Cutting both ways

Maeve Connaughton reviewed an attempt to understand and oppose the austerity agenda in Issue 56 (June 2014).

Kieran Allen with Brian O’Boyle, Austerity Ireland: The Failure of Irish Capitalism (Pluto Press)

Socialists are notorious for taking a keen interest in the process of production, and the same should go for the books we read. When two authors appear on a cover, one of them writing “with” the other, the usual assumption is that the second has been ghostwriting for the first. Or at least, that the latter has been assembling facts and statistics to fill the holes in the former’s argument. A possible division of labour is suggested by the difference between the reference-heavy Chapters 1-7 of this book and the rest, which is noticeably lighter in that regard. The fact that only one author is mentioned in the back cover blurb tells us that the other’s billing was added at the last moment, but the phrase “Copyright © Kieran Allen” in amongst the front matter shows who was boss.

How and ever, the result is a book which marshals a welter of facts on what the recession has done to us. It is useful to bring together even familiar stories in one place, and every reader is likely to encounter interesting things for the first time here. Plenty of raw material for getting our heads around our present predicament is to be found within these covers.

How big capital in Ireland gets out of paying tax is expounded, as well as official facilitation of it, and (p 100-1)

it begs the question why does the Irish state connive in allowing a gigantic multinational to avoid its already low corporate tax rate?… Why, it must surely be asked, must its own population suffer so much in order to show immense tax generosity to global corporations?

It surely must, and the same could be asked of the entire range of state actions which serve the interests of the rich at the expense of everyone else. A socialist answer would go some way to explaining that the state doesn’t in fact belong to us, that it is ultimately an instrument of that capitalist class, that its nature is to advance their interests, for much the same reason that cats chase mice. The authors’ answers fall a good bit short of that mark, however. They tell us that an “attitude of deference to the corporate elite runs deep in official Ireland”, detect a “policy bias of the Irish state towards neo­liberalism”, and go so far as to claim that “the political elite were intimately linked to the big corporations” (p 4, 30, 5). An attitude, a bias, even an intimate link don’t come close to the sheer class essence of what we are up against politically.

This reluctance to brand the state leads to confusion around its involvement in the economy. “Nationalisation is often thought of as a left-wing policy”, Allen and/or O’Boyle write, but when Irish banks were nationalised it “was about taking control of debt—not assets… There was no talk of sharing the profits with society” (p 7). So presumably, if the banks had a healthier balance sheet, and Brian Lenihan had spread that around a bit, then nationalising them would have been left-wing? The two “radical left” approaches to the question are defined (p 147): “Some favour ownership by the existing state while others link it to a demand for workers control.” So on the one hand the capitalist state can just nationalise something, or then again it might give the workers a say in it: not unlike choosing whether to spread jam or marmalade on your toast. Later they explain that “workers’ control” means “genuine workers’ involvement—and, indeed, self-management” (p 161). Nowhere to be seen in this picture is the idea that the workers need to take over rather than just take part, depriving the capitalists of their economic domination rather than settling for a share in administering it.

“The stark reality behind the Irish story is that austerity is not working”, claims the book’s central argument (p 23). Half a decade of cutting to the bone, tightening belts, and mixing other metaphors has significantly reduced the living standards of most people in Ireland, with nothing to show for it all (p 37): “With investment declining, household consumption reducing and cuts in government spending increasing, it is difficult to see how the Irish economy can fully recover.” Widespread as the argument is, it misses some points which don’t bear missing.

Austerity has never been about generating some mythical rising tide to lift all boats, but about shifting wealth from the working class to capitalists. Recovery in a capitalist economy means no more and no less than a recovery of profit on capital: nothing else matters to such an economy. Allen and O’Boyle recognise that recessions allow some capitalists to swallow the business of their failed competitors, and even that profits in Ireland had got back around pre-recession levels by 2011, but they all but rule out the possibility that this could grow: “there is little evidence to show that” (p 36). They go on to quote figures illustrating a decline in the amount and rate of investment, down to €16 billion and 8 per cent in 2011. However, those figures themselves show the decline starting to slow down, which should have counselled caution. Subsequent figures show just how previous they are: investment was up to €17 billion and 8.8 per cent in 2012, €18 billion and 10 per cent the year after.

A bizarre variety of wishful thinking on the left assumes that the decline of capitalism will take care of itself, that every recession can be confidently hailed as the final countdown. But if capitalism can successfully utilise a recession to extract a greater surplus from the wealth workers create, then they have a chance of getting their show back on the road—even if the revival looks a bit bockety compared to its glory days. Capitalists impose austerity on us for a reason. If we don’t understand that, we can only see them as evil geniuses sadistically getting off on the hardship of others. In the movies, such beautiful wickedness melts upon accidental contact with water, but a much harder rain will have to fall on capitalism before it departs the stage.

The authors point to the loaded dice handed to those who question austerity, forcing them to explain where the money will come from to plug the holes: “they have to give an answer to a problem caused by the system without questioning the nature of the system itself”, and all within the confines of a soundbite (p 30-1). Fortunately, no such constraints hold them back here, as Pluto Press have given them 180-odd pages to question the hell out of the system. They want “to challenge capitalism rather than manage it and this means looking to Marx rather than Keynes” (p 156). But for all the space and the radical boasts, the alternatives they propose don’t challenge the basis of capitalism at all.

They rightly call low corporation tax “the great sacred cow of Irish politics” (p 91), but just can’t bring themselves to slaughter it. When they get round to concrete proposals (p 159) they only call for 12.5 per cent to be the effective rate rather than the headline rate. This would at most double it, leaving workers on the average wage still paying income tax at a higher rate—although they coyly refer to the possibility of unspecified “further increases where necessary”. Other proposals look for employers to pay more, but don’t say how much more. Their demand for “a Robin Hood tax on all financial speculation” doesn’t put a figure on it either, but we can safely assume it would be nothing like the 100 per cent which Robin Hood himself reputedly levied on the rich.

Where they do go into specifics, their prescriptions tend to be alarmingly weak. Rather than let the bondholders go whistle for their payments, Allen and O’Boyle want us to “write down these debts to a pre-crash level” (p 157). However, the return on government bonds is now lower than it was before the 2008 crash, and has been since late 2012, so putting it back to pre-crash levels would actually make bondholders richer.

Likewise, their solution to penal mortgage debt is to “write down house values to 2003 levels for those in financial need” (p 158). The latest figures from the Department of the Environment show a new house costing €231,011 on average and a second-hand house €257,462. At the end of 2003 the new house was €235,688 and the second-hand house €277,818. So turning the clock back to 2003 values would actually leave things a bit worse. In 2003 house prices were at ridiculous levels, forcing thousands of workers to beggar themselves and get saddled with ball-and-chain mortgages on un­suitable houses. Socialists used to wear themselves out pointing out the unfairness of it all back then, but how quickly some people forget! The important thing for socialists must be to argue that housing is a social need which should be provided collectively, not left to the mercy of the market.

Worst of all is their suggestion that people employed on a public works programme be “paid at just over the minimum wage” (p 158). This would represent a severe cut in the going rate for construction and infrastructural work, worse than anything employers have been able to impose in the recession, and on a par with the compulsory labour schemes now being forced on the unemployed. There is something very distasteful about two academics—a breed not noted for material self-denial—expecting other people to spill their sweat at hard physical labour for €9 or €10 an hour.

Lenin had a point when he said that politics is a concentrated form of economics. When people see capitalism as a system too weak to preserve itself, they underestimate the work needed against it. It makes sense for them to try and bring the capitalist state to look after the people’s interests, primarily through taking a bigger role in the economy. It is logical, then, that their political agitation would focus on reforms which “challenge” capitalism into being a fairer version of itself.

The big difference from social democracy in its heyday is that Allen and O’Boyle actually set their sights lower. The accusation they level at Sinn Féin that “Repeatedly in Irish history, Irish republicans have employed a left rhetoric to win a popular base and then used positions won to manage capitalism” (p 146) is fair enough, but they forget that the very same could be said of self-proclaimed socialists, even Marxists. They usually get a bit further up the electoral ladder before quietly leaving aside talk of ending capitalism—but then, many things end up getting cut in a recession.

The book concludes with a call for building “a large and substantial Left in Ireland. The conditions for doing so have never been more opportune” (p 165). Given that at least one of the authors has been whistling that same tune in vain for decades now, it is fair to ask why it should be correct this time round. It is admitted here that “Ireland’s radical left” is “historically insignificant, and its ideas have barely penetrated the workers’ movement in any substantial way” (p 129). It is a refreshingly frank confession of failure, and contains in itself part of the explanation. As long as socialist ideas are held separate to the movements of the working class, something external over here trying to “penetrate” those movements over there, they are destined to remain the precepts of cliques. The first step from that is to realise that socialism is no more than the generalised expression of the working class as it has fought to vindicate its right to a human existence, that socialists have no agenda of their own to insert into the movement, only lessons to draw from the historical and contemporary experience of workers themselves. That experience belies the conventional quest to reconstitute capitalism on a fairer basis, and suggests that an escape from austerity could not hold back from ideas and actions which would necessarily end up pointing to a society beyond capitalism.

A false economy

Maeve Connaughton reviewed two attempts at a socialist response to the economic crisis in Issue 39 (December 2010).

Kieran Allen, Ireland’s Economic Crash: A Radical Agenda for Change (Liffey Press)
An Economy for the Common Good: Strategy for a new direction (Communist Party of Ireland, €4.50)

Kieran Allen’s book appears, as he writes, “At a time when the living standards of PAYE workers are being severely reduced” (p 177). All the more reason, then, that they shouldn’t be charged €17 to read all about it. Does he not know there’s a recession on? In all seriousness, times like these call for socialists to take real account of the afford­ability, and hence accessibility, of their arguments.

Both these publications give a solid and useful account of the way the economy has gone belly-up in Ireland and globally, and the painful social consequences that have followed. An Economy for the Common Good features an admirable analysis of Irish economic history to illustrate the peculiar weaknesses of capitalism here. Allen, on the other hand, refers only to “many complex historic reasons” for this (p 14), without telling us what they are: his history only really starts in the 1990s.

Both analyses agree, however, in locating the source of capitalist crisis primarily in the sphere of consumption. The system’s problem, according to Allen, is that capitalists hold down wages, and hence “workers cannot buy the goods that have been produced… the more they succeed, the more they reduce the buying power of workers and feed into the problem” (p 95, 97). An Economy for the Common Good sings from a similar hymn sheet, asking “if production is increased while the wages of the workers—who are also the majority of the final consumers—are held down, how can the rising volume of goods be sold” (p 41)?

Strange, then, if low wages are the cause of capitalism’s woes, that the capitalist class always and everywhere strives to reduce wages as much as it can get away with. A vast sector of the economy doesn’t produce consumption goods for workers at all, but machinery and technology for other companies: how would higher wages help to sell those? Crisis originates, not from workers’ decreasing consumption, but from their decreasing role in produc­tion: the tendency for their labour to become a proportionally smaller part compared to other inputs, and therefore for the surplus value they produce to reduce in relation to overall investment. If capitalism gets out of its current predicament, it will be by extracting more profit from workers and paying them less in return, not more.

Focussing on the capitalist labour process like this points logically to the need for a whole new economic system. The under­consumption argument, how­ever, logically leads to the conclusion that stimulating consumer demand can revive the economy. Allen calls government stimulus packages “a form of ‘Keynesian­ism from above’” (p 80), as if the theories of John Maynard Keynes were ever based on something other than state inter­vention. His call for a large-scale public works programme is classically Keynes­ian, even if he hopes for this Keynesianism to come from below. Of course, we should be building more schools, better hospitals, decent houses, but purely for the benefit of the working class, not as a measure to revive the fortunes of the capitalist economy.

Understanding the recession “entails returning to the ideas of the greatest critic of the system, Karl Marx” (Allen, p 84). Indeed, reading Marx’s analysis of capitalism is one of the most profitable things you could be doing at the moment. But you can only return somewhere once you’ve been there in the first place. Both public­ations ignore Marx’s insistence that exploitation is rooted in produc­tion rather than consumption, that while capitalism systematically fails to meet human needs, its growth was never based on meeting them and neither can its collapse arise from failing to meet them. He was quite clear about it in Book Two of Capital:

It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recognize any form of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are unsaleable means no more than that no effective buyers have been found for them, i.e. no consumers… If the attempt is made to give this tautology the semblance of greater profundity by the statement that the working class receives too small a share of its own product, and that the evil would be remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise…

The cavalier attitude that so many self-proclaimed Marxists have towards Marx’s economics is on prominent display here. “Karl Marx, in his study of capitalism,” according to An Economy for the Common Good (p 11), “explained the tendency for individual capital units to become bigger and in so doing to oust the smaller capitalists, to stop the distribution of surplus value among smaller capitalists by price-fixing and by limiting the supply of material to them.” He did explain such a tendency, but not by such underhand means: while price fixing and other fiddles undoubtedly take place, the concen­tration of capital in fewer hands proceeds apace when the system operates entirely legally and above board. Allen quotes from Capital repeatedly, but if you follow his references, the text he cites usually doesn’t match up with the edition he refers to (p 90-1, 94-5, 117). Evidently he has lifted his quotations from someone else’s book but cobbled together footnotes that give the impression of having read Capital. It is a little disturbing to come across such an old student trick from such a leading academic personage.

More disturbing is the nationalistic framework that An Economy for the Common Good argues from. It sees the sovereignty of national capitalist states as some kind of bulwark against capitalism, but worse still, displays an unmistakably negative attitude to migration (p 39):

The “free movement of labour” is anything but free… whole families are split and communities wrecked so that the most able can go to another country and earn money, often in conditions of extreme exploitation, while local workers are unemployed… In such circumstances, policies of economic protection are the only method available to a national parliament answerable to the people with which to protect the population within its legal framework. Each country, in the face of ruthless trading, must do what it can to protect itself and its people.

This amounts to a sophisticated version of the claim that foreigners are taking jobs from “local workers” and that Ireland needs to ‘look after our own’. The exploitation of immigrant workers becomes a reason, not to combat that racist exploitation, but to restrict the entry of its victims. When a rich country closes its borders to poor immigrants, it is never out of concern for their families or communities, but an attempt to encourage prejudice against scape­goats. The duty of labour movements in such countries is to wel­come and organise them as equals, to defend their rights as tenaciously as any “local workers”. This responsibility should be greater than ever now in Ireland, as the recession is disproportion­ately attacking the jobs, conditions and entitlements of workers from other countries.

Both publications put forward similar demands to alleviate the current situation, demands that are becoming fairly common currency on the left: a state bank, nationalisation of oil and gas reserves, a public pension you could comfortably live on, and more besides that contains much merit. But is all this to reform capitalism or replace it?

An Economy for the Common Good is explicit here (p 2):

These proposals are not in them­selves revolutionary; they will not “smash capital”. The overthrow of capitalism requires that the working class and its allies refuse to be governed in the old way and that the ruling class is unable to rule in the old way. These circum­stances have not yet arrived.

Consequently it calls for “a profound democratisation of the role of the state, moving it away from being an instrument for imposing policies and protecting the interests of the powerful minority to being an instrument for ensuring that the will of the majority—of working people—is primary”, with parliaments being “forced to administer the state in favour of all the people” (p 51).

Of course we are not on the brink of revolution, but neither are we a million miles across an impassable chasm from it. The ruling class’s way of ruling has been severely upset lately, and many workers are a good bit less amenable to how they are being ruled. In these circumstances, socialists can put the idea of smashing capital up for serious discussion, rather than putting it into dismissive quotation marks. But that would require a recognition that capital’s state needs smashing and replacing too, instead of trying to remodel it into something it can never become.

Allen is better here: “we need to question the very fundamentals of the system… step beyond the parameters set by a for-profit economy”. His proposals are meant to be “Bridging mechanisms” that combine “a vision of what a different society might look like with certain policies which can be fought for now”. But while he wants a different state “which represents an entirely different class interest to the present one”, his demands could all be met within the boundaries of the capitalist system. So there is more here than the “certain ambiguity” he admits to: reform and revolution are blurred, with a new society stumbling into existence out of frustrated attempts to remould the old one, with no clear demarcation between the two (p viii, 84, 157-9).

An Economy for the Common Good is frankly nostalgic for the good old days of the USSR where the economy was apparently based on “providing for all citizens, not merely a privileged few” (p 13). This may come as a surprise to people who worked in that economy to fund superior lifestyles for their economic and political bosses. Allen has no such attachment to Stalinist economy, but surprisingly his chief objection to it is technical: the lack of “genuine transparency or accountability” in economic administration (p 210). His ideas for a workers’ economy are strikingly weak (p 184, 209):

In a socialist society, there would be monthly meetings organ­ised, on a non-hierarchical basis, where staff are allowed to propose changes in the organisation of the service.… Workers should periodically discuss how to run their enterprises. They should be free to discuss better ways to raise productivity…

This differs little from modern techniques of capitalist management that endlessly interact with staff, valuing their feedback and wel­coming their suggestions. In a truly socialist workplace, workers would not just be allowed a consultative role but would run the show themselves. And the same principle would apply to the political direction of society—an aspect on which Allen is mute.

Who exactly is going to turn the situation around? The answer is annoyingly vague: “people power” for Allen (p 207), “a politically organised people’s movement” for An Economy for the Common Good (p 50). But the ‘people’ is anyone and everyone, Tom, Dick, Harry, and whoever you’re having yourself: it’s a word that mystifies rather than clarifies. Marxist socialism, in contrast, is nothing if not clear that the working class and its struggles have to be in the saddle if capitalism is to be genuinely overcome. Allen, to give him his due, does speak of “the workers’ movement, the key agency in modern society which has the power to reorganise society” (p 158)—but socialism and “people power” are two separate and parallel tracks for him. With all these wheels within wheels, it looks as though the socialists are to emerge from the belly of populism when the time is right, like Greeks from a Trojan horse.

While the economic crisis hasn’t been as catastrophic as feared, it has shaken up a lot of things in society. It has obviously given some socialists the impetus to start talking about how the economy works or doesn’t work. What it hasn’t yet done is emboldened many of them to stand up openly for an absolute clean break with capitalism and all it crawls for. Too often, the left’s alternative comes across as a radical reconditioning of the vehicle that’s breaking down on us, when what we need is a scrappage scheme. The idea that we have to skirt around the notion of socialist transformation, smuggling it into the conversation as only a little thing after all, is a false economy, a dead end rather than a short cut. A bold advocacy of a complete social and economic overhaul can begin to create a real pole of political attraction for people seeking credible answers. We could surprise ourselves, because now is a time for socialists to come out with their ideas fighting. If not now, when?