Yesterday saw the publication of both the British Government's 2009 Pre-Budget Report and the 2010 Budget by the Dublin Government. Both represented attempts by their respective states to respond to the rising economic challenges presenting themselves.
The policies announced in both capitals were quite different in approach and this reflected the point in the representative electoral cycle in both states. In Britain, the New Labour government is desperate to avoid a devastating loss in the forthcoming election in May next year and sought to position itself politically vis-a-vis the main opposition Conservative Party. As such, the budget was largely opportunist attacking public sector workers and threatening massive cutbacks across public expenditure on one hand but balancing that with fairly punitive extensions of taxation to well paid workers in Banking Institutions.
The budget announced by the Irish Minister for Finance was in a qualitatively different position. Ireland's inability to control both the quantity and value of its currency has necessitated an immediate response to the economic crisis. The Dublin Government has decided that the only solution is to attack public expenditure in an attempt to reduce working class pay.
These attacks reflect the historic weakness of the labour movement in both countries and the ideological collapse of the parties of the left since the fall of the Soviet Union in 1991. Reversing this course of cuts will require a reinvigoration of socialist consciousness and the development of effective structures of class struggle not just in Britain and Ireland but in Europe. The tasks facing revolutionary socialists are manifestly daunting but the critical factor is never the skills and experience of activists but their ideological clarity and favourable objective conditions. Revolutionaries can be confident that the onslaught on worker's conditions heralded by these budgets will radicalise society as hard-won social provisions are rolled-back in the interests of private capital.
The British Budget Reviewed
The main elements of the British Government's Pre-Budget Report included:
The budget was based on highly questionable growth forecasts assuming growth rates averaging at 3.5% a year for 2011/12 and 2012/13 while inflation is recognised as likely to rise to 3% in 2010 before falling back to 1.5% by the end of that year. Moreover, his figures assume bad debt associated with the collapse of the banks to fall to only £10 billion from a previous estimate of £50 billion.
The British Chancellor clearly has eyes fixed on the next election and included some relatively low-cost commitments e.g. increases to pensions and children's benefit as these will reinforce support in traditional Labour heartlands. The move against the London bonus culture has caused greatest reaction and plays on the populist opposition to bankers but risks potentially threatening the City of London's status as a leading financial centre.
Quite why the Chancellor is willing to potentially sacrifice the 'holy of holies' for the wider British economy is hard to discern. It may be that he has calculated that Labour have no hope of winning the next election and so this will not threaten the British cash cow. The move will certainly mobilise the traditional vote but could well be another sign that Labour has given up the battle for middle England. On the other hand the announcement tonight that France will introduce a similar provision and that German bankers are already attempt to pre-empt a similar announcement in Berlin may reflect a wider trend in terms of global approaches to the banking sector at this time.
All the same the measures put a gloss on the situation ahead of an election which Labour would be happy coming out of losing but able to contest the next one in 2015. All the tough decisions are put off until after the election, none of the major cuts beyond a further £5 billion in 'efficiency gains' are identified. It is, in short, an attempt to avoid the realities of austerity that are around the corner.
Dublin - No Avoiding the Pain
The Budget issued by Brian Lenihan was remarkable for its unerring determination to push the bulk of the cost of the recession onto working people. There is no doubt a sense of fear among some in the political commentariat and establishment in Dublin; so much so indeed that radio station Newstalk FM issued a pro-government pre-budgetary editorial justifying the forthcoming cuts ahead of time.
The main items of note included:
The only stimulative proposals were a measly €100 million for renewable energy systems and €50 million for an agricultural programme.
The neo-liberal bias of the Irish government has been exposed in this deeply reactionary and conservative budget.
The overall aim is coherent with a long-term economic development strategy predicated on export-oriented growth - as such, the opportunist criticisms from all opposition parties in Leinster House rings hollow.
The Dublin government have to implement these cuts unless they are move outside the current capitalist paradigm. The cost of borrowing is becoming excessive, increasing taxation drastically on businesses and the super rich will result in catastrophic job losses at a time when the Irish economy is already reeling.
Like the British Government, Dublin faces the challenges of a fiscal regime running on empty. But unlike London, the Irish Government does not have the power to vary interest rates, engage in monetary expansion (i.e. printing money) or engage in predatory devaluation. Brian Lenihan was clear in his commitment to retain the 12.5% corporation tax rate and to leave income tax rates where they are - this was to reassure the market.
So it had to be that they found the cuts through reducing public sector provision, slashing public sector wages and social welfare benefits. But that is not all the story.
Race to the Bottom Economics
The reality is that both Britain and Ireland are now caught in the crosshairs of a global phenomenon which has afflicted many nations for quite some time. The globalisation of investment has resulted in a significant downward pressure on wages. In the past, Western Governments have reacted to this by cutting loose on unsustainable employment and restructuring their economies by moving up the 'value-added chain'.
The problem for this strategy is that as fast as they climb up the ladder it is sinking into the sands below faster. London's dependency on financial services was a mechanism to channel third world wealth back into a largely unproductive economy propping up a standard of living unsustainable without a productive base. Ireland's growth model was to tap US FDI into Europe becoming an off-shore entry point to the European and British markets.
Unfortunately, in both cases, the strategies proved unsustainable. Britain's over-dependence on financial services exposed it to massive levels of default in the context of the global credit crisis the steps taken to prevent a more fatal reoccurence of this threat is likely to prove excessive to footloose bankers and London's status as a world financial centre looks increasingly under threat.
As has been analysed on this site repeatedly, Ireland's strategy came unstuck a few years ago but the state managed to inflate beyond the natural limits through the free availability of low interest credit through the euro and a construction bubble.
In both cases, the governments are keen to reinvigorate their productive bases. Britain's late turn to green energy and high technology sectors is a necessary consequence of the realisation that London's lustre is rapidly losing its brilliance. In both cases, but that of Ireland most pressingly, there is a need to reduce the cost of labour in order to compete with business overseas.
The collapse of the private sector has reduced wage levels considerably but insufficiently. Workers are inspired by tales carried by the pliant media to accept 'voluntary' days off or days without pay.
These recent moves however are to break the back of the public sector to reduce their standard of living and thereby effect more far-reaching reductions across the wider workforce. This is the true meaning of yesterday's Irish budget and in Britain the Tories are clearly relishing their future role in re-enacting Thatcher's victory over labour with a new generation of union leaders.
A Rotten Leadership - Trade Unions and Social Democracy in a state of decay
In ordinary times it might be expected that with such cuts generalised throughout society the left would pose a potentially deadly threat to such an agenda. However today finds the Trade Union and traditional left-wing parties in a state of absolute ideological collapse. They have become conditioned to the ideological priorities of the ruling caste and many have been bought off through positions traditionally recognised by revolutionaries as the 'Aristocracy of Labour'.
The behaviour of ICTU leadership who marched their members up the top of the hill only to march them back down on the back of a one-day strike has been educational for any who retain any illusions in their capacity to act as champions of working people. Yet their public spurning by the Dublin Government and the massive pressure building up within the ranks of the trade union membership will force their hands to take up a more aggressive course in the coming months. It is to be hoped that this failure may occasion grassroots organisers and convenors closer to their membership to join with socialists in the ranks in an assault on those coseted at the top of the trade union bureaucracy. The unions need to become organisations of struggle once more.
An Ideologically Vacuous Social Democracy
Whereas trade union leaderships sharing the corporatist ideology of the political mainstream is not a new thing, the complete absence of even a socially significant revolutionary or even socialist opposition is relatively new to modern politics. In Ireland the only consistent socialists are to be found in the small yet ideologically robust Socialist Party, the vocal yet ill-defined People Before Profit and the largely marginalised and anachronistic Communist Party. The same situation obtains in Britain albeit with a greater number of militants in some of the leading trade unions.
In such a situation taken alongside the defeat suffered by socialists following the collapse of socialism in the Soviet Union (both before and after its political collapse) would suggest that the case for a realistic socialist opposition challenging the right-wing agenda of cuts looks bleak.
However, history does not stay standing. Francis Fukayama's End of History may have been proclaimed almost twenty years ago but looks undeniably anachronistic today. The cutbacks will force working people to revisit their adherence to ruling class ideology. Their experience of struggling against the coming cutbacks and the whole political class behind them - whether that's in Britain, the Republic or Northern Ireland - will teach them of their own power and authority. The experience of defeats and victories in struggle will reinvigorate an awakening of the spirit of democratic and socialist ideals.
Socialists today must be more resolute than ever, more steadfast in upholding the lessons which were so hard-won and earned by former generations. Not for nothing has the entire political class, including his alleged descendents in Sinn Féin and Labour, dispatched Connolly of all revolutionary content. Socialists in Ireland must be resolute, determined and strain every nerve in attempting to build a mass working class opposition in these times. Every battle lost today will make it harder tomorrow, every victory will bring closer the day of liberation from the yoke of capital.
Thursday, 10 December 2009
More Cuts coming North and South!
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