Ireland - poor relation of the E.E.C.

page 6

IRELAND-POOR RELATION

OF THE E.E.C.

in May 1872 a-referendum in Southern treland resoundingly endarsed a proposal _ to join the EEC. If recent opinion polls are " anything to go by, then that initial euphoria has compleiely evaporated. The trish population is now reputedly amongst the most discontented of any momber atato uf the EEC. Ths $mehin th iar WS a! The general living standards in the South are 30% below the EEC average. Irish. workers, wha put-in the longest working hours (apart from- Greece); aré the lowest pee | ~. workers In-the community. And the smail .,dlarmers who earn less still than ciao aré even. worse off. "Wt is not simply tow living standards which cause pag ts be but-the ever increasing disparities. -in’ wealth “god . income distribution. A mere 5% of the. population wWtS” ius iyuana (Ul? bie Private wealth while 10% of the population takes home a quarter of the ‘national income.

Grinding. poverty stands” in contrast everywhere. to the Vasher ad livia: of a tiny elite. ul This picture beciiivies more éveeling when put in the context of a relative iwcrsening of lralands position vis-a-vis other European countries since EEc membership. The widening gap cari ide Se roughly by the GDP { Domestic Product) index which fell a further 4% Rinse the EEC averana Ketwoann 1974.7 ‘This esa points to the fact | ‘that’ The capitalist tarmers were ardent pes onl labaleeadechel were posh sk crt HOH, Tae dictions left by Britain's previous imperialist exploitation.

HERITAGE OF THE PAST

The trish economy was moulded largely to agricultural production under British rule.

Moreover, agricuiurai acilvity was geared almost totally towards supplying the British market with cheap meat and dairy ucts... This Kind of extensive farming tied .the need for agrarian reform " along the. dines of large scale enterprises.

But the. plecemeal reforma imposed by Britain and the resistance of the mass of @mall farnnere reauited in a hybrid system -a minority of emali farmea in a sea of rail, mainly unviable farms... .

treiand’'s. subsequent economic devetopment was profoundly debilitated by this Inherited nature of agricultural production and structural deformities of gh Oe, 1) | Extensive’ fasming did ‘not: “require a great deal of investment. Big farm capltalisis were conservative. Profits were ted in the banks rather. ae put to further productive use: eT ae "2 The profitability: PAN Toby datthers ed on access to the British market.

Teh capitalist. farmers Were ardent free traders. This had two'tc sequences.

| “Tariff protection was noi available to infant . <4rish induatry. Side by side with free trade “went free fnobility of capital... The: banks ~ “Invested the accumulating . Rs swesciting ofits in. safe British: ‘Govt.

rish industry wes exposed to the full full lest of deve! British industry and starved of capital. indigenous:industzial devalopment wes Sonsequenily very. ni leaps 8 3) The land’ tenure sled peri "g hierarchical division .of labour within agriculture whereby the smail farmer was constrained to the arduous and meagre end of production ji.e. breeding and rearing) while the capitalist “ecinere monopolised the speedy and lucrative end (fattening and exporting). Under these conditions the cyclical crises of trish agriculture tended to be more sudden and deeper. They also tended to fail more firmly on the email farmers.

4) €xtensive farming aiso implied the necessity to minimise, the direct cost of land: (and property) ‘ownership. This iat “dictated the need for an environment of 1 " Jc OP

minimal taxation. State involvement in industry was initially restricted and when the fevel of taxation did begin to rise, ~ its burden was shifted SUL ale realy onto an already impoverished population.

Social needs became heavily dependent on private institutions (mainly vinemier and politics met on a oo net Alentaiet:» colour. century was - ‘dominated: |: Ays3 186 elite™* Capiiaiist iminiig “sell wren ted off. .

smat!, semi-canitaliat: Cidrviag a depended on British markets; a prosccrous, : (if unadventurous) financial ‘sector...

minora with the Griiishucapital market”.

and with no investment! im industry; a merchant secior also depencent:.- Britain; a smali sector cf consisting of diminutive enterprises catering for the domestic consumer market; and a small sector of exraorting industries, based on food/drink, which was largely foreign-ownes cr conirailed.

This state of affairs ‘lad to repeated periods of stagnation culminating in & profound mataise during the 12500. The | alternative poasibility of growth was to .

adopt a strategy of more comprehensive integration with internatiorial imperialism.

This became all *he’mors Uroent in the 1950s because tha postibility of Gritain joining the EEC was mooted. in 1967 a decision to seek mo embershis of the EEC was readily wien. Fiskte by" is two major - bourgois Mee’ fo end Fine .

Gael. Pese EEC memntvoeii "isan to the frish electorate on a numbor cof economic grounds. It wes argued that the contradictions of agriculture. °° \- cri toeal eased by substantialiy higher and viable prices; foreign capital wouts pour la and create a spin-off effect which would iead to a sound industrial conrot; living standards would increare enormousty and the “crection: of a comprehensive sociei weolfors system would be possible. This’: was. the promise of final de-colonication. -ireland would at fast ‘take (ts Re. Sailiaies the nations of the world’. aa!

EEC membership cid indeed wihnulewe the Irish economy to some extent. Dut it couid..

not overcome the forces of chaes which...

repeatediy cresicd economic torpor and social blight.

AGRICULTURE - ART IFICIAL GROWTH

Within the agricultural éector, entry inte. .« the EEC gave bees undar. native |. hee daw . ~~ rise to historically .; .

unprecedented levels of investment and... .

output pilus some drametic — La et ls tif igh ete Od : rish ~ priees begen to level out. En This set-back was compounded rad a ,o, | nputs, : vi significant bites out of farm profits.

‘virtually as bdefore. happened, however, is that the contraincome. Yat behind this apparent success story lies s grim tele. rises (up to W0%) auton’ into a flurry of modernisation and expansion. But giver that the EEC is aimost self-sufficient in [a . beef and has e surplus of dairy products - Mak « * ae fonether constitute BAM of nity. wa eure output - the impact..ot. hg The Irish econoiny:ane on Sir: nai of thie. ; iriah "OF IIMA price mcentives a bound tw Be e prnia tare. li celia ehort iived. From negative turn in the input-output price ratic. this deteriorating ration After the initial hectic expansion, a new phase of crisis set in. For the past decade, os a whole, farm income in real terns has remained at t ha sgh et level.

Growth retes nave tapered off and since 1876 Have declined to am historic: low.

‘The nature of fand tenure has ramained the same and the variation in farm size has _ hardly changed at ell. The composition of { and the division of labour between of farms hes stayed Wheat has out various groups dictions of agriculture have sharpened without any fundimental change in the insofar as the ~*°» potential for euch change did emerge, it structura of production. has jonded towards wholesale disintogration rather than any wiet bea aolution. To get the fall story tt ig necessary te" ar penotrate ben ath .the * sucsase. Ovuring the period of EEC™ mombership the artificial support system. rs ms of European agriculiural policy ‘has flay intensified a number of distartions in irish’ farming whicn are conceaied by statistical averages.

INCOME

INCOME. Agricultural income has been static in real terms ovar the past yeers.

But within this context there have been striking changes. The two cattle crises of i874and '78 piaved a major role in ievelling out the cverall returns to farmers.

However the EEC intervention support for beef ensured that the burden of these disesters would fall on the breeders and rearers of cattle.

The big capitalist farmers were able to sell thelr beef at guaranteed prices through ' EEC intervention while at the same time refusing to purchase any more cattie for ».'s Tha bottom fell out of the: fattoning. = Deapite a reduction in: the use of. .

surface venee, of disproportionately SO... ch ae. * 3 he merket the refere only for the medium. a: Su Dx Mpc . oo ~ be waree

page 8 small farmers. This left them overestocked with ati the obvious consequences for the viability of their farms.

Today over half the incomes from agriculture accrues to one-fifth of the farmers.

The fact that the average farm income is below the average industrial wage (ora of the lowest in the EEC) gives an idea of the penury in which 80% of irish farmers tive.

GROWTH: Output fell dramaticelly to.

around 1% per annum afier 1974. The .

main feature of this trough wee a huge’. .

reduction in the national ceitie herd several hundred thousand, .

which fait by sé back to its 1970 level. Paralle! with this, there has been a shift by big farmers.

inte dairying, having a greater concentra-_ tion of cattle on small farms. indeed, an increasing number of smail farms produce nothing but cattle. Tho decline of the beef sector therefore means that the number of farms. producing absolutely nothing is bound to grow. LAND TENURE. Land continues to be aa immobile as ever despite a rapid fall in prices which In the mid-1970s wera the highest in Europe. Over tha past decade the average siz of hkaldings have increased by oniy 2 acres. The offects of EEC membership have intensified thig problem. On the one hand a high level of debt servicing and general uncertainty makes the big farmers reluctant to purchase.

To meet this situation they are turning (albeit marginally} to a more Intensive use of land rather than augmenting their holding. The problem of deht is the moet immediate and ‘undamental cause of this.

Farm indebtednuss ress froni 15% of tote!

indebtedness in 1970 te a record 30% In 1980. Farm indebtedness ranrscan tad 40% af farmare aninisal incoma ir (OF and had increased to 120% by i950. This daht ts Svied sLIOSS Ine whois farming populetion but is concentrated in tho medium and big farmers. Many medium and small farmers, on the other hand, are gravitating towards family subsistence farming. They are .

prepared to accept an income far inferler to the average wage. Changes In market: prices for products or land do not exert subsiantia!l pressure on thern to ieave farming. Some 50% of farms, 9n one third of the land farmed, contribute nothing te growth of new output. The Sulk of growth Is produced by 20% of farmers. The 30% of borderline cases »r@ particularly threatened by current EEC trends. There ia a real pousibinty thet 8% af framera could end UO In the sake siding: pari-time category: a ve This will, under conditions of tamily ownership of farms, intensify rather than eae the immobility of land.

Combined with this, the division of izbour betawsen big and small farmers ic roughly defined on a regional basis. The consolidation of samail and medium farms tnia viabie enterprises would have to take re through a differentiation among smail and medium farmers themselves.

The daap depression in which these, groups have ianguished, virtually rules out, such a str Gictions invoived in the division of labour.

end the nature of landholding is ilkely to gal for some considerabie ime.

FOOL'S GOLD FROM

MULTINATIONALS

The implications of the Situation in agricul-.

lure will be enormous (or the trish economy gle. The structural contra-. .

as a wiiole. Al the economic level agricui- .

ture SNpioys direcliy OF inuuccliy SU% oO: .the natione! lebour force, accounts for upto .

45% of output in the goods sector, and ~ represents 59% of net exports. At the .social! level, nearly half the population lives In rural arens and it is there that a consicerable section of ircland'’s. poor is trish industry, particularily manufacturing, is su ty one of the af af EEC membership. During the 1970s manufacturing output grew at a rate of 4%.

per annum compared with the 4% %n EEC.

average. But this growth exhibited a num-:..ber of defects and has : problems than it has solved.

Manufacturing has undoubtedly increased its weight witiin the economy. But much of the growth is auperficial. Away and by. far the most dynamic componen sector hes been the foreign muiti-nationais. Throughout the 1870s lreland . ersily firms (relative to population size} comed with other EEC countries. These success Stories — t of this . Southern. . attracted more foreign. irms now employ over a third of the manu- |...

facturing workforce.and account for 70% of +4 exports. indeed the significant growth =.

of manufactured exports during the 1970s was almott exclusively generated by the overssas multinationals. Nonetheless, this performance still does.

not give much hope for long-term devetop-.....

ormance of the multinas. tlonais in iroland ie sirikingly similar to.

thai in other ec called ‘developing’ (i.e.

n2o-cotonie!) countries: 7 — linkene= ~!*h the rest of the economy.

ave extremely tow —~ only 16% of their.

ment. The perf

inputs are purchased: locally. in some . pranches, auch a3 chemicals, only 2% of raw materials are purchased in trelend.

~~ They ars generally low skilled assembly operations and for the most oart low-pay industries. Their value-eided content Is extremely low. — They ara BAe ermal piants oe redtricted potential for employment — average of 100 jobs oer pian.

In addition to this very wees spin-off effect, thea multinationals PBERES ereate barriers to growth: -They supply only a third.s! the congel 5; ea : needed to set-up. Thus, they,are in. compe« ° lition with focal induatry. foe ihe: reat, _ — 90% of their profits are taxires — caus-” ing a multi-million hole in tax revenue.

= The free trade environment which they dictate has couwsed a precipious decline in the traditional industries: A _....

quarter of the jobs which. existed. In indigencue indusiry in 1873. Rave now — disappeared. Since this sector produces mainiy for ithe domastic merikat the result is not only a deciine in net ere creation est aiso increased Imports. — These compenies moke huge profits.

The US companies, according to the US Depariment of Commerce achieve @ raturn of 30%, which is well abave the parformances in any other EEC country where 9 the average is 13%. Poinvestmment was initially high (70%). in the last few years this has changed dresticely. In 1263 ower o < iR£1,0C0 million (ebout helf the balance of payments deficit) in unapesified .

_ Gutflows occurred.ft ia bet'eved by ecensmists that [RE200 million of this was repatbe ae rlated ag multinetionse! ceetits.

These aspecis cf tha multinationals | makes it clear that a airciegy of rsiying on foreign investment can Mako o..needway in grappling with the macroeconomic problems which beset the irish economy. irish industry still has the lowast lovel of productivity tn the EEC; there has been no net - increase in manufacturing employment over 10 years; despite the fact that manufacturing greaily incraezed its factor share i of GNP and axports, a structural balance of payments deficit {attenuated for the moment by a fail in imports by a goncral decreases In consumpcaused ': thon) stili exiats. The latter problem is one) -* se gf the major medium-term constrainta to °° ' economic growth and i? is ironic that the multinationals which dominate experis are * @ Main contriputer to it. Certainly -- in the short term, with tha pruchase of "page 9 facil and mMaierial from capital snapped u n treland (iwa thirds of eetting up capital 2 Bie Importers of large initial stocks, contribute heavily to the peyments doticn This is probably true in the jong term as well, given a steady departure rate and the consiantly nigh proportion of new companies in this sector. Wik. : - 8

_., HUGE BORROWING

A see seth rest of the manufaciuring sector ' stidigérious companias- 4 contributes ‘reiaktvaly. iy CLAN HATEIG Orch ANG 1S GSpendent largely on ine domestic market. The oof otter ” Sodlicont sector of industry ding and construction. It usually ingles 10% of the labour force and cantributes output at around 20% of the GDP.

Since this sector ceponds Naavily on devepeat ale in lndueiry and agriculture and he level.of consumer anc government , dt is hardly surprising that it ic one. thicough the worst crisis in forty Weare ALR ymoment nearly half the workforce is unepanlo ed. Vvith over one miltion square fect of oftice space and three miilion squares icei ai fsstory space iying idle and with a thriving market in second-hand fven: Shere is litia Rope of an early rovivel. 5 3, @ The mest $3.2 ing aspect of the situation in eee ae & fut! reckoning with ite {he 1G... reliance on foreign ‘trevest ran es. a to ba faced. A contrac- - tlev ef 'raltinationa: operations is now ‘ undorway Most ef the forsign owned plants in ivgiand aro subsidiaries of companies at tha batiom end of the multinational ‘spectrum (oniy a handful of the 800 firme figure .n ‘Foriuns’s’ top 900)..At the beet of tities thase firms hed a redundancy rata of 30% over ten years. Now the rigours of rocession and the general chite of depression ia taking an even greatef toll, A. fecent survey indicated that s Quarter. of Iriah based forsign firms are already considering relocating elsewhere.

On top of this Ireiand's share of outside investrnent coming to Europe has declined steadily ovar the past fow yours.

This process is tikety {o accelerate in the future. The long-tesm decline in the econcmiss and | «fosis of some ef the advanced Eurepean countries — notably Britain — plus accession of Greece and Portunal to the EEC wil! stiffen compatition forthe ‘location of multinational subeidierice: Ireland long ago reached the bottom Hine in the package of granis and concezzions it can offer. creation of €0,000 multinatione! jobs has cost the irish axchenuer t{FRES6,COO million. There is no More scanr for Increasing the bidding.

page 10 Under the lengthening shadow of ihis impasse a maior debate on reortontating.

industria! strategy is in progress. The consensus emerging from this dedate Is.:in_ favour of turning Ireland into a bese forthe”...

provision-of international services. jatest ten yeor plan of the more than 10, _ — created over the next decade. 7 development of luxurious medicare facititles and banking erciaves is being cenvassed as a way of Generailng wealth to create servicas-type jobs. The dream of industrialisation....ls being buried unoeremoniousiy. The so-called ‘Telesis Ropart’, manufacturing sen, it —— 1S Industrial. Development Authority (ihe government’.

chief ‘job ae agency’) foressea no...;.

which initiated the dcbate en aew eeretent 7 had turned Ireland into a ‘email export haven’. For. the trish bourgsoisie the logical progression is ts turn treland into.a, ©.

playground for the intornaiionc: jst ect.

The way in which economic contradictions, under conditions fi BEC membership heve | sharpened is well tilusirated in the drama tic growth of a crisis in public finences.._ _ Much of the controveray over government’ expenditure hss focussed on current” ~ spor. The reason is obvious ¢ Me current budge? hes been rising steadily — from 30% of the GNP (Gross National Product) in the carly 1870s to 40% in the 1980s. At the aame time the current deficit has risen from zero in 1270 | to 8% of the GNP by 1650.

However, 2t the same time ireland hae experienced a phenomenal growth in capital formation. fn tho 122% it avaraged 20% of the GNPand after ECC memberenip, it .

ros@ to over 20%: This growih has been motored by gevarnment -r-rditure.

Throughout the pest decede tia pudils capital programma ceudled its sahara of national capital formation and by the 1980s stood at 50% of thototal..

Since the canlial prearammea is tinanced.

largely through borrowing, the fovel of nationa’ debt has intrested sccorcingiy.it has risen from 63% of ihe GNP in the early 1970s to almest 100% of the GNP today.

The fiscal logic behind this was. the ‘assumption that an increase in predustivity would eventuaily produce a componzating flow of revenua. hoe ieadet In tact, public capital epending has clsen faster than current expenditure. Furtheremore, within the aggregeie cf capital “spending the share going to manufacturing roos. most rapidly. In. sum, the scaim of sueceesive governments was to force oomarch the pace of industrial devetosment * $0.88 to. sustain adequate expenditure on _ current services, etc. iat argos it ig pracisaty the failure’of industrial sirategy and not excessive growth of current outlays which is at the root of the cieordes in puolkc fmances. Currefe spendin by £ simply to p t a worsening of already bad cond tilons. For example, social welfare: -fastest growing component )/i-.

of current spending but in the last tive::/: aome 40% of this growth was cauged wes the an inerease of recipients, due to unemplo too many small. and outdated hospitals (50% of health spending. on at the behest of conservative pressure a ll a3 focal bourgeois interests, relig orders and prof ‘ Although the jevel of irish public spending woks satisiactory compared to. a!

EEC standards; It is far from.

t and failing incomes. >: The high level of expenditure on health vor.

reflects a costly and inefficient service with os.

increnses were not exhorbitant.. °° standards were necessary “* tals). This situation is maintained largeiy °™ ©.

relative to the nsecs of the Irish people, — -The greatest: proportion of poor in the gut ZEC- a quartor of the population lives: % Deiow tie poverty ling, whan is defined as two thirds of the average income (which is, in turn, only:two thirds of the EEC avers Bee 868). ~— One of tha highest ratios of pupils to © ve teachers ari one af the lowest ievels of expenditure on education. f: -- Amongst the lowest use of such items as *!

household alectricity, private cars, teie-— phones, televisions, etc. 5 and highest ) 40% of the popuiation is either under the age of 14 years or over the age of 65 years).

— One of this fastest growing populations | anandaiee ratio, (over *: a oS -One of the highest rates of unemployment '°" - af 19% it is greater than the entire manufacturing workforce.

‘The zosis! situation in ireland nas not: improved at all since EEC membership. A°° survey thia year raveeied that Ireland ass © whol is the most disadvantaged country in” the EEC ead is only a hairsbreadth * ahead of regional The failure of industriai strategy means” dynamic which’ can pull the nation out of this social backwater in which it is now floundering — On the. public finences will aggravate the situation still that thers le no economic the contrary, the crisis of.

further : mF om Ste pod, eos bleckspots such as

The staggering size of the national debi has produced iwo new problems: forecicn indebtedness end punitive taxuwtion.

As —— borrewing inerossed, the liquidity of tia financial sector eerlously decreased, interest rates rose arm) credit became scares. The private sector was in danger of grinc ing to & halt. Governments of the day then turned to international financial institutions. Sucddenty, pubtic foreign borrowing roze from erecttcelly nothing before EEC membership to over 40% of the GDP at preeent. Along with this, the servicing of fovelon dott hes gow to a dangerous bevel ef 6.7% of the OP: This ievel of extevnal berrewing and debt servicing (equal fe ebew two thirds of external raverves) could, W uncorrected, lead to a dacline of coniiianes by lreiand's trade partners anc consaguant disruption of tha whole economy.

Apart from borrowing, ths only other source of finance evellabio ia tax reventus.

Since EEC membership ths tovel of texeton has risen steadily. At the beginning of the if70s irciand's tex level was lower then any of the existing EEC countries. Since thea, taxes heave risen from 27% ci the GNP to 41% presently. Within this overall ries, a soncictent -.

shifting of ssctions of society hes occurrect, income iax (87% of wiich ia peld irom wages) has cimoast doubled since the early 1970s to 14% of the GOP todey and Indirect taxes On comgummar geccs incrocsad in the same period fram 19% to 18%, Thus, neeriy four fifths of (exes fa) me'aly on the workers and the poor.

The overall: tove!l of foxstien, given the relative undardevcisament of voisnd, is punitively high aad ihe chara borne by workers and their ailics coos? amherzania, The latiiuce for extracting more vevenue page 711 by means of taxation is, theretere, negtigibt. With oxesesiva foreign borrowing and excessive taxation, government fiscal pollcy ia carght between two grinding stones. Any attempt to significantly roduse external debit would cause a spiralling defiation — deflation, erosion of tex basa end exturnal reserves and further doflation. As ecainst this, tc Increase or even maintain the existing lavei of taxation would risk serious political unrest and 90 ireland’e credit rating thereby activating the balance of payments consircint Inherent in the foreign debt. The vegult would bo equrily Sehitlodary, The ently tray out is through a programme of miectt ive tuis. Thera is a solle consensus hatweon the two maine bourcens parties “and the Labour Party on this. But the CYP OF wilintites otk @ PTOQ ANN WoUIG mocetsiicie, eddead io the social and cuonvawns evisia which already exiete, has te cen cosas. Aner from the obvious econome dangers, there ie a hiekly organised and combative Working clots to contend with — over 50% e7 trigh workcra are untonised. What the wArKers lack moet is @ peiliies] awareness cr teely own sirongth. A full-ecale attempt ts diamantis state involvement in the cminemy wault undoubtedly lead to a qucsticning of the delicate political coneenacs on which the state reets. Thet kind of fermentstion in workers’ consciousness ip circacy enrarent in the governmental invahiilty which omarged from the last twes coccral elestions and in thrse masevoty tuoferted national work stoppages inst ine tax system in 1979, 1860 and 1631. {#3 Mone of the pollicians want to cut toe Ceanly, too quickly. None wents to be the tirat to feat the full might of the workers’. . SO On top of economic instability, thers la a growing political instability. =.

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