Posts By Conor McCabe

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Socialist Party Resignation Statement

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This statement has been drawn up by the following recently resigned members of the Socialist Party: Andrew Phelan, Megan ni Ghabhlain, Richard O’Hara, Pamela Rochford, Stephanie O’Shea and Jimmy Dignam.

Notes:

Tragically, Rob Ryan passed away before this statement was completed but he played an important role in the debates that took place around the process of its writing. He repeatedly expressed agreement with the key issues contained within this statement and we feel it is vital that we acknowledge his contribution. We have included links to articles that elaborate further on some arguments made within this document as many of the topics described have been written on extensively before.

After our recent resignations it became clear to us that whilst differing on some issues there were some core reasons behind all our resignations. We hope that this document can be a contribution to the debates currently taking place around what kind of mass Party is needed to rebuild the workers’ movement and play a crucial role in overthrowing Capitalism. While not claiming to have the answer to this question we feel it is important for us to offer our criticisms not just of the Socialist Party or the Committee for a Workers International but Trotskyism1 as an ideology.

We are aware that the political movement that has been defined as Trotskyism has a wide and varied history, however for the purposes of this statement we will discuss mainly Trotskyism as practised by the dominant Trotskyist parties in contemporary polity and especially the version of Trotskyism dominant in the Irish and British left; that is the Committee for a Workers’ International, the Internatonal Socialists and the Workers’ Revolutionary Party. These parties and international groupings share tendencies discussed below that we believe point to serious issues with the ideology of contemporary British and Irish Trotskyism itself.

The reality is that none of us can stand over calling ourselves Trotskyists. Furthermore we feel that Trotskyism by its nature can in many instances act as an obstacle to the development of a truly mass and democratic workers’ party. This is not to malign the contribution of many individual Socialists who are members of Trotskyist parties but to recognise the inherent sectarian nature of these parties and the damage they can do to the wider movement.

In this statement we would like to raise tactical differences that emerged between ourselves and the SP but more importantly criticisms of Trotskyism that seem to permeate such organisations to varying degrees.

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Ireland and the Shadow Banking System

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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

Conor McCabe

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.

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Financialization, Housing and Dublin: Protest Outside Arthur Cox

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Small protest today outside the offices of Arthur Cox, Earlsfort Terrace, to highlight the financialization of the city and the role that law firms such as Arthur Cox play in this process.

This was part of the Right to Housing and the City campaign which will be launched across Europe tomorrow, with the Dublin event taking place at 2pm at Custom House Quay. All welcome.

[Photo by Aubrey Robinson]

Mick Byrne also has a column in The Journal on the reasons behind the protest.

In all of the above cases, debt-driven owner occupancy sectors dominate the housing market. It is no coincidence that from Spain to Ireland and from Hungary to Latvia, property bubbles emerged after widespread privatisation of the social housing stock in the preceding decades. Nor is it by chance that these same countries typically feature over-priced, under-regulated private rented sectors, leaving families little option but to seek a stable home through home ownership. Conor McCabe, in his book Sins of the Father, describes Ireland as a place were the ‘need for a home has been replaced by the need for a mortgage’ – and the same could be said for many countries across Europe.

But the unhappy marriage between housing and finance goes beyond the owner occupancy sector. Throughout the last decade social housing complexes in Dublin and Limerick were to be redeveloped under ‘public-private partnerships’ that relied on private finance. The local authority would give public land to developers for free, and the developer would build new social housing units while making a tidy profit from the construction of additional private housing.

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Padriac White and the Establishment of the IFSC

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The following extract is taken from The Making of the Celtic Tiger: The Inside Story of Ireland’s Boom Economy. Dublin. Mercier Press. (2000). It is Padraic White’s own account of the development of the Irish Financial Services Centre.

In the middle of 1973, the IDA launched international services as its latest product. At the time, this category included both technical consultancy services and computer services. However, within the IDA’s own research unit, work continued to identify and analyse other service products, including those n the financial-services area. One of the economists engaged in this task was Ken O’Brien, who later, as founder of Finance magazine, would provide specialist coverage of the Dublin financial centre. Our New York office befriended a Wall Street lawyer, Bob Slater, who was familiar with the then-exotic world of offshore banking – the reasons why banks set up in specialist offshore centres, the kind of financial activities undertaken there and the nature and number of jobs created in this developing sector.

As manager of the planning unit, I agreed to take on Bob Slater, both as a financial consultant on financial services to IDA and to produce a study of offshore banking systems. His report examined the success of Bermuda in creating jobs in financial services, and he was satisfied that Ireland could emulate its achievement. And so in 1978 – innocently, in hindsight – we set out to promote international financial services to the world, and did so on a pilot basis to test-market the reaction. The IDA executives embarked on their selling mission, armed with the expert conclusions of the Wall Street expert.

During the year the IDA team soon landed some big fish in the form of two US banks that had developed specific job-creating proposals. However, the agreement of the Central Bank was first needed. Michael Killeen* considered the proposals sufficiently important for himself to go with Jerry Kelly, who was negotiating the projects, and myself to make the case for Central Bank authorisation. The reaction was not encouraging and we left the Dame Street offices feeling rather dejected. We could not give the required assurances or promises of authorisations to our foreign bank clients. The projects died and we ceased to do any more financial-services promotion. Subsequently, it emerged the bank no stomach for the projects and would not approve them. However, the IDA could never get a clear reason for this. The most authoritative word which came back indirectly was that the Central Bank believed the offshore financial projects ‘smacked of a banana republic.’ (pp.323-4.)

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Selections from Finance Dublin Magazine, 1988

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These scanned pages are intended as an aid to research into the world of finance in Ireland. I’m going to try to post as much of the primary and secondary source material I come across as I can. The purpose here is purely educational.

Some quotes, just to give a sense of the articles below.

First, from Ray Douglas, group general manager, Treasury, of Allied Irish Banks, talking about Dublin’s biggest dealing room (January 1988, pp.37-38):

 

The commissioning of our new 80-position dealing room is Bankcentre is only the latest step in a long association between Allied Irish Bank and the global financial markets. In the mid-1970s AIB identified the emerging global financial markets as a major business opportunity for the bank… Our objective is to make AIB a significant niche player in the markets, trading on our own account, providing liquidity to the markets and acting as market maker in some specific areas…
During the 1980s the emergence of the new global financial markets in securities and in off-balance sheet instruments such as SWAPS* and FRAs** has provided a further range of opportunities for AIB.

SWAP
**Forward Rate Agreement

Ireland had been hot-wired into the world of swaps, derivatives and other off-balance sheet activities for at least twenty years before the crash of 2008. This was no ‘bad apple’ scenario.

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