The Republican Congress society in Queens University, Belfast recently held a successful public meeting on the current state of the Twenty-Six County economy and the entry of the IMF into Ireland. The meeting was addressed by éirígí’s Stewart Reddin and Andy Storey of Action from Ireland [Afri].
Below is the speech that was delivered by Reddin on the night.
“I would like to thank the Republican Congress here at Queens for the invitation to participate in this important discussion and to commend the recent actions of students north and south who have taken to the streets in opposition to education cuts across Ireland.
These types of actions and campaigning work offer great hope for the mobilisation of a grassroots movement to challenge the regressive right-wing agenda of the political establishment across Ireland.
The IMF deal is essentially about heaping the burden of privately accumulated debt onto the shoulders of working people, while simultaneously imposing savage public spending cuts, driving down wage rates, introducing additional charges for public services such as education and health, privatising public assets and enhancing the ability of private corporations to accumulate further wealth.
While there has been considerable debate in the Twenty-Six Counties about the current state of the economy, unfortunately, precious little attention has been focused on the actual political role of the IMF. Indeed, the corporate media has largely presented the IMF as a benign organisation that came to Ireland simply to carry out a mere technical exercise of rebalancing the books. The popular RTÉ radio phone in show Liveline held a poll at the time of the IMF take-over and in excess of 70 per cent of those who texted into the show welcomed the organisation’s arrival in Ireland.
That IMF representative Ajai Chopra chose to walk the short distance from his hotel on Stephen’s Green to the Twenty-Six County Department of Finance building rather than take a driver was widely reported by the corporate media as the sign of a man serious in intent but frugal when it came to public finances. The fact that Chopra represents a fundamentally undemocratic organisation that has imposed free market fundamentalism with devastating consequences upon some of the weakest economies in the world was simply overlooked.
The Cheapest Bailout in the World?
While deeply mistaken, for many the IMF represented the possibility of an improvement on Fianna Fáil, who treated the economy as the plaything of their banker and developer friends. This was the party, after all, that enacted a €440 billionblanket bank guarantee that socialised the losses of these domestic parasites as well as international banks and bondholders. It was the Fianna Fáil finance minister Brian Lenihan who stated that the guarantee represented“cheapest bailout in the world”. Well, the cheapest bailout has now cost over €50 billion and counting.
The economy in the Twenty-Six Counties is facing a deep crisis, exacerbated by the insane decision to guarantee the bondholders in the state’s domestic banks. Between 2008 and 2009, the economy contracted by 11 per cent, unemployment has now reached 13.5 per cent and the Economic and Social Research Institute reported recently that upwards of 50,000 people in the Twenty-Six Counties will emigrate this year. Over the last three years, the Dublin government has made cuts of almost €14 billion and this year’s budget imposed further cuts and tax increases of €6 billion. Over the coming three years, as part of the deal with the IMF, a further €9 billion of cuts and tax increases will be imposed.
Interest repayments on the state’s loans are squeezing the economy further – the 2009 debt interest was €2.5 billion and will reach €8.4 billion in 2014. Meanwhile, the economy continues to rely heavily on both the export sector and Foreign Direct Investment, effectively creating a dual economy where multinationals continue to amass profits while workers struggle to pay for the basic necessities of day-to-day living.
A significant factor in tipping the Twenty-Six Counties over the edge was the private banking sector. During the so-called Celtic Tiger years, banks were allowed to grow at an extraordinary rate, with little or no regulation of their lending practices. Such was the lending splurge that banks grew to almost five times the size of the Twenty-Six County economy – or €500 billion. The bulk of bank lending went into property and speculative developments and it is estimated that Irish banks currently owe foreign banks over €300 billion. German banks are owed €113 billion, while British banks are owed some €107 billion. In effect, working people in the Twenty-Six Counties are being impoverished to save British and German banks.
Neoliberalism and the Origins of the Current Crisis
However, while the insane decision to offer a blanket bank guarantee has exacerbated the crisis in the Twenty-Six Counties, it is by no means unique to Ireland.
Capitalism is facing its deepest crisis since the 1930s. Its origins lie in the neoliberal onslaught of the 1980s, the primary aim of which was to smash the power of organised labour, drive down wages and create profitable outlets for accumulating capital. Margaret Thatcher’s crusade against British miners was a key moment in that war. Smashing a trade union as powerful as the National Union of Mineworkers would send a clear message to workers across Britain and, indeed, Ireland that resistance was futile.
Many within the leadership of the trade union movement in Ireland have cited Thatcher’s defeat of the miners as a key reason for their embrace of the disastrous social partnership process. While there are more complex reasons for the development of social partnership – trade union leaders in Ireland had long ditched the radicalism of Connolly and Larkin – the defeat of the NUM certainly sapped the confidence of workers generally. Over subsequent years, mass unemployment, supplemented by cheap labour supplies across the globe, suppressed wages and enhanced the power of capital. The trade union leadership in the Twenty-Six Counties swapped union organising for a place at the social partnership table, where they had a nominal input into social and economic policies and bargained so-called wage restraint in return for low direct taxation.
However, given the decline in wage rates, capitalism had a problem. Unemployment and low wages weakened demand for the goods and services being produced by global capital. But, as ever, capitalism adapted, resolving this particular problem with the supply of cheap credit. With vast sums of accumulated capital sloshing around investment banks, cheap credit was made available to workers to buy the abundance of goods produced by cheap labour and to buy the houses and properties that capital was investing in.
In addition, surplus capital was increasingly investing in complex financial instruments, such as futures markets, currency derivatives and hedge funds, rather than industry and manufacturing, where profit rates were declining. Profits soared for those who invested in finance capital. An example of the obscene profits being made in financial markets was highlighted last week by the Wall Street Journal, which reported that one US hedge fund manager, John Paulson of Paulson & Co, made a personal profit of $5 billion in 2010. In December 2007, the value of global derivatives markets stood at an astonishing $596 trillion. To put that in context, the total global GDP in the same year was $65 trillion.
While the alleged masters of the universe cleaned up, the consequences for working people of the property crash has been devastating. Two million people in the US lost their homes in 2008 and a further four million were in danger of foreclosure. In the Twenty-Six Counties, at least 70,000 households are experiencing severe difficulty in meeting their mortgage repayments, while a recent report commissioned by the Dublin government found there were 33,000 vacant houses in over 2,000 uncompleted projects, or what are referred to as ‘ghost estates’. The solution as capitalism sees it is to socialise the losses of the banks and make workers pay for the debts accumulated by the wealthy. And this is where the IMF enters the fray, playing the role of global debt collector.
The IMF Enters the Fray
So who is the IMF? Well, the IMF was founded at the end of the Second World War as part of the Bretton Woods Agreement, its primary role at that time was to provide short-term loans to states experiencing balance of payment difficulties and to manage the gold-standard currency valuation system. It was essentially put in place to stabilise the capitalist system. While, initially, it was a bit part player on the international arena – as capitalism enjoyed its so called golden age in the post WWII era – the IMF stepped out of the shadows in the 1980s.
Much like workers were targets for cheap credit so were countries in the developing world. Surplus capital in the form of loans was pumped into Latin America and Africa. With the rise in interest rates, these countries ran into severe debt repayment difficulties and so emerged the loan sharks of the IMF. The IMF offered loans in return for the enforcement of so-called market discipline on these vulnerable economies.
The IMF’s neoliberal mania forced governments across the developing world into prioritising debt servicing, the imposition of savage public spending cuts and widespread privatisation. Its legacy has been the impoverishment of millions and the prising open of economies to allow vulture capitalists profiteer from the sell-off of state assets. Structural Adjustment Programmes, the IMF’s weapon of mass destruction, have wreaked havoc across the globe. Nigerian writer Fedilis Balogun described the crazed logic of SAPs as practiced in his country in the mid-1980s:
“The weird logic of this economic programme seemed to be that to restore life to the dying economy, every juice had first to be SAPed out of the under-privileged majority of the citizens. The middle class rapidly disappeared and the garbage heaps of the increasingly rich few became the food table of the multiplied population of abjectly poor. The brain drain to the oil-rich Arab countries and to the Western world became a flood.”
Let us not forget that Nigeria is an oil rich country; the fifth largest oil producer in the world. Balogun’s description of the poor of that country being forced to feed off the garbage heaps of the rich is a haunting spectre. Back in the early 2000s, the mere mention of the IMF was enough to send the children of the barrios of Buenos Aires scurrying in terror. And not without reason, for here was an organisation that laid waste to economies and societies across Latin America and Africa, impoverishing millions while enriching the few.
In more recent times, the IMF has imposed severe austerity programmes in Europe. The €7.5 billion loan offered to Latvia in 2008 was conditional on the imposition of a significant programme of cuts that included 20 per cent public sector pay cuts, staff cuts of between 10 and 15 per cent in government departments, the closure of schools and hospitals and an increase in fees for third level education.
Earlier this year, Greece was forced to accept an IMF/EU loan of €110 billion, which again came with punitive conditions attached. These measures included an increase in the age of retirement from 63 to 67, swingeing cuts to public spending and public sector pay, alongside the privatisation of public services and state assets. However, the imposition of this austerity programme has driven the Greek economy into a deep recession. The Greek economy contracted by 4.2 per cent last year and is estimated to contract by a further three per cent this year, while unemployment has soared to over 12 per cent. It is increasingly clear that the IMF-prescribed austerity medicine is killing the patient. It is the same medicine being now prescribed for the economy in the Twenty-Six Counties.
The IMF Takes Over the in Twenty-Six Counties
The Dublin government’s deal with the IMF involves a joint EU/IMF loan of €67.5 billion, with €22.5 billion of that total coming from the IMF and €45 billion from the EU.
Interest payments on this loan amount to an extortionate six per cent. Like the children of Buenos Aires, working class children in the Twenty-Six counties have much to fear from the IMF. For this is the parasitic organisation that seeks to deprive them of a third level education; an organisation that demanded and got a reduction in the minimum wage; that intends to further cut the payment rate for young unemployed people and force them to take up low paid and low skilled jobs; and that seeks to commodify all public provision and privatise our remaining public assets.
Some of the key elements of the IMF deal include:
€1 cut in the minimum wage rate
Abolition of the Registered Employment Agreements
Increased taxes on worker’s wages
Significant cuts to social welfare payments and the forcing of the unemployed into workfare programmes
Reintroduction of third level fees and the introduction of a loans system
An increase in the pension age to 68 over coming years
Threats to sack public sector workers if they do not adhere to the conditions imposed in the Croke Park agreement
The imposition of a family home tax and water charges
Increase in the rate of VAT from 21 to 23 per cent
A review on the cap on the size of retail units, facilitating the entry of union busting companies such as Walmart into Ireland
The privatisation of key public assets such as the ESB and Bord Gáis
The one thing the IMF did protect was the 12.5 per cent corporation tax rate and, in this, they are supported by all the political parties represented in Leinster House. This is the price people in the Twenty-Six Counties are being asked to pay in order to bail out the banks.
Given the fact that we are facing into four years of austerity budgets, which will slash and tax up to €15 billion and possibly more if the IMF estimates that wealth is not trickling up sufficiently, poverty and inequality will rise significantly. Already, official reports have indicated the effects of the recession and the austerity budgets imposed to date. There has been a rise in child poverty levels, with almost one in five children in the south-east region in consistent poverty.
The Examiner newspaper reported before Christmas on the dreadful plight of two five-year-old children who were found searching for food in bins in Waterford City. President of the Kilkenny branch of St Vincent de Paul, Liam Heffernan, has compared poverty rates in the south-east to those in the developing world. The south-east region has the highest rate of unemployment in the Twenty-Six County state.
What Can We Do?
Class war does not come much clearer than this. Which brings us to the question of what we can do to resist and ultimately defeat IMF imposed austerity?
It is clear that the Twenty-Six County state has surrendered what sovereignty it had left to the IMF and that the right-wing adherents of neoliberalism are seeking, once again, to enhance the power of the capitalist class. What we are witnessing here is an epic transfer of wealth from working people to the wealthy. The simple fact is that the Twenty-Six Counties cannot afford to take on this debt and, as in Greece, the IMF austerity programme is causing a deflationary spiral and mass unemployment.
We can and must burn the bondholders. But this is a short term solution, the economy in the Twenty-Six Counties as well as globally remains in deep crisis. Over the coming years the process of transforming how the economy is organised must be to the fore if we are to break the connection with capitalism.
Throughout history, from crises have sprung alternatives – not always progressive it must be said, as in the 1930s – but many have been the collective expression of a will to build a different world: a world free from exploitation, where the rights of people are placed before the interests of capital.
While the mobilisation of mass resistance to the IMF in the Twenty-Six Counties and the austerity programme has been slow to emerge, there are grounds for hope. As I stated at the outset, the student movement has, in recent times, offered great hope to all us who seek to build that different world. The continued resistance to Shell Oil in north Mayo demonstrates how communities can challenge the might of corporate power, while the massive mobilisation organised by ICTU last November indicates the powerful potential of organised labour.
We need, collectively, to build these local struggles and create a movement to break the shackles of the IMF and consign the neoliberal ideology to the dustbin of history.”