The State and Stockholm Syndrome – Part 2

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Today the State is inflicting attack after attack on working people but just like sufferers of Stockholm syndrome many people keep coming back to ask it to protect them.

It is not that this is an idea with no rational content at all.  It does have a basis in reality but not one that justifies the political positions of some of the Left.

Last week on RTE news some disabled people were interviewed protesting outside the Dail at cuts to personal assistance, without which they might be forced into hospitalisation or else left to suffer appalling neglect.  Their protest was a powerful demonstration of the enormous dependence some of the most vulnerable have on the State and the capacity of that State to mistreat them appallingly.  While the media and others basked in the achievements of Irish athletes in the Paralympics in London the Irish State was preparing to shaft disabled citizens at home.  The protests succeeded in getting a U-turn on the proposed cuts and a rare but welcome victory.

This is but one example of the welfare state which is what the Left has in mind when it defends the state.  Where the right wing scream private good and public bad the left has often responded by defending public services and with declarations of the evils of the private sector.

Opposition to welfare cuts and to cuts in education and health services should not however imply any wider defence or support for the state or ‘public sector’.  The public sector is a large bureaucracy that has no democratic content, often providing poor and inefficient services.  The state training agency FAS is just one outstanding example of the corruption and wastefulness of the provision of services by the State. These are run by a capitalist state, in the interests of capitalism, by bureaucracies totally unaccountable to working people.  Why on earth should there be any inclination to defend what we are not responsible for? What we have no control over? That should rightly be criticised by us for its often bureaucratic waste of our money?

And this is the point. It is working people who pay for the welfare state, not the rich and not capital.  In a paper written some years ago the Marxist economist Anwar Shaikh sought to examine the argument that excessive welfare provision caused economic stagnation and unemployment.  In the course of this he demonstrated for six major countries (US, UK, Australia, Canada, Germany and Sweden) that this was not the case.  His central finding has relevance to our own argument, which was “that social benefit expenditures were financed out of the taxes paid by recipients of these very expenditures: in other words, by and large, social welfare expenditures were self-financed.”

The capitalist state taxes workers and then bribes them with their own money while liberals loudly declare that taxation is somehow progressive, even left-wing, and should be increased to improve welfare servicers and boost the economy.  Workers are expected to uncritically support this as if ‘the State’ is paying for something when it is actually they that are doing so.  The key question of ownership and control of the services provided by the state is ignored and the debate is framed in terms of the supposed ‘socialist’ position of ‘tax and spend’ and the right-wing position of cutting taxes and privatisation.

This framework has been used by the right to push privatisation, presenting it as the only alternative.  But it isn’t, and opposition to privatisation is not itself an alternative to the failures of health system or education systems that consistently betray those most in need of their help.  Too often the woeful character of state services has been defended in some misguided belief that defending state ownership is defending the workers delivering the services.  Such an error is rarely made when the unsatisfactory nature of services or products produced by workers in the private sector comes under similar attack.  It is against this background that the State seeks to divide private sector workers against public sector workers and portray the trade unions, often accurately enough, as primarily interested only in the latter because that is where their own bureaucratic power base resides.

While socialists must oppose privatisation as a solution to the inefficient provision of services we should never confuse this with support for or excuses for poor State delivery of services.  Too often the attacks on the working conditions of those employed to deliver these services are made prior to privatisation, or prepared prior to privatisation, by the state itself.  Nor is it true that state ownership guarantees better delivery of services.  The appalling neglect of older people in care for example has taken place under both private and state provision.

So what we have then is the provision of welfare state services which workers pay for but which are delivered often bureaucratically, with no democratic control and often in oppressive ways, such as the means-testing of welfare recipients.  Many workers delivering the services conscientiously do their best but this is despite rather than as a result of how they are organised and managed.  Simply demanding more welfare ignores all this and ignores that it is workers who pay for it.

Many are happy to pay because they care about the services provided and have in the past or will in the future benefit from them.  The provision of unemployment insurance etc. limits the devastation to living standards consequent on redundancy or sickness.  It puts a floor under the minimum wages capitalists can demand, which is why they always want it reduced; but fundamentally it is necessary because a pool of unemployed is necessary for capitalism and this pool must be of sufficient quality to take up employment when it is available.  Welfare capitalism is necessary for the capitalist system as a cost effective way of preserving the quality of labour power.  It is not fundamentally about delivering on the human needs of people.

The large growth of the capitalist state sector, from an average in the OECD (advanced capitalist countries)  of 27 per cent of gross Domestic Product in 1960 to 42 per cent in 1988 (statistics from Shaikh paper), has been the material and ideological power base of social democratic ideas that the capitalist system has been or can be reformed, if not into socialism, then at least something ‘different’ or along vague lines of ‘another world is possible’.   The limited standards of the services provided and endemic insecurity under which welfare recipients live are one testament to the limits and precariousness of this social democratic vision of reform.

Workers expected to row in behind demands to defend a large state should be aware that this sector has grown in recent years because of the state’s role in preventing a financial collapse pushing the whole capitalist system over a cliff. In Ireland, as in many other countries, workers are having to pay for it through tax increases and service cuts.  The last thing workers need is the idea that the State is something neutral that can be captured to represent its interests.  Yet this is the present perspective of much of the Left who have diagnosed the current situation as first of all a ‘crisis of working class representation’.  That is, a crisis of the social democratic illusions that once had hegemony over many workers, although to a much lesser degree in Ireland, who have suffered mainly from capitalist populism.

This dependence on the State as part of the fundamental programme of the Left is the ideological explanation for the electoralist strategy now so much a feature of the Left.  It is no accident that the need for a United Left Alliance was suddenly seen before the general election.  Having made the electoral intervention the need for unity was then considered by some as no longer so strong and the promised progress to a real party has evaporated.  We know when it will come back, if it’s not too late.

If this is at least one of the ideological origins of the chronic electoralism of the Left it must still be explained why this has happened given the parallel ideological notion that what the Left organisations want is a revolution in which the working class seizes state power.[i]

Whatever about the belief in revolution this has not been a practical proposition for many years: during the Celtic Tiger boom or the social and political defeat of workers during the previous couple of decades.  So, while often preaching revolution in the future, as a matter of pure practicality it has done what is actually possible.  Given its ideological confusion on the role of the state and having no conception of revolutionary politics outside of a contest for state power the Left has degenerated into electoralism.

The contest for state power by the working class in a long period where the working class has not been interested in such a project has become a reformist contest for state power which resolves into just getting elected to parliament.

The real Marxist attitude to the state, as opposed to dependence on the state for solutions, which I have looked at here, here and here for example, will be the subject of future posts.

[i] I realise that the Socialist Party has political roots which eschew this traditional Marxist view in favour of a perspective of a Left electoral victory, leading to majority in Parliament passing legislation nationalising big industry with the support of mass mobilisations, this allowing the introduction of what they believe to be socialism. But this has always been a relatively hidden revision of Marxism that is disguised by what is presented as a rather rigid orthodoxy.

A Case of Stockholm Syndrome* – The Left and the State

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In two recent posts, here and here, I have criticised proposals of the United Left Alliance (ULA) that rely on dealing with unemployment through a state investment programme.  I have also made criticisms of tax plans of the ULA, which again rely on state action for their implementation.  The state is clearly extremely important to the left alternative proposed by the ULA.

The Socialist Party in the general election called for nationalisation of all the banks and their being run democratically under public control and management. It demanded that the state take the economy and natural resources into democratic public ownership in order to plan the development of a real manufacturing base.   It called for a government based on working class people that implements socialist policies and puts people before profit.  All eight of its proposals involved state action or the need to get the left into the state and into government.

The ‘Alternative Economic Agenda’ of the People Before Profit Alliance was constructed in a similar manner.  It has eleven separate elements and again all rely on the state taking action on behalf of the working class or ‘people’ in general.  Their demands include creation of one good state bank; creation of a State Construction Agency for infrastructural investment; expansion and reorientation of the public sector away from a corporate agenda and general reliance on the state to develop the economy.

These demands for the State to take action to defend working people must be taken at face value.  It is not possible that these demands are raised in order to expose the State and rid workers of their illusions in it because very few workers actually expect the State to take over the economy and run it for the benefit of working people.  The illusions peddled are those of the Left itself, for what is presented is the ideal objective which they aim for and which workers are called upon to endorse.  Except of course that state ownership is not socialism and the Left knows it, or rather will claim to know it.  The problem is that the means – capitalist state ownership – is supposed to lead to an end that is not capitalist state ownership.

When I say that the left knows that capitalist state ownership is not socialism I mean that it knows well the statements of  James Connolly including – “state ownership and control is not necessarily Socialism — if it were, then the Army, the Navy, the Police, the Judges, the Gaolers, the Informers, and the Hangmen, all would all be Socialist functionaries, as they are State officials — but the ownership by the State of all the land and materials for labour, combined with the co-operative control by the workers of such land and materials, would be Socialism… To the cry of the middle class reformers, ‘make this or that the property of the government,’ we reply, ‘yes, in proportion as the workers are ready to make the government their property.’ Workers’ Republic, 10 June 1899.

Engels put it similarly in ‘Anti Duhring’ published just over twenty years earlier -“… since Bismarck adopted state ownership a certain spurious socialism has made its appearance here and there even degenerating into a kind of flunkeyism which declares that all taking over by the state, even of the Bismarckian kind, is itself socialist. If, however, the taking over of the tobacco trade by the State was socialist, Napoleon and Metternich would rank among the founders of socialism. If the Belgian state, for quite ordinary political and financial reasons, constructed its own main railway lines, if Bismarck… took over the main railway lines in Prussia, simply in order to be better able to organise and use them for war, to train the railway officials as the government’s voting cattle, and especially to secure a new source of revenue independent of immediate votes – such actions were in no sense socialist measures. Otherwise the Royal Maritime Company, the Royal Porcelain Manufacturer, and even the regimental tailors in the army, would be socialist institutions.”

We only need to recall that the enormous austerity that working people are suffering is due to the state’s budget deficit and the state’s debt burden to understand what Irish workers should think of ‘their’ state.  It wasn’t the collapse of the banks that placed this debt on the backs of the workers, it was the State that placed this debt on the backs of the workers through guaranteeing all their liabilities and then effectively nationalising them.  Yet nationalisation of the banks has been a left demand for years and still is today.  Yet this nationalisation is precisely the mechanism used by the State to bail out the capitalists involved directly and the whole system indirectly.

Nor is such a purpose unusual for nationalisation.  In fact I can’t offhand think of a nationalisation that wasn’t meant to benefit capitalism and didn’t place a burden on workers.  The rhetoric about dependence of many working people on the state for jobs is no different in essence from that of the supporters of Sean Quinn who have been dependent on him in the past for employment.  Anyone on the left who argues that the State is somehow democratic and has duties to working people no longer believes that the capitalist state is above all the defender of the capitalist system.  That this is what is its defining role.  But for the Left it would appear that holding the belief that the capitalist state is both a defender of capitalism and cannot be reformed and that it can provide all the things that are demanded in Left manifestos are not two mutually exclusive ideas that cannot both be true.

I am reminded of F Scott Fitzgerald’s remark that “the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”  Some in the left appear to go one better and actually sincerely believe two opposed ideas at the same time.  My view is that this is dysfunctional.

*Stockholm syndrome, or capture-bonding, is a psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. (from Wikipedia)

to be continued.

Sectarianism in Belfast. What’s new?

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On July 12 this year a loyalist flute band marched past St. Patrick’s Catholic Church in Donegall Street near Belfast city centre.  They stopped at that particular point by “pure chance” and started walking round in circles playing a tune known as the Famine Song, which contains the line “the famine is over, why don’t you go home?”  This song is sung by supporters of Rangers Football club in Scotland and refers to the large Irish and predominantly Catholic immigration into Scotland from the 19th century onwards.  It has been found to be both sectarian and illegal by the Scottish courts.  According to the band and their political apologists they were merely playing a pop song.  Perhaps it was again mere chance it doubles as a sectarian anthem.  Perhaps also those allegations of an attack on a cameraman filming this Orange version of the X Factor are also mistaken.

On this basis the Parades Commission, a quango established by the British government to adjudicate on contentious parades, decided the band could not take part in the loyalist parade last Saturday, which was to pass the same church.  The other bands were also only allowed to march by a single drum beat past the church.

Unionist politicians were outraged and issued a statement, along with assorted flute bands, denouncing the Parades Commission, saying they were running out of adjectives to describe it , so they gave some nouns instead – “arrogance”, “incompetence” and “general ignorance”. This statement was signed by prominent members of the Stormont Government who claimed that they could no longer let the Parades Commission do untold damage to the peace process. “Violence” would potentially ensue, they said.

So on Saturday the loyalist flute band at the centre of events marched as normal and played the normal sectarian tunes that are the staple of these ‘kick the pope’ bands, as did many of the rest. The normal sectarian insults were hurled, which are surprising only to those terminally stupid or naive.   The police did nothing that anyone could notice to prevent this.  Well, not exactly nothing: there is a picture of one policeman using a loudhailer to tell the passing bands that they were really not allowed to do what they were doing.  This robust action will no doubt be followed by the police warning burglars by megaphone that they are breaking the law when they are seen to break into someone else’s house in broad daylight. Through the Police Federation the police later complained of being caught in the crossfire, presumably between those intent on breaking the law and those who were, well, how shall we say it, wanting it upheld?

There were minor scuffles and one apparent loyalist from Scotland was arrested for running through a nationalist protest, although this was blamed by one unionist politician on a republican.

So we have a loyalist coat-trailing exercise in bigotry, defended by the most senior unionist politicians who warn of violence, which stokes up the adrenaline of the street level bigot but allows the unionist politician to deny any responsibility when the lighted match touches the blue touch paper.  The police wring their hands and the nationalist politicians talk about getting it all sorted out through talking.  You have to be very, very young not be aware that this record has been played a thousand times before.  So what’s new then?

Well what is new is supposed to be – everything!  We have a new peace process, a new political settlement, a new Government and a new coalition between the “two sides”.  Belfast has a new skyline with lots of new visitor attractions welcoming tourists, which is still a relatively new concept to Belfast.  We have new cafes and restaurants and art galleries and a new generation too young to remember ‘the troubles’ and which just wants to live in peace and has no time for this sectarian stuff.

But we have been here before.  Belfast in the 1960s was also a ‘happening’ city with a burgeoning night-life whose young generation was hailed as no longer interested in the sectarianism of the past.  The sixties brought new life, hope and light even to Belfast and not just the streets of London or San Francisco.  New housing was being created that was demolishing the slums that had no inside toilet and entries that doubled as permanent rubbish tips.  Some of this new corporation housing promised mixed estates and a new Unity Flats was built at the bottom of the Shankill Road only a couple of hundred yards, if that, from St. Patrick’s church.  Unity Flats was so called because it was to contain both Protestant and Catholic tenants, sharing the one space in harmony.

We all know, or at least have some vague idea, what happened at the end of the sixties.  That swinging decade that even moved in Belfast was very new and modern but Belfast was incapable of accepting civil rights, including fair allocation of housing and jobs and equal voting rights.  Instead it burst into violence, with Orange parades which were hyped up by unionist politicians and a police force that could not subject violent bigots to the normal restrictions of the ordinary law.  Of course this violent explosion hasn’t happened yet and in my view isn’t going to happen, not yet at least.

The mutual exhaustion of the contending political forces has not yet ended and been reversed.  The unionist leaders are attempting to exert pressure that might eventually usher in their preferred model of unionist-only rule but they are not in a position to force a confrontation that would see the British Government accede to their demands. It is not impossible that a violent eruption might occur that goes beyond unionist plans but it needs a realistic objective and the aim of getting Sinn Fein out of government has not yet become the unifying campaign theme within unionism and loyalist organisations that is required.

Instead the provocative and vitriolic sectarianism endorsed by unionist politicians in the highest offices of the Stormont administration erodes the faith of nationalists in the new deal. The approach of Sinn Fein to the recent events has been relatively muted and resembles nothing so much as the old SDLP approach which so many nationalists rejected by supporting the old (republican) Sinn Fein.  Here too however there is no unified project beyond staying in office and doing nothing to jeopardise the electoral prospects of Sinn Fein in the South.

The real republicans can attempt to take advantage of the disillusionment with the Sinn Fein reaction to the sectarian provocation and can build up their support base but what is their political project?  In so far as it simply involves a renewed armed campaign it only strengthens the ideological hold of the peace process even while more and more people, subconsciously at first, begin to wonder when exactly this process, like every other, is going to end.  The traditional republican policy isn’t credible except as a form of protest but outside of an overarching strategy this republicanism isn’t in a position yet to mobilise a large political opposition.

A large scale sectarian provocation might accelerate these trends and the planned large loyalist parade on 29 September past the same church certainly has the potential to be such a provocation.  It might at the least drive home the lessons of last Saturday if it goes ahead as the parade did then.

The condemnation by two Protestant church leaders of the sectarian behaviour of the loyalist bands shows how vulnerable the loyalists are to criticism.  It is their solutions and that of the Catholic Church that is the problem.  They both want to set the rulings of the Parades Commission as inviolable.  The Catholic Church is worse because it calls for special measures to apply when the parades pass a place of worship conveniently setting themselves up as victim, potentially privileged  protection in future while turning a blind eye to the fact that a sectarian march is a sectarian march no matter where it passes. Its vitriolic bigotry is no more acceptable a hundred yards from a church than right in front of it.

What is needed is an anti-sectarian campaign that is unafraid to name sectarianism when it sees it and is not seduced by the siren calls for equality of traditions, including mutual respect for each other’s culture.  There can be no equality for a tradition based on sectarian supremacy or respect for a culture soaked in bigotry.  Such a campaign would target not just loyalist parades but the sectarian policy creeping into housing policy and the recent discriminatory employment practices of Sinn Fein.  It would challenge the trade unions to take a principled stand and, at least in principle, should be capable of uniting much of the small left. The ULA could take the lead on this in the South by making it an issue on the floor of the Dail as the clarion call for an all-island campaign.  To do otherwise is to turn one’s back on sectarianism while claiming this as the means of opposing it.

The main task would be to rip away the protection of the current sectarian arrangements that are more and more revealing their true colours by refusing to subordinate anti-sectarianism to the demands of the peace process, however this is defined.  What sort of peace is it that allows, even sanctions, the displays of sectarian bigotry on display in Donegall Street on Saturday?

The state of job creation

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In my last post on the politics of the left I questioned proposals on state investment as the answer to unemployment.  In this post I want to look at this further.  The Nevin Economic Research Institute (NERI), an economic think-tank affiliated to the Irish Congress of Trade Unions has published a similar proposal to that of the United Left Alliance (ULA).

Its paper is entitled ‘An Examination of the Effects of an Investment Stimulus’ and its research shows that an investment stimulus of €1 billion would create about 16,750 short term jobs and between 675 and 850 long term jobs.    In the longer term the competitiveness of the economy is increased so that the economy grows, which increases taxation, which more than offsets the interest cost of any loan to fund the investment in the first place.  This means that “overall there is a long-term permanent decrease in the government deficit as a result of an investment stimulus.”  This is what has been referred to often as growing our way out of the crisis and debt problem.  NERI therefore proposes a phased investment stimulus of €15 billion over 5 years.

The net cost per job created, at around €34,500, is nearly the same for both the NERI and ULA proposals.  The paper by NERI sets out more fully its assumptions so it is fair to assume that these are not dissimilar to those of the ULA, which in any case we can also fairly adduce from the ULA proposals themselves.

In order to arrive at its estimates the NERI researchers use an economic model.  Like all models these require assumptions as to how the economy works and therefore how the parameters of various economic variables interact, e.g. how imports will increase given a certain increase in income as employment increases.  This is calculated from historic data from the Irish economy.  The HERMIN model used “combines Keynesian short term features with neoclassical longer term features.”

This is a problem, or rather there are two problems, not perhaps so much for the presumably Keynesian researchers at NERI but for the ULA, whose biggest components claim to be Marxists.  The Marxist analysis of the way capitalism works is very different from the Keynesian or neoclassical one.  Unfortunately, through the budget proposals of the ULA and their similarity to those of NERI, the policy proposals of the ULA display much affinity to Keynesian economics.  We have noted this already in their definition of the problem as being one of insufficient demand, which is also the view of Keynesian economists.

For Marxists this is indeed a feature of the current crisis, indeed of all crises.  Where the difference lies is that Keynesians think that this problem can be put right by state-led investment while for Marxists the lack of sufficient demand is really just one expression of deeper problems but not the fundamental cause of the crisis, which will not be put right by expansion of state expenditure.  This fundamental difference is invisible when the proposals of the ULA and NERI are compared.

For Keynesians the capitalist economy can reach equilibrium, where demand for investment funds and its supply are equal, in a situation where there is nevertheless massive unemployment, both of people and resources.  The autonomous action of the state in increasing investment can solve this problem and bring the system back into an equilibrium that resolves the unemployment problem.  For Marxists state investment can at most postpone the crisis but is not itself an answer.  By contrast the ULA present it as part of the answer.

For Keynesians the autonomous action of the state can provide a solution because the system can reach equilibrium and investment can be the driver of the economy to this equilibrium.  As the Keynesian Minsky puts it –“Investment and government spending call the tune for our economy because they are not determined by how the economy is now working.”  That a model shows state investment to be self-financing when that model contains Keynesian assumptions can hardly be called convincing. Keynesianism believes that “if entrepreneurs can only screw themselves up to do enough investment, it will eventually justify itself, since the income generated will absorb the excess capacity.” (Robin Mathews in ‘The Trade Cycle’)[i]

On the other hand Marxists see this type of statement as an example of bourgeois economists overwhelming tendency to assume that the capitalist economy works like a socialist one; that all production will more or less fulfil a useful role.  After a crisis based on massive construction expenditure that powered a phenomenal boom and then bust, this is just an incredible assumption.  The NERI and ULA proposals are based on further infrastructure spending by the same state that encouraged the last ‘stimulus’. That NERI believes this will lead to long term growth is again built into the neoclassical assumptions of the model.  Neoclassical economics assumes that capitalist markets are totally free and efficient.  A model built on such long term assumptions could hardly show anything else.

Neoclassical economics assumes that production is efficient and finds a market and that growth is the result.  Marxism makes no such assumptions but instead demonstrates the contradiction at the heart of an economy determined, not by autonomous investment, but by the pursuit of profit.  The recent massive overproduction of infrastructure was massively profitable, which is why it continued for so long.  The contradiction between this profitability and real need; the contradiction between the limitless expansion of capital and the limit of the market, was suspended temporarily and resolved temporarily by the expansion of credit.  When this expansion of credit can no longer continue the limits of the market are exposed and massive overproduction , which inevitably involves massive over-accumulation of capital, is revealed.  Keynesianism’s answer is to continue the accumulation because investment will find its own market and in any case can be autonomous within the system, as we have seen.  Marxists believe on the contrary that the accumulation of capital is determined by profit and lack of it may see accumulation shudder to a halt and collapse.

In a contest of economic ideas, between neoclassical economics where crisis are not supposed to happen and are self-correcting when they do, and Marxism, in which overaccumulation driven by super-profits is periodically inevitable, the real world has given a decisive confirmation of the latter. In a contest in which Keynesianism can assume investment creates its own demand and is self-financing and Marxism which points out the contradiction in production between use and profit, the empty office blocks and ghost estates are again striking confirmation of the truthfulness of the latter.  So why oh why would the left want to promote Keynesian solutions?

There is absolutely no reason to believe that a renewed burst of construction spend would not create new imbalances.  Perhaps the left believes that because the state carries out the spend it does not have to earn a profit but this is false for a number of reasons.

First it has to pay for the investment.  If it takes out a loan it will have to pay it back and if the investment does not create tax revenue by promoting further private capitalist investment it will not raise the necessary tax.  In these circumstances taxation would have to come instead from workers or business, which would remove the stimulus that has been created.  If the investment does stimulate or facilitate private investment then this only confirms ULA reliance on the state promoting capitalism as the way out of crisis.

Although the ULA does call for €5.3 billion of state investment in modern industry it calls for much more, €26 billion, to be invested in infrastructural investment.  In fact even some of the modern industry investment is in infrastructure.  Such infrastructural investment is normally not competitive with the main private capitalist industries but complimentary to it, facilitating it to make profits.  By making such spend central to its economic alternative the left, subconsciously no doubt, evidences the inadequacy of its alternative and subservience to capitalism.

An alternative is that state investment is directed to the production of goods and services that people actually need and want and are prepared to pay for.  This would indeed be competitive with private capitalist owned industry but this is not what is proposed by NERI or the ULA.  Instead either taxes or the promotion of private capitalist production through helpful infrastructure is proposed.

In our last post on this we questioned the policy of reliance on state investment given its history of incompetence, even in areas of no great complexity or requiring no great innovation.  The left sometimes excuses this (why?) as the result of subordination of the public sector to private capitalism.  And the answer to this is yes, that is what the capitalist state is for.  It is not for creating competition to private capitalism so why would the left demand that it does?

Even if the specific proposals of the left, in the particular circumstances that Irish workers face, are not practical this is not the main objection to them.  The main objection to them has possibly more force where they actually to work.  For if they worked, even if only temporarily, they would be both a diversion from creation of a socialist alternative and some evidence that this alternative is not needed.  The success of state industry would be the success (temporarily) of state capitalism.

The successful development of capitalism has been facilitated by the state many times and it may be argued that the more recent, and quicker, that development the more it has relied on the state.  This may be true going back through the development of every new major capitalist power from Holland in the 17th century, to Britain in the 18th, Germany and America in the 19th and 20th, the Asian Tiger economies of the late twentieth century and the Chinese of the 21st century.

The socialist alternative is something very, very different from this but the left’s fixation on the power of the capitalist state is strong and we shall look at the question some more.

[i] The quotations above are taken from a new paper that compares the Marxist explanation that the capitalist economy is driven by profit with the Keynesian alternative of the role of investment – ‘Does investment call the tune? Empirical evidence and endogenous theories of the business cycle’ See link.

 

Visiting Dachau

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Some years ago I read a book ‘Against all Hope’, by Hermann Langbein, an Austrian who had fought in the Spanish civil war against the fascists.  It was the story of resistance in the Nazi concentration camps by one who had been prisoner, including in Dachau and Auschwitz.  I had anticipated being inspired by stories of this resistance but was instead humbled by the most common of all resistance activities – the struggle to survive.  So when I went on holiday to Germany I wanted to visit a concentration camp and did so by going on a guided tour to Dachau, just a short trip outside Munich.

There it was driven home that such was the indescribable oppression, for some survival was not the form of resistance taken.  Instead a number of prisoners ran onto the grass at the perimeter of the camp and were literally cut to pieces by heavy machine guns from the guard towers.  As our guide explained, this was not so much suicide as the one and only act of self-affirmation some prisoners felt they could take.  In every other respect they were crushed; ripped of dignity and of control of every aspect of their lives.  Every part of existence conspired against all hope.  For survivors this choice of their fellow captives was not an act of cowardice but an assertion of the only freedom they felt that they had left.

Our guide was a young Irishman who was serious and perceptive and through the numerous answers to our questions demonstrated a deep knowledge of not only the Dachau camp but the associated history, including that after liberation.  His intelligence was demonstrated not only in the questions he answered but those he did not.

He pointed out that the pictures on display were taken by the SS guards.  In these the viewer looks down on the prisoners who are in regular rows with adequate clothing.  We cannot see their eyes which are in shadow.  We see shaven heads.  As he later explained; when prisoners first arrived they took their clothes off, were doused in  often searing pesticide, had their hair cut by blunt shears so ineffective the prisoners doing the cutting often simply ripped the hair off.  Then they were shaved.  If they did not work quickly enough their hands would be tied behind their back and they would be hung from beams in the shower room. Only the location of the beams’ insertion into the wall is now still visible.  In this position their shoulders, elbows, wrists and arms would often break.  In a camp dedicated to work or death this, I imagine, could only have one outcome.

The new prisoners would then have to rush to grab clothing and clogs before leaving this area.  Our guide gave the example of one young prisoner who grabbed a jacket so small only one button could be closed, trousers too short by a distance and two clogs, one which was half the size of the correctly fitting one.  This prisoner described his clothing as continued torture throughout his captivity.  Worse, such circumstances increased the danger.  Anyone that stood out in any way; who attracted the notice of an SS man for any reason – an unfastened button or a new high number – risked the danger of deadly attention. This could, for example, mean an SS guard throwing a prisoner’s cap onto the grass and being ordered to retrieve it.  Stepping onto the grass meant machine-gunning from the guard tower while refusal to follow an order meant death.

He explained that we could not go into the guard towers because the survivors of the camp, responsible for its existence today, require that visitors cannot go anywhere prisoners could not go.  It would not be possible to view the camp from the viewpoint of the guards, not because the experience of prisoners in some way was to be recreated, but because no facility that would allow neo-Nazis to seek some sick thrill would be provided.

He told the story of the three hundred Luxembourg policemen who refused to swear allegiance to Adolf Hitler and who were sent to Dachau as punishment.  When they arrived they were ordered to do so again in the main square.  When they again refused seventeen were selected at random and executed.  The same ritual was held every year.

He told the story of Hans Beimler, the Communist Party member, who became a special prisoner held in the ‘Bunker’, one of the few remaining original buildings in the camp.  He escaped by killing his SA guard, putting on his uniform and walking out of the camp.  A few years later he died in the battle for Madrid during the Spanish Civil War.

He told the story Johann Georg Elser, a religious worker who was a keen defender of workers’ rights who had voted for the Communist Party until 1933. In 1939 he planted a bomb in a Munich beer hall where Hitler was due to speak.  Hitler was due to fly back to Berlin that night but because of fog it was thought he should take the train so he left earlier than planned.  The bomb missed Hitler by 13 minutes.  Elser was caught, severely tortured by the Gestapo, and incarcerated in Dachau.  Hitler planned that when the war was won he would be put in front of a show trial and executed.  Just a few short weeks before the end of the war Hitler ordered the killing of Elser and he was shot in the bunker at Dachau.

Our guide did not sentimentalise the camp or its prisoners. He pointed out the hierarchy within the camp and the persistent policy of dividing the prisoners.  What was most new, to me at least, was the history of the camp since the end of the war.

This was symbolised by an art work in the camp showing the different symbols – pink , red or green triangles or two different coloured triangles overlapping each other so that they looked like the star of David, used to identify and mark the different categories of prisoner.  Our guide cautioned us not to regard the prisoners in this way or to take the view that this was in many ways an accurate categorisation, even in its own degenerate terms.  Unfortunately this art work has some missing coloured triangles because of current objections to their inclusion in the memorial.  I can’t claim to have a confident recollection of what these were but they may have included the black and green triangles of ‘asocial’ and criminal prisoners.

Our guide pointed out that the concentration camp was only a relatively small part of the whole and the much larger part was the SS training camp.  Today it is a training camp for the German police.  In 1972, for the Munich Olympic Games and because of the widespread media attention this would bring, the authorities knocked down parts of the site and built a mound between this training camp and the concentration camp.  In this way it would not be possible to view the training camp and it would perhaps not arouse questions.  This is now covered in grass and trees today.  A campaign involving survivors succeeded in getting part of this removed so that today you can see, but not enter, this camp, and see one of the original but otherwise unremarkable buildings still in existence.

At the far end of the concentration camp lie three churches as memorials to the victims.  Due to cold war politics the thousands of Soviet Union soldiers possibly murdered at the camp are represented by a Russian Orthodox church outside the perimeter.  The Jewish religious site is smallest and situated in the farthest corner from the entrance.  The Protestant one is in the other corner to the left, larger but low level and of a similar grey concrete colour as the foundations of the barracks in their two rows, which are all that is left of the original buildings.  The Catholic church is by far the largest, siting in the middle of the other two in a grass site with trees.  Our guide pointed out that plans were afoot at one time to cover the rest of the site with grass and trees but again campaigners stopped this.  While not explicitly expressing this, the contempt for this attempted simultaneous appropriation and erasure was clear.

The final part of the visit was to the new crematorium which contained a gas chamber.  Our guide stated that historians disagreed whether this chamber was actually used but that survivors affirm that is was used on a number of prisoners.  What is not in doubt is that so many were murdered in Dachau that the original policy of carrying many of the dead in trucks into Munich for burning could not be continued and new crematoria needed to be built to destroy the thousands killed.

Beside the gas chamber and crematoria was a memorial in three languages vowing never again.  As our guide thanked everyone for coming to visit Dachau he noted that in Bosnia it happened again.  For me the danger of it happening again is an inescapable potential within capitalism.

Holidays are a time to recharge the batteries.  There is more than one way of renewing the energy to continue the struggle for socialism and forever making never again a reality.

Workers rally in support of Millionaire Quinn

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Ireland is in the throes of an economic slump with official unemployment at nearly 15 per cent despite emigration.  Severe cuts are being inflicted on essential public services; there are large cuts in take home pay and glaring inequality as the wealth of the richest in society has actually risen in the last few years.  So how do we explain that in one corner of Ireland four thousand of the plain people of Ireland demonstrated in support of a man who was very recently the richest man in the country and who was at the centre of a disastrous attempt to buy the most rotten of Ireland’s very rotten banks?

In a small corner of County Cavan thousands demonstrated in support of Sean Quinn as he dodges and dives to keep large bits of his foreign property empire out of the hands of the successor to the Anglo-Irish Bank from which he took out loans to buy the property but is now unable to pay back.  The property was security for the loans and now that he can’t repay the loans the State, through the Irish Bank Resolution Corporation (IBRC), wants the property.  In effect the local population was demonstrating in favour of Quinn holding on to this empire by underhand and devious means ,to keep it out of the hands of a state bankrupt and making huge cuts that affect those demonstrating as much as anyone.

In this he was supported by a local and high-profile priest, by a local Sinn Fein MP and by a number of senior and well-known figures within the Gaelic Athletic Association.  The columnist Kevin Myers once wrote that he could imagine Ireland without Fianna Fail, without the Irish language and without the Catholic Church but he could not imagine it without the GAA.  Especially in most of rural Ireland that is how important the GAA is to local society.  It is such a huge and varied organisation that it cannot be said that the GAA as a body supports Quinn but the members present were too numerous and prominent for the relationship to be simply dismissed.  Sean Quinn’s brother Peter is an ex-President of the Association and a further ex-President Sean Kelly, a Fine Gael MEP, also issued a statement in support.

I was having a conversation in the car with my other half when she said that they all had one thing in common – they were all men for whom it is always about them.  When I also pointed out that it could be said they were also all quite well off, Catholic or ‘culchies’, she thought for a moment and said – no, it’s all about them being men with their masculine egos.  Then I said that the worst aspect of all this was that so many ordinary people had come out to support him but she disagreed with this as well and said they were demonstrating because he had given them work.

Quinn is by far the biggest employer in the area with cement and glass businesses, a large hotel and latterly branching out into insurance.  It was his €2.3 billion gamble on buying Anglo-Irish Bank that brought this business empire down.  There seems little recognition locally however that not only has he sought to deprive the state of much needed funds and caused an increase in everyone’s insurance premiums required to pay for his mistake but he gambled with people’s jobs to enrich himself when he was already filthy rich.

Now, while claiming through tears, that he is a victim, a man with plain needs and modest life style he has ensured that his relatives have been paid hundreds of thousands of Euros from the Russian property companies that he is trying to keep hold of. The wife of his son has, for example, been paid €320,297 after tax by a Russian company owned by the Irish State while being a part time receptionist at a motor dealership in north Dublin.  Yet people on a fraction of this came out to declare that he has been hard done by!

For some the demonstration of support is but the latest expression of a long lived Irish slavish mentality that has much in common with peasant attitudes of supine deference to a local feudal Lord. The great and the good declare the Lord one of us and the serfs oblivious to their real interests blindly obey their masters and betters.  Such a view however is only possible from outside.

Cavan and Fermanagh are not some atavistic backwater with ignorant peasants innocent of the sophisticated ways of the modern world.  What is in evidence is not some centuries-old peasant tradition of subservience.  The rural location gives some apparent justification to such views but the industries they work in are modern, few make money directly from the land and they are as educated as anyone in the country.  What is expressed is a particularly personal and local phenomenon of dependency which characterises the whole country and which is only particularly noticeable because of the scale of the local dependency.

The obvious power of the Quinn family in economic terms has been extended naturally into an ideological and social power over the local community and become repulsive to many only because it is so personal and accentuated by the local circumstances.  Expressed in a rural idiom it is easy and tempting for others to ridicule and mock but such acerbic criticism has much bigger targets if it were only to look.

In what way is the subservience of some of Cavan people any different to the subservience of all the people of the Irish State to an unholy trinity of State, banks and property developers   who have placed on their shoulders a debt so huge that their children will be paying for it for decades to come?  In what way is the willingness to support the local Lord any different from the near universal political agreement across the State that the richest multinationals, including speculative financial institutions, should shape economic and social policy, despite the economic disaster they are so closely associated with, while the poorest and most vulnerable must suffer?  If the slavish dependency of some people in Cavan offends so much why doesn’t the much greater dependency of the whole country not also?

The exhibition of subservience witnessed in one part of rural Ireland is not to be excused.  It must be understood and above all recognised as simply a particularly obvious reflection of the exploitation and oppression of the working people of Ireland.  In this respect it is fundamentally no different from the position of workers anywhere.  The notion that Quinn gave people work is accepted as fact just as capitalists employ workers while workers are employed.  But Quinn didn’t give people work, the people gave work to Quinn and he gave them back an amount of money worth less than the work they provided.

Under a system of private ownership by capitalists of the means of production it is nearly always the case that it appears that the capitalist gives work to the workers, and it is not that this is a pure illusion.  In a very real sense workers do depend on capitalists for jobs, which they create and destroy regularly.  This dependency and its results become obscene in some circumstances but it exists everywhere.

It’s time that working people, some of them, started to put forward an alternative, starting with the left and not one that presents the state as the fountainhead of this alternative.  The alienation of people in Cavan from this state (and the banks it supported), easily pictured as a remote Dublin cabal, is a distorted reflection of what would otherwise be a healthy impulse.

After all, for socialists the alternative to Quinn is not the Irish Bank Resolution Corporation, is it?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Taxing Capitalism

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Turner’s ‘The Slave Ship’

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Taxing the Rich

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

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

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

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

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

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

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

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

There are five reasons why this won’t work

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

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

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

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

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

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

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

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

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

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

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

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

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

Default on the debt – part 3

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How would a policy of default be implemented?  There might appear to be two ways for this to be achieved.  The left could demand it as part of a manifesto to win a majority in the Dail whereupon this majority would implement the policy.  This is however neither immediately realistic, practical nor will the Irish State allow workers to use the machinery of the State to challenge the capitalist system, which is what a left default would represent.

The second is that we think pressure can be put on the existing State to repudiate at least part of the debt and lessen the demands for austerity.  The Irish State already wishes to get concessions from the EU and ECB but on a very limited scale and with all the strength of a beggar asking for change.  However no amount of pressure will get the Irish State to break with the EU, IMF or the US.  If any significant concessions are ever offered it will only be in response to either recognition that the interests of European capitalism as a whole, or the Euro project, is threatened (which is why we now have the latest deal)or if a socialist movement threatens to do more than repudiate the debt. We are nowhere near the latter situation and it is not the current perspective of the left, which is the subject of these posts.

From a Marxist perspective repudiation should not be sought in order that the existing capitalist economy should grow, although that is a better capitalist alternative for workers than the existing policy – if it could work.  It should be part of a strategy of assisting the creation of a working class alternative that will ultimately overthrow this economic system and the state that defends it.  We should not seek salvation from a Keynesian alternative that seeks to grow the capitalist economy because Keynesianism seeks only to postpone austerity and to effect wage reductions through inflation.

The role and place of the demand for repudiation must therefore be dependent on the stage of development of the creation of this workers alternative.  We are neither at a point where the majority of the population actively seeks repudiation of the debt or even believes it a necessity and nor are we at a stage where a large movement is building up support for such a demand.  Most importantly we are not at the point where the working class in in a position to reject the necessary laws of capitalism and present itself to society with a new alternative.  By alternative I mean not absence of debt through repudiation but an alternative to the capitalist system, of which debt is a symptom.  And by ‘present itself’ I mean not promises that things will be better under socialism, but be in a position to show actual examples of workers power in the economy and society. The demand to repudiate the debt is therefore currently limited to an educational role, a propaganda role.

This does not mean that it is unimportant. The argument on debt is important in supporting opposition to austerity, which is the only way at present that workers can actually counter the effects of the debt and in effect seek their own means of repudiating it.  It plays a role in persuading workers that ending austerity is not only desirable but possible.  The wider and deeper the opposition to austerity the more convincing this argument will have to be.  The wider and more successful opposition becomes the more other elements of the programme become important, but we will take these up one by one as we proceed.

In relation to debt repudiation socialists are regularly challenged on the effects their proposals would have on the workings of the capitalist economy.  It has already been claimed that repudiation of the debt would lead to a flight of capital and virtual collapse of the banking and credit system and that, absent outside help from those just told to take their losses, it would lead to severe economic dislocation.  The crisis would intensify across Europe and beyond and lengthen and deepen the recession.  The reputation of the Irish State as a haven for multinational business and as a site for financial speculation would be in tatters.  The loss of capitalist confidence on its own would increase unemployment.  This of course does not affect in the least the purpose of our demand for debt repudiation, which is to win workers away from acceptance of payment for the crisis and for the debts of the State.  As we have seen above, we do not actually currently control any mechanism to repudiate the debt.

Nevertheless the arguments against repudiation of the debt and the effects such repudiation would cause are not false, they are not a lie, or a simple blackmail because in large measure they are true.  Repudiation of debt by a Russian or Argentinian government determined to get back into the markets by assaulting working class living standards do not provide the model for a working class default beyond countering arguments that it is in itself simply impossible.  While for socialists they do not outweigh the necessity to persuade workers to take no responsibility for the crisis they do expose the need not just for a socialist opposition but for a socialist alternative.

For Marxists, as we have said, the achievement of socialism is based not on sound and logical argument but on necessity.  If the socialist alternative is not practical then it will not succeed and will certainly not win the working class to take it up as its own programme.  This is the underlying reason we pointed to for the defeat in the referendum – that we are as yet far from having a real alternative – practical ,immediate, in place right now, contesting for hegemony because it is widely if not yet universally recognised as a real, potential, living alternative.

Sine this alternative is the working class taking ownership and control of the economy, the state and society as a whole we have to answer a very simple question today, right now: is the working class poised to take ownership and control of the economy to counter the sabotage of the capitalist class as we repudiate the debts to its big cousins in the European Banks?

That is the working class as it presently exists in reality; not an idealised one that resides in books or in abstract slogans, but the working people in your street, your neighbourhood and your workplace?  Have they been readying themselves to take over the running of the economy and the state; have they already taken over, or are in control of some workplaces?  Are they perfecting their organisation?  Have they been debating the necessity to do so, the requirements of doing so, the burning necessity to do so – to carry out a veritable revolution?  If not then we currently have no answer, or no practical answer, to the capitalist charge that what we propose, if implemented right now, would simply cause chaos.

That we, the working class, are not yet ready to take over society is obvious because we can see this every day if we live within working class communities and work alongside other workers.

A fatal answer to this current weakness is to seek salvation through a non-working class solution which at first glance might look more ‘practical’ or ‘realistic’: calling on the State to do what can only be done by workers.  Calling for nationalisation when what we stand for is ownership and control by the workers, not the capitalist state.

Instead of such ‘short cuts’ to a different destination Marxists recognise that we need to put forward a comprehensive programme that addresses the needs and interests of the working class and that repudiation of the debt, which is not even a specifically socialist measure, is only one element of this.  It is necessary to place any specific demand within an overall programme that represents a real alternative.  This does not mean that we need always to proclaim a veritable shopping list of demands or that specific and often very limited struggles and demands are not where we really are at.  It is to understand and be able to explain how any particular struggle fits within a global alternative.  As we have said, this alternative must assume a living corporeal reality to count as a real alternative and not simply a logically coherent programme.  The beginning of a living alternative based on a coherent programme is defending the working class by supporting its resistance to austerity and renouncing its responsibility for the causes of the austerity.  Only on such resistance can an alternative be built.

In addressing the austerity inflicted to pay off the State’s debt the left has recognised the necessity for a wider alternative by calling for the continuing budget deficit to be made whole by progressive taxation of the rich.  In our next post we will look at this part of the left alternative.

One more issue merits being addressed in the context of the Marxist approach to the state’s debt.  This is the call for an audit of the debt.  The burden of the bank debt was placed on the workers’ shoulders in order to pay bondholders, but who are or were these bondholders?  Who got paid in full or is awaiting payment that is a hedge fund used by the fabulously wealthy who bought the bonds at a huge discount or who already had insurance for default?  Who is the recipient of this huge transfer of wealth from working people? This is an elementary demand and is not an alternative to repudiation.

For example, what if we found that it was a workers pension fund that held the debt?  Then we could say to them – let’s talk about what effect it would have on your pensions of us not paying this debt.  What arrangements could we come to which would recognise the legitimate claims of both sides?  What if this pension fund was privately managed and subject to the normal charges by its managers which excluded the control of its members or even knowledge of what mangers were doing? Then we might say – ok, we recognise that we should not deprive you of your pensions but we have no obligation to fund the huge charges that allow the financial services industry to pay its managers and bosses salaries and bonuses that are counted in the millions.  We will take ownership of our debt if you, the workers of this pension fund, take ownership of this fund and do not use it to speculate against the living standards of other workers.

Such a debt audit is thus not a call for justification of the debt but becomes a call to action – a workers’ enquiry to determine its ownership and its beneficiaries now and in the past.  A call to action to repudiate what is not legitimate in our eyes and accept what we believe is legitimate by demanding the actions that make it so.

The argument will come back that this debt is subject to rules of confidentiality that are imposed by market exchanges in foreign countries.  Ok then, the debt we still owe should not be paid until we know who we are paying, that it is the appropriate amount and does not involve an unfair redistribution of wealth from workers to international spivs.  If the bondholders have already been repaid we still want to know who walked off with our money since we are still paying for it and we weren’t asked for permission in the first place.

The demand for an audit is a demand for the books to be opened on international finance and is the first step to taking it over.  The very first step in this would be bank workers doing a ‘Wikileaks’ and releasing all the emails and documents relating to the debt guarantee and repayment.  What an education that would be, especially the howls of condemnation from the powers that be – despite this being our money that is being paid over, our banks that we are supposed to own and our Government and State which are supposed to be defending our interests.

The demand for an audit is entirely legitimate; it is the first step to control and to demonstrating the legitimacy of repudiation.