the developed capitalist world. In 2009 the number of millionaires and multi-millionaires grew, and wealth became concentrated in fewer and fewer hands.
The increased consumption power of working people disguised the fact that they were receiving a smaller slice of the pie, that wealth was increasingly concentrated in fewer hands, and that Ireland had become one of the most unequal societies on the planet.
This brought the scourge of drugs and criminal gangs to many communities. With increasing unemployment and the reality of long-term unemployment as a result of this crisis, these social problems are only likely to worsen, unless political interventions can invigorate and build upon the signs of a growing resistance.
For some time, economists and governments presented Ireland as a role model for Portugal, and even now during this crisis some persist in presenting Ireland as more capable of overcoming the situation of a depressed economy and high interest rates on the debt due to its greater labour-market flexibility. Can this flexibility help in any way the working people to a better life? Would it be in any way defensible, from the workers’ point of view, to adopt such a model in Portugal?
Ireland has indeed one of the most flexible labour markets in Europe: our minimum notice period, five days, is among the lowest in Europe, where most countries require at least a month’s notice and some workers, as in Belgium, are entitled to fifteen months.
However, while already imposing austerity on workers, through devastating cuts in public services and social benefits, the European political class are also keen to push through a project of greater labour-market flexibility. This has been most evident in the EU-speak of “flexicurity” in recent years.
The conventional wisdom behind the talk about flexible labour markets is that, by allowing business to get rid of workers more easily, employers will bring forward the decision to re-hire workers. In turn, the additional purchasing power coming from the front-loading of jobs would support aggregate demand and accelerate economic recovery.
Clearly capital is interested in easy firing or flexible contracts—for two reasons in particular. Bearing in mind the sudden and spectacular collapse of demand and activity that companies faced at the end of 2008, capital is now reluctant to hire workers on the basis of open-ended contracts. Capital has all the rights; labour has only responsibilities.
Another motive for businesses turning to short-term contracts is the credit squeeze that many companies have been facing or are still facing as a result of the financial crisis. To reduce dependence on bank lending, capital is now keen to maximise profits as a source of new capital; and one way to cut wages and increase profits is to hire temporary workers, who tend to be cheaper than normal labour.
There is no evidence to support the argument that labour-market flexibility can help in surmounting the difficulties presented by a depressed economy. Indeed flexible (or, to be more accurate, insecure) employment conditions tend to generate low training, lower productivity and lower levels of innovation in national economies while having particularly negative consequences for working people.
Firstly, temporary workers tend to receive lower wages than workers in open-ended contracts. This had wider macro-economic effects, in that workers on temporary contracts, having lower wages, tend to consume less and save more as the insecurity inherent in such contracts drives them to precautionary saving.
In contrast to the widespread view that core workers are protected from flexibility, there are consequential effects on the rest of the work force. The very use of temporary contracts functions as a threat to workers under open-ended contracts to be careful not to lose their job and find themselves in a situation in which they would be forced into precarious contracts when re-entering the labour market.
This makes workers more inclined to accept wage cuts, longer working hours and other diminutions of their rights simply to keep their present job. It is hard to see what further labour-market flexibility could contribute to working people, over and above the exacerbation of what is already a highly asymmetrical and unequal power relationship with their employers.
Germany pressed Ireland within the EU to access the newly created European system of financial rescue, and to negotiate an IMF financing. These proceedings are probably to generate new actions against the Irish welfare system. The CPI took a stand on this issue. In its statement the CPI strongly criticises the principles of this financial supports and states that the Irish people, both North and South, are now paying the price of Irish and British governments’ failed policies as well. Can you enlighten us on the effects of this so-called rescue, as well as on the policies followed by the Irish and British governments over the past twenty years?
In response to the first part of the question: Germany did indeed press Ireland to access the rescue package. The imposed supports to the Irish state have been made to ensure that the interests of EU finance houses, in particular German banks and bond-holders, can be protected.
However, in response to the question on the effects of this rescue package, it is useful to consider some important facts and figures. The EU-IMF financing package was €85 billion. The Irish state is contributing €17½ billion to this effort by raiding the country’s pension reserves. The interest on the deal is 5.8 per cent. One way to put this figure into context is to consider that in 2014 Ireland’s national income, measured by gross domestic product, will be €183 billion. At the end of 2009 the national debt stood at €75 billion.
This year’s deficit, plus the deficits to 2014, will bring the national debt up to €183 billion by 2014—that is, 100 per cent of gross domestic product. This is just the principal owed and does not include interest. The interest on the deal will be €45 billion, bringing it to a total of €114 billion. This is to be paid by the beginning of 2020 and covers nine years. A further €50 billion will be added to the €100 billion that is not part of the IMF deal and already exists.
The total government debt in 2019, without anything paid off it, will be €264 billion. Yet the government’s own four-year national recovery plan shows it will run a deficit until 2014 and might break even by 2015. However, the maximum surplus secured by the government during the period of economic boom was usually €3 billion. So, the government would be lucky to gather €1 billion a year in surplus from 2016 to 2019. This would give it a tiny repayment capacity of €4 billion to the IMF, which will be owed, with the interest, €114 billion.
This figure would include nine years of economic hardship and cuts in public spending. At the end of the period Ireland would still owe 133 per cent of everything produced in the country in one year. Knowing how the IMF operates in Africa, Asia and Latin America, we can see that thousands of jobs will be lost, social services will be ravaged, and the state sector will be destroyed.
In response to the second part of this question: the economic policies pursued by the Irish government are a crucial factor in explaining the origin and the character of the crisis here. Apart from the crisis being a structural example of a general capitalist crisis of over-accumulation, there were particular superstructural institutional features peculiar to Ireland, namely failures in banking regulation combined with excessive and high-risk lending by the banks. These were buttressed by the government’s budgets, which contributed significantly to economic overheating and which in turn relied heavily on an unsustainable property and construction bubble, which they encouraged through tax reliefs.
However, such institutional policies did not operate in a vacuum but were directly shaped by the influence of the European Union. Joining the euro in 1999 meant that Ireland no longer had the power to control its own monetary and exchange-rate policy. During the bubble years, up to 2007, when unsustainable lending practices were being taken by Irish banks, Ireland should have had very high interest rates to rein in cheap consumer and mortgage credit and inflationary pressures.
However, in January 2006 the European Central Bank’s main interest rate was only 2.25 per cent, with inflation reaching 4.2 per cent, while for 2006 as a whole Ireland’s GDP surged by 6 per cent and its gross national product by 7.45 per cent. This was done because growth in the euro area, particularly Germany, was low. This negative real interest of 1.95 per cent resulted in companies and households being paid to borrow and in development projects going ahead at absurdly artificial rates of return. The country was awash with cheap credit, with the commercial banks acting as the transmission mechanism, linking the Central Bank to consumers. Real interest rates at this time should have been in the region of 8 to 10 per cent in order to rein in the unsustainable behaviour of consumers and bankers.
If Ireland had retained its own currency it would have had the ability to set its own interest rates and inflation targets as essential components of its own monetary policy, rather than being subject to the dictates of the European Central Bank. In addition, by having its own currency and monetary policy Ireland would have had more control over its exchange rate.
In relation to this matter, the CPI recently called for breaking the connection with the euro and the repudiation of this illegitimate debt placed on the backs of a mere 4½ million people. It is not the people’s debt, therefore the people should not pay for it.
On the question of the policies of the British government and their influence in the North of Ireland: clearly the policies pursued by the British government in support of British finance capital have also affected the Irish people living under British jurisdiction in the North of Ireland. In response to their national deficit and the socialisation of debt in support of the banks, the British government is implementing a programme of austerity that directly affects the North of Ireland.
An estimated £2 billion is to be taken out of the Northern economy after cuts of between 20 and 25 per cent in the public sector. For various historical reasons, the Northern economy is heavily reliant on the public sector; and cuts in the British government’s subvention to the North will lead to significant job losses, a deterioration in the provision of social goods, and significant hardships for working people.
As far as we can see, the CPI is well informed on the situation in Portugal as well as on the analyses of the PCP. Is there any kind of co-operation or regular exchange of information between the two parties?
The CPI receives regular updates on the situation in Portugal from the International Department of the PCP. Our two parties also meet at the International Meetings of Communist and Workers’ Parties, the most recent one being in South Africa.
We are aware of the central role played by the PCP in the Portuguese Revolution and the overthrow of the dictatorship, which also led to the collapse of Portuguese colonialism. We have a common theoretical understanding of the European Union and its class character and the forces driving ever greater European integration. We have a common understanding of imperialism and the importance of the unity of all anti-imperialist forces.
As Ireland is still divided into two territories, the Republic and Northern Ireland, and the Communist Party acts in all Ireland, it must deal with two different and complex realities: the Irish Government in Dublin and the UK authorities, namely the Autonomous Government in Belfast. How does the CPI deal with this situation?
As an all-Ireland party, our policies are determined by the national congress of the party, which determines policy on central questions for the whole country. However, reflecting the partition of the country, the party is organised as two areas: a Southern Area for the Republic and a Northern Area for the North of Ireland. Each of the two areas holds an area congress after the national congress. The area congresses are empowered to flexibly formulate policies and procedures relevant to the area, in accordance with the decisions of the national congress. This is necessary because the political and economic situation varies markedly between the North and the South, for historical and social reasons. However, as a republican party we strive to promote all-Ireland policies that we see as the most viable means of meeting the needs of our people.
While the Republic is a sovereign state, the Northern Ireland Assembly in Belfast has no fiscal powers, and its budget is controlled by London. The people in the North of Ireland are triply marginalised: they have little influence in London, little influence in Dublin, and even less in Brussels. That is why our party has adopted a “National-Democratic Transformative Strategy.”
Although the interests of the working class tend to be the same everywhere, different societies tend to generate different awareness of the class interests. Adding to this, there are contradictions and conflicts with deep historical roots among the working class, especially in the North. How did the CPI deal with this question?
For complex historical reasons, the working people of the North have been divided along a combination of political and religious-cultural lines. While historically that section of the working class falling within the Protestant “Loyalist” strata secured some marginal benefits from the Unionist state in comparison with the Catholic-Nationalist strata, such material distinctions have progressively dissipated over the years. Northern society has changed dramatically over the past decade. The Unionist monolith has been shattered, and historical divisions within the working class have far less objective meaning. Particularly in the light of the present economic crisis, all sections of the working class throughout the North will be affected by cuts in the British subvention, regardless of their religious or cultural caste.
Indeed, in the light of the attacks that working people, both North and South, will face in the coming years, the CPI seeks to develop the maximum unity of our class to protect its shared interests on core issues, such as employment and social spending.
We are aware that the electoral systems both in Northern Ireland and in the Republic make difficult the election of MPs from parties outside the system, so this is a real barrier to the CPI in having a voice both in the Dáil as well as in Stormont. Would the election of a communist MP make any difference in CPI strategy? And if not, why?
In answering this question, one must understand the historical context in which the CPI has operated throughout Ireland. As one front in the struggle for change, it has been historically difficult for Irish communists to make electoral gains. There is a variety of reasons for this. In the Republic, a mixture of active state repression, ideological scaremongering and the fanning of religious fears played a crucial role, with the additional complication of mass emigration—about a million people from the foundation of the state in 1922 up to the 1960s. It was also mainly an agricultural economy, and the working class was small.
Meanwhile, progressive forces in the North have notably suffered from the straitjacket created by religious and cultural sectarianism, and the working class was split along religious-ideological lines. Therefore, our principal fighting ground, and principal successes hitherto, have been on other fronts of struggle, notably the organised labour movement, and in broad social campaigns for democratic change.
In the South we were presented as an alien force, controlled by Moscow, while in the North we were presented as being in favour of a united Ireland, which was a political stick with which to beat us within the Protestant community. This was further complicated by the general Cold War politics and the strong British and American influences.
We are fully aware of the limitations of existing political institutions. It is also clear that for a considerable—although perhaps declining—body of people, such institutions are still perceived as vehicles for change; and they do offer an important platform on which to put forward progressive arguments and to challenge the cosy establishment consensus.
Therefore, while we would support the election of communist, left and progressive candidates to the existing political institutions, this would not make any difference to our general strategy for progressive social change which we seek to bring about through the mobilisation of the people through struggle on numerous fronts.
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