Saturday, July 25, 2009

Is "The Irish Economic Crash" Good?

A review of "Ireland's Economic Crash"

Paddy Hackett

Kieran Allen's recently published book is called Ireland's Economic Crash. It
is a book cobbled together from a variety of sources. The book has a
sprinkling of tables and graphs to lend it an authority it does not have.
Indeed the question of the reliability and accuracy of bourgeois statistics
is not even raised in the book notwithstanding the fact that there is much
use made of them. For instance he claims that "today manufacturing
represents just 13 per cent of the Irish workforce.". (Ireland's Economic
Crash; page 37) Kieran's statistics are drawn from a bourgeois source. What
these bourgeois statistics cannot tell us is that although the manufacturing
sector constitutes 13 per cent of the work force it has a very high
technical and organic composition of capital. This means that its labour
power is very highly exploited which means its contribution to the
Republican economy cannot be simply based on the size of its labour force.
INTEL located in the Irish Republic is probably a classic example of such a
highly productive corporation,

The services sector uncritically referred to by Kieran in the book a
frequent number of times is a rather ambiguous bourgeois category. This is
because many of the services are commodity producing sectors while other are
not. This means that many of these services are engaged directly in the
valorisation process and thereby are direct sources of value. This means
that their status is no different to that of the manufacturing sector. There
are other more obvious problems with Kieran's use of statistics which I shan't
go into now. But, en passant, I understand that John Fitzgerald is Garret
Fitzgerald's nephew and not his son as Kieran suggests. (ibid. page 126)

The principal underlying assumption in Kieran Allen's book is that there has
been a corporate takeover of Ireland. This thesis is elaborated in a
previous book of Kieran's called The Corporate takeover of Ireland (Irish
Academic Press; 2007).

Kieran's understanding of the nature of the corporation dominated state
stems from a false instrumentalist and voluntarist theory of the state.
According to this theory of the state because the various lobbies and
committees are dominated by personnel from the corporate sector because it
has more economic power than other interest groups such as farming and trade
union interest groups. In that way the minority interests of the corporate
capitalists are promoted more by the state. This means that to be effective
against the minority interests of the corporate capitalists it is necessary
for a radical left wing government to be supported by a mass
extra-parliamentary movement. This movement, Kieran would claim, would
counter the economic power of the corporate dominated lobbyists, committees
and whatever else.

However it is not correct to suggest, as Kieran does, that there has been a
corporate takeover of the Irish state because parts of that state are
dominated, even if increasingly, by significant members of corporations and
their satraps. Even though not correct concerning other matters, Nicos
Poulantzas was correct when he argued that the state can be capitalist
without the capitalist class having to act as the ruling political class.
The real situation is that the state is capitalist by virtue of the fact
that the state can only act within certain limits determined by the
capitalist mode of production. The state can only function if it has power
to raise taxes and command material resources. So long as the material
reproduction of society is the capitalist mode of production, this power
ultimately depends on the success of capitalist accumulation. If the state
persistently acts against the interests of capital then sooner or later the
conditions of capital accumulation will be undermined and the economy thrown
into crisis. The state, then, would find it increasingly difficult to secure
the material resources it needs to function. Insofar as society is
structured by the capitalist mode of production, the state is always
determined, in the last instance, by the need to sustain capitalist
accumulation. Yet within such structural limits there is always a large
degree of relative autonomy for state policy and political action

Now if capital in the form of corporate capital is the leading and dominant
form of capital it will come as no surprise that the state is determined, in
the last instance, by the need to sustain corporate capital. Yet within
these corporate structural limits there is always a large degree of relative
autonomy for state policy and political action. This provides a space
whereby the state may or may not bear corporate dominated committees within
itself. The upshot is that whether a state contains or does not contain
corporate or non-corporate dominated bodies is not necessarily conclusive
evidence as to whether there has been a corporate takeover of the state. The
personnel engaged in aspects of the state will depend more on the specific
conditions prevailing at any particular time. This means that even in the
absence of any corporate personnel occupying any state agencies the state
itself may have undergone a corporate takeover. Kieran, then, cannot use
corporate personnel as the criterion as to whether political states are
corporate or not. In short his position shares a lot in common with the
theory of State Monopoly Capitalism according to which there is said to be
close personal relations between the monopolies and the members of the
apparatus of the state. The state and the monopolies, it is thereby claimed,
are fused into a single system.

But the larger and more powerful section of corporate capital in Ireland is
foreign. This means, for Kieran, that corporate Ireland has been taken over
by foreign corporate capital. It is a claim suggesting that corporate
capitalism is generally more oppressive on the working class than
non-corporate capitalism. There is then progressive and non-progressive
capitalism and the politics that goes with it. Clearly Kieran and the SWP
want to be on the side of the little man, "the little progressive capitalist".
This had been Sinn Fein's position too until they decided to make British
imperialism its paramour. The SWP are catching up on Sinn Fein.

This can only mean that the Fianna Fail led government no longer represent
the class interests of the non-corporate Irish bourgeoisie. This is because
it is not possible for a corporate state to exclusively represent the
interests of corporate capitalism while serving the interests of
non-corporate capital. Since this corporate state cannot by definition
represent the class interests of the Irish working class the conditions for
an alliance between the non-corporate capitalist class and working class now
exists. Such an alliance can only but be nationalist in character. But
nationalism and communism share nothing in common. This being so Ireland's
Economic Crash is a nationalist work sharing nothing in common with

When it comes to Kieran's use of Marx's work on political economy we are
subjected to conceptual and analytical distortion of Marx's thought. Kieran
claims that ".this is a systemic crisis which arose from a search for higher
rates of profit. Those pressures led to over-production and a speculative
wave of madness in the financial sector, so even if the system revives
again, the same pressures will re-emerge in the future." (ibid. page 157)

But the above is just not true. It is only when the total amount of surplus
value produced fails to compensate for the falling general rate of profit
that an economic crisis breaks out. This is of significance in relation to
outlining the character of the crisis. The falling rate of profit then does
not necessarily spell economic stagnation or crisis. Instead it means the
relentless drive of capitalism towards more and more accumulation of
capital. This is the hidden dynamic that leads to enormous economic
development. It is only when the amount of surplus value produced fails to
make up for the fall in the general rate of profit that the expanding
accumulation starts to breakdown. Incidentally Kieran in his book concludes
that the possible current crisis is unique because it hit's the core of the
global system. But all economic crisis hit the core of the global system. It
is just that that make them economic crises.

Then there is Kieran's under-consumptionist ideology. Underconsumptionism is
the ideology of reformist politics. It falsely suggests that capitalism is
potentially capable of serving the interests of the people.

"The more people loose their jobs, the less money there is to buy goods
produced by other workers. A government that actively intervened could
alleviate this suffering by stepping in where private businesses are
unwilling.The whole economy has entered a downward spiral because of the
cuts, levies and sackings." (ibid. pages 7 and 8)

"But the more they succeed, the more they reduce the buying power of workers
and feed into the problem of over-production. And when profit rates are only
partially restored, this can also lead to reluctance by capitalists to
invest in new plant and equipment. The slowing of investment then lead to
"excess savings" and this, too, feeds into the wider problem of reduced
markets for others" ( 97)

For him taking demand out of the economy by cutting wages further reinforces
economic decline. Now the logic of this false position is that if, on the
other hand, wages are increased sufficiently demand can be raised to such a
degree that they precludes the outbreak of recession. Underconsumptionism
and reformism are inseparably related to each other. Much of the leadership
of the current trade union movement in Ireland is underconsumptionist in its
conception of solutions to unemployment, economic crises or . So Kieran will
not be lost for company. Underconsumptionism suggests that capital can be
gradually reformed by incrementally increasing demand through wage increases
and expansion of social spending beneficial to the working class and "the
underclass". But capitalism cannot be reformed into a system that serves the
class interests of the working class. It is an historically limited
obsolescent social system that must be replaced by communist society if the
needs of humanity are to be minimally met.

It is asserted in his book that because of this falling rate of profit
capitalism must generate a bubble sequence as compensation: "As economic
performance has declined, the system has needed periodic bubbles to add
vitality and growth. From the 1990s onwards, these bubbles played an
increasingly important and disruptive role. There was a stock market bubble
and then a dot com bubble when absurd prices were paid for internet firms."
(ibid page 89)

But Kieran never shows how these bubbles are a product of falling profit
rates. To at least render his unfounded assertion plausible an outline as to
how they occur is required. "As economic performance has declined, the
system has needed periodic bubbles to add vitality and growth." Then if this
is the case capitalism has found a solution to its problems. There is
nothing for capitalism to do but produce continuous bubbles since these
buttress up the system. If these bubbles have been adding vitality and
growth then how can they inevitably burst. If, as Kieran is, an
underconsumptionist then increasing demand through state action should
indefinitely sustain non-collapsible bubbles. But then they are not bubbles.

Kieran informs us that neo-liberalism has failed. Indeed the title of one of
his chapter is called The failure of Neo-Liberalism. "Today this whole
edifice is in tatters, as neo-liberals recant and proclaim themselves
converts to regulation." (ibid. page 71) But one could as much say that
Keynesianism has failed or classicalism has failed. One could say too that
capitalism has failed because of the outbreak of depressions and even large
scale wars. But again this is to misunderstand the nature of the capitalist
system of reproduction. It is through the medium of periodic economic
depressions, and even wars, that capitalism perpetuates itself. Without
recessions or depressions there can be no economic development under
capitalism. Neo-liberalism is merely another form in the history of
capitalism irrespective of its existence as an imperialist ideology.
Capitalist production organised in the form of corporations is just another
aspect of capitalism's economic history. Neo-liberalism or globalisation
never meant the end of depressions. Indeed the present economic depression,
if there is no social revolution, will lead to the consolidation of
neo-liberalism. Those reformist ideologues repeatedly declaring that
neo-liberalism is at an end completely misrepresent the character of
contemporary events.

According to Kieran "it is no longer possible to draw a neat dividing line
between financial speculators and the wider capitalist class. The division
between finance capital and industrial capital broke down a long time ago
and now all corporations engage in 'financial engineering'." (p. 87)

Kieran is falsely suggesting in the above quoted comments that financial and
industrial capital are inseparably integrated with each other. If his claim
was correct then General Motors which has its own financial arm would not be
experiencing acute financial and sales problems. Indeed if finance and
industry were integrated into a unity there would have been no financial nor
general economic crisis.

Again his ignorance of Marx's Capital is demonstrated here. Within the
system as a whole there is a necessary distinction between industrial and
financial capital. Each form pays a distinctly different function within the
economic system. The former is located within the production process while
the latter is located in the circulation process. It is the very distinction
between these two forms within the general unity of the system that renders
economic crises possible.

Towards the end of the book we are presented with the 9-Step programme for
change. The wording may be apt to remind readers of AA's 12 -Step Programme
to alcoholic recovery. In this chapter Kieran wants to have his cake and eat
it. He wants to support revolution and yet support nine major demands that,
he indicates, are realisable under capitalism. If such an 9-Step Programme
is realisable under capitalism then the entire justification for communism
collapses. Either the class interests of the working class can be realised
under capitalism or not. They cannot as Kieran seems to believe sort of be
realisable under contemporary conditions.

Kieran's nine steps to reform is a nationalist opportunist plan. Given the
growing global nature of capitalism today a national plan cannot solve the
economic depression that has engulfed Ireland. The solution to the economic
crisis that has ripped through the Irish economy must be global in character
either from the perspective of capitalism or communism. It is not possible
to introduce a national plan, such as Kieran's, as a solution to Irish
economic problems. Given that the Irish economy is merely a minuscule
component of the world capitalist system radical solutions within a national
framework cannot be realised. There must be a global challenge to capital
from the world's working class. This means that workers in Ireland must
struggle for a united communist federation of England, Scotland, Wales and
Ireland as a platform for the global communist revolution. Despite the
fundamental weakness of the politics of Trotsky he was spot on when he made
the following remarks:

"The forces of production which capitalism has evolved have outgrown the
limits of nation and state. The national state, the present political form,
is too narrow for the exploitation of these productive forces. The natural
tendency of our economic system, therefore, is to seek to break through the
state boundaries. The whole globe, the land and the sea, the surface as well
as the anterior has become one economic workshop, the different parts of
which are inseparably connected with each other. This work was accomplished
by capitalism. But in accomplishing it the capitalist states were led to
struggle for the subjection of the world-embracing economic system to the
profit interests of the bourgeoisie of each country. What the politics of
imperialism has demonstrated more than anything else is that the old
national state was created in the revolutions and the wars of 1789-1815,
1848-1859, 1864-1866, and 1870 has outlived itself, and is now an
intolerable hindrance to economic development." (Leon Trotsky. The War and
the International ; Author's Preface vii)

Nation states promoted the development of capitalism in the past and
constituted the framework, in a sense, for the solution to economic and even
social problems. Today the nation state is an obsolescent political form
that reinforces economic problems while obstructing their solution. The
solution to the present general crisis of capitalism can only be solved
globally whether on the basis of capitalism or communism.

To finish: Kieran Allen's book exposes the opportunism of his politics and
that of the SWM of which he is a leading member. It is an obscurantist book
in which he likes to have things both ways. This allows him to be a winner
irrespective of what side wins. He advances a plan of action which he
suggests is realisable under capitalism while at the same time he seems to
mildly suggest that it may not be quite realisable under capitalism. He
claims that neoliberalism has failed while hinting that it has worked. His
aims are thereby rendered ambiguous which confuses workers rather than help
provide them with clarity. He follows the same approach in his economic
analysis. He claims at one moment that the falling rate of profit is the
cause of the crisis and then at another time hints that some other factor.
At another point he bellows out that a tiny minority of bankers, developers
builders and the Irish government are responsible for the latest crash while
he contradictorily hints that other factors may have played a role. Although
his book is a source of great confusion it is clear too that Kieran may
himself be the unfortunate victim of great confusion. In his book Kieran is
all over the place making it difficult to pin down what it is he is really

Paddy Hackett