Document: Irish success story a social partnership myth

President Mbeki recently quoted from a 2002 paper written by Lucio Baccaro from the International Institute for Labour Studies (linked to the International Labour Organisation), saying that Ireland’s experiment in a social partnership, had turned around the country’s economy. In this article, Irish academic Kieran Allen debunks this myth.

The Republic of Ireland is sometimes held up as one of the great success stories of the world economy. According to the most recent World Investment Report, it tops the index for globalisation and has the fourth-highest foreign direct investment rate relative to the economy’s size. One explanation for this is that Ireland has benefited from its social partnership arrangements. Irish workers have been convinced to regard their employers as partners and, it seems, have been duly rewarded. A new morality tale is offered for the developing world: if there is partnership between all social classes and your society follows neoliberal economic doctrines, you too can be rewarded with economic growth. This is a myth for a number of reasons. Countries often follow the Washington consensus and still are not rewarded with economic growth. They may deregulate, hold down wages and cut taxes on the wealthy and still experience wholesale poverty. Ireland itself followed these policies in the 1980s – and still experienced mass emigration. Its growth only took off in the mid-1990s and that was for a number of specific reasons. US companies, particularly in computers and pharmaceuticals, needed a platform inside the EU to get access to the single European market. A number of them discovered that Ireland offered an English-speaking, highly educated workforce that was comparatively cheap. On top of that, the Irish government cut corporation profits tax to a mere 12.5 percent so the hugely profitable banks paid less tax on their profits than their cleaning women did on wages. In addition, Ireland concluded special agreements with the US government to allow US firms to benefit from transfer pricing for tax purposes. The Celtic Tiger, therefore, was not the result of a social partnership, or even of a deliberate state strategy. It emerged through a particular set of circumstances that is difficult to repeat. Once the boom gathered steam, new arguments emerged to suggest that social partnership brought a kinder and gentler form of neoliberalism. The Irish, it was claimed, had the best of both worlds: US-style jungle capitalism and European-style social solidarity. But this too has proved to be a myth. Under the social partnership, Irish workers are offered very low pay rises, but get small tax cuts instead. (Even the latter have disappeared recently.) Almost every other item in the Celtic Tiger is “liberalised” – except wages, which are held in check by “voluntary” restraint. There are no price controls on building land, no rent controls, and no limit on profits. Only wages are held back. The result has been twofold. Ireland became one of the most expensive countries in Europe with, for example, fantasy figure house prices. A simple house in a working class area now costs between E250 000 and E300 000 (R2 million and R2.5 million). On top of that, the share of the economy going to wages and social welfare has declined faster in Ireland than elsewhere in Europe . The neoliberal offensive has meant that the wage share of the total economy in the EU fell from 72 percent in 1987 to 68.3 percent in 2000. In Ireland , however, it fell much further – from 71 percent to 58 percent. Irish workers have one of the lowest holiday entitlements in Europe . They are subject to continual calls for more flexibility and their unions in effect give employers a free hand to promote measures to intensify work effort. Stress and longer working hours have become an important feature of life. A survey conducted by the Mental Health Association in 2001 found that 73 percent reported life more stressful than five years previously. In the past, Ireland had one of the lowest levels of married women joining the paid labour force. Now three-quarters of women in the 25 to 35 age group are in employment because a two-earner family is a prerequisite for survival. Yet, in line with its neoliberal policies, the Irish state takes no responsibility for providing child care facilities. As a result, Irish child care costs are among the dearest in Europe . The tax-cutting model has had dramatic effects on Irish society. If Ireland leads the race to the bottom in cutting corporate taxes and if workers have to get small tax cuts to compensate for low pay rises, it follows that there is less money for public services and for redistribution. The country’s tax take stands at 33.9 percent of gross national product compared with an EU average of 41.4 percent. One spin-off is that public services are of a poorer quality than would normally be the case in a developed industrial society. Ireland , for example, has spent only 70 percent of the EU average on healthcare over the past 20 years. It holds the record for cutting the most hospital beds per head. As a result, waiting lists for treatment are unnecessarily long and the poor suffer most as they wait longer than those with private health insurance. The unions, which supported the social partnership model, have lost out considerably. Union density has fallen from 48 percent of the workforce to 35 percent today. Many of the large US firms, whose balance sheets benefit greatly from wage restraint, do not recognise unions. Union participation has probably declined even further with few people attending meetings and morale at an all-time low. In a recent dramatic case, the largest union, Siptu, was not even aware that 300 of its mainly migrant members at a major construction firm were being paid just over a quarter of the legal minimum wage! Ireland has much to offer by way of example to the world. During the apartheid era, for example, young Irish shop workers refused to handle South African goods. From James Connolly to Bobby Sands, there is a powerful tradition of resistance to empire and injustice. One example not worth following is the social partnership model. That is, unless the aim is to co-opt South African unions into toeing the neoliberal line.

This article originally appeared in Business Report, May 25, 2005. Kieran Allen is a senior lecturer in the department of sociology, University College , Dublin . He is the author of The Celtic Tiger: The Myth of Social Partnership