Issue 218 of SOCIALIST REVIEW Published April 1998 Copyright Socialist Review

Feature article: Miracle workers

Kevin Devine

Last month 39 Ryanair baggage handlers at Dublin airport brought flights to a halt as they won solidarity from other airport workers in their dispute over union recognition. These workers' action suggests the resurgence of the workers' movement on the back of a remarkable boom in the Irish economy. A combination of more jobs, the halting of emigration and an increase of both wealth and poverty in Irish society has created this situation.

Since 1994 company profits have risen by an average 45 percent, business executives' salaries have increased even further and luxury goods are selling like never before. Average economic growth rates of 7 percent over the past four years compared with 2 percent in the rest of the EU have prompted comparison with the tiger economies of south east Asia. While the comparison should serve as a warning to those who think the good times will keep rolling for Irish capitalism just look at South Korea it does highlight the difference between Ireland and Britain where, despite recovery, growth rates remain sluggish.

Until relatively recently Ireland was still regarded as one of the poorer members of the EU. How did the economic transformation come about? The main explanation lies in the massive scale of direct investment in Ireland by multinational companies over the last 20 years. Foreign multinational companies produce around 70 percent of Ireland's total net output and account for 45 percent of employment in manufacturing industry. They are concentrated in the high-technology sectors of pharmaceuticals and electronics. Most of the output of these firms is for export. American companies like Hewlett-Packard, IBM and Intel, the computer chip manufacturer, are predominant. Since computing is the main growth industry at the moment, it's not surprising that the Irish economy appears to be doing so well.

Credit for the 'Irish miracle' lies not with the market, however, but with the Irish state. Multinationals have been attracted to Ireland by substantial government grants and low taxation. The Irish corporate tax rate is the lowest in Europe, at just 10 percent (in Britain it is 31 percent). There is also another side to the Irish miracle. The most important factor in attracting foreign investment has been low wages, for example, in the growth of the call centre sector in Ireland. Although this sector is regarded as high-tech, making use of the latest telecommunications technology, it relies on human operators to generate profits. Because of this, call centre employers want to ensure that wages are as low as possible.

Wages have been kept low by a series of national pay deals signed by the government, trade unions and employers. Under the latest deal, Partnership 2000, workers will receive pay increases of just 9.25 percent over three years in return for small reductions in income tax and vague promises of 'partnership'. By 2000 workers will only have gained a pay increase of 1 percent in real terms after inflation.

Wage rates themselves are generally lower than in other EU countries, including Britain. Some groups of workers, like specialised technicians, can command fairly decent wages because of skill shortages. But wages for semi-skilled workers are much less favourable than the wages paid to semi-skilled workers in similar UK based companies.

Most mainstream commentators are upbeat about the prospects for the Irish economy. But even at the height of the current boom there continue to be deep divisions in Irish society. Although unemployment has fallen since 1987, it remains among the highest in Europe, with around one eighth of the workforce on the dole. There are deep pools of poverty in Ireland's working class. In some areas of Dublin local unemployment rates are as high as 70 percent. There is still no minimum wage, though the unions are campaigning for 5 an hour. Even the Economist has been forced to admit that 'the average Irish person is still poorer than the average Briton the Irish still own fewer cars, phones and washing machines.'

But as the economy has developed, the working class has grown. And the boom has restored workers' confidence after the defeats of the 1980s. Today workers know the bosses can afford to give them higher pay rises. In spite of the national wage agreements, skill shortages are driving pay up in some areas. Hourly rates for bricklayers in Dublin are around 11 an hour, about 2 an hour higher than in London. Computer specialists have seen their pay rise by between 10 and 30 percent over the past year.

Workers outside these sectors are increasingly dissatisfied with their low wages. Last year nurses voted for strike action over pay and the dispute was only called off after they got a pay increase way beyond the limits set by Partnership 2000. Around 5,000 local authority craft workers are currently pursuing a claim for a 27 a week pay rise. There has been evidence of independent rank and file organisation during this dispute, with activists from around the country holding meetings to plan strategy.

The mood in all these struggles has contrasted sharply with the mood around earlier disputes which were largely defensive. The best example of a changed mood was the dispute at Dublin Airport last month. The workers at Dublin Airport and Aer Lingus, the national airline, who jumped to the defence of the Ryanair baggage handlers, had been demoralised in the early 1990s by a restructuring programme which resulted in a spate of redundancies and lower wages for new workers at Aer Lingus. The solidarity action they took last month shows how they are starting to bounce back.

During the current boom profits have increased, while the national wage deals have ensured that wages generally remain at fairly low levels. Perhaps it's not surprising, then, that opposition towards the latest national wage deal was greater than towards its predecessors. The new deal was approved by just 217 votes to 134 at an Irish Congress of Trade Unions special conference in January last year, compared with a three to one vote in favour of the previous deal in 1994. In Siptu, the largest union, the membership vote in favour was a relatively narrow 65,000 to 55,000. Both Mandate (the retail, licensed trade and distributive workers' union), and Asti (the secondary teachers' union) voted against the deal.

Opposition to the deal was reflected in the support for Socialist Worker supporter Carolann Duggan, who received 38,000 votes in a contest with Jimmy Somers for the general presidency of Siptu. Somers won by a relatively narrow margin of 14,000 votes. Duggan stood on a platform of opposition to Partnership 2000 and a call for more democracy in the union. The Siptu leadership were obviously shaken by the scale of support for her campaign.

Following the election, Siptu leaders announced that they were instructing their shop stewards to target profitable companies for increases of 2 percent above the agreed 2 percent local bargaining increase in Partnership 2000. The issues which fuelled Duggan's campaign have not gone away. She is currently standing for general secretary of Siptu. Such is the discontent among union members that even establishment papers like Tony O'Reilly's Irish Independent have argued that there is a chance she might win.

The national wage deals are the product of a political consensus among the mainstream political parties and the trade union leaders surrounding the development of the Irish economy. The consensus is that each of the 'social partners' must make sacrifices if the economy is to prosper. In reality this means workers tightening their belts while employers are free to make as much profit as they like. This has become increasingly clear over the period of the current boom.

Fianna Fail the main bosses' party can no longer count on working class votes. There have been a series of scandals which have exposed the links between FF politicians and the so called 'golden circle' of wealthy businessmen. This fed into the massive vote for the Irish Labour Party in 1992. But Labour in government dashed the hopes of its working class supporters, and its vote collapsed in the 1997 election. However, although Fianna Fail was able to form a government, the result was not a victory for the right. Fianna Fail failed to increase its vote, and the Progressive Democrats, its partners in government, lost ground, mainly as a result of its Thatcherite rhetoric. Some of the anger at Labour's betrayals found its way to left wing candidates. Corruption scandals continue to dog the current Fianna Fail administration and once more this looks like feeding in to increased support for Labour. In two recent by-elections Labour topped the polls.

So even at the height of an economic boom the prospects for socialists are favourable. But what will happen when the boom falters? Some commentators claim that economic growth will continue for another ten years. In reality, the Irish economy is much more fragile than this. There are a number of contradictory features of the Irish miracle which may mean it will end sooner rather than later.

Ireland was ahead of the field in the 1960s in introducing incentives to encourage foreign investment. Now, however, European governments in particular are promoting foreign investment by means of a range of incentives. The impact of Ireland's incentives has been eroded, and there will be additional competition from Eastern Europe, especially if those countries join the EU. In addition, Ireland's low rate of corporate taxation has come under fire recently from Germany and other EU member states who want to bring Ireland into line with the rest of Europe.

Also the labour cost advantage that Ireland enjoys over many of its competitors may begin to be eroded as workers fight for and get better pay. But the main problem for Irish capitalism is the fact that the boom is largely based on the growth in electronics manufacturing. A slump in the market for computers and computer software would hit the economy very hard. This is why manufacturers in Ireland are so concerned about the collapse in the Far East. As crisis ridden manufacturers there reduce prices to stay in business, western producers will be forced to follow suit. In the short term they will be able to achieve this by squeezing their own workforces. But they can only squeeze so much before workers begin to fight back.

As profits fall and businesses fail, government revenues will be reduced. They will then have to cut public spending even further in order to meet the Maastricht convergence criteria. A revival in working class militancy would make such a step more difficult. As the Financial Times put it recently, 'If current growth rates were to slip, some economists worry whether Ireland would have the political determination to make the spending cuts necessary to keep the deficit within the single currency limits.'

The timing of entry to the European Monetary Union raises a number of problems for Irish capitalism. The drive to a single European currency will expose the weaknesses in the Irish economy, especially if Britain, still the main market for Irish exports, stays out of the arrangements for monetary union. For those companies whose main business is with the UK, it would be preferable to enter at the same time as the larger neighbour, especially given the strength of sterling. According to the Financial Times, 'Maintaining the [Irish] miracle poses a number of challenges. It demands tougher control of government spending, continued moderation in wage setting and greater efficiency in indigenous industry and services.'

Joining a single economy will not make this easier, only more important. There is every prospect that a more combative working class will make this extremely difficult for Ireland's capitalists and their political representatives. That would make for the sort of Irish miracle we would all prefer to see.

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