Category Archives: Budget

How left does a Left Government have to be?

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AAAdownloadThe weakness of the left’s strategy is revealed in the proposals upon which they would proclaim their difference from Sinn Fein and their preference not to seek a common platform.  If we look at the Anti-austerity Alliance (AAA) proposals for the 2016 budget we can see this illustrated in a number of ways. The gap in the strategy of the Left, evidenced in the AAA proposals, therefore also raises the question of how left the policies of a Left government have to be.

But first there is the reluctance of the AAA to accept that there is an economic recovery and one that many have benefited from, if only to the extent that the cuts appear to have relented.  Of course, that the rich do best is a permanent result in capitalism.  The issue here is not that the rich do best but the view that “for us, for working class people, for the majority of young people, unemployed people, pensioners and small farmers – there is no recovery.”  (AAA)

But this isn’t true.  Unemployment has fallen, and not just as a result of emigration, and wages are beginning to rise again while taxes are no longer increasing as before.  These things matter to people and go some way to explaining why there will be no left Government elected in 2016.

Stating otherwise allows the opponents of socialism to claim that socialism is politics for the poorest only.  It sits comfortably in right-wing rhetoric that socialists are only interested in those at the very bottom of society as opposed to better off or better placed workers.  It makes poverty the issue rather than the class inequalities and class divide in society.  It does not make one more of a socialist, or revolutionary, to deny that capitalism can improve the living standards of workers in particular ways, within particular limits and with regular crises that threaten the lifestyle that workers have slowly tried to create for themselves.

Worst of all, it fits with the view that socialism is created not out of the strength of the working class – that it has employment, that this employment is often skilled, that society is dependent on this skilled labour, that the working class is increasingly educated, and that it is not on desperation and oppression that socialism will be built but on hope, expectation and confidence of the working class in its potential power.

Above all, the unity of workers is based on shared interests regardless of more or less temporary differences in status and income.  The income inequalities within the working class are barriers to its political unity while the reformist emphasis on redistribution ignores what all workers share regardless of levels of income.

Poverty, unemployment and marginalisation are most important from a political point of view because they present barriers to a common class identity and unity.   Denying what little improvement there is robs whatever else is said by socialists of some credibility and it is not necessary to deny the growth of capitalism in order to argue for its greater failure and the need for an alternative.

When we move to the programme of the AAA the gap in the perspective of the left becomes apparent.  In proposals to repudiate the debt the case of Syriza’s attempt to renegotiate the Greek debt is recalled.  While it is proposed that “a left government in Ireland would demand a negotiated write-down of debt to a sustainable level” it is acknowledged that “if as the Greek experience indicates seems likely, it did not have success at the negotiating table, it (a left government) would then turn to the option of repudiation.”

The proposals state that this would involve an audit of the debt and that “it is reasonable to estimate that such a debt audit repudiation would result in a reduction of the total debt to at most 50% of GDP.”  The issues this proposal throw up – of opposition by the EU and of private capitalist measures that would be taken in retaliation, in other words of everything that makes this option a challenge, is unexplained.  The unwillingness to state how this would be successfully implemented and the opposition to it defeated hides an inability to explain how it could be carried out.

No amount of rhetoric will hide the failure to explain what needs to be done to implement the policy.  In a previous post I have looked at the lessons that the Greek experience might teach us, which elicited some discussion, but none of the potential lessons touched upon there are presented in the proposals of the Anti-Austerity Alliance.   Unfortunately problems are not overcome by ignoring them.

A second area in which purely reformist perspectives are evident is in the proposals for ‘Public Investment, Jobs and Decent Work’.  Here it is argued that “the state should not only be willing to employ people in public services, but rather should also invest and create jobs in “wealth creating’ sectors of the economy – construction, communications, natural resources.”

This proposal cannot be confused with the demand for employment presented in the Transitional Programme written by Leon Trotsky, which was written to “deal with the present catastrophic period” and which was not a perspective for long term development of the (capitalist) economy.  It was required in order to protect the working class “under the menace of its own disintegration.”  Its purpose was not primarily to protect living standards or to provide a long-term solution to the ravages of unemployment but was necessary because “the proletariat cannot permit the transformation of an increasing section of the workers into chronically unemployed paupers, living off the slops of a crumbling society. . . Trade unions and other mass organizations should bind the workers and the unemployed together in the solidarity of mutual responsibility.”  Its purpose was plainly mainly a political one, to put the workers in a better position to take over society, not to confuse such measures with socialism itself.

The proposal is mistaken not only on the grounds of principle, that it proposes, and expects, that the capitalist state  could “provide the investment necessary for the creation of a an economically and environmentally sustainable recovery”, in other words a more efficient and effective capitalism, but that its proposals are concentrated on development of infrastructure that private capitalism has been so bad at providing almost everywhere and on which it has often relied on the capitalist state to provide.  In other words state investment in infrastructure is complementary to private capitalism not a competitor to it, even if state ownership in itself could be so considered, which it can’t.

The specific proposals for investment make this clear, mostly directed to traditional state sectors – a public works programme based on the water and sewerage industries, healthcare and education; childcare and development of wind energy.  All are complementary to existing private capitalist accumulation and are supportive of it.  Even development of the wind industry is already well established and already has state companies at its core – ESB and EirGrid.

The most dynamic industries situated in Ireland are in the ICT and chemicals sectors (including pharmaceuticals).  Encouraging the setting up of workers cooperatives in these would signal a real appreciation of the possibility of a workers’ owned cooperative sector of the economy growing in competition with the private capitalist sector, laying the basis of a future economy totally based on cooperative principles.   But there is no evidence that this has been considered at all.

Finally, the AAA proposes not to raise the corporation tax rate but simply asks that the headline rate of 12.5 per cent becomes the effective rate.  It is obviously aware of the timidity of its approach despite saying that: “by maintaining a regime of low effective corporation tax to entice foreign multinational companies, Irish society pays a heavy price by depriving our wrecked public services of the funds they require to provide decent living conditions for all.”

Given its view of the paramount need to redistribute income from the richest corporations to workers it makes little sense to propose that these corporations incur a tax rate of 12.5 per cent while the lowest income tax rate for workers is 20 per cent (excluding the universal social charge).  The reluctance to even make them equal arises from the knowledge that such a rate would not be considered credible.  The AAA is unable to rebut the claims of establishment society that low corporate taxation is essential for the State’s economic sustainability:

“If it is truly the case – as claimed by the entire political establishment (as well as Sinn Féin, who support not only maintaining corporation tax at its current levels but extending that rate into the North) – that the slightest rise in effective corporation tax, to say fund the expansion our healthcare system and end the scandal of homelessness, would lead to a flight of companies out of Ireland then that is an indictment of their system, not a mark of economic irresponsibility on the part of the Anti-Austerity Alliance.”

So despite stating that “it is not simply a matter of tweaking with elements of the system here and there”; that a “rupture is needed”; “rules must be broken” and “a fundamental transformation of our society  . . needed”, it becomes clear that this rupture lacks foundation, except as a generalised declaration of the existence already of “the wealth and resources . . to deal with all the ongoing problems of the crisis”.

The calls for a “move to a socialist economy, with public ownership of the key sources of wealth, under democratic control of working people, and planned in the interests of the majority”, like the AAA “indictment of their system”, becomes a moral condemnation separated from a programme to achieve the goals desired.

If the AAA cannot have the confidence that multinational capital will not up-sticks and leave upon increased corporate taxes, never mind actively seek to sabotage a left Government’s plans, then what confidence can workers have?  More importantly – what will give workers this confidence to take steps to tax the rich, tax the corporations and slash corporate welfare?  The AAA itself admits that: “as was unfortunately demonstrated in Greece, the wealthy are unreconciled as a class of people to any encroachment on their privilege. . . . the rich . . . will attempt to do whatever it takes to avoid paying for the crisis in their system.”

Unfortunately the AAA comes nowhere near explaining just what “whatever it takes” means, or whatever it takes would mean for the working class to defeat this capitalist resistance.  A radical left Government that truly sought to introduce a socialist society could not do whatever it takes, and this wouldn’t be mainly because of the opposition of capitalism, but because socialism can only be the creation of the working class itself, not a left government sitting atop a capitalist state.  If multinational capital struck against a radical Irish state this state is not capable of taking over the production vacated even if it were able to sell internationally what it produced.

This demonstrates in a very practical way how reformist notions of a state-led transformation of capitalism into socialism cannot work.  Only working people themselves can take over production and organise it on a cooperative basis.  Only workers can implement a radical restructuring and development of a cooperative economy and only they can replace, if necessary, the production vacated by fleeing multinationals.  That no significant section of Irish workers sees this as a possibility, as a mission, is why they buy into the fear that to challenge multinational capital too hard would only invite a retaliation they would be unable to cope with.

All this is why the creation of workers’ cooperatives is so necessary – in order to establish in the minds of workers the realisation that they can own and control production themselves; that they can create their own firms, provide their own jobs, develop their own products and markets, and impose their own discipline in the workplace.  On such a basis the failure of capitalist production will more and more witness a successful rival that, as the cooperative sector grows, would provide a potential alternative to it, one based on more than simple propaganda or agitation.

This alternative would involve the realisation of workers that their future lies not in sacrifices for the capitalist system but the development of their own cooperative sector to cover the whole of production.  In this rival sector of working class power all firms would be under the ownership and control of their workforce, all jobs their creation and all products those that workers see a genuine need for.  Within this sector of the economy their own discipline would determine the relations of power which would more and more come into conflict with the relations of power across the rest of society.  Such an exercise of power would see them shed illusions in the neutral role of the state and would see them stop looking to the state as the solution to all their problems – a state that they can never control and that can never reflect their interests or will.

Unfortunately the AAA like many others present the state very differently, as all its proposals demonstrate.  I will not dwell here on whether its devotion to the capitalist state as the vehicle for socialist transformation is a result of electoralism, which posits a left government at the top of the state as the key task, or whether worship of the transformative power of the state makes pursuit of a left Government the only rational objective.  But even the AAA sometimes can’t help expose the contradictions in its whole approach, as when it states that: “the contrast between the state’s efforts to publicise its corporate welfare schemes and its miserly approach to social welfare claimants could not be starker, or more revealing of the capitalist interests the state exists to serve.”

So if the state exists to serve capitalist interests why would it tax a resistant capitalist class, provide jobs for workers and strengthen their bargaining power; attack corporate welfare; countenance the replacement of private capitalist investment for its own and agree to a programme that clams will lead to socialism?

Perhaps some defence of the AAA proposals is possible by recalling its statement that “the purpose of the Anti-Austerity Alliance budget statement is to give an illustration of how things could be organised differently – how the wealth exists to provide decent living standards for all.” Except that what it holds up is more than an illustration but is proposed as an important step on the road to a socialist society.  Of course socialists should not oppose the measure proposed by the Anti-Austerity Alliance but only because their implementation, even partially, would make taking the right steps on the right road to working class power easier.

One purpose of the examination of the AAA proposals has been to demonstrate that the conception of change held by the left is not so very different from that of Sinn Fein; one based on state led economic development directed by a left Government with popular support.  In the next post I will look at further proposals to separate the left from the Sinn Fein by People before Profit and what approaches the Socialist Party and the Socialist Workers Party have for dealing with the situation after the election when there will not be the left Government they seek.

Back to part 2

Forward to part 4

Austerity and Sinn Fein

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sfdownloadThe strike by public sector workers in the North of Ireland on March 13 was significant because the two major parties, including Sinn Fein, were a target of the strike, whether Sinn Fein or even some of the strikers liked it or not.  Sinn Fein obviously didn’t like it because it damaged its posturing as an anti-austerity party and trade union leaders didn’t like it because their strategy is to persuade the parties responsible for austerity to change their minds and try to get more out of the Treasury in London.

The latest multiyear budgetary programme of the Stormont administration is the second austerity programme which Sinn Fein has jointly authored while in office.  The first did not see the job losses witnessed in England, Wales and Scotland but it did see a reduction of around 14,000.  Pay and pension entitlement for public sector workers were also cut.  Along with almost every other public sector worker I have suffered two years of a pay freeze while inflation consistently exceeded the supposed target of the Bank of England and my pension contributions increased, while my benefits were reduced and I will have to work longer to get them.

The much vaunted protection of welfare in the new budget, whatever coverage it eventually has, will come from money taken from other public services, including cuts to education.  As one local newspaper columnist put it – these will include an end to free books for pre-school children, making Northern Ireland the only part of the UK that will not have the scheme.  This will save £250,000 a year, or one third of the £750,000 that 36 Sinn Fein politicians at Stormont paid to a party research company that was unable to show any research.

As also remarked, Sinn Fein’s often boasted politician’s salary at the industrial wage includes industrial scale expenses.  Widespread cynicism exists in ‘republican’ areas at the rise to riches of leading figures identified with the movement.

The much vaunted financial deal that saved the Stormont administration, before the latest crisis, was hailed for delivering an extra £2 billion to the Northern Ireland budget, except that it didn’t.  Only a third of it could be called new, which spread over 10 years is less than a third of 1% of what is spent each year.

The rest is loans or ‘flexibility’, which means that money that is for capital investment can be incurred on day-to-day expenditure.  You don’t have to be an accountant to realise that relying on loans and investment funds to pay for on-going expenses is not sustainable.  Further expenditure is allowed if funded by asset sales, which again is not sustainable, and raises a green light for privatisation.

Such privatisation would leave the lefty credentials of Sinn Fein wearing even thinner.

Not all the capital money will be spent on recurring expenses.  £700m can be spent (in fact must be spent or it won’t be spent at all) on paying off around 20,000 public sector employees through a voluntary exit scheme.  This is a major plank in the opposition of the trade unions but it is not clear that many workers themselves will not take the money and run.  Unfortunately the old union maxim that the job is not yours to sell is long forgotten.  It is obviously completely unknown to Sinn Fein who talk of losing only ‘posts’ as if this is not what is actually wrong about what they are doing.

It is claimed that there will be no compulsory redundancies but the NIPSA trade union has drawn attention to advanced plans to cut 50 jobs, or over half the workforce, from the Northern Ireland Association for the Care and Resettlement of Offenders (NIACRO).  As NIPSA points out, when NIACRO works with prisoners on release reoffending rates drop from over 50% to less than 25%. This has all the hallmarks of the stupid and counter-productive cuts often condemned by Sinn Fein.

The claim to be protecting the vulnerable now doesn’t look so strong.

An amount of £350m will go to capital investment in integrated education, which at least sounds progressive until it’s understood that this doesn’t involve Catholic and Protestant children being educated in the one classroom but actually often means two sectarian-denominated schools being put on the one campus.  The move towards a shared campus simply reflects the fact that sectarianism is becoming expensive.

Rather than signalling the end of sectarian schooling it shows the lengths that will be gone to in order to preserve this apartheid system.  But the sectarian education system also has the support of Sinn Fein.  It would appear that apartheid can be supported in this case if the justification  given for the original South African variety – separate but EQUAL – can be adhered to.

This isn’t even progressive never mind left wing or socialist.

That the new deal means no rejection of the previous imposition of reactionary Tory-Lib Dem policy is shown by the fact that the fines of £114m that had to be paid for not implementing the welfare cuts in 2014-2005 must be paid now, and the £100m loan required to balance the books in the same year must also be paid.

Last but not least the new financial arrangement allows the local administration to lower corporation tax, once again supported by Sinn Fein.  Their thread bare justification for this is the harmonisation of an all-island economy.  In fact, along with many republicans’ support for Scottish independence, it involves mutual competition of small states in a race to put more money into the fat pockets of mainly US multinationals.  Were the policy to succeed the London Treasury has stated clearly that the Stormont regime will have to pay it for its losses.

All of this passes Sinn Fein by.  It clings to its claims to be anti-austerity purely on its partial opposition to cuts in welfare benefits.  Its populist politics is revealed by its approach that workers are victims and its most vulnerable members should be given some form of protection by a benevolent state.

The effect of privileging one section of the working class above another is always to undermine and weaken its potential political unity.  In this case the potential unity of the working population and those on benefits, who are always the subjects of divisive attack by right wing forces.   By limiting its proclaimed anti-austerity agenda to support to some on benefits it plays into the divisive claims of these right wing forces.  Sinn Fein appears happy to see austerity delivered to those in work while proclaiming great concern for those who are unable to or cannot work.

The interests of the working class as a class and as a political force independent and opposed to the state are alien ideas to a purely nationalist movement.

Unfortunately it is also alien to the leaders of Ireland’s trade unions and their new proclaimed support for Sinn Fein is proof of this.  At the Sinn Fein Ard Fheis – that is even before Sinn Fein’s renewed expressions of concern for welfare claimants – the Irish Congress of Trades Unions President, Jack Douglas, extolled Sinn Fein’s adherence to the union cause.  That is after the austerity budget the Northern unions were calling a strike against!  A week or so earlier the leader of Ireland’s biggest union SIPTU, Jack O’Connor, hailed Sinn Fein as a potential partner of the Labour Party in Government. The same Labour Party that has been implementing the Troika austerity agenda it was elected promising to oppose.

The performance of Sinn Fein in office in the North is a stark warning of its future role in the South but the record of Sinn Fein in the South is ample demonstration itself.  It was Sinn Fein who voted for the bank bailout that made the debts of the speculators the millstone round the neck of the workers.  Its ‘leading role’ in the resistance to austerity today is to identify itself with the campaign against water charges while seeking electoral advantage from it.  Beyond seeking votes from the campaign it has no strategy to make the campaign a success.

A couple of weeks ago an economist from Goldman Sachs claimed that the biggest threat to the Irish economy was that Sinn Fein would keep its promises on its opposition to austerity.  He needn’t have worried.

I remember around twenty years ago attending a meeting in Conway Mill on the Falls Road during which time Sinn Fein was trying to get into talks with the Unionists, who were refusing to engage. I asked Gerry Adams what he expected to achieve from such negotiations when the Unionists wouldn’t even talk to him.  A United Ireland he said.

Well we all know how that worked out.

Budget 2013 and the alternative

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6122011-budget-2012-second-day-14-630x491The 2013 budget is going to introduce tax increases and spending cuts of €3.5 billion.  Michael Noonan smiled when holding up the budget document to the cameras while Brendan Howlin looked serious.  Nevertheless RTE reported that Labour TDs were pleased claiming that their fingerprints were all over it.  And so they are.  Their footprints, where they walked all over many vulnerable sectors of society, are also all over the budget.

There has essentially been only one defence of these austerity budgets and that is that the Government has had no choice.  No choice because there is no economic alternative and no choice because the State has lost its economic sovereignty and is basically doing what it is told to by the Troika of European Commission, European Central Bank and International Monetary Fund.

In this budget they have felt compelled to come up with a new defence – it is nearly over. This was trumpeted by Michael Noonan and also claimed by the Labour leader that “It is the budget that is going to get us to 85% of the adjustment that has to be made, and will therefore put the end in sight for these types of measures and these types of budgets”.

This hardly looks credible, which is not good news, because what it essentially means is that the austerity measures implemented have both been insufficient and haven’t worked.  The economy has contracted and stagnated even as the austerity measures have been insufficient to bridge the deficit.

For 2012, the deficit has turned out to be around €500 million larger than planned but because of upward revisions to data from earlier years, the deficit target, set as a percentage of GDP, will still be hit. This assistance in meeting the ‘target’ will not be available in 2013.

At the end of 2013 the deficit will be 7.5% of GDP.  In 2008 (excluding that related to the banking bail out) it was 7.3% rising to 11.5% in 2009. All the austerity budgets have achieved so far is a reduction of 4% – less than half way to eradicating the budget deficit never mind 85% of the way.  Even by 2017 the IMF forecasts the deficit will be 1.8% so the debt will still be getting bigger.

As with all these budgets there have been cuts to capital expenditure with another €500 million reduction targeted for 2013. In 2008, capital expenditure was close to €10 billion. In 2013, it will be under €3.5 billion. Public capital expenditure has been slashed by 66% which wipes out, and more, the so-called stimulus measures announced earlier in the government’s PR/con exercise that claimed to be promoting jobs.  This means the infrastructure of the state, economy and society will disintegrate more or less quickly.

The sheer madness of the austerity agenda is demonstrated by the fact that the €3.5 billion in cuts and tax increases will be wiped out before they are even implemented by the €3 billion payment of the promissory notes for the Anglo-Irish bank, which no longer exists, and repayments of €2.45 billion of bonds for Irish Life & Permanent. On top of this there is the rising interest cost of the debt, which will increase from €5.7bn in 2012 to €8.1 billion in 2012-13.

With the debt increasing, even at a reduced rate of increase, the burden of interest payments on it can only worsen.  This makes the debt unsustainable.  A rising interest burden will be a permanent anchor on growth.  This is a problem because the Government is relying on renewed economic growth to get out of the stagnation now in place.  The weakness of Irish capitalism means that it must rely on outside forces for this growth.  Either that or there is some debt relief to lower the amount of debt and the burden of interest payments.

In the meantime particular groups of the working class will suffer real hardship, living standards will decline or at best stagnate and unemployment will be limited only by continuing emigration.  The stresses imposed on society will be expressed in mounting social problems that will often be presented as a simple increase in personal misfortune while increased inequality will coarsen social relations and further weaken social solidarity.  The absence of any radical perspective will see reactionary prejudice become common currency.

Once again the United Left Alliance has put forward what it states is a socialist alternative.  In substance it is the same argument as that put forward last year but with more detail and some development here and there.  There is no need to repeat the analysis presented earlier in this blog including here, here and here.

The ULA is in no position to implement any of its proposals.  The purpose of the document must therefore be an educational one.  What it teaches is therefore the only useful criterion by which to judge it.

It starts out by claiming to be a socialist alternative and its headline is repudiation of the debt, an end to austerity and the need to invest in jobs and services.  All these are undoubtedly the immediate needs of the working class.  The problems start when we look to see how it is proposed these ends might be achieved.

The ULA “proposes to take the burden of the crisis off working people, improve their lives and revive the Irish economy.”  On the other hand it admits that “the budgetary proposals put forward by the ULA can in no way offer a comprehensive solution to the crisis we face.”  How the first claim is reconciled to the second is not explained.

While the debt crisis “resulted entirely from the actions of developers, bankers and the politicians who facilitated them” it is not explained how this can be reconciled to it being “a manifestation of a deep structural crisis of global capitalism.”  It is nowhere explained what this latter statement means, how it explains what has happened or how it explains what solutions are possible.  The Marxism to which the core elements of the ULA claim commitment is founded on claims to present just such answers but they are not here.

It might, with some justification, be claimed that the precise cause of the crisis is also a cause of some debate within Marxism.  Unfortunately any suggestion that a key task of the ULA might be to debate this out so as to inform the politics it espouses would be held up many as a fetish of sectarian or dogmatic individuals who aren’t interested in practically ‘building the movement’, or some other such boorish remark.  Instead while (dumbed down) Marxism is relegated to recruitment meetings for novices the vacuum that is the politics presented to workers is filled with Keynesian, that is capitalist, ideas that are the currency of liberals and the leaders of the trade unions.

Let us see some ways in which this is expressed in the ULA economic alternative.

First the ULA proposes to improve the lives of working people and revive the Irish economy but there are no socialist measures proposed that would achieve this.  Were the proposals to therefore fail (if by some miracle they were tried) it would discredit what passes itself as socialism while if they were to succeed they would go some way to making socialism irrelevant.

The ULA claims that “the alternative we propose will not be implemented by the current parties in the Dail or by the Irish state.”  Yet it proposes that the Irish State increases income tax on the rich, reduces taxation on workers, introduces a wealth tax, introduces a financial transactions tax, increases corporation tax, takes “full control of the banks”, supports small business, invests to create jobs, embarks on a programme of council house construction, creates a new construction company, renationalises all privatised strategic enterprises and establishes a state owned gas and oil company. It declares that “the ULA believes public enterprise and public works must play the central role to redevelop the economy on a sustainable basis.”

The ULA claims that “radical measures that break with the logic of ‘markets’ are required” but the demands on the state above do not do this while it is claimed these measures will “revive” and redevelop the economy on a sustainable basis.”

“There is a need for active struggles to demand policies that prioritise the need for jobs, public services and growth, using public investment and democratic socialist planning to chart a way out of the current crisis.”  What sort of struggles? For what policies? And who will we demand this of?  How would they deliver on it?  What, who and how?  Where and when don’t even arise given the vacuousness of this string of words.

In other words – as a vehicle for education – the alternative budget, when it is not mistaken, as we have explained in earlier posts, is simply incoherent.

What is clear is that the ULA has no strategic perspective.  It calls for socialist planning, but socialist planning is just another term for working class rule, for the working class controlling society.  Yet it proposes the state, the capitalist state, take action in the here and now to solve the crisis and develop the economy on a “sustainable basis”.

This lack of coherence reveals itself in timidity, contradiction and calls for solutions that have already been the means to subordinate and exploit the working class; as when the ULA calls for “full nationalisation with direct public control of the banks” when it is nationalisation and state control of the banks that has been the mechanism to burden workers with the debts of the speculators.

Even when it calls for “direct public control of the banks” this can as easily be defined as the current arrangements as it might by workers control.  So how does such a demand clarify anything?  How does it educate anyone on what they should fight for?

The ULA is currently undergoing an organisational crisis but its real problems are political.  It argues an alternative that is simply not based on the actions of the working class. It is imperfectly aware of this so it substitutes vague calls for action and acknowledgements that what they are proposing is only temporary amelioration.

There is a possible solution to this problem and it involves debating openly and democratically what a socialist strategy should be.  As I have said such calls are resisted.  It therefore falls to those prepared to do so to engage in such a debate so that we don’t just point out what’s wrong but also say what’s right.

Back to the Future? – the State to deliver jobs?

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Before it went on holiday the government announced the stimulus package for the economy that many in opposition had demanded. An additional €2.25 billion is to be spent over the seven years to 2018 on roads, schools, a new college site in north Dublin, primary health care centres and Garda headquarters. The government claimed it will create 13,000 new jobs and is designed as a stimulus to the economy that will promote growth.  Green Party leader Eamon Ryan got it right when he said the “plan is a throw-back to the last century when the only way Irish politicians knew of stimulating the economy was to pump money into the construction industry.”

Unemployment is 309,000 or over 440,000 if you include part time, seasonal and casual workers entitled to Jobseeker’s benefits or allowances.  The stimulus will therefore not stimulate very much.  The chief Economist for the Irish Congress of Trade Unions (ICTU) nevertheless said it was “an important step in Ireland’s recovery.”  The Irish Business and Employer’s Confederation (IBEC) welcomed it in almost identical words saying it was “an important first step in helping to restore domestic demand in the Irish economy.”

The feeling of déjà vu became overpowering when the Minister announcing it, Labour’s Brendan Howlin, had to ‘explain’ why road projects were going ahead in his own constituency.  His Department was also unable to provide a journalist with any cost/benefit analyses for individual projects, which are always nice to see even when they begin ‘once upon a time’.  A commentator described one road project as “largely a vanity project” and that it “never added up even at the height of the boom.”

The money will come from what’s left of the National Pension Reserve Fund, so workers will know their future pension money is being craftily spent.  Some will come from the European Investment Bank but it’s not clear how much.  Some will come from the sale of state assets.  This is where the state buys duff things from the private sector – like banks – which cost it a lot of money and sells good stuff – like companies that make profits – which also cost it money.

No spanking new construction project would be complete without the involvement of the banks and they too will be involved, although again it isn’t known by how much, but since these are funded by the State this doesn’t really matter that much.  Finally, to complete the story, much use will be made of Public Private Partnerships, a partnership where one partner gives money to the other, for example when roads don’t have the traffic that was predicted but one partner gets paid anyway.  Again we don’t know the figures but we’re not expected to get much exercised over this because it’s all for a good cause, although it’s the usual story of being bribed by your own money.

Fianna Fail complained that many of the announcements would have no effect for six years, which might have been a good thing had it applied to their own policies.  They complained that some of the announcements were bringing back projects that the government had just cancelled, such as the Grangegorman project, which inspires confidence that planning by the capitalist state will continue to be used as a weapon to discredit socialist planning. The word planning might however be going a bit too far since Howlin said it would be nice to give the new jobs to people from the Live Register and also to apprentices who haven’t finished their training, but “I don’t want to promise  that that can be done.”   It’s wonderful how governments can promise to spend billions of workers’ pension and tax money while saying that they can’t promise that it will deliver what it’s supposed to deliver.  The sense of building new health facilities while preparing to get rid of health staff and of building new college facilities while cutting the number of lecturers seemed not to have been questioned by many.

The Irish State doesn’t have a great record when it comes to investment.  It bought 700 electronic voting machines for €55 million and they didn’t work.  It wasted money on hospital co-location, decentralisation and €100 million on the ‘Bertie Bowl’.  It commissioned a PPARS IT system for the health service with an original budget of €9 million in 1997 which ballooned to €120millin in 2004 before being pulled in 2007.  The Auditor General reported that the roads programme which was supposed to cost €5 billion ended up costing €20 billion.  The high-technology Media Lab Europe set up jointly with the Massachusetts Institute of Technology was to focus on the development of digital technology but went into liquidation within five years with consultants describing its output as “mediocre, “surprisingly weak” and “dismal”.

The United Left Alliance’s budget statement stated that “the current crisis cannot be resolved without a state led programme of investment.”  It proposes a reversal of cuts in capital spending and an emergency state programme of infrastructure investment costing €26 billion to get 150,000 back to work.  If we assume unemployment at around 310,000 this would still leave 150,000 unemployed. What happens to them?  The programme is to last “for at least five years”.  What happens after that? The economic contraction has already been going nearly five years and the slump could continue five more.

The ULA wants to employ workers’ private pension funds just like the government wants to use the pension funds of public sector workers.  The ULA wants the latter money, €5.3 billion, to fund investment in modern industry and it rejects privatisation.  Instead it wants state companies to carry out this investment.  If successful this might make some further dent in the unemployment total and at the cost of job creation estimated in its infrastructure programme this would reduce unemployment by perhaps 30,000. Of course there would be further multiplier effects but this depends on the overall performance of the economy.

It is the assumption around this performance that motivates both the proposals of the government and the ULA.  As we have seen, the bosses organisation IBEC, and also ICTU, see the problem as one of insufficiency of demand and the government’s stimulus “an important first step in helping to restore domestic demand in the Irish economy.”  The ULA say “direct government job creation through public works is necessary to promote effective demand and halt the deepening crisis.”  The government, bosses, trade unions and the left offers a similar analysis of the problem and a rather similar remedy.  Of course the trade unions and left oppose privatisation but state ownership in itself is not socialist. What we have, as in the sphere of taxation, is a difference of quantity in the measures being proposed, not a difference of quality.

What the ULA proposes, based apparently on a Keynesian analysis of the problem, is not socialist although, if successful, would have a big impact on defending workers’ living standards by reducing unemployment and defending its welfare entitlement, take home pay and public services.  Were its proposals to succeed they would go some way to providing a capitalist alternative to the policies of austerity although they would do little to prevent the regular future occurrence of capitalist crises.

Lest it be thought this judgement too harsh let’s go back to just one proposal of the ULA, that of using workers’ pension funds.  This is a proposal that the capitalist state that has saddled the working class with an unsupportable debt and denuded its state pension fund, imperilling the pensions of future workers, should also take a chunk of workers’ private pensions, and it with its sterling record of investment and economic management.  In effect it’s a capitalist expropriation of workers funds with no more than a promise from a politician for comfort, and a few Irish workers have had letters of comfort from the Irish State before.

The workers should take over management of their own pension fund?  They should promote worker owned firms to address the problem of unemployment?  Heaven forbid!  That sounds like socialism.

Taxing Capitalism

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Turner’s ‘The Slave Ship’

A press statement by the United Left Alliance last week, just before the Dail went on its long summer holiday, reported on Richard Boyd Barrett of the ULA who  ‘challenged Taoiseach Enda Kenny during leaders questions over the “gross inequality and unfairness” in the manner in which “the pain of austerity policies has been imposed on the least well-off and most vulnerable sections of Irish society, while the wealthiest people in the country have been protected and in some cases have actually increased their incomes.   All the promises in the programme for government about “protecting the vulnerable and to burden sharing on an equitable basis” have now been fully exposed as hollow. The government have constantly claimed they have no choices, that austerity and pain for ordinary people was a tragic necessity.  Only people power, protests and strikes can challenge this obscene injustice.’

Boyd Barrett is correct to tear into the policies of the government, which favour the rich and places the burden of austerity on the rest of us.  He is absolutely right that this is not inevitable and that there are choices.  Above all he is right to demand taxation of the rich in order to press this home so that workers should not meekly accept that they suffer while the rich escape.

In my last post I criticised the ULA’s tax proposals but not for any of these reasons.  They were criticised for the idea that they could really take the wealth off the rich, that this could fund real protection against austerity, that the rich would not fight back and that the state would not help them do so.  Above all they were criticised because they were put forward as being practical, realistic and reasonable because they could be implemented by the state, when in reality all these things are determined by class struggle against the rich and the state. All the points made by Richard Boyd Barrett can be supported precisely because they are all arguments for and within the class struggle.  While I may disagree that “only people power, protests and strikes can challenge this obscene injustice” this difference is one of strategy to be adopted by workers, which is of a different character than criticism of a policy based on explicit reliance on the state.

In such strategy the excuses that the rich will evade tax would be turned against the state to demonstrate its incapacity to enforce a fair and just tax system as perceive by the majority.  The evasion by the rich would then be held up as a reason to demand expropriation of the source of their wealth and for refusing to pay for austerity in their place.

The policy of taxing the rich is not however what really stands out in the ULA taxation policy.  What stands out is the dog that does not bark, for what is most distinctive about tax policy in the Irish State is not its protection of the wealthy but its policy of minimal taxation of corporate profits.  This is such an article of faith of the political system that there appears almost universal agreement that while children, the sick, elderly and disabled should suffer from austerity the richest corporations in the world should be protected from even the most modest changes to their taxation.  The result is that the taxes paid by them have become voluntary contributions to facilitate the pretence that they are subject to rules and laws like everyone else.  Yet the ULA budget proposals simply note that the policy of taxing multinationals at an effective rate of 4 – 7 per cent has failed to develop a sustainable economy.

Some US multinationals pay even less than this.  Two years ago it was reported that Google paid only 2.4 per cent on non-US earnings that were routed through Ireland to Bermuda.  Apple is a pioneer of a tax strategy called ‘Double Irish with a Dutch Sandwich’ which routes profits through Ireland, the Netherlands and onto the Caribbean.  The deliberate lack of controlled foreign company legislation allows the Irish State to collaborate with notorious tax havens to produce such results.  Microsoft was reported in 2005 to have made a profit of over €682m on its Irish subsidiary and paid no corporation tax at all (as did Symantec between 2004 and 2005).  The company at the heart of this tax structure was based in a solicitor’s office in Dublin.  Facebook has five subsidiaries here but only two are required to publish accounts.

These tax structures and systems are not only used by big corporations but also by the world’s corrupt dictators, its non-resident multimillionaires and its international criminal organisations.  The offshore tax system, which should include the tax-dodging activities in Dublin’s International Financial Services Centre, has been described by Raymond Baker of the Washington Global Financial Integrity organisation as “the ugliest chapter in global economic affairs since slavery.”

This massive tax avoidance is central to the Irish taxation system yet it is ignored.  There are no proposals to raise the headline tax rate, not even for Irish companies many of whom pay no corporation tax either.  No proposals for controlled foreign company legislation, steps to tackle transfer pricing or suggestions to close tax breaks for holding companies.  All the ULA proposals are aimed at individuals not business or corporations. Why?  Why is there no proposal to increase taxation of multinationals?  Or proposals to tax the IFSC through which billions are routed in speculation every year, the sort closely associated with the recent global financial crash?

Perhaps the reason is revealed by the justification given by the Revenue Commissioners for continuing with a policy of encouraging corporations to set up their Headquarters in Ireland even though they recognise many pay no tax.  They justify it on the basis that these companies may increase real investment later.  It is therefore not just fiscal policy that is predicated on minimal corporate taxation but what is laughably called industrial policy, in fact the whole hope of economic growth to get out of the current slump. In essence the reliance on foreign investment is a testament to the continuing failure of native capitalism and a profound expression of its weakness.  On this weakness has rested a weak working class and on it sits a weak left, unable to present a convincing policy of taxing multinationals lest they pack up and leave and add perhaps another 100,000 or so to the ranks of the unemployed.

Would this be the result of an increase in corporate taxation?  The truthful answer is that this would probably depend on how much it increased.  Multinationals locate in Ireland for many reasons including market access to the EU, a relatively skilled and compliant workforce which speaks English and a general pro-business environment.  The left can hardly claim that increased tax will not endanger the location of these multinationals because it cannot credibly claim that it would support the continuation of a pro-business political environment which, among other things, ensures the exclusion of union organisation in most multinational plants.

Instead the ULA concentrates on income taxation and in doing so proposes measures that are radical only quantitatively but not qualitatively, in other words they are not in themselves socialist measures.  Proposals for increased taxation of the rich have to some degree gone mainstream, supported even by millionaires, conscious of the need to fund their state.  A financial transaction tax has been supported by Bill Gates and increased income tax by billionaires Warren Buffett and George Soros.  Of course the support of the rich for increased taxation goes nowhere near where the ULA would go.  It should however also not be forgotten that in Ireland as recently as the 1980s there was a marginal tax rate including PRSI of 72.5 per cent. In the US during the cold war a tax rate for income ranged up to 92 per cent and was still as high as 70 per cent in 1980.

In other words taxation does not get to the heart of the matter and the way in which it does not was explained by Karl Marx in his ‘Critique of the Gotha Programme’:

“it was in general a mistake to make a fuss about so-called distribution and put the principal stress on it.  Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?”

What matters fundamentally then is the mode of production.  The ULA concentrated in its budget statement on measures purely to do with distribution.  It did however raise the question of production and the way it did it will be looked at in the next post.

 

Taxing the Rich

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In its 2011 budget statement the United Left Alliance (ULA) pointed out that while unemployment and taxation of workers had gone up, net financial assets of households had increased by €45 billion between 2008 and 2010, which meant that while many workers’ living standards were taking a hammering the wealthy in society were actually getting richer.  They therefore called “for a radical shift in taxation policy so that those with the real wealth pay according to their ability to pay.”

We all know the arguments against such a policy – higher tax rates, especially for those at the top, will discourage work, investment and business creation.  It would be tempting to dismiss such arguments except that Marxists believe that it is profits that regulate the operation and performance of the economy.  Surely reducing the returns to profitability would reduce capital accumulation and economic growth?

Research has shown however that the massive reduction in top tax rates in the English speaking world has not led to improved economic grow compared to countries without similar tax cuts.  The reduction of top tax rates, which were over 70 per cent in the 1970s, by over 40 percentage points in the US and UK has not witnessed any more impressive growth there than countries which have not reduced the rates by such enormous amounts.

This could be because high tax rates are not  the disincentive claimed, that those affected are often not capitalists, that most profits are reinvested and not subject to income tax anyway, and that profits are determined by much stronger and more fundamental forces than taxation of individuals or taxation in general.  Many people believe that those earning astronomical amounts of money simply want more of it because they are greedy, obscenely status conscious and engaged in grotesque exhibitions of conspicuous consumption.

The ULA has put forward plans to raise taxation on the rich in order to “use the money for a state funded programme of job creation.”  They state that the top 5 per cent hold 46.8 per cent of all wealth and have total net financial assets of €219.3 billion.  These figures are taken from Credit Suisse ‘Global Wealth Report’ in November 2011.  Elsewhere they quote a figure from the Central Statistics Office which estimates total net financial assets of €117 billion in 2010. If we assume non-financial assets (property) as 53 per cent of the total this would give a total wealth of €249 billion and that of the top 5 per cent at around €117 billion, over €100 billion less than they calculate from the Credit Suisse report.

It should be kept in mind that all economic statistics are estimates and subject to all sorts of errors.  One thing they are not is exactly right.  The Central Statistics Office has revised its GDP figure for last year by €2.6 billion while the Department of Finance double counted and found itself €3 billion better off.  How much more is this the case when the very rich seek to hide as much of their wealth as possible, which varies as the various markets go up and down, including the stock markets and currency markets. Looking at the Credit Suisse report I calculate the wealth of the top 5 per cent at ‘only’ €185.7 billion instead of €219.3 billion.

One more check available that I am aware of is to look at the ‘Wealth of Ireland’ report published in 2007 which recorded it at the height of the boom.  If we assume a fall in property prices of 50 per cent and its estimate of the share of the top 5 per cent at 40 per cent we arrive at a figure of almost €206 billion.  This however excludes the fall in value of shares, which dropped by 47 per cent between September 2007 and November 2010.  If we assume that equities were 40 per cent of financial assets the value of wealth becomes €188 billion.  This discussion only goes to show the uncertainty involved.  We will therefore go with the ULA budget statement number of €219.3 billion without any illusion that it is exactly right.

The ULA proposes an annual wealth tax of 5 per cent which would bring in roughly €10 billion a year (219.3 times 5%).  It also proposes that those earning over €100,000 should have their taxes increased.  These people, it says, have a total income of €20 billion and paid €4.86 billion in income tax.  This should be increased by a further €5 billion.  The ULA also sets a target of an additional €2 billion to be taken from the super-rich tax exiles.  Thus an extra €17 billion would be raised per year which, allied with refusal to pay for the bank debt, would be used to reverse cuts in social welfare, abolish the Universal Social Charge, increase tax credits for workers and reverse cuts in health and education etc.

There are five reasons why this won’t work

Firstly the sums involved.  The proposals above, where they to come in on plan, would raise €17 billion yet the budget deficit in 2010 excluding the bank bailout costs was €17.4 billion.  There would therefore be no room for closing this deficit while also funding the state-led investment programme of over €5 billion per year, which the ULA statement said was to be partly funded by tax increases. This also ignores reversing the €12 billion of cuts etc. which took place before and during 2010 in order to arrive at a deficit of ‘only’ €17.4 billion at its end.

The second is the nature of the wealth. Roughly half the wealth is in financial assets and half in property.  The financial assets will be in cash and bits of paper like shares which can be sold for cash.  To turn this wealth into money that can be used to pay workers to provide services, reverse workers’ tax increases and procure services it will be necessary to sell these bits of paper after the wealth held as cash is exhausted.  The value of these bits of paper, such as shares, may very well fall if a lot are sold at one time or it is known that they cannot be held and sold at what might be considered by their owners as the most favourable time.  The value they are held and valued at may therefore be greater than what could be got in a sale.  Everyone is familiar with this because of NAMA and the property collapse.  How much more of a problem is this for that half of assets which is property?

And there is an additional issue.  Who would the State sell these assets to?  Workers, self-employed, farmers and small businesses are in no position to buy these assets.  In fact only Irish and foreign rich would be in a position to buy.  But when we consider this for a moment, how would the Irish rich afford to buy these assets when these assets are being taken off them in the first place?  This leaves only foreign capitalists.  Putting it like this, selling off Irish assets to foreign capitalists to finance State expenditure doesn’t look too much different from what the Governing parties want to do.  Perhaps it is proposed that they too are taxed on Irish assets, in line with the policy on taxation of Irish assets held by tax exiles, but this then only puts them in the same position as the Irish rich.  Why buy assets that are going to be taken off you in tax?

Making the most simple assumption that a wealth tax would remove an equal amount of the wealth each year, with a wealth tax of 5 per cent the total wealth of the rich would be cut in half in ten years.  Ten years later it would be gone.  Even with wealth growing at say 2.5 per cent a year, and a wealth tax that took 5 per cent of what was left from the previous year, the wealth of the rich would still be halved in less than 23 years.

In other words this is not sustainable and anything not sustainable collapses long before the final step is taken.  An unsustainable tax base based on property is replaced by an unsustainable tax base constructed on wealth taxation.  The ULA proposes that those earning over €100,000 pay an additional €5 billion in taxes above the €4.86 they are currently paying, on a total income of €20billion, doubling their taxes and moving to an effective tax rate of half of income.  The ULA give the example of the top 0.5 per cent who have a current average after tax income of €400,000 each, which after the implementation of the ULA proposals would reduce to €166,000 each.  This is a reduction of 58.5 per cent in income.  This won’t work because of reason four.

The ‘Sunday Independent’ rich list published in March this year records that the richest man in Ireland is Pallonji Mistry, an Indian tycoon with Irish citizenship, worth €7.4 billion. How long does anyone think he would hang around if he thought the Irish State was going to take half his wealth off him within ten years and reduce his income by nearly 60 per cent?  How many others of his fellow rich would do exactly the same as him?

The ULA have said they have plans to get €2 billion extra out of Irish tax exiles and propose various measures to get this €2 billion.  Unfortunately they have said that “it is impossible to predict the revenue which would be generated by the above measures” which is tacit acknowledgement that they have little confidence that these measures could be effective.  They refer to the US and its expectations that its citizens will pay US income tax on earnings abroad but the Irish state is not the US state.  It says that its demands are reasonable but whether workers believe them to be or not, the rich do not and become tax exiles to avoid tax.  They will not be swayed by ‘reasonable’ demands that they pay up and the ULA knows this.

The ULA has said that even if such people move liquid assets out of the country, as will non-exile tax payers, the tax can be taken from the value of their fixed assets in Ireland.  But this leads us to the problems involved in reason two above.  The idea that the wealth of the rich can be taken by taxation is fine only if one believes that they will not resist with every weapon in their armoury.  The budget statement mentions that there is an investment strike by private investors as if it were some wilful act and not a perfectly rational response to the recession.  Yet serious attempts at taxation of the rich really would produce wilful acts and private investors would use their ownership of assets to reverse investment and sabotage the economy.

Marxists have always been aware that in the class struggle the capitalist class have usually demonstrated much higher levels of class consciousness than workers and their superior organisation will see them able to avoid a great deal of taxation, especially when it becomes worth it.  Their success in this is guaranteed by reason five.

The ULA have stated that “it is a matter for government which has Department of Finance, Revenue Commissioners, Central Statistics Office etc at its disposal to devise legislation to reach the target revenue of 10 billion from the top 5 % and that, in particular that the homes, farms and pension funds of those outside the top 5% be exempt.”  But this is the State that has given rich tax fraudsters two tax amnesties on top of all the various tax incentives and loopholes!

As a Marxist I believe that the state is an instrument to defend and protect the capitalist class, that it is therefore a capitalist state.  I believe that the bail out of the banks even at the cost of bankrupting the state itself is testament to how far it will go to do this.  The recent history of attacks on the working class in order to spare the rich are further examples and are the result not of a policy whim that can be changed but a result of the structure of the state, economy and society.  The proposals of the ULA rely on all this being mistaken.

I remember listening to Today FM and an American writer on financial affairs, whose name I did not hear, being interviewed about the situation in Ireland.  He remarked that Ireland was no more corrupt than many other countries but that what really set it apart was that no one ever seemed to get punished for all the corruption.  Yet the tax plans, and others, of the ULA depend not only on the Irish State not defending the rich but instead actually defending the working class.

The taxation proposals of the ULA are clearly presented as eminently reasonable and practical.  However what is reasonable is decided by class struggle and class struggle means they are not practical.