‘Ahead of the Curve – Ireland’s place in the Global Economy’
27th August 2004
The latest report commissioned by the government on Irish economic development, and published in July - ‘Ahead of the Curve – Ireland’s place in the Global Economy’ -from the Enterprise Strategy Group, was meant to be a radical look at how to ensure continued economic success in an era of rapid global change. It was expected to be another landmark document, following in the footsteps of the previous Telesis report in 1982 and Culliton report in 1992. ‘But the game is changing quickly and we need a plan which goes beyond the usual platitude of “moving up the value chain”’ wrote Cliff Taylor of the Irish Times on 23rd April, in anticipation of the report.
What we got went beyond the usual platitude only in the sense that it raised it to another level. One Director of an economic consultancy firm complained that the report was ‘pretty thin on analysis throughout,’ consisted ‘of casual empiricism’ and was, he said, ‘quite incontinent with cliché.’ (Colm McCarty, Irish Times, 8 July)
It is indeed an extremely repetitive document and consists of a description of what the authors think a successful economy should look like, ticking off all the characteristics it should have, rather in the way a doctor might treat a patient by telling her that she needed to be strong, fit and healthy by having strong bones, toned muscles and clear eyes. Thus strong economies have high levels of research and development expenditure so the Irish State must spend at this level too. What the report offers then is not so much prescription as description.
The report therefore bears unfavourable comparison with its predecessors, not that they deserve their reputation. The Telesis report in 1982 criticised over-reliance on foreign industry, recommended a better balance between indigenous and foreign industry and substantial reductions in the level of grants to foreign firms. There followed the 1980s which witnessed the continued decline of indigenous industry and a huge rise in unemployment. The Culliton report in 1992 recommended a shift from grants to equity support for indigenous industry and further restriction of the grant budget for foreign investment.
We are all now only too well aware that the turn-round from bust to boom had little to do with the efforts to support indigenous industry but was the result of the foreign investment these reports had begun to despair of. Politicians and ‘experts’, including the authors of this report, now praise ‘Ireland’s historic commitment to education’ (p. xv) that apparently drew in the multinationals, forgetting that the education budget was, and still is, one of the first to get cut when money is tight.
Jim Culliton himself made his own contribution to the development of indigenous industry by investing his money illegally offshore, thus avoiding tax; a double blow for indigenous development.
‘Ahead of the Curve’
The report of the Enterprise Strategy Group, made up of academics, managers, businessmen and Des Geraghty, ex of the trade union movement, now recognises the critical reliance on foreign industry. Commitment to a nationalist solution is now couched in terms not only of promoting indigenous companies but of attempting to root foreign multinationals more firmly to Irish soil. Thus when the report talks of Irish industry or enterprise this definition includes US multinationals!
When it talks of ‘promoting Ireland’s enterprise brand internationally’ (p.xv) this overwhelmingly means foreign-owned companies currently sited in the Irish State which export 95% of their output. These state supported foreign companies accounted for 89% of-supported exports in 2002 while ‘export growth in most indigenous sectors has been negligible.’ (p.59)
The report notes ‘the growing attractiveness of emerging economies as a location for foreign direct investment Ireland has attracted in the past’ and the ‘reduced opportunities for sub-supply by the indigenous base.’ (p.19). It notes that ‘indigenous companies trading internationally are increasingly competing against companies that can produce goods at a much lower cost’ (p17) while acknowledging that ‘the two biggest sectors… which together accounted for 68% of indigenous agency-assisted activity showed no sales growth (in real terms) over the past decade.’ (p 16) The outlook for services industries is similarly threatening: ‘Deloitte Consulting predicts that two million service jobs currently based in western economies will migrate to India by 2008.’ (p. 21)
Despite all this and the failure of previous reports the authors do not hesitate to make exaggerated claims: ‘The strategy and recommendations in this report identify a routemap to sustainable employment and national prosperity for Ireland.’ (p.xxi) What such a statement shows is that this is a report that deep down does not take itself seriously – an unchanging strategy for guaranteed success in a world of constantly changing threats?
Such contradictions reflect more than an attempt to sell the report or convince workers to continue with an economic policy which, even when it succeeds, is incapable of offering security, equality or the level of prosperity it promises. And while the report is not meant for workers, it does represent the intellectual case for pursuing a policy which is sold to them in one way or another ever day.
The claim to have some permanent recipe for success hides an utter lack of capacity to achieve it. The Irish State and indigenous capital is small and weak so that the contradiction between political and social policy framed on a national basis and economic forces that operate most powerfully on a global level is posed particularly sharply.
The report’s central strategy may be called ‘teaching your granny how to suck eggs’: ‘Foreign-owned companies operating from Ireland will need to develop a more balanced range of business processes. Building direct relationships with customers is vital: they need to develop in Ireland an understanding of market dynamics and customer needs, so that they can influence the production cycle and the development of new products.’
All this must be done in the Irish State because at present ‘the majority of these companies do not conduct their sales and marketing activities in Ireland. These activities are usually managed and executed elsewhere within the corporate family. The resulting lack of direct customer interaction limits their ability to innovate and to influence their future development in Ireland.’ (p.60) ‘A significant proportion of the foreign-owned firms are, by global standards, still positioned at a relatively low point in the value chain . .the activities that underpin the competitive strength of the parent organisations are not for the most part located in their Irish operations.’ (p. 8)
Achieving this, of course, is the problem since the choices made by multinational companies are determined by many factors which are often out of their own control never mind that of the Irish State. It is the very nature of the market that is so resolutely defended that it is outside anyone’s control.
The report notes that ‘Investment in R&D (Research and Development) and innovation by enterprise in Ireland is relatively low. At 0.88% of GDP, Ireland’s Business Expenditure on R&D (BERD) is only 73% of the EU average and 57% of the OECD average. There is a need to increase business investment in research and development. It is estimated that BERD will need to increase from €917 million in 2001 to an estimated €2,540 million in 2010 to meet the EU 3% R&D target.’ (p.65)
The authors of the report would be the first to reject the efficacy of public expenditure without clear goals but here they call for commitment to a target spend that is entirely arbitrary and whose effectiveness could not even be guaranteed if the necessary initiative was taken by increased private expenditure.
Some of the commentary in the report is frankly laughable. The report notes the falling taxation of profits among the Irish State’s competitors for mobile international investment and criticises its marginal rate of tax, stating that ‘The Government should reiterate its commitment to the current corporation tax rate of 12.5% on trading profits.’ (p.83) The government has also apparently lost its ‘clear focus on enterprise as a key economic driver’ and should ‘institute a twice-yearly Cabinet meeting dedicated to enterprise.’(p. 85 & 86)
The report states that ‘the whole of society ultimately depends on the enterprise sector for employment and wealth.’ (p.86) To this end it calls for the further subordination of education in the State to the requirements of private interests. It calls for changes to the structure and management of higher education calling for its management bodies to be reduced and ‘reflect in equal proportions the needs of enterprise, education and society.’ (p.75) It calls for competition between institutions for funding and the encouragement of ‘additional diverse sources of private funds.’ ‘Entrepreneurial skills should be included in the syllabus for the senior cycle and any necessary curricular changes made at primary and junior cycle level’ (p. 104), presumably so that children can be taught at a young age all the good things about being a capitalist.
The picture of a government and State not entirely devoted to the interests of big business will be recognised by only the most blinkered ideologue of the right. Should the Irish government repeat any more often its commitment to corporate welfare it will develop an incurable stutter and grounds for a psychiatric diagnosis of the most profound pathological disorder.
The other Ireland that the authors live in is further illustrated by its remark that the country will have to attract skilled immigrant workers by being ‘seen as an attractive place to live and work, with a welcoming attitude to immigrants and a vibrant, diverse cultural life.’ (p.80, also see p.43) Astronomical house prices, a racist referendum and educational institutions dominated by a backward and rigid church all go without mention.
Other recommendations in the report are equally unconvincing as a response to the questions being posed to capitalist economic development in the State. A prominent recommendation much trumpeted in press coverage is the proposal to ‘establish a five-year programme, to place, on a cost-sharing basis, 1,000 graduates and internationally experienced professionals in Irish firms to augment the stock of national sales and marketing talent.’ (p.62) This is based on the view that sales and marketing, along with technological innovation, are the critical weaknesses of Irish firms. (p.39) There is however no reason to believe that foreign ‘Irish’ firms are deficient on this score or that ‘Irish’ Irish firms would make any use of such help, if given to them, to drastically transform their fortunes.
The threats to ‘Irish’ economic development are real enough, even if they have been repeated while the Celtic Tiger roared. Global competition is increasing and the Irish State’s ability to bring in new investments to replace exiting firms is to a large extent outside its control. In terms of manufacturing it may be competing for a smaller share of possible investment and this is predicted to be true of ‘service’ industry as well. The report highlights the growth of investment in India and China and notes that ‘in 2002, the number of investment projects in the EU-15 member states declined by 11%, whereas in the 10 new member states, investment projects increased by 14%, reaching a value of $29 billion.’ (p. 17)
The Irish State is a very small one and has not needed large absolute amounts of investment to maintain high growth. This however can also be interpreted as a weakness, as the report notes: ‘Ireland’s performance was driven primarily by a relatively small number of foreign-owned firms who chose Ireland as their base for serving European markets.’ (p.12)
Primary among these has been Intel, which has just announced the opening of a major new plant and plans for yet another one. This and other recent announcements have encouraged belief that the Irish State can still compete successfully for mobile international investment. However the reasons cited for these latest Intel investments give pause for thought.
When opening the new Fab 24 wafer fabrication plant in June the Chief Executive of Intel warned that more effort was needed to ensure the Irish State did not price itself out of the market. ‘Cost is a significant issue. Labour costs and the other is the cost of building facilities and infrastructure in Ireland.’ He cited corporation tax, education and political stability as key reasons why Intel continued to invest in the country. Standing beside Bertie Ahern he showed who was boss by saying ‘If you want an example of this type of non-business friendly environment just look at California, which has priced itself out of competition for manufacturing facilities. It got so bad there that they effectively threw out their governor. So it is possible for this thing to happen.’ (Irish Times 15/06/04)
In May the company announced a further investment of $1.6 billion in a Fab 24.2 plant; the company’s local general manager citing the State’s track record and political stability as reasons for Ireland being chosen over competitors such as the US and Israel. Investments like these have ensured that the ‘total stock of foreign direct investment in Ireland in 2002 reached $157 billion, the highest in the world in per capita terms after Hong Kong.’ (p. 5)
The pause for thought is given by the fact that these Intel investments have come because previous investments have made money. But then so did previous investments in the US itself, which is now no longer the favoured location for these new Intel manufacturing plants. In other words, despite the success and hopes of rooting foreign companies to Irish soil, if Intel – a US company – does not build its latest plants in the US, where if it is rooted anywhere it is there, what prospect of rooting it in the Irish State when it is claimed that many costs are now as high as in the US? The very smallness of the State means relatively small investments accelerate cost increases. On the flip side relatively small exits of foreign investment could see rapid economic retrogression. Rooting mobile international investment; attempting to combine first class low cost infrastructure, a low cost educated labour force and low, low corporate taxes is not sustainable.
Even in success the Celtic Tiger has demonstrated the limits of what capitalist achievement can deliver in terms of security and prosperity – a grossly unequal society that provides public services which teeter on the edge of crisis. The current search by increasing numbers of companies for the most profitable location means a continuing pressure for cost advantages that the Irish State cannot deliver indefinitely, at least not without attacks on workers living standards that are at present unacceptable.
This dependence on outside capital has had its reflection in the consciousness of the Irish working class. Workers are all too aware of the multinational dominance of the State and its economy, a dependence further reinforced by the policy of the union movement not to organise in multinational firms and the weakness of rank and file organisation as a result of over fifteen years of social partnership. The historically weak class consciousness of Irish workers has been made weaker still by these processes.
The policy of successive governments has been to undermine and divide working class organisation through social partnership and give concessions easily afforded in a period of boom to ensure that workers do not take advantage of these favourable economic conditions to press for wider gains. Divisions have been strengthened along the axes of foreign/ indigenous employer with the multinational sector paying higher wages and employing modern techniques to prevent unionisation. The report notes that the average wage in the multinational sector is €39,600 while that in indigenous industry is €34,700. The remarkable thing about this is not the difference but, given the profits attributed to the former, how narrow the difference is. On the face of it this would indicate that workers in the foreign sector are actually exploited more.
Most recently the ability to maintain a highly exploited workforce of immigrant workers has been strengthened by the overwhelming passage of the racist referendum.
Concessions have been given to many public sector workers in the form of benchmarking awards while benchmarking is used to undermine terms and conditions in the long run. The union bureaucracy has used these increases to protect its position while the position of unions in the private sector has shrunk as unionisation rates decline. Privatisation has been accelerated with relatively large chunks, under the control of the union bureaucracy, being given to workers to smooth the process. Where sections of workers have pressed claims that the State has not wanted to concede, such as nurses, the most vicious propaganda and hard nosed posture has been adopted which has succeeded as the union bureaucracy has effectively isolated and defeated their action.
As long as the boom continued these attacks and the arguments of the State, bosses and union bureaucrats were reinforced by an objective reality of rising living standards for many, all caveats aside. Defeating this in any important test was always going to be difficult and on no important test has such a victory been registered by workers. To advance a political perspective based on the crisis of capitalism and the need for socialist revolution has therefore seemed the most crazed ravings of doctrinaire lefties.
A Left ‘Ahead of the curve’
While the State has published its own strategy it should have been clear that the left needed its own perspective for resistance. This is needed to explain the nature of the boom and both its temporary and unequal character. It is needed to hold to the defence of class interests that have been under assault using short term concessions, such as shares in privatised companies, as well as the more traditional threats. Above all it has been required to oppose to social partnership and, through campaigns against it, an attempt to maintain or build anew rank and file activity.
Some attempt has been made to explain the boom but much of the criticism of the Celtic Tiger has tended to reflect a sort of moralistic rejection of inequalities specialised in by Catholic Church groups. The left’s response to political attacks encapsulated in referenda on Europe and most recently on immigration have purposefully not challenged this moralistic approach which, if analysed in Marxist terms, can only be described as petty bourgeois. Thus the anti-war movement has failed to advance a specifically working class understanding of imperialism and the relationship of the latter to its own country.
For the Marxist left maintaining practical activity through a policy of taking up defensive struggles is, although necessary, in itself no answer. It can simply lead to it talking about revolution in the privacy of their own meetings while acting as no more than militant reformists in public action. No long term strategy has been in evidence and failures have gone unregistered. Since, as Trotsky notes, one learns most from the experience of mistakes, not much if anything has been learnt.
No rank and file structure of trade union oppositionists has been created despite occasional anti-partnership campaigns. These have always had the most short term perspective, preventing them from developing a larger programme. No organisation on the left is currently in a position to give a lead to any movement of resistance by the working class – this is the important lesson of the anti-bin charges campaign. The result is a left that is either too small or opportunist or sectarian or all of these.
Swift changes of economic fortunes will undoubtedly result in working class anger, and in many circumstances will lead to mobilisation of resistance as workers will have regained some confidence from being spared the threat of high unemployment for some time A younger generation will have had no experience of the demoralisation of defeat in struggle. Already a significant minority has looked to electoral alternatives to the prevailing consensus even if these have been utterly fraudulent – the Greens and Sinn Fein most recently. The task of today’s small Marxist movement is to develop a programme and a degree of unity and activity in preparation for these mobilisations.
The programmatic basis of such a left alternative must be working class independence, i.e. unity of the left not non-political unity with the latest ‘radical’ electoral force. Rather it must find a way to expose these movements for the frauds that they are. An open commitment to internationalism as explicit as that of the globalisation trumpeted by the latest report must be central.
This means rejection of any nationalist solution and a clear response to the widespread understanding by workers of the country’s small place in the world. This means no resort to arguments that claim an independent Irish State can somehow successfully beat off the forces of globalisation i.e. imperialism, and create an island of tranquil prosperity and security.
It is not possible to ridicule the nationalist pretensions of the Irish State or of its indigenous capitalism – including its claim for the ‘Irishness’ of US multinationals – if one clings to the idea that somehow some other progressive Irish State is an alternative. Socialist must say that the dependence of the people of Ireland on others is irreversible. What is at issue is not global dependence versus national independence. What is at issue is the unity of the working class of the world, the dependence of Irish workers on their international brothers and sisters.
‘The small peoples can be assured the opportunity of free existence only by the proletarian revolution which will free the productive forces of all countries from the tentacles of the national states, unifying the peoples in closest economic collaboration on the basis of a common economic plan, and offering the weakest and smallest people an opportunity of freely and independently directing their national cultural affairs without any detriment to the unified and centralised European and world economy.’ (Leon Trotsky, The First Five Years of the Communist International Volume 1 p. 48, New Park edition)
This is no mere utopian perspective. The exploitation of workers around the world requires each nation’s workers to accept the limits on their welfare imposed by competition over costs and reduced corporate taxation. It requires everyone to accept competition against each other. The exercise of solidarity is ideally no less feasible than the exercise of a mutual race to the bottom requiring each nation’s workers to cut their own throats.
This is true of workers in multinational firms as it is of movements opposed to the international policies of the imperialist states – for example the international protests against the war in Iraq has mobilised millions in common cause across the world even if it has yet failed to form into a real international movement.
Such an international perspective must form the basis of socialists’ interventions even where the forces of international competition do not apply so immediately and where therefore we might expect resistance to break out sooner and be that much easier. The international forces which the Irish State pretends it can harness can only be turned to the good of Ireland’s people through overthrowing the anarchic system that generates them. Neither the intellectual case for socialism nor the practical struggle guided by this theory and practice can be advanced by retreat into any sort of nationalist or state-centred alternative. That is the real message for workers from this report.