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The Trade Union traitors and the Financial Crisis

Joe Craig

19 January 2009

The Irish Congress of Trade Unions goes into negotiations with the Government this week to repudiate the existing social partnership deal, agreed only a few months ago, and consent to plans to make the working class pay for the economic and financial crisis which has gripped the Irish State.  The Government has stated it wants to cut public expenditure by €2 billion, which thus becomes the total cut in working class living standards which ICTU is about to accept.  The negotiations, such as they are, are merely about how this will be packaged and sold, but the essential aspect of the packaging and selling is that it is the trade unions that will be decisive in marketing it.  Without them and the litany of excuses that will stream out of them in the next few days and weeks what is being demanded would be very difficult to sell.

Without this service provide by the union leadership imposing such a large cut in living standards might prove difficult.  It would certainly prove difficult if there existed a trade union leadership determined to protect its members’ interests.  The majority of workers who have regarded social partnership as some sort of protection now have an almighty cause to think again.  Not only about partnership, not only about their leadership but also about the role of existing trade unions as mechanisms for defending their interests.  The union leaders are alive to these concerns, complaining that their acceptance of these cuts must be so arranged that workers do not decide there is no point being members of these organisations and eave them.

The left must also be forced to re-evaluate previous positions.  For example the Socialist Workers Party has dropped opposition to social partnership and in the last deal advocated a better social partnership deal.  The difference between their proposed deal, which was never fully explained, and what was eventually agreed will be less than the existing deal and the one to be pushed through in these negotiations.  Will they follow their logic and propose defence of the existing deal as the basis for opposition?


This however is a relatively minor matter.  The problem for all partiers mentioned above is that the existing social partnership deal involves a pay freeze for public sector workers for 11 months.  How then would it be possible to blame these workers for the collapse in public finances that has just occurred?  The answer of course is that it isn’t possible, but the demands have been made that the State can’t afford the wage bill anyway.

But this too is a difficult argument to make in current circumstances.  The public sector in the Irish State is not large.  Even the right wing economist Jim O’Leary has noted that ‘the public capital stock per person here is little more than half the OECD average, reflecting underinvestment in the past. . .”

A few short months ago the State promised over €400 billion if it was necessary to support the banks.  In December it promised €5.5 billion with the potential for €2 billion more in recapitalisation of these banks, (and we haven’t even got to the smaller ones yet).  Brian Lenihan stated he really didn’t know how much his rescue of Anglo-Irish Bank was going to cost.  In December he promised a restructuring plan after six months and that “we will know exactly what the position is then.”  He may claim he knows the cost of nationalising Anglo-Irish now but almost no one else knows, including his cabinet colleagues(1).   The budget and latest economic ‘plan’ have promised yet more tax cuts for property developers and multinationals. Why then should workers have to pay?  Why would the Government even think it could try it on with trade union leaders under such circumstances?

The Government, bosses and economic experts’ who populate the media with such dreary regularity say that public sector workers are pampered and that they cannot afford to maintain their living standards while that of workers in the private sector are cut.  It is absolutely true of course that many private sector workers have had their wages cut, with faint or no resistance from ICTU.  But just how would cutting public sector wages help private sector workers?  This divide and rule strategy, which has been an element of the partnership process since its inception, has no basis in truth.  The people who want to cut public sector wages aren’t doing so to defend private sector workers - quite the opposite.  Cuts in the State sector are meant to lower wages overall by pushing down the level of wages in the whole economy.  Lower wages in the public sector set a new lower benchmark for workers everywhere and force workers in the private sector to accept lower wages because nothing more will possibly be offered elsewhere.  In addition, if a fully unionised workforce in the State sector can have wage cuts imposed on them, it demoralises workers everywhere and makes it more difficult to convince them that it is necessary and possible to fight back.

One fig leaf of an argument advanced is that prices will fall and that wage cuts will not be as marked as they might appear.  They remain quiet however about the increases in taxes and service charges that are coming down the line later this year.  Sometimes the commentators who advance such arguments lose the run of themselves and claim that prices are already falling, (see Cliff Taylor for example in ‘The Sunday Business Post’ on 18 January).  In fact prices continue to rise even while wages are held still and in the previous pay round inflation ran ahead of pay increases.    It is therefore patently obvious that excessive wages have not caused the State’s financial crisis.

Let’s be clear.  The State’s finances are in a real mess.  They have reached this mess however because of cuts in corporate taxation, promotion of a property bubble and an economic policy with no clue other than wave money at multinational companies.  The current shortfall in State finances is of the order of €16 to €17 billion, perhaps €20 billion, yet the Government offered guarantees to the banks, recapitalisation funding and now nationalisation of Anglo-Irish Bank without telling any of us what potential bill this has exposed the State to.  Instead we have been fed a diet of lies which have been exposed one after another as the banks crashed further.

The bank bail outs have been designed to save bankers and property developers with taxpayer’s money while the crisis has exposed the banking fraternity as greedy liars, deserving of the description ‘scum’ by a Government TD.  The Government have in turn been revealed as serial liars and incompetents.  In these circumstances the Government would have found it impossible to defend this policy of protecting the bankers and property developers so it needs help – step up the bureaucrats of ICTU.

The End

It all comes down to this – who will pay for the economic crisis?  The Government has attempted to save the bankers and their friends but this costs money that the State doesn’t have, so who will provide it?  Initially this will have to come from borrowing on the international markets.  However this has to be paid back and the cost of it has increased and will increase further as the extent of the mess of the Irish Government and its banks becomes apparent.  Already it has been stated that there is little chance of Allied Irish Bank and Bank of Ireland being able to raise the €1 billion each required by the recapitalisation plan.  The State will therefore have to step in.  In other words €2 billion is to be taken from workers pay packets to give to the banking scum.  This is a precise description of ICTU’s role – to ensure that this happens.

The policy of supporting failing banks, of making it easier for them to borrow money, has helped ensure it is harder and more expensive for the State to do so – a bill to be paid by Irish workers.  A number of credit rating agencies have announced that they are looking at the State’s credit rating with the possibility of reducing it, thus making it more expensive to borrow money.  The Fitch analyst on Ireland said that “I find it very difficult to keep up – so fast the news from Ireland deteriorates.”  The latest increase in Irish State borrowing costs has raised it to 1.8% above the benchmark German level, which might not appear a lot at first glance, but which amounts to €360 million a year or €1.8 billion over a five year loan period.  This in itself may prove relatively small if the billions in euro promised as capital to the banks simply finances the writing off of property developer loans.


There can be no doubt that ICTU will perform the role demanded of the State, the bosses and the experts.  We can be sure of this for two reasons.  Firstly because it is in the interests of the ICTU bureaucrats to perform this role and because they have, in their usual display of negotiating skills, announced before negotiations are even supposed to have started that this is what they will do.  Let’s take this latter aspect first.

At first trade union leaders declared that there was no chance of their going into negotiations to accept wage cuts; Peter McLoone of IMPACT was particularly vociferous in this respect.  Then ICTU said that it would not engage if it was simply about cutting public sector wages.  Then it said ‘everyone should pay,’ that ‘everyone’s shoulder is to be put to the wheel.’  SIPTU’s Jack O’Connor then said that unions had ‘a responsibility to play our part.’  Then it was stated that the unions would be ‘constructive provided no unilateral actions are taken that would render our co-operation impossible.’

This statement came from Dan Murphy of the Public Services Executive Union, who also threatened that if public finances weren’t controlled the IMF would be brought in to force mass dismissals and pension cuts.  And here’s you thinking it was the Government’s role to threaten workers with the IMF if they don’t do what they’re told.  Murphy said that it was therefore ‘very much in the interests of our members that a solution is found to this crisis.’  Apparently for David Begg the problem for the unions then became ‘wage cuts per se’, which are different from ordinary wage cuts in what respect was not explained.

What a trade union deal might look like can be seen at Aer Lingus which is in some ways a microcosm of the Irish State.  After first pretending to oppose cuts in jobs and terms and conditions the trade unions later embraced them.  While top executives negotiated golden parachutes of millions of euros should Ryanair take over, David Begg sat on the Aer Lingus board of directors and simply didn’t notice.  Begg also sat on the board of the body with overall responsibility for regulating the banks, while these banks indulged in a destructive speculative binge, stuffing its executives full of cash and side-stepping anaemic regulation by giving their top brass loans from their own banks.

All this brings us to the second reason the ICTU bureaucrats will betray their members.  The issue at stake is the health of the Irish State and the bureaucrats of ICTU are a separate social layer with material benefits utterly dependent on the state.  Their futures are not tied to the members they supposedly represent.  They get paid very large salaries, much higher than the vast majority of their membership, and are not at risk of either the job or wage cuts that face the membership.  When their members go on strike they don’t lose money and they don’t risk victimisation.  Their salaries depend on the health of the union bureaucracies that have been built and on the dues of the membership.  The state ensures that no problems arise with union subscriptions being deducted from state salaries, the right to union membership is ensured in State employment, and in return trade union leaders have made sure they don’t challenge the lack of unionisation rights in multinational companies. 

The social partnership process has ensured access of the union bureaucrats to the corridors of state power and it is not in their interest to threaten or weaken the walls of those corridors in any way.  They are wedded to defence of the state ideologically as well as materially: their ‘alternative’ economic proposals invariably involve greater intervention by the Irish capitalist state, and such is the ignorant level of public discussion, this is often described as ‘socialism.’  Base material interests are nevertheless still very much involved.

This has been revealed recently by the scandals at the State training agency Fás, in which procedures were trashed and expensive junkets for those at the top, at taxpayer expense, were the order of the day.  Largely ignored in coverage was that the board of directors of Fás, which supervised this scandal, was stuffed full of union bureaucrats, with members and former members from SIPTU, TEEU and ICTU, presided over by Peter McLoone from IMPACT who was Fás Chairman.  Who needs bankers to preside over corruption?  Fás also provided funding for trade unions and in 2007 gave ICTU €832,670 and SIPTU €889,336 plus €25,000 for its equality unit.

The left has traditionally had an analysis of the bureaucracy as being a group balancing between workers and bosses who bend towards whoever applies most pressure.  The logic is then simply to apply the most pressure.  Unfortunately this analysis cannot account for the facts above and leads to policies of unity with the bureaucracy instead of declaring it part of the enemy of working class interests and then fighting it.


The current attacks on workers are justified as necessary for the ‘national interest’ and this of course is very easily identified with the interests of the State itself, even when it doesn’t represent the whole nation and has sold itself to bankers and property developers; and while it is ruled over by a party that is composed of those who did their own patriotic duty by avoiding taxes to the very state that they now say is in need.

We are not therefore required to take the declarations of the leadership of the trade unions seriously when they say that they will not accept wage cuts.  At this point of their current surrender process, conducted through the media, they have made it clear that they would not accept wage reductions in ‘basic pay’ but that everything else is more or less up for grabs.  This includes an extended pay freeze – regardless of inflation; accelerated redundancies; cuts in increment entitlement and premium pay for night work etc.; reduced allowances; increased pension contributions with no additional benefits while existing funds are gambled on the shambolic banks through recapitalisation; and a shorter working week.  In the words of Shakespeare: “O, be some other name! What's in a name? That which we call a rose by any other name would smell as sweet.”  A pay cut by any other name would smell just as rotten.

The disingenuous call by ICTU for workers to share the pain with other sectors of society is bogus on two counts.  First the ‘sacrifices’ of the rich will either be much smaller, still leave them stinking rich, or will be losses which are the price for playing the capitalist game and are unavoidable.  They are the cost of a system driven by pursuit of profit, a system of cut-throat competition which capitalists will defend even while massive numbers of their class go bust.

The second reason however is more important and is not about equality of pain, even where this possible.  The sacrifices being called for are, in the end, not calls to save individual capitalists but appeals to defend the system as a whole.  Workers have no interest in saving a system that builds houses that lie empty, while prices inflate at unsustainable levels and people in need of housing go without.  Far less a system that performs these feats and then brings the whole economy crashing down as a result.

To therefore read David Begg condemn thirty years of liberal economics when for over half that time ICTU was in social partnership with the governments that implemented this economics; and listen to Jack O’Connor of SIPTU condemn the failures of the capitalist system over the same period on ‘Morning Ireland’, is to inhabit the make believe world of trade union bureaucrats.  This world is one ‘of political cover . . .for the social partners to accept the swingeing cutbacks in public spending that 2009 will bring.” (Pat Leahy, political editor, ‘The Sunday Business Post’, 21 December 2008.)

The trade union leaders are wedded to the capitalist state and through it to the capitalist system.  They have no alternative to this system and therefore no means, even if they wanted to, of framing an opposition to it never mind an alternative.  Thus they have supported the bail outs of the banks and as a result the bail out of the property developers they love to denounce.  For years they have supported expanded state intervention only to see that such intervention is for the protection of the rich.  The nationalisation of Anglo-Irish now makes the Government the direct bankrollers of the property developers.  The idiotic claim by Brian Cowen that it will be ‘business as usual’ might be interpreted as such.  The promise to stop the rich parasites removing their money from the bank while leaving their dirty debts has, according to reports while this is written, now been dropped.  How obvious can daylight robbery be?  Money is to be taken from the lowest paid to write off the loans to property developers, pay the fat salaries of bankers and the interest payments of bond holders.  What would be more pathetic, were it not so threatening, is that the sacrifices being called for will not work.


The Government is calling for €2 billion of cuts in 2009; but a further €4 billion are pencilled in for next year and the year after, with a further €3.5 billion in 2012 and €3 billion in 2013.  This is before the additional bad debts that the State will fund from the rotten banks are taken into account, and before future increases in borrowing costs imposed by international capital and the effects on public finances of a deeper recession.  In other words the capitalist crisis, for which workers bear no blame, will require greater and greater attacks on living standards.  This will require not just cuts in public and private sector pay but a large increase in bankruptcies and unemployment, emigration and tax increases.  Only a belated upturn of the international capitalist economy with some positive effect on the Irish State can prevent such a scenario coming to pass, and then only until the next recession demands the elimination of remaining excess debt and credit.  Only rejection of this whole process offers an alternative way out of such possible futures.

This requires a campaign to oppose ICTU’s involvement in any plans to cut its members living standards.  This means a campaign opposed to social partnership and opposed to any wage cuts or redundancies.  Workers should feel no responsibility for the rotten banks nor for the mess that they have created.  Workers should demand repudiation of the Government’s bank guarantee.  The subsequent collapse of the banks should see their take over by their workers and their complete restructuring.  The assets of capitalists who have outstanding loans should be seized as should their deposits, which in Anglo-Irish they have attempted to take out while leaving workers to pay for the loans that won’t be repaid.

The difference between the falling assets of the banks (their loans and capital) and their liabilities (their deposits and loans by other financial institutions to them) should be covered by simply allowing Anglo-Irish to go bust.  Those depositors in need – pensioners and workers - should be compensated at full value; the rest can go hang.  The money owed to the bank should be collected on behalf of the Irish people and a plan drawn up for how it may be usefully invested for the benefit of the people.  The other banks should immediately be subject to workers control to ensure that the deposits of the rich are not spirited away and then put through the same process.  This process should involve the opening of the books to reveal the hidden scandals and the extent of the mess but also the size of potential assets and liabilities.

Such a challenge to capitalism would not be countenanced by anyone in the Irish State yet it is the only road down which those guilty of the economic crisis are made to pay for it.  Any other route involves workers bailing out the rich and their system.  It involves unemployment, wage cuts and cuts in welfare services that will cause misery and death for the most vulnerable.  We face a struggle between the logics of two systems and two classes which will not be solved by negotiation or the fine points of technical argument.

The working class needs to respond to the increased stakes of the Government.  Only by uniting with workers around the world, all facing the same threats and the same attacks, can they present an alternative that defends their interests.  Framing this alternative is the job of the socialist movement, it is up to our movement to show it can provide the political weapons that can allow the working class to successfully resist and begin creation of an alternative class power.

(1) In a previous article we asked the question why the Government had taken such an expensive route to defend the banks.  One reason trumpeted by the opposition parties in the Dail is the closeness if Fianna Fail to the property developers that are up to their necks in debt to the banks.  This is obviously one factor but we argued it was not the only one.  The opposition politicians have not mentioned the fundamental reason because they are as wedded to the real cause of Government policy as Fianna Fail.  This is the utter dependence on attracting multinational capital into the State and presenting as capitalist friendly a face to international capital as possible.  Brian Lenihan has now on a number of occasions accepted this as the rationale for the State’s actions, even if it doesn’t excuse their incompetence in the process.  In his justification for recapitalisation of Anglo-Irish he said that “Ireland’s international reputation and creditworthiness among international financial markets and investors is dependent on maintaining stability in the banking system.” (‘The Irish Times’ 10 January.)  When he announced the bank’s nationalisation he said “That’s what’s fundamental here for the credit and reputation of Ireland around the world. . . Were we to permit this bank to fail, we would be saying to depositors, to businesses, to citizens, to people in our economy and other economies, that Ireland is closed for business.” (‘The Irish Times’ 17 January.) 



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