State and workers’ power in the Irish city-state

The recent ruling of the EU’s General Court in favour of Apple and the Irish state has led to a renewed discussion around the future of Ireland’s tax haven status. Michael Rafferty argues that Ireland’s low-tax arrangements form one part of a new ‘relational’ economy centred on Dublin’s financial/professional/tech industries and the new, atomised labour market patterns it engenders. This raises important challenges and opportunities for the institutional left.

by Michael Rafferty

Irish neoliberalism is on the up. It almost always is. And the current version, a new government with a seat on the UN Security Council, the presidency of the Eurogroup and an historic civil war axe-burying ‘green’ makeover, is strutting its stuff on the international stage. The stern rebuke given by Irish voters in February on the very real negative impacts of the post-Tiger growth model is now a distant memory amid the international plaudits for marginally more decisive action than the UK and USA on coronavirus. Come what may, the tax-haven configuration centred around its multinational corporate clients in Dublin’s docklands, its financiers and property tycoons, is sacrosanct. All imaginable alternatives occur within this narrow window; even the previously unimaginable implications of a global pandemic do not threaten it. There is simply no conceivable deviation from the trajectory which began in 1987 with the Irish government’s conversion of Dublin Corporation land – which, in poetic irony, was earmarked for public housing – into the fiscal vacuum of what is now the IFSC.

Upsetting the Apple cart

The economic hubris displayed following the tentative outcome of the Apple corporate taxation case belies a flimsy legal framework for the Irish tax-haven, and falls flat in an increasingly inhospitable global political environment for tax avoidance. The ‘Single Malt’ was the corporate response tolerated by the Irish government for years after the expiry of the ‘double Irish’ fix, itself a state-assisted doubling-down of Ireland’s tax flexibility following the 2008 meltdown. Shrewd use of ‘brass-plate’ real-estate, consultancy or financial firms as conduits to offshore accounts developed by 2015 into wholesale repackaging of giant corporate accounting systems to report profits from ‘intellectual property’ registered in Ireland. This technically mushroomed Ireland’s GDP by 34.4% in Q1 2015 alone (the highest ever single quarterly increase in the OECD), revealed in 2018 as being inflated by the profit-shifting activities of multinationals such as Apple.

That these eye-watering amounts were being extracted via Ireland not only made a mockery of GDP as being any kind of yardstick for phantom investment in Irish economy, but posed unavoidable political problems for the principle of the European single market and stuck in the craw of European capitalists unable to avail of such facilities in their member states. The innocuous sounding EU ‘tax package’ announced on 15 July 2020 is seen as tonic for several rather overworked tax-dodges in several member states, but the threat of regulating and taxing digital platforms operating in Europe rings alarm bells in the Irish tax haven, at least in its current form.

While the Irish government is likely to use all of its diplomatic wherewithal to mitigate its effects and bureaucratic alchemy to make its tax code compliant, it is also confronted with a slowdown of globalisation and a plateau in the digital platform economy – the tide that keeps the Irish tax haven afloat.  But rather than using the tax it would gain and make the necessary structural investments towards a more robust economy, the Irish bourgeoisie can be relied upon to fight tooth and nail to defend the unproductive system they have. It’s a strategy that has worked for generations.

Why has the hegemony of Irish neoliberalism been so impermeable?

The resilience of Ireland’s neoliberal hegemony is not built on its adherence to ‘fiscal discipline’, devotion to free-market ideology, or on economic ‘success’ at any cost. Rather, the onset of the Celtic Tiger was a permanent volte-face in Irish industrial policy away from the decentralised, export-oriented and comparatively diverse (but incomplete and declining) economy developed in large part by the Industrial Development Authority since the 1970s. The Irish miracle would be focused sectorally on financial, professional and other advanced services, and geographically centred on the capital city, back then considered a postcolonial ‘backwater’ among its European comparators by dint of the deep recession of the 1980s.

Amid the new geopolitics of the 1990s, both on the island of Ireland and globally, this decisive shift would produce a major transformation of the Irish economy and society, particularly after Ireland’s incorporation into the Eurozone in 1999. Enormous national GDP growth, Dublin’s ‘alpha-minus’ and top-ten global city rankings, attracting giant corporate HQs through fiscal deals, inward migration and population growth in this period were only slightly interrupted by the 2008 financial crash and subsequent austerity and austere ‘recovery’ since 2016.

The impact of neoliberalism in Ireland is frequently understated, and sometimes essentialised as a local iteration of a global phenomenon involving privatisation, market-oriented (de-)regulation, globalisation and financialisation. More critical accounts have identified the interplay between Ireland’s arrested industrial development and urbanisation, idiosyncratic post-colonial politics and contemporary self-positioning as ‘somewhere between Boston and Berlin’. This created favourable conditions for an enthusiastic uptake of neoliberal ‘governance’ in the Celtic Tiger years, compared to states where the post-war Fordist welfare state was more fully developed.

But what makes Irish neoliberalism comparatively resilient is that it reconfigured the economic and social geography of the whole country, and inverted what was previously a system of national government which benefited a longstanding rural/provincial bourgeoisie into one which now instrumentalises Dublin as a spatial conduit, connecting Ireland’s monetarists to the emerging circuits of financialised global capital of the late 20^th century. The spatial ramifications of this have been considerable: since 1991 the population of the Greater Dublin Area has grown by around 2/3 to represent 40% of the national population without commensurate improvements in infrastructure, and with the deepest and most sustained housing crisis of a city of its size in North-Western Europe.

Small state or city-state?

As with almost all neoliberal transformations, the primary driving-force for Ireland’s ascension to tax-haven status is its national political system. The OECD describes Ireland as one of its most centralised member-states, meaning that government (or ‘governance’) at the national level retains control over many areas of public policy which are elsewhere devolved to local or regional authorities. This situation gives the national government unparalleled leverage over the development of its single major urban centre, which it has, for example, used in 2012 to designate the ‘Docklands Strategic Development Zone’, fast-tracking the required level of office development for FDI with reduced planning scrutiny. Economic data produced by Ireland’s Central Statistics Office (CSO) shows that more than 50% of Ireland’s GDP (for want of a better measure) derives from economic activity in Greater Dublin. Gains arising from property and other financialised areas of the economy outside the city in large part flow back to Dublin through banks, mortgages and other financial products where they are reinvested (read ‘extracted’) into what financial geographer Manuel Aalbers calls the ‘quaternary circuit’ of global capital. 

These measures, taken to heighten Dublin’s global prominence firstly as a financial and professional services (and now also ‘tech’) hub exist as part of a national strategy notorious for its bending of the rules of the European single market on corporation tax and state aid to facilitate US, EU and, increasingly, Gulf capital. That Dublin now features on the GawC Global City index as an ‘Alpha-minus’ city (alongside Luxembourg, New Delhi and Vienna), and prominently in other ranking systems of urban competitiveness signifies the ‘success’ the of the architects of this situation. But the gains are often extracted entirely from the Irish economy, and are commensurate with the costs imposed domestically through unaffordability and austerity in welfare and public services.

In historical comparative terms, the magnitude of economic transformation owing to the wider process of financialisation of the Irish economy, in parallel with the state-led conversion of Dublin into an emerging urban magnet for footloose global capital, easily dwarfs that of Ireland’s tiny internal market being opened up to the Common Market in 1973. It is for these reasons, and some others, that it is appropriate to understand that the Republic of Ireland now operates competitively as a city-state in the global economy.

This type of rapid urban transformation of small or medium size places towards positionality in the global system of flows under capitalism is researched by geographers in ‘relational cities’, a categorical term referring to cities which have emerged under financialised capitalism as nodes between local, regional and global economic circuits not just of finance, but of goods, services, people, culture and information. ‘Relational urbanisation’ describes the process of adaptation involved here, which is contingent on particular governance features and historical trajectories, and relevance to the management of capitalist flows. Examples relevant to this ‘relational city’ category are commonly recognised as offshore or micro-state ‘tax haven’ economies (such as Panama City, Luxembourg or Singapore), whose relatively small, wealthy populations and unique geography represent a rather barren environment for alternative politics.

But Dublin finds itself caught between two worlds: hugely transformed towards global relevance to financialised capitalism and as the major city on an island of over 6 million people, with a large-but-weak labour movement and a century of working-class politics (even if the rest of the Republic industrialised somewhat later). The relevance of radical alternatives to (or within) Dublin’s relational urbanisation is therefore far higher than in the tax-haven offshore micro-states with which it finds itself in competition. Why, then, do socialists and progressives not see radical potential among the new labour profile this relational urbanisation model brings into being? Why is state power not regarded as a viable instrument for a more equitable economic configuration?

Labour power

One of the most visible aspects of newfound global prominence is the attraction of a new, international labour profile. The remaking of cities to attract financial/tech/professional ‘expats’ is an example of the ‘creative destruction’ inherent to this extreme process of neoliberalisation, seen in the proliferation of luxury housing and avenues for consumption in expectation of an incoming expert bourgeoisie. Gentrification is prevalent among the mechanisms employed to clear out ‘old’ working-class communities around Dublin’s docklands, to be replaced by the new cadres of higher-paid (and higher-paying) workers in the ‘relational’ economy.

That a city which becomes a globally-relevant financial hub attracts upwardly-mobile yuppies from the hinterlands and international ‘expat’ types is almost a banal observation: it comes with the territory. But what is serially overlooked in almost all relational cities is the labour intensity of maintaining the sterile glass office towers, soulless overpriced restaurants and glibly kitsch wine bars which come with the new, transient bourgeoisie. In addition to attracting a new layer of bourgeoisie, relational urbanisation quietly creates an alienated, detached and atomised working-class (both white collar and blue collar), which contends with heightened unaffordability, long commutes and precarious, hamster-wheel employment now common to the service economy. Yet much more work remains to be done to unionise the army of labour required to maintain the corporate ‘global city’, alongside current struggles and new advances in the more established parts of the city’s economy.

State power

A similar paradox seems to exist regarding state power in the small neoliberal (city-)state. On one hand, the national state has ‘made’ an economy around relational urbanisation, not only in the development of the Docklands but with e.g. the establishment of Dublin’s airport and ports as the sole hub on a national ‘spoke’ system of transport infrastructure, melding it into the system of flows of global capitalism. The Port Tunnel, the Irish government’s most expensive undertaking, exemplifies the new primacy of Dublin Port at the expense of Rosslare and Dun Laoghaire. On the other hand, the state’s limited organisational durability is routinely tested, whether in European courts over its fiscal policy or more practically in the coronavirus response. Leaning forever on a staid postcolonial provinciality operating at a global scale, the Irish state rests on its laurels with almost foolhardy confidence, in passive denial of its fragility. The ‘niche sovereignty’ it has used to utterly reconfigure itself since 1990, and now flaunts around the Eurogroup and UN, suffers from the same lack of robustness as the economy it created.

Yet the attitude of much of the Irish left to state power is that the forces that stop it from achieving it are too strong; and even in power the state would be incapable of something as humdrum as a public housing programme, let alone taking on the corporate tax policy. Those downbeat assessments are all too common, yet do not reflect the experience of the last thirty years: Ireland has a strong centralised state with easy access to plentiful capital to address its myriad problems of infrastructure and equality.

Conclusion

Irish neoliberalism might be looking up but it is enjoying the last days of its unquestioned hegemony. But it is not currently progressive, left or working-class forces which are bearing down on it. Epidemiological and economic externalities are breathing down the neck of a city-state economy in a national system defined by its smallness, centralisation and reticence to invest in an economy in desperate need of radical state intervention. Its systemic and current vulnerabilities, partly a function of its scale and partly of its operating model, are also ripe opportunities for those in labour and progressive/left movements. The contradictions of Ireland’s tax-haven city-state and the externalities it faces in its global game are finally opening up a left-right divide in Irish politics long overshadowed by traditional forces. But the Irish Left needs to rapidly develop counter-hegemonic imaginaries and strategies to illuminate them, and to branch out of the traditional areas of trade union, political party and community organisation to realise them.

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Michael Rafferty is a PhD researcher in the Department of Geography and Spatial Planning, University of Luxembourg.

Time to reflect, build and organise

by Laura Smith

The Labour Party is going through a process of rapid realignment, in which many of the key policies and ideological hallmarks of the Corbyn project are being swept aside. But, as Laura Smith explains, those on the left of the Party are busy with the difficult and necessary task of reorganising in working-class communities. 

Back in June 2017 I found myself in a situation that I never thought was possible when I was elected to be the Member of Parliament for my hometowns of Crewe and Nantwich. I was always the outsider to win, and frankly never really believed that someone from my background, with no experience of mainstream politics, could find themselves sitting on the green benches in Parliament. At first, I must admit, I let the whole place, the whole moment overwhelmed me. During my first speech my knees knocked together with nerves and the weight of imposter syndrome sat heavy on my shoulders. My father quickly made me buck up my ideas, stating quite matter of factly that I was there to represent my class and my home and in the nicest possible way, get a grip.

One of the thoughts that played on my mind was the question of delivering change for those that I represented. Always a more difficult thing to do in opposition of course, but I had made election pledges that I intended to keep. All too often politicians fail to keep to their promises, which has fed into the apathy and mantra repeated frequently that “You are all the same.” For me this included, critically, ensuring that Labour honoured the party pledge to respect the result of the 2016 EU referendum. Imposter syndrome aside, it was exciting to be part of the first real opportunity for an actual socialist with principles and consistent politics to become Prime Minister.

An unlikely route

The parliamentary road to socialism has always been an unlikely route, because of course once elected, MPs immediately fall out of the control to a degree of those who elect them. The party whips dictate the route forward-and as we all know the Labour Party has had a rocky relationship with socialism to say the least. But surely this time under Jeremy Corbyn there would be a greater chance than ever before of real substantial change. The popular policies of the 2017 manifesto, especially with regards to how the economy would be run gave me hope. Little did we know back then the degree of internal sabotage that is evident in the leaked Labour report, which may have even caused us to lose the 2017 election.

Fairly quickly after joining the Parliamentary Labour Party (PLP), the blockers began to fall into place. The right-wing media, teamed with the Tories and the right of the Labour Party started to put the wheels in motion to stop any chance of that near win of 2017 turning into a majority win for Corbyn in 2022. I also soon began to realise what I had feared before being elected was in fact largely true. The real decisions that matter in our lives have very little to do with our elected representatives, and instead are often made outside the formal political processes and institutions. They happen in the boardrooms of capitalist corporations, where MPs really have little influence – except of course where being an elected politician is just a second job to their real positions as directors and shareholders.

The MPs in the theatre of Parliament were sent to goad, to undermine and to ridicule by those angered at the thought that their extraordinary power and wealth might be disrupted. A pesky socialist in a scruffy suit with his mob of activists was not going to get in the way of the life that they were accustomed to. Brexit was our opportunity on the left to really change the set up in the way that this country is controlled, with a focus on democratic control, taking away the power of unelected bureaucrats. We knew the vote to leave was for change to the status quo. But we blew it.

Socialist advance outside of the EU

The two and a half years that I was there were dominated by Brexit. The failure of the Labour Party to explain what leaving the European Union could mean for socialism resulted in a party at war, the public losing trust and ultimately the downfall of the only real chance we had to have a truly left-wing Prime Minister. It was hugely frustrating – heartbreaking in fact – to see the Labour Party become such an obstacle in the democratic vote of the referendum, falling into every trap that would destroy what trust we had left with our traditional core vote. To witness it first-hand under a left-wing leadership was puzzling to say the least, but the reality of a PLP who did not support the left meant an opportunity was seized. Some, like myself, tried to make the space for a debate around the opportunities for socialist advance outside of the EU, but it was never taken. Labour’s position became ever more ridiculous.

Back in December 2018 I led a debate in Parliament raising issues of public ownership bringing to attention the dispute at the Royal Bolton Hospital. The Labour Party should have been all over the fact that in the legal case of Alemo-Herron, the ECJ ruled that private employers that take on the provision of public services are not required to pay transferred staff the pay rises they would have had if they had remained in the employment of the public sector. By prioritising the rights of private companies to business freedom over the rights of workers who find themselves in that situation, EU law creates a financial incentive to privatise our public services. For those on the left, there was also the haunting impact of the Viking and Laval cases, which placed the rights of business above the rights of workers making the right to strike even more difficult.

The official Labour position was that privatisation had to be reversed and stopped and anti-trade union laws repealed. At the same time many of the shadow cabinet actively clung on to a project that would never allow them to fulfil many of the policies that had made the manifesto so popular in 2017, instead favouring to remain in the EU. For me respecting the referendum was not to retreat into isolationism, protectionism and nationalism; on the contrary, it could herald the beginning of a new internationalism. An opportunity to actually implement the manifesto pledges ‘For the Many’. However, rather than shaking up the system, challenging the establishment and implementing our policies, we were going to be left only able to tinker around the edges.

The final straw

Even if the majority of the Parliamentary Labour Party did not particularly want to achieve real radical change, I could not understand the electoral strategy that they were taking. Many of those who were actively pushing to overturn the referendum result were representing strong Leave seats like mine. One thing I had concluded almost immediately after the referendum, was that to ignore the result in 2016 would be a profound and unforgiveable mistake. Research conducted by Lord Ashcroft at the time had concluded that the three lowest social groups voted Leave by a majority of two thirds.

In that same poll, the single reason most frequently given for voting to leave was the principle that decisions about the UK should be taken in the UK. This reflected the sense within many communities that they had increasingly lost control over their lives to the remote chambers of Westminster and Brussels, and that this was at least partly to blame for their diminished material conditions. Just one year later, more than 80% of voters cast their vote for parliamentary candidates representing parties promising to respect the result of the referendum. It was no surprise to me that after extensive Parliamentary shenanigans, and manoeuvres to pincer Labour politicians into following a disastrous second referendum campaign that the defeat in December was so predictable and particularly brutal for those of us who had tried to do something about it. It is also worth noting that the recent Labour Together report confirms that support for a second referendum was a major factor in the loss of traditional Labour communities, and that this formed part of a longer term ‘realignment’ of the Labour Party’s politics that began with the Blair era.

The fact remains that the result in 2016 was a demand for change by those who benefitted the least from our economic status quo. What is more, it was an expression by a majority of the electorate—however small and for whatever reason—that change was best achieved with the UK outside the EU. The Tories incredibly became the anti-establishment party whilst the Labour Party turned its back on the very communities it was once created to represent. Trust that had worn down over decades now eroded. In 2019 many broke the habit of a lifetime and put a cross in the Tories’ box. This is something that will not be won back without a massive amount of effort, and in my opinion can only be built up over time and by demonstrating results.

No quick fix

The question the Labour left is now asking itself as it splinters into a million pieces is ‘What do we do?’ ‘How do we save this?’ Disorganised, disorientated, and disillusioned. There is no easy answer or quick fix and accepting that is the first hurdle. This must be a major time for reflection for all of us on the left: to move forward there must be an understanding of what went wrong and acceptance of the limitations of Parliamentary politics in its current form. It is becoming more unlikely by the day that the Labour Party will anytime soon be a vehicle for socialism in Britain. But it is also clear that it can and must play an important part, in the same way the wider movement must. 

The Covid-19 crisis has shown us both the miserable inefficiency of a hollow state dependent on dodgy outsourcing companies, and the huge difference that communities can make acting in the common good and looking out for each other. Climate change and the other challenges we face will make this clearer still. The need for a change to the way this country operates is not going away-it is becoming greater. Almost daily people are being faced with the ugly reality of a world controlled by capitalists and the brutal injustices the system creates.

Building the working-class movement

This is why one area that I am happy to plough my energy into is the No Holding Back initiative that was born out of the Northern Discomfort pamphlet created by Jon Trickett and Ian Lavery, two of the MPs who pushed against the disastrous change in the Brexit policy whilst in the Shadow Cabinet. Together we are focusing on the question of how to regain trust and start to deliver for our communities again. We cannot allow policies and socialist ideas to just be dismissed and smeared by a powerful right-wing machine. Our mission is to build a diverse working-class movement that unashamedly puts the concerns of our communities and people at the heart of what we do – yes as Labour Party members, but also as trade unionists, socialists and as a wider movement. We need to give a voice to working-class socialists and ensure they can access the training and opportunities that will build the confidence to deliver a new generation of activists and candidates at all levels. Our focus is on empowering these people to embark on creating political education groups, and developing a community organising model, something that was maligned by elements of the Party’s right wing. We are focusing on bringing socialist politics to change our communities and our country for the better, whilst campaigning around policies that would benefit the many, winning the argument and making sure that they are believable.

The threats posed by the rising far right and the ongoing crises of capital mean that strategic mass mobilisation against the government and strengthened rank and file organisation in the workplaces is essential. The growth and speed of the Black Lives Matter movement mobilising across the world demonstrates how even in a global pandemic there is a clear desire to join together and fight against injustices and for change. We have of course already seen this happen with the climate justice movement that has become more active over the last few years. This movement will without doubt continue to grow as climate change is once again pushed to the sidelines in Parliament when it is arguably the biggest and most critical challenge our globe faces. 

Over the last few months, we have also seen trade union membership across the country swell, with workers recognising the likely struggles they are facing into. It is now essential that the unions educate their membership on the need to organise collectively and campaign rather than just see it as a monthly subscription to an insurance policy. The trade unions must also now work with one another to campaign and organise on key issues, supporting one another in what will undoubtedly become a more hostile period of time as businesses restructure and do everything that they can to protect their shareholders’ interests over their workers. The left desperately needs to return to the movement we were before Jeremy Corbyn became the leader, with better political education and understanding of what it is we are trying to achieve.  We must stop looking to the Parliamentary Labour Party and politicians in general to shape the future. As I have said many times politics is everything and everything is politics, and if only the people realised the power they have the policies that would benefit us all would materialise far quicker.

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Laura Smith is a Labour Party Councillor for Crewe South on the Cheshire East Council. Between 2017 and 2019 she served as an MP for Crewe and Nantwich. She is also an active member of Unison and Unite trade unions.