The Economy in the Republic

From International Socialism (1st series), No.92, October 1976, pp.27-30.

GIVEN HALF a straw to clutch at which seems to show that the economy of the 26 Counties has made a decisive turn for the better, Dublin press and politicians will brandish it about. There were, indeed, some straws earlier in the year – increases in industrial production bringing the level back to the previous ‘high’ of 1973. But with unemployment rising again against the summer seasonal pattern, and with the accelerating rate of inflation to put the Irish economy top of the European league, spring hopes turned to autumn gloom. The Dublin Evening Herald made a gallant last bid with an enormous headline during August: Things Looking Up. The details below the headline, however, belied the optimism. The balance of trade deficit narrowed in July, it was true, but largely because the low expectations of Irish industrialists had kept down their imports. More importantly, the English market, still taking over half of Irish exports in spite of expanded markets elsewhere in the EEC, is taking steadily less Irish goods.

For months, employers, accountants and economic experts have been decrying as ‘irresponsible’ the promises made by politicians that 1976 would see the Irish economy rise on the back of the international recovery. The President of the Institute of Chartered Accountants, Donal Flinn, a director of several private and semi-state companies, described as ‘pious’ the hopes that 1977 was going to bring better news; he said they were ‘empty words, totally devoid of realism.’ A banker, Patrick McEvoy, expressed the doubt that Ireland could participate in whatever recovery does take place in the world economy. Even the Director of the Industrial Development Authority, Michael Killeen, who has a well-established reputation for exaggerating the prospects of ‘creating’ new jobs, has been forced to acknowledge ‘the hard facts that, as we seek to move towards full employment, we are going to have to continue to plough a lot of money into all sectors of industry simply to minimise the loss of jobs.’ Referring to the much larger dimensions of the problems in the future, he went on: ‘This defensive investment will undoubtedly act as a drag on our efforts to raise the total number of jobs to cope with the rising population.’

Suddenly, population figures (and new, unexpected arguments for the legalisation of contraceptives) are on everybody’s lips. The projection made last year by economist Brendan Walsh that a net addition of 30,000 jobs would be needed each year to bring unemployment down to four per cent of the working population by 1986 have become part of everyday speech. But all the incentives offered to foreign enterprise have not been able to raise the total numbers working in manufacturing industry during the past five years. The overall level of the workforce in the 26 Counties remained static between 1961 and 1971 and actually fell by some 28,000 in the years between 1971 and 1975.

There is every reason to believe that it will be even more difficult to increase those figures during the next five years even in the unlikely event of the four per cent and five per cent growth rates – predicted by the Minister for Finance, Richie Ryan. An internal EEC report on the Irish economy has suggested that the current rate of unemployment will persist ‘even under the most favourable growth hypothesis.’ Rather than have the evidence of the ‘youth bulge’ in the population made all too obvious, the government simply cancelled the census due to be held in 1976. The present official figures, showing ten per cent unemployment, do not in any case allow anything approaching an accurate assessment of the present scale of the problem – and even less of future tasks. Only a small proportion of the school-leavers of the last two years who are looking for jobs are recorded in the unemployment statistics. The absorption of some unemployed tin-pot schemes of ANCO, the Industrial Training Authority, help to deflate the figures, too. Many women who are unemployed are either not eligible for benefits, or do not claim them. The 112,000 registered as unemployed (out of an insured working population of 1,125,000) represent something much more like 160,000 or 170,000. Even if export trade does improve again in 1977, it can only have a very slight effect on the size of that reserve army.

The productivity of manufacturing industry has been rising faster in the 26 Counties than in other European states – it rose fourteen per cent in the four years to 1975. And the increased output in some industries during late 1975 and early 1976 was produced without any increase in the workforce, or with a reduced workforce. Manufacturing industry – in which all hopes for providing additional jobs are placed – has taken from the state less than half of the grants offered under last year’s Employment Premium Programme, a scheme through which the employer taking on workers from the dole queue has £15 (earlier £12) per week of that person’s wages paid for them. Manufacturing employment fell by seven per cent in 1975 and redundancies in that sector increased from one half of the total in 1974 to two-thirds in 1975. The increasing capital-intensity of the industrial projects being located in Ireland by mainly Japanese and American firms compounds the problems. The maximum level of state grants per new industrial job has had to be raised fifty per cent during the past year. The fall in profits of private enterprise – pre-tax profits were twenty-eight per cent down on the previous year in the 24 public companies which reported in the first quarter of 1976 – raises little hope that employment-generating investment will be coming from there.

The apparent complacency of the Coalition (Fine Gael and Labour) government in the face of this deepening crisis has amazed many – and is increasingly angering business interests. Smarting under the more symbolic than effective blows of new capital gains and wealth taxes, they have been heaping abuse on the government, harping most insistently on the maintained level of public spending. Resources need to be freed for private enterprise, they say, and most of the recent reports of public companies have contained long diatribes about the way in which the government has been ‘stifling the spirit of enterprise’ through supposedly penal taxation and because it seems to refuse to hold the wages of workers in check. The conservative Finance Minister is known in business circles as ‘Red Richie’. However, banker Patrick McEvoy speaking to the Dublin Rotary Club in August made a more moderate and accurate comment when he said that ‘the coalition nature of our government poses special problems for them in the formulation of economic strategy.’ Those problems have been aired in part in a discussion around the long document produced by Brendan Halligan, General Secretary of the Irish Labour Party and recently elected TD (member of parliament). His call for economic planning and for greater participation by the state in enterprise is mealy-mouthed and vague, but it has raised the hackles of many political and business leaders.

The Coalition government – a right-wing government by any standards in most aspects of its policy – has up to recently warded off the challenges to cut public spending, and particularly to reduce social welfare expenditure. Since coming to power in early 1973 they have been keeping benefits ahead of the rate of inflation and have expanded some categories of recipients. Pay-related unemployment benefits, whose duration was recently extended from 50½ to 63½ weeks can, added to standard and other allowances, give the workers up to eighty-five per cent of earnings after being laid off. These commitments have been an important basis of the relatively undisturbed relationship between the government and the trade union leadership during the first three years of office. They have also helped buy peace in the rank and file of the trade union movement.

The government’s attempt to save public cash by postponing the implementation of equal pay legislation met with an unexpected wave of protest and was barred by the EEC. But it is the Common Market itself which has brought the most significant pressure to bear for cuts in state expenditure. The exchequer has had to borrow whatever and wherever possible in order to operate the deficit budgeting of which they have boasted to the trade union movement. Borrowing has reached a higher proportion of GNP than in any other European country and has increased five-fold from 1973 to 1975 to give a national debt of £833 million. The cash has come from Swiss banks, from Arab states, and from the EEC-owned European Investment Bank. The conditions attached to this last loan were detailed and stringent – and made it quite clear that there could be no more money from the same source if public spending and therefore the rate of borrowing was not checked.

The declared intention of the government to wipe out the Budget deficit in three years can only sound as a grim warning to that large part of the population whose jobs and whose incomes depend on the state. In an economy like that of the 26 Counties, where there is an unusually high proportion of nationalised industry for EEC countries, and where new foreign investment depends so largely on state incentives and on keeping the employers’ contributions to social insurance down, cuts in public spending or even the failure to keep pace with inflation, can have a very substantial effect.

Such economies, expected in some form in the January 1977 Budget, can, and will, affect the working class movement, too. For the workers in the public service, including semi-state companies, form a large fraction of the workforce (about 270,000) and their unions are a weighty bloc within the Irish Congress of Trade Unions. Workers in several sectors of the public service, such as maintenance fitters in Aer Lingus or clerical workers in the Electricity Supply Board, as well as some grades in the civil service, have set the rates by which others bargain. The National Wage Agreements of 1972, 1974 and 1975 allowed for ‘special claims’ above and beyond the minimum cash terms where ‘anomalies’ could be demonstrated. Awards made by the Labour Court under these clauses of the National Wage Agreements had been concentrated latterly in the public service. The first sign of a tougher line from the government on pay policy came during last year when the Minister for Finance announced a ban on such awards in the public service.

Since that time, the government’s shifting intentions towards their own employees and those workers whose wage levels they directly control, have shaped the progress (and the interruptions) of negotiations between unions and employers for a National Wage Agreement. Matt Griffin, President of the ICTU, blamed Richie Ryan’s ‘interference’ for the defeat of the first proposals for an Agreement in July. It was as much in spite of what the government has done as because of it that talks re-opened for new terms and the sights are now set on a three-way deal involving unions, employers and government.

The Coalition’s mixing of hard-line and conciliatory approaches to the trade union movement on matters of pay and employment has been a genuine reflection of their own confusion and incoherence. Taoiseach (Prime Minister) Liam Cosgrave stated in the Dail (lower house of parliament) last December that a freeze on income would be necessary following the expiry of the 1975 National Wage Agreement and got the most direct rejoinder from colleague Michael O’Leary, a Labour Party minister, who argued publicly against a statutory incomes policy.

From talk of a freeze or a ‘pay pause’ for a suggested nine months from April to December 1976, the line has shifted to one of a more general ‘restraint’. While this has made it possible for talks to go ahead with the unions, it has not satisfied the businessmen who complain about the ‘failure of the state to accept its special responsibility for controlling inflation,’ meaning halting wage rises. At a management conference in May, the Minister for Finance came under heavy attack from the participants for not taking a ‘sterner line’ on wages.

When talks had started earlier in the year, for a new National Wage Agreement, time was already running out; 1975 Agreements were due to expire in a matter of weeks for some. Because the very commencement of talks, and their early stages, were marked by many difficulties, the employer and union negotiators made an unprecedented departure from their normal procedure by announcing in April the agreed cash terms before completing the rest of the package. The response from employer circles was little encouragement to continue. Two industrial groups stated they would not pay the terms; at least one prominent businessman announced, ‘we’ had ‘all taken leave of our collective senses’; the Minister for Finance said he could not guarantee that the increases would be paid in the public service. Talks continued – and broke down twice again – in a strained atmosphere, made worse by the evidence that the rates of unemployment and of inflation which had dipped early in the year were rising again. The final proposals which were for a two month pay pause and which would give increases of about thirteen to fifteen per cent in the year if paid in full were agreed in June and rejected by the trade union movement in July. The many escape clauses and the restrictions on special claims were the principal obstacles to acceptance. When the employers proposed an interim agreement based on the same wage increases but with the remaining terms of the 1975 Agreement, the opposition, other than that from those unions which oppose all such Agreements, crumbled.

What might appear, if differently presented, as a sophisticated and successful plot to get the trade unions in tow, has, in fact, been marked by extraordinary incompetence and uncertainty on the part of the employers and the government. The employers, in particular, never seemed to have fully decided whether or not an Agreement was the best alternative to a freeze. The government needed an Agreement which allowed them an escape clause – he possibility of claiming ‘inability to pay’ – because they could not risk taking on the unions in the public sector without the cover of such a document. But the drawn out series of stops, starts, and misfires has demonstrated – much more importantly – he failing confidence of the workers’ movement. In spite of the very substantial claims which were lodged when the 1975 National Wage Agreement ran out on the first 130,000 in the ‘queue’, none of these took advantage of the five months limbo since then to press the claims. A further 250,000 have had no Agreement for three months.

Along with that, the rhetoric of the trade union leadership has shifted to the right; the tone is now much more apologetic than earlier this year. The same leaders who, six months ago, were protesting about the employers’ intransigence and the government’s interference by walking out of talks on the National Wage Agreement, are now fully committed to the efforts to get a tripartite deal. The whole ICTU leadership is involved in talks leading up to the 1977 Budget, being softened by the government for visible cuts in spending on social welfare, education and health, as well as greater economies in maintenance work and capital spending than are already being made. The only ‘sop’ which the government is bothering to offer is legislation to meet the ICTU’s demands. That is enough to keep the talks going, given the union leaders’ confusion and the lack of any concerted pressure on them from below. But when it had previously been suggested that the Irish unions should emulate the example of their British counter-parts by agreeing to very low wage rises and public spending cuts in return for supposed tax relief, the Congress delegate who objected to the comparison because the British government clearly had the interests of the labour movement at heart (sic) and the Coalition government equally clearly did not was greeted with prolonged applause.

The changing attitude of the trade union leadership can be explained in part by their changing assessment of the state of the economy, in part by their miscalculation of the rank and file’s willingness to fight. They appear to have accepted the government’s view of the economic prospects during the latter part of last year, and agreed to the modification of the 1975 National Wage Agreement on the basis that the government was ‘doing its bit’ and the sacrifice would be short-lived. The trading of food subsidies from the government with the removal of the ‘floor’ on phases of the Agreement gave a zero increase in the third quarterly phase, and a 2.8 per cent increase in the last. Just three months after that, the Taoiseach gave the clearance for a wage freeze. The government wanted out of their equal pay commitments. The January Budget added an estimated five per cent to retail prices in one stroke. And in March, a survey by British researchers estimated that inflation was running at twenty-eight per cent! The near one hundred per cent increase in redundancies from 1974 to 1975 showed clearly that restraint in wage demands did not help save jobs.

The union leaders resented having been conned. In the run-up to the decision on whether or not to open talks for a National Wage Agreement, many of them vented their spleen on the government and the employers. They were angered by the insistent attempts to shift the burden on to the workers. Michael Mullen General Secretary of the Irish Transport and General Workers’ Union, picked up contradictions in the various estimates of the causes of inflation, argued that the competitiveness of Irish exports was not as seriously hit as the government claimed, and said: ‘I think it is high time that trade unionists said loudly and clearly that, while we all recognise there is a crisis and we must all help to alleviate the situation it is a myth to suggest that workers have created the present difficulties.’ Now that the measures are being taken on the basis of that myth, he and others like him put the emphasis on ‘we must all help’. In the opening round of Wage Agreement talks, however, the union negotiators pushed a nine-month freeze down to two months and ended up with cash proposals which, even allowing for the higher rate of inflation, were better than those on offer in similar deals in other Western European countries.

However, when the trade union leadership looked straight into the chasm of free collective bargaining, firstly after the expiry of 1975 Agreements then again after the defeat of the first 1976 proposals, they took fright. They did try to use a strike by 30 craftsmen in the national broadcasting service (RTE) as a battering ram. But the claims for busmen, motor assembly workers, building workers, maintenance workers, and others – (claims for increases ranging between £11 and £26) – were left lying on the table. On the Tuesday of the ICTU annual conference in July, the President formally gave the ‘green light’ – as the press called it – for these claims to be pursued. And less than 24 hours later, the employers had produced the proposals which put the lights to amber again and have since been accepted as an interim agreement.

During the months of the ‘tougher line’ there were signs, too, that the unions would officially sponsor a move against unemployment. Dublin Council of Trade Unions, which had hardly discussed the matter since agreeing to launch a campaign against unemployment 12 months earlier, organised a march on the slogan, ‘Unemployment Can Be Ended’. The attacks on ‘the system’ from delegates to the Council flowed thick and fast. But after one march, the campaign seems to have petered out and in the month after it, two Dublin factories closed – one with 360 workers, the other with 120. In the first there was a protest march and talk of an occupation, in the second, a limited sit-in and plans for a co-operative, but the resistance collapsed almost completely by the time the closures came. Neither union officials nor the workers concerned could see a way of fighting for the jobs other than calling on the government to reinstate tariffs on fertilisers, in the one case, and clothing, in the other. The most back-handed compliment paid to Dublin workers was made later that month by the owner of another big clothing concern, Cecil Yard, who, after attacking the government, then went on to commend the ‘very realistic understanding by employees.’

There were, of course, strikes against this tide. A complete stoppage by women workers in three TV rental businesses brought a significant advance towards equal pay. But a strike by maintenance workers in the Turf Board (Bord na Mona), as well as a threatened strike by construction workers, were settled, or averted, with sums well below the original claims – and with productivity strings attached. The bank workers’ strike which started in June was untypical in every respect – and got ‘special treatment’ from the government. Their use of legislation to freeze the bank workers’ pay was the most immediate provocation for the strike. Their campaign to isolate the strikers was largely successful – and assisted by the indifference of the leaders of the ICTU, to which the Irish Bank Officials’ Association is not affiliated and by whose agreements it has not been bound. The government may well have exaggerated the possibilities that the bank workers’ example would have been followed by others – here are few groups of workers who base their claims on comparison with bank rates – but they took no chances, and succeeded in part at least in humiliating the bank workers and their leaders.

So for all its inconsistency, and in spite of its mounting problems, the ruling class has faced no serious challenge in its management of the economy. The orthodox Left of the trade union movement, for a time centred on the ‘Left Alternative’ – an organisational tie-up between the Communist Party. Official Sinn Fein, and ‘Liaison of the Left’, a grouping within the Labour Party offers a series of alternative ways of bringing money into the state coffers, and alternative ways of spending it. It does not offer any lead to rank and file workers and has not been able to build on the support which was obvious at its first public meeting last March. In a number of meetings and pamphlets, they have devised ever more detailed analyses of the possibilities for expansion of the public sector, based mainly on state development of the mineral and oil resources which have been discovered, or which are being developed, below the land and below the coastal shelf. But they have made no impression nor apparently tried to make an impression, on the falling confidence of the working class. movement. The ideas of the Left Alternative overlap in many respects with the official policy of the ICTU – he call for a state development board, for greater state control of resources, for an emphasis on attracting labour-intensive industries from abroad (as if there was an open choice!). The trade union support for more expression of those ideas goes through the Resources Protection Campaign, the Committee for the Defence and Expansion of the Public Sector (made up of workers in that sector), and other such bodies as much as through the Left Alternative itself. Indeed, the rivalry between Official Sinn Fein and the Communist Party, along with Liaison’s mistrust of them both, seems to have paralysed the Left Alternative as a mobilising force.

Others closer to the government have been insistently drawing attention to the demand which a rising population (rising for the first time in the history of the state, because the emigration safety-valve has been closed) makes on the economy. They have been speaking of the need for economic planning and have partly stolen the thunder of the Left Alternative at that level. The Coalition government has long promised that it would publish an economic plan. But, said Richie Ryan, the economic situation had been too uncertain to make the exercise worthwhile. He thought a plan could be published about July when things were more settled ...

If and when the government does introduce some concept of planning into the tri-partite talks, the trade union Left is likely to be drawn into criticising its terms and suggesting alternatives, rather than seeing as the shallow cover it will be for further sacrifices from the working class. The economies in the public sector are already taking place; increased competition, depressed foreign trade, rationalisation and productivity dealing are taking their toll of jobs. When the focus needs to be put on the means of defendingjobs and on resisting restrictions on wage bargaining the orthodox Left’s pre-occupation with the benefits which resources development may bring in ten years is a wasteful diversion.

Nationalism and some allegiance to the notion of ‘national interest’ still go too deep for them to see that the call for import controls as a way of saving jobs helps to generate that ‘realistic understanding’ among workers which capitalists so admire. The daily protest pickets put on the Department of Industry and Commerce by the Irish Shoe and Leather Workers’ Union and calling for increased tariffs on shoe imports are a pathetic and despairing gesture.

Rebuilding the confidence and the independence of the rank and file is not going to be easy. The several efforts at drawing together militant elements in the trade union movement to fight anti-National Wage Agreement campaigns have left nothing permanent behind, not even- a reliable network of contacts. So much negotiation now gets sucked straight into state-supervised conciliation and Labour Court procedures, that many sectors of workers (and many trade union officials) have little or no experience of direct bargaining and using industrial strength to back it up.

The National Wage Agreements, as well as record unemployment, have sapped morale, and the steady build-up of repression, even though it is not aimed directly at working class organisations yet, has an intimidatory effect. But in the unstable conditions of Ireland, as in the other peripheral countries of Europe, the pendulum can swing suddenly and decisively in the opposite direction. The year-long strike in the American-owned Crown Controls factory in Galway showed that the militant tradition of Irish workers can resurface in unexpected places. A single dispute can act as a focus for much pent-up discontent.

The role of socialists, small though their forces are, can be crucial in helping to organise solidarity around individual struggles, to generalise their experience and broaden their scope. It is a role which the Socialist Workers’ Movement has been able to play in a limited way, and this remains the organisation’s main area of political work, the site for laying the foundations of a revolutionary workers’ organisation in Ireland today. It is from the platform built in those struggles that the distinct working class contribution to answering the national question can be made.

A recent article by a well-known right-wingjournalist close to the government foresaw ‘young unemployed rampaging through the streets shouting leftist slogans’ if the unemployment problem is not solved. It is in the certain knowledge that neither this government nor any other trying to manage Irish capitalism can make a serious impression on the problem that working class socialists find their confidence.

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Last updated on 20.1.2008