Joe Craig

10 February 2009

In our article on the recently collapsed social partnership negotiations we confidently predicted that the union leaders would sign up to wage cuts.  They didn’t.  We got our prediction wrong.  Why did we get it wrong?  Are the union leaders really valiant defenders of workers’ living standards?  Are they maybe just prepared to take only so much?  Do they have a bottom line below which they will not tolerate attacks on workers’ living standards?

We think the answer to these question is no.  We think the history of social partnership evidences this and we think our articles and book recording this history demonstrates it.  We think the answer to the question – why did we get it wrong – is in fact further evidence of our argument.  So why did ICTU walk out and why did they not support the cuts announced by Cowen the next day?

Explanation

When David Begg of ICTU walked out of the talks he complained that they had simply ‘ran out of road’ and ‘ran out of time.’  Yes, he opposed the increased pension contributions, but everyone knew cuts in pay via increased pension contributions or some such method were going to be agreed, so there was never unconditional opposition expressed to this measure by the union leadership.  Instead it is clear that the talks collapsed because the Government weighted these cuts to hit even the very lowest paid and disproportionately hit the vast majority of public sector workers with quite onerous increases.  It did this with nothing but the slightest genuflection to everyone sharing the burden.  There were no bones given to ICTU to allow them to hide any capitulation over the pay cuts.

Begg, straight after walking out of the talks, did not therefore signal any real opposition to the measures announced by the government and in fact rubbished ‘protest’ against them, making it clear that ICTU were still prepared to negotiate the cuts with perhaps more political cover.  The need for such cuts had already been approved with the joint agreement of a Framework document and indeed this charter for cuts has subsequently been brandished as the foundation for union agreement to Government proposals.  ICTU still professes its support for social partnership even while the Government joins the employers in ripping up the existing pay deal and imposing by fiat deep pay cuts.

All this means that the question is not one of why ICTU walked but becomes why the Government did not include them?

Part of the explanation is undoubtedly the sheer incompetence of the Government which has been noted by many commentators.  After the announcement of increased pension contributions it was clear they hadn’t even understood how they would be calculated or how much they would cost!  Running out of time through delaying the negotiations, and not allowing the usual grandstanding by ICTU or SIPTU that is part of the partnership talks ritual, were mistakes, but they join a long line of mistakes including the original one of not appreciating it was building up a crisis and not recognising it when it exploded.  The subsequent failures of the various steps to save the banks then followed.

It all however goes deeper than this. The government parties have shown a determination to safeguard the position of the rich in Irish society way beyond what it can really afford.  The support for the banks, especially Anglo Irish, and the property developers, their additional tax breaks in the last budget being only one instance, are earlier examples of this approach.  The current wheeze of giving €7 billion to the bankers from the workers’ pension funds while topping these up with a few billion increased contributions is now the latest.  A more honest policy would be just to dragoon everyone into their local bank branch and hand over their money so it can be written off on behalf of the bad loan property developers.  Not for them a policy of saving the system by making even a section of the capitalist class pay a modest price. Like Haughey before it, the current Fianna Fail leadership has all the strategic vision of a small town huckster at sea in a world of high finance.

Scale

Of course such a policy is unsustainable.  The magnitude of the cuts in public sector wages and services in 2009 is €2 billion but this will have to double next year under the Government’s existing plans and these in themselves are already optimistic predictions of the economic situation.  Cuts in workers’ living standards will have to be greater and the cretins of Fianna Fail will have to learn the lesson that in order to save the system it will have to accept the logic of capitalism: that some of the pain generated by the crisis will have to be borne by sections of capital.  This is already the case and there is nothing Fianna Fail can do to prevent it.  It can continue to try to protect its favoured sectors such as the banks and property developers but capitalist crises are precisely crises for capitalism and capitalists.  It is normally through destroying those capitals most vulnerable that it is possible for those left to gain by their competitors’ destruction and the resultant cheapening of capital and labour, which helps boost profits and the incentive to invest once again.
 

This is why it is so mistaken for workers to accept any argument that as long as the pain is shared it should be accepted.  It must be said again and again - workers did not cause this crisis, it is not their fault and they should not pay for it, any of it.  The pain can never be equally shared because the fundamental point of the pain is to allow the profit system to grow once again; in other words for profits to surge for the benefit of the capitalists who have the money to invest.  The intelligent capitalist politician will recognise the threat to the system and turn the inevitable capitalist casualties into evidence of the ‘shared’ pain, and so assist it to impose cuts in workers’ living standards. There is no reason for Cowen not to impose small reductions in a few fat cat salaries costing a few hundred thousand euros if it helps him give these same shysters billions of euros to prop up their banks. 

Unions

The union leaders’ only demand now is that the Government engage is such subterfuge.  Their own deception is therefore transparent, if only their words were interpreted literally.  Thus Peter McLoone of IMPACT stated after the talks that his union was “not in the business of discussing pain for our members in the absence of a contribution from business and the wealthy.  Any discussion will only happen in the context of the framework document agreed by Government and IBEC last week.”  The purpose of talks therefore is not to reverse attacks on workers but simply to conjure up some ‘contribution’ from the rich.  The need for the union leaders to protect themselves through this cover was made equally obvious when Begg stated that agreement to them would have led workers to “have a revolution against them.”  It is entirely appropriate that it is not clear whether the ‘them’ in this context meant the pension levy or ICTU.

All talk now of these union bureaucrats leading a resistance to the cuts is the sheerest delusion.  ICTU has said it is not against the principle of the cuts; has warned against knee-jerk reactions although such reactions are medically a sign of good health; has acknowledged that industrial action could be self-defeating and added ruefully that “we can’t passively walk away.”  “Ultimately, if we have to have a campaign against it, we will have a campaign against it.”  No doubt such stirring words will have the Government shaking in its boots.  Were they not so shameless it would have been embarrassing for ICTU to have to deny suggestions from the media that it had really ‘given the nod’ to the cuts.  The media can see what every worker should be made aware of – ICTU is not opposed in any meaningful way to these cuts.

Scale II

The Government has been criticised for not conveying to the public the sheer scale of the economic crisis which faces the State.  It is as if being made aware of its scale will more easily convince workers to swallow the poisonous remedies.  Socialists should not in response attempt to minimise the scale of the crisis. We should not hope that we can stir resistance by conning workers that this is all a hoax – that it is another deception simply aimed at emptying their wallets and purses.  In fact we should spell out loud and clear the full dimensions of the economic disaster, not just to demonstrate the crisis-ridden character of capitalism, but to show them just how much they are being expected to pay to bail out this rotten system.

The relative enormity of the crisis in international terms is revealed by Ireland being the ‘I’ in the PIGS of the EU (including Portugal, Greece and Spain), which are those considered most hit by the financial crisis, although this conveniently leaves out the British State.  The Irish State has become the first western European country to have its credit rating placed on a negative outlook, meaning it could be reduced, by the rating agency Moody’s following a similar decision by Standard and Poor’s.  Revealingly this was partly justified by erosion of the Celtic Tiger model, meaning a lack of confidence that the Irish State could repeat this model in the future even if it wanted to – good times may not return.  The sacrifices may not bring back ‘prosperity.’

An article in ‘The Irish Times’ (3 February) revealed figures from the International Monetary Fund and Bank of International Settlements (IMF and BIS) which show the scale of credit that must be crunched in this crisis.  As we have said before, the capacity of capitalism to produce real value to realise the mountain of credit and debt that has been produced has been tested to destruction by the crisis.  It has revealed that the fundamental disparity between an explosion of credit and real value creation means that the two must come into some sort of realignment through a process of ‘deleveraging’- that is reduction in credit and debt.  Calls for the banks to keep on lending simply ignore this reality.  The banks cannot do this.  If they do they risk further bad debts, losses and bankruptcy.  If they try to maintain a high level of credit they risk long term stagnation where fundamentally insolvent businesses, including their own, stagger on with their bankruptcy disguised but not cured.  The economy then simply stagnates for years and years and sometimes the comparison is made with Japan in this regard, although Japan was and is a much stronger economy than that of the Irish State.  Finally the banks can manage a reduction in credit and debt by reducing loans and gradually liquidating those that they have already on their books.  Done too quickly this will lead to a crash but however it is done it must lead to recession, if not depression.

The scale of deleveraging required is therefore important.  The IMF/BIS report thus records gross debt outstanding at the end of 2008 as €1,671 billion, up from €504 billion in 2002 and €907 billion in 2005.  This is over eight times national income and is mostly owed privately.  What we are now seeing is the State taking some of it over.  It is clear it cannot do this for more than a fraction of outstanding debt and will do so only at a cost, as the credit rating agencies have reminded us.  The Government’s plans will therefore not prevent economic disaster, they will not work and workers should not sacrifice themselves in the effort to make them work.  The amount of debt outstanding is ‘gargantuan’, in the words of the “Irish Times” authors; foreign claims on the Irish economy amount to seven times national income, one measure of imperialism, and in absolute terms is one-sixth of the USA’s and greater than that owed by Japan!!  Even in net terms indebtedness is €790.8 billion at the end of 2008, more than five times Gross National Income.  The authors calculate that this means that around €300 billion has to be repaid between July 2008 and July 2009.  While some of this will be repaid, some more borrowed and more rolled over this implies deep cuts in current income and a large increase in bankruptcies as some debts cannot be repaid.

The speculative capitalist frenzy spurred on by the property developers, fuelled by the banks and sanctioned and supported by the State has thus led to a real economic disaster that will cause a deep and sustained crisis.  None of it is the responsibility of the working class.

Question

Let is thus answer the question at the top of this article – yes workers will fight back.  We have already seen this through the occupation of Waterford Glass and the inability of ICTU simply to accept cuts in the living standards of public sector workers.  That this fightback will start off in a confused state and with a lack of clear ideas on how to win or what an alternative might be – this is all but certain.  An insurmountable problem only arises if those with an alternative, the socialist alternative, lack the courage or the politics to advance this alternative, satisfying themselves with populist programmes that they think will be more immediately acceptable but which will ultimately fail.  The short cut and opportunist practices of the left in Ireland will thus face a test they have so far shown little prospect of passing.  It may be hoped that the scale of the crisis will also radicalise, in fact revolutionise, their supporters if not their organisations and create the basis for creation of a revolutionary workers party.that can unite workers to fight for a socialist alternative.

Workers and socialists should not therefore remain content to criticise ICTU, although many will not do even this. They must take the opportunities presented by ICTU’s manoeuvres to organise and mobilise workers and present them with the socialist analysis and perspectives for resistance and alternative.

This resistance must be based on complete opposition to cuts in the living standards of the working class.  It must oppose a sectoral response such as ICTU seeking only to mobilise public sector workers against the latest pension levy, thus playing into the hand and validating the arguments of the Government and bosses.  Workers must accept no responsibility for the economic disaster which has engulfed them.  They should oppose the bank guarantee scheme, oppose the recapitalisation of the banks and oppose the Government’s plans for nationalisation.  Nationalisation, it should now be obvious, is not socialism.  Our alternative must involve workers control of the banks and the elaboration by the workers movement of an alternative economic plan that makes the capitalist class pay for the crisis, for it really does have to be paid for, and defends the position of the working class.

The current workers’ movement is not only incapable of such a plan, it and its leaders are opposed to such a perspective. The task of socialists and radicalising workers is therefore to fight inside and outside the workers’ organisations to create the movement that will do so.  The alternative to the capitalist mess is workers power, the creation of a movement that can fight to establish such a State power is thus our most immediate alternative.  It will be created through fighting against the crisis.  Neither its creation nor the crisis will be over soon.  Short cuts are not required, socialist politics and a revolutionary workers party are.