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2009

Statement on the Economic Crisis

Date Released: 19 Jan 2009

It is important that we analyse the economic crisis properly and respond to the challenge in a manner that best protects the jobs, pay and living standards of union members and workers generally. There is no point in under-estimating things. This is a global crisis on a scale that has not been seen since the Wall Street Crash of 1929 and its aftermath. It was correctly described in a recent editorial in the Irish Times as ‘… intrinsic to the very functioning of the capitalist system’.

Tragically, the global problem has been compounded by the policies pursued here since 1997. These embraced the neo-liberal free-market model hook, line and sinker. The tax base was    dismantled by cutting capital taxes and the higher rates of income tax dramatically in the   interests of the well off. This was offset by shifting the emphasis from direct to indirect taxes such as VAT and stamp duty, thereby transferring the burden disproportionately onto the middle and lower income groups during the credit-led property boom which followed. When  it evaporated, this left a gaping hole in the public finances.

Consistent with the old adage that ‘it never rains but it pours’, the problem has been further exacerbated by the appreciation of the Euro against Sterling, the Dollar and other world currencies (although we would be in a much worse place if we were not in the Euro). This is a very serious problem in our small economy in which exports play an absolutely critical role. It is estimated that of the €64.6676 billion in exports over the first nine months of 2008, 18.4 per cent went to the Sterling area, 19 per cent to the USA, and 23.3 per cent went to other    countries outside the Euro Zone. It cannot be denied that this presents serious problems for price competitiveness in these markets. Indeed, if we were not in the Euro the question of a currency devaluation, (effectively a pay cut by another name), would now arise.

Against the background of the crisis, a relentless campaign has been underway to impose savage wage/salary cuts. An endless array of ‘independent economists’ are promoting the agenda through the establishment media. It is important to note that none of them are ‘independent’.

For a long time, they were pumping the line that all that was required was a substantial cut in the pay of public service workers and all would be well. This was designed to drive a wedge between private and public sector workers. However, the veil has slipped in the last week or so and it now emerges that the real agenda is to establish the principle of cutting pay in the public service so that it could be driven all across the economy. It has also emerged that this agenda is to be complemented by selling off what remains of key strategic State assets (disregarding the Eircom  disaster), so that they can be picked up at bargain basement prices by corporate  vultures, on the pretext of fixing the public finances.

While it is critically important that we resist all of this, it is equally vital that we don’t fall into the trap of believing that the problems confronting us all, while not of our making, are not of the most serious kind. We must pursue a strategy designed to ensure that the jobs and living standards of our members and working people   generally, are protected to the fullest possible extent. However, that doesn’t mean rolling over. Despite all the talk about workers across the private sector accepting pay cuts – thus far there is only one example in one employment of actual cuts in agreed rates of pay among union members. Indeed, we are progressing ahead with the implementation of the Transitional Agreement. A number of employers have agreed and applied the first phase. Others are stalling in the hope that the Agreement will be suspended – it will not. We are also dealing with a number of others whose business has been severely affected by the economic crisis, with a view to protecting the maximum number of jobs without recourse to cutting agreed rates of pay.

There is a very serious problem with the public finances. This has come about because of the coincidence of two factors:

a)    The evaporation of the property boom has resulted in the collapse of revenue from stamp duty and severely diminished VAT returns as well.

b)    Allied to this, the overall decline in economic activity has impacted on all revenue sources.

The neo-liberal lobby has been vigorously portraying the image of a bloated public service as the cause of the problem, rather than its own failed project. The facts show otherwise. We spend a lesser proportion of Gross Domestic Product (GDP) on our public services than any developed European country and the proportion of people employed in them is actually on the low side of average in the OECD. Moreover, our total overall national debt is much less than most European countries. However, the present level of annual debt, which stands at 10.5 per cent of GDP, will become problematic over the medium to longer term. If it is not addressed, it will undermine the economy, resulting in further unemployment and the decline of our public services, which are already inadequate.

The Government has been much criticised by right-wing commentators because they haven’t put the boot far enough into workers already. All the talk about ‘outsourcing’ the job of tackling the economic crisis to the ‘social partners’ betrays their hostility to the idea that workers should have any say at all. Without it the bankers, developers and business gurus will be dictating the agenda exclusively. The reason for the Government’s reluctance to abandon social partnership is not because they like us, but because they can see that a major national initiative has the greatest prospect of success. They also recognise that imposing cuts in pay and social benefits is likely to result in a stiff campaign of resistance, including strikes and civil disruption. Apart from worsening the problem, this would also jeopardise any remaining prospect of their being re-elected. Those promoting a right wing agenda do not have to worry about this Government being re-elected because they are confident that Fine Gael would impose the burden on workers equally ruthlessly. However, all that being said, it is clear, in all our interests, that the public finances should not be allowed to deteriorate further.

Our problem is that while we can be confident of mobilising a stiff campaign of resistance, it would not make the problems go away. The best outcome of a prolonged battle, which would inflict suffering all-round, would be a negotiated solution in which the burden would be shared by all sides in accordance with their ability to contribute. It would be far better if we could get this result before the battle and save a great deal  of suffering as well as damage to the economy on which we all depend.

Our approach is that:

  • There should be a ‘Social Solidarity Pact’ to which all sectors of society would contribute in accordance with their capacity to do so;
  • This should be focussed on recovery and building a socially-sustainable economy;
  • The maximum number of jobs should be protected throughout;
  • The Banks should be brought under public control to ensure they act in the public interest (especially with regard to home repossessions), and a rigorous system of legal regulation must be put in place prohibiting the reckless behaviour which has been demonstrated by some of those at the top;
  • The prospects of people who are unemployed, or who are working in threatened sectors should be enhanced by dramatic new initiatives in support of training, adult education and skills enhancement. (This would also facilitate future economic growth and job creation);
  • Promised legislation affording workers a degree of protection against the ‘Race to the Bottom’ should be enacted swiftly. (This pressure on workers will intensify – especially since many do not have a right to union recognition and therefore, have no say at all on what is happening to them);
  • Urgent measures should be put in place to shore up the pensions of private sector workers and to create the basis for proper provision for those who are not currently in schemes;
  • Public services should be protected and improved gradually as resources allow;
  • The problem with the public finances should be addressed over a five to seven year time frame, commencing immediately. The better off in society must contribute, through the building of a proper progressive tax system, similar to that of developed countries in Europe. Those who work in the public service must also play their part by providing a continuously improving service of the highest quality, which utilises public money in the most efficient manner possible;
  • Cuts in pay across both the private and public sectors must be avoided because, apart from the injustice aspect, they would serve only to further deflate the economy and exacerbate our economic problems.

If you wish to be informed by e-mail or SMS (text) of progress, please check that your Branch office has your mobile phone number and e-mail address. If it has not, could you please forward them to your Branch office so that you can be set up on our electronic communications system. This will mean that you will be among those activists who will be first to know about significant developments.




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