Cutting to the core

Ireland's budget amounts to a charter of exploitation that puts very deep blue water between the government and its people

The Irish economy is currently the subject of a rather dangerous experiment, of the sort that might be nurtured in thinktanks or the minds of obsessive ideologues.

As the rest of the world combats the downturn through judicious stimulus and state support, Ireland will attempt to deflate and cut its way out of the crisis. There is only one modern precedent for this policy - Japan - and it endured a decade long slump as a result.

Ireland is on the cusp of doing something similar. Recent figures that appeared to show the country was ‘technically' out of recession are illusory: they show the disconnect between the country's multinational sector (many of whom engage in transfer pricing and ‘locate' profits here) and the wider economy.

In that wider economy, unemployment has now reached 12.4% and will grow further next year as the impact of recent cuts are felt. The cuts were the central platform of budget 2010 announced on December 9. The Irish Congress of Trade Unions labelled the budget ‘a savage attack on working people and the most vulnerable.'

Among the measures announced were: cuts in unemployment benefit and wider welfare rates, cuts in public service provision and with a tiered 5-15% cut in public sector pay.

The impact will be deflationary and risks turning a recession into a depression. Some 50% of Irish GDP results from domestic consumption and lowered demand has already led to job losses. From January, 330,000 public sector workers will have some €1 billion less to spend. More jobs will go.

But it would be wrong to characterise this as a panicked reaction on the part of government. The closer you examine budget 2010 the easier it is to discern the ideological thrust that gives it shape and coherence.

It is a profoundly ideological exercise. With membership of the Eurozone eliminating the currency devaluation option, government has embarked on a policy of ‘competitive devaluation of wages' in order, it claims, to restore lost competitiveness. (Ironically, figures just released show Ireland's exports are unchanged from 2008 and holding up well in a global recession, hardly a sign of lost competitiveness).

It wants to drive down wages across the economy and therefore attacks those wage rates over which it has direct control - the public sector - in order to maximise that downward pressure. Indeed, just five days before the budget the government walked away from a deal with public sector unions that would have seen (temporary) short-time working introduced instead of permanent pay cuts.

This ideological drive explains why budget 2010 contained no job creation or protection package - any such measures might support and protect existing wage rates. Equally, it helps explain why the young unemployed have seen their dole cut by 50 percent: their options now are to take a job at any price or emigrate. Once again, we will see our youngest and best educated either beaten down by exploitation or forced overseas.

And if the message has still not gotten through, there is the €54 per week cut for any unemployed person who refuses to take a job offer, any job offer.

That is a charter for exploitation and will further intensify the downward pressure on wages. But with no similar action on costs and prices, many people will find themselves in real trouble next year, particularly those who bought property during the boom.

Meanwhile, Irish banks are expected to request and get an injection of up to €10 billion in 2010, without any obligation to restructure troubled mortgages.

Budget 2010 saw new taxes for the wealthy that will raise €70 million, while welfare was cut by €760 million.

But there is one piece of good news: there is now clear and very deep blue water between this government and the majority of Irish people. They will be gone at the first opportunity.

 

David Begg is general secretary of Ireland's Congress of Trade Unions

18 Dec 2009 17:19

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Comments

• Posted by David on 19 December 2009, 1:10:14 PM The next general election will be in 2012 assuming the full 5 years from 2007. That leaves quite a few years for the full effects of this experiment to be felt, and a clear opportunity for comparison against the UK measures which have clearly been much more progressive (subject to the effects of the likely governmental change in 2010). This is a great opportunity for progressive values to be validated, albeit at the short-term expense of the Irish people, though conversely if the UK underperforms versus Ireland then there will be questions asked which the progressive movement must be prepared to counter. I suspect both left and right wing commentators will watch the relative effects and performance of both countries with interest.
• Posted by Chris on 21 December 2009, 1:03:31 PM If the UK had been a member of the Eurozone then the sort of measures that the Irish government is taking would probably have been introduced in the UK also as there would have been no possibility of devaluation. But at the end of the day is there any real difference between competitive devaluation and Irish style compulsory wage reductions? I am not sure that one is more "progressive" than the other and in the run of things both reduce the purchase power of the wage earner.
• Posted by Liam Bohan on 21 December 2009, 3:17:36 PM I'm glad you mentioned the e54 because it's the one part of the budget that neither FIANNA FAIL or THE OPPOSITION---or for that matter any media-press, TV , RADIO have repoirted on except MARY HANNIFIN(who was at pains to point out who would not suffer a cut--is failure to tell the truth a lie?) Even my local Rescource Centre did not know about this upcoming revolution when I spoke to someone there this morning. LIAM BOHAN 37Hillview,Drogheda tEL 0419740044 MOB 0868980717