Ireland under austerity

Neoliberal crisis, neoliberal solutions

Colin Coulter, Angela Nagle, Colin Coulter, Angela Nagle

• Publisher: Manchester University Press
• Year: 2015
• Print ISBN: 9780719091995
• eBook ISBN: 9781784996505
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Communism, Post-Communism & Socialism
• Index: Politics & International Relations

Once held up as a 'poster child' for untrammeled capitalist globalisation, the Irish Republic has more recently come to represent a cautionary tale for those tempted to tread the same neoliberal path. The crash in the world economy had especially grave repercussions for Ireland, and a series of austerity measures has seen the country endure what some consider the most substantial 'adjustment' ever experienced in a developed society during peacetime. In this collection of essays, a range of academics, economists and political commentators delineate the reactionary course that Ireland has followed since the ignominious demise of the Celtic Tiger. They argue that the forces of neoliberalism have employed the economic crisis they caused to advance policies that are in their own narrow interests, and that the host of regressive measures imposed since the onset of global recession has fundamentally restructured Irish society. The book provides a critical account of a society that has more often than most mapped out the pernicious cycle of boom and bust that remains an essential hallmark of contemporary capitalism.

1

Ireland under austerity: an introduction to the book

Colin Coulter

#tbscitwiwtat

In the closing days of October 2013, Dublin hosted a major gathering at which technology corporations at various stages of development exhibited their wares and explored investment opportunities. Although only in its fourth year, the Web Summit had grown at a remarkable rate and was now capable of attracting ‘9834 attendees from 97 countries around the world’.¹ The centrepiece of the two-day event was an informal roundtable discussion of which the undoubted star was the web entrepreneur Elon Musk.² Over the course of the 45-minute session, the founder of a range of companies – most notably the online payment facility Paypal, the electric car company Tesla Motors and the space exploration undertaking named, appropriately, SpaceX – was feted with a sequence of breathless testimonies to the vision and courage he has seemingly brought to the business world. In response, the evidently discomfited Musk offered a series of disarmingly earnest monologues, the tone of which was offset by that of the contributor seated immediately beside him, the Taoiseach (Prime Minister) Enda Kenny. The Fine Gael leader seized his quite explicit position down the billing as an opportunity to act as a comic foil to the South African web capitalist, offering himself as the genial ageing luddite who has somehow stumbled into a gathering of the technologically adept whose arcane vocabulary has left him befuddled.

While Enda Kenny’s previously undisclosed flair for comic playacting went down a treat with the audience, his motivation for attending the Web Summit was of course entirely serious. In his period in office, the Taoiseach has increasingly come to stress his role as economic ambassador for Ireland. The gathering of high-tech companies in Dublin offered an invaluable setting in which the Fine Gael leader could promote the twenty six counties as what he is wont to call ‘the best small country in the world in which to do business’.³ The phrase has been rehearsed with such regularity that it now even has its own hashtag – #tbscitwiwtdb. At one point in the ‘fireside chat’ at the Web Summit, Elon Musk responded to an invitation to outline his future business ventures. As the South African native sketched out some of his plans, the Taoiseach – grinning and ‘hamming it up’⁴ for a graciously amused audience – interjected to comment that if Tesla Motors were looking for a European base for their operations he might just know a country that would be ideal. If the company were to produce its innovative electric car in Ireland, Kenny continued, it would be guaranteed an excellent labour force, prompting him to confide in Musk: ‘Our workers will not let you down, believe you me.’ It was quite a performance to behold. Anyone attending the summit who had come from abroad and arrived late, missing the introductions that prefaced the roundtable discussion, would have been forgiven for thinking that the incongruously attired elderly gent at the front of the room was the owner of some medium sized commercial enterprise – the purveyor, perhaps, of reputable incontinence attire fashioned in some estimable though instantly forgettable midlands backwater – rather than the leader of an independent state only weeks away from the ostensible and widely broadcast restoration of its full powers of sovereignty.

The bonhomie and horseplay that defined proceedings at the Dublin Web Summit served of course to conceal certain rather darker realities that cannot be allowed to intrude into such exalted settings. Since the early 1990s, the prevailing official narrative has sought to suggest that companies such as those represented at the two-day gathering at the Royal Dublin Society conference centre are drawn to Ireland by the prospect of operating in a technologically advanced country with a skilled and industrious workforce. This is a representation, however, that could not be said to square entirely with the facts. In actuality, Ireland is one of the most technologically backward countries in the developed world. To take the most obvious and pertinent illustration, the scale and quality of internet provision in the twenty-six counties lag far behind those of other wealthy nations. In the rankings of countries in terms of broadband speed, for instance, Ireland languishes in the lowly position of forty-third.⁵ It might reasonably be concluded then that whatever it is that persuades foreign high-tech corporations to establish Irish offshoots it has relatively little to do with technology.

The principal attraction that Ireland holds for multinational capital is of course that it offers a scarcely equalled environment in which to avoid tax liabilities both at home and abroad. Foreign enterprises operating in an Irish context are subject to rates of taxation well below the norm in other developed countries. While the official level of corporation tax presently stands at 12.5 per cent, the absence of adequate fiscal regulation and investigation means that foreign companies often pay rather smaller proportions of their profits to the Irish state. One of the various incarnations of the American corporate giant Apple operating in Ireland, for instance, registered profits of $7.11 billion between 2004 and 2008 but paid only $36 million in tax, an effective rate of half of one per cent.⁶ The disclosure of figures such as these has nurtured a growing sense that several major multinationals have struck secret deals with the Irish authorities, prompting members of a subcommittee of the US Senate to describe the country as ‘a tax haven’. The generosity that is extended to multinational capital reveals a version of contemporary Ireland that is starkly at variance to the one that is offered to the world in contexts such as the Web Summit. If the political establishment does in fact have a vision for the Irish state it is evidently one in which it can compete convincingly for the mantle of ‘the best small country in the world in which to avoid tax’.⁷

In the course of the conversation that headlined the Dublin Web Summit, there was a minor, seemingly innocuous occurrence that becomes darkly ironic when placed in its proper context. At one stage, the host of discussion, Mark Little, noticed that the speakers had not been provided with water, as custom not unreasonably dictates. The erstwhile rich emollience of the former journalist and newly minted web entrepreneur’s voice sharpened momentarily as he instructed the hired help to rectify the situation, lest an unslaked thirst might interrupt the steady slew of tales of corporate endeavour. Within seconds, as one might anticipate, some unfortunate appeared on stage and placed bottles of water in front of each of the speakers. At that precise moment, there were across Dublin literally thousands of people who would have been deeply envious of this development. On the days that the Web Summit was taking place, the Irish capital was in the midst of a drought that saw water supplies suspended to various parts of the city for hours on end.⁸ While the Taoiseach sat enraptured listening to a multibillionaire enthusing about his ambitions for living on another planet, many of his own citizens were being deprived of the most essential resource for living on this one. It would be hard to think of a coincidence that evinces more starkly the skewed priorities that continue to animate official Ireland even after all the harsh lessons of the last few years.

The ‘fireside chat’ that dominated media coverage of the high-tech conference offers certain indelible insights into the version of Irish society that has been forged out of the experience of crisis and austerity. In particular, the musings during the Web Summit offer the timely reminder that for all the profound changes that have occurred in Ireland in recent years, crucial vestiges remain of the world that existed before the flood. If we were to delineate the most insidious traits of the Celtic Tiger we might call to mind the veneration of the ‘risk taking’ entrepreneur, the poverty of public provision of essential resources for living, the adulation of multinational capital, the tiresome charade that Ireland is a ‘knowledge economy’ and all the rest. Watching the very public canonisation that passed for a conversation at the Dublin Web Summit reminds us that for all that was erased when the long years of boom finally turned to bust, these fundamental iniquities of the old order remain. When the world falls apart, some things stay in place.

This is the time of our great undoing

The world in which we live has been shaped overwhelmingly by an originally obscure and especially virulent version of capitalist ideology that is typically designated as ‘neoliberalism’. Formulated by a small band of central European philosophers and popularised by economists in the United States, the ‘neoliberal’ project would assume political power in much of the Anglophonic world during the 1980s.⁹ The seismic geopolitical events that concluded that pivotal decade would of course offer the evangelists of neoliberalism the rather broader canvas on which they had always aspired to work. With the end of the Cold War, an unparalleled volume of capital flowed out of the United States in particular as multinational corporations pursued new markets and opportunities for profit. The triumphalism that attended the economic expansion of the nascent era of ‘globalisation’ was captured most famously in the writings of the neoliberal political scientist Francis Fukuyama.¹⁰ The facility of the free market to afford optimal prosperity and freedom for the individual had, Fukuyama insisted, secured an ideological victory for capitalism that would over time be translated into the political realities of the world. With the battle of ideas that animated the era of the Cold War decisively won, we were now living ‘at the end of history’. The hubris that characterised the outlook of neoliberal political scientists was amplified in the writings of academic economists. Nobel Laureate Robert Lucas, for instance, asserted that in the era of globalisation the ‘central problem of depression-prevention has been solved’ ensuring that there was simply no prospect that the ongoing boom might turn to bust.¹¹ This optimism was echoed in somewhat more colourful terms in the enthusiasm of the technoutopians of Silicon Valley for the ‘new economy’ being nurtured by the Clinton administration. In July 1997, their trade bible Wired instructed readers to ready themselves for the ‘long boom’ of ‘25 years of prosperity, freedom and a better environment for the whole world’.¹² And for a decade or so it often appeared that they might just be proved right.

The golden age of neoliberal capitalism would of course find an unlikely ‘poster child’ in the guise of the Irish Republic.¹³ Throughout almost all of the twentieth century, Ireland had lagged behind its neighbours in terms of economic growth and was often characterised as among the ‘poorest of the rich’ nations of the world.¹⁴ In the 1990s, however, the country experienced a remarkable reversal in fortunes that at times seemed to amount to an economic miracle. A combination of low corporate tax rates and an educated and at the time still relatively low paid workforce enabled Ireland to attract a disproportionate amount of the American multinational capital that flowed into Europe after the fall of the Berlin wall.¹⁵ In per capita terms, the Irish Republic drew five times more foreign direct investment than the European average and managed to secure one third of all the funds directed towards the region by US software companies. Throughout the 1990s, the number of American multinationals operating in Ireland grew exponentially and by the end of the decade two thirds of all investment in the country would owe its origins to the United States.¹⁶ This influx of transnational capital was widely seen as the principal catalyst for a remarkable period of economic growth that would give rise to the ubiquitous metaphor of the ‘Celtic Tiger’. In the seven years after the phrase was coined in August 1994, Ireland registered annual economic growth of around 8 per cent, a rate without parallel anywhere else in the western world, even at a time of global expansion.¹⁷

The astounding progress that Ireland appeared to have made throughout the 1990s was halted momentarily early in the new century by the worldwide economic dip that followed on the heels of the atrocities in the United States on 11 September 2001. In the face of the first serious disinvestment by American multinationals since the advent of the Celtic Tiger, the Irish government began to shift focus from attracting foreign corporations to boosting the domestic construction industry. This change of priorities in 2002 is widely regarded by commentators as the moment at which the boom became a ‘bubble’.¹⁸ Over the next five years, Ireland would experience a period of house building even more frenzied than that in most other developed societies. This construction boom was both the symptom and cause of a further steep acceleration in property prices in the country. In the course of the Celtic Tiger period – 1994 to 2006 – the price of a second-hand home in Dublin rose an astonishing 511 per cent.¹⁹ The inflation of the Irish property market was facilitated by a banking sector that availed of the cheap funds generated by the advent of the Euro to lend to a growing body of customers wishing to buy or build homes. As the housing boom gathered pace, the volume of money lent by the banks grew exponentially and the eligibility criteria for these loans became ever more lax. In 2007, the Irish banking system issued €342 billion in loans, around twice the size of the entire national economy of which it was part.²⁰

In the increasingly reckless banking culture that marked the twilight years of the Celtic Tiger, the most cavalier of the financial institutions was the now infamous Anglo Irish Bank. This was not a bank in the conventional ‘high street’ sense of the term. Anglo only had a handful of branches and did not provide even one instance of the facility that Paul Volcker has identified as the only innovation since the financial ‘big bang’ that has actually benefited ordinary people – the auto...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures and tables
• List of contributors
• Acknowledgement
• 1 Ireland under austerity: an introduction to the book: Colin Coulter
• Part I: The political economy of crisis in Ireland
• Part II: Casualties of the crisis in Ireland
• Part III: Lessons of the crisis for the Irish left
• Index