Paul Murphy MEP and David Murphy of the Socialist Party provide a critical appraisal of the government’s Action Plan 2013 and argue that Ireland needs a radically different action plan.
Another year and another instalment in the Action Plan for Jobs from the government. After the self-proclaimed sensational success that was the 2012 action plan, with 92% of its targets being hit, unemployment still stands at over 14%. Self-congratulation is no congratulation.
With over 87,000 people having emigrated since the last Action Plan was launched, what does Action Plan for Jobs 2013 have to offer? Well, not a lot, despite containing 333 ‘actions’ to build on last year’s 270 ‘actions’. It continues to outline the next steps in the government’s plan to create 100,000 new jobs by 2016 and makes a big effort to be savvy by using the latest business jargon like “Disruptive Reforms”.
It contains some of the government’s favourite catchphrases like “governments don’t create jobs…but create the environment for jobs to be created” and Enda Kenny’s mantra of making Ireland “the best small country in which to do business”. It contains lots of lofty ambitions, but in effect doesn’t contain a lot of ideas to actually get people back to work. It is a plan firmly anchored within a neo-liberal framework, calling for less regulation and tax cuts for businesses together making Ireland more ‘cost competitive’, while hoping for a major increase in Foreign Direct Investment.
Jobs Plus – subsidies for business
One of the key concrete proposals in the Action Plan is Disruptive Reform 5, ‘Jobs Plus’. In effect, this amounts to a state subsidy to any business who hires someone who has been on the live register for 12 months or more. This is not new, a whole slate of these types of tax breaks already exist “but there has been low take-up of some schemes to-date.” So the government has in effect repackaged, simplified and advertised the process.
It is accepted that the effect of becoming what is classified as ‘long term unemployed’ does have a hugely detrimental effect on future employment opportunities, the report suggests that a person’s prospect for employment falls by 50% after 42 weeks of unemployment. A scheme which is based on tax breaks will simply not deal with this problem, however.
Jobs Plus will result in the state subsidising €1 in every €4 of the cost of hiring an employee for a period of 2 years. The amounts vary depending on how long the person has been unemployed.
This will have very little effect in getting people back to work because it doesn’t in itself create any new jobs. It offers a marginal incentive to employers to employ someone from the ranks of the long term unemployed rather than someone else. But it is the nature of tax breaks like this that it is a blunt instrument – in many cases the businesses would have employed the worker regardless of the tax break. In those instances, it is simply a transfer from the public purse to an individual employer with no benefit to society as a whole.
Jobs Plus will underwrite the cost of employment for the private sector when in fact the funds could be used in a planned way to match the skills of the unemployed with socially useful public works programmes. We may even see, as we have with JobBridge, the replacement of current staff with new workers who are being subsidised by the state, thereby decreasing a company’s wage bill and increasing profits.
Disruptive Reforms – building on sand
When asked at a press conference what a disruptive reform is Taoiseach Enda Kenny replied “it is jargon”. He’s right, it is jargon, it is one of the buzzwords used in business circles that is supposed to mean an effective clearing of the decks – new measures and ways of doing business in particular sectors of the economy which challenge the existing businesses in that sector.
The proposed reforms are not as radical as they would have you believe. There is a not very imaginative target to “increase the number of businesses trading online” which is being subsidised with another hand-out by the state where they will match investment on a website up to €2,500. Disruptive reform 3 amounts to a reduction in regulation by cutting the number of licences which a business must need. This is estimated to save business up to €20 million a year. While there may be cases of bureaucracy and red tape, this move to de-regulation is taking place at a time when the ethics of big business are rightly under question particularly after the horse meat scandal.
The underlying weaknesses of the majority of the reforms are that they are built on sand. The boom was built on the construction sector, the planned recovery that the government are aiming for is being built on an equally mistaken foundation – to “make Ireland the best small country in which to do business”, in other words an over reliance on Foreign Direct Investment and multi-nationals. This is an attempt to paper-over the structural weakness of the Irish economy – namely a weak capitalist class and chronically low levels of investment.
The short-sightedness of this is extreme. Over the years we have seen many profitable multi-nationals up sticks and leave, or lay off staff. We saw the effect of the ‘Patent Cliff’ on the economy last year. The government now plans to turn significant parts of the economy and state into nothing more than poles of attraction for foreign companies in an attempt to woo them here. It again does nothing to match the skills of unemployed workers with the needs of society, rather the government plans to adapt many parts of society to the needs of multi-nationals.
Education for business
During the boom, many working class young people were pointed towards the construction sector as a career path in numbers never seen in the history of the state, with apprentices increasing by over 50% between 1996 and 2006. Calls were regularly heard for more places in apprenticeships and for schools to adopt their curriculum to carry more classes in woodwork and metalwork. These workers have now either emigrated or are on the dole (106,000 former construction workers are currently unemployed ), yet the government is now preparing to commit the same mistakes again by turning much of the education sector towards the interests of the latest industry to become fashionable in the economy.
Reform 2 aims to provide for the needs of the ‘Big Data’ companies that the government hopes to attract, by changing parts of the education system to suit their needs. The Action Plan aims to make sure that Ireland has the highest percentage of ICT graduates by 2018.
The government’s plan sets out to turn the education system into a conveyor belt of workers whose skills match with the need of the current crop of MNCs. They have even established an ICT Skills Foresight group made up of representatives from industry, education and other development and business agencies to overview higher education to meet the demands of these companies.
While it is obvious that many parts of the Irish school system and curriculum need to be updated, this cannot be done at the expense of a whole and rounded education. However, it is questionable whether the government will even be able to achieve this aim. The current programme of government austerity has caused serious damage in the education sector – children are arriving to schools hungry to sit in bigger classes than before. Schools are pushed to the limit to provide basic teaching services because of cutbacks, never mind having the most cutting edge technology to introduce pupils to. In Higher Level education, fees have risen, and will continue to do so making this option unattainable for many young people. This will leave vast swathes of the population unable to acquire the educational levels which the government is banking on.
Exports = success?
It is in the section on ‘Building Competitive Advantage’ that the government’s plan for creating jobs and economic recovery is clearest. It is encapsulated in the section on ‘Improving Cost Competitiveness':
“In order to deliver growth, Ireland’s international cost competitiveness needs to continue to improve. In the absence of a currency devaluation policy lever to manage cost competitiveness pressures, the policy focus needs to be on achieving enhanced competitiveness through a combination of cost reductions in key business inputs and enhanced productivity growth…. To achieve a greater restoration in cost competitiveness, further price adjustment is required relative to our main competitors.”
This has been the (mostly unstated) strategy of the government since the start of the crisis – a strategy of ‘internal devaluation’, making up for the fact that currency devaluation isn’t possible by driving down wages and conditions instead.
But this is the strategy that has been pursued vigorously since the start of the crisis and with some success in its own terms. Wages are down (with unit labour costs down 13%) and exports are dramatically up (having almost doubled in per capita terms since 2007). But despite this ‘success’ the economy remains mired in crisis with massive levels of unemployment. The following graph from an article by John Weeks in the Social Europe Journal gives the picture:
“Unemployment rose continuously after 2007 in the land of the star pupil, with economic growth bringing no reversal (measured in percentage of the labour force on the left). This rising unemployment rate went along with increasing exports per capita, from less than six thousand dollars per head in 2007 to over eleven thousand in 2011-2012 (measured on the right hand vertical axis).”
Why is the strategy failing in terms of generating real economic growth? Partly because of the imbalanced nature of the export sector in Ireland and partly because of the inherent problems with the strategy itself. The exporting sector in Ireland is overwhelmingly multinational based and in many cases is somewhat disconnected from the rest of the economy – for example in the pharmaceutical sector which is capital rather than labour intensive and where the majority of inputs are imported. Added to that the fact that what shows up as ‘service exports’ from Ireland may in many cases be little more than tax avoidance strategies by multinationals. Therefore the knock-on impact of even successful exporting is limited. This is seen in the fact that despite this ‘success’, the numbers employed in the exporting sector in Ireland are at a twelve year low.
However, more fundamentally the ‘Mercantilist’ strategy of rigorous austerity to drive down costs and therefore out-export everyone else isn’t much of a strategy when everyone else is doing the same. The simultaneous austerity in Europe is destroying export markets as well as domestic markets. So the strategy of exporting our way to recovery has been tried, succeeded and failed all in one go.
Small businesses lauded but no access to credit
This government like the last one likes to talk about ‘putting small business first‘ and emphasises the importance of these small businesses for the economy. Such rhetoric ties in ideologically with the free market mantra. There must be an Irish dream to match that of the American model of capitalism which the Irish political establishment apes. The reality of course is that small businesses are hurting and hurting badly as a result of the crisis and the austerity.
Five small businesses are closing every day in this state . The primary reason for this is the collapse of the domestic market as a result of austerity, with domestic demand declining year on year every year since 2008. Retail sales are continuing to decline. Despite the government’s hopes to the contrary, the vast majority of SMEs are oriented to a domestic, not export market. Yet the government is willing to destroy that domestic market in the pursuit of the holy grail of ‘cost-competitiveness’. A consequence is the destruction of much of the retail and service sector in Ireland, regardless of all the fine rhetoric and commitment to small businesses.
Together with the impact of austerity, the inability of small businesses and farmers to access finance is crucial. In response, the government’s Action Plan has a whole section on ‘Access to Finance for Micro, Small and Medium Enterprises’ which includes 24 actions. Much of this involves yet more genuflection in front of the altar of the markets. MSMEs are encouraged to go outside of the traditional bank lending structure by investigating “the potential for alternative funding mechanisms including peer to peer lending, supply chain finance and crowdfunding” as well as encouraging companies to raise funds through ‘Initial Public Offerings’ – taking their companies onto the stockmarket.
Of course, the obvious (to those without the blinkers of neo-liberal orthodoxy) solution is ignored. It is banks which traditionally provided credit to small businesses and farmers. Now, seeking to increase their capital ratios, they are holding back from lending. But the state owns the majority of the banking system in this country. Exerting real public control over the banking system and directing them to increase lending would clearly have a decisive impact.
However, that is not an option for a government which limits itself to monitoring “the lending targets for the two pillar banks to €4 billion in 2013”. This ridiculous situation, whereby the government joins in the chorus of giving out about the banks not lending, but restricts itself to nicely calling on the banks to lend, is a result of a respect of the ‘rules’ of the market and a wish to run the banks as if they were private banks.
FDI – Investment, what investment?
Of course for all of its rhetoric about the indigenous sector, what the government is really focused on is Foreign Direct Investment. The experience of the Celtic Tiger weighs heavily on the minds of the political representatives of the economic establishment in this country.
In heralding Ireland’s turning of “the tide to recovery” on Monday 4 March in the Irish Times, Taoiseach Enda Kenny once more boasted that, “[t]he flow of investments in new jobs by multinational companies is strong”. A section and 11 action points are devoted to ‘Developing and Deepening the Impact of Foreign Direct Investment’.
It sings the praises of Ireland’s ‘strong FDI performance’. But if this is success, what metric are we using? How about we focus on the key question of investment in the economy – what is measured as ‘Gross domestic fixed capital formation’ in the National Income and Expenditure Accounts? How does the story about increased investment stand up against the facts?
Well, investment has gone from €48.4 billion in 2007 to €16.1 in 2011 (the most recent figures) – a collapse of 66%. The result is Ireland now has a level of investment of just over 10% of GDP, only slightly more than half that of the EU average of 18.5% (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/National_accounts_%E2%80%93_GDP). Projections by the IMF suggest that Ireland will be bottom of the pile in terms of investment in Europe between 2011 and 2016 with 10.5% compared to an average of 20%.
The reality is that Ireland is a low investment economy and is likely to continue to be so for the foreseeable future. The spurt of Foreign Direct Investment that was an integral part of the Celtic Tiger was a once-off, linked to Ireland’s entry into the common market and the search by primarily American multinationals for an ‘aircraft carrier’ into Europe. This will not be repeated. Even if a major section of US capitalism was to decide once more to invest in Europe, Ireland is not the attractive prospect it once was, with the integration of Eastern European states into the common market, with even lower wages and corporation tax. A strategy which amounts to ‘The Gathering’ writ large, pleading and hoping for a repeat of the Celtic Tiger is no strategy at all.
What would a real Action Plan look like?
A real plan to tackle the unemployment crisis wouldn’t start metaphorically speaking from ‘here’ – where ‘here’ is the blind faith in the market and neo-liberal solutions that underlie the whole government strategy and it’s Action Plan.
Instead, it would start with the reality of mass unemployment in this country, despite emigration on a level not seen since the famine. This level of unemployment is not caused by people not having enough work experience or being lazy and is not solved by various ‘bridges’ into work or ‘activation’ measures. It is caused by the deep crisis of capitalism that we are experiencing and exacerbated by the government’s strategy of austerity with consequent job losses in the public and private sectors. Fundamentally, if simply, the crisis of unemployment is caused by the lack of jobs.
Therefore, the starting point of a real Action Plan on jobs would be to attempt to create jobs. This means breaking with the patently nonsensical neo-liberal commonplace that “[g]overnments don’t create jobs, successful businesses and entrepreneurs do.” Of course this ignores the double reality that those businesses and entrepreneurs are in many cases shedding jobs and that even under capitalism a relatively significant portion of the workforce is employed doing vital jobs in the public sector (over 300,000 workers in Ireland).
There is no shortage of useful and necessary work to be done. There is work that would represent an extension of the existing public sector, for example, the training and employment of childcare workers to operate public crèche facilities, the employment of thousands of SNAs and Resource Teachers, and the employment of adult education teachers to tackle literacy and numeracy problem.
There is necessary infrastructural work which could employ close to 100,000 of the unemployed construction workers in projects such as the replacement of all non-compliant water mains, developing a national rainwater harvesting programme, developing sustainable urban drainage and necessary flood relief work and retrofitting all public buildings with insulation and proper ventilation. There is the building of necessary new homes and the adaptation of homes owned by NAMA to make them suitable for direct Council provision of housing.
In addition, there is work that goes beyond the limits usually imposed on the public sector – into actual wealth creation. For example, a project of state-led development of renewable energy. These are all jobs that would be meaningful for the worker and of benefit to the economy and society generally.
It is only ideology which says that the idea of the public sector engaging in significant and productive works like this is a ridiculous notion. The more substantial objection is how could this work be funded? But here we have a simple question of political priorities. For example, this year the bailed-out banks will transfer over €17.4 billion to bondholders. These are taxpayers’ funds that are still being transferred to a group of people primarily made up of the super-rich and bankers. This is on top of the €9 billion in payments on state debt being made this year.
Instead, this debt could be declared as odious and the funds diverted to tackling the jobs crisis. In the ULA pre-budget statement, which I worked on, we estimated that the above projects could directly create 180,000 jobs at a net cost to the state of €15 billion – with an additional creation of 120,000 jobs indirectly.
Of course, such a policy would have consequences, no one is denying that. If a left government made such a move, it would attract the wrath of the European Commission, European Central Bank and the IMF amongst others, who would try to do what they did in Greece and Italy and replace elected governments with governments of bankers. It would sharply pose the need for a significant struggle of working people to radically transform and reshape our society along democratic socialist lines. But it is a choice – a real choice that exists to place dealing with the unemployment crisis above paying the bondholders.
Of course, major public projects like these alone would be insufficient. They should be combined with a re-launched apprenticeship scheme and free third level education. The banks should be brought into public control as well as ownership, with democratic structures involving the bank workers and representatives of working people generally – and instructed to lend to small businesses at low rates.
But in particular, they should be combined with an attempt to really develop the economy beyond dependency on major multinational exporters and an extremely weak indigenous sector. Both the multinationals and weak ‘Irish’ capitalism have proven fundamentally unable to develop the economy. The dramatic collapse of investment and projected future levels of investment are evidence of this.
In order to bring the level of investment up to the EU average, an extra €13.6 billion of investment would be needed, including to raise the levels of Research & Development spending which still lags behind the EU average. Banks and big business run for profit will simply not do this. What this points to is once again is the need for state investment, as outlined above, but also democratic and public ownership of the key sectors of the economy.
It means taking power to decide on crucial investment decisions out of the hands of the 1% and taking it into the hands of the 99% through nationalisation and genuinely democratic public ownership, with real input from the workers in the industry, the surrounding communities and working people generally. Through this sort of public ownership, which is far removed from the semi-states headed by political appointees that we are used to, a plan could be democratically developed to create meaningful jobs and to redevelop the economy in an environmentally sustainable way.
Radical? Yes. But the government’s strategy is radical in its own way. It will see yearly Action Plans on unemployment launched to great fanfare while the numbers emigrating and unemployed continue to rise. It will see billions transferred every year to rich bondholders while our society and economy sink deeper into crisis. It will see people pushed to work for little or nothing to increase profits for the rich while further depressing wages and conditions. Its strategy is a radical one for the rich. We need a radical and socialist programme in the interests of the rest of us.
Paul Murphy MEP and David Murphy of the Socialist Party
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