Ireland was one of the most unequal societies in Europe when the pandemic began. A year later, Brian O’Boyle highlights how the Irish government’s response has widened those inequalities, and it is only through workers organising that these trends can be reversed.
The crisis associated with Covid 19 has been deeply unequal in its effects. At the end of January, Oxfam laid out the stark differences in how people entered the pandemic, how they are being affected by it and how they will eventually exit it. Their Inequality Virus report is particularly clear on the disproportionate impact on women and people of colour and it correctly blames a “flawed and exploitative economic system”, rather than merely the epidemiology of Covid 19.
Two facts will illustrate their general narrative:
(1) Jeff Bezos, currently the world’s richest man, could afford to give every one of his 876,000 employees a check for $105,000 and still have as much wealth as he had at the beginning of the crisis.
(2) Despite no major decline in availability, 150 million people have been pushed into food poverty, with an extra 6,000 people dying daily from Covid-related hunger.
Scarcely could two facts reveal so much about the nature, and the horrors, of global capitalism.
Sharpening Existing Inequalities
In Ireland, the crisis has thrown up a series of what seem like contradictory statistics.
On the one hand, Ireland has followed the pattern of other countries with rolling lockdowns creating havoc for hundreds of thousands of workers – particularly those in workplaces unable to social distance. From a workforce of 2.5 million there are currently just short of 900,000 people unemployed or receiving state assistance. These include, 400,000 receiving the Pandemic Unemployment Payment (PUP), 300,000 receiving the Temporary Wage Subsidy Scheme (TWSS) and 180,000 classified as long-term unemployed.
The effects are being felt disproportionately by younger people and women, with youth unemployment currently standing at 45% versus 25% for the general population. For many of these workers, income insecurity is compounding their loss of routine, mental health difficulties and the fear of getting sick.
In total, workers have lost more than a billion euro in take-home-pay while domestic construction, transport, retail and hospitality have each declined by at least 40%. Viewed in isolation, these facts would seem to signal disaster for the Irish economy, but they must be viewed alongside others that paint a very different picture.
Writing in the Irish Times recently, Cliff Taylor pointed out that, despite the major shutdown in activity, Irish households managed record savings in 2020 with their total wealth rising to €831 billion, including an increase of €13.5 billion in the three months from July to September. Despite unemployment increasing to 25%, moreover, income tax receipts fell by just 8% while corporation taxes actually increased.
Foreign exports also increased, while Ireland was on course to be the fastest growing economy in the world during 2020. How can we explain these growth statistics when so much of the economy was in lockdown? The answer lies in a combination of three phenomena: the uneven effects of Covid 19; particular features of tax haven Ireland; and the determination of global monetary authorities to protect the assets of the 1%.
Let’s unpack these explanations in sequence.
- A Rise in Inequality
The most straightforward explanation for seemingly contradictory statistics, is that different groups of workers have been affected differently by the crisis. One aspect of this is the unusual level of income inequality entering the crisis, which left poorer workers far less resilient than their wealthier counterparts. Look at the statistics below to get a sense of the pre-existing inequality between capital and labour on the one hand and within the Irish labour market on the other.
- Data from the European Statistics Agency shows that Irish labour productivity increased by 34% from 2010 to 2017, at the same time as nominal unit labour costs fell by 17%.
- Data from the European Commission shows that Ireland has 25% more workers on low wages (defined as less than €12 an hour) than the European average.
- Median wages in the private sector for 2018 were €31,000 while the average wage was €47,500 and the wages of the wealthiest 10% were €181,000.
This inequality was further exacerbated by the lockdowns as better paid workers have typically been deemed essential (barristers, politicians, etc.) or been better able to work remotely (lecturers, computer analysts, financiers, etc.), while poorer workers lost wages and benefits.
A recent European Commission Report estimated that the poorest workers in Ireland lost twice as much (10% on average) as their wealthiest counterparts in the first wave of the lockdown. This latter group could generally work remotely, protecting their wages while saving on transport, lunches, and other expenses. Thus, not only was Ireland an unusually unequal society to begin with, Covid 19 has exacerbated this inequality by taking more off those who had less to give.
- The Effects of Tax Haven Ireland
The second part of the explanation involves features of the Irish economy linked to its status as a tax haven. In particular, many of the industries that have grown off the back of the pandemic, are also those that previously relocated here to take advantage of Ireland’s tax regime. Major US technology companies – with European bases in Ireland – have thrived over the last 12 months, as people have been forced to communicate online.
It has also been a bumper year for pharmaceutical companies, medical equipment companies and those specialising in financial services, as governments scramble for ventilators and vaccines, while trillions have been pumped into financial systems. These are also some of the industries attracted to Ireland by tax advantages, meaning that the country’s growth and export statistics cannot be taken wholly at face value.
Running alongside a genuine increase in economic activity are vast overseas profits shifted into Ireland by US multinationals. This explains why last year witnessed record corporate tax receipts while large sections of the economy were in lockdown. To get a sense of the scale of this avoidance, Gabriel Zucman recently estimated that non-tax-havens typically expect profits to wages to be in the region of 30-40%. Yet in Ireland during 2015, US multinationals declared profit ratios of 800% or €185,000 versus an expected rate of €23,000.
These figures were more than confirmed the following year, moreover, when the Central Statistics Office showed that employees in US manufacturing firms were individually responsible for gross value added (profit per employee) of €686,949. Meanwhile a sector with just 210,000 workers is supposedly responsible for exports of €440 billion – or more than €2 million for every worker employed during 2020. None of this is remotely plausible unless vast profits are being shifted into Ireland, meaning the official statistics are simultaneously being improved and distorted by the presence of large multinationals.
- Neoliberal Keynesianism
The third part of the explanation is rooted in the response of the monetary authorities to Covid 19, as $12 trillion has been pumped into the global financial system. This is a distinctly neoliberal version of Keynesian monetary policy as the owners of capital receive free gifts in three different ways.
Firstly, vast sums of money have simply been handed to businesses without any oversight. In the US, for example, half a trillion of public money was gifted to the owners of big business, including more than 300 publicly traded companies.
Secondly, much of the stimulus has made its way into global stock markets, inflating the prices of stocks and shares. This protects the paper wealth of the “1%”, but it also allows those with financial assets to take more commodities from the real economy (when these financial assets are cashed in).
Thirdly, a large portion of this money has been lent to national governments in the form of ‘emergency liquidity’. In Ireland this is estimated to come in at around €40 billion, which will be paid back by taxpayers in coming years.
In his analysis of financial markets, Karl Marx made an important distinction between ‘real capital’ which results from exploitation and ‘fictitious capital’ which exists as paper claims on future wealth – until, of course, it actually commands this wealth produced by workers. By loading ‘fictitious capital’ onto future taxpayers, global financiers will capture real value from workers’ over time, while the workers themselves can expect yet more austerity.
Alongside the Irish government’s strategy to restrict housing in the state, quantitative easing explains why Irish households are currently wealthier than ever before. On the one hand, millions of Irish people are finding it ever more difficult to survive. On the other hand, those with property assets and financial wealth have never had it so good.
Never Let a Good Crisis Go to Waste
Behind what seem like contradictory statistics we have therefore discovered an important truth – namely that the Irish establishment has largely avoided the economic pain associated with Covid 19. This is evident in official income statistics and in the growing figures for household wealth. But it isn’t the perception of most people living through the lockdown.
Ruling classes are better resourced than the workers they exploit, allowing them to think strategically when people are anxious and disoriented. As we face into the coming year, there are at least three strategies that our rulers will pursue to ensure they ‘don’t let a good crisis go to waste’.
The first of these we have covered already, which is their intention use state borrowing to transfer taxpayers’ money to the wealthiest in society. Far from us all being in it together, this shows the ruthlessness of the Irish elites as they enrich private bondholders, packaged as support for nurses and workers.
Secondly, the government have already used the crisis to reduce pay claims from 300,000 public sector workers. During the Great Recession public sector workers took average pay cuts of 15%. They also had to work free hours to increase productivity, while newer members were subject to pay apartheid through lower wages. These austerity measures were meant to be addressed this time around, but the fear and anxiety created by Covid-19 have allowed conservative forces in the Irish Congress of Trade Unions to sell pay increases below inflation (at least when rising rents are factored into the equation).
Thirdly, private sector employers have availed of billions through the Temporary Wage Subsidy Scheme (TWSS). This has been a free gift from taxpayers to employers at the same time as it has often been a pay cut for the workers themselves. As the TWSS is unwound, expect many employers to insist on making these pay cuts permanent. Pay cuts may also be on the cards for the hundreds of thousands still on the Pandemic Unemployment Payment (PUP), while at least 100,000 people will likely lose their jobs permanently.
Workers will have to organise to avoid this from happening and People Before Profit have already begun to prioritise these struggles – offering important solidarity to taxi drivers, student nurses, building workers and ex-Debenhams staff over the last 12 months. People Before Profit is determined to do what we can to organise different groups of workers, but we must also agitate for a Solidarity Wealth Tax on households who can afford it and for a €15 minimum wage to help redress income inequality made worse by Covid.
Many small businesses have suffered losses during the pandemic, but this is far from universally true for the Irish ruling classes. Understanding this allows socialists to be more assertive in our workplaces and our unions in the fight for an ecosocialist Ireland rooted in the traditions of Marx and Connolly.
Brian O’ Boyle is an economist and a member of People Before Profit. His book Tax Haven Ireland (Co-authored with Kieran Allen) will be out in the coming months.