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How real is the recovery?

How real is the recovery? From a socialist point of view, there is no direct connection between the possibility of revolution and economic ups and downs. Workers may revolt out of desperation when their backs are to the wall, but equally the confidence that comes from a boom can inspire revolt.

The issue is still important, partly because different   strategies apply in boom and bust and also because socialists are divided about the nature of the crisis. Some groups see the credit crunch as part of the normal business cycle, Socialist Democracy believe that the crisis of capitalism is systemic, with no end in sight.


There is no limit to the jubilant optimism on the capitalist side. The government claims a new era of Irish freedom and  independence following the supposed exit from the troika. The central bank predicts a period of growth, only to be outdone by the ERSI's more expansive claims.   Dublin housing prices are booming again. In the UK and US the economies are growing and Europe is out of recession.

However there are dissenting voices. Economist Morgan Kelly, in an off the cuff remark, dismisses all talk of a  recovery and claims that the reality is a slow drip feed of low interest funds from the European Central Bank. Any stress test of Irish banks would mean further stress on domestic firms and the collapse of small and medium sized enterprises. In any case the reality of everyday life is further austerity budgets, an extra water charge and a bailout debt extending until 2054.

Eurozone tensions

Finance minister Noonan claimed that the extra debt taken on in last year's bailout would shrink to nothing over time because of inflation. Now the main concern in Europe is around deflation and the reality is that the Irish debt is not an imaginary number but a real pressure on the Irish working class and the economy. The 2013 deal was "noted" by the European Central Bank rather than endorsed by them. Some member countries have continued to voice concern that the arrangement is illegal and a proposed resolution is that the Irish Central Bank sell bonds early, forcing up interest rates. This is all part of an ongoing tension in the eurozone, where the insistence that bondholders be protected from any consequence of their recklessness has to be balanced against the need to prevent sovereign debt turning into an overall euro debt that might bring the whole house of cards down.  The fact that Greece is now trading bonds at relatively low interest rates despite the lack of any real change in its    economy is a indication that speculators now assume that the European Central bank will cover debt and also draws attention to the illusory nature of much of the Irish recovery.

In Europe there is a great deal of resentment of the ECB subsidizing a 12.5% corporation tax rate, especially when it turns out that the effective rate is close to zero and that a central element of the Irish recovery is its use as a tax   haven, producing almost nothing but a branch office and kickbacks to the property   speculators.  

There is much dispute about the relative weight of different  elements in the proclaimed recovery, but all commentators, no matter how optimistic, agree that an Irish recovery is absolutely dependent on a more general recovery which is very much in doubt.

Capitalist strategy

Rather than speculate it is possible to examine the wider successes and failures of capitalist strategy.

At the start of the collapse the main strategy was to nationalise the debt as sovereign debt, with the immediate outcome programmes of mass austerity justified by the debt the working class now found itself in possession of. There was much talk of rebalancing the economy to reduce the weight of finance capital in relation to manufacturing capital. An unstated aim of austerity, and its main effect, was to reduce the cost of labour in terms of overall wage rates, pensions and the social wage of state services while simultaneously opening up a mass privatisation of services and natural resources. 

Quantitative easing - fictional capital produced by government decree at almost zero interest rate has been a factor in US and UK recoveries and is being considered by the ECB in an attempt to overcome economic stagnation. (The 2013 Irish loan extension had something of the same effect as QE in that it provided a ready supply of money at low interest).

The sovereign debt has not gone away and remains an  immense economic drag. Irish banks are still extremely weak. A wave of privatisations has transferred large sums from public to private hands and this will lead to an increased cost for services. In  Ireland a vast range of resources have been swept up by US speculators - the entire NAMA holding in the North went at a quarter of its book value. It is true that wages and pensions have been driven down, but there is a long way to go if this process is to ensure a high level of profitability.

Of all the strategies employed by capital one mainly underpins the current limited recovery. That is the strategy of quantitative easing and the associated bank and sovereign debt guarantee by the ECB. 

This is of course the exact opposite of rebalancing. Finance capital is roaring ahead, feeding a bubble of speculation and yet another property bubble. 

The next recession is on its way, and this time there will not be the same reservoir of public capital available to cushion the blow.


Yet there is no refutation of the bizarre claims of a new  prosperity because there is no opposition. Despite the depth of the crisis, the Irish ruling class are able to sail through it with only a few flunkies guilty of any wrongdoing. There is no smoking gun, says Irish Central bank governor Patrick Honohan,   despite standing in a battlefield of smoking guns.

The judicial process refuses to find anyone guilty. Judges admit that the crimes occurred, but direct juries that they are the fault of the system. It would be unfair to punish anyone for the nightmare working people have suffered. They claim there is no evidence implicating individuals, yet the investigations show a ruling class that acts as a criminal conspiracy. Decisions that shape the lives of the workers are taken informally by a clique, with no notes and no chain of evidence.

What makes opposition so difficult is that everyone in the  establishment is in the clique - and that includes the trade union leadership. 

The groups on the outside won't break with labour and the union bosses and scandal follows scandal with no response.

The capitalist system in Ireland and across the world has not  recovered from the great depression. The limited recovery that we see has been built around the same motor of financial speculation that produced the crash. Many of the mechanisms of austerity that have been imposed on workers have yet to feed through.

Workers are crushed by feelings of desperation and anger. They lash out in elections but at the same time cling on desperately  to their traditional leaders (or to con artists such as Sinn Fein  mimicking a left party) and to the belief that bust will be  followed by recovery and a new dawn.

According to capitalism the recovery is here. Yet for workers fresh pressures, charges and poverty are the reality.  Real recovery will only come when workers take charge and establish a socialist society no longer tied down by the need to feed the profiteers, the bankers and the speculators. 



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