Article from 1998 looking at where the Celtic Tiger came from.  This bit is obviously relevent today "Lower taxes would be great if they were funded by higher taxes on the rich but in the last budget the rich gained the most from tax cuts. This means that in a future slump money will not be available to maintain or improve social welfare, or public health/education without again raising PAYE taxes".

 

The Celtic Tiger …
who’s doing the roaring

The closure of Seagate in Clonmel with the loss of 1,600 jobs underlines the knife-edge on which the Celtic Tiger economy is balanced. But, particularly in the greater Dublin area, there is an economic boom and for many – though not all – this boom has brought jobs and hope for the future. Where did this boom come from and how long will it last?

There is little agreement on these questions, there is even confusion about how big the boom is. Many sources, including the leading international business magazine, ‘The Economist’, quote a growth rate of 7% a year for the last three years. The factors that are cited as the cause of the Celtic Tiger seem to depend more on the political outlook of who is talking, than on any objective analysis. So many of the reformist ‘left’ will refer to the social partnership deals between bosses and unions as the key, while the neo-liberal right prefer to point to "an economy exceptionally open to trade", or to very low public borrowing.

Jargon

Most people are lost by the jargon used in these debates but one picture can be worth a thousand words. The graphs below, in the context of a European market and products that are easily transportable, explain the Tiger’s growth. They show that companies investing here pay the lowest corporate tax in Europe in Manufacturing and Internationally Traded Services, and get workers cheaper than in almost any other European country. For companies exporting services or goods with a high value per kg, this is what attracts them to Ireland*. They have low or no transport costs in getting their goods to the European market.

This is the reason why the computer sector is at the core of the Celtic Tiger. Nearly one third of PCs sold in Europe are now made in Ireland. Pharmaceuticals, telemarketing and financial services also follow this pattern. In 1996 Irish ‘traditional exports’ of food and live animals had fallen to 15% of total exports, computer related exports on the other hand had risen to 40% of the total. In the last thirty years manufactured exports have risen from 20% to 70% of total exports. The basis of the Irish economy has fundamentally changed.

It’s not us they love…it’s Europe

The European basis of these exports is underlined as only 30% go outside Europe. In the six years from 1990 to 1995 exports rose from just over 50% of GDP (Gross Domestic Product, the total value of production in the economy) to over 70% of GDP. Ireland now ranks as the third largest world exporter on a per capita basis. (Behind Singapore and Belgium/Luxemburg.)

These factors have made Ireland attractive to US investors seeking a way into the European market. OECD figures at the end of 1994 showed direct US investment into Ireland running at $3,000 per head, Spain was receiving just $200. The $3,000 alone is higher then the per capita GDP of most ‘3rd world’ countries. Total inward investment is currently running at IR£3,000 million a year. ‘The Economist’ estimates that trans-national firms account for 30% of the economy and 40% of exports.

Both Trans-national and native business receive massive subsidies from the state in the form of grants, tax reliefs and tax amnesties. Apart from these massive legal subsidies, the news over the last year has often featured corruption scandals involving Irish business people and politicians.

Although the form of these has varied the plot is pretty much the same, business person hands politician money in return for a hand out from the Irish exchequer in one form or another. Few prominent Irish business people or politicians have not been mentioned in connection with, or suspicion of being involved in, such scandals.

Who pays the piper?

If Irish business people are taking money from the Irish state, then who paid for the Tiger. That is, who created the conditions where there can simultaneously be corporate tax rates as low as 10%, unemployment payments to 11% of the workforce and money to train "a young, skilled, well educated workforce". From our point of view these last two should not only be better funded but paid for by the rich. As they obviously are not paying, who is? The answer to this was given in Portraits of a "Partnership" which pointed out that

"In 1987, PAYE workers contributed 80% of all income tax revenue. By 1995, the PAYE sector contributed 87% of all income tax revenue, farmers contributed 1.7% and other self-employed 11.6%. Since 1987, the total PAYE income tax contribution has increased by almost one third, adjusted for inflation. Indirect taxes, (VAT plus Customs and Excise duties) which fall primarily on the working population and unemployed, increased by over 40% in real terms between 1987 and 1996. Average real earnings increased by less than 10% over the same period."

In short, whether it’s cash handouts to multinationals, favours to Irish bosses or supporting the infrastructure the Celtic Tiger requires, it’s you and me, Ireland’s PAYE workers, who are paying for it. We are paying for it twice, firstly through our taxes and secondly by working at pay rates well below many other EU workers. Indeed while Irish bosses seem to be getting greedier and greedier we are working harder and harder to make life easy for them. From the same pamphlet "The annual index of unit wages costs has dropped from 87.9 in 1990 to 72.1 in 1995, while output per person rose from 145.4 in 1990 to 214.1 in 1995".

This tax bonanza for Irish and multinational business is far more important than the EU subsidises so often talked about. In reality the vast bulk of these are either going on infrastructure projects like motorways (which again we also pay for) or to prop up the farming sector, in which only 10% of the population are now employed.

Work and pay

Working conditions for those paying for the Celtic Tiger are becoming worse, particularly for those at the heart of the beast. The computer sector is notorious for its long and often unpaid hours of overtime, its high pressure working environment, its lack of job security and, in case you want to do anything about this, its hostile anti-union environment. Although some people in this sector are well paid the vast majority are not, Seagate with wages as low as £160 or £180 a week being one example.

Total employment has increased by a little over 10% in the period from 1992 to 1996. But this increase is largely due to new people coming into the labour force (school leavers, returning emigrants, and women returning to work) rather than any substantial decrease in unemployment. Last year the number of unemployed only fell by 900 and the number of long term unemployed only fell by 300. Of the 200,000 extra ‘jobs’ created between 1989 and 1996, 41,000 were in Community Employment Schemes and one-third of the total were part-time. At the same time 34% of the population have incomes below the poverty line compared with 30% a decade ago (and many of these are people in work). There are 33,000 families on housing waiting lists, an increase of 40% on five years ago.

Statistics like these are causing much concern in liberal circles who see them as being at odds with the existence of the Celtic Tiger. John Lonergan, the Governor of Mountjoy prison has referred to "an era of success, of mé féinism..where..the weak are left behind". He points out that "over 80% of prisoners in Mountjoy left school before the age of 16, 90% were unemployed and 56% come from six Dublin postal districts". The point about figures like these however is that they do not contradict the Celtic Tiger, instead they show the ethos on which it is being built, one which excludes those it judges ‘uneconomic’.

So what have we gained?

It soon becomes clear that the gains of the Celtic Tiger for ordinary Irish workers are somewhat elusive. We may have a better chance of a job, particularly if we are willing to move to Dublin and live in an expensive shoe box, but in this job we will have little or no control of our working conditions. We may have extra money, but this will be gained not through higher pay, but rather through longer hours and lower taxes. Lower taxes would be great if they were funded by higher taxes on the rich but in the last budget the rich gained the most from tax cuts. This means that in a future slump money will not be available to maintain or improve social welfare, or public health/education without again raising PAYE taxes.

Capitalism is prone to such slumps, where growth rapidly turns into collapse. A number of factors make the growth of the last few years in Ireland particularly prone to collapse. Again from ‘The Economist’ "Pessimists would emphasise the economy’s extreme dependence on relatively few industries. A global contraction in computers or financial services, for instance, would hit very hard".

Seagate demonstrates this and more critical economists like Denis O’Hearn have pointed out that "it is barely an exaggeration…to say that the difference…boils down to a few US corporations in computers and pharmaceuticals". In 1994, research shows, ten large Trans-National Corporations accounted for 75% of all value added to goods (in assembly, etc) in 26 county manufacturing. Manufacturing accounted for 40% of the economic growth.

What’s wrong with the figures?

Our very low corporation tax has attracted TNC’s who can generate extraordinary profits by importing pieces from high tax zones, assembling them and exporting again to these high tax zones. A simple example is found in soft drinks where the parent company sells the syrup cheap to the Irish company who simply add water and re-export at a greatly inflated price. This of course inflates GDP and is the source of the argument over how real the GDP figures are. There are three indications that this is happening in Ireland, firstly Trans-National profit rates are far higher here than elsewhere for the same processes, and when compared with similar Irish owned companies. Secondly, there is a low ratio between investment and profits.

Finally, many of the jobs in the ‘high tech’ computer sector are in reality ‘low tech’ assembly and packing of components manufactured elsewhere. The cynic may argue that profit is profit but the point is that the presence of such companies here is dependant on low corporation tax rates. One of the consequences of European convergence will be the elimination of such differences between EU countries.

The other half of this equation is low wages. Irish wages are amongst the lowest in Western Europe, thanks in part to a decade of ‘social partnership’ that has seen extraordinary levels of growth accompanied by minuscule increases in wages. One indication of this is that huge amounts of Trans-National profits are exported from the country, nearly 15% of GDP. This is only possible because Irish workers have seen so little benefit in terms of wages from these high profits or, as ‘The Economist’ puts it, "why the Irish still own fewer phones, cars, washing machines..".

Again a cynic (or many of our trade union bureaucrats) might argue that low wages are better then no wages. However Europe is expanding to take in the low wage economies of Eastern Europe so this phase is soon to end. Again Seagate is an example of this, low wages rates in the far east were cited as a reason why Ireland was no longer a competitive place to manufacture.

In its major analysis ‘The Economist’ points out that many of the conditions which created the Celtic Tiger are starting to vanish as Ireland catches up with Europe. It concludes "If Ireland has another decade as successful as the last one, it will be a miracle economy indeed". Elsewhere it points out that Ireland’s comparatively high growth "owes much to the slowdown elsewhere in Europe".

Another example came to light in August with the threatened closure of the massive ‘Fruit of the Loom’ textile plants. The ‘Irish Times’ revealed that the average earnings of the 700 workers in Buncrana are £200 a week. In Morocco ‘Fruit of the Loom’ is already operating a similar operation with average wages of £30 a week. Dropping to a wage of £30 a week is simply not an option in Ireland.

Irish workers have been sold a ‘pig in a poke’ by the trade union bureaucracy. We have been told the ‘poke’ (bag) contains future jobs, and gradually but constantly increasing wages. The reality is that business believes it would take a ‘miracle’ for the boom to continue for another decade and, far from re-investing the profits here, large percentages are being exported for investment elsewhere.

All is changed

The Celtic Tiger has come to mean much more than the economy. Over the last couple of decades southern Ireland has gone through massive changes. Agriculture is now a minor part of the economy. Reliance on Britain is now replaced with a reliance on the USA for investment. The move to a majority urban population created the conditions where a real struggle could be launched against clerical domination of the southern state. This struggle is by no means over but it is transparently obvious we have come a long way since the 1980’s when divorce was illegal, information on how to obtain an abortion elsewhere was illegal and the Bishops could keep the state from prosecuting priests involved in child abuse.

The Celtic Tiger has thus become a metaphor around which a new 26 county ‘national’ consensus is being defined. One that finally buries De Valera’s "comely maidens dancing at the cross-roads". A new way of being ‘proud to be Irish’ is being sketched. This new consensus is as objectionable as the old one. ‘The Economist’ points out that "for more than a century the view of Ireland that the Irish knew best was looking back from a boat heading somewhere else".

In a short period of time Irish workers have gone from a culture when economic emigration was a way of life to one in which racist abuse is heaped on those who wish to come here. Even the liberals are keen to draw a line between ‘real’ and economic refugees.

The Celtic Tiger is at the heart of this growth in racism because it assumes bosses have our best interest at heart. This is the assumption of ‘social partnership’, that workers and bosses agree a deal from which we all gain. Racism has become a tool in the hand of the state to ‘explain’ to Irish workers why we have yet to gain from this deal.

The reality is that ‘social partnership’ has stopped us gaining the improvements in living standards that the booming economy owes us. The boom will not last for ever. We either win these improvements while it is on or the struggle becomes far harder. Seagate shows that when the boom turns to a slump the bosses will reward loyal workers by dumping them straight back into unemployment.

At the end, the metaphor of the Celtic Tiger is all about the modern Ireland we live in. For anarchists it is also all about everything that is wrong with this society and a demonstration that a revolution is required to tackle these problems on a permanent basis. It is not a time to wait out until the slump makes workers angry over betrayal. It is a time to awaken that anger under the very nose of the tiger and directed at it.

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This article is from Workers Solidarity No 53 published in January 1998

WORDS Andrew Flood (Follow Andrew on Twitter )