17 January 2002 Edition
Social Partnership fails workers
LE DOMHNALL Ó COBHTHAIGH
I was recently on the Internet doing some research when I discovered a paper written in July 1991; entitled "On the causes of Irish Unemployment" (Frank Barry UCD and John Bradley ESRI). What use could such a document be to us now, some might ask, now that we live in the era of the Celtic Tiger? Yet this document contains pearls of information regarding the underlying nature of the 26-County economy, something which will become more transparent with the onset of more difficult economic circumstances in the near future.
The document studied Irish economic history from 1961 to 1987, a period when the Irish economy was stagnant by today's standards. Many of our population were forced to seek employment outside the state and those who stayed had to endure poor conditions and rates of pay. In particular, one statistic took my attention, that over this time (calculated over short-term periods) a 1% rise in labour productivity generated a 0.61% rise in average wage rates. This in itself is confirmation of a form of economic analysis now abandoned by many on the left. By definition, a rise in productivity will generate a proportionate increase in GDP, and by extension GDP per capita. Our overall wealth increases by 1%, yet how much is passed on to the worker? Only just over half! The beauty of this statistic is that it is immune from distracting arguments over the need for capital to recover interest and neatly avoids rates of expenditure on overheads. It represents the fundamental inequality at the base of the existing dominant mode of production: that workers receive only a proportion of the wealth they create, the rest serves as interest on the capital invested (this profit itself becoming, in turn, capital for further reinvestment).
The question then arose as to whether this circumstance has changed over the past ten years. In order to answer this, a visit to the Central Statistics Office website was necessary. Figures produced by the annual Census of Production indicated that over the six-year period (1994-99) and taken across all industrial enterprises, gross value added (a measure of value created by economic activity) increased from €14.679 million to €30,059 million (or 104.8%), yet wages paid to workers only increased by 43% (from €5.310 million to €7,593 million). Based on these figures, an increase of 1% in productivity would generate only a 0.41% increase in wage rates. Clearly, according to these statistics, workers in Ireland are being exploited at higher rates than in earlier periods when we were experiencing stagnation.
The reasoning for such a decrease is manifold. It certainly includes the ever greater demands for return on capital invested (or else the risk of capital flight outside the state), the greater proportion of fixed capital investment on equipment and machineries and the wholesale repatriation of profits outside the state. Such figures totally undermine the credibility of 'trickle down' theories in which overall growth is said to reach those at the bottom of society.
Indeed, this increase in the rate of labour force exploitation has occurred at precisely that time when social partnership was being fêted as the genesis of all success in the Irish economy. Perhaps this is the most important factor at play, that social partnership has merely bound organised labour to 'Thatcherite' neo-liberal economic policy - one attuned to the needs of capital, not of workers. These figures clearly demonstrate the bankruptcy of the 'consensus' policy in terms of benefiting those at the base of Irish society - those who produce the wealth.
I was recently on the Internet doing some research when I discovered a paper written in July 1991; entitled "On the causes of Irish Unemployment" (Frank Barry UCD and John Bradley ESRI). What use could such a document be to us now, some might ask, now that we live in the era of the Celtic Tiger? Yet this document contains pearls of information regarding the underlying nature of the 26-County economy, something which will become more transparent with the onset of more difficult economic circumstances in the near future.
The document studied Irish economic history from 1961 to 1987, a period when the Irish economy was stagnant by today's standards. Many of our population were forced to seek employment outside the state and those who stayed had to endure poor conditions and rates of pay. In particular, one statistic took my attention, that over this time (calculated over short-term periods) a 1% rise in labour productivity generated a 0.61% rise in average wage rates. This in itself is confirmation of a form of economic analysis now abandoned by many on the left. By definition, a rise in productivity will generate a proportionate increase in GDP, and by extension GDP per capita. Our overall wealth increases by 1%, yet how much is passed on to the worker? Only just over half! The beauty of this statistic is that it is immune from distracting arguments over the need for capital to recover interest and neatly avoids rates of expenditure on overheads. It represents the fundamental inequality at the base of the existing dominant mode of production: that workers receive only a proportion of the wealth they create, the rest serves as interest on the capital invested (this profit itself becoming, in turn, capital for further reinvestment).
The question then arose as to whether this circumstance has changed over the past ten years. In order to answer this, a visit to the Central Statistics Office website was necessary. Figures produced by the annual Census of Production indicated that over the six-year period (1994-99) and taken across all industrial enterprises, gross value added (a measure of value created by economic activity) increased from €14.679 million to €30,059 million (or 104.8%), yet wages paid to workers only increased by 43% (from €5.310 million to €7,593 million). Based on these figures, an increase of 1% in productivity would generate only a 0.41% increase in wage rates. Clearly, according to these statistics, workers in Ireland are being exploited at higher rates than in earlier periods when we were experiencing stagnation.
The reasoning for such a decrease is manifold. It certainly includes the ever greater demands for return on capital invested (or else the risk of capital flight outside the state), the greater proportion of fixed capital investment on equipment and machineries and the wholesale repatriation of profits outside the state. Such figures totally undermine the credibility of 'trickle down' theories in which overall growth is said to reach those at the bottom of society.
Indeed, this increase in the rate of labour force exploitation has occurred at precisely that time when social partnership was being fêted as the genesis of all success in the Irish economy. Perhaps this is the most important factor at play, that social partnership has merely bound organised labour to 'Thatcherite' neo-liberal economic policy - one attuned to the needs of capital, not of workers. These figures clearly demonstrate the bankruptcy of the 'consensus' policy in terms of benefiting those at the base of Irish society - those who produce the wealth.