Mass Unemployment as a Permanent Structure in Irish Capitalism?

national | worker & community struggles and protests | opinion/analysis Wednesday September 02, 2009 18:32 by Henry Silke - SP (Personal Capacity)

Unemployment in Ireland: A Brief History

Introduction

Is the spectre of mass unemployment a permanent feature in post-boom Ireland? Ireland’s economic boom was predicated on a policy of low tax entry to the European free market as well as an unsustainable housing boom. The Irish state’s response to the global crisis seems to be deflationary policies in a ‘race to the bottom’ between peripheral and semi-peripheral economies. The weakness of indigenous Irish capitalism and the living costs in debt ridden Ireland do not leave much room for growth in private sector employment. The private sector has never been able to provide sustainable full employment in the history of the state. This article explores this thesis and maintains that workers should not depend on the private sector and its political servants to provide decent employment for all.

August 2009: Live Register Rises to 444,000

The Central Statistics Office Report (CSO 2009) on the live register for August 2009 has shown a continuing rise in unemployment. The live register has risen to 428,800 claimants after the seasonal adjustment, or 440,056 in total. This is an increase of 5,000 in one month. In one year the live register has gone up a total of 192,672 or 192,700 when seasonally adjusted. This represents an annual increase of 77.9%
The number of people aged twenty-five years or less on the register is 95,745, which represents an increase in 40,709 in one year. *

*(The CSO points out that the live register is not a measurement designed to measure unemployment as it includes part-time workers. However this article maintains that those part-time workers are to some extent underemployed, and are in need of financial assistance. While at the same time the live register does not take account of those who may have difficulty in claiming social welfare such as the self-employed or trades people. According to the CSO, the official unemployment rate, as of March 2009 is 223,400 people unemployed. However in light of the continued increase on the live register since then, and the difficulty in finding employment in the present labour market, the live register is a better guide to levels of unemployment and underemployment. The estimated number of part time or casual workers is 37,749 males and 32,354 females.)

Employment and Unemployment in Ireland a Brief History

Between 1926 and 1951 trends in employment in Ireland correlated with trends in emigration: emigration, in essence siphoned off increases in the labour force. When emigration was cut off during the Second World War, it was easily replaced by employment in the armed forces (Irish and British) and a brief return to labour intensive agriculture. The 1950s in Ireland was a period of depression. Much like contemporary government policies, the 1952 budget was deflationary which itself added to the recessionary conditions. By 1957 the economy was in serious recession; but the budget, instead of offering a stimulus package, introduced more deflationary measures. Total employment fell 12% between 1951 and 1958.

It was from this period that Ireland entered its period of export-led industrialisation, which meant in short, because of native Irish capitalism’s failure to develop, the state invited foreign-owned transnational corporations to both industrialise the country and supply employment. This implied by its very nature a neo-classical economic development. And it returned Ireland (after a brief flirtation with protectionist policies) to a dependent peripheral-or semi peripheral part of the world economy.

By the 1980s the spectre of mass unemployment overshadowed industrial progress in Ireland with 126,000 unemployed in 1981 jumping to 227,000 by 1986 (Kennedy et al. 1988 p. 143). However the 1990s saw an unexpected upturn in the world economy which Ireland would benefit from. In 1992 the EU single market was established. This allowed the free movement of goods, services and capital within its borders. Once this happened non-European trans national corporations raced to get into the market by establishing production facilities in the EU. Ireland succeeded in attracting a disproportionately large number of US firms to its shores.

The were a number of reasons for this: firstly, Ireland’s status as an English-speaking country, with a politically stable right-wing political culture; Ireland’s social partnership process; lax labour laws; a highly educated supply of labour not to mention the peace process. However the single most important cause was Ireland’s tax regime (Allen, 2009 p. 32). From the 1980s, Ireland charged a ten percent corporation tax to the manufacturing sector. In 1987 it extended this to financial services operating out of the new Irish Financial Services Centre. In 1996 it announced that a 12.5% tax rate would apply to all firms from 2003.

As Allen (2009 p. 33) puts it, Ireland became an Atlantic tax haven for US or global companies who wanted to escape tax rates of 35% or more in the US or EU. This dual position of Ireland as a tax haven and its access to the European free market made Ireland especially attractive for US companies. Moreover Ireland had no laws against so called transfer pricing, which meant companies could transfer tax payments to tax havens such as Ireland; in other words goods not manufactured in Ireland could be sold internally to the Irish subsidiary and when sold on pay tax on profits at Irish rates. This led to an explosion in employment, a shortage of housing and even a mass net inward migration. The state funded itself by taxing workers and taxing house sales rather than profits or wealth.

By 2001 this industrialisation process had effectively ended. However, Ireland’s lack of housing stock in the earlier part of the boom allowed a housing boom which in turn became a speculative housing boom. This boom was unsustainable and in an almost perfect example of a crisis of over production (Marx, 1976) collapsed and took the rest of the economy with it. The Irish state with the removal of house sales could not support itself and entered deficit; it has since begun higher taxation on the workforce (rather than profits or wealth) worsening the consumer market and economic crisis; which is spiralling into more unemployment. The world financial crisis has also meant foreign national companies are even less likely to establish more production facilities, and some have used the cover of recession to move production further east. Moreover, as many countries in Eastern and Central Europe have emulated Ireland’s tax haven policies it has structurally undermined the motor of Irish dependent capitalism. This seems to be resulting in the Irish state’s attempt at deflationary measures in a ‘race to the bottom’ of semi-peripheral capitalist states.

Unemployment and Debt

Today we have a return to mass unemployment with up to 500,000 unemployed. Much like the 1950’s the state is setting deflationary measures to try and make the Irish workforce competitive. The driving down of wages and living conditions and living costs would allow Ireland to compete again in the World Labour market. However a direct flaw to this argument is the debt situation as many unemployed and employed workers remain in serious debt, much of which was derived from the property and credit boom. These long-term debts will remain around the necks of workers employed or unemployed for decades making cuts in pay even more difficult. The high cost of mortgages also mean that rents will not fall below a certain level which again affects the competitiveness of the Irish workforce. The government, in establishing NAMA, may in essence artificially keep up the prices of housing which again will affect competitiveness. Therefore the state’s only option will be to attack workers’ living standards and increase productivity; both of these will not lead to employment as the consumer market will be affected and fewer workers will be employed to do the same, or indeed more work.

Other Structural and Demographic changes:

Today the highest single type of household is that of one person living alone. Households containing single mothers and fathers, and cohabiting couples, have also increased. (For figures on the 2006 census on types of household see Appendix A). The stresses of unemployment on single occupancy households and single parent households have added dimensions. Where married or co-habiting households with two or more workers may in some sense cushion the family’s lifestyle, single worker households have no-one to fall back should they be made redundant. Single occupancy mortgages (who in many cases rented out rooms to meet mortgage repayments) will find it difficult to continue repayments. Single people renting will face more difficulties as it is easier for private sector landlords to evict tenants than the banks to evict homeowners.

Conclusion

The spectre of mass unemployment has dramatically returned to Ireland. As the state’s economic strategy has been severely undermined by new entrants to the European market it is difficult to see a way out. Moreover, the export-led industrialisation process has left Ireland highly exposed to the world economic crisis, with little indigenous industry to cushion the fall. Moreover the deflationary economic policies make it unlikely that consumer confidence will return anytime soon. The only policies that the state seems to be following are those characterised by the propping up of private financial institutions, which will more than likely see the economic crisis deepen and thus keep rents artificially high. They do this in the hope that the private institutions will ‘release credit’ and start the economy moving again. However, as pointed out above, indigenous capitalism has never been able to provide full employment in the history of the state.

Unemployed workers will effectively become Marx’s ‘reserve army of the unemployed’ who will be used against employed workers into diminishing living standards for all. Workers employed and unemployed must demand a stop to the bailouts of the speculators and to use this capital to establish public companies with direct employment. Private capital will not supply full employment, especially in peripheral states like Ireland. Irish capital’s embracement of neo-liberal economics and its semi-peripheral status in the world economy makes both radical economic and political change necessary.

References:

Allen Kieran (2009) Ireland’s Economic Crash: A Radical Agenda for Change, Dublin, The Liffey Press.

CSO (2009) Live Register August 2009 http://www.cso.ie/releasespublications/documents/labour...g.pdf

Kennedy Kieran A., Giblin Thomas and McHugh Deirdre (1988) The Economic Development of Ireland in the Twentieth Century London, Routledge.

Marx, Karl (1976) Capital; Volume One; A Critique of Political Economy, London, Penguin Classics

Appendix: A

Census 2006

Composition
of total no. of persons*
Household

One person 329,450

Husband
and wife 204,487

Cohabiting
couple 65,055

Husband 477,705
And wife with child/children

Cohabiting 39,626
Couple with child/children

Lone mother 130,853
With child/children

Lone father 21,689
With child/children

Non-family with 43,426l
Related persons

Non-family 64,144
No related persons

*This able shows the total number of persons involved in such households not by the total number of households. It also does not differentiate between differing numbers of children in families. Therefore (apart from the single no. households) there will be less households than the population number. For a more detailed tables see CSO:
http://www.cso.ie/census/census2006results/volume_3/ent...3.pdf