How the Celtic Tiger was tamed

As Ireland heads to the polls, it expects not change but more of the same.

If all the talk of treason in Dublin were in earnest, there would be nooses dang­ling from the Georgian lamp posts around the Dail instead of general election posters. There are no lynch mobs along the banks of the Liffey and the worst financial crisis in southern Ireland since the founding of the Free State doesn't seem to be bringing about the kind of large-scale realignment that the Irish left has been longing for.

Forget "Guns'n'Roses", as a Sinn Fein-Labour coalition was nicknamed when a single rogue opinion poll suggested such a mould-breaking possibility. For all his gung-ho rhetoric about triumphing over the two big tribal parties, the Labour leader, Eamon Gilmore, now has a struggle on his hands to play any role in the next government. Instead of making history, the most he can hope for is to become a Hibernian version of the Liberal Democrat leader-turned-Deputy Prime Minister Nick Clegg - and he might be denied even that dubious achievement if a resurgent Fine Gael can muster a majority with the aid of independents.

Although Gilmore has accused the outgoing Taoiseach, Brian Cowen, of "economic treason", the Labour leader is unlikely to pursue retribution if he becomes Tanaiste (deputy Taio­seach). A politically connected golden circle of investors seems always to be protected, even in times of socio-economic carnage. Most people in Ireland can't imagine this ever changing. Meanwhile, mass emigration is acting as a safety valve for social unrest. A new exodus from the country is one of the very few reasons that the number on the dole has yet to reach half a million.

Following the €85bn EU/IMF bailout, many have become exercised about the issue of economic sovereignty. The most that Fine Gael's leader, Enda Kenny, promises is that, if he becomes Taoiseach on 25 February, he will try to negotiate a less onerous interest rate with the European Central Bank (ECB). But its president, Jean-Claude Trichet, has already publicly slapped him down for this. Alan Dukes, a former Fine Gael leader who is now chairman of Anglo Irish Bank, has added to Kenny's woes by indicating that the country's banking system will need a further €15bn on top of the €35bn already earmarked.

If the Irish Labour Party becomes the junior partner in a Fine Gael-led coalition that spends even more public money while implementing savage cuts in front-line services and social welfare payments at the behest of the ECB and the IMF, it will not be able to avoid becoming as loathed as Britain's Lib Dems. And if they fall into the same trap, Dublin's social democrats could end up following the Green Party, which fears electoral annihilation as punishment for propping up the outgoing Fianna Fail-led government. Even ardent ecologists find it hard to lament that prospect. Despite securing two of the ministerial portfolios that they most coveted - energy and environment - the Greens failed to tackle a national betrayal that straddles both these crucial spheres.

The great giveaway

The Corrib gas controversy concerns plans by Shell, Vermilion Energy and Statoil to exploit the hydrocarbon reserves off the Irish coast, whose total value is estimated by the government to be €420bn. It involves not just a rejection of local public safety concerns but also a sell-off of the nation's natural resources.

When Eamon Ryan first entered the Dail, the charismatic young politician, once hailed as the great Green hope, campaigned for the Rossport Five, a determined group of local demonstrators who were prepared to go to prison to halt the construction of a gas pipeline through their village in County Mayo. When Ryan became Ireland's energy minister, however, he seemed to forget this pledge of solidarity and failed to use his influence to prevent planning permission from being granted for an onshore, rather than offshore, refinery.

Furthermore, over the coming decades, as the Corrib gas starts to thunder through the pipe, the almost insolvent Irish state will not receive a single cent in royalties. And when the likes of Shell do eventually declare any profits, they will be taxed at just 25 per cent, compared to the international average of 68 per cent imposed by energy-producing countries.

In 1987, Ireland's then minister for energy, Ray Burke, granted multinational corporations terms and conditions that few other countries would have stood for - including the abolition of royalties - purportedly to encourage gas exploration. Dick Spring, who was then Lab-our leader, is said to have denounced Burke's deal as "an act of economic treason". Burke was later jailed for offences relating to tax evasion. Little attempt has been made by any subsequent government to rescind his great gas and oil giveaway.

To cap it all, it emerged recently that a British undercover agent had been given free rein by the Irish police to infiltrate the Corrib protest groups. Mark Kennedy of the Metropolitan Police posed as an eco-warrior called Mark Stone while on the payroll of the UK National Public Order Intelligence Unit; he has claimed that he was commissioned in Dublin to do so. It seems that, when it comes to safeguarding the interests of international capital, Ireland's national sovereignty can be breached not just by the IMF but also by the British police and equally unaccountable elements within the Irish state.

Rob Brown is senior lecturer in journalism at Independent College Dublin

This article first appeared in the 21 February 2011 issue of the New Statesman, The offshore City

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 21 February 2011 issue of the New Statesman, The offshore City