Jun 12 2013

IRELAND – UNION STRATEGY, KEYNES AND THE DEBT

This article, by James Fearon, is from the Socialist Democracy (Ireland) website. It highlights how the Irish Congress of Trade Union’s (ICTU) support for Keynesian reforms is tied to a strategy to make workers pay for the ruling class’s debts – only more slowly than the incumbent Fine Gael/Labour coalition government.  

In the UK, Ed Balls has flagged up Labour’s acceptance of current Tory attacks on our class, and his willingness, if Labour is elected in 2015, to go down the same road with further attacks on universal benefits. The TUC’s thinking goes no further than that of the ICTU. Only when pushed does it mount any actions – such as on November 30th, 2011 over pensions. However, these actions are merely token, as the TUC’s ignominious collapse in the subsequent days highlighted. The TUC is trapped in the same Keynesian thinking as the ICTU.  It has no wider vision than a return of a Labour government, hopefully committed to  some Keynesian economy boosting measures, so that, as in Ireland, workers are given longer to pay off the ruling class debts. With such miserable aspirations, it is unlikely that the TUC will be able to shift Ed Miliband and Ed Balls. Their appeal is directly to the  banksters and other corporate capitalists –  ‘You can trust Labour to continue the austerity offensive and the welfare counter-reforms.’

David Begg, General Secretary of ICTU whipping up worker enthusiasm

David Begg, General Secretary of ICTU whipping up worker enthusiasm

The Irish Congress of Trade Unions (ICTU), and reformists in general, have been particularly animated recently over flaws that have been found, in the research by Reinhart and Roghoff, on the effect of austerity on the fiscal multiplier. They have taken this as evidence that ‘austerity isn’t working’ and that the possibility exists that they may still receive a lifeline from a slower, less virulent capitalist attack on the working class. If this ‘Better, Fairer Way’ to pay off the banksters’ debts should be adopted by the political elite in any meaningful way ICTU could claim that the slightly reduced pain of a slower austerity was their doing, and this in turn would provide them with some semblance of a fig leaf to cover their shame.

A former senior advisor to Citibank was quoted favourably in union literature recently when he expressed doubts about the efficacy of austerity based on figures which show a larger than predicted fiscal multiplier of €1.6 in economic shrinkage for every €1 removed through austerity measures. Figures from the IMF, based on data from 28 countries between 2009 and 2013, actually put the multiplier as high as 1:1.7 and Keynesian economists, the TUC and ICTU have all seized hungrily upon these figures. While trade unions exhibit a touching, perhaps over zealous, faith in these figures, the findings are not so readily accepted by the financial establishment.

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May 31 2012

A NEW TYRANNY OVER EUROPE


A crisis of capitalism, a threat to democracy

The leaders of Europe spent much time and ingenuity in designing the Financial Stability Pact so that it would not require a vote. The fact that Britain and the Czech Republic did not sign meant that it could not be formally part of European structures. The major powers went ahead anyway. The Irish government signed without a murmur. This ad-hoc arrangement was to become law over European citizens behind their backs, outside the formal (and already undemocratic) European structures, with a recommendation that it be written into individual constitutions. The Fine Gail coalition, having explored every legal avenue to try to amend the constitution without a vote, now tell us that there is no alternative to voting yes to the Pact.

The arguments of the European Leadership, of the troika and of Irish capitalism rarely refer to the contents of the pact. This is hardly surprising, as the ideology on which it is based is the debased neoliberal ideology that was used to justify the credit boom in the first place. It is roughly the fifth in a series of increasingly desperate attempts to resolve the credit crunch, which became the sovereign debt crisis and then the Euro crisis. Stability is to be achieved by imposing increasingly harsh austerity and savagely cutting wages, pensions and public services.  As none of these were in any way responsible for a crisis based on the financialisation of capital and a frenzied bubble of reckless lending by the banks, it is hardly surprising that repeated doses of the same medicine don’t resolve the issue, especially when the banks and the bondholders continue to absorb a greater and greater share of the world’s wealth.

Protesters often cry that austerity isn’t working. At a number of levels this misses the point.  It causes terrible privation to the working class – but this is the scheme working – this is what it is supposed to do.  It has certainly worked for the bondholders, banks and stock markets, restoring share values in the stock market to pre-crash levels. Where it hasn’t worked is in restoring stability and this is where the emphasis has shifted from the workers picking up the tab to a process of restructuring – wage rates and social benefits must be driven down to a point where competiveness is assured by pushing wage rates to the bottom and keeping them there. The stability pact is aimed at outlawing opposition and moving the levers of the economy outside any form of democratic control, so that  the workers feel powerless and so that any kind of reform seems impossible.

The demands of the fiscal pact are:

*            General government budgets shall be balanced or in surplus. The annual structural deficit must not exceed 0.5% of nominal GDP.

*            Budgets will be submitted to the commission in advance – so Ireland’s budget is discussed in Germany, not in the Dail.

*            The balanced budget rule will be introduced in Member States’ national legal systems at constitutional level. It will be out of the reach of any new government that opposes austerity.

*            Member States whose government debt exceeds 60% of GDP will sharply cut public spending.  In Ireland’s case this would mean a 5% cut year on year.

*            The governments in this situation shall submit a structural reform plan to the European commission and council and they will oversee the economy – a permanent troika arrangement.

*            The plan will be a partnership arrangement – social partnership in Ireland has delivered so well for capitalism that it is to be exported across Europe.

*            Countries that don’t meet their targets can be fined by the European court.

The central idea is that countries must balance their books. The sheer gall of this demand is breathtaking. The US economy floats on trillions of debt. The British print billions of extra pounds to manage their economy. The banks don’t balance their books, the bondholders don’t balance their books, the speculators don’t balance their books but Sean and Sinead Public – they must practice the most severe forms of financial stringency!

It is difficult to see just how extreme an idea this is when we are bombarded with propaganda that claims that the crisis is one of unbridled public spending and that assures us that national economies are just like private households.

All of the above is nonsense. Public spending had nothing to do with the credit crunch and Irish public spending  – and the level of public services – are at the bottom end of European tables.

In any case a national economy is nothing like a household. What it needs to function is liquid capital – the ability to move quickly between surplus and deficit as the occasion demands. The imposition of the pact would confirm the dependent nature of the Irish economy.

But much of capitalism no longer operates by the old rules. Despite all the blather about risk-taking entrepreneurs the new rule is that senior bondholders must never suffer a loss.

Under this rule the debt built up by banks and bondholders in the credit crunch became public debt. The public debt became sovereign debt. The accumulated sovereign debt became a crisis of the Eurozone. The Financial Stability Pact aims to stabilize the Eurozone by assuring bondholders that there is no limit to the amount that will be extracted from the working class to guarantee the euro.

There are two further elements to the pact worthy of notice. One is its permanent nature. It is not meant to overcome a temporary difficulty of one or two years. Rather it is meant to forever change the balance of forces between capital and labour and leave the majority of the working class in abject poverty. The other element is that, under the regime of late capitalism, democracy is becoming increasingly obsolete. In Greece and Italy capitalism has stepped in with an imposed regime. In Ireland the troika supervises the government. Now the FSP will enshrine  austerity in law and in the constitution and votes will have no power to alter economic policy.

The Irish establishment argue that the barbarism of the stability pact represents safety, stability and the road to prosperity. With these sorts of arguments they should be on a hiding to nothing – yet at the time of writing they have a majority of those expressing an opinion.

Beyond the formal argument there is an unstated argument, expressed in arguments that Europe will simply ignore a no vote or, alternatively, that we are so deeply committed to austerity that a new pact will make no difference. The basic argument is that Ireland is incapable of having any autonomy or level of self-determination. We should simply do as we are told and the imperialist powers will recover, dragging dependent countries like Ireland in their wake.

If we are to fight for a no vote we must both expose the dishonesty and brutality of our capitalist overlords and make the case for an alternative society able to meet human needs and that allows us to control our own destiny.

 

A better, fairer way

It is now generally forgotten that the bank bail-out was followed by mass demonstrations and by a public sector strike. The initial protests were not all unsuccessful – pensioners and students forced retreats on the first austerity plan. It was notable that the further one got from the trade union leadership the more successful the protests were.

There was a pretty simple reason for that. The trade union leaderships had been locked in social partnership with government and bosses since the 1980’s. Wage freezes were punctuated by cost of living rises and compensation in the form of tax cuts. Even while economic growth took place wages as a proportion of the economy fell sharply and profits rose equally sharply. Strikes were largely unknown but the union bureaucracy gained new status, ensconced in partnership committees at every level of society, sympathising with their members at changes to working conditions they had agreed in solemn conclave.

As this model of business unionism gained ground the salaries of union bosses, appointed for life, swelled – John Carr of INTO, with an enormous salary and pension package, become the highest paid union executive in the British isles, his pay dwarfing that of union officials in British unions with ten times the membership. He was closely followed by Jack O’Connor of SIPTU.

So when the credit crunch broke the concerns of the bureaucracy were not identical to those of their members. Ordinary trade unionists worried about jobs, wages and pensions. The bureaucracy worried about maintaining their place in partnership, including the acceptance of austerity. They had, however, to sell a policy of collaboration to their members.

The outcome was their policy of a “Better, Fairer Way”.  The policy was misnamed. In reality it was a better, fairer way to pay the bondholders. Essentially there were two proposals. One was to take longer to pay the debt. In essence the Irish government has been forced down this path. The outcome is even higher interest payments and austerity stretching beyond 2025.

The second proposal was that, in addition to paying the bondholders, the government should have adopted a “countercyclical” Keynesian programme of investment to stimulate the economy. Again this would have involved a bigger debt and more interest payments, but that didn’t matter. The fact that government and employers rejected their programme did not affect its usefulness in providing cover for a policy of support for austerity.

It is important to remember that, even if sincere, the “better, fairer way” would not have amounted to an alternative. It is firmly rooted in a Keynesian past and is essentially an appeal for an alternative, gentler capitalism. None of the major powers say that such an alternative exists. When the Greek people vote against austerity the capitalist powers tighten the financial necktie around their throats, when Hollande proposes investment for growth he does so on top of the continuation of austerity.  Socialists should not find themselves putting forward a left version of the bureaucracy’s programme.  The question is not what capitalism will do to help the workers. It is what the workers will do to fight back.

The union leaders called for a better and fairer way, but caved into savage wage and pension cuts. This collapse was followed by a new partnership, summarised in the Croke Park agreement , where the unions not only accepted cuts, but worked to agreed targets to impose them. The arrival of the troika saw trade union collaboration written into the memorandum of understanding.

There are a number of key elements in the discussion about the Croke Park agreement that remain important. One is the claim that the pay of public sector workers would be protected. Almost immediately that narrowed to cover existing members. New teachers, for example, work at a lower rate with very poor pension provision. That makes the agreement not a temporary shelter, but a mechanism for restructuring pay and conditions. Even in the case of existing workers pay rates are maintained via extra unpaid work and mass redundancies. Allowances, we are now told, are not part of our wage and can now be slashed.

A second point is the role of “left” trade union leaders. Although a sizable section of the trade union leadership opposed Croke Park, that opposition was purely formal and never involved putting forward an alternative or mobilising workers in struggle. Following the vote Jimmy Kelly of UNITE called on members to reverse their no vote, effectively turning a 60% victory for the right into a 100% victory.

Throughout the discussions about partnership, austerity and Croke Park one thing stands out. If the union bureaucracy stood by a single word of their “better, fairer” alternative then we would be facing into an indefinite general strike. At the very core of the Financial Stability Pact is the outlawing of any Keynesian “invest for jobs” alternative. So when ICTU shrugs their shoulders, when Jack O’Connor mumbles weasel words, they are simply confirming the policy of David Begg and the majority of the Trade union leaderships – there is no alternative to sacrificing the workers to save capitalism.

 

Building Resistance

Resistance has to begin by recognizing the depth of the hole we are in. We are the victims of a failed economic system, handicapped by the political collapse of working class institutions. As we write, the majority of workers in France and Greece have voted against the austerity. Growing opposition will cause disquiet and instability among the European elite, but will not lead them to abandon austerity.

In France Francois Hollande has won mass support, but has not put forward a programme of opposition to austerity. Rather he promises what our politicians routinely promise – renegotiation – with investment proposals that will remain marginal when tied to an agreement of permanent austerity.

Hollande is echoing many socialists when he proclaims that austerity isn’t working, but this is to misstate the case. At one level austerity has worked very well. All the bondholders have been paid, the stock exchanges have recovered to pre-crash levels and the total assets of the rich have significantly increased.

Of course austerity does not work for the working class. Young people flee Ireland. In the North charities distribute 1/3 million in food parcels. In Spain 50% of youth are unemployed.   In Greece parents, unable to feed their children, abandon them in food kitchens. This does not represent a problem to capital. Its normal operation involves a significant proportion of the world’s population living with permanent hunger. Part of the current recovery involves global speculation in food reserves, pushing the poor closer to starvation.

Where austerity isn’t working is in providing a return to stability. The level of debt weighs down economies. They slip in and out of recession and the danger of all-out revolt by workers becomes greater. The current strategy is to press ahead with austerity, to create a new reality where the price of labour is driven downwards so that if capitalism does recover, a new boom will be driven by low wage economies, with public services stripped away and privatised.  This will not feel very different from austerity to the working class. The capitalists hope to convince workers that it is impossible to fight back by removing democratic controls on the economy through the Financial Stability Pact.

The alternative strategy offered by Hollande is to manoeuvre to retain the support of workers by adding a small element of investment. One example of this kind of strategy was Obama saving the US car market while slashing jobs and wages far car workers. Even the minor proposals by Hollande have led to panic in the markets. They fear that rising hopes in workers that cannot be realized will simply increase the threat of revolt.

That revolt has to be changed from potentiality to actuality. We need to build new workers movements across Europe with policies that resolve the crisis in the interests of the workers, not those of capital.

 

A genuine alternative

A genuine alternative must include:

*            A full repudiation of the debt. Any form of bailout can only bleed the workers dry.

*            Seizure of assets where capitalism is no longer able to productively develop them. We either own them as public services or we have involuntarily bought them through NAMA.

*            A bank controlled by the workers – after all, we own all the capitalist ones.

Workers Control of national resources in the process of being given away to transnationals.

*            An international confederation of workers resistance across Europe.

All of the above presupposes an independent workers movement which can only be built from the existing resistance and from a political opposition to ICTU’s policy of collaboration.

A no vote will give new life to resistance. Alongside the votes in Greece and France it will establish that austerity is not something that workers accept but something imposed upon them, and thus justify further resistance.

And further resistance will be necessary. There is no possibility that a series of votes will persuade the bondholders, the IMF and ECB to set fire to hundreds of billions of debt. We may not be asked to vote again on this one, as it does not block the European strategy, but our enemies will be striving to apply the crushing blows of the Austerity Pact and bring a more brutal form of capitalism to life in an Ireland of perpetual austerity.

It is important that we build a movement that will continue after the vote and that sees itself as an action movement rather than an electoral one. The simplest process would be for the household charge movement to become a more general anti-austerity movement.

The movement must orient towards the working class. It should challenge ICTU now that it is effectively out of the shadows and in support of austerity. It should call on unions that say they are for a no vote to break with ICTU and to campaign actively as part of the resistance. Nor should it wait for any section of the bureaucracy: rank and file movements should be formed across the unions to assert the rights of the ordinary members.

The tide is turning. We have had four years of austerity and endless promises that capitalism would recover. Instead we have continued chaos and a merciless attempt to drive the living conditions of the working class back into the 18th century.

Now workers across Europe are saying no. We must join with them to reject capitalist austerity and begin the journey to a socialist society, based on human need.

 

Socialist Democracy (Ireland), May 2012

 

 

 

 

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