Workers Solidarity Movement

On Tuesday the 7th of December, the Irish government were barricaded inside the parliament in Dublin. They were there to vote on a Budget implementing the cutbacks and austerity measures demanded of them by the IMF and ECB. The budget comes in a year of ever deepening crisis, as the debt of what was once Europe's fastest growing economy, spiralled out of control. The obvious question one is faced with is “What went wrong? What happened to this economic miracle?

Building the house of cards

To answer this question we need to look at the economics of the growth period and of the recent crisis. The economic growth that Ireland experienced from the middle of the 1990s until the financial crisis of 2008 was actually two different stages of growth. On the one hand there was a period of growth driven by low wages, high levels of education and high levels of Foreign Direct Investment (foreign multinationals relocating to Ireland). This period was known as the 'Celtic Tiger' and it lasted between 1995 and 2000 approximately. After this, economic growth was driven by an out of control property bubble which lasted until about 2006.

The property bubble began with the Celtic Tiger economy. Increased employment and wages began to push up house prices. As these increased, so too did construction. Increased construction led to increased wages and demand for houses as migrant workers moved to Ireland to work as builders. This circular process was reinforced by the banking system which made money both by lending to buyers of houses and builders of houses. This fact meant that banks could inflate the demand for houses by loaning more money for mortgages; this raised prices, increasing the amount of money that they could earn through lending to builders. Foreign banks and investors got in on the game, lending an estimated €844 billion to Irish banks in order to profit from the construction madness.

The cards come tumbling down

By 2007, construction made up 23% of GNP and 20% of total employment; it was the single most important part of the Irish economy. But building mania had created a huge over-supply of housing and inevitably house prices began to fall. In practice this meant that the property developers who had borrowed huge amounts of money from the banks were unable to sell the property for the price they had estimated and thus unable to repay their loans. When banks seized these properties, they were similarly unable to sell them at a profit. As banks’ incomes were cut-off, they began to run out of money to pay their own debts.

By 2008, the Irish banking system was on the verge of collapse. In order to prevent this, the Irish government issued a guarantee on all the debts of Irish banks. This meant that the Irish state, and thus the Irish taxpayer, became responsible for the huge holes in the finances of the Irish banks. The madness of this scheme is breathtaking. Instead of holding investors responsible for their decisions to invest in a bubble economy, the deal obliges the ordinary people of Ireland to clean up after the mistakes of bankers and property developers.

Passing this debt from the bankers to the taxpayers meant that the Irish government's debt became far greater than its GNP. The government was thus forced to borrow money, but doing so involved huge interest rates, as money-lenders did not trust the government's ability to repay. In order to impress money-markets, the government attempted to lower its deficit, cutting expenditure by slashing wages and cutting social services.

Enter the ECB

However, this wasn’t enough for the markets and the cost of Ireland’s lending increased and increased in tandem with the increasing costs of the bank bailout. In November of this year, the European Central Bank (ECB) decided to step in with a full bailout package. Besides stopping Irish economic collapse, the intervention had two other objectives.

First of all, the ECB was worried that if Irish banks go bankrupt, it would have severe effects on the French and German banks that are central to the Eurozone economy. German banks alone have lent approximately €206 billion to Irish banks, so a default of this size could have huge effects on French and German banks.

Furthermore, they wanted to prevent the crisis spreading to the rest of Europe. Eurozone economies are deeply inter-linked and a crisis in one country causes investors to fear a crisis in another. At present, Portugal and Spain are in serious danger of needing a bailout package and it is possible that the crisis will spread to the rest of Europe.

Death from a thousand cuts

Thus when the ECB announced the details of the bailout package for the Irish government, it was clear that it was a package designed to save the banking system at the expense of the Irish people. The vast majority of the €85 billion euro lent to the Irish government will be poured into Ireland's bankrupt banks. In return, the Irish government must make cutbacks of €15 billion within the next four years. This is to be achieved through the traditional neo-liberal package of wage-cuts, privatisations and cutbacks to public services.

The most deprived sections of the working class will be those who suffer the most, as the government has removed tax relief from low-income families, decreased the minimum wage and cut social welfare. Economists agree that the combined effect of these cuts will prevent the Irish economy from growing over the next few years. Unemployment is already a huge problem, affecting nearly 14% of the workforce and is unlikely to get better any time soon. In such conditions, many young Irish have revived the national tradition of emigration and fled overseas.

Resistance or resignment?

In the face of such extreme attacks on the living conditions of working people, there has been only a limited fightback by the Irish population. Union-organised demonstrations gathered up to 100,000 people, but these demonstrations have not developed into a sustained strike movement. Students have been more militant, occupying government offices and staging walkouts from schools; but compared to other countries in Europe, the Irish working class has been surprisingly passive.

This can in part be blamed on a government and media-driven propaganda campaign to cover-up the true causes of the crisis. Irish people were encouraged to believe that the crisis was their own fault for incurring too much debt, or for failing to save during the boom years. The government, meanwhile, succeeded in creating a division between public sector workers and private sector workers by blaming the national debt on overpaid civil servants rather than on the extortionate bank bail-out. This division was exploited to push through wage-cuts for all public sector employees.

The union movement, although strongest in the public sector, has spectacularly failed to prevent wage cuts. Large union demonstrations and a strike by 250,000 public sector workers in 2009 have shown the depth of anger at the government, but this anger has failed to develop into something bigger. Left-wing activists within the unions have attempted to push unions in a more radical direction, but these efforts have so far only had a limited influence.

There are two main reasons for this. On the one hand the union movement pursued a tactic of partnership during the boom years; under this arrangement, unions agreed on a central level to no-strike clauses in exchange for wage increases. This tactic weakened the unions' ability to fight and reinforced a tendency towards centralisation that has made it possible for conservative union leaders to strangle the protest movement. On the other hand, the left wing in Ireland has been historically weak, limiting their ability to develop a radical agenda within the union movement or elsewhere.

Activists have had more success in the student movement, where a radical group opposed to the conservative leadership of the national student union has emerged. This group has been behind an occupation of the Department of Finance and has been involved in walkouts by secondary school students.

The next few years are unlikely to bring economic growth or significant numbers of jobs back to Ireland, as austerity bites even deeper. Until now, the movement against the bailout and the government cutbacks has been extremely limited in scale but the future is far from clear. The upcoming election will likely see the ruling party lose many of their seats and may even lead to a government led by the social democratic Labour Party. Several socialist parties have formed an electoral alliance and may also win seats at this election.

But the real action is elsewhere. It is possible that the trade unions will cancel their truce with the government and return to strike action. It is also likely that the student movement will continue to fight against education cutbacks. Elsewhere, community activists are preparing to fight against the privatisation of the water supply and social welfare recipients are campaigning against cutbacks to the dole. 

WORDS: Ronan McAoidh

This article by an Irish anarchist living in Denmark was written for a publication there and then published on Anarkismo.net.  Ronan interviewed a couple of WSM members for the article which provides a useful overview of 'were we are' [Also available in Italian]