The beginning of the end for Argentina’s Macri

By Martin Burgos.

“Political vacuum”, “default” and “hyperinflation”: these are the terms being used by several economists from Argentina’s public service, discussing the country’s current political and economic situation.

Earlier this month, the Peronist opposition led by Alberto Fernández defeated the right-wing government of President Mauricio Macri in the primary elections by 47 per cent to 32 per cent. Primary elections in Argentina feature a selection of candidates and are open to the entire electorate, not only party members. the system was introduced in 2009 as a way of reducing the number of candidates in presidential elections. The participation rate for the the primaries held on August 11 was 75 per cent of the electorate.

Right-wing Argentinian President Mauricio Macri looks set to lose the Presidential election on October 27

This result, in effect, means that there is no chance that President Macri can reverse the situation in the presidential elections scheduled for October 27. Fernández leads the main opposition coalition, Frente de Todos, and his running mate is the former left-wing President Cristina Fernández de Kirchner. If he succeeds in gaining 45 per cent of the vote (or 40 per cent with a 10 per centage point lead), he will be elected President in the first round.

This situation means that we currently have a president continuing in office, with Fernández waiting to be able to assume his duties on December 10, after the ratification of his election in October.

As a result, Macri and his government exist in a political vacuum: he does not have the real power to lead the country and implement economic policies, while Fernández has real power, but not formal power. Game theory identifies this as a potentially dangerous situation, especially since the outgoing president has chosen an aggressive strategy that may be explosive for the country. This moment is reminiscent of the 1989 Alfonsin-Menem transition, when the former president had to anticipate the transition of power in the middle of an episode of hyperinflation.

The reasons for Macri’s defeat are clear: the electorate soundly rejected his neoliberal economic policies that have led to indebtedness, rising interest rates, the fall in GDP and wages since 2016, increases in utility rates, the rise in inflation that has reached 52 per cent (compared to 25 per cent in 2015) and the tumbling exchange rate (at 45 pesos per dollar, compared to nine pesos per dollar in 2015). The economic crisis of 2018, from which the country never recovered, combined with the unification of the opposition explains this political Waterloo of the Argentinian right.

Markets react with capital flight

The day after the primary elections, the exchange rate tumbled further, from 45 to 55 pesos, and the stock market fell by 30 per cent. The Emerging Market Bond Index (EMBI) Country Risk rose from 800 to 1800 points, illustrating investors’ doubts about Argentina’s ability to repay its debts. The 75 per cent interest rate the day after the primaries did not have positive effect on monetary variables, and the rush to the dollar was unstoppable.

For the “markets”, the defeat of their champion is grim news, especially as the talk on Wall Street describes Alberto Fernández as a puppet of Cristina Fernández de Kirchner, and fears a return of “populism” and “Chavismo” in Argentina.

The risk for Macri is that the economic chaos caused by his allies in the financial world will be used against him in the presidential campaign. For the moment, the support of the International Monetary Fund is propping up the government. The IMF sent the director of the central bank to Washington to request a $20 billion loan from the US government.

While US President Donald Trump has consistently helped Macri, it is very likely that this aid will end. That day, the government will have a hard time coping with the forces of the “market”, the very same forces that promoted Macri to power.

Martin Burgos is an economist at the Centro Cultural de la Cooperación in Argentina. Title photo shows Alberto Fernández, right, with former President Cristina Fernández de Kirchner

Neoliberalism is dead, long live neoliberalism!

By Lisbeth Latham.

Neoliberalism is a term which has entered the left lexicon over the past three decades, although in different countries it can have other analogous terms. While it is a term that the left has embraced, the right, and the advocates of what is commonly referred to as neoliberalism, deny it exists as a phenomenon, instead arguing that it reflects the conspiratorial nature of the left. 

Contrary to these positions I argue that there is a usefulness in conceptualising neoliberalism as a distinct response to the capitalist crisis, and that it is not only the hegemonic response to capitalist crisis but that its proponents use crises to deepen and strengthen its hegemony. Moreover, because significant sections of the governmental left have embraced neoliberalism, challenging neoliberalism is central to not only rebuilding left alternatives but to challenging the rise of the far-right internationally. 

Why does capitalism experience crises?

Capitalism is the only economic system in the history of humanity that is driven by a need to expand and take over pre-existing social relations. It is also the only economic system in which  economic crises are characterised by the production of too much use values (at least in the early period of the a crisis). Marx postulated that the primary underlying driver of an economic crisis is the tendency of the rate of profit to decline. Adding to this general tendency is the anarchic character of the capitalist system, where individual capitalists seek to maximise their own profits by shifting investment to areas of higher rates of profits, which leads to a series of additional crises, specifically crises of overproduction and crises of over-accumulation. 

The rate of profit is profit (or surplus value) over the sum of constant capital and variable capital. Political economists dating back to Adam Smith and David Ricardo argued that it was an undeniable fact that there was a tendency of the rate of profit to decline; however, they believed it remained unclear what the mechanism for this decline was. Marx, in Volume 3 of Capital, argued that this tendency was driven fundamentally by profit (i.e. surplus value) being derived from labour. 

Therefore, increases in constant capital (an increase in the organic composition of capital – for example, factory machinery or the value of the goods and materials required to produce a commodity) would reduce the amount of labour power involved in production and thus overtime would result in a reduction in the amount of surplus value being extracted in comparison to the total constant and variable capital involved in its production. 

Crises of overproduction 

Overproduction simply means that too many goods – of either a single category or multiple categories of goods – are being produced to be sold and generate sufficient profits. Since the earlier period of laissez faire capitalism when markets were generally expanding, this is the normal state of affairs. In the US auto-industry, for instance, the industry operated at 75.9 per cent of capacity in the first quarter of 2019. 

A crisis occurs, however, when the production and sale of goods is no longer able to produce a profit, or at the very least a sufficient profit which can lead to individual companies, or whole industries collapsing. Such collapses, while a disaster for individual capitalists or corporations and the thousands of workers who are employed by them, creates opportunities in the economy to remove excess capacity from circulation and reduce competition.

Crisis of over-accumulation

Over-accumulation crises occur when the level of capital accumulation in the system reaches such a point that there is too much capital in circulation for significant levels of capital to be profitably invested or reinvested in production, or at least increases the appeal of capital investment in financial speculation rather than in investment in new capital goods. 

Overcoming a crisis of over-accumulation requires either the destruction of significant amounts of capital, such as through war, a major recession with widespread bankruptcy, the opening of new markets to create expanded demand, or via the development of new technology – opening new avenues for capital investment. In all of these circumstances, the relief provided cannot and will not be permanent.

Throughout the history of capitalism there have been a range of responses to capitalist crises, particularly large-scale crisis such as recessions and depressions. In the wake of the 1929 stock market crash and resulting Great Depression, then US President Franklin Delano Roosevelt, along with a range of governments in advanced capitalist countries, embraced Keynesian responses, which focused on what Roosevelt referred to as “pump-priming” – i.e., public expenditure on infrastructure, much of which was subsidised by using the unemployed as a cheap labour source. 

The Great Depression

Such measures were essential in overcoming the impact of the Great Depression, and they undoubtedly ameliorated some of the worst levels of poverty unleashed by the depression. But there are two important points to remember: the first is that in many countries the Great Depression unleashed significant levels of class struggle, including both the unemployed and the employed – with this struggle resulting in the victory of fascism at the domestic level in Germany, Italy, Portugal, and Spain – and with the emergence of social democratic governments in a number of countries for the first time. 

In response to an increasingly combative US working class, exemplified by the West Coast maritime strike, the Teamster strikes in Minneapolis, and the Toledo Auto-Lite strike – all of which occurred in 1934 and are seen as key drivers of industrial unionism in the US –  Roosevelt’s second New Deal in 1935 had specific measures seeking to limit the level of violence in the class struggle with formal mechanism for union recognition (Preis, A. 1964. Labor’s giant step: Twenty years of the CIO. Monad Press, New York). 

The second point to note is that many economies did not truly recover from the Great Depression until the second world was, where the massive investment in armaments, mass conscription, and the destruction pf capital goods fed economic growth, and massive profits, this was particularly the case in the united states where the majority of unions, particularly in Stalinist lead unions, made no strike pledges to help support the war effort (ibid). 

Expansion of capitalist accumulation 

In the wake of World War II, the environment was set for the rapid expansion of capitalist accumulation. These were the massive destruction of capital goods wrought by the war, and the opening up of new markets as more and more imperial colonial powers broke up under the pressure of anti-colonial national liberation struggles. 

At the same time, the growth in confidence of the working class, along with the enhanced standing and expansion of the Soviet Bloc through its role in the defeat of fascism in World War II – placing whole swathes of Western Europe at risk of being ‘lost’ to capitalism – despite the efforts of the Soviet leadership to maintain the division of Europe as agreed between Britain, the US and the Soviet Union at the Yalta Conference. 

In this context the US government launched the Marshall Plan to massively boost the rebuilding of capital in Western Europe and Japan. In addition, there was pressure to expand social services and public welfare provisions. These steps lay the foundations for the long post-war boom in Western Europe and the US, which was also prolonged by imperialist spending on their militaries as part of Cold War and hot wars in Korea and Vietnam. 

The 1973 oil crisis

However, the long boom held within it the roots its own demise, which were exacerbated by other dimensions. These were the absolute limits of expanding markets via the collapse of European colonial empires; the rebuilding of capital in the wake of the destruction of World War II leading to greater capitalist competition and reduced opportunities productive capitalist investments; and growing US deficits due to the cost of the Vietnam war. 

In addition, more and more markets were either removed or became more restricted from access to imperialist capitalism as a consequence of national liberation struggles and attempts to build their own national economies. These developments led to a growing stagflation crisis, where both inflation and unemployment grew. This meant that the international capitalist system was vulnerable to further shocks to the economy as the long boom came to a close. Of particular importance were the 1973 OPEC strike and subsequent oil crisis and along with global decline in the demand for steel, exacerbating pressures of deindustrialisation, particularly in the US.

Insurgent neoliberalism

In response to these challenges, a wave of conservative economist and social theorists began to gain a greater hearing among governments for their alternative model for saving capitalism. These groupings, commonly referred to as neoliberals, have their origins in a serious of meetings that founded the Mont Pèlerin Society (MPS) in 1947. 

Although not having a clear economic doctrine, it represented a political project to reassert capitalist class power and defeat the growing strength of the working class and its organisations the trade unions and the social democratic and communist parties. During its early existence neoliberalism sought to construct a international thought collective represented by a range of national and international think tanks, and seeking to influence and take over university economics departments transforming their positions into increasingly common-sense and thus hegemonic responses to economic crisis.

The ‘Chicago Boys’ make their mark

The first experiments with the implementation of neoliberalism came in Indonesia and Chile following the respective coup d’etats  in those countries in 1966 and 1973. In Indonesia, following the establishment of Suharto’s New Order regime, which had been supported in its smashing and mass slaughter of the country’s communist and nationalist left, orchestrated by US intelligence services (particularly the CIA), moves were made to remove barriers to investment by capital from the US and other imperialist nations. 

In addition, the Indonesian economy was actively carved up between US corporations. Despite these changes that enabled the expanded imperialist exploitation of Indonesian natural resources and labour, investment processes were extremely corrupt, with investments requiring joint ventures – with domestic Indonesian capital generally with connections to Suharto’s family and the cronies around him. 

The extensive level of poverty within the country, exacerbated by the opening up of the economy, also meant that the state was forced to provide a significant level of subsidisation of basic goods to enable much of the population to survive – essentially state subsidies for social reproduction in order to allow the imperialist extraction of super-profits. 

In Chile, following the September 1973 coup against President Salvador Allende’s Popular Unity government – carried out by the Chilean armed forces with the backing of the US government (pictured) – there began a program of both mass repression and economic transformation.

During the coup and its aftermath tens of thousands of people were murdered and terrorised, and a further 200,000 people (six per cent of the population) were forced into exile. At the same time, the ‘Chicago Boys’ – academic and graduates from the University of Chicago’s School of Economics, including “Nobel Prize” winner Milton Friedman – were brought in to reshape the Chilean economy. The impact of this transformation saw significant reductions when comparing, wages and social spending when comparing 1970 to 1989:

  • Wages decreased by eight per cent.
  • Family allowances in 1989 were 28 per cent of what they had been in 1970. 
  • Budgets for education, health and housing had dropped by over 20 per cent on average.

At the same time, Chile was seen as an economic miracle in comparison to other parts Latin America, with consistent growth in the economy, and lower levels of unemployment than in other Latin American countries. This helped neoliberals to assert ‘common-sense’ truths that private companies are more efficient than governments in delivering services; that higher profits leads to more jobs; and thus lower wages lead to more jobs. 

Neoliberalism bites in the global south

With these ‘successes’ neoliberals were in a position to push for the application of neoliberal solutions to economic difficulties facing both economies of both the imperialist centre and the global south. These changes were pushed by both the victory of openly neoliberal politicians such as US President Ronald Reagan and British PM Margaret Thatcher, and in the case of Australia, France, and Germany social-democratic (or more accurately social-liberal) governments. 

In these countries the attacks were pitched as necessary to maintain competitiveness, the rejection of social goods, and general social responsibility for the collective good – and the assertion, in Thatcher’s words, that “there is no alternative”. In many global south countries, resistance to change came from governments, who were unwilling to go as far as demanded, then the levers of international financial institutions as such as the World Bank, International Monetary Fund (IMF), and World Trade Organisation (WTO), which sought to tie loans and bailouts to deregulation and privatisation of countries’ resources.

These institutions routinely operated on a gaslighting framework where the people whose economies had failed under the strain of neoliberal restructuring were told that the problem was not the changes that was enabling corporations to extract billions in profits from the countries for little return, but rather that that their economies had not been restructured enough and the recipe for their situation was more and more privatisation and deregulation.  

Can neoliberalism be defined?

So what is neoliberalism? There is no definitive prescription of what neoliberalism consists of, which is why its advocates can so readily dismiss its existence.

Neoliberalism began as a small intellectual society founded at Mont Pèlerin in 1947, initially heavily influenced by the ideas of Austrian economist Friedrich Hayek, but similar societies and think tanks were established globally. These organisations sought to take over and influence university, institutional, and governmental economics programs, forming what Philip Mirowski refers to as the “neoliberal thought collective”

These interlinking bodies do not so much articulate a coherent policy doctrine as seek to build and inculcate policy discussions with neoliberal ideas, which may well be at odds with each other, but have the effect of co-opting and subsuming the language of other movements, but also creating a situation where people are presented with not a choice between neoliberalism or an alternative solution, but simply varying forms of neoliberal solutions – which both, in George Lukács’ view is an articulation of the power of neoliberalism as a hegemonic discourse, but also reinforcing Thatcher’s dictum that “there is no alternative”.

Neoliberalism as a response to capitalist crisis

Neoliberalism constitutes a political project aimed at weakening the political power of the working class, asserting the political power of the capitalist class and seeking to establish profitable avenues for capital investment (Harvey, D. 2007. “A brief history of neoliberalism”. Oxford University Press, Oxford.)

Key features of neoliberal projects include:

  • Reducing barriers to the movement of capital by both removing barriers to capital investment and shattering trade barriers; 
  • Increasing barriers to the movement of workers – which results in increasingly constrained rights and marginalisation for migrant workers (this includes open calls to movement being linked to migrants’ wealth);
  • Prying open more aspects of social life for capital investment – privatisation and ownership of water, for example, exemplified by the 1999-2000 water wars in Cochabamba, Bolivia, between the community and the the Nestlé corporation;
  • Opening of government services to capitalist competition, whether through direct privatisation; corporatisation; “public-private partnerships”; access by government agencies or the introduction of “voucher systems” to enable government subsidisation of the entry of private capital into the provision of social services; and at the same time, deregulating costs. This is often articulated in terms of enhancing consumer “choice”;
  • Reduction in government spending, primarily premised on the justification of the need to reign in deficits, although this has rarely been achieved (throughout the neoliberal decades the US’s budget had regularly been in deficit). Instead reductions occur primarily as a consequence of declines in government income via the narrowing of the tax base to be more heavily reliant on working people, and a redirection of government spending away from social spending on the working class and the promotion of worker-funded retirement funds – which both reduce government responsibility and make massive levels of capital available for speculation on capital markets. For example, the Australian Superannuation Funds amounted to to $AU2.8 trillion in funds at the end of the March Quarter of 2019 .

Weakening the strength and power of organised labour 

The outsourcing of work occurs both within public services and in private companies, often posed as leading to cheaper costs, Outsourcing works to undermine the bargaining power both of the outsourced and non-sourced workers, but tends to have higher overall costs due to the labour hire companies’ own need to provide their own work materials. 

The tying of wage increases to productivity increases has resulted in a significant shift in the share of GDP to profits away from wages, as workers are forced to work increasingly hard to see their wages maintain pace with inflation 

The shifting the cost of the reproduction of labour onto the working class has occurred through a range of mechanism including:

Shifting the burden of paying for the state apparatus via increased taxes on workers and the reduction taxes on capital; 

Reducing spending on social services – via either total elimination of services or means-testing services.

The 2008 crisis and beyond 

The 2008 global financial crisis and subsequent Eurozone crises, with the accompanying response by governments have been seen by some as signalling the death of neoliberalism. However, as Mirowski and others would argue, the responses to these crises instead reflect a deepening of neoliberalism – in that they have resulted in the efforts of saving capitalism being carried on the back of workers, while international capital has largely been free to continue to reap massive profits and pay out dividends and bonuses even as they were receiving public subsidies to survive.  

In response to the global financial crisis (GFC), the US government bailed out banks and financial institutions to the tune of of $US4.6 trillion. This was bankrolled by US taxpayers. The US and other governments facilitated banking consolidation to “save the system” – handing billions in assets to surviving major banks. 

In response to the failure of the “big three” US auto manufacturers, the then Obama administration provided a bailout of $US80.7 billion. This bailout was premised on the tearing up of workers’ collective agreements with demands that workers make significant concessions on their working conditions in order to keep their jobs. 

In Europe, Ireland’s opening up of the purchase of non-performing loans to cheap purchase by vulture funds has driven up housing prices in Dublin at a time of acute economic decline. We also continue to see – in the face of the imminent destruction of our planet – continued refusal and obfuscation by governments and by capital to take serious action to slow and hopefully stop action to combat climate change. The US and Australian governments in particular continue to subsidise the fossil fuel industry .  

Factors behind the growth of the far right

The past three decades have seen a growth of the far right in a wide range of countries, which has coincided with a decline and weakening of the left. This shift has been partly premised on deindustrialisation of certain economies and the erosion of the welfare state, which left-wing parties have at times been responsible for, particularly when in government coalitions with right-wing forces.  

This has resulted in understandable anger and frustration among sections of the working class and the petite bourgeoisie – anger which the right has demagogically sought to direct into anger at marginalised communities, which it blames while at the same time cynically supporting many of the attacks on working people. 

In France for example, Marine Le Pen’s National Front – now National Rally – has sought to court a range of marginalised communities, including Jewish, Islamic, and Queer communities by painting itself as the only force capable of protecting them from “marriage equality” and Islamic fundamentalism respectively. 

Part of the growth of the far right can be explained by the reality that the interests of capitalist class are not homogeneous – the capitalist class is made up of fractions that reflect different interests within its own class. The far right reflect interests of capitalist class fractions that would benefit from a more nationalist framework. Moreover, the far-right in a range of countries have a long history of supporting policies that are not in the interests of working people or the petite bourgeoisie. 

This includes support for:

  • deregulation and privatisation;
  • cutting of legislation which limit pollution; 
  • cuts to social security;
  • attacks on working people.

Left demands opposing neoliberalism

Despite this record, the far-right has taken advantage of the complicity of social-democratic and other left parties in the implementation of neoliberalism to seek to present themselves as the only opponents of austerity and the dislocation of the working class. This includes seeking to cynically accuse social democracy and the left more broadly of abandoning workers for support for multiculturalism and the support of other marginalised communities – causes that the left are more likely to support, but which is totally unrelated to the implementation and support for neoliberalism. 

In response to this challenge, it is important that the left is seen as putting forward proposals that address the needs of working people without giving ground to attacks on marginalised communities. Such demands would include:

  • In the event of mass foreclosures government should protect owner-occupiers;
  • Ensuring our demands are around universal provision of services rather than accepting means-testing for access;
  • Ban redundancies in profitable companies;
  • Job creation through limiting overtime and reducing working hours with no loss in pay;
  • Support for a universal basic income – but it must be set at a level which is liveable, and there must be strict controls on rent/commodity prices to ensure that it is not simply consumed as increased profits;
  • Ending of speculation and separating retail banks from investment banks;
  • Caps on wage ratios between senior managements and the lowest-paid workers;
  • Lifting company tax and personal income tax threshold for higher-income earners to fund an expansion of social services;
  • Reabsorption of outsourced social services back into the government – to facilitate collective bargaining and improved wages for workers in these vital and essential services;
  • Legislate to require companies operating in a country to at minimum comply with that country’s standards when operating in other countries;
  • Legislate to enable workers the option of creating co-operatives in companies facing closure or sale;
  • Give workers veto rights on restructuring plans.

While such demands seem unrealistic in the context of more than 30 years of retreat and defeat globally for progressive movements, it is important for us to consistently challenge neoliberal hegemony and to always, to quote Che, “be realistic and demand the impossible”.

Lisbeth Latham is a contributing editor to Irish Broad Left. You can follow her on Twitter @grumpenprol.

Barnyard socialism revisited: Farmers are victims of market manipulation

By Niall Monaghan.

For what toil the sons of Róisín, is it pennies?

In this period of increased focus on the climate breakdown, our primary producers are often perceived as holding back progress. They are commonly viewed as another polluter that must be challenged to change their ways.

But farmers are generally not multinational corporations solely focused on selling us things that we either don’t need or are bad for us. Farmers are workers at the bottom of a supply chain, which produce the most essential things for our survival. They are price-takers not price-makers because they have very little bargaining power.

Like any other body of the Irish workforce, they deserve respect and a fair standard of living based on their labour. Even in places like Tubbercurry, County Sligo, or Glenties, County Donegal, they have not been insulated from the scourges that affect the rest of the modern economy and political thought – neoliberalism and globalisation.

A common misconception has arisen in recent years that farmers are making money hand over fist as they not only profit from their products but also are directly supplemented by EU funding. However, the reality is that these payments are not a supplement but rather a drip-feed fund to keep an industry on its knees from collapse; it is the outworking of a failed system.

Subsidies keeping farming industry from collapse

The reason farmers are supported is not EU generosity but more so that we depend on this system and cheap labour to keep food prices down. In fact, the surplus left between the prices farmers were paid for their products and their costs shrunk by 16.1 per cent in 2018, resulting in a 15 per cent drop in farm incomes.

Here is the chilling reality for the average farmer in the west of Ireland – let’s call him ‘Joe’. Joe is a beef farmer, receiving the industry average EU payment for his region, €9,881. Not unusually, this makes up about 103 per cent of his income.

Put simply, after everyone is paid Joe is making a loss consistently and depends on his EU Common Agricultural Policy (CAP) payment to cover his losses and to be able to survive. This equates to less than half of the living wage in 2019. Those on the right will assume Joe is a bad businessperson and we should not be subsiding his loses. However, since Joe earns the average salary for his sector the problem is not Joe but rather the market, right?

Supermarkets and food giants suppress prices

Let us take a closer look. Joe sells his carcasses to the beef processor who in turns sells them to the supermarket. The retail price of his product can be broken down to 51 per cent for the supermarket, 29 per cent for the processing factory and the remaining 20 per cent for Joe, who does the vast majority of the work.

The two actors above Joe in the food chain are constantly doing their upmost to ensure they pay as little as possible for his product. Supermarkets, for example, do this by below-cost selling. This involves selling Joe’s products below the purchase price. The aim of this practice is to undercut the competition. That competition is usually small, independent retailers that then pressure Joe to lower the price of his products or they will just purchase them from the nearly supermarket.

After this is achieved the objective, or fair price, of the product has been lowered and becomes the new norm, affecting the price Joe is offered in future. This practice is also designed to push competitors completely out of the market so he will have fewer options of who to sell to, thereby weakening his bargaining position further.

While the supermarket is focusing on the sale price, the food processing factory is focusing on the price they buy the product for. The food processing industry in Ireland is highly concentrated: the three biggest factory groups in Ireland had started out by owning single factories and they now control 60 per cent of the kill in Ireland and Britain, as well as further factories in Eastern Europe.

This allows them to act as a cartel and often offer farmers a price below the cost of production. The farmer has a perishable product, which leaves them little scope to negotiate. Traditionally the only weapon available to the farmer is his or her ability to negotiate in times of short supply.

Have the food processing factories been cunning enough to find a solution against this rebalancing of the scales? You can bet your bottom dollar they have. In recent years, they have established their own feedlots, which are grassless industrial factory farms where animals are grain-fed to fatten more quickly and be ready for slaughter.

Feedlots now constitute 18 per cent of the weekly kill in Ireland. These are used strategically by factories to release cows into the market when supply dwindles, thereby out-manoeuvring the farmer. The reason factories do not use these all year round is because the Irish public prefer pasture-reared animals for animal welfare reasons, and rightly so.

Government ignores cartels and market manipulation

Now that we understand how the food chain acts to squeeze the farmers, we would assume government intervention would have put in place measures to combat such exploitation. But this is wishful thinking at best.

The approach of the Irish government and the EU has been to ignore the market manipulators and plaster over the issue by subsidising the beef farmers’ losses. We all need to think long and hard about what this means: instead of putting in place measures to protect farmers from such exploitations, we have taken the approach of watching the farmers make a loss and then sending them money to cover those losses and just about survive.

EU money comes from European taxpayers; therefore the EU is facilitating a system where public EU funds are used to allow supermarkets and processors make a greater profit from paying unsustainably low amounts to farmers. This is effectively taxpayer-funded aid to multinational supermarkets.

Free trade deals will devastate Irish farmers

The European Commission is also negotiating and agreeing free trade deals to facilitate the export of things like German car parts in exchange for the import of cheap beef. The proposed EU-Mercosur free trade agreement is a perfect example of this: the EU will allow 100,000 tonnes of beef, mostly from Brazil, which will cause the price of EU beef on supermarket shelves to plummet.

Those on the neoliberal right are supporting such free trade deals and coming out against a ban on below-cost selling, when they are fully aware that such positions make deep EU intervention in the market essential, in the form of cash subsidies to protect farmers from bankruptcy.

Some have even gone as far as supporting a financial cut to the CAP. This radical position has been taken knowing that without protection, regulation or subsides, European farmers will be something you have to learn about in a museum.

The logic of this position is clear – there is an entire developing world sector just waiting to be exploited, so why waste money keeping in place a system, EU agriculture, with a higher cost base? They are quite happy to have all food imported from places where production is not burdened by animal welfare or environmental laws. For them, not only would food get cheaper but we could remove agricultural emissions and preach to the rest of the world how Europe has moved closer to our climate targets.

How can Irish farmers fight the tide?

As Clann na Talmhan emerged in 1939, farmers themselves must be at the fore of resisting this system and fighting for change. Two organisations have emerged in recent years that are fighting for those farmers on the edge of bankruptcy, the Irish Natura And Hill Farmers Association (INFHA) and, more recently, the Beef Plan Movement.

The Beef Plan Movement have now have amassed 15,000 members and hope to get to 40,000. This would be a big enough portion of the weekly kill, 50 per cent, to have a major impact on production and make a shortage unmanageable for the factories. This would allow them to create a supply crisis if the factories refuse to play ball.

Further to this, they are examining setting up cooperative processing factories to bypass the industry completely and negotiate directly with supermarkets, which would give them a significantly bigger chunk of that per euro percentage.

Whether they are conscious of this or not, these organised farmers have seen the flaws of the system they operate in and came to the same conclusion that we have come to on the left: the market needs regulation to curtail exploitation of the workers and those businesses at the bottom. Not only have they identified the problem but have realised what they can achieve if they band together. Talk of sending empty cattle trailers to the factories, as a message, sounds to me like the kind of direct action Connolly or Larkin could have got behind.

What should the government do?

In terms of legislation, we must as a matter of urgency ban below-cost selling and even look at the feasibility of banning a company offering a farmer below an agreed cost of production, outside of times of great oversupply. Fine Gael, which is committed to non-interference, has flatly rejected these ideas, which begs the question as to why such a high percentage of farmers vote for them?

Farmers cannot continue to vote against their interests if they are to survive. Voting for Fine Gael because they are seen as the traditional party of rural Ireland is like taking up smoking because Benson and Hedges sponsor the local GAA team.

Finally, if we fail and agriculture is fully shifted to the developing world to be exploited, it is not only Joe that will be out of business but the town that depends on him. This was confirmed by a recent study, which stated every €1 of direct support for cattle and sheep farmers underpins over €4 of aggregate output in the rural economy.

The health, housing and homelessness crises should give you an indication of how likely it is that the neoliberal Fine Gael would be wading in to replace that output in the rural economy.

Niall Monaghan is a Sinn Féin policy advisor in the European Parliament, working on the Agriculture and Rural Development Committee.

Economic democracy, trade unions and labour-managed enterprises

By Michael Taft.

“It is the supreme paradox of democracy that every man is a servant of the matters of which he possess the most intimate knowledge, and for which he shows the most expert proficiency; namely, the professional craft to which he devotes his working hours; and he is a master over that on which he knows no more than anybody else, namely, the general interests of the community as a whole.”

Beatrice and Sydney Webb pointed out that where people had intimate knowledge and expert proficiency – the workplace – they were denied the right of participation they were allowed in political society. Democracy is not a 24/7 process. It stops at the beginning of each working day.

There are many arguments for economic democracy: rights-based arguments that claim people should have the same entitlements as they do in political democracy; performance-based arguments showing how greater democracy improves economic and social outcomes; and psycho-social arguments emphasising how it enhances the individual.

All of these arguments are valid but unfortunately they are made ineffectual as they are painted as naïve or impractical, anti-business or anti-entrepreneurial.

But the real complaint is the privileging of labour. This is economic democracy at its most audacious – the idea that people, the producers, have the capacity to run workplaces and economies in a better, more efficient and sustainable way than capital.

The privileging of labour: both the trade union movement (producers coming together to exert more power than they can do individually) and the cooperative movement (where labour hires capital rather than the other way around) are agents of this. But, unfortunately, with so much in common, they do not always act in concert.

Ladder of participation and productivity

The jury is not out. It came in a long time ago. We have what can be called the ladder of participation and productivity. It is the same ladder. Let’s take one example: employee participation, a rather bland term which, however, conceals a more insidious, essential message. Academic studies and government papers, institutes and special commissions: all report that the greater the participation of producers in the decision-making processes of the enterprise, the better the performance.

Participation operates in a continuum, or on different rungs of the ladder, ranging from the minimal right to information, to the right to suggest, to prior consultation, to bargaining, to veto, to co-decision, and finally to unilateral workers’ decisions, or labour-managed enterprises. Each step up these rungs has been shown to improve the performance of the enterprise.

So if the evidence is so overwhelming, why isn’t democracy at enterprise level more widespread? Simply because it undermines so many vested interests – the status of senior executives and management, and the financial interests of shareholders. And more.

Ever since societies started producing surpluses, there has been a hierarchy that dictates what is produced, how it is produced, who produces it, on what terms, and – most importantly – who derives the greatest benefit. This is the source of social and political power.

The trade union and cooperative movement enter the frame at the enterprise level. However, they enter at different rungs on the ladder. Trade unions enter at the most basic level, organising workers, their voice and their potential collective strength.

The cooperative movement enters at the top of the ladder – as contractual owners of the firm. These different stations inevitably create different perspectives and strategies.

Rethinking enterprise and ownership

One perspective might be that workers in a cooperative are both the producers and owners whereas workers in a traditional, capital-privileged enterprise produce but do not own. However, the distance between the two is not so great in practice.

Workers in both types of enterprises want the business they work in to succeed. Obviously, workers in the cooperative want the business to succeed. But so do workers in the traditional firm. Living standards, job security, social benefits and social networks are all vindicated by and through the enterprise. Nobody wants the business they work in to fail.

Indeed, the biggest group within any enterprise that wants the business to succeed is the workers. They outnumber management and shareholders. Shareholders are mostly passive, rentiers by definition, extremely short-term, with no interest in the company beyond dividends and share appreciation. Workers look to the enterprise to provide for their future; for shareholders, the future is short-term and contingent.

Given its centrality to economic democracy and people’s lives, we need to redefine and reconceptualise the enterprise. We need to reframe the very idea of ownership. In this task we will have a lot of help. Academics, lawyers and researchers – even court rulings – have concluded that no one owns a corporation. Instead, it is described as a legal person, a nexus of contracts, a franchise government which is neither public nor private, and an economic commons.

In other words, the enterprise is a social space where a number of interests – workers, management, shareholders, creditors, suppliers and the community – have contractual rights and obligations but no one group owns the business. If shareholders or management have power, it does not derive from the essential activity of the enterprise, but from law. Its power is politically defined.

This may appear as highly theoretical and detached from day-to-day struggles. But it helps us to go to the heart of the problem. We are all too aware of how the odds are stacked against us when are adversaries frame the debate and define the terms.

Labour is a cost and we need to keep our costs down, we need to be flexible, we need to adapt quickly, we need to be competitive, we no longer can afford permanent full-time jobs, etc. etc. Employers, management, entrepreneurs are the wealth creators and who would oppose wealth creation. We lose the debate before we enter it.

Economic democracy as a cultural struggle

Democracy’s enemies license what is acceptable and what is unthinkable in society and the economy; in other words, they determine what is ‘common sense’.

And how do they enforce that license? They rely on us. We adopt what is acceptable and what is unthinkable as if we came up with these ideas on our own. Such is the power of this ‘common sense’ that we end up policing ourselves. Ironically, the debate that we lose before entering is actually framed by us.

Therefore, economic democracy first presents itself as a cultural struggle – a struggle over ideas, over what is desirable and practical. We must refashion common sense, reframe the debate and redefine the key terms. The current construction of the enterprise masquerades as a natural order.

In an alternative construction, the enterprise is a social space. Capital may have rights based on contract but this does not equate to ownership. And employees, in this construction, cease to be a mere vendor of their labour, a downsized party in the hierarchy of the enterprise.

Our pragmatic and ideological arguments for economic democracy may receive a wider audience if, at the same time, we reframe the debate into a new common sense.

State support for cooperatives

At first glance, the cooperative movement appears to have solved this problem since they are both producer and shareholders. However, the cooperative can be extremely circumscribed and vulnerable within markets dominated by capital.

They may be forced to compete with traditional companies that pursue ‘race-to-the-bottom’ labour strategies, engage in below-market selling, externalise their costs (especially in the environmental sphere) and other predatory practices while at the same time face discrimination by the financial system.

This is even more so given the weakness of the cooperative movement in Ireland. We do not have the long-established and deep-rooted ecosystems that sustain cooperatives in the Bologna or Basque regions, in the American plywood industry or in the French construction sector.

The cooperative movement would have a better chance in markets where economic democracy is making advances – where collective bargaining is widespread, where transparency is not the exception but the rule, where precarious practices are suppressed, where there is supportive public banking. The wider democratic agenda is the cooperative movement’s best chance of taking root.

Economic democracy is not just about reframing the enterprise as a social space. It constitutes a long march through the market economy itself. This can be done by changing the relationship between the state and enterprises, or creating new enterprise models.

For instance, Mariana Mazzucato has shown that the state is not only an entrepreneur but actively creates markets through its role as risk-taker and first mover in investment and R&D. However, the state does not act like a market investor who takes a direct stake. This means that the costs and risks of investment in companies are socialised but the profits are privatised.

This should be addressed by taking of equity in companies and markets the state supports. The equity can be leveraged to extend democracy – ensuring collective bargaining, introducing participation programmes and even requiring workers’ representatives on the board – within those companies which benefit from direct and indirect grants. This is similar to a ‘social value’ clause in public procurement contracts, requiring enhanced democracy in firms that seek to win public contracts.

Role of public enterprises

A second form of market intervention is the promotion of public enterprise, especially at the local level. Throughout Europe and North America local public enterprises play an expanded role; it is far more limited here in Ireland.

Public enterprises can be used for a number of purposes. For instance, a rural town in Kentucky found itself a victim of a cartel of petrol stations. It countered by establishing a public petrol station that sold petrol at cost. This broke up the cartel and forced other petrol stations to cut their prices.

Local public enterprises can be used to provide goods and services where private capital is absent or engages in monopolistic practices. It can set benchmarks for prices – as in the Kentucky example – for wages and working conditions, and for democratic practices in the workplace.

Local public enterprises can become laboratories where labour-managed practices can be tested, workers trained in self-management, creating spillover effects that can drive the formations of worker cooperatives and other civil-society led businesses.

Social infiltration of the market space

And it is in the promotion of civil society-led enterprises where labour-managed activities can find traction. We must get out of the mindset that the public is only served by state intervention. The creation of community enterprises, labour-managed enterprises, and innovative hybrid models of small capital, public capital and labour-managed – all these represent opportunities for the social to enter the private and market space.

Economic democracy – whether reframing the enterprise or creating new enterprise relationships – can also help the trade union movement square a perennial circle. The Fabian Society, following up on an earlier survey by the TUC, found that employees want a number of things from the workplace: fair pay, certainty of hours, opportunities for advancement and promotion, chances to learn new skills, better work-life balance, reductions in the gender pay-gap and a say in how their work is organised. All of these point to the enterprise as a social space as referred to earlier.

The Fabian survey also indicated that employees want the trade union to protect them from problems that arise – that is, protect them from employers’ actions – while at the same time they want unions to work with employers. This may seem contradictory but it is not; it merely reflects the actual conditions of capital-privileged enterprises.

The enterprise may be the source of workers’ living standards but it is also a place of insecurity, stress and discrimination. Capital allows the former on its own terms and engages in the latter when it suits it, unless there is a counter-veiling collective force.

This dichotomy – working with and being protected from – can be reconfigured in the social space to labour’s advantage. But this requires us to champion that space for interests other than our own. For instance, it has been shown conclusively that collective bargaining leads to productivity gains. When management refuses workers’ collective rights, they are actually undermining enterprise performance and harming other interests or stakeholders in the firm.

Therefore, rewriting common sense requires unpicking alliances that currently oppose labour, finding the fault-lines that can pry apart those alliances, and to develop new – if ad hoc – links that can advance economic democracy.

Challenging the infantilisation of workers

So where do we start? It is very simple and extremely subversive: to challenge the infantalisation of people whether in the workplace and in civil society. We’ve seen this throughout history (‘you are not capable of reading and properly interpreting religious text’. We experience this today (‘you are not capable of understanding complex economic issues or sophisticated business strategies’).

A number of cultural tools are employed to maintain hierarchies in society and in our heads: the idealisation of the lone ‘entrepreneur’ and the assertion that hierarchy is the natural order of the enterprise. These need to be challenged.

This is exactly what both the trade union and cooperative movement do: challenge the sociology of infantilism. All of us promote the idea that people are the producers, capable of writing their own contracts, possessing – as the Webbs put it – intimate knowledge and expert proficiency of their craft, their workplace.

To promote people’s confidence that they can participate fully in the workplace is the very first condition of economic democracy. This is the common station where we both enter, the common ground, the alliance, the partnership. It’s a good starting point. So let’s start. It can only take us to better places.

Michael Taft is a SIPTU researcher and author of the political economy blog Notes on the Front. Follow him on Twitter @notesonthefront and on Facebook here.

This article is based on a speech Michael presented at the ‘Economic Democracy and Workers Cooperatives: the Case for Ireland’ seminar held on April 9 in Liberty Hall, Dublin.  

The paradox of plenty: Why we all need to worry about precarious work

By Marie Sherlock.

Looking from the outside in, the Irish economy is performing really well at the moment – on course to have the second-highest GDP growth across the European Union (EU) this year. Malta and Ireland have alternated positions at the top of the EU28 scoreboard for GDP growth for the past five years.

Yet ask any young worker on average earnings about their prospect of ever purchasing a home, particularly in Dublin, or a hard-pressed young couple trying to pay childcare and a mortgage or rent out of their combined average earnings and they will probably tell you they don’t feel they are doing particularly well at the moment.

Income distribution

This issue goes to the heart of how income is distributed in Ireland. It is measured in two ways: the first relates to how much workers can claim from the proceeds of output in terms of wages and taxes paid, relative to the owners of capital who elicit a return in the form of rents, dividends and interest paid on loans owing. This is the labour-capital share of output. The second relates to how evenly that labour and capital income is dispersed between various households.

Over the past 30 years, there has been a five-fold increase in GDP here in Ireland. Based on adjusted labour share data in the EU commission’s ameco database, we know that back in 1987 some 65.9% of national income was distributed to households. Thirty years on in 2017 that wage share has dropped to 37.1%; the lowest across the EU28.

Labour’s share of the pie is shrinking

So the overall pie has got bigger but the slice for households from employee’s income has got proportionately smaller. Importantly, within that slice, we know from ESRI work on long-run income growth and income distribution that all households are better off now compared to households across the income distribution three decades ago.

What stands out is that with the exception of the lowest 10 per cent of earners, all households saw their income more than double between 1987 and 2014. Trying to understand exactly how much higher-income households are better off becomes complicated when we factor in non-earned income. This is generated from rents, dividends and share options. For the top 10 per cent of earners, self-employment earnings and income from other sources account for some 15 per cent of overall income.

What has all of this got to do with precarious work? In short, developments within the world of work, within workplace technologies and an emerging global trend towards even larger corporates threatens to skew the balance between labour and capital further and to widen the divide within labour income.

Precarious work and automation exacerbate imbalance

Plain old-fashioned greed in the world of work remains, with many trade unions reporting the emergence of a more aggressive breed of employer. New technologies are transforming how firms produce through increased automation and the digitalisation of production and the emergence of digital platform companies are transforming how firms are organised. These technological advances plus government tax and enterprise policy are combining to ensure the growth of increasingly large firms.

We know that precarious work in Ireland is not new. My union SIPTU started off originally as the ITGWU and was formed over 100 years ago to organised casual labour on the docks in Dublin.

What is potentially new, though, is that the developments set out above will exacerbate the existing imbalance between workers and business and that this will have far-reaching implications for incomes, for future consumer demand and the sustainability of the public finances.

In its 2017 discussion paper on managing automation in a digital age, the Institute of Public Policy Reform (IPPR) in the UK note that the changes brought about by technology challenge some of our fundamental assumptions about how the world of work operates. In particular, they highlight concerns about how technology may alter “the role of employment as a primary means of distributing reward, labour’s position as a central factor of production, notions of scarcity and returns to scale and how we organise working time.” Many of these factors point to an increasing precariousness and insecurity of work.

Taking these concerns to their logical conclusion, the IPPR notes that automation and the control of many by a small number of robots may give rise to the “paradox of plenty.” In short, technological innovation may give rise to higher output but lower gain for workers and a widening inequality in the distribution of income between the owners of capital and workers. Not only would this have very serious implications for workers and their household income, their reduced purchasing power would also have a serious longer term impact on the wider macroeconomy.

US superstar giants concentrate resources further

Technology is not the only future driver of a global and national trend towards declining labour income. The rise of so called “super star” firms also plays a part in concentrating greater amounts of resources in fewer hands.

In its 2018 Economic Outlook, the OECD highlighted an increasing trend among companies in advanced countries who are oriented towards allocating an increasing share of profit towards their cash pile as opposed to sufficiently reinvesting in their business. At a time when returns from bank deposits are at historic lows and the returns on investment are very high, we would expect firm investment to be booming. Instead companies have opted to sit on large profit piles and not distribute the gains between the owners and workers.

When we look at the Irish situation, the experience of US multinational corporations (MNCs) stands out. The presence of US superstar firms has long been a feature in Ireland with global leaders in pharmaceuticals and technology located here. In his comparison of multinationals located here, John Fitzgerald highlights the extent to which US MNCs do not repatriate their cash.

US tax rules have meant for many years that US companies located abroad could “defer” repatriation of their profits and thereby put off paying US corporation tax. Ireland’s low corporate tax regime meant it was more attractive to “park” profits in Ireland. While changes were introduced to the US corporate tax code in 2017 to limit the amount of tax deferred, the new rate is hardly penal. The result for Ireland is that approximately 40 per cent of corporate tax revenues in this country comes from just 10 companies, the bulk of whom are US multinationals.

How are profits distributed via taxes and wages?

So where does that leave us? While Ireland’s public finances may enjoy the benefit of US multinationals paying significant corporate tax bills here, there is a wider and longer-term issue as to how profits are distributed via wages, how they are taxed and how they are reinvested back into companies. The macroeconomic impact of concentrating greater market power and greater resources in fewer hands means there is less to be redistributed to incomes, taxes and by extension, social spending.

Special tax deals for REITS worsen housing crisis

Or another way to think about it is to understand how real estate investment trusts (REITs) operate in Ireland and their impact on Irish tax revenues, housing supply and the precarious life of so many renters. In order to encourage investment into rental and commercial property in Ireland, the Irish state waives the corporate tax liability on the rental income generated by these trusts and it waives the capital gains tax on any property disposals provided such sales do not take place within the first three years of purchase.

The outcome? Much of the new or recently built housing supply, typically in the form apartment dwellings, has been purchased by REITs with the result that control over this type of housing supply is becoming concentrated in the hands of a few and with that, the ability to set rental prices. This is not good in terms of rental market competition and rental price, it elevates the insecurity of individual renters to a whole new level in that large swathes of renters could face a change in ownership and all that that brings, and it is not good for the public finances in that it deprives the exchequer of revenue that could be used to build additional much-needed housing.

Direct regulation of companies

So how should we respond? No one measure will ensure greater distribution of income to workers. But a series of actions can. There is a growing volume of research that has found that increased financialization of companies is a strong predictor for the decline in wage share within countries. So a strong case must be made for enhanced financial and prudential regulation of companies. As a start there needs to be greater transparency in the reporting obligations of unlimited companies.

In order to protect workers from precarious working conditions, we need to see stronger enforcement of existing labour rules so that they are worth the paper they are written on. And we need to have stronger welfare systems to mitigate the uncertain effect of flexible working conditions. We know from looking at the experience within the Nordic countries, that there is a high correlation between well designed, flexible welfare systems, lower than average wage dispersion and a higher than average wage share.

Collective bargaining rights

And finally, we need a strong legislative framework to support collective bargaining in this country. That involves the right to bargain and to be recognised for trade union negotiations. In Ireland at the moment, there is the right to benchmark wages against other workers doing similar work, provided certain criteria is met. That is not the same as the direct right to be recognised for trade union negotiations.

Again there is a growing volume of research that shows that higher union density and greater union coverage are associated with a higher wage share and lower income inequality respectively. In their review of studies on the income share, Guschanski and Onaran (2017) highlight that union density is the most robust or consistent variable exerting a positive impact on the labour share within a sector when compared with all other variables.

Union density is the proportion of workers in union membership within a workplace. And in terms of the distribution of income within that wage share, 2015 research by OECD economist Oliver Denk finds that top earners obtain a smaller share of the total wage income of an economy when a majority of all workers are covered by collective wage bargaining. He used data from Eurostat and the international trade union database ICTWSS to compare wages shares with collective bargaining coverage.

Technological advances and the increasing concentration of market power by companies in certain sectors means that the power balance between workers and employers remains greatly skewed. In that context, precarious and insecure work will remain part of the workplace landscape. Overcoming it requires stronger unions and more collective bargaining- something SIPTU is striving towards every day.

Marie Sherlock is Head of Policy & Equality in SIPTU. Follow her on Twitter @marie_sherlock.

New secure-hour law is a gamechanger in the fight against low pay and poverty

By David Gibney.

Ireland has a very serious low pay problem, and a corresponding problem with poverty. We have the highest prevalence of low-paid jobs in the EU. Only a matter of weeks ago St Vincent de Paul stated that almost 800,000 people live in poverty, including 230,000 children. Finding employment should be a route out of poverty, but there are now more than 100,000 “working poor”.

One of the reasons for this is the lack of power workers have in winning pay increases. Ireland has among the most restrictive workers’ rights legislation in the EU, with no legal right to trade union representation for collective bargaining purposes.

The absence of this fundamental human right means workers have two routes in terms of winning pay rates that provide you with a meaningful and productive life: beg your boss; or go on strike and win the best possible deal.

Going on strike, though, can be extremely difficult. Especially if you are victimised for it. Which is exactly what many employers do.

Victimised for striking

When 6,000 Dunnes Stores workers across more than 100 stores in Ireland took industrial action on 2 April 2015, the very next day management began a campaign of retribution.

Workers who had worked 38 hours per week for years had their hours slashed to the bare minimum in their contracts, 15 hours.

For many, this was a cut from €418 per week to €165 per week, a 60 per cent loss of pay. With the dole being €188 at the time, it was clear what direction management wanted trade union members to go in.

Control over hours causes compliance

This level of control over working hours and therefore income leads to a very compliant workforce. Why would you go on strike if your manager can slash your hours the very next day and deprive you of your ability to pay your bills or feed your children?

“Is security over working hours used by management to control or intimidate you or others in the workplace?”

When Mandate surveyed workers in the bar trade, asking them this question, 44 per cent of all respondents said ‘yes’.

The survey of workers in the retail trade was even more stark, with 51 per cent of workers saying ‘yes’. When Mandate asked workers in Dunnes Stores, one of the largest private-sector employers in the country with 10,000 staff, whether allocation of hours was used to control or intimidate them, 85 per cent said yes.

Considering those two sectors alone – retail and bars – employ more than 350,000 workers, this is clearly a very large problem. And it’s why workers in those sectors could not win substantial pay increases – until now.

For more than a decade, Mandate had focused on winning secure-hour contracts along with pay increases. The first deal was done with Tesco Ireland in 2006. Penneys followed in 2013. It was clear in 2015 that Dunnes Stores and many other employers could not be persuaded, and so a political campaign to change legislation had to commence.

As Muireann Dalton, Dunnes worker in Newtownmountkennedy said: “If Dunnes Stores won’t change, we’ll change the world around Dunnes Stores.”

On Monday 4 March 2019, five years after Mandate started the campaign to win secure hours, new legislation was enacted.

Secure-hour legislation won

The legislation has many benefits:

  • Workers are entitled to a written statement of their terms of employment within first five days;
  • Zero–hour contracts are banned in almost all circumstances;
  • Workers are entitled to a minimum payment if their employer fails to provide them with work;
  • Wage rates below the minimum wage for trainees are abolished; and
  • Workers are entitled to be guaranteed hours of work that reflect their normal working week.

While all of these provisions are important, it is the last one that will hopefully enable workers to achieve far better pay and conditions of employment.

Under the new law, a worker has a right to be placed in a ‘band of hours’ that accurately reflects the hours they worked over the previous 12 months.

For instance, a retail worker on a 15-hour contract, but who has been working 32 hours per week on average over the past year, is entitled to be placed in the 31-36 hour band. Their employer can give them more hours, but cannot reduce their hours below 31.

Strengthening workers’ power

This new provision should enable workers to take industrial action with more confidence in pursuit of pay increases and improvements to working conditions.

And if there was any doubt over the desire for secure-hour contracts, almost half of Mandate’s members in Dunnes Stores alone, 1,500 workers, have submitted banded hour requests in the first month of the legislation’s existence.

The legislation also contains strong anti-penalisation clauses, yet still employers are attempting to dissuade workers from utilising the legislation by fear-mongering and intimidation.

Some managers in Dunnes Stores, for instance, have been telling workers that if they apply for security over their hours, that the company cannot give them hours above the bands. This is despite the Minister confirming in the Dáil that they can: “[A]n employee who is employed on any band of hours can work more hours provided both the employer and employee agree to same.”

Other employers are warning workers that they may be requested to do extra duties if they apply for security over hours, or that they can be fired if they work hours outside their bands. All incorrect.

Dunnes workers and Mandate activists win rights for all

It is important to state that the provisions within the Act were fought for and won by Dunnes workers and hundreds of other Mandate activists.

When the government tried to water down the legislation by seeking an 18-month reference period, Mandate members pushed back and demanded a maximum of 12 months.

When the government tried to introduce broader bands of hours, which would facilitate employers cutting incomes by more than 50 per cent, Mandate members fought back and demanded maximum flexibility of five hours per band.

This new law is the most significant win for the trade union movement in decades. We didn’t get everything we wanted, and it could have been an awful lot better if Fianna Fáil and Fine Gael had accepted Joan Collins’ and Clare Daly’s amendment demanding that any available working hours are offered to existing part-time staff before hiring new workers.

It will, however, enable trade unions in all sectors to win better pay increases without fear of recriminations. And this, in turn, can help us to challenge low pay and poverty and deprivation levels in Ireland.

David Gibney is the Communications Officer for Mandate Trade Union. Follow him on Twitter @davegibney and follow Mandate @MandateTU.

Trade unionists can bring class politics to debate about united Ireland

By Ruairí Creaney.

Irish unity is on the agenda. Across Ireland, it is being discussed in the media, at dinner tables and workplaces on a daily basis. While the endless calamity of a Brexit led by hard-right Tories, and the possibility of a hard border being imposed on our country against our will, has ensured that the debate on Irish unity has largely centred on our membership of the European Union, there is much more at stake.

The debate has begun, but it has struggled to move beyond questions of national identity and what Irish unity would mean for businesses and trade. Little attention has been paid to what it would mean for the working people who make up the majority of this island.

To broaden this debate, a group of us in the Irish labour movement recently launched Trade Unionists for a New and United Ireland (TUNUI), an initiative aimed at shifting this debate to the left and at putting economic and social justice at the heart of the discussion, rather than just focusing on what it would mean for the business classes. We want to articulate a specifically trade union-led vision for Irish unity and why this issue is one that should be a concern of workers.

So far, we have secured the public support of 150 trade union officials and senior activists, including two veterans of the famous 1984 Dunnes Stores anti-Apartheid strike. To properly initiate the debate on constitutional change within the labour movement, we will be hosting a conference, entitled ‘Uniting Ireland – Uniting Workers’ in Dublin this summer. We are inviting trade unionists and progressive activists from across Ireland to attend this conference and take part in this historic and exciting debate.

Bringing class politics to this debate

The trade union movement is uniquely positioned to offer three important contributions to the discussion on reunification.

Firstly, TUNUI want to bring class politics into the debate. The partition of Ireland not only divided our country geographically; it divided the labour movement and it divided working people along sectarian lines in the North. This product of the counter-revolution benefited only the wealthy establishment on both sides of Britain’s border in Ireland.

The trade union movement represents the interests of the mass of working people who create society’s wealth as opposed to the wealthy minority who control it. We recognise that the interests of working people are in direct conflict with the bosses. When workers seek better pay, the bosses seek ‘efficiency savings’ in order to boost profits.

No such thing as a ‘national interest’

Consequently, we recognise that while class conflict exists, there can be no such thing as an Irish ‘national interest’, as if we all seek the same thing. Nations are made up of classes with competing economic interests. The economic interests of Michael O’Leary, for instance, are very different from those of the Ryanair baggage handler. The interests of the tax-dodging corporations and the lawyers and accountants who facilitate them are not the same as an overworked nurse or a primary school teacher.

An opportunity for a new beginning

Irish reunification will be a chance for our country to have a new beginning, and will present an opportunity for progressives to ensure that the mistakes of the last century are not repeated. Constitutional change will mean that we could steer our economy from serving the interests of multinational corporations and towards serving the needs of working people. That means ending the scandalous tax haven system in the south, establishing universal free health care and introducing proper trade union rights for every worker.

Throughout the debate on Irish unity, much of the focus of civic nationalism has understandably been placed on protecting the rights of Irish citizens in the North that are under threat as a result of Brexit.

Little focus, however, has been put on advancing the economic and material conditions of working people. The whole discussion up to now has been contained strictly within the realms of what Mark Fisher described as ‘capitalist realism’.

The ownership of industry and our natural resources is not up for debate. The imbalance of power between capital and labour will not change. The harsh rule of the market is seen as an inevitability. As with so much else in our neoliberal age, ‘there is no alternative’.
We seek to challenge this narrative. We want to ensure that constitutional change will lead to a massive social transformation that will improve the lives of working people.

More that unites than divides us

Secondly, the trade union movement is Ireland’s largest civic society organisation, encompassing people from every ethnic background. There is a colonial myth that working people in the North are bloodthirsty tribes that despise each other and are incapable of having a civilised debate about our collective future.

Furthermore, there is an insidious and snobbish narrative that unionist workers are afraid of having a debate about Irish unity. This is offensive, patronising and dismissive to an entire section of society and ultimately displays an underlying prejudice against working-class people.

Trade unionists have the ability to break down racial, ethnic and sectarian barriers and organise working people based on their class interests. We want to ensure that this debate moves beyond the issues of identity of ‘unionist’ and ‘nationalist’ and towards broader issues of who gets to own our natural resources and how the wealth of this country is distributed. We know that there is more that unites us than divides us, and class politics is how we achieve that unity.

Independent advocacy of working-class interests

Thirdly, and most importantly, we want to empower working people to advance their own rights. Some in civic nationalism have called on the Irish Tories of Fine Gael to protect the rights of nationalists in the North. Again, these rights have not included economic rights.

No mention has been made of the fact that Fine Gael has always opposed the basic right of workers to collectively bargain; that they are opposed to the right to housing; and actively undermine the public health system in order to promote the private for-profit health sector. Why would anyone seriously believe that these people are suited to protect the rights of people in the North when they are undermining basic rights in the south?

Organise for real change in trade unions

Rather than appealing to Tories like Leo Varadkar or the institutionally neoliberal European Union, the most effective way for working people to protect and advance their rights is by organising into strong trade unions and fighting for those rights. This is how we won the 8-hour working day, the weekend, paid annual leave and every other right many of us take for granted.

For those of us involved with Trade Unionists for a New and United Ireland, reunification is not about nationalism. It is about democracy and participation.

We are not nationalists; we are trade unionists, democrats, socialists and internationalists. The debate on Irish unity has already begun, and it is vital that trade unionists step up and articulate our vision for society.

If we fail to do so, we will abandon that ground to corporate interests and they will mould a new society in their interests. This would be a continuation of the tax haven status of Ireland, the crumbling public health system and mass homelessness. Trade unionists avoid this debate at our peril.

Ruairí Creaney is a spokesperson for Trade Unionists for a New and United Ireland. Follow him on Twitter @RuairiCreaney.

Image above : Trade Unionists for a New and United Ireland at their Linen Hall Library launch in February. Pictured from left are former Siptu division organiser Christy McQuillan, Debbie Coyle of Unison, Mick Halpenny of Siptu and spokesman Ruairí Creaney. Picture: Mal McCann.

Climate Emergency Manifesto launched by the European Left

By Damien Thomson.

On Tuesday 16 April, Swedish teenage climate activist Greta Thunberg addressed the Environment Committee in the European Parliament in Strasbourg, calling for “Cathedral Thinking” on climate action – a reference to the huge and immediate mobilisation of empathy, panic and money at the sight of the Notre Dame in flames. The real panic, she said, should be about the “house on fire” – the planet – leading to a mobilisation of funds, emergency emissions reductions and state-led direction of the transition.

Today in Strasbourg, the Left group in the European Parliament GUE/NGL (European United Left/Nordic Green Left), has launched a Climate Emergency Manifesto ahead of the European elections taking place at the end of next month, firmly marking Just Climate Action as the group’s number one priority.

The manifesto, which explores six overarching demands for effective climate action, comes off the back of two recent developments: the United Nations’ Intergovernmental Panel on Climate Change (IPCC) Special Report from October 2018 strongly pushing for policymakers to limit global warming to 1.5°; and the global social movement known as ‘Fridays for Future’. These two developments have shaken the political foundations of the European Union (EU) in particular, and called into question its climate credentials. 

Climate emergency demands emergency response

The latest IPCC report paints a dark picture of the current pathway we are on. It gives us less than 12 years to enact “rapid, far-reaching and unprecedented changes” to every aspect of the economy to stay below 1.5° of global warming. We are already at 1° of warming above pre-industrial levels, and at 1.5° the chain reaction of climate catastrophe will be unleashed as we surpass the tipping point. We are already in climate chaos at cliff-edge: the emergency brakes need to be activated now.

At the 24th UN Climate Conference held in 2018 in Poland (COP24), Miguel Arias Cañete, European Commissioner for Energy and Climate Action, stood up on a platform with the Canadian environment minister and other posing ministers to hold a big banner stating ‘High Ambition Coalition’. This was their way of trying to affirm that they are the leading parties at these high-level climate negotiations – leading for higher climate ambition. Needless to say, no-one was really convinced. 

The EU’s feeble attempt to promote itself as a global climate leader looks even more pathetic now in the context of over one million students across the globe coordinating a world-wide strike on 15 March 2019.

These young people are clearly not impressed with the self-congratulating Commissioner Arias Cañete’s level of ambition, nor of any state that claims it is doing enough. After all, the CV which qualified him for the portfolio he runs is based on his family ties to the oil industry itself. The next global strike scheduled for 24 May 2019 will set the tone for the European elections, demanding that radical climate action is on the agenda. 

As students gathered last month with their placards and chanted in more than 1,000 locations in over 100 countries worldwide, there wasn’t any rallying to congratulate the EU or the ‘High Ambition Coalition’ Ministers. Nor did young people chant “Carbon Tax Now” or “Secure the Rulebook!” They demanded climate justice.

The manifesto presented today by GUE/NGL is a response to this call and is commensurate to the demands of the striking youth.  A central demand to the global movement is a declaration of climate emergency – to effect an emergency response to an emergency situation. This manifesto is the Left’s way of hitting the panic button and declaring a climate emergency, as well as putting its climate commitments out there before the elections for all voters to see. 

Left approach rejects the market’s pseudo-solutions

The anti-capitalist Left has a nuanced approach to climate action – one that is clearly distinct from the Greens and Social Democrats, and of course, the Liberals and beyond who always appropriate the language of climate action to cover up their prioritisation of profits.

The Greens and Social Democrats prize the market and economic growth just as much as Conservatives, and consistently vote for the liberalisation of the EU energy market for instance, withdrawing the directional control of the energy sector away from elected governments.

Any real Leftist would reject this. We demand that governments are behind the wheel on the transition rather than watching markets fluctuate, and crucially, we are the only ones that reject the perpetual growth mode – the root cause of the climate crisis.

By removing the responsibility of climate action from governments and lawmakers and placing it in the invisible hands of the market, the Greens and Social Democrats have actively played an important role in this climate disaster.

While their intentions may well-motivated, the Greens have been the driving force in pushing climate responsibility off the desks of world leaders, by pushing for the EU emissions trading scheme (ETS) carbon market, commercialised energy markets, the monetisation of pollution and carbon pricing – all policy recommendations from the fossil fuel industry itself. 

Climate crisis requires anti-capitalist action

The conclusion here is clear – only by being anti-capitalist can one be a climate activist. Anything less than this is the preservation of the status quo. Greening capitalism is indeed the most sinister form of climate action delaying. 

The manifesto launched by the Left goes to the very heart of the economic model that has created climate change. Overturning global capitalism may not be realistic within the next 11 years, given how it morphs and self-replicates in the search of commodities, but the forces of capitalism can be resisted. It is precisely here – in counteracting capitalist forces – where an effective response to the climate crisis lies. 

Keep fossil fuels in the ground

The solutions to climate change must come from outside the capitalist framework, beyond the logic of a market transition.  This is why this manifesto is about directly regulating the fossil fuel industry – keeping fossil fuels in the ground and phasing out their use altogether with strict time-bound targets.

It is about massive public investment, matching the financial responses already seen at times of war, responding to terrorism, or saving the banks. It is about regulating sectors to ensure sustainable practices, stopping the wild flurry of extraction and environmental abuses produced by capitalism. The Left is the only group bringing forward this critique and this response.  

Core to this manifesto, and a prism used throughout it, is that of the principles of climate justice. For the Left, these are not just pretty words to speckle our manifesto – they are guiding tools and tests. We stand for climate policies that empower communities, not debilitate them. We stand for a rights-based approach to climate action, including a right to renewable energy. We want an integrated sustainable development approach to climate action – ensuring the fight against climate change interlinks with the struggles against poverty, gender inequity and socio-economic inequalities. 

Just and effective climate action is our number one priority, and anything less than this is a climate crime. 

A copy of the manifesto in English can be found here. Other language versions can be found on the GUE/NGL website

Damien Thomson is a contributing editor of Irish Broad Left and the climate campaign coordinator for the GUE/NGL group in the European Parliament. Follow him on Twitter @dmacthomais.

The eurozone’s ‘soulless market’ and its thuggish enforcers

By Emma Clancy.

In his open letter to Europeans last month, French President Emmanuel Macron revealed that he feared Europe “has become a soulless market” in the eyes of its citizens. Twenty years after the introduction of the common currency, and more than a decade after the global financial crisis, the soulless market is in trouble – again.

The eurozone has experienced a period of anaemic GDP growth over the past five years, during which a peak of 2.4 per cent growth in 2017 – the highest in a decade, but a rate that pre-crisis would have been considered to be very low – was celebrated as heralding the final end of the crisis, and christened with the hashtag #euroboom.

After a dramatic fall in growth in 2018 in which growth slumped to 0.2 per cent in the third quarter, the European Central Bank (ECB) and the European Commission have both sharply revised downwards their growth projections for the eurozone in 2019. In its February Winter Forecast, the European Commission said it expects eurozone growth to slow from 1.9 per cent in 2018 to 1.3 per cent this year and 1.6 per cent next year.

The ECB followed in March with a gloomier quarterly forecast, projecting growth to slow to 1.1 per cent in 2019 and 1.6 per cent in 2020. This announcement was followed by several ECB policymakers anonymously briefing Bloomberg that they thought the projections were still too optimistic. Apparently abandoning all pretence of hope of achieving its target of “close to 2 per cent” inflation at any point in the near future, the ECB also cut its inflation projections to 1.4 per cent for this year, 1.5 per cent in 2020 and 1.6 per cent in 2021.

In Italy, growth was negative for two consecutive quarters in the second half of 2018, meaning the country has officially fallen into its third recession in a decade. The grim surprise came from the export-led manufacturing powerhouse of the eurozone: Germany avoided the recession label by the skin of its teeth, recording negative growth of -0.2 per cent in the third quarter and zero growth in the fourth. Data released last week showed that German industrial production and manufacturing orders and fell in February, with a survey this week reporting “both total new orders and export sales are now falling at rates not seen since the global financial crisis”.

Constitutional austerity

Addressing a bankers’ convention in Frankfurt in November, ECB President Mario Draghi outlined the weak and fragile nature of the eurozone’s recovery: “Since 1975 there have been five periods of rising GDP in the euro area. The average duration from trough to peak is 31 quarters, with GDP increasing by 21per cent over that period. The current expansion in the euro area, however, has lasted just 22 quarters and GDP is only around 10 per cent above the trough. In contrast, the expansion in the United States has lasted 37 quarters, and GDP has risen by 21 per cent.”

What can explain the brief period that saw eurozone growth reach the dizzying height of 2.4 per cent in 2017? In a word – a massive fiscal expansion. But the expansion did not take place in the eurozone; it was a result of the fiscal policies implemented in the US, Japan and China, in the latter two cases funded by their respective central banks. Such an expansion could not possibly take place in EU member states, which must stick to the absurd, arbitrary and stifling debt and deficit limits laid down as gospel in the Stability and Growth Pact (SGP) and Fiscal Compact.

The slow growth and grinding recovery in the eurozone can be partially explained by the post-crisis austerity shock treatment applied to the periphery by the Troika, but the architecture of the common currency has acted as a brake on sustainable growth and convergence since day one. The euro has been built on an enduring effort to constitutionalise austerity, an effort that continues today despite all of the evidence demonstrating that it causes economic contraction.

‘Purely ideological and economically unsound’

The Maastricht Treaty of 1992 enshrined the so-called ‘convergence criteria’ – a set of rules members and potential members of the common currency were obliged to follow. To join the euro, states had to pledge to control inflation, and government debt and deficits, and commit to exchange rate stability and the convergence of interest rates. As the ECB was preparing to begin operating to control inflation and interest rates, Germany pushed for the adoption of an EU-wide SGP in 1997, including non-eurozone members, to enshrine the fiscal control aspects of Maastricht, and more generally to increase EU surveillance and control over member states’ national budgets.

The convergence criteria are purely ideological and economically unsound. When a eurozone member state experienced a downturn, its deficit would inevitably rise as a result of lower tax revenue and higher expenditure on social security. But when the convergence criteria kicked in, causing governments to cut spending or raise taxes, it would invariably worsen the downturn by dampening demand. Even French neoliberal Pascal Lamy, formerly the Director-General of the World Trade Organisation, called the SGP “crude and medieval” when he was EU trade commissioner.

The blanket, one-size-fits-all fiscal rules in the criteria – that member states must keep public debt limited to 60 per cent of GDP and annual deficits to below 3 per cent of GDP – were proposed by Germany, based on its own national SGP structure. In 2010, Germany proposed the reform of the Pact to make it stricter and more enforceable through the adoption of the so-called ‘six-pack’ and ‘two-pack’. Despite the vast evidence by this stage that the SGP was counterproductive and unenforceable, Germany pushed for the fiscal rules to be tightened yet again in 2012 through the Fiscal Compact Treaty, which created the obligation for the convergence criteria targets to be inserted into the national law of the ratifying states.

Fiscal straitjacket

The Fiscal Compact Treaty, signed by all EU Member States with the exception of Britain, the Czech Republic and Croatia, enshrines the rule that members in excess of the limit are obliged to reduce their debt level above 60 per cent at an average of at least 5 per cent per year. The structural deficit rule – called the “balanced budget rule” – must be incorporated into the national law of signatory states under the Fiscal Compact.

Not satisfied with the Fiscal Compact being an intergovernmental treaty, the Commission proposed last year that it be permanently enshrined into EU law. The Commission wanted the Fiscal Compact’s automatic correction mechanism to be integrated into national budgetary processes so that deviations would immediately lead to a reduction in public expenditure.

On 27 November 2018, this proposal was rejected in a tied vote of the European Parliament’s Economic and Monetary Affairs Committee. Fortunately for the Commission, it had anticipated such a possibility and had made its proposal on a dubious legal basis that provides for a decision to be taken solely by the Council of member states, and under which the Parliament only has an ‘opinion’ – despite the fact that several EU laws on the same issues have been adopted using the normal process whereby the Parliament and Council are co-legislators.

Despite the opposition of the Parliament, the Fiscal Compact is likely to be enshrined into EU law permanently – with its automatic correction mechanism, designed to remove the power to make a political decision on spending from national governments and put it in the hands of technocrats, beyond the reach of politics.

Surveillance and enforcement

Since Maastricht, the Commission has taken every possible opportunity to impose structural reforms that will exert downward pressure on wages in the belief that this ‘flexibility’ will act to increase convergence of the eurozone’s diverse economies and absorb shocks. The eurozone elites believe (or claim to believe) that if only ‘wage rigidities’ in the member states were overcome, both unemployment and trade imbalances would disappear. If only a country’s population could be forced to work for poverty wages, there would be a job for everyone; and the resulting stagnation in domestic demand would mean prices would fall and this country’s real exchange rate, which had become misaligned and risen too high, could regain its balance.

This view underpins the repeated attacks on the rights and wages of French workers, which has intensified under President Macron, as well as underpinning the EU’s overall agenda and forcing structural reforms in the member states in order to increase productivity, competitiveness and profit. The austerity imposed by the Troika was not only designed to regain market ‘confidence’ in peripheral governments, but also to facilitate internal devaluations in member states by a form of shock therapy. Of course, this adjustment facilitates not only the reduction of trade imbalances but also a sharp increase in the amount of wealth transferred from labour to capital.

The European Semester process – a yearly cycle of policy coordination between member states and the Commission – monitors the ‘progress’ of member states in implementing structural reforms that will facilitate downward movement on wages. In spring each year, EU member states submit their plans for managing public finances, including keeping debt and deficits within the SGP limits, and their National Reform Programmes, to the Commission. These plans are then assessed by the Commission, which proposes country-specific recommendations to member states, that are discussed and adopted by the Council. Then each autumn member state governments are graciously permitted to present their draft national budgets to their respective parliaments.

The next step in the drive to constitutionalise austerity is to establish a European Monetary Fund (EMF) that would replace the existing bailout fund, the intergovernmental European Stability Mechanism (ESM). An EMF could provide emergency funding for member states in a crisis, in return for strict budgetary discipline and invasive surveillance and control.

Accompanying the drive to enshrine austerity in EU law is a relentless push by the Commission to impose ‘conditionality’ over every aspect of its relationships with member states. Just one example of this is that in the EU’s next long-term budget (the multi-annual framework) for 2021-2027, the Commission has proposed to divert €25 billion away from existing ‘cohesion’ funds towards implementing austerity measures in member states. This funding stream will be targeted towards ensuring member states implement structural reforms – such as the privatisation of public services, reduction of spending on pensions, and labour reform aimed at reducing workers’ collective bargaining power – instead of being used unconditionally for direct cohesion policy: to provide support to rural and coastal communities, and support for employment, research, education and the environment.

Winners and losers

It will come as little surprise that a system designed to promote the German model of wage suppression, low inflation and export-led growth, propped up by a currency modelled on the Deutschmark, has benefited one country more than all other members of the eurozone.

In February, a German ordoliberal think tank affiliated with the ruling Christian Democrats, the Centre for European Policy, published an empirical study of the “winners and losers” from the euro 20 years after its introduction. It found that Germany was the big winner, having benefited by €1.9 trillion from the euro between 1999 and 2017, or around €23,000 per person. The Netherlands was the only other state that gained substantial benefits from the common currency. France had lost €3.6 trillion or €56,000 per person; while Italy had lost more than any other state, at €4.3 trillion or €74,000 per person.

Germany’s massive and consistent trade surplus has meant that its biggest export to the rest of the eurozone has been stagnation. But as a result of European fiscal discipline in the wake of the recession, there is not enough internal demand in the eurozone to sustain German industry. Now that a global slowdown has taken hold, and growth is slowing in China due to US trade tariffs and a debt crisis, the dangers of this economic model are exposed. If China’s latest stimulus package fails to boost demand, the German economy will certainly enter recession.

Italy, the euro’s big loser, is there already. The Italian economy is one of just two in the OECD in which GDP has failed to return to pre-crisis levels; the other is Greece. The Italian governing coalition between the anti-establishment Five Star Movement and the far-right Lega Nord faced its first test of eurozone fiscal discipline last year through the European Semester process. When it presented its draft budget for 2019, including a 2.4 per cent deficit, the Commission rejected it and threatened to enact the ‘excessive deficit procedure’ under the SGP, which consists of deadlines to comply, followed by substantial fines.

Open bias

The proposed deficit did not even cross the SGP’s 3 per cent limit. But using dubious mathematics to measure the structural deficit – what the deficit would be if the economy was at full employment – described here by Thomas Fazi, the Commission argued that the Italian economy – in recession – would be at risk of overheating if a fiscal deficit of 2.4 per cent was reached.

Instead of being technocratic, the budgetary surveillance and enforcement process is overtly political. When Macron’s government announced €10 billion in additional spending in December to defuse the gilets jaunes protests, taking France’s projected deficit for 2019 up to 3.4 per cent, EU economic commissioner Pierre Moscovici gave the thumbs-up.

“The comparison with Italy is tempting but wrong,” he said. “The situations are totally different. The European Commission has been monitoring the Italian debt for several years; we have never done that for France.” This is despite the fact that it was only in 2017 that France emerged from a long period with a deficit breaching the SGP rules.

A French treasury official agreed with Moscovici: “The situations are not comparable. Contrary to Italy, we do not question European rules. We agree that having public finances in order and reducing public debt are the right thing to do.”

Thuggishness dressed up as technocracy

The Commission is not the only enforcer policing the public spending of EU member states. The ECB has played an even more important role, throughout the crisis and in the latest clash with Italy. Its role during the crisis as part of the Troika enforcing austerity shock therapy under the bailout programmes is well known; its role in manufacturing the sovereign debt crisis between 2009-2012 as a means to force governments to capitulate on their budgetary plans, less so.

Adam Tooze refers to the ‘bond market vigilantes’ behind the massive capital flight from the periphery to the core during this period, and adds: “The role of bond markets in relation to the ECB and the dominant German government was less that of a freewheeling vigilante, than of state-sanctioned paramilitaries delivering a punishment beating whilst the police looked on.”

In May last year, during the political and market crisis in Italy arising from the temporary collapse of the coalition after the effort to appoint a eurosceptic finance minister by Five Star, EU budget commissioner Günther Oettinger openly hoped that the market turmoil “could be so drastic that this could be a possible signal to voters not to choose populists from left and right”.

The ECB’s new role, self-proclaimed in 2012, in the context of a mass sell-off of government bonds of a member of the eurozone – the situation that caused the sovereign debt crisis in 2010-2011 – is to support the state’s economy though purchasing the bonds though its quantitative easing (QE) programme. But instead of buying more Italian government bonds during this crisis in May last year, the ECB was buying less, and diverting its investment to German bonds instead.

In October the ECB announced it planned to change the ‘capital key’ it used in its €2.5 trillion QE programme from January this year. Though the ECB announced it would stop buying government bonds from the end of 2018, it is not the end of QE. The ECB is continuing to reinvest the maturing debt it holds – an estimated €117 billion in the first nine months of 2019 – back into eurozone government bonds. How much it spends, and where, is determined by the capital key.

The adjustment to the capital key will reduce the shares of 12 member states including Italy, Spain and Greece, while increasing the shares of 16, including Germany, France and Austria. One economist estimates that the change will result in about €28 billion less in reinvestment in Italian bonds, and €19 billion less in Spanish bonds than would have been the case if the change had not been made. Like the Commission’s bizarre calculation of the structural deficit as potentially causing runaway inflation in Italy’s clearly stagnating economy, the ECB’s capital key adjustment is another example of politicised thuggishness dressed up as ‘technocracy’.

Italy approaches the cliff-edge

This long stagnation caused by the SGP rules, Italy’s inability to recover economic activity to pre-crisis levels, double-digit unemployment and still massive youth unemployment have created the conditions for the election of the racist Lega Nord and the anti-establishment Five Star Movement. Following the Commission’s budgetary clash with Rome, support for Five Star has been strongly overtaken by support for the Lega. The actions of Commission and the ECB have directly contributed to the ongoing rise of the far right in Italy. It is no mystery if Italians, and Europeans, see Europe as a “soulless market”.

The threat of an economic collapse in Italy, precipitated by an inter-related banking and sovereign debt crisis, remains very real. It is exacerbated daily by the Commission and ECB. The Italian government needs to issue around €400 billion a year in public debt in order to stay afloat, which domestic banks are pushed into buying. This means Italy’s shaky bond market is highly exposed to its vulnerable banking sector, and vice versa. Banks in other EU states hold more than €425 billion euros of sovereign and private Italian debt. French banks are most exposed, holding €285 billion of this.

None of the much-touted reforms put in place in the EU after the crisis will rein in the bond market vigilantes; free movement of capital is sacrosanct. The proposal to end the ‘too-big-to-fail’ problem in Europe’s banks by structurally separating the commercial and investment activists of the banks – the so-called Bank Structural Reform – was officially withdrawn in 2017 after conservatives blocked its progress in the European Parliament and Council.

It is little wonder that there are winners and losers in the eurozone when the game is rigged and the referee is openly biased. Fears of economic collapse in Italy that peaked in May last year receded later in the year. But the country’s recession, combined with the broader global slowdown and a high likelihood of a eurozone-wide recession in the near future will push Italy closer to the cliff-edge. The deficit fetishism of the ECB and the Commission may push them off.

Emma Clancy is an economics advisor for the European United Left/Nordic Green Left group in the European Parliament, and editor of Irish Broad Left.

A shorter version of this article first appeared on the ICTU Trademark/Rosa Luxemburg Foundation blog, Brexit, Europe and the Left, on 12 April 2019.

The Left and the EU: Steering a course of principled resistance to neoliberalism

By Andy Storey.

Trawling through the website of the Irish Freedom Party (IFP) – the group calling for Irish exit (Irexit) from the European Union (EU) – is a strange experience. Amidst the xenophobia and often crude and puerile attacks on left-wingers, there are moments where those same left-wingers might find themselves nodding in agreement.

IFP support for Ireland’s “meaningful military neutrality”, for example, would raise few hackles on the Left.

Another reason for IFP opposition to the EU is that it, allegedly, “forbids state aid”. In fact, it does not, but it does seek to strictly limit such aid as a tool that governments can use to boost economic activity and equality. The potential in being freed from that restriction, and the other elements of neoliberal EU economic governance, is a point grasped by left-wing supporters of Brexit in the UK.

But the apparent enthusiasm for state aid sits uneasily with simultaneous IFP support for “slimming the state” and cutting taxes. They even endorse the widely discredited ‘Laffer Curve’, which claimed to show that tax reductions, counter-intuitively, boosted a state’s overall tax take, a proposition that is now considered bogus in the vast majority of cases.

The IFP does, implicitly at least, concede that the state might have a role in resolving issues like the housing crisis, but here their approach is overshadowed by their visceral hostility to immigration – they claim that unless free movement of people within the EU is ended then the demand-side pressure on housing will make the crisis intractable.

Which rather begs the question of how other EU countries seem to have dealt with their housing problems while remaining open to free migration across the EU. Vienna’s much-admired public housing model, to take just one example, has not depended for its success on keeping foreigners out of the city.

There is much more that could be said about the IFP. Its stance on climate change is confused and probably disingenuous. And its nativism is sometimes close to comic, such as the pledge to “support all efforts to strengthen the Irishness of Ireland”, whatever that might mean.

But let’s stick with economic policy for now. One of the billboards it has recently erected claims that a “normal self-governing state… can trade globally”, while the website bemoans the fact that Ireland (within the EU) “cannot make bilateral trade agreements”. You might have thought that the Tory Brexit pantomime would have given the IFP some pause for thought regarding the difficulties of maintaining (existing) and establishing (new) trade relationships while exiting the EU.

Economic consequences of exit

In reality, Ireland leaving the EU alongside the UK, as Irexiters urge, would be economically damaging to this country, as a recent study by Davies and Francois indicates. They argue convincingly that any Irexit would generate even worse economic outcomes than Brexit alone (which will be bad enough for Ireland) – while trade with the UK would be less disrupted by Ireland following the UK out the exit door, trade between Ireland and the EU (which is more important than that with the UK alone) would be damaged to a much greater extent.

Davies and Francois conclude that “Irexit in any form is likely to make a bad situation worse” on the grounds that “erecting barriers to trade with the continent would have a massive impact on Irish global economic integration”, with low-skill and low-income workers (the very people whose interests the Left should be prioritising) hardest hit.

And this is only considering trade effects. In all likelihood, Irexit would also see a downturn in foreign (especially US) investment into Ireland on the grounds that we would no longer constitute an uncomplicated bridgehead into the EU market. By way of precedent, foreign investment in the UK has already been negatively affected by Brexit.

Ireland, as many commentators have long argued, is overly dependent (to a much greater extent than is the UK) on such multinational investment but, as the cliché goes, we are where we are, and the Left cannot now afford to be blasé about this. IFP leaders might have no problem telling the workers who depend on those multinationals that their jobs can be sacrificed in order to “strengthen the Irishness of Ireland”, but it is not a task I would relish myself.

It is worth noting that the immigration restrictions the IFP wants to see implemented would also have negative economic consequences. The (partial and uneven) Irish economic recovery after the 2008 crash was, as my colleagues Sam Brazys and Aidan Regan have shown, largely due to foreign investment from, especially, US tech companies, and those companies would not have come to Ireland had they been unable to freely recruit the skilled, specialised labour they needed from elsewhere in Europe.

Those economic considerations doubtless go a long way towards explaining generally positive Irish attitudes towards the EU, as revealed by the most recent Eurobarometer survey data (collected in November 2018). The data show that 64% of Irish people hold a positive view of the EU (the EU average is 43%) and only 8% hold a negative image of it. Seventy five per cent of respondents express satisfaction with how democracy works in the EU, and 76% feel Irish interests are taken into account by the EU. Seventy per cent of those sampled in Ireland do not believe that the country’s future would be brighter outside the EU.


But there are some important qualifications to be taken into account concerning these survey results. The first, as the survey managers themselves point out, is that the views are often ‘soft’ – for example, people’s image of the EU tends to be somewhat rather than strongly positive.

Secondly, and relatedly, these views can change pretty dramatically within a short period of time. Only 8% view the EU negatively now, but that proportion was 31% in 2012 (when the figure for those with a positive attitude was just 35%). Back in 2011, just 38% thought the EU took Irish interests into account, compared to 76% at present.

Thirdly, views of the EU may be broadly positive, but trust is a scarcer commodity – 50% proclaim trust in the EU (up from 24% in 2011) but 38% are still distrustful. Given the EU’s outrageous insistence on Ireland repaying the socialised debts of private banks, that distrust is entirely legitimate and understandable.

A summary paraphrase of what the survey respondents are saying to the EU might read as follows: “we like you, now, and we think we are better off, for now, being a member, but we don’t trust you as much as you might think”.

The relatively high level of distrust may help explain why 25% of people think Ireland’s future prospects would be better outside the EU, a sizeable constituency that could rise if circumstances changed (such as the EU being seen to insist on a post-Brexit hard border on this island) and one which is not currently represented by any major Irish political party. That is the constituency that the IFP (and its allies) is pitching to.

The argument about sizeable sections of the electorate being unrepresented by the current parties is not, of course, confined to stances towards the EU: 38% of voters were against same sex marriage in 2015, 34% were against the legalisation of women’s reproductive rights in 2018. No substantial political party speaks for the No voters on those issues.

The newly formed Aontú party (led by former Sinn Féin TD Peadar Tóibín) is clearly aiming to hoover up that socially conservative vote, and its recent launch saw its leader make a play for the anti-immigrant vote also, albeit under the dog-whistle guise of calling for a “debate” on immigration that would reflect people’s supposed “growing unease and concern” on the issue. Aontú’s position vis-à-vis the EU is not yet known.

Left’s orientation

So where should the Left go in this context? Well, obviously, not towards social conservatism: that would be wrong in principle but also in practical terms – opposition to LGBTQ+ rights and to a woman’s right to choose is a minority stance, and one that seems set for long-term secular decline in Ireland. Hostility to immigration may, sadly, not be similarly destined for the dustbin of history.

More specifically, how should the Left approach EU issues? The points made above – that Ireland leaving the EU would be economically damaging at present, and that the vast majority of people support (for now) Ireland’s continued membership of the EU – are important, but at the same time they do not invalidate the serious criticisms left-wingers are obliged to make about EU policies and practices.

Those criticisms include a neoliberal economic governance framework that is hostile to state intervention in the economy and to the pursuit of economic justice on the part of progressive governments, trade unions and others. The crushing of Syriza’s short-lived (and only ever limited) Greek defiance of that mode of governance should represent a defining moment for all those on the Left who ever harboured illusions about a ‘social’ or ‘progressive’ Europe.

Subsumed under this left-wing economic critique should be the signing by the EU of trade and investment agreements with other countries and regions that lock in the rights of corporations at the (potential or actual) expense of the public good – of Europeans and non-Europeans alike.

The growing drive towards the adoption of a coordinated and beefed-up EU military capacity should represent another red line issue for the Left.

And just as we can make no common cause with the anti-immigrant politics of the IFP and (it seems) Aontú, so also do we have to condemn the EU for cynical deals with Turkey,  Libya and elsewhere that deny many asylum seekers the ability to access Europe at all, and consign them to locations of egregious and horrifying abuse. The EU has also engaged in militarised policing actions against migrants that have turned the Mediterranean in particular into a watery grave for many thousands, even before the Union’s recent outrageous decision to abandon the vestiges of a naval rescue operation for some.

A programme for challenging neoliberalism

In practical, political terms, what all this might translate into is a willingness on the part of the Left to be very EU-critical, but not to call, as a matter of preordained principle, for withdrawal from the EU. What would such an approach look like in terms of a programme for government? Here are a few points that such a programme might contain.

  • We will not be bound by economic rules that prevent us solving crises such as those besetting the housing and health sectors – if we have to breach EU deficit, debt, state aid and other regulations in order to abolish homelessness or fix the health service then that is what we will do. This does not put us out of line with other EU states: Portugal and Spain have breached the EU Fiscal treaty provisions and not been penalised for it, while Macron in France has made tax and spending concessions to the ‘yellow vest’ protests that will likely see France also miss EU fiscal targets. What is sauce for the Iberian and French goose is sauce for the Irish gander.
  • We will not endorse trade and investment agreements that privilege investor profits over the public interest and the fight against climate change; in this, we share, for example, the current reservations of the French government, and of large swathes of European civil society, over the proposed reopening of talks on a trade agreement with the US.
  • We will not sign up to Permanent Structured Cooperation (PESCO) that would see Ireland be pushed to raise military spending and to boost the profits of arms manufacturers – our resources will instead be devoted to lifting Irish military families out of poverty and contributing to genuine peacekeeping operations on the international stage. Again, this does not put us at odds with other EU member states – neither Malta nor Denmark has joined PESCO.
  • We will not participate in inhumane and deadly actions at the European level that prevent refugees claiming protection in Europe, in the same way that we will defend and enhance the rights of migrants and asylum-seekers in Ireland through the abolition of, in particular, the brutal and indefensible system of ‘direct provision’. Our opposition to racism and violence directed against migrants will be as clear and unambiguous on the European as it will be on the Irish stage.

I suspect that critics will respond to such positions by saying that, whatever about individual acts of resistance, the cumulative impact of this suite of measures would put us on a collision course with the EU. And I think we will have to answer honestly: it may well do. And, again in all honesty, it may generate at least the prospect of punitive action against us if we were ever in government – the ECB might, for example, threaten to cut liquidity to the Irish financial sector as a form of leverage against a real left-wing challenge (they have done so in the past to other countries, most notably Greece).

Justice and realism

So there are risks here, and a need for contingency planning (including for exit from the Eurozone) if likely EU threats are followed through on – one of Syriza’s many tragedies was its failure to prepare for what they would do if the EU powers rejected their modest proposals for reform. But this type of resistance on the part of a Left government would have a massive advantage in terms of mobilising potential public support: it would be clearly identified as a last resort that the Left, as it sought to defend the interests of people living in Ireland, had been driven to by a recalcitrant EU.

In other words, the starting position would not be a reflexive Euroscepticism (that can be left to the likes of the IFP) but, rather, a willingness to stand up to bullying and to do what it right by people here (and indeed elsewhere also) – through negotiation and constructive engagement by preference, and working closely with like-minded groups across the continent, but through principled resistance if necessary. That would provide a context in which already changeable public opinion might be more readily brought along to EU-critical positions, even while remaining cognisant of economic risks being run. Tax policy, which I have not discussed here for reasons of space, would inevitably loom large in that context also.

There is no point pretending this is not going to be a difficult balancing act, but nor can we wish away the choices we will have to make. In making those choices, we need to see the Irish-EU relationship as a dynamic and changing one, and one we ourselves can help change, not as static and fixed.

To commit to the EU come what may is to collude in the neoliberal attenuation of democracy and economic oppression of the many in Europe, to militarisation and to the violation of the human rights of migrants and others. Equally, to commit, as the IFP does, to leaving the EU come what may is to gamble recklessly with the welfare of people living in Ireland and to endorse a reactionary right-wing Euroscepticism.

The Left needs to steer a course between these opposite poles, one that is based on both justice and realism and that is willing to seek to change the terms of the debate at the same time as it is willing to adapt to changing circumstances. It will not be easy, but not to try is to cede the field to either the EU’s neoliberal autocrats or to right-wing xenophobes at home, or to some unholy combination of the two.

Andy Storey teaches political economy in the School of Politics and International Relations, University College Dublin, and is on the board of the justice and human rights NGO Action from Ireland (Afri). The views contained in this article are expressed in a personal capacity.