Ireland – the Apple Republic part 2

Posted on September 15, 2016 by irishmarxism

apple-tax When a left wing TD called the decision of the Irish Government to appeal the decision that gives it €13+ billion “economic treason” against the Irish public he contributed nothing to clarifying for Irish workers the role of the state, which is precisely to defend big business against that part of the Irish public made up of workers, their families and small businesses, who mostly have little choice but to pay the state’s taxes.

Much better would be a socialist campaign to rally trade union branches, community groups, tenant associations, consumer groups and campaigns etc. to put together their own proposals as to how exactly the €13 billion should be spent. The purpose would be to demonstrate that the needs of workers should come before those of multinationals and before the reputation and interests of the state and its ‘national interest’. A campaign that sought to unite with the workers of other countries swindled out of tax receipts by Apple would go a long way to demonstrating that this is not about a race to the bottom that pits workers of one nationality against all others.

This would also allow working people to show, not least to themselves, that they can plan effectively how to spend the money, not just for their own benefit but in the interest of all working people. Its purpose would be to begin to instil a view within them that they should take control of society themselves rather than relying on the state to do the big things for them.

On this count the view expressed by another left wing TD was much closer to the mark. Speaking in the Dáil Paul Murphy said: “Governments in capitalist societies are but committees of the rich to manage the affairs of the capitalist class. It is as simple as that …. All of the establishment parties represent the rich and the 1 per cent. We need to be rid of this committee of the rich, and we do not need it replaced with a reconfigured committee of the rich.”

The creation of a desire for, and mechanisms to achieve, an alternative to a “reconfigured committee of the rich” is precisely the objective of this proposal for working class activity. Only by workers increasingly taking control over their lives now can we conceive an alternative that is real, compared to reliance on a state that always has your best interests as far away from its mind as possible. The motto of socialists in this regard should be the famous quip of the British actor David Niven who, when speaking of Errol Flynn, once said “you always knew precisely where you stood with him because he always let you down.”[i]

A wider claim in relation to the Apple judgement and reaction to it is that such sharp practices are part and parcel of a policy of neoliberalism which is past its use by date. The exhaustion of this policy has been expressed in the crisis of financialisation in 2008 and the failure of Eurozone austerity policies and similar policies in Britain, where their effects have not been quite so damning only to the extent that the Tories have failed to follow through fully on their austerity rhetoric. In this view we will see a return to a class compromise that was supposedly the cornerstone of Keynesian policies practiced among the most developed countries after the Second World War. Among these will be fair taxation of capital and the rich.

Against this it might be pointed out that the Apple ruling did not uphold any principle that taxes should be levied where real economic activity takes place and that in fact it was justified through an objection to state intervention, on the grounds of unfair state aid.

In 1997, even during the neoliberal era, EU Finance Ministers set up a Code of Conduct Group on business taxation that was charged with examining unfair tax practices and in succeeding years it abolished nearly 100 tax incentives across the EU. Today it is the OECD which is supposed to be spearheading cooperation between governments on tax avoidance and evasion but this body has been a consistent supporter of neoliberalism.

In so far as there has been a trend in corporate taxation it has been a lowering of rates:

“Corporate tax is falling, both as a share of GDP and in the global tax take. . . Within the last 20 years, corporate tax rates have fallen from around 45% to less than 30% on average in OECD countries. And lately, with increased mobility of multinational corporations, tax competition has intensified. Thus from 2000 to 2005, 24 out of the 30 OECD countries lowered their corporate tax rates while no member economy raised its rates.”

Closing or restricting some ‘loopholes’ is perfectly consistent with lowering rates because the loopholes become less and less relevant. Reliance on the state to produce ‘fair’ taxation is like relying on Errol Flynn. The Apple case, precisely because of its scale, is instructive in this and other respects.

The Left has pointed out the sheer scale of the windfall that the Irish Government is potentially spurning, pointing out its hypocrisy in demanding that the Irish people must do what the EU wants when it comes to austerity, bailing out the banks, ensuring no bond-holder is left behind and their demand that water charges simply must be paid. When it comes to standing up for the Irish people no demand from the EU is too big but when it comes to standing up for the wealthiest multinationals no claim is too disreputable, no sacrifice too large and no neck so shiny and hard.

Commentators have pointed out that €13 billion would make up the budget for the health service for a year or it could take a significant chunk off the national debt of €200 billion. It could pay the equivalent of a few years of the unpopular Universal Social Charge or it could mean a cash donation to everyone in the state of around €2,800 each, so that a household of four would get over €11,000. A tidy sum for everyone in the State, or a significant boost to public services.

What it isn’t, despite its unprecedented size, is fundamental or transformative. While it is a godsend of an example of taxing the rich, which much of the Left repeatedly presents as the answer to austerity and an exemplar of socialism, the Apple example shows that it is not. Or not if one thinks of socialism as a fundamental change to society and a transformative change in working people’s lives.

What it is, is confirmation of the point made by Karl Marx many years ago, about the limits of distributing existing income or wealth, as opposed to changing the fundamentals of the ownership of productive resources that creates and recreates, again and again, this income and wealth.

“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 labor 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?”

This is the argument that goes to the root of the nonsense peddled by Michael Noonan that taxing Apple would mean “eating the seed potatoes” or Micheál Martin that “This model supports hundreds of thousands of jobs and pays for teachers, nurses and pensions in every part of our country. What’s more, it has done so for decades.`’

Such is the significance of any battle over Apple’s taxes. Reliance on multinational capital and all the crap that goes with it or a cooperative economy owned and controlled by workers not just in Ireland but everywhere.

[i] Of course the parallel isn’t exact – Niven and Flynn were “pals” while the working class and the capitalist state are enemies. It is appropriate however that the above remark was made of an immature personal relationship that has no correspondence to the political stance workers must take against the state; even if failure to take such a stance reflects an undeveloped and therefore immature failure by some Irish socialists.

Back to part 1

Ireland – the Apple Republic part 1

Posted on September 12, 2016 by irishmarxism

apple_tax_european_union_sept022016 The decision of the European Commission to require the Irish State to collect €13 billion in unpaid taxes, plus a potential €6 billion in interest, from US technology company Apple made headlines across the world. Special tax arrangements, which appear not to have applied the State’s already low 12.5% corporate tax rate, led to an effective tax rate on Apple of 0.05% in 2011 and 0.005% in 2014. Two tax rulings in 1991 and 2007 allowed an Irish company to book Apple sales across Europe, the Middle East, Africa and India in Ireland and attribute profit on these sales to a “head office” which was stateless, had no offices, had no employees and existed only on paper.

The Irish State has decided to appeal the ruling, as has Apple itself. Apparently preventing the State from abjectly prostrating itself in front of Apple is an assault by the European Commission on the sovereignty of a small nation. It supposedly calls into question Irish tax policy while the Government frantically claims that the ruling affects the arrangements of no other multinational.

The appeal is to protect Ireland’s reputation although being dragged kicking and screaming to apply your own laws without discrimination, while defending cheating other countries of tax revenue, is apparently good for it. The appeal is to prove that the Irish State is not a tax haven although a tax rate of 0.005% would appear to be a decent definition of one and defending it would appear to be open acknowledgement of it. The Irish Government seeks to defend its prerogative to set an (in)famous corporate tax rate of 12.5% but does so by defending a 0.005% rate.

€13 billion is a big number and is the biggest judgement in the history of EU competition law – the cumulative total of all EU cases involving repayment of illegal state subsidies over the past 15 years is less than €11 billion – and it has been imposed on Apple, the world’s biggest company by market capitalisation.

One explanation given for all this is that the Irish state is dominated by imperialism and plays its natural role as an obsequious supplicant to multinational capital. This is ok as far as it goes but it doesn’t go far enough, either in explaining or in providing the grounds for an alternative. If we start with the latter – an anti-imperialist struggle in Ireland to make the natural resources of Ireland the property of the Irish people isn’t a solution.

For a start, the main natural resource of Ireland is its people. In fact the growth of technology, and companies like Apple, demonstrates that it is the knowledge and skills of workers which is the key to the most dynamic sectors of the economy. So it is harnessing the power of workers that is the key to economic development in Ireland as elsewhere, not minerals under the earth or the factory building which house the most modern production. The machines that power this production are obsolete within years; simple ownership of them does not guarantee the future unless workers not only own them but have the knowledge and capacity to continue to revolutionise their development.

Secondly an utterly subordinate role for Irish capitalism does not explain how it allowed itself to become the vehicle for depriving other European countries of tax revenue, which the EU ruling now gives the latter an avenue to pursue. The ruling signals that although other EU states may not have liked the Irish State’s low corporate taxation regime, it was not such a problem if it remained relatively marginal. After all, they’re all engaged in tax competition in one form or another as one facet of inter-state and inter-company rivalry.

The problem for the Irish is that they prostrate themselves disproportionately to the US, who don’t so much mind the role of Ireland as a tax haven since it is US tax rules which permit Ireland’s role of in tax avoidance and also still allows the US to take a cut if and when the profits are eventually repatriated, perhaps as a result of some tax amnesty.

The Irish State has thus put itself in the middle of a bigger competition between EU and US capital and however much it might be “closer to Boston than Berlin” and wallow in its generations of emigrant’s ties to the old sod, the Irish State is part of the EU. Its facilitation of US companies through an effective tax haven can only be permitted so much success before the bureaucracy of the EU proto-state decided that it had gone too far. The Irish are therefore not just functioning as a subordinate client to imperialism but play a particular role in inter-imperialist rivalry.

And it would be wrong to characterise this role as something anomalous to the normal functioning of capitalism. Apple had over $215 billion in cash and assets sitting outside the US as of June this year, sitting there avoiding US taxation. It has been estimated that this is only part of $1.4 trillion sitting offshore of the US, all avoiding tax and perhaps waiting for an amnesty and a nice big deal.

It has been estimated that about half of all lending and deposits originate in Offshore Financial Centres(OFCs), about half of which are also tax havens. The Irish State comes in 9^th on the list in terms of size of tax haven, behind the Cayman Islands, which is the largest, and Switzerland and the Netherlands, which are 7^th and 8^th respectively. These OFCs account for receipt of about 30% of the world’s foreign direct investment and themselves originate a similar amount.

While the tax rulings in 1991 and 2007 were based on Apple’s proposals to the Irish State, there is nothing anomalous about this either. The British ‘Guardian’ newspaper reported last Thursday that “the government has effectively privatised tax policymaking and enforcement . . . a working group consisting entirely of representatives from GlaxoSmithKline, Rolls-Royce, Eisai pharmaceuticals, Syngenta, Shell, Dyson, Arm, KPMG, Vectura and AND Technology Research drafted what eventually became known as the Patent Box legislation. They secured a special tax concession worth over £1bn a year for large corporations.”

The EC ruling on Apple has been described as “a watershed” and liberal Irish commentators have argued that it’s a wake-up call – that the Irish State’s success, based on attracting multinationals through tax breaks, is not a strategy that will stand the test of time. The Irish State and its apologists claim that their tax policy is actually an industrial policy, which should be regarded as a purely national issue, but if this were so then we would expect the Cayman Islands, the Bahamas and Jersey to be thriving centres of industrial production. Their brass plate companies and those in Ireland shown how ridiculous this rebranding exercise really is.

Some states benefit from tax competition and some suffer losses. The EU bureaucracy attempts to set rules that do not allow discrimination against European companies as if the European Union was one capitalist state, which it isn’t (yet). The state aid case against the Irish State is not therefore a bolt from the blue. Since 2000 there have been 400 state aid cases and 225 cases involving tax advantages across the EU. The Irish State, as a fully paid up member of the EU, has approved European Commission investigation of the tax arrangements of fellow EU states.

In October last year the EC concluded that Luxembourg and the Netherlands had granted tax advantages to Fiat and Starbucks respectively and in January concluded the same in relation to Belgium’s treatment of at least 35 multinationals, mainly from the EU, amounting to €700 million that should be collected. The EC is currently investigating Luxembourg and its relations with Amazon and McDonald’s.

Capitalist states therefore both cheat and enforce laws against cheating. They both protect big business and tax it in order to pay for itself. Mostly however they tax small businesses and workers to provide the services and infrastructure that allow society to operate and function, one that functions and operates according to the laws of capitalist accumulation.

Forward to part 2

Reforming the Northern Ireland Economy – A job for the State

Posted on December 28, 2013 by irishmarxism

The following two articles originally appeared in the newspaper of the Irish Socialist Network.

CHANGING THE NORTH’S PUBLIC SECTOR

Northern Ireland got a new Finance Minister in August, Simon Hamilton from the DUP, and he made a bit of a splash in his first major speech.

He noted the well known facts that around one third of the workforce is in the public sector and two thirds of economic output is in the State’s hands. However, instead of simply deploring these figures and blaming an inefficient and bloated public sector he said that the public sector can help the economy grow and not simply hold it back. He said that what was needed was a reformed public sector that was more efficient. And who could disagree with that?

Let’s skip for the moment what he means by reform and efficiency. Surely socialists are in favour of reforms and efficiency? Aren’t we?

Well, the answer has to be yes. Socialists are in favour of change. In fact we want so much change that this requires not only reforms, not only radical change, but revolutionary change. Of course we know the DUP aren’t advocating this but that doesn’t mean we don’t welcome change that involves genuine reform that, for example, improves efficiency. And yes, we are in favour of increased efficiency.

In fact we are socialists because we believe a socialist society is a higher form of society than capitalism and is higher because, among many other things, it is more efficient. Such efficiency could eliminate the need for unnecessary work, reduce the burden of work that does need to be done and create enough wealth so that poverty is eliminated and everyone has a standard of living that can satisfy our reasonable needs.

Simon Hamilton also said that he is in favour of alternative models of service delivery – like mutuals, cooperatives and social enterprises. In other words public sector organisations or companies run or owned by the people who work in them. What could be more socialist than firms or state bodies owned and controlled by workers?

Some might think this is a very naive approach to what Simon Hamilton is saying. Surely he isn’t advocating the sort of reforms we would want? Since when did the DUP become socialist and advocate workers’ ownership as a solution to economic underdevelopment?

Well there is a reason for the above approach and we can appreciate this reason when we compare it to the reaction of the trade unions to his speech.

I got a copy of the speech through a circular by my trade union NIPSA. The letter from the General Secretary of NIPSA, Brian Campfield, noted the references to different models of public service delivery but said only that the view of NIPSA is that these would be detrimental to the interests of the union’s members and to the general community.

Of course Hamilton referred not only to cooperatives but also to ‘partnering with the private sector’, which is code for privatisation. (You see! I’m not so naive!) But this is only part of the story and not the most important part either.

Sticking only to the question of privatisation, which of course we should vigorously oppose, presents only a negative answer. When our class enemies propose change our answer isn’t that things should stay as they are, but just be funded better. We don’t defend the current state – or public sector as many call it – we want it changed just as much as we want the private sector changed. We want the whole capitalist system changed, not just big private corporations but the bureaucratic state that supports and defends the corporations.

Socialists don’t look at the current state as a model for socialism. It’s bureaucratic and undemocratic. I’ve worked in various bits of it for nearly 30 years and I haven’t had any meaningful say about how I do my work in all that time. I have a boss, in fact I have loads of bosses, and I don’t have any say over who they are or what decisions they make. How could this be any sort of socialism?

Socialists are socialists not only because are we against the present set-up but because we actually have an alternative – something positive to say. So when the DUP says the present state is in need of change the first thing we should say is yes – and here is what it should look like.

It is much easier to be against things but much harder to say what you are for; even harder to explain what the alternative is and harder again to put it into practice. That’s why when we see an opportunity to say we have an alternative and explain what it is we should grab it.

Part of the current weakness of socialism is that we, like the majority of people, are against how things currently are – with unemployment, inequality, crap jobs and the stress of everyday life – but we haven’t fought for the socialist answer that demonstrates the alternative.

Instead socialists have often been seen as defenders of the status quo – opposing privatisation but not offering any alternative to how the state delivers services, except to demand that it gets more money to do it. Instead we are often seen as demanding solutions that don’t offer any radical change to the present system. A better funded and bigger state is often how our alternative is presented, not just by our enemies but by ourselves!

The economy in the North of Ireland is well know as a bit of a basket case and the big size of the state sector is not the cause of it but is an expression of it. This is also pretty well known by many. It should be a big clue that a big state is not the answer.

Simon Hamilton thinks the public sector can be a vehicle for changing this situation and ironically the trade unions agree with him. They just have slightly different ideas about how this can be done.

Socialist don’t agree with this and so don’t agree with Simon Hamilton or the standard trade union view. In my next article I’ll explain this a bit more by looking at what else Hamilton said in his speech and what the standard left response has been.

STATE LED DEVELOPMENT?

When the new Finance Minister in the North said that the public sector could be a vehicle for developing the North’s economy, instead of being simply a drag, this was welcomed. But with suspicion that this might mean privatisation. There was also concern that he was continuing to boast of his party’s record of supporting low taxation. In response the NEVIN economic think tank, sponsored by the trade unions, called for adequate levels of taxation; that is it was calling for increases in taxes.

What attitude should socialists take to this argument?

First of all we should recognise that states all over the world have involved themselves in promoting economic development, some more successfully than others. Nationalists of all types are in favour of the nation state promoting its own economy in competition with other states. For much of the last century this type of political programme was held up as ‘national liberation’. More and more state ownership was and still is presented as socialism.

It is very hard to see how the Northern state could ever be one of the successes. State led economic development elsewhere has been successful to a point but the Northern State is dysfunctional. Behind the rhetoric what is being proposed is not state led development but state enablement and facilitation of growth, but it is doubtful if the Northern State could even make progress with this. Instead it will at best be reduced to attempting to lower taxes and entice a few footloose multinational companies to invest, based on a bucket of state hand-outs.

How desperate this has become was illustrated at the beginning of October when £3.3 million was given to a call centre company to promote nearly 1,000 jobs. Half already existed, no capital investment was being made by the company and it had previously closed in Derry two years ago with the loss of 1,000 jobs.

The Northern Ireland Assembly hardly meets, it discusses things it can do nothing about and hasn’t a clue about what to do about things it can influence. The Executive meets but has nothing to talk about since the DUP and Sinn Fein can agree nothing except to give hand-outs to multinationals. But state led economic development requires much more than this.

It is doubtful if this is understood. The DUP is a party of small businessmen who see the state and taxation purely as red tape and expense. The need for the state to provide high class infrastructure and a well-educated and healthy workforce is all far removed from their immediate concerns with ‘how much tax do I have to pay?’

However a recent report by the Organisation for Economic Cooperation and Development records that in Northern Ireland (and England), 16 to 24-year-olds scored 266 on average in a literacy test, which put them third from bottom in a 24-nation league table. In numeracy, 16 to 24-year-olds scored 257 – putting them fourth from the bottom.

Sinn Fein thinks the economy would be great if there were only one Irish economy rather than two but there is not even an inkling that a united economic state might result in benefits for the larger Southern bit to the detriment of the smaller Northern bit. It’s called uneven development.

A policy of relying on the state in the north for economic development looks hopelessly improbable not least because the state hasn’t been able to modernise itself never mind anything else. The new minister, Simon Hamilton, announced the creation of a new Public Sector Reform Division but there is no strategy.

It is recognised that innovation comes from people but in his speech all he can do is ask the question – “and how do we motivate our public servants and unlock their ability to innovate?”

Don’t expect an answer. Workers won’t get paid any more and they won’t be trusted with ownership or control over their own workplace or job. And if you’re not trusted to control your own job how could you be trusted to make truly transformative changes to society?

One ideological supporter of capitalism once wrote a book with the interesting title ‘Why most things Fail’. It noted that most companies fail sooner or later. While the capitalist state will accept that this or that capitalist enterprises can fail there is one capitalist undertaking that cannot be allowed to fail, ever, because it protects the rest. That is the state itself. Only the most trustworthy can be entrusted with state power which is why the DUP and Sinn Fein don’t really have it. What they have are the powers of a glorified council and they don’t even exercise the powers they have.

If workers were really to be given the power to develop a new economy there would still be many failures but the powers unleashed would ultimately lead to a new society.

This however isn’t the model of state economic development on offer or championed by any nationalist party.

The Northern state has failed but unfortunately for Sinn Fein so has the Southern State. The nature of the capitalist state everywhere is that it cannot give workers the autonomy or freedom to take risks, innovate and try to change society, for example by promoting workers’ cooperatives. Such economic power might sooner or later form the basis of a rival political power.

In other words state led economic development is nothing to do with socialism, which is the power of the working class. And ‘national liberation’ tells us that the key problem is liberating a state in the oppressed nation instead of liberating the working class of the oppressed nation from the state – foreign and domestic.

This means workers have no interest in supporting many of the measures usually associated with such a programme, including tax increases, which will inevitably hit them hardest, or supporting local industry against foreign as if it was somehow ‘ours’. Socialism is not the growth of the existing state or its accretion of more and more powers.

Simon Hamilton’s proposals on privatisation are widely recognised as bad news but the bureaucratic state is not the alternative. If the Northern economy shows one thing it shows this.

Why have the Irish not revolted? Part IV

Posted on December 1, 2013 by irishmarxism

In much of Europe the workers movement developed in the latter half of the 19th century and first half of the 20^th through industrialisation, the growth of trade unions and socialist parties and the radicalisation caused by two world wars, in particular by the first. The socialist movement often led the struggle for democratic rights and freedoms and gained support as a result.

The Irish experience has been different, leading to a working class with a lower level of class consciousness. While Ireland started to industrialise early it was thrown back by the development of superior industrial development in Britain. What industrialisation did occur was small and mainly concentrated in the north east of the country. Defeat and brutal repression of Ireland’s bourgeois revolution in 1798 led to a bitterly divided working class with the most extreme reactionary ideology dominating the most advanced industrial area.

The land question was denuded of its radical potential by this counter revolution and by the effects of the catastrophic famine in the middle of the19th century when, in a population of over 8 million, around a million died and a million emigrated and the population began a decline that did not reverse until the 1970s. The number of agricultural labourers fell by 700,000 from 1845 to the early twentieth century, the number of small farmers was halved and the cottier class almost wiped out. All this could only but weaken the potential base for a radicalised land movement.

The result of all this was that when the national movement erupted in the first decades of the twentieth century in a battle for an independent state it was dominated by middle class revolutionaries who subordinated workers’ interests with the demand that ‘labour must wait’, which has been pretty much the policy of Irish republicanism since.

The new truncated statelet these most conservative of revolutionaries created was dominated by the same economic subordination as that which preceded nominal independence, resulting in economic growth after foundation of the new state at very much the same rate as before its creation; and a polity not much different than before except for the role of the new Irish bourgeoisie that often proclaimed its Catholicism more than its nationality.

The working class in its majority never broke from this political class and the socialist movement has been small and peripheral. The Second World War passed the Irish State by and during the 1950s emigration was higher relatively than it had been almost 100 years earlier, sapping all social classes of vitality and energy.

The Irish State caught the tail end of the world-wide post war economic boom and the workforce in industry increased from 259,000 in 1961 to 363,000 in 1981. Overall however there was little increase as the numbers employed as agriculture continued to decline. This growth in the working class led to some limited revival in socialism reflected in the Labour Party claiming ‘the 70s will be socialist’ before that decade came and went and republicanism being genuinely influenced by socialist ideas, although of a Stalinist-type that did not offer any real alternative.

This period saw a large growth in the number of strikes so that at one point the Irish State had the highest number in Europe (see below).

It also witnessed huge demonstrations against the high taxes imposed by the State on the working class, which amounted to 87 per cent of all income taxes in 1978. In 1979 over 150,000 workers demonstrated in Dublin with many thousands in thirty other towns including 40,000 in Cork.

At this point the Irish State’s model of economic development began to collapse. World-wide economic crisis, a weakening of foreign investment and bankruptcy of indigenous industry led to massive unemployment, renewed emigration and a ballooning State debt. That the Irish working class and small socialist movement were unable to offer an alternative to the resulting capitalist restructuring and political offensive should not surprise. There was no successful resistance and alternative created anywhere else.

The defeat of the tax struggles in the late seventies and early eighties and the inability to take advantage of ruling class political disarray, evidenced by repeated general elections in the first few years of the decade, plus the mass unemployment and emigration during the decade, weakened the working class both materially and politically. The graph of strike activity above clearly shows a steep decline from the 1970s from which there has been no recovery. It was in these circumstances that social partnership was imposed in the late 1980s.

Partnership signalled the move away from bargaining with the employers and State through militant action and acceptance that when the solvency of the State was in question this took priority. Beginning in 1987 a series of deals were negotiated that meant accepting major cuts in pay and state services in order to reduce the massive State debt. The parallels with today are obvious.

There was resistance to social partnership but it came in its most militant form from outside the trade unions and the trade union leaders were decisive in its relatively smooth introduction. This defeat of militant workers action and acceptance of the prerogatives of capitalism was, as we have said, not at all unique to Ireland.

Across the world the ability and willingness of the working class to fight back in defence of its interests was set back. Strike statistics are only the most graphic measure of this development. Taking 42 countries and looking at the period between 1981-85 and 1996-2000 the number of countries in which strikes increased was 8 while there were 34 countries in which they declined. In the group of countries in which strikes had risen the increase was only 5,183 while the reduction in strike numbers was 63,657 in the group of countries in which there was a decline.

In the Irish State the annual number of days lost in strikes fell from over 580,000 in the 1970s to 26,650 in 2005. In the latter year there were only 15 strikes and only 10 in 2006, in which only 7,352 working days were lost, the lowest since records began in 1923. In 2007, the last year of the boom, there were only 6.

As a percentage of the employed workforce trade union membership fell from 56.2% in 1987 to 42% in 1998. Separate figures record a reduction from 46% in 1994 to 35% in 2004 while the Irish Congress of Trade Unions has admitted that density continued to fall, being lowest among young workers. Where unions did exist member participation dropped and some of the features of bureaucratisation long normal at higher levels of trade unions infected union representatives further down the ranks.

All this occurred during an unprecedented boom in the economy, the period of the Celtic Tiger, when GDP growth ranged between 7.8% and 11.5% from 1995 to 2000 and between 4.4% and 6.5% from 2001 to 2007. From 1990 to 2007 total employment grew from 1.160m to 2.112m, an increase of over 80%. While incomes fell during the 1980s they grew rapidly during the Celtic Tiger. The historical working class was recreated in many ways as a result of rapid economic growth both quantitatively as a result of falling unemployment, immigration and increased labour force participation rates and qualitatively as a result of the increased employment of women (whose number grew by over 125% from 1990 to 2007) and an influx of foreign workers.

The Irish working class was recreated as a result of a boom fuelled primarily by foreign investment, which excluded unions from its workplaces, increasing corporatism and bureaucratisation of the unions that did exist. This within a world in which the historic goals of the working class movement – from progressive reform of the capitalist system to the view that it could be replaced – was increasingly discredited through the fall of Stalinism and defeat and retreat of workers struggles and the claims of social democracy.

The boom saw no political strengthening of the workers’ movement even as unemployment fell and the class objectively, at least in numbers, grew enormously. As we said at the end of Part 3 capitalism is a revolutionary mode of production that recreates the working class. In the Irish State it did so in a way and in circumstances that did nothing to overcome the historic political weaknesses of the class. Indeed the trade unions became weaker as they bought into social partnership and the view that the interests of workers, State and bosses were best aligned. Even the historic nationalist politics that has been hegemonic became encapsulated in the need to have a low corporation tax for US multinationals.

Lack of a strategic alternative, among other things, brought about defeat of the large struggles of the 1970s. Unemployment, emigration and prolonged economic crisis brought an assault by the State on working class living standards and did so in such a way that it survived, even prospered, when the economy recovered and entered into a boom. Social partnership sold the working class into sacrifices to bail out the State from bankruptcy and made the workers subordinate even when the boom gave them the conditions in which they could have recovered their strength and learnt to advance their own interests. Instead, in so far as social partnership was later abandoned it was abandoned by the State.

The nationalist politics of the working class, the partnership with the state and the agreement of workers to sacrifice themselves on its alter came together in the reluctant acceptance of workers that they must bail out the banks and accept austerity when the economic crisis finally broke. This dependence on the State can be seen in two other ways.

In Part 2 we noted that the left wing economist Michael Taft has claimed that the ‘squeezed middle’, the 4th to 8th deciles of income earners, suffered declines in direct income in the five years leading up to the crash, gaining only as a result of social transfers. Social partnership involved a deal between the trade union leaders and the State/bosses in which workers refrained from industrial action and accepted lower than potential pay rises in favour of tax cuts. This was not just the case in the final years of the boom but was the line pushed almost from the start – a policy that became more and more explicit as the partnership deals were negotiated.

Thus not only did the workers movement become denuded of any militant initiative but it became more and more dependent on the state, and this was true not only of public sector workers but of workers in the private sector as well. Gross average industrial earnings grew by 25% in real terms in the 15 years between 1987 and 2000 but take home pay rose by 60% for a single person and 58% for married because taxation was cut.

Mainstream economists, in 2000, also reckoned that these tax cuts were regressive because they were largely achieved through reductions in tax rates, which favoured those on higher incomes. It is well known that the State became excessively reliant on revenues from a credit boom but what this shows is that social partnership, and the whole strategy of the trade union leaders, was just as reliant. But really, how could it be otherwise?

The second way this dependence increased can be seen in the simple growth of the state itself, true in all countries and not just of Ireland. ‘The Economist’ reported that the average size of the state had grown from 12.7% of GDP in 1913 to 47.7% in 2009. Even in the UK after decades of Thatcher and New Labour the size of the state remained around 44% from 1980 to 2005. This translates into widespread and increasing dependence of the population on the state, which has become the supposed solution to every and all sorts of problems.

Such massive growth could not fail to have deep impacts on society at the ideological level and the ruling ideas that infect the working class. Neoliberalism hasn’t done away with the State and neither has it weakened illusions in it. The Irish State now presides over the world’s biggest property company (NAMA) after private capital made a mess of it. The State is now the means by which the debts created by this private capital are made good by the working and middle class.

One business journalist has quantified some of the ways in which this dependency is transmitted:

“Irish Budget 2014: Half of Ireland’s population is on welfare and when recipients of child benefit, farmers dependent on public subsidies which are effectively welfare, accounting for 81% of average farm income in 2012; legal services costing the state about a half billion euros annually; public payments to doctors; a raft of corporate welfare schemes and the public service itself, at least while Karl Marx is likely to be disappointed that a few remnants of the failed communism experiment only remain, in Ireland there is a shining example of the halfway house known as socialism or to put it in non-ideological terms, dependency on the State.”

As we can see, he paints the growth of the capitalist state as somehow a practical example the ideas of Marx, and who can blame him? It’s the view of most of the Left as well, who constantly call not on the working class to solve its own oppression but for the state to do it for them.

The journalist gives a host of facts that demonstrate the growth of dependency on the state -from the growth of social welfare expenditure from €9.5m in 2002 to €15.5m in 2007 when the crash came and to €20.7m in 2012. The number of social welfare beneficiaries rose from 1.5m in 2002 to 1.6m in 2007 and 2.3m in 2012. Of these 486,000 were on the Live Register.

He notes the increased number holding medical cards; the direct subsidies to private industry and agriculture – mostly to the biggest operators; the tax breaks for business and the direct procurement of goods and services from private capital.

However the bottom line with the austerity offensive is that the Irish State became bankrupt and could not afford to continue this, so introducing harsh cuts and tax increases. The question we have sought to address is why Irish workers have not resisted, or resisted so little and to so little effect.

We have seen numerous reasons for this – from the historic weakness of the class; the recreation of such weakness in the defeats of the last few decades; international developments that have demonstrated the hardly unique character of the experience of Irish workers in this respect, and the particular role of trade union and political leaders, which again is far from unique to Ireland. Only a few weeks ago I listened on the radio while a professor of economics in Madrid noted that commentators in Spain were wondering why Spanish workers were not reacting more angrily to austerity compared to their Portuguese neighbours.

The experience of Irish workers reflects the weakness of indigenous capitalism which the growth of foreign direct investment has not significantly altered. The latter has only reinforced the weakness of Irish workers – they have hardly even attempted to unionise in the multinational sector and appear to have bought into the view that they must live through nine circles of hell before the proud Irish race will ever succumb to a headline corporation tax rate higher than 12.5 per cent.

Finally we have seen the very direct dependency of so many on the State that has just bankrupted itself bailing out the banks. Unable to stop them doing so, in fact not even being asked if they agreed, and fed crap about the ‘cheapest bailout in history’, the working class was left with a choice – bail out the state it depended on for jobs and welfare or default when the only people in place who could carry out this policy was the same State that was demanding they pay up. Without a mechanism to enforce default, even if that is what they wanted, and without an economic and political power base outside of dependency on the State, the choice was pretty clear, even if there could have been struggles that could have made it messy.

Put simply – how could workers tell the State to get stuffed when it relied on it so much? The Left has peddled nonsense that the State can be made a means to redistribute wealth such that only the rich pay for capitalist crises but the workers haven’t bought this and some of the Left that calls itself Marxist is not actually supposed to believe it either.

The defeat inflicted on workers in the last five years should cause a rethink. Renewed declarations of faith will not do.

A new Left electoral campaign in Limerick

Posted on July 27, 2013 by irishmarxism

The Revolutionary Programme web site altered me recently to the latest electoral initiative of the Left – here. The programme of this initiative is the following:

No to the Property, Water & Septic Tank Taxes – No to Deduction at Source.
No to all Austerity – ordinary people have paid enough.
For a united movement of ordinary people affected by home taxes and austerity – no to divisions based on race or nationality.
Tax the Wealthy as the alternative to austerity: For progressive taxation on the wealthy and corporate sector.
End the bailouts of banks and bondholders, instead use the money to create real jobs through a programme of necessary public works.
Our candidates if elected would:
Fight against plans for Water Metering, Water Taxes and Water Privatisation.
Oppose all cuts in council services or erosion of workers conditions.
Make no deals on the Council with the austerity Parties (FF, FG, LP).
Oppose the gravy train – no participation in junkets. Demand local planning for the community, not for developers or vested interests.

What attitude should Marxists take to this electoral initiative?

Just like every other party standing in an election it must surely be judged by what it says – by its professed programme or set of policies, providing of course these are also what it truly represents.

Can and should it be supported?

The electoral slate is clearly not a party and was organised by the Campaign Against Property Tax and Austerity but the logic of standing in an election is to act like a party and even more so if elected. The failure of the Unite Left Alliance to do so has led to its demise.

The policies above are no way different from that of the ULA, except more limited. The Left has argued over the last number of years that elections and those elected are there to advance ‘real’ struggles outside of parliament and council chambers. The last few years have demonstrated conclusively however that it is the other way round – struggles in communities and estates have been means to advance electoral ambitions. Electoralism is a dirty word on the Left but nothing would appear to describe the method of organising so accurately.

This initiative, the promised first of many, must be judged firstly on its own terms.

The short summary of its aims says it is against austerity and the various taxes that have made up a large part of this agenda. The anti-property tax has failed so it will have to be explained how standing in elections will bring success. Otherwise voters are being asked to vote for good intentions. Councils can clearly not change the policy of central government so how will the taxes and austerity more generally be blocked and reversed? No concrete and practical way forward is put forward. Maybe it will be, but if it isn’t then it is purely propaganda.

If the reason for standing is to build the campaign this should be the main point of the programme but even here it should be explained how the campaign will achieve its aims. Is, or rather was, a mass boycott a road forward given deduction at source? If not what is the alternative – a mass political campaign aimed at persuading tax workers to refuse implementation of the tax?

What role is there for councils? Are enough candidates standing to win a majority? If so what would they do with such a majority? Can they unite with other similarly minded councils to campaign against the tax? What powers do councils have to frustrate or prevent this tax or austerity? Will the new council promote workers control or ownership of council services? What other steps will it take to promote the democratisation of local government?

If there is no possibility of winning a majority then what role would those elected take? Will they release all information currently withheld on council activities? How will they frustrate the local implementation of austerity?

If these questions aren’t put to the fore then, as I’ve said, what we are seeing is purely propaganda. This does not mean that this aspect should be underestimated. Even in periods of limited struggle, in fact particularly in such periods, the task of socialists is to try to educate as many workers as possible through propaganda. Given the very small size of the socialist movement in Ireland this is by far and away its biggest task. If it doesn’t get this right then the majority of what it is capable of doing is wasted if not positively harmful.

The thrust of the programme appears to be anti-austerity with the alternative being taxation of the wealthy – “for progressive taxation on the wealthy and corporate sector.” It is also proposed to “End the bailouts of banks and bondholders, instead use the money to create real jobs through a programme of necessary public works.”

I have shown what is wrong with the idea you can tax the wealthy here and here so I won’t repeat my arguments again in this post. The main problem is that it is not the wealth or high incomes of the rich that are the cause of austerity so even if it were possible to tax both effectively the cause of austerity would persist. This cause is the economic crisis. Because the economic system is a capitalist one the elementary task of a manifesto would be to state this and explain it. Explain exactly how the way the capitalist system works has given rise to this crisis and will create more in future. This would be necessary in order to argue that the alternative to austerity from a working class point of view is socialism. Explaining what this is would involve is an obvious next step – expropriation of capitalist ownership and workers ownership in its place and a workers’ state in place of the existing state.

Complaining that the programme does not mention socialism is not the problem since the programme is not a socialist one. If this is the way it is then it is better that it does not claim to be socialist.

The programme proposes ending the bailouts of banks but does not explain how this might be done, the consequences or the alternatives. Some of these issues are touched upon here, here and here. How is the debt to be repudiated? What debt is to be repudiated? How would credit be provided if the banks were allowed to fail?

Anyone who begins to think seriously about what “ending the bailouts” means will have these questions in their head and without an answer they will be open to accepting right wing claims that such proposals are not thought through , cannot be implemented or would be even more disastrous than what we already have. Dealing with such claims is the important task of propaganda and at this point in time elections are useful means of getting across the message.

In the absence of all this the message put across is a radical Keynesian one, that is a capitalist one. One that is temporarily more beneficial to working people but one, if followed,that would lead to inflation, wage cuts, unemployment, and calls for reducing budget deficits and tax increases later on. That’s if it worked in the meantime!

From a political point of view therefore the programme does not assert separate working class politics but, in so far as it puts forward an alternative, puts forward the benign actions of the capitalist state as the solution. It therefore doesn’t even get to first base in terms of a socialist alternative. It may therefore be reformist but it isn’t working class reformism because it seems to rely solely on pressurising the state.

In terms of the reformist/revolutionary dichotomy it isn’t even the former since it lacks the courage of its convictions and fails to propose a Left Government for the Dail that could tax the rich and the corporations; burn the bondholders and use the money to create jobs in the public (read – capitalist state) sector.

A socialist programme would explain that fighting austerity is required to defend our living conditions but that this will ultimately fail unless the system is replaced. Austerity can at best be ameliorated but such is the depth of the crisis it cannot be entirely halted and reversed under the present economic system.

Some will deny this and claim that austerity can be ended without changing the system; that the rich can be made to pay for their crisis and that policies of growth will ensure that this can happen.

On the other side will be those who will claim that austerity is an inevitable result of an economic crisis, which is caused by the capitalist system in its attempts to produce and accumulate capital beyond the conditions that allow it reproduce itself harmoniously. The excessive expansion of credit is always a feature of capitalist crisis and the bigger the boom the bigger the bust, unless even more credit is injected into the economy in which case the bigger the boom . . . No amount of regulation or honest government can prevent this without seriously gumming up the capitalist system, in which case you simply have a different sort of crisis with very much the same symptoms of unemployment etc.

On the first side of this debate will be the liberal defenders of Keynes, including their economists and leaders of the trade unions. On the second, socialists, who can only consistently defend their ideas by understanding and presenting the arguments of Karl Marx, which is the reason Marx wrote ‘Capital’.

A recent post on the Michael Roberts blog has a couple of interesting points to make about these arguments.

He points to research showing that inequality of income reduced between 1910 and 1950 across the OECD (most advanced) countries, which calls into question the idea that capitalist crisis is a result of inequality that progressive taxation could cure. This period, after all, covers the great depression of the 1930s.

He points to other research that:

“Credit booms mostly lead to financial crises, but inequality does not necessarily lead to credit booms. “Our paper looks for empirical evidence for the recent Kumhof/Rancière hypothesis attributing the US subprime mortgage crisis to rising inequality, redistributive government housing policy and a credit boom. Using data from a panel of 14 countries for over 120 years, we find strong evidence linking credit booms to banking crises, but no evidence that rising income concentration was a significant determinant of credit booms. Narrative evidence on the US experience in the 1920s, and that of other countries, casts further doubt on the role of rising inequality.“

The problem with left solutions that highlight (sometimes more or less exclusively) inequality of income and wealth is that their solutions do nothing to tackle the origin and cause of this inequality. The Michael Roberts blog points out that “in 2011, capital income constituted 60% of the top earner’s income compared to just 32% in the 1980s.”

The origin and cause is capitalist ownership of the means of production, including its purchase of labour power, its ownership of capital and the money and power this involves. It is the relations of production in which workers have to sell their ability to work to a class of owners of the means of production that produces the gross inequalities in society. Redistributing what is already produced, even were it possible, would not overturn this power relationship or the exploitation and oppression involved because it does not get to the heart of the matter.

In a country where little or nothing of this is understood the elementary task of socialists is to explain this to as wide a number of workers as possible and elections should be taken as an opportunity to do so.

So we are back to our question – should this electoral initiative be supported?

To the extent it has been judged as a more or less adequate immediate guide to action or corresponds to the educational needs of the working class the verdict would appear to be no.

Perhaps unity could not be agreed between the participants on any other basis and what we see is a campaign standing in an election not a party. But was any other basis proposed or offered? Was any discussed or do the participants see no problem in the platform of a campaign being adequate to a programme for an election?

It might truthfully be said that the low level of the programme reflects the low level of Irish workers’ class consciousness but this is not a way out of objections to it, for there is nothing in it to advance Irish workers’ understanding of the cause of the austerity they face or the great changes that are required to defeat it and establish a new society.

The only conditions upon which it would be possible to support this initiative is if it went further in arguing the socialist case or if it raised the prospect of invigorating a section of workers into activity, in which case through this activity they may learn about the roots of their predicament and themselves go beyond the timidity of the anti-austerity campaign. To do the latter they may have to go beyond the existing Left groups who save what they think is socialism for potential recruits while the broader class of workers they address in electoral material, the purported agent of revolution, are fed re-heated capitalist reforms.

G8: The Mafia Empire Part 1

Posted on June 18, 2013 by irishmarxism

by Belfast Plebian

‘We shall not shock anyone, we shall merely expose ourselves to good-natured or at any rate harmless ridicule, if we profess ourselves inclined to the old fashioned and simple opinion according to which Machiavelli was a teacher of evil.’ Leo Strauss

The wiseguys are again meeting at a secluded location, not at the Apalachin retreat in upstate New York as depicted in the Godfather movie, they did that one back in 1957, but at a lakeside hotel in Fermanagh. The world’s most feared political gangsters are holding two days of much needed sorting out talks, for their dark mutterings and latent rivalries have reached a point of near breakdown in diplomacy. The quarrels between them have become so heated that they imply in an undeclared war over the future of Syria and beyond that you can see through in the ongoing currency war between them.

It is my contention that there is a strong correspondence between the politics of the G8 and the Mafia politics of the recent past. When I say correspondence I do not mean identity.

The political gangsters of today are therefore obliged to acknowledge a debt to the late great mafia boss Salvatore Luciano, the mobster who dreamt up the idea of a Mafia Commission to settle intense quarrels over criminal opportunities. Lucky Luciano established the Mafia Commission in 1931, a corporate body to mitigate the violent disagreements among the warring crime gangs. Luciano wanted to end the chaos that had led to a bloody and self -destructive gang war in New York and Chicago during the 1920s. In 1925 he was grossing over 12 million dollars a year and had a net income of around 4 million dollars after the cost of bribing the politicians, judges and police was deducted.

But his private fortune was put in jeopardy by the intense gang rivalries, which escalated into a fierce street battle known as the Castellammarese War, that raged from 1928 to 1931 and resulted in the deaths of at least 60 top mobsters. So he looked for a way to lessen the strife and violence and found it in the Commission, a corporate body that has endured for over seventy years.

Lucanio did not want to be an Italian- American Caesar. He realised that the best way for him to stay alive and rich was to let the most powerful crime families run there own internal affairs, but establish an administration to settle their differences and to mobilise enough combined muscle to crush any new rivals. He established a mob board of directors known as the Commission to oversee all criminal and business activities and to mediate strife between the contending families. It was to meet every five years and its decisions were non-negotiable.

The Commission officially comprised seven crime families; the heads of the New York five plus, the Chicago Outfit of Al Capone and the Buffalo based crime family led by Stefano Magaddino. The Commission did not stop all gang warfare, but it did reduce the number and scale of them; when one gang transgressed against another it would often find itself at war with all the rest. There was no single ruler of the Commission, but there was a nominated chairman who was oath honoured to stand for the common good.

The Commission largely succeeded, for what we find is that while the personnel of the ‘FAMILIES’ frequently changed, over time the same crime families stayed on top of the underworld from then until today: The Bonanno crime family, the Colombo crime family, the Gambino crime family, the Genovese crime family, the Lucchese crime family, the Philadelphia crime family and finally Al Capone’s Chicago outfit. They established a better capitalist crime model for themselves than the current rather shaky G8 one and it is the reason why Time Magazine once called Lucky Luciano one of the most influential Americans of the twentieth century.

“I learned too late that you need just a good brain to make a crooked million as an honest million. These days you just apply for a license to steal from the public. If I had my time again I’d make sure I got my license first.” Lucky Luciano.

The G8 – the people who got the licence first.

If you succeed in politics you can usually surpass anything a Crime Family Boss can do in almost every division of life including killing and enriching yourself at the cost of others. Take Tony Blair for example. Everyone knows about his illegal and immoral acts of killing, but what of his wealth? Here is a report just picked up from reading yesterday’s newspaper (Daily Mail Saturday 15, 2013). Depending on how you cut it Blair is now worth £60 million or £80 million. He has set up a Byzantine network of inter-related companies to funnel his vast tribute for being a useful Prime Minister. Useful for whom you might ask, well useful for the Banksters.

His first tribute after leaving office came from the world’s leading investment bank JP Morgan Chase. He has been a senior adviser for the last five years on a £2.5 million salary and his preferred mode of transport these days is a rented Gulf Stream V private jet. He says he was able to facilitate the bank’s clients due to high-level political contacts made with the Rwanda government when he was Prime Minister. The former PM has also done a deal to promote the dodgy government of Kazakhstan, he apparently gives it advice on good governance and this has already netted him £16 million

He has been receiving £1 million a year for advising the Abu Dhabi sovereign wealth fund where it is safe to invest their oil money. He is said to be as thick as thieves with the super rich Sheikh Hamad bin Jassim bin Jaber al Thani, the PM of Qatar. One of his other rewards for once holding political office came from the Kingdom of Kuwait – this netted him a swell £27million and his think tank was asked to produce a report on the future of the Kingdom called Kuwait Vision 2035.

There is plenty more of that sort of stuff in the newspaper article. Tony Blair is an example of a political mobster of the very successful type. The thing that makes these ‘democrats’ different is that they have to wait to leave political office before collecting the readies rather than taking it while they are in office, say like ‘oligarchs’ like President Putin, another of the G8 stars.

President Putin officially lists his salary at 5.8 million rubles, about $190,000 a good deal less than Obama’s official salary of $400,000. He also claims that he has very little personal wealth. During his election campaign he claimed he had $180.000 in his bank account, owned three Russian made cars and a small apartment in Moscow, so a lot less than Obama’s personal wealth estimate of $12million.

Here is an independent assessment of his personal wealth made by a celebrity magazine:

‘So what evidence is there of Putin’s secret obscene fortune? Let’s start with the small stuff. Putin is known to sport a $150,000 Patek Philippe watch on most occasions and his total collection has been valued at at $700,000. He also has full access to a $40 million ultra luxury yacht that features a wine cellar, Jacuzzi, helipad and outdoor barbecue area In terms of living accommodations, Putin has access to 20 mansions throughout the world including a lavish ski lodge and Medieval castle. The crown jewel of his property portfolio is a $1 billion palace overlooking the Black Sea that he allegedly owns through an anonymous trust. Furthermore, Putin makes frequent use of 15 Presidential helicopters and more than 40 private jets, many of which feature gold plated interiors . If Vladimir Putin’s net worth truly sits at $70 billion, that would be enough to make him the second richest person on the planet right behind Carlos Slim Helu. It would likely also represent one of the largest personal fortunes ever accumulated by a sitting President. The only other world leader who possibly looted more cash from his country was Muammar Gaddafi who after 40 years of power stashed away a reported $200 billion in ill-gotten oil money.’

It might of course be argued that Tony Blair is a rogue politician, that the Heads of States of our Democracies are usually very different from him and therefore different from the Bosses of the Mafia Families. Yet ex-President Clinton has trousered a lot more tribute than Tony Blair and Obama will certainly get filthy rich when he finally hangs his coat up on the White House door.

Some of our more notorious mobsters believe they have a good handle on the entire thing. Here are a few quotes from Al Capone about living in the world’s purest democracy. Al didn’t ever get too caught up in the whole democracy thing ‘capitalism is just the legitimate racket of the ruling class’. . . ‘This American system ofours, call it what you will, gives each and every one of us a great opportunity if only we seize it withboth hands and make the most it’. The mobsters can never fathom how they are doing anything different from the politicians and that often is their weakness, the bankers and lawyers of the democracies get the law on their side before they commit the crimes, or if they do the crime without the assistance of the law they get the politicians to amend the law to make sure they avoid the normal consequences of the law.

In every episode of the Max Keiser show on Russia Today evidence is produced to demonstrate how the law is broken and amended to help the financial criminal elite of Wall Street and the City of London. In March of this year a US Senate committee compiled a 300 page report documenting the fraudulent and criminal practices sanctioned by Mr Blair’s favourite bank and the largest dealer in derivatives trading in the world. Despite all the evidence, no legal action was deemed appropriate, and the CEO Jamie Dimon remains a Consigliere to the President concerning the financial markets.

The late John Gotti was once the Boss of the powerful Gambino family. is advice to the young included the following: ‘be nice to the bankers. Always be nice to the pension fund managers. Always be nice to the media. In that particular order.’ The Mafia ‘philosophy of self enrichment without conscience’ is perfectly suited to the present condition of finance-dominated capitalism. It is certainly difficult to spot the difference between what the law calls loan sharking and current legal lending.

The loan shark figures a lot in Mafia books and films, the person or business that offers loans at extremely high interest rates and the smaller the loan the more onerous the repayments. In the early days of Mafia loan sharking it was confined to payday lending on potential wages with most of the customers being office clerks and factory workers. The 1952 film ‘Loan Shark’, featuring mobster favourite George Raft, depicts the whole payday loan racket.

In the 1960s the Mob shifted their loansharking to small businesses as they had assets that could be confiscated if payment was overdue. The irony is that the Mafia historians tell us that payday lending to workers largely disappeared by the 1970s. Now of course they are back with the sanction of the law and the backing of the politicians. In Britain the Campaign group Debt on our Doorstep campaigns against the practice, if you are interested go to their web site for some horrific stories.

One of the big players in the payday loan racket is Wonga, the sponsor of Blackpool football club. Last year it declared £45million in profit, by advancing over 4million loans. The annual interest rate on its payday loan is 4,214 percent. One of Wonga’s main stockholders is Dawn Capital, whose chairman is called Adrian Beecroft who is a donor to the Conservative party. The Prime Minister David Cameron asked his friend Mr Beecroft to prepare a report on the future of employment law and he recommended that employers be given the right under the law to sack workers at will and without explanation. The oily rag PM liked the idea but the Liberals thought it was a bit strong for now so it did not become law. Once again the immoral activities of the Mafia mobsters have been superseded by the legal activities of the political gangsters.

Lets move on to tax. The Mafia bosses never like to pay tax, they are very much in the low tax political camp. This brings us to Al Capone; in 1927 it is estimated he made about $100 million, the equivalent of about $1.2 BILLION today. Despite his profession the authorities could never pin a serious crime on him with the Treasury Department attributing this to his ‘natural Italian secretiveness.’ He was maybe helped by the fact that no witnesses would testify against him, but the main reason was he was generous with his money. It is estimated he spent over $30 million in 1927 on gifts to politicians, judges and police chiefs.

Al Capone was eventually convicted and sent down because he was a tax evader, yet how was this conviction lawful? Capone had this to say: ‘the income tax law is a load of bunk. Thegovernment can’t collect legal taxes from illegal money.’ When he was sent down it was the toughest sentence ever imposed on a tax evader. Capone told the newspaper guys: ‘I’ve been made an issue, I guess I’m not complaining. But why don’t they go after all of those bankers who stole the savings of thousands of poor people and lost them in bank failures? How about that? Isn’t it a lot worse to take the last few dollars some family has saved-perhaps to live on while the head of the family is out of a job-than to sell a little beer.’

This of course is an example of trying to get the victims of the capitalist system on to your side when you have just become undone and disgraced politicians frequently play this populist card, nevertheless we appreciate the point. Many respectable people got rich during the prohibition era by selling alcohol as a legal medicine. The fine novel ‘The Great Gatsby’ is a fictional account of a legal medicinal bootlegger. The father of the Kennedy political dynasty held such a licence and he used it to stock his warehouses in the period just before the end of prohibition.

But what about tax evasion and tax avoidance? Davis Cameron says this is to be one of the big-ticket items on the agenda of the G8 summit. He claims he wants to see companies pay their fair share in tax but he doesn’t try to define fair. One can just imagine him raising the matter at the G8 to the annoyance of the French President. Here is what he had to say one year ago to the very day: “If the French go ahead with a 75% top rate of tax we will roll out the red carpet and welcome more French businesses to Britain and they will pay taxes in Britain and that will pay for our health service, and our schools and everything else.”

Let’s now add a little bit more beef to his speech from the G20 meeting in Mexico 2012: “Every country sets its own tax rates, but I think in a world of global capital, in a world where we’re competing with each other, in a world where we want to send a message that we want you to build businesses, grow businesses and invest, I think it’s wrong to have completely uncompetitive top rates of tax.” The oily rag PM is just playing with the public over tax.

Consider this snippet from a recent white paper covering the status of the UK oversees territories: the UK’s parliament has “unlimited power to legislate for all its overseas territories and crown dependencies”. He is putting on a show as if to say all he can do is try to persuade Bermuda, Cayman Islands and the Channel Islands etc to play fair on tax, when he could command them to do so. They will of course carry on as before and Cameron will stand back and shrug his shoulders. You should not be fooled into thinking that the British government is responding to the campaigns of the NGO’s to make tax on companies into a social issue. What he is defending Britain from is criticism from the other G8 political leaders, especially that coming out of the Congress in Washington who think the political class in Britain have effectively turned the country into one big Tax Haven to the detriment of Uncle Sam and others.

Taxing Capitalism

Posted on July 27, 2012 by irishmarxism

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

Posted on July 16, 2012 by irishmarxism

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.

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