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Problems Problems
From: Irish Political Review: Editorials
Date: January, 2013
By: Editorial

Trade Unions: time to grasp the nettle.

Is money a thing in itself with no relationship to the real economy? The boom seemed to have created a load of it, easily accessible and easily spendable. 

Wage determination in 1990s Ireland was a State-funded affair. Under Social Partnership the Trade Unions agreed to restrain demands for wage increases to help restore the competitiveness of the economy. In return workers’ real take home wages were to be increased gradually by way of generous tax reforms. And the Unions got to play a central role in economic and social planning. It was a strategy that worked and was seen to have helped create the growth environment of the 1990s. In the property boom years of the 2000s, the enormous business profits to be made in a low-interest environment led to a great expansion of productive activity. This, combined with a chronic labour shortage, caused wages to rise 25% in less than a decade,  along with less than 10% inflation. The plentiful money (apparently) available to the State led to an erroneous view of productivity improvements. Private sector wage inflation led to public sector aggregate pay increases of 40% through the Benchmarking system.

In a capitalist economy, the cost of labour is one of the main factors of production. Trade Union muscle can cause a growth in the proportion of surplus value created by the economy that goes to workers and can also cause an increase in the "social wage", i.e. the proportion of State revenues spent on public services that benefit the working class. The market will sustain such increases, as long as there is some reflection of it in productivity gains, but if productivity decreases relative to wage gains, labour costs can cause the economy to become uncompetitive. In a globalised economy, capital can react by simply moving elsewhere.

In the much derided era of Protectionism and 'closed' economies, the essence of the class struggle was the divide-up or distribution of the national surplus value produced. Until the 1980s the "global economy" was a marginal affair, and national economies counted for something. In Britain in the 1970s the strength of the working class was such that capitalism could no longer function unless either the working class took co-responsibility for production or its power was broken to facilitate a reassertion of capitalist power. Although offered the first option by the Bullock Report on industrial democracy, the British Trade Unions baulked at the wage implications of self-regulation and co-determination and, as doing nothing was not an option, British society reverted to a re-assertion of capitalist power as advocated by Thatcher.

In Ireland the introduction of the Euro led to some widespread illusions regarding the nature of money.  The explosion in global trade that followed the fall of communism, and the mushrooming of 'swaps' of financial instruments, undermined the common-or-garden understanding of national economics and productivity, and of their relationship to earnings, property and salaries. Money was something that could be conjured in large amounts at no apparent cost. The crash reflects a re-assertion of the real economy.

The Eurozone is an incomplete currency and economic zone. The Germans are currently sorting this out. By joining the Euro, the state believed it was becoming part of what is known as an "optimal currency area". National monetary authority was traded for currency stability, and macro-economic management at national level became a matter of wise fiscal policy (tax management). In the current crisis, national deficits in the real economy have re-asserted themselves, and Eurozone states must deal with this through fiscal policy. Hence the famous FG-Labour disputes over the relative proportions of revenue increases versus spending cuts. Sinn Féin seems now to have grasped this, though its economic proposals will need to develop a bit further before gaining traction.

States and political economies have faced these dilemmas before. In a comparable situation in the 1970s, the Wilson Government in the UK agreed with Trade Union and employers a programme of controlled costs and wages to restore British competitiveness following the financial crisis caused by the collapse of the Bretton Woods system. In the early 2000s, the German Social Democratic Government of Gerhard Schröder did something similar, again through social partnership. In a radio programme in mid-December, the German Ambassador to Ireland reminded Pat Kenny of this when the popular media personality sought to discredit social partnership as part of the Irish problem. The Ambassador suggested that Ireland should re-consider its abandonment of the tri-partite route of managing our way through the crisis through a social pact of Government, Employers and Unions.

Trade Unions need a purpose for themselves. Verbal radicalism and anti-capitalist rhetoric tend to grow when real power and influence decline. The least powerful Unions will tend to be the rhetorically most radical. Since the ICTU failure to convince the Fianna Fáil-Green Government to revive a social pact in 2010 (due to its insistence on ring-fencing current salary levels), speeches by Trade Union leaders have been growing ever more 'radical'. This is a bad sign. 

Despite supporting Labour participation in Government on the basis of holding the line on social and wages policy with Fine Gael (given that the unions no longer have this function), SIPTU has expressed its great dissatisfaction with the December Budget. It is also unhappy with European Central Bank debt policy, and its proposal to the Irish Congress of Trade Unions for a series of street protests about national debt during the Irish EU Presidency when the Council of the EU will be in town, has been agreed to by ICTU. It is difficult to avoid the conclusion that this is an expression of powerlessness. 

Would it not be better for the Trade Union movement to develop a strategy to put a nationally agreed Pact for Recovery in place, and offer to play its part in a strategy in which everything—including the managing down of unsustainable salary levels (which currently is happening through market forces anyway)—must be on the table? The attraction for Government and employers would be the socially cohesive and morale effect of a shared road to recovery. Would it not be a better approach, with trade-offs for salary reductions being secured through co-determining other areas of policy (e.g. social insurance, vocational training, industrial policy, housing, pensions), rather than powerless rhetoric directed at governmental policy after the fact?

C O N T E N T S

Census Conflict.  Pat Walsh
Irish Budget 2013.  John Martin
The Prospect Of BREXIT.  Jack Lane
Readers' Letters:  The Euro Zone Or Britain?  Dave Alvey
Origins Of Capitalism.  Jim Dixon 3,6 Trade Unions:  Time To Grasp The Nettle.  Editorial
The Long Road To Gaza.  Wilson John Haire
Shorts from the Long Fellow (Green Taxation;  Taxes On Pensions;  The Euro Crisis;  Emigration
Remembering The First Dublin Car Bombings.  Jack O'Connor (Report)
The Liberty Hall And Sackville Place Bombings.  Margaret Urwin (Report)
Mad Consumption Patterns.  Report
Fact, Myth And Politics In Ireland's Property Crisis.  Philip O'Connor  (Austerity Report, 2)
Politics Of 'The Famine'.  Jack Lane reviews The Famine Atlas and Tim Pat Coogan's Famine Plot
Belsen And 'The Famine'.  Brendan Clifford  (Part 1)
World Day For Decent Work.  David Begg  (Report)
Working Class Must Stand Up Against Welfare Threat.  NIPSA (Report)
Biteback:  Keaveney's Principled Stand Recalls That Of Michael Bell In 1922.  Manus O'Riordan  (Report)
Does It Stack Up?  Michael Stack (Unemployment Statistics;  Agrubusiness And
Fishing;  Environmental Protection;  Turf Cutting;  Fishing Industry)
Dail Report.  Social Welfare;  The Budget.  Finian McGrath  (Report)
Yes You.  Wilson John Haire (Poem)
Labour Comment:  The Dublin Guilds,  Mondragon, Part 15
Trade Union Notes