Joe Craig

30 March 2007

A remarkable article appeared in the business section of last Monday’s ‘Irish Times’.  Headlined, ‘Multinationals give ultimatum to government’ it was remarkable for its statement of simple truths about the nature of the Irish State that almost every political force, from right to left, ignores.

The occasion for the article was a review of a short document by the American Chamber of Commerce Ireland, which represents US multinational companies with investments in the State.  The article’s author, John McManus, wrote that ‘as wake up calls go, they don’t come much louder.’  The wake up call is the threat by these companies that unless certain action is taken ‘US mobile capital is out of here, with all the consequences that entails.’ 

The report points to the mounting problems now affecting the Irish economy, particularly the challenge of lower cost competitors: ‘the pace of globalisation means that newly-industrialised economies have an ample supply of skilled labour, with much lower costs.’  The lower rate of corporation tax that has played such a major role in attracting US multinationals to Ireland ‘is now being emulated by governments in competing economies.  Changes to EU state aid limits will restrict the amount of aid Irish enterprise receives from 2007 onwards.’

The report expresses concern at the level of inflation which is above the EU average and notes that one result of all these unfavourable developments is that ‘Ireland’s balance of payments has shifted to a deficit of 3% of GNP in 2005 and is expected to drop to 5% in 2007.’ (‘Retuning the Growth Engine’, The American Chamber of Commerce Ireland, p. 6)

Action

The action to be taken offers ‘a vision of how Ireland will look in 10 – 15 years time’ and is broken down into five areas.  The first is a reorganisation of education, to one that delivers ‘a high quality, flexible workforce that enables and transitions human resources as demand dictates . . . enabling the working population to move into and out of the system as it adapts to changing skill requirements.’  (p. 8)

Despite repeated self-congratulation by Government parties and many commentators the report is none too complimentary about Irish education and notes that ‘Ireland (has) the lowest level of educational attainment of 12 key countries, based on 2004 OECD statistics.’  It advocates a doubling of investment to raise it to the top ten per cent in the OECD league table.  This would involve radical change in the curriculum to emphasise science, technology, engineering and mathematics subjects and even more radical reorganisation of the education system.  This includes changes to the secondary and third level systems, ‘flexible remuneration’ of teachers that takes account of ‘market reality’, and tax incentives to companies and individuals to promote adult education.  If the public sector proves incapable of delivering the required flexibility the report makes a thinly veiled proposal for privatisation – ‘a debate on the merit of developing a private alternative.’ (p. 10)

The second, third and fourth actions required by the State involve increased research and development expenditure (R&D), its commercialisation and its application to ‘convergent’ technologies.  R&D is to be increased by an expansion of infrastructure through public-private partnerships, based on the needs of multinationals already in the country with a view to increasing this investment.  Additional incentives are advocated to attract top level researchers.  Commercialisation involves taking advantage of ‘the window of opportunity for Ireland to establish leadership in Europe as a global IP (intellectual property) trading hub and gateway.  Currently Ireland’s participation in this activity is well below countries such as Germany, UK, USA and Japan.’ (p. 16)  Once again all this will be encouraged through ‘novel tax incentive schemes.’ (p. 17)

‘Convergent’ technologies are those new industrial innovations that typically earn super-profits and are based on the coming together of elements of existing, separate industries.  The objective is once again to develop these ‘niche areas’ on ‘the existing FDI (Foreign Direct Investment) base.’ (p. 19)  The report lists examples of the State support required, including the Biomedical Diagnostics Institute at DCU and the Centre for Research on Adaptive Nanostructures and Nanodevices and Centre for Telecommunications Value-chain Research at Trinity.  The emphasis again is on public-private partnerships.

Finally the report emphasises the need for the State to offer substantial tax advantages to multinational companies including a favourable ‘regulatory environment’ and ‘pro-business political environment.’  This involves certainty being given to the retention of the existing 12.5% corporation tax, extension of the recent 2004 R&D tax credit system, tax incentives for IP, expansion of patent royalty exemptions, and further privatisation, or public-private partnership as it is called here.

The way tax incentives work is nicely illustrated by the remark in the report that ‘the low corporation tax environment does not support undertaking R&D in Ireland and from a competitive perspective, many countries offer attractive R&D tax credit incentives.’  The Irish State’s low corporation tax encourages multinationals to place and record their R&D activities in their country of origin, such as the US, because taxes are higher there and any cost of such R&D can offset this higher tax by reducing the profits subject to such tax in that country.  The revenues generated by the company’s activity can be skewed to places like the Irish State where tax on these inflated profits is lower.  The answer given to this tax avoidance strategy is of course to offer yet more tax reductions to the multinationals to encourage them to carry out their R&D in Ireland.

Consequences

The consequences of such action would be – in the words of the ‘Irish Times’ journalist - to turn ‘the State’s education system and much of its infrastructure into some sort of outsourced research and development function of a handful of US corporations.’  He writes however that it could be argued ‘that we made our Faustian pact with US style capitalism many years ago.’

‘A more significant issue is the notion that if the Government goes along with what the American chamber wants, then national policy making has been handed over to the boardrooms of these same US corporations.’

The writer notes that the American chamber ‘helpfully spells out’ the power multinational corporations wield and why we must ultimately do what they want and ‘get a move on’. ‘US companies have a $61.5 billion (about €50 billion) investment in Irish-based operations (7.6 per cent of all US investment in the EU and 3.5 per cent world wide).  Today an estimated 100,000 people are directly employed in over 580 US firms in Ireland while indirect employment in the sub-supply industry and services has been estimated at over 225,000.  US firms contribute over €2.4 billion to the Irish exchequer in corporate taxation and a further €1.32 billion in expenditure in the Irish economy in terms of payrolls (and) goods and services employed in their operations.  The US is Ireland’s top export destination and US firms based in Ireland export an estimated  €57 billion of products and services from Ireland into world markets.’

The economic exploitation of small countries by larger and more powerful ones and their ability to transmit this into political power over the exploited is not of course a new phenomenon.  It is what Marxists call imperialism.  The Irish capitalist class have long since accepted this and, while their political parties do not parade their dependence, they know well that the Irish people are conscious of this dependence and are reminded of it when suggestions are made of even mildly radical measures that US multinationals might find objectionable.

Problem?

The people for whom this report throws up a problem for are thus not the capitalist parties.  In the coming election these parties will faithfully implement the demands of the US corporations.  This week Miceál Martin welcomed a €250 million investment by US company GlaxoSmithKline in Cork on the back of R&D carried out in the State.  The US President of the company noted that while it had 80 facilities world wide it had picked out Ireland for production of its new drug because ‘this facility has never let down the corporation.  It has a 100% track record . . .’  The local parties will thus ‘get a move on’ and seek whatever crumbs they can from the table of the US corporations while releasing as little as possible in order to keep the people pacified.

No, the people this article causes a real problem for is the left, and most immediately for those who will stand in the coming general election claiming to have an alternative to Fianna Fail, the PDs and Fine Gael etc.  Having proved incapable or unwilling to understand or accept the existence of imperialism as a fundamental problem in the North of the country, despite the presence of more British troops there than in Iraq, some will, without a doubt, prove equally oblivious to the existence of imperialist domination in the South.  If even bourgeois journalists can perceive the locus of real power, of the origin of the major power of exploitation that the Irish working class suffers, the inability of the Irish left to speak out against it will be damning.

The imperialist domination of Irish society has profound implications for any socialist alternative.  Above all it means that no purely national solution is possible.  It is not possible to build an independent socialist Ireland.  Socialism in Ireland will only arise out of the deepest engagement with the rest of the world, on the basis of cooperation rather than competition.  The socialist programme is therefore an internationalist one.

From this also flows the necessity of it being a revolutionary one.  It is just about possible to argue for reformist socialism, for changes to the way the capitalist State redistributes income and ownership, if the nation state is the only relevant framework.  When only an international framework of power can settle the problems faced by workers it becomes utopian to believe that the international institutions of the capitalist system can be bent to workers interests.

This report is therefore extremely useful.  It demonstrates the limits to democracy within the Irish State, to the possibility of defence and development of working class interests on a purely national level and the necessity for an international socialist programme as an alternative.  While we can start at the national level in building such an alternative only on an international level will we be able to offer an alternative that is credible.

The majority of Irish workers understand that, despite all the Celtic Tiger guff, the Southern state is a dependent state, but the task of building an alternative society seems so difficult that it is easier to believe that it is possible to survive through individual adjustments by consuming less, extending credit, working longer hours, extending a house mortgage over 50 years and so on.

The final message of the report is that this is not possible. Wages, job conditions and the social infrastructure of health, pensions etc, will be pushed downwards at an accelerating rate as we compete with other dependent countries to set the lowest wages and conditions while taxes are absorbed to carry out unpaid research and development for US corporations.

Its time to begin the race to the top, building the alliances, links and policies that will maximise working-class power on a national level while constructing the international organisation that are necessary to build an international alternative. 

But to do that one would need a dose of reality.  To know what the majority of workers know and what bourgeois journalists shout from the roof top.