Socialist Worker

Resisting the corporate takeover of Ireland

Ireland’s low tax ‘Celtic Tiger’ economy is widely heralded, but, as Kieran Allen explains, economic growth has widened the gap between rich and poor

Issue No. 2046

Dublin 2005: Fighting the Shell corporation

Dublin 2005: Fighting the Shell corporation


The great irony of most modern societies is the enormous disjuncture between their official rhetoric and how actually existing capitalism functions. Nowhere is this irony more evident than in the Irish republic today.

Neoliberals suggest that the world ought to be a pure marketplace where rugged individuals like Ryanair’s Michael O’Leary compete unhindered by cumbersome state policies.

They despise the “inefficient” public sphere – by which they mean any service that is not subject to the “rigours of competition”.

During the course of the 20th century, Europeans came to expect certain social services as a right. It was assumed that dustbins should be collected, schools should be free and heath care should be delivered to all in an equitable fashion.

Today, it is said that these expectations are “unrealistic” and that boards of directors, rather than elected representatives, should make many decisions that affect our lives.

In this respect Ireland is held up as an example of successful capitalism that should be followed elsewhere.

During the 1990s the Irish republic was the world’s fastest growing economy, creating the so-called “Celtic Tiger” that is presented as the model for a prosperous future for both Northern Ireland and Scotland.

The Irish economy has boomed on the back of US investment and today Ireland is among the 25 richest nations. Between 1988 and 1998 manufacturing output increased by 9 percent a year.

Yet Ireland comes second only to the US in having the highest percentage of low paid workers in the developed world, and the gap between rich and poor is growing.

The New York Times columnist Thomas Friedman attributes the growth of the southern Irish economy to an Anglo–Saxon model of flexible labour markets.

He suggests that, “The Germans and the French may want to take a few tips from the Celtic Tiger. One of the first reforms Ireland instituted was to make it easier to fire people, without having to pay years of severance. Sounds brutal, I know. But the easier it is to fire people, the more willing companies are to hire.”

Taxes

Another of Ireland’s significant contributions to the neoliberal agenda is in the race to the bottom on taxes on profits – Ireland is an international tax haven.

The headline rate of corporation tax is 12.5 percent and there are countless loopholes to make Ireland attractive for multinationals and rich individuals.

The internet company Google provides a good example of how this works. In the first quarter of 2005, it raised its profits to £233 million, compared to £105 million in the same period of 2004.

Yet it managed to cut its effective tax rate from 59 percent to 19 percent by routing much of its business through its Irish subsidiary. Microsoft has also used Ireland to help shave £254 million off its annual tax bill.

Tax cuts for the wealthy have contributed to Ireland having a very low tax base. Total taxes represent only 29 percent of gross domestic product, compared to the European Union average of 40 percent.

This means that overall there is less money for public services and that poor people in Ireland make a bigger contribution to the cost of the services.

Ireland’s low tax policy gave the country an initial lead, and made it attractive to the major corporations. But it has triggered low tax competition with other European countries.

Cutting taxes on the wealthy usually means increasing the revenue obtained by indirect taxes like VAT or the new bin charges. These flat rate taxes take no account of a person’s income and therefore hit the poor hardest.

One economist has shown indirect taxes in Ireland cost the lowest earners 20 percent their income, but just 10 percent of the incomes of the richest.

The stated reason for handing control of public services to private companies is that the “culture of efficiency” in the private sector can lead to better services at reduced cost.

Contrary to the accepted view, there can be more bureaucracy in the corporate world than in the public sector.

One study in Britain found that while about 7.5 percent of those working in the public sector in Britain were classified as managers or senior officials, the corresponding figure in the private sector was 17.2. In finance and services, it rose to 27 percent.

The Irish health system was supposed to be made more efficient through the introduction of human resource management and a new payroll system.

The project was initially predicted to cost £6 million but by the time it was eventually scrapped, it had risen to £89 million. So much for business “efficiency”.

The school building programme in Ireland is being handed over to the private sector under the Public-Private Partnership (PPP) scheme.

Companies that build new schools gain control of how they are run – including the hiring of non-teaching staff.

This system has limited extra-curricular activities, and even means that the corporation has to be consulted if the school wants to change the software on its computers.

For all the neoliberals’ talk about allowing global markets, not the state, to determine the allocation of resources, it is clear that they have been attempting to colonise the very state that they claim to despise.

Corporations have been able to heavily affect government policies and are attempting to make the national state the direct servant of their immediate, not just their strategic, needs.

Public relations firms, which have developed a “public affairs” or lobbying function, tend to recruit individuals who have been former members of the political elite or who have worked closely with government ministers and top party officials. These individuals are prized for the connections they have.

An example of the clout that the lobbyist yields was evident in the “chewing gum affair” in Ireland.

For a brief moment in 2003, the then environment minister Martin Cullen appeared to be on the verge of imposing an extra cost on business after he was handed a consultancy report on the cost of litter to the state.

The report proposed a levy of £2.7-3.4 million on chewing gum firms to help bear some of the cost of cleaning up the litter they are responsible for.

However, chewing gum manufacturer Wrigley approached US ambassador James Kenny who duly set up a meeting between the company and Irish government representatives. Unsurprisingly, following the meeting, the proposed levy was withdrawn.

When a sovereign government appears unable to impose even a chewing gum tax, there should be concerns about the fate of democracy. But when it is casually explained that this type of intervention is perfectly normal, one really wonders.

The US embassy in Dublin said that, “The ambassador makes these interventions in a whole range of sectors in pursuit of US interests and on behalf of US firms. This was just a case where the ambassador saw US interests at play and decided to get involved.”

“US interests”, it seems, are synonymous with large corporations such as Wrigley and McDonalds.

One Irish Business and Employers Confederation executive gave a glimpse of the information asymmetry which employer organisations enjoy, “We can tell [politicians] pretty much anything – how would they know?”

Fortunately, there have been responses to this assault on democracy – from the campaign against service charges, such as the bin tax and water charges, to the huge workers’ protests over the rights of migrant labour.

Even in the far distant corner of North Mayo, in the west of Ireland, a determined campaign is underway to protect the local environment from the Shell corporation.

Costs

Globally, Shell has major problems after it was discovered that it had inflated its oil and gas reserves. Hoping to cut costs, the corporation wants to use Mayo as part of an experiment to process gas inshore rather than at sea, which is normally the case.

The company has estimated this will cut operating costs by 40 percent a year. The way in which the gas that lies off the Irish coast has been given away to the corporations is a scandal.

No wonder that a World Bank report rated Ireland as one of the top seven countries that offered “very favourable” terms for natural resource exploration. By contrast, George Bush’s home state of Texas was rated “tough”.

However the corporations have reckoned without the determined opposition of local people. They have not only highlighted the environmental dangers, but have also asked why Ireland’s natural resources are being handed out in this way.

In the process of fighting against the implantation of the profit motive into every aspect of our public services, the campaigns call into question the very nature of our democracy. The corporate takeover of Ireland is facing serious resistance.

Kieran Allen teaches sociology at University College Dublin and is the author of the new book, The Corporate Takeover Of Ireland. Bookmarks, the socialist bookshop, will have copies soon. Phone 020 7637 1848 or go to www.bookmarks.uk.com


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Features
Tue 10 Apr 2007, 18:35 BST
Issue No. 2046
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