Now that we
only have one copy have no copies of the first issue of the print edition of Irish Left Review left and the second issue is now available to buy either online or in these bookshops we are now publishing some of the articles from the first issue on the web. The first is Conor McCabe’s brilliant article on Ireland the Shadow Banking System.
Ireland and the Shadow Banking System
Bretton Woods and the Eurodollar Market
Ireland is a tax haven. It is a hub in the shadow banking system. The dominant form of business in the Irish state, the one to which national economic policy shapes itself, is that which accommodates the needs of foreign capital and finance, to the detriment of productive and social activity. This business model is an intermediary model. It is conducted by a middleman class which has positioned itself between foreign capital and the resources of the state. These middlemen are found within law, accountancy, stockbroking, banking and construction.
This is not to say that every successful business in Ireland is a middleman business, but rather that these businesses wield the most influence regarding national economic policy. The type of middlemen may have changed over the decades, but the way of conducting business has not.
The intermediary/middleman business model maintains and reproduces itself through the structures of the state. In other words, the class which benefits the most from this economic policy is also the class with the most influence over the dynamics of Ireland’s legal, education and political systems. Governments come and go but the structural dynamics of the state remain the same. As a result of the structural presence this class has within the state, policy change comes dripping slow.
The current privileged status of international finance and wealth management within Ireland – that is, paper assets over production – is the latest field of play for this middleman class. Upon independence it was live cattle exports to the UK and the transference of credit to the city of London; in the 1960s it was free access to the UK economy for international companies with branches in Ireland, followed by similar access to the EEC/EU, giving rise to construction, land and property speculation; all of this was underpinned by the selling of the State’s gas, oil and mineral rights to whatever bidder took the middlemen’s fancy.
The national resource that is for sale today is the right of an independent state to set its own laws and tax policy. In other words, it is Ireland as a mature democracy and legal jurisdiction, one that is recognised by international law that is traded by this middleman class for the private gain of its privileged players.
The current emphasis on paper assets over production reflects the fundamental changes in economic power relations which have taken place over the past forty years in advanced capitalist countries. This period has seen the financialisation of everyday life and the re-emergence of rentier capitalism. The move towards profit-seeking in paper assets is in part a response to the decline in the rate of profit and a tendency towards overcapacity in global manufacturing industries. The pressure to return profits in a world of declining margins has seen reductions in social expenditures by national governments and stagnation in wages. The resultant decline in aggregate demand is an underlying factor in the explosion of price speculation over production.
This is part one of a two-part article on Ireland and the shadow banking system. The rise of the Eurodollar market and the decline of the Betton Woods system is covered here. The emergence of shadow banking and Ireland’s role in its operation will be covered in a future issue.