A Capitalist Crisis but a Workers’ Solution!
What follows is the first published version of our socialist programme. It addresses the nature of the financial and economic crisis in Ireland, and puts forward proposals on how the working class can defend itself and push for the transformation of Irish society. It is not comprehensive and certainly it doesn’t claim to have all the answers. But it is a start to an essential ideological and practical task faced by socialists in Ireland. As our programme is informed by both the ongoing crisis and the struggles of workers it will inevitably be revised over time. We also want to engage with the arguments and experiences of other socialists and would welcome any comments on what we have written.
The Irish people face the biggest economic crisis of any industrialised country since the great depression in the 1930s, and that’s official. The Economic and Social Research Institute (ESRI) which published optimistic forecasts in 2007 and 2008 has finally caught up with reality. It has forecast unemployment to rise to almost 17%, which will mean perhaps over half a million workers on the live register and net emigration of 30,000.
The bankers who have helped cause this mess are walking away with their big fat pensions while the organisations they led are bankrupt and the working class taxpayer is ordered to pick up the bill. Michael Fingleton of Irish Nationwide walks off with a pension worth €27.6 million while workers in Waterford Glass, SR Technics and Visteon have their pensions decimated.
This reveals all you need to know about how this crisis is being handled. While those who helped cause it get rewarded those who did nothing to bring the economic catastrophe about are expected to pay for it.
The nature of the crisis in Ireland
The crisis in Ireland has three elements. The first is a financial one in which every one of the Irish banks is effectively broke. All busted by lending to speculators and property developers who sought get rich quick schemes in a property bubble that anyone with any sense could see was unsustainable and could not last.
The second is a crisis of public finances that has threatened to bankrupt the Irish State. Having encouraged the property developers and bankers in the speculative boom the State has now witnessed its tax take fall dramatically, with tax returns for the first quarter of 2009 revealing a reduced tax take of 24%. Net Government debt according to the Department of Finance is set to increase from €37.6 billion in 2007 to €111 billion in 2012. The budget deficit this year is forecast to be over 10% of Gross Domestic Product and this is before the cost of buying the bad loans from the banks through the National Asset Management Agency (NAMA).
The third is an economic one – bankrupt businesses, wage cuts in the private and public sectors, and a huge and sudden rise in unemployment.
The Government’s response to the financial crisis has been to bail out the banks with billions of euro using workers’ pension fund money. Since the bad loans that have bankrupted them are so large this pension money will simply be written off - it will disappear.
The Government’s response to the State’s fiscal crisis has been to raise taxes on workers while giving yet more tax breaks to property developers, swearing blind it will not increase corporation taxes, and making cuts in public services and welfare. In its last budget it is allowing business to write off intellectual property costs against taxes and has cut the rate of interest charged to those who are late paying their taxes. PAYE workers of course have no choice when to pay their taxes. It has also promised that dramatic cuts will be made to public services in December’s budget.
This is all a disaster unfolding in front of our eyes.
The bail out of the bankers has come from workers pension funds and taxes. The banks are still bankrupt, only the property developers are being spared from their recklessness. Tax increases and wage cuts for workers only increases unemployment and increases the cost of welfare, which worsens the State’s debt crisis - unemployment may cost €10bn to €11bn a year. A vicious spiral has set in and the economy is now forecast by the ESRI to shrink by 9.2% in 2009 and a further 1.2% in 2010 - if things go well! Over the three years from 2008 to 2010 it is forecast to contract by 14%!
It is clear that ordinary working people are being made to pay for this economic crisis but workers did not create it and it therefore stands to reason that even if they pay for it the problem will come back. It is clear that there will be no return to the Celtic Tiger. The Government sponsored National Economic and Social Forum admitted as much in an analysis published in March this year, and a Freedom of Information request last year revealed that nearly half of sampled foreign companies in Ireland would not invest here if they had the choice again. We have heard a lot about Ireland’s reputation hitting rock bottom but it is the reputation of the Irish rich and their State that has been exposed. Their crony capitalism is hypocritical and corrupt, supported by lies and hot air.
The speculative boom has been so much worse in Ireland because the multinational-driven boom disappeared before the beginning of this century. These multinationals came here because of low taxes and relatively low wages. Low taxes have led to a near bankrupt State and when workers sought higher wages to pay for a fast increasing cost of living all the politicians and experts complained that we were making ourselves uncompetitive. The multinationals shifted investment to China and Eastern Europe.
Some workers believe that if they make sacrifices then eventually things will be alright, that the Government or one of the opposition parties will provide a solution. But they won’t.
Can the Government’s solutions work?
The first thing to understand is that this incompetent Government doesn’t have a solution. We know that because it is on its fourth ‘solution’ and none of them have stopped the economic crisis from getting worse!
It promised financial stability after its bank guarantee scheme pledged over €400 billion to the banks that it didn’t have. It lied and said it wasn’t a bail out. Then it promised three banks €5.5 billion if they could also raise some of their own money. When they couldn’t they nationalised Anglo-Irish and gave €7 billion to Bank of Ireland and Allied Irish. They gave our pension money to institutions that no capitalist in the world was prepared to invest in and claimed some of them were of systemic importance when they were plainly only any use to the property developers whose speculation blew up in their face. Even after this Allied Irish has come out once again saying it needs yet more money.
Its latest plan is NAMA, but Michael Somers from the Treasury Management Agency who is supposed to be in charge of it has admitted to the Oireachtas that he doesn’t know what is going on except what he has read in the newspapers! This so-called plan only makes sense if the Government takes the €80bn to €90bn bad loans off the banks by making us pay far more than they are worth. It even envisages the banks continuing to manage the loans and it has been reported that the Government wants to protect the developers from bankruptcy. This whole exercise will cost us billions. It is billions that we and our children could be paying for years. And it too will not work!
The Government is trying to substitute State credit for the collapse of private credit by offering guarantees, recapitalisation to the banks and buying bad loans. But debt in the Irish State has exploded from €504 billion in 2002 to €1,671 billion at the end of last year. We now have a bigger net debt than Japan and the Government cannot replace all this mountain of credit that is now collapsing. Of course not all of this debt needs to be paid back right away but a lot of it does and we are being asked to pay for it whether we took it out or not, and will be asked to pay for it for years into the future.
The Government says that all this is not about bailing out the banks but is to ensure the revival of the economy. But how can wasting billions of euros paying for bad loans possibly do this? Even if the banks are saved they will spend years shrinking their loans because they will be too weak to do otherwise and the economy is in recession anyway. March this year recorded the slowest pace of lending to businesses and households in 15 years.
The banks will hoard our money and charge exorbitant fees while we pay for their recklessness through cuts in services and welfare. These cuts are what the Government will use to pay back its loans to international investors and the local banks! Lower wages will mean bigger profits and lower costs for the State but it will reduce demand in the economy and intensify the vicious spiral of falling production, increasing unemployment, lower wages and economic recession.
But this is where the real irrationality of our economic system is truly revealed, because doing the opposite - maintaining wages - will result in lower profits, lower investment, higher borrowing and higher interest costs on the State debt, lower production and more unemployment. This shows the craziness of the system we live in – neither higher nor lower wages will provide a solution because wages are not the problem – weren’t workers enduring a pay freeze when this whole crisis erupted? How could any of this be our fault?
Yet this Government has even blamed workers for the financial crisis while most of us don’t even understand how the stupidly complicated financial system works never mind have had the least bit of control over it.
The causes of the crisis
The trigger for this disaster has been massive speculation in property resulting in unsustainable price increases that could not be maintained. Prices had to stop increasing and when they did many speculators were left with property they could not afford but could not afford to sell. Massive oversupply led to falling prices and the huge amounts of money lent to property developers by banks are now bad debts, many of which will never be repaid. This in turn has led to a banking crisis and a crisis in State finances, which became overly dependent on taxes on property sales. This however has only been the trigger to the disastrous economic collapse which is now taking place.
In order to create and sustain the Celtic Tiger it was necessary to generate massive amounts of credit leading to a huge increase in debt. The massive expansion of credit for property speculation is really only one example of this. This increase in debt was necessary in part because wages everywhere have been held back, with the pay freeze under the latest partnership deal only one example. The share of national income going to wages has fallen from 71.2 to 54 per cent between the periods 1980-1990 and 2001-2007.
Repeatedly we have been told that wages have to be kept lower to remain competitive, but every worker across the world has been told the same story. How do any of us gain if we all allow our wages to be cut? Thousands of jobs in the Dell factory in Limerick are gone but no possible amount of wage cuts could make Irish workers ‘competitive’ with Chinese workers paid a pittance. An Ipod can be produced for $4 in China and sold for $290 in the West. Dell is even moving production from the Chinese coast to inland China because it is cheaper there! Some Chinese workers cannot even compete with other Chinese workers! This is a race to the bottom we cannot win and we should not accept.
But how are all the new consumer goods to be purchased when wages are being held back and profits are exploding? The answer is to get all of us to take up more credit and get into deeper and deeper debt. When this credit is created the bankers levy commissions and charges so that our incomes are squeezed a second time to boost the profits of the bankers and other financial parasites. This enormous creation of debt could not continue without creation of real incomes and wealth to pay it all back, and the bursting of the housing bubble has exposed the whole finance system as a house of cards.
What other system would build 350,000 houses that lie empty, while prices inflate at unsustainable levels and people in need of housing go without; and performs these feats while bringing the whole economy crashing down as a result? What other system could take our pension contributions for years and now say there is nothing there, as was the case with Waterford Glass?
Many of us now know that this crisis has been precipitated by a massive increase in credit and speculation across the world which was worse here in Ireland. But this does not get to the heart of the crisis because it does not answer why this explosion of credit and debt was necessary everywhere in the first place.
This is simply because higher profits could not be made by making goods and services that people actually need and this has led the world’s capitalists to seek easy profits in stock market bubbles, commodities speculation and sub-prime loans to poor people who couldn’t possibly pay their loans back. What did the bankers care? If the poor defaulted on their loans they could be evicted and their home sold for an inflated price. But then the housing bubble, like the stock market bubble before it, also bust and the whole world has been thrown into recession.
In Ireland we have been lectured about the need to be competitive but why should workers accept lower wages when profits would only increase and then be used to fund a frenzy of property speculation? Capitalists all thought they could make bigger profits through financial chicanery than in making real goods and real services that people actually needed.
The crisis is worse here because Irish capitalists have always been more parasitical. That is why the Gombeen man has played such a role in our history. And they still do so today. In 2007 €13.9 billion was invested into European property deals by local capitalists while they couldn’t even raise €200 million for venture capital projects. No Irish high-tech company has revenue of over $100m and the largest, Iona Technologies, was sold to a US firm last year.
This disastrous situation could only come about because of an economic system based on the pursuit of the highest profit irrespective of the social consequences. Only a capitalist system could do this. A system that rewards greed and ignores social need. A system which awards fat cat bonuses to bankers who create no wealth themselves, and admit they don’t even understand how their organisations work, while condemning as unproductive those like teachers and public servants who provide essential services.
The ultimate cause of this economic mess is because we live in a capitalist society.
The Government is not only wedded to the bankers and property speculators but also to the system that these people own and control. That is the reason why saving the system means saving the people who run it. That is why the bankers and property developers are going to be called in to help run NAMA. It is not enough to blame the speculators and bankers, it is necessary to break with their economic system.
That is why none of the proposals from the Dail opposition parties will work either, because they too want to save the system. Fine Gael recognises that saving broken banks from bankruptcy will not make them lend, or contribute to a growing economy, but they propose to wait until next September to see that the banks are bust. They do however agree with the Government that workers should help pay for the rotten loans and they have proposed more draconian cuts than Fianna Fail and the Greens. They simply don’t recognise that if banks became profitable again, and the property developers were saved, they would not invest in the real economy but simply do what they did all over again.
Nationalisation, as proposed by the Labour Party, will still mean that workers will take responsibility for the bad debts and, while shareholders may or may not lose out, the bond holders in the bank’s debt will be protected even though many of them will actually have insurance against loss. Nationalisation is not socialist and the nationalisation of Anglo-Irish has been seen correctly by every serious commentator as a bail out of the bankers and developers. Even those who have supported nationalisation are rightly fearful of the cronyism that would immediately infect State ownership and control of the banks. The Labour Party, like nearly all the voices calling for nationalisation, want to sell the banks back to private owners after workers have paid to clean them up.
It has recently been revealed that perhaps one third of State bonds issued by the Government to pay for its debt are being bought by the same banks that the Government is using the money it receives to bail out. The banks give money to the State for bonds and the State gives the money to the banks to bail them out! The banks can then use the bonds they have bought to get cash from the European Central Bank. The whole Irish banking system has become one giant pyramid scheme! It is one that workers are being asked to pay for in deference to the so-called experts who have invented this crazy financial system.
Demands for a Crisis
The Irish working class is facing massive attacks from both Government and employers designed to make them pay the cost of the severe economic crisis. In the face of this onslaught workers need to mobilise around a set of demands that can offer a defence and bring into view some alternatives to what is being put forward by the capitalist class and their representatives.
The priority for Irish workers is to develop their independence on a political and organisational level. It is essential that the working class have its own policy. What is set out below is a set of demands that we believe might provide the basis for a workers movement that will do this. These demands not only address the immediate concerns of workers, but also point towards a socialist transformation of society. Their immediate objective is to strengthen the organisations of the working class through defensive activities and the rebuilding of solidarity between ordinary workers.
These demands are not some sort of wish list, or a con trick to demonstrate the bankruptcy of the Government (for many people that is already evident). They are put forward as practical solutions, that if taken on by a broad movement can at the very least mitigate the impact of the crisis on the working class, and at most begin the transformation of Irish society. The outcome is not predetermined but dependent on a class struggle that will develop whether anyone likes it or not over the coming years.
General Election Now!
Given the severity of the crisis that the Fianna Fail led government has presided over and the unpopularity of the measures they have taken to deal with it, they clearly deserve to lose office. This would demonstrate that politicians have to pay a price for pursuing such policies. For Fianna Fail to continue to govern in the current situation would be to normalise the programme of austerity. This does not mean that we have illusions in the official opposition Dail parties. On the contrary, we wish to see Fine Gael/Labour replace the current Government as soon as possible only in so far as this is inevitable in order that they too may be discredited along with Fianna Fail as rapidly as possible.
In themselves such elections offer an opportunity to present and build a real alternative. This alternative means the presentation of a real alternative government, a workers government that defends the interests of workers on all issues just uncompromisingly as the current government has sought to defend the bankers and developers.
More generally we demand the abolition of laws that restrict the ability of workers to organise within trade unions and on a political basis (i.e. anti-terrorism, pubic order laws). This also includes abolition of the 1990 Industrial Relations Act
We also demand the extension of local democracy with councils no longer subject to more or less complete control from central Government. We call for the abolition of the post of city manager and the ending of bureaucratic interference over local government, and for the outsourcing of services to be halted and reversed.
The struggle for democracy is also a struggle at a European level. We must continue to oppose the Lisbon Treaty, which transfers more power to unaccountable institutions, and the judgements of the European Court of Justice that undermine trade unions. The fact that the Irish people are being asked to vote again on the Lisbon Treaty after its clear rejection in a referendum illustrates the undemocratic nature of the European Union. Indeed, the vote in Ireland was effectively the third time that such proposals had had been rejected, following on from no votes in its earlier incarnation - the European Constitution – in France and the Netherlands.
The Irish people are part of a continent wide struggle and should build links and develop a programme with labour and democratic movements across Europe. The capitalist Governments of Europe are coming together to push their agenda, so it is essential that the working class come together in order to counter it with their own political organisation.
In the wake of the economic and financial crisis the EU is being promoted as a means of protecting nations, particularly small nations such as Ireland, from the ravages of global capitalism. It is put forward as an alternative to the ‘Anglo-Saxon’ model of capitalism in the US and Britain. However this is a false distinction – capitalism is a system that encompasses most of the world and Europe is thoroughly integrated within it. Indeed, the EU has been one of the main instruments for promoting the policies of neo-liberalism within its own borders and across the world. European financial institutions (we need only look at Ireland!) bear as much responsibility for the current economic crisis as their counterparts in the US.
The Banking Crisis
Workers must realise that they bear no responsibility for the banks which are more or less broke. The value of the four biggest fell from €52.8 billion in 2007 to less than €4 billion in 2008. They continue to function only because of the Government’s guarantee which really means it is our taxes that are propping them up. This guarantee must be immediately repudiated and only the deposits of the vast majority, belonging to workers, farmers, students and the elderly protected, just as they were before the guarantee.
The financial institutions bankrupted themselves through reckless lending which allowed their Directors to pay themselves millions in huge salaries and fat bonuses. During the boom years they were found guilty of tax evasion and overcharging of ordinary customers and now they want our taxes to bail them out!
The lead story of ‘The Irish Times’ on 19 January this year described Anglo-Irish Bank as one that “specialised in large loans to wealthy business figures, including most of the State’s larger property developers.“ There is nothing progressive about its nationalisation and the Government’s claims that it was of systemic importance only reveals their whole bank bail out plan as a cynical lie. The bail out of all the financial institutions has more to do with the cronyism and corruption that would be revealed if any of these institutions were allowed to go under than concern for the Irish people. Allied Irish Bank and Bank of Ireland are now zombie banks which are of no use to a healthy economy. In fact the banks did little to create the Celtic Tiger boom and much to create the speculative bubble that has followed it.
The banks are bust and those who invested in them such as shareholders and bond holders have effectively lost their money. It is not up to working class taxpayers to protect them. They gambled and they have lost. The banks should therefore be expropriated and these investors made to take the loss for their risks. Those property developers and speculators who owe the banks money should pay back now or have their assets seized. The Government has allowed many of them to shift their money deposited with the banks out of the country while we are still left with their debts. These speculators have taken money off the banks in loans and now want us to pay for them! Seizing their assets will simply allow us to take it back.
The Government said, when it announced that Anglo-Irish was going to be nationalised, that it would prevent those who owed more than €20 million from moving money out they had deposited. It then quickly reneged on this decision. Now it has announced that it is going to bail out the banks by taking our taxes to recapitalise them and by buying their bad loans through NAMA. The working people of Ireland effectively own the banks and are certainly paying for them but aren’t allowed to know how the banks created the mess or how they are going to be bailed out.
Capitalist ownership of the banks has failed. Workers must take immediate steps to prevent everyone from being ripped off and to ensure that the money the banks can mobilise is used to develop an economy for the benefit of the majority of the Irish people.
1. Bank workers must immediately, with the support of their trade unions and the wider union movement, release full details of the bad loans that the Government has demanded we pay for. The recent PriceWaterhouseCoopers report into the banks must be published in full. The exact state of the banks must be revealed to everyone so we know exactly where we stand.
2. All workers, in the banks and outside them, must demand that the boards of Directors of all the financial institutions be sacked. Every single one of them is hiding the truth. These boards should be replaced by democratically elected committees composed of bank workers, workers from outside the banks, representatives of the elderly and students, small farmers and small businesses. Local bank branches should have similar committees to guide the work of local institutions and ensure they support local economic development.
3. The banks must be expropriated and their numbers reduced in the interests of efficiency. Compensation to shareholders should be based on proven need. The loans to the developers and speculators should be reviewed and their assets seized if they are unable or unwilling to pay what they owe. Where these do not cover the loans they owe both the developers and the banks should be declared bankrupt and new banks established with the assets of the developers, the deposits of existing workers and the State money not wasted in trying to keep the old banks afloat. These will then be the foundations of the new democratically controlled banks.
4. The new banks must be placed at the service of the people. A new plan of economic development should be drawn up using the knowledge and creativity of the Irish people plus the energy and imagination of migrant workers. This should be a democratic plan involving representatives of all working sectors of society including trade unions, students and farmers etc. with advice and assistance from the universities and workers in the economic development agencies of the State. New productive enterprises can be created and funded, providing jobs and wages, owned and controlled by the workers themselves. This will take the place of the funding for property speculation that the capitalist banks were engaged in for over a decade.
The Government has bummed and blowed about creating a new ‘knowledge economy’ while the State is only ranked 26th out of 28 OECD countries for education spending. It allows the closure of productive enterprises which embody real knowledge, such as Waterford Glass and SR Technics. A democratic plan would save these jobs and develop enlarged and new production.
The income and wealth of Ireland is notoriously unequally distributed yet even in the midst of a calamitous crisis the State has still protected these inequalities. The bottom half of earners (49%) get just 17% of total income while the top 6% get 28%. Even after the collapse of share and property values the journalist Vincent Browne has estimated that the top 50 most wealthy are worth €19 billion, or over €380 million each.
Like claims that Ireland has an incomparably generous welfare system, it is also claimed erroneously that relatively little income tax comes from what is called ‘lower and middle income’ earners, which is the working class. In fact Revenue figures purporting to show this are false, because married couples, in other words two people, are treated as if they were one person. So those earning less than €30,000 do not pay only 2.3% of all income tax but 10% and those earning between €30,000 and €100,000 paid 58.6% of all income tax not 47.8%. So those earning more than €100,000 do not pay 50% of all tax but 31.4%. That they still pay such an amount is not mainly due to the progressive nature of our tax system but because of huge income inequalities.
That this is so is demonstrated by the enormous wealth these people have been able to accumulate. Even a small tax of 10% on this wealth would raise nearly two billion and a tax of 25% almost as much as that forecast to be raised in the last budget in a full year. Yet this would affect only 50 people who would still continue to be incredibly wealthy. Instead the budget consisted of the much more damaging cuts in living standards forced on the vast majority. Yet none of the opposition parties want to do any more than tinker with this approach.
Again even modest inroads on the incomes of the wealthy could go a long way to protecting the majority. Tax relief on private pensions benefit mostly the top 20%, and are mainly a tax dodge, are worth €3.2 billion. Two people are known to have pension benefits of €100 million each. The rich are saturated with other tax reliefs, usually calculated at the higher tax level – capital allowances, health benefits and various property based incentives that fed the speculative boom.
Figures released by the Revenue Commissioners show that several of the highest earners in Ireland pay no tax whatever, while 1,060 with incomes above €100,000 a year pay less than 5% tax. And these aren’t tax exiles - they live in Ireland. It is estimated that tax not collected on the wealthy could amount to €3 billion a year. The biggest loophole of all is the residency rule which states that you have to live in Ireland for more than 183 days a year before becoming liable for Irish taxes on all income. Almost 6,000 people on the Revenue’s books have declared themselves “non resident for tax purposes” and 440 are ‘high worth’ tax fugitives who are worth an estimated €30 million each.
That this wealth is not touched, and the inflated incomes of the rich are boosted by various schemes and protected by loopholes, demonstrates that the State does not operate for the general good but only for the good of a tiny minority of very, very wealthy people. The most blatant tax benefit to the rich is Ireland’s low corporation tax of 12.5%, which means that profits are taxed proportionally far less that wages.
Among the multinationals to benefit most from Ireland’s tax regime have been mining and energy companies. While Ireland has valuable mineral and energy resources on land and offshore the Irish people have derived little benefit. The most glaring example of this is the Corrib gas field which has been valued at €9.5 billion, though independent consultants reckon it could be up to 21 billion euro. Despite such wealth within its waters the Irish State will receive very little revenue. Indeed, it is actually subsidising the foreign energy companies – it has provided infrastructure and land; it has provided police to act as security and to put down protest and even when the field comes on line it will have to buy gas at market rates.
Up until the mid eighties, when the law was changed, the State got a half stake in oil and gas discoveries. The level of tax on the profits of the energy companies in Ireland is only 25% compared to 78% in Norway and a world average of 50%. We should demand that the Government immediately renegotiate the Corrib gas field contract, take a controlling stake in the project and increase taxes on profits. But this is not enough.
While taxation has a role in protecting workers from the worst, even this can only be ensured when workers gain control over production and the products of their own labour. Fundamentally Ireland’s wealth does not derive from what is in the ground or under the sea, or from the profits of capitalists, but from the labour of Irish workers. To gain control over the wealth they create, and determine how it is used, workers have to expropriate capitalist enterprises such as Shell.
Wages and employment
The proposal for wage cuts put forward by employers and the Government as an essential element of recovery must be rejected. This is another attempt to pass the costs of the economic crisis onto the working class.
It is a myth that wages in Ireland are relatively high, or that high wages are the cause of the economic crisis. The reality is that Irish wages are 25 per cent below the EU(15) average and that wage rises have been around the average. When the cost of living is taken into account Irish wages fall even lower in the table.
During the period of the boom the relative position of the working class in relation to the capitalist class actually deteriorated. While living standards did increase, the advance for the capitalist was much greater. In this period bosses based in Ireland were making much more profits than bosses in any other EU economy. For example, while in Ireland profits per employee stood at an average of €45,800 in 2005, the average figure for the EU-15 was only €29,500. For the UK, it was €22,500 according to the EU’s KLEMS database. Net profits at enterprise level increased between 2000 and 2005 at more than twice the rate of wages. Net profits per employee increased three times the rate of cost per employee. There has been a huge transfer of wealth from labour to capital. The wage share of national income has gone down from 71.2 to 54 per cent between the periods 1980-1990 and 2001-2007. If anything it is the declining value of wages that has contributed to debt expansion and the financial crisis. Yet the demand from bosses is that wages be depressed even more.
Workers are also threatened with rapidly rising unemployment. In order to maintain wage levels and employment it will be necessary to share out the available work without loss of pay. We should demand that working hours are reduced with no loss of pay, and that the retirement age be reduced to 55. The minimum wage should be replaced with a “living wage” – enough to support one adult and one dependent. Deferred wages in the form of pensions must also be defended, including the creation of a pension guarantee scheme for workers in the private sector. What is essential is that workers are active in their own defence. None of these demands can be advanced in the absence of struggle, and certainly not when trade unions are wedded to the idea of sharing the pain. Ultimately, the defence of jobs will require the expropriation under control by the workers of the companies that cannot guarantee jobs, conditions and wages.
The housing policy of the current government has been described as ‘social welfare for the rich’. It includes €391m of rent supplement, €169m of tax incentives, €450m of stamp duty loopholes, and €400m unspent in local authority accommodation. This policy has resulted in: 56,000 people and families on housing waiting lists, 60,000 depending on rent supplements, 5,000 homeless, 14,000 living in mortgage arrears, 49,348 empty houses, and dispersed, devastated and abandoned communities. In Ireland housing has been bound up with the financial system - we have seen how this operates with the credit fuelled property boom of recent years. It is impossible to separate the financial crisis from housing and the solution to the housing problem inevitably follows from the solutions to the banking crisis.
If the banks were nationalised they would take on the ownership of vacant and mortgaged houses. This would include many of the surplus housing units in the country - more that enough to house the people currently on housing waiting lists. The vacant houses, if they were suitable, could be transferred to the control of councils as public ownership rental. Overnight the housing waiting lists could be eliminated, and families put into decent accommodation. This would save hundreds of millions currently paid in rent allowance to private landlords, which could then be used for other essential public services. Control over financial institutions would make it possible to guarantee a halt to repossessions. Owner-occupiers who are unable to pay mortgages could choose to convert their properties to public rental, or have their homes re-valued and their repayments adjusted to more manageable levels.
The revenue accumulated from repayments and rents could be used to fund a programme of rebuilding local community infrastructure neglected during the uncontrolled house building boom. It would also increase employment in the construction sector and provide the opportunity to build and regenerate communities in a way that reflects the needs of the people who live within them.
Health and Education
Despite Government claims that the public sector in Ireland is bloated, the reality is that State spending in Ireland is among the lowest in the developed world and is falling. State spending as a share of GDP fell from 47.2% in 1988 to 35% percent in 2008.
The Irish State’s health spending is way behind that of other European countries, accounting for 7.5% of GDP compared to an 8.9% average. Much of this is taken up by private medicine and private insurance.
It is also spending proportionately less on education that it did 10 years ago, falling as a proportion of GDP from 5.2% in 1995 to 4.6% in 2005. Public services in Ireland are squalid. To bring about improvement we need major investment and restructuring.
The most serve problems in the Irish health service are a result of its entrenched two tier structure and the distinction between public and private. This is seen most graphically in hospital waiting times as public patients wait years for treatment that private patients receive within weeks in the same public hospital. There are not enough beds available for public patients. Related to this is the shortage of medical staff in Ireland. Its doctor – population ratio is only 22 to 10,000, far below the EU average of 33 to10,000.
Cutbacks in nurse training have also led to shortages. The recent growth in employment in the health service has been on the non-medical side – a reflection of its increasingly bureaucratic and centralised nature. This was advanced most in the 2004 Health Act, which abolished regional health boards and created the Health Service Executive (HSE).
The power of private finance within the health service has been boosted by successive Governments. For example, medical consultants have been gifted public beds in public hospitals for their private practice. Taxpayers are forced to subsidise private medicine, footing over 40 per cent of the cost of the for-profit beds. It is this public-private mix in which the public realm is subordinated to the demands of business that is eating away at healthcare. Corporate interests, whether as consortiums of consultants, insurance and pharmaceutical companies or private providers of services, have completely penetrated the health service.
The number of private nursing homes and private for-profit hospitals has increased dramatically, encouraged by the introduction of tax breaks for companies that built or refurbished public or private hospitals and nursing homes. The major push towards privatisation came in July 2005 when Mary Harney announced the building of private hospitals on public sites, the policy of “co-location”.
There are a number of immediate measures that need to be taken to improve the Irish health service. These include: an increase in the number of clinical staff, a major investment in public health system to clear the A&E backlog, the funding of more hospital beds and the employment of more specialists to reduce waiting lists; the extension of GP out of hours cover and the end to the outsourcing of hospital catering and cleaning services. To improve accountability all hospitals should be required to publish statistics on medical procedures and their outcomes. All healthcare institutions and personnel should be subject to independent inspection. As a means of tackling the staff shortages in hospitals, the cap on medical courses at universities should be lifted, and all medical students compelled to work within the Irish health service for a fixed period upon graduation. A new public only contract for consultants should also be introduced. We must also have the creation of a common waiting list that would see people treated on the basis of need not money.
The critical condition is the expulsion of private finance from our health system. If the inequalities and distortions are to be removed then private health insurers and providers must be eliminated. The demand must be for a free, universal, and public health system that covers all needed services without charge. Such a system would be funded through a system of national insurance and general taxation.
The management structure of the health service must also be transformed. The bureaucratic monster that is the HSE must be abolished and control of medical services devolved to the most local level that is practical. Control over the delivery of services should be determined by health service staff and the communities they serve, ending bureaucratic and top consultant control.
The Irish State comes close to the bottom of the international league table on education spending relative to the country's economic wealth. According to the OECD’s ‘Education at a Glance’ 2008 report it came 27th out of 29 countries in the amount of GDP per capita invested in each second-level student. Between 1995 and 2005 the proportion of GDP invested in education dropped significantly from 5.2% to 4.6% with the OECD average at 5.8%. Only six out of 30 OECD countries have a worse pupil-teacher ratio at second level and only two countries invest less as a percentage of GDP in education than Ireland. Primary schools have 24.5 pupils per class - the second largest of the EU countries surveyed. On average, there are four more pupils in Irish classes than in other EU countries.
The low level of spending is also reflected in the poor physical state of school buildings. Many schools have small classrooms, little or no ancillary accommodation, libraries, PE halls and general purpose rooms and there is inadequate specialist accommodation at post-primary level. The second-level schools built in the 1970s and 1980s, which were of a low cost high maintenance design, are still in use. There are around 40,000 pupils in prefabs. Many school buildings are in need of major refurbishment or replacement.
These figures attest to the poor state of our schools. But things have deteriorated even further with the cuts announced in the budget. Overall, there were 32 cuts, 16 of them in the primary sector. As a result of the budget class sizes will increase from 27 to 28, which will result in a cut of teacher numbers; teaching posts will be lost from schools that are no longer designated as disadvantaged; and a new ceiling of a maximum of two-language support teachers for most schools will be introduced.
These cuts fall heaviest on pupils from poor and migrant backgrounds. Given such pressures it is no wonder that many pupils are being lost to education. Student drop-out is currently running at around 20%. This translates to 10,000 students who start second level any year not completing the Leaving Certificate. The TUI calculates that half of these young people end up on the unemployed register.
The education sector urgently needs investment. We need to employ thousands more teaching and support staff in order to bring down the pupil teacher ratio and improve the school experience. Resources should be targeted at pupils who are at most risk of falling out of the system. Every school-leaver should be guaranteed a job. A school building programme to improve the physical conditions in which pupils are taught should be rolled out. As well as helping schools this would also serve to boost employment.
Schools must be thoroughly integrated into their communities and their management placed into the hands of staff, teachers and parents. We need to move away from centralised control of education with its emphasis on arbitrary targets and testing. The current curriculum should be replaced with one whose objective the realisation of every student’s potential. Individual schools should have the freedom to adapt the curriculum and their teaching methods to fit the needs of pupils.
University education should be made available to every student who has the interest and ability to pursue a degree course. There should be no return to student fees. All students who qualify for higher education should receive a living grant. The expertise within universities should be harnessed to aid the transformation of society.
End church control
Since the inception of the state successive Irish Governments have ceded a large degree of control over health and education services to the churches and religious orders. This has enabled them to solidify their power in society and to use State funded institutions as instruments of religious indoctrination. One of the consequences has been the distortion of practice within health and education. For example, two of the biggest scandals within the Irish health service, the wide use of symphysiotomies up the 1980’s and the unnecessary hysterectomies carried out at Our Lady of Lourdes Hospital in Drogheda in the 1980’s, were both a consequence of the influence of Catholic doctrine on medical practice. Both practices resulted in the mutilation of hundreds of women.
The recently published Ryan Report provides a shocking indictment of the systematic neglect and abuse of children by religious orders and the State. The cosy relationship between them meant that such abuse was covered up for decades. When it was exposed the State gave immunity to those responsible and protected the religious orders and institutions from any claims for financial compensation. The 2002 deal limited the religious congregations’ contribution to just €128m of the estimated €1.4bn liability with the taxpayer picking up the tab for the rest. Despite all this the same church remains in charge of children’s education.
While compensation is important, and the compensation deal should be repudiated and the religious orders made to contribute more, the fundamental structure of our health and education services must be changed. The involvement of churches and religious orders in the delivery of health and education services must end. These services must be completely secular in their structure and scientific in their ethos. The overriding priority of these services must be the physical and psychological well being of the population. In order to achieve this all hospitals and schools must be brought under the democratic control of workers who staff them and the local communities they serve.
When the Government finally acknowledged the extent of the economic crisis it introduced a pension levy to get public sector workers to bear the cost. The Irish Congress of Trade Unions (ICTU) called a demonstration to oppose it. It was a stunning success and around 150,000 people marched against the levy and demanded an alternative. Individual unions promised a series of strikes to stop the levy and proposed cuts in public services. This showed that a huge number of workers were not only opposed to the Government’s plans and not only looking for an alternative, but also prepared to take action to press their demands.
Yet a very short time later the Government were able to introduce much more draconian cuts in living standards while yet more of its lies and hypocrisy in support of the bankers and their shady dealings had been exposed. How was this able to happen?
Workers are just as angry – the elections have proved that. There is nothing to indicate that they are not still prepared to take action. They want an alternative and we have just shown that this alternative exists. Yet still the Government ignored the mass demonstration and threats of strike action. Why were they so confident?
The answer is that after the demonstration the trade union leaders who were supposed to defend workers interests and devise a strategy to fight the Government immediately called off the action and accepted that workers had to pay for the crisis.
They have covered up this surrender and betrayal by claiming that we all have to share the burden but that workers must only accept their ‘fair’ share. But why do workers have to accept any of the cuts in living standards while the bankers who helped cause it walk off with massive pensions? What’s fair about this?
ICTU have come up with a 10 point plan, a ‘Better, Fairer Way’, but it is neither fairer nor better. Behind this document of capitulation ICTU, instead of organising the fightback, organised new social partnership talks behind which they could hide their surrender. It then immediately accepted the central demand of the Government that workers help pay for the crisis. Their 10 point plan proves that our trade union leaders, in ICTU and in individual unions, have not only failed to lead a resistance but have joined the Government in attempting to force their cuts through against our will.
Their 10 point plan calls for nationalisation of the banks but Anglo-Irish proves that this can simply be a mechanism to bail out the bankers. There is no mention of who should pay for the banks losses. In fact, by itself, nationalisation means we pay for them! There is no mention of workers taking control of the banks or of them revealing the banks guilty secrets. The union leaders clearly don’t trust us but trust the Government and bankers. ICTU’s plan accepts that workers must be ‘competitive’ and that the existing social partnership deal must be respected even if it simply means companies using its inability to pay’ clause to cut wages. What good is that to us?
The plan does not say we should oppose the cuts; does not say we should oppose the bank bail outs and does not call for reversing the pension levy. Above all it does not call for action to fight back. In this respect it is an inevitable result of a social partnership process that has been built on the claim that workers and bosses and the State all have a shared and common interest. The crisis has exposed this claim as a lie.
Workers and bosses and the State are not partners. When social partnership began it was introduced to win union support for wage cuts and cuts in public services. These cuts in the 1980s resulted in such damage to the health service that it has even now not recovered. During the boom the partnership deals were used to keep wage increases as low as could be enforced under conditions of high levels of employment. These increases were often paid for by tax cuts which in turn limited public services. Partnership was used to get workers to accept privatisation and accept changes to their working terms and conditions. Now social partnership is back to offering nothing but pain.
But workers do not have common interests with their bosses. The latter seek to maximise profit and today we are reminded that this requires workers to sacrifice their wages and often their jobs. The collaboration of the leaders of the union movement now also demonstrates that workers do not have common interests with the bureaucrats who lead the trade union movement.
We can see this in many ways. When workers go on strike their leaders do not endanger their jobs or lose money. The bureaucrats’ salaries are much higher than their members and if they behave themselves they are put on the boards of Government quangos where they can mix with the great and the good from the State and big business. This has meant that they have become directly responsible for the current mess. David Begg of ICTU has been on the board of the Central Bank since 1995, so he shares personal responsibility for the banking mess we have been asked to pay for. No wonder he has called on workers to pay for it. What about him paying for it and resigning for his failure to defend workers interests? And what About Peter McLoone of IMPACT who was Chairman of FAS when that organisation was a nest of corruption?
The alternative doesn’t mean new or even ‘left’ versions of this. We don’t want ‘left wing’ bureaucrats who walk the corridors of power with politicians or sit on boards of State and private bodies and prepare cushy retirement homes
It is therefore now clear that to oppose the cuts in workers living standards and to defend ourselves we need not to attempt to shove our union leaders to the left, we need to replace them. But not only that, we need to radically change the character of our trade unions. Who gave ICTU a mandate to call off action, go into talks and surrender our demands? This was only possible because we don’t have a democratic union movement and we desperately need one. We need rank and file workers to take control of their unions and ensure they become vibrant and active organisations that truly represent their members.
Workers should demand an end to the current social partnership talks and a complete and definitive end of the whole process. Trade unions must become organisations that defend workers not negotiate our rights away with partners with whom we have nothing in common. Through a rank and file campaign in the unions ICTU must be removed, the current trade union leaders replaced and the whole movement made independent and freed of the bureaucratic rule books that make it so undemocratic.
We cannot rely on left leaders. We must rely on ourselves because ultimately we must go beyond the sectionalism that riddles the trade union movement and on which even the most left bureaucrats depend. Self-organisation means our leaders must come from within our ranks and must at all times be accountable to us. They must be paid no more than the average of their members and they must be recallable and subject to a new mandate whenever workers feel it necessary to ensure they continue to defend their interests.
In summary we must rid ourselves of those partners of the Government and bosses who exist inside our ranks and we must create a new movement which makes sure that they are not simply replaced by new equally fake leaderships. The fight for an alternative includes a fight in our own ranks – success outside the union movement is not possible without success inside
Our alternative starts with practical proposals to ensure we successfully resist the attacks on our living standards. We need a workers campaign that unites all of us in the private and public sectors. We should reject partnership with those responsible for the crisis. Our campaign should be organised, built and controlled by ordinary workers and not by leaders who are more interested in walking the corridors of power with the rich and those in authority. We need to organise a nationwide campaign which calls not just to ‘change’ the cuts but scrap them. This campaign should demand a general strike of all unions on the same day with the same clear and unambiguous message.
Our alternative then is not one we call on the Government to implement. It is not one we can rely on opposition parties to adopt and then hope that they get into office sometime in the future. It is not one we can leave to union leaders wedded to partnership with those supporting and implementing the pension levy and cuts. It will become immediately practical when we are strong enough to impose it.
It is therefore one we must create ourselves,
organise ourselves and struggle for ourselves. It is one that goes
beyond simple trade unionism and is political. It is a socialist
alternative and it is one we need a new party to fight for. We need
a new workers’ party to struggle for our interests and fight for our sort
of society. The current crisis is the greatest argument and demonstration
of its necessity.