24 November 2010

Ireland collapses into the capitalist maw

Poor little Ireland. So successful for so short a time, now back into the doldrums. Unlike Greece, its companion in misery, its government ran hefty surpluses for years up to the time of the financial crisis. Nonetheless, it is in a state of economic collapse. It was, of course, undone by its banks, who failed because they doled out billions to developers on the premise that property prices would continue to soar. Then the recession hit, prices collapsed and the banks were left with enormous debts they couldn't pay.

Ireland now faces an austerity budget that is rumoured to include a 12 per cent reduction in the minimum wage and substantial cuts to welfare. What it almost certainly won't include is an increase in the 12.5 per cent corporate tax rate, the lowest in the EU. The Irish don't dare. The corporations won't allow it. Lionel Alexander, head of Hewlett-Packard's Irish operations, categorically threatened, "HP is very clear, if the tax rate increased we would be re-looking at our investment in Ireland." That's clear enough. So the Irish government will demand sacrifices from the poor, but not from the rich whether it likes that choice or not. So much for "we are all in this together."

You can't blame the corporations of course. Global trade has been set up for their purposes and guided largely by their hand, so naturally they exploit it to the hilt. Democratic process has to yield. The Irish government is simply recognizing that.

And it will get worse. The Irish government is talking to those two capitalist-friendly outfits the European Central Bank (ECB) and the International Monetary Fund (IMF). The ECB and the IMF are pushing for what the IMF calls an "internal devaluation," a process of shrinking the economy and creating so much unemployment that wages fall dramatically, making the Irish economy more competitive internationally. The increased competitiveness is designed to increase exports thus helping the economy recover. It probably won't work -- Ireland's major markets are the EU, the U.K. and the U.S. and they aren't buying all that much these days -- but it will effectively reduce Irish incomes for years. It will, like reducing the minimum wage, certainly give Ireland another boost in the race to the bottom. Average incomes have already declined by over 20 per cent since 2007 and unemployment more than tripled.

The Irish aren't helpless. The EU can't afford to see Ireland, as small as it is, do an Argentina and default on its debt. And the Irish could always threaten to abandon the Euro (a common currency for highly unequal nations may be the underlying problem anyway).

Nonetheless, between international corporations and their servants the ECB and the IMF, the Irish are largely at the mercy of a capitalism running rampant over democracy and sovereignty. Such is the new world order.

1 comment:

  1. It truly is sickening. A fiscal collapse caused by an incestuous merger of political, financial and development interests now to be fought on the backs of the poor.

    In earlier times that jerk Cowan's head would be displayed on a spike. Today all the Irish people will manage is to kick him and his party to the political curb. Pity.