Economy

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China is winning the new global industrial contest

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The international financial crisis brought about a radical change in the structure of international industrial competition, and China is winning this new contest. That is the only conclusion that can be drawn from the pattern of industrial expansion and contraction in the major industrial centres in the five years since the beginning of the international financial crisis in 2008.

As taking comparisons only for single years can obscure this fundamental trend, Figure 1 shows the changes in industrial output during the entire last five year period in the world’s four major industrial centres – China, the U.S., the European Union (EU) and Japan. The pattern is clear and striking.

  • U.S. industrial production on the latest data, for February 2013, remained 1.3% below its level five years previously – essentially stagnating over the five year period taken as a whole.
  • Industrial output in the EU remains at 12.2%, i.e., significantly below its level five years ago. EU industrial production has fallen since February 2011.
  • Japan’s industrial production remains at 19.2%, i.e., substantially below its levelof five years ago and has also fallen since February 2011.
  • China’s industrial output is 76.1% above the level five years previously.

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EU-US Free Trade Agreement: Race to the Bottom of the Atlantic

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A lot of ink has been spilt in the mainstream media, praising the role a free trade agreement between the EU and the US could play in pulling the two economies out of the crisis they are engulfed in. Richard Bruton outdid himself in the Sunday Business Post on 14 April 2013, claiming “abolishing restrictions in the EU’s services sector alone could boost EU GDP by 2.6%.” Three days later a press release from him claimed that the whole deal could boost EU GDP by a mere 0.5%! Of course, these claims of increased growth, together with hundreds of thousands of new jobs, should be treated with a pinch of salt by those with the experience of the ‘Lisbon jobs’ promises. 

These trade negotiations will be carried out in secret, away from any real public or parliamentary scrutiny. Thankfully the draft mandate prepared by the European Commission for the Council has been leaked, although it’s outrageously meant to be kept secret from most MEPs and the public at large. The draft clearly illustrates these negotiations are a means for big business including agri-business on both sides of the Atlantic to push their interests at the expense of European and American working people. They will drive for full liberalisation of public services, and a race to the bottom in terms of regulatory standards. They intend to give privileged access to ‘justice’ to major corporations and may threaten internet freedoms with the potential for ACTA by the backdoor!

The International Trade Committee of the European Parliament will vote on a resolution in April which will most likely voice support for the negotiations. Here, Paul Murphy MEP and Tanja Niemeier (Trade Advisor for European United Left in the European Parliament) provide a critical analysis and explain why  this deal will not be ‘win-win’ for workers on both sides of the Atlantic, as the free trade propaganda suggests.

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Workers Have Spoken

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This post originally appeared on Unite the Union’s Croke Park Report blog on the 17th of April.

66 percent of public sector workers voting on the Croke Park 2 proposals rejected the deal. Of the 20 unions participating in the ballot, 14 rejected the deal and 5 accepted (we don’t have information on the vote from Veterinary Ireland). The result was overwhelming and conclusive.

There is one argument going around that says if four percent of public sector workers in SIPTU had switched from rejection to acceptance, then Croke Park 2 would have passed.

However, this overlooks the fact that two-thirds of public sector workers rejected the deal. A small change in any particular union would make no difference in the overall vote.

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Why Ireland’s 2008 Blanket Bank Guarantee Decision Was Taken?

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There seems to be a myth doing the rounds at the moment that the 2008 Blanket Bank Guarantee, which ran for 2 years from September 2008 until 2010, wasn’t put in place to simply stop both Anglo Irish Bank and Irish Nationwide from collapsing in order to protect, as far as possible, the considerable interests that a small group of Irish people had in those cauldrons of greed and corruption.

Rather, popular thinking now goes, the notorious guarantee was put in place because of pressure from the ECB who were eager to ensure that revenue from Irish taxes would be used to pay bondholders in the banks of Core EU countries in full.

Take this recent article published on the 27th of March last which has the headline: “Germany’s rethink on just where the blame lies for the Irish bank bailout”. The implication behind the headline is that the bailout was required because of the guarantee, but also suggests that the statement made by the German Finance Minister that the Irish guarantee was a solely Irish initiative is a ‘rethink’, that is, an attempt to change the narrative that the bailout, and the guarantee that made it inevitable, was dictated by interests of big German banks.

“It was the Irish government that imposed the farthest-reaching guarantee for its banking system at the start of the crisis – on its own initiative,” said German finance minister Wolfgang Schäuble.

The statement itself was prompted by comments made by Irish politicians while negotiating on bank debt. Such comments, of course, are tailored to an Irish audience who are increasingly convinced that the enormous and unsustainable burden of Irish bank debt which the residents of Ireland are being forced to finance is being imposed by the ECB and Germany in order to protect their own struggling banks. This particular framing of the story feeds into the tale told about Timothy Geithner’s phone call and the posthumous yarn about the letters Brian Lenihan received from Jean-Claude Triche.

These Irish politicians are entirely aware, however, that the decision to provide such a broad guarantee was made without the advanced knowledge of the ECB. It is a consequence of this decision which was only put in place to maintain access for Anglo Irish Bank and Irish Nationwide to the interbank market that the vast majority of bonds have been paid off in full.

We know this because on the 3rd of Oct 2008 the ECB published an opinion on the Irish bank guarantee. Here’s the relevant excerpt.

“As a further general comment, the ECB notes that the Irish authorities have opted for an individual response to the current financial situation and not sought to consult their EU partners. In view of the similarities of the causes and consequences of the current financial distress across EU Member States and the potential interdependencies of policy responses, it would have been advisable to properly consult other EU authorities on the envisaged legislative plans.

2.5 A further point relates to the risks to the Government’s budgetary position arising from any financial support to Irish credit institutions. While the ECB appreciates that any guarantees provided by the Minister under the draft law would be contingent in nature, given that the financial exposure of the Irish State under such guarantees is potentially very large, the Irish Government could be obliged to make significant payments in case these guarantees are called over the next two years. At a point in time when the Irish budgetary position is deteriorating and may risk exceeding the 3 % of GDP reference value for public deficits, as specified under Community law12, this is a cause for concern, even when the provision of financial support would, under the draft law, as far as possible ultimately have to be recouped from the credit institution or subsidiary in question.”

More to follow.

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Dublin Council of Trade Unions: May Day March, ‘1913-2013 Unfinished Business’

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Dublin Council of Trade Unions

May Day 2013

‘1913-2013 Unfinished Business’

Resist austerity- March with your banners

The Dublin Council of Trade Unions is holding its annual MAY DAY demonstration on Wednesday, May 1st.

Assembly point will be Parnell Square at 7 pm and marching to Liberty Hall for a public meeting at Beresford Place.

Music and stalls around the Lock Out theme will follow in the theatre and bar area of Liberty Hall.

This year’s theme will be ’1913/2013: unfinished business’. The unfinished business includes the legal recognition of trade unions in all employments and negotiating rights for all members.

It also includes a policy of resistance to austerity imposed by the government at the behest of the troika. Resistance to unemployment; to relentless cuts in health services, education, social welfare, community services, and in provision for the needy.

Job creation can never be seriously addressed in a climate of austerity. Oil and water don’t mix.

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Ireland and the Enclosure of the Commons

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This article was originally published on Conor McCarthy's blog, Reflections from Damaged Life on the 6th of April.

Last January I climbed Djouce Mountain, in Co. Wicklow, with my old friend and comrade Andrew. We went up by the Barr and White Hill, and on to Djouce summit. It was a beautiful day of hard frost, and the hills retained a dusting of snow. It's a magnificent, easy hike. Cresting the Barr, where we passed the memorial to JB Malone, the view down to Lough Tay and Luggala, over to Fancy and Knocknaclohoge, and beyond to Lough Dan and Scarr, was superb. Snows fringed the rim of the great cliffs above the lake, backed by pale azure skies. Every blade of grass bore its own banner of hoarfrost.

The walk is deceptively easy, as much of it is now 'boardwalked'. By this I mean that the path had been becoming severely eroded, and some combination of agencies – the Wicklow National Park, perhaps, and Coillte, and Mountain Meitheal – came together to lay a pathway over the soft heather and bog, made of old CIE railway sleepers bound together, and laid in pairs end to end, in steps or stretching out over the moors. For once, a decent and environmentally-sound intrusion has been made into the over-pressured Wicklow hills.

But a much bigger problem is in the making, and has been for some time. Andrew and I parked the car at the entrance and carpark of a state forest on the east side of the Sally Gap-Luggala road, a Coillte forest that drapes the southern flanks of Djouce and White Hill. These forests, which litter Wicklow, and are present all over Ireland, are mostly composed of fast-growing lodgepole pine and sitka spruce and other unprepossessing conifers, that can cope with rugged or boggy or otherwise marginal land. They are planted very densely, and in ugly boxed formations that lap up the mountainsides. They are planted so closely, in fact, that in the resultant darkness there is no undergrowth, and much the ground beneath them becomes sterile. Very little wildlife can survive in these forests once they are mature, though some species like the plantations when the trees are young. The pine needles and other detritus from these trees, which are grown mostly for pulp, not for quality timber, cause acidification of the soils, such as they are. When Coillte decides to fell a certain crop of trees, the procedures used are extraordinarily destructive and ugly. 'Clearfelling' involves simply smashing down all the trees in a designated area. They may be felled by axe and chainsaw, or they may be pulled down by some kind of pulley machinery. Either way, the result is a blasted landscape of grey deadwood, resembling some dismal blend of Flanders in 1916 and Tunguska in 1908.

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Attack on Wages is About Social Control: Marx, Kalecki, and Socialist Strategy

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In the April edition of the Monthly Review John Bellamy Foster has a piece called Marx, Kalecki, and Socialist Strategy on the Polish economist Michal Kaleck that is well worth getting stuck into – particularly given the outright assault on worker incomes ongoing in Ireland at the moment. It’s also struck me as worth reading in light of Ken Livingstone’s comment today which correctly contrasts the viciousness and failure of Thatcherism with the Post-World War 2 settlement.

Foster first refers to the profit-squeeze theory which is often used to explain why capitalists try to resist full employment, as rising wages hurts profits. He refers to a 1974 article by Raford Boddy and James Crotty’s “Class Conflict, Keynesian Policies, and the Business Cycle” which was developed counter to Kalecki’s suggestion that the pressure from capitalists to reduce wages stemmed not from a concern for profits, but as a form of social control. Writing in the 1940s Kalecki said that with full employment profits would ultimately not be affected. However, what was more important was removing the opportunity for workers to exercise any form of power.

“Kalecki’s views on the profit-squeeze argument, the political business cycle, and socialist economic strategy were rooted historically in his close observation of the French Popular Front government led by Leon Blum in 1936–1937. Kalecki had spent the summer of 1937 in Paris witnessing developments there. In what came to be known as the “Blum experiment,” a concerted attempt was made to implement a forty-hour working week, two weeks of paid vacation time for all workers, and collective bargaining rights. As part of these reforms the Popular Front initiated a substantial increase in the money wages of manual workers, which rose by about 60 percent over the course of a year. This increase in money wages did not, however, have a negative effect on overall output and employment, since wholesale prices were raised proportionately. However it did produce substantial net benefits both for manual workers and large capitalists, and for the industrial sector in general—at the expense of rentiers and other income groups. Yet, despite the fact that big capital had significantly gained from the redistribution toward industry that the wage increase had brought about, it allied itself with rentiers to resist the wage increase, complaining of a profit squeeze. The Blum government eventually succumbed to these pressures, leading to a fatal dampening of the aspirations of workers.

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Croke Park 2′s Attack on Women and Family Life

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The unions opposed to Croke Park 2 have launched an Equality Audit of the proposals. It focuses on the impact of changes in working conditions – issues which have not received as much attention as the pay-cut elements of Croke Park 2. Which is unfortunate as this audit shows is that these proposed will have a profound impact on women in particular, and family carers in general. This is why Croke Park 2 has been rightly labelled as anti-women and anti-family.

The Equality Audit is written by Niall Crowley who, as former head of the Equality Authority, is particularly well-placed to assess the impact of Croke Park 2. His key points are:

  • The provision for additional hours will have a higher impact on women – and for women and men with caring responsibilities. This could force women and carers out of the workforce.
  • There will be a similar impact of the provision regarding work sharing which will be reduced. Women and carers will be disproportionately hit. Furthermore, there will be a negative impact on productivity.
  • Flexi-time arrangements, again, will impact more negatively on women and carers. That the Croke Park 2 rules out any reference to family circumstance or the right to appeal to a third part means employees will have even fewer rights to maintain family-friendly working hours.
  • There is a potential loss of productivity arising from the proposals as the loss of work-sharing opportunities and flex-time, combined with more working hours will reverse the gains that these working practices produced in the past.

The effect of all this will be a management driven by spurious and highly misleading balance-sheet considerations which will disguise the loss of productivity in the public sector, impose costs on to workers, drive many women and carers out of the workforce, and end up with a degraded public service. This is quite an achievement for a ‘deal’ that pretends to drive efficiencies.

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April Edition of the Socialist Voice is Out Now

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April addition of Socialist Voice is now out. It can be viewed online here

  1. Time for a radical departure [EMC]
  2. Cypriots paying the price [EMC]
  3. Growing threat of NATO membership
  4. The state of bourgeois political economy [NL]
  5. William Thompson: political economy and co-operative communism [NL]
  6. The new pope [MA]
  7. The question remains: when are we going to talk about class? [PD]
  8. Can we learn from Cuba? (or where to go from here?) [TMS]
  9. Financialisation, the euro, and the crisis [NC]
  10. A modest exposure
  11. The family, private property, and the state [SOD]

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Ireland is Hardwired into the Tax Evasion Network

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As reported today, “[Eamon Gilmore] did not believe that multinationals having headquarter operations in Ireland that used offshore locations as part of their tax avoidance strategies, put the country in a difficult position when it came to the subject of tax havens”.

The Tax Justice Network has made a point in recent years of replacing the term ‘offshore’ and tax haven with ‘secrecy jurisdictions’. This is their reason for creating the Financial Secrecy Index which lists Ireland at 31.

“The Tax Justice Network has estimated, conservatively, that about $250 billion is lost in taxes each year by governments worldwide, solely as a result of wealthy individuals holding their assets offshore. The revenue losses from corporate tax avoidance are greater. It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.

These staggering sums are encouraged and enabled by a common element: secrecy. Secrecy jurisdictions, a term we often prefer instead of the more widely used term tax havens, compete to attract illicit financial flows of all kinds, with secrecy as one of the most important lures. A global industry has developed where banks, law practices and accounting firms provide secretive offshore structures to their tax dodging clients. Secrecy is a central feature of global financial markets – but international financial institutions, economists and many others don’t confront it seriously”.

Irish politicians don’t take it seriously either, for the obvious reason that it remains good business for the Irish executives who operate the subsidiaries of foreign banks here, and who work in the law practices and accounting firms that advise large multinational firms on the international tax strategy. For a relatively small economy Ireland has a disproportionately large number of experts on international taxation.

So it’s unlikely, when talking about the need to attract foreign direct investment, or saying that that the Irish economy has to become more competitive to boost the export sector as a means of reducing the deficit that Eamon Gilmore or Enda Kenny would say that as a means of doing that we have to build on our excellent relationship with our largest trading partner: Bermuda, the off-shore the tax haven.

Taken from Mary Everett, The statistical implications of multinational companies’ Corporate Structures, Quarterly Bulletin, Central Bank of Ireland, April 2012

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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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What is the Government Thinking? Is it Thinking?

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This post was originally published Unite the Union’s Croke Park Report blog today.

It is difficult at times to understand what the Government is at. The weekend papers were full of analysis showing why growth was essential, if only to avoid another banking crisis (the IMF has warned of a €16 billion black hole if growth does not return to the economy). And yet Minister Brendan Howlin is threatening a 7 percent across the board-cuts in public sector wages if workers don’t vote for the current pay-cut proposals. There is nothing more certain to ensure we don’t return to growth than to cut wages.

We’re back in recession, according to the CSO (though you wouldn’t know this from reading media commentary which claims growth is on target). This occurred in the latter half of last year – the latest period we have data for. So what’s been happening so far this year? Are there signs of recovery on the horizon?

  • Retail Sales Index has fallen in the first two months of this year.
  • Industrial production is down (though there was a marginal increase in February).
  • Property prices are back in decline – having fallen in each of the last three months.
  • Manufacturing exports (which makes up most of our exports) fell in January by an annual 17 percent in value.
  • New vehicles licensed are down in the first two months by 14 percent over the first two months last year.
  • The Monthly Services Index fell in both January and February of this year.

The Live Register has fallen by 3,000 in the first three months of this year but how much of this is due to people moving into labour activation schemes, returning to education or just emigrating we don’t know.

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Occupation at Bawnogue Unemployed Group’s Jobs Club against threatened lay-off 4th April

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Martin Walsh who has been an activist on the political scene and is a delegate to the Dublin Council of Trade Unions has been working for ten years for the Bawnogue Unemployed Group, managing their jobs Club which assists unemployed people to help find work. He has been threatened with lay off with NO redundancy. Management are not engaging with his union Unite.

As a result he is occupying his workplace in Banowgue on his own. He explains why in this short video.

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