The effect of the
Common Market on a dependent economy very limited.
iii) The land tenure system created a hierarchical division of labour within agriculture whereby the small farmer was constrained to the arduous and meagre end of production (i.e. breeding and rearing) while the capitalist farmers monopolised the speedy and lucrative end (fattening and exporting). Under these
The recent Brussels summit of Common Market premiers was dominated by two questions - Britain's repayments and Irish opposition to the proposal to limit milk and dairy production.
The final resolution of the problem for Ireland was in the final deal that allowed a modest growth in Irish milk production of almost 5 per cent this year, although the overall aim is to limit production and impose penalties on countries or producers who exceed the quota.
The article below looks at the effects of EEC membership on the Irish and explains why maintaining the dairy industry is top priority economy:
for the Irish government.
Brendan KELLY
In May 1972 a referendum in Southern Ireland resoundingly endorsed a proposal to join the EEC. If recent opinion polls are anything to go by, then that initial euphoria has completely evaporated.
The Irish population is now reputedly amongst the most discontented of any member state with the EEC.
The reason is not hard to see.
The general living standards in the South are
30% below the EEC average.
Irish workers, who put in the longest working hours (apart from Greece), are the lowest paid workers in the Community. And the small farmers who earn still less than workers are even worse off.
It is not simply low living standards which cause resentment but the ever increasing disparities in wealth and income distribution.
A mere 5% of the population owns three-quarters of the private wealth while 10% of the population takes home a quarter of the national income.
Grinding poverty stands in contrast every-
International Viewpoint 23 April 1984 where to the sumptuous living of a tiny elite.
This picture become more revealing when put in the context of a relative worsening of Ireland's position vis-a-vis other European countries since EEC membership. The widening gap can be judged roughly by the GDP (Gross Domestic Product) index which fell a further 4% behind the EEC average between 1973-79. This trend points to the fact that EEC membership, rather than fostering modern capitalist development in Ireland, has in fact exacerbated the economic contradicitions left by Britain's previous imperialist exploitation. Heritage of the past
The Irish economy was moulded largely to agricultural production under British rule. 1(1) Moreover, agricultural activity was geared almost totally towards supplying the British market with cheap meat and dairy products. This kind of extensive farming implied the need for agrarian reform along the lines of large conditions the cyclical crises of Irish agriculture tended to be more sudden and deeper. These crises also tended to fall more firmly on the small farmers.
iv) Extensive farming also implied the necessity to minimise the direct cost of land (and property) ownership. This dictated the need for an environment of minimal taxation. State involvement in the economy was initially restricted and when the level of taxation did begin to rise, its burden was shifted disproportionately onto an already impoverished population. Social needs became heavily dependent on private institutions (mainly religious) and politics took on a distinct clientelist colour.
The Irish economy in the first half of this century was therefore dominated by an elite capitalist farming sector which fed off small, semi-capitalist farming and depended on British markets; a prosperous (if unadventurous) financial sector integrated with the British capital market and with no investment in industry; a merchant sector also dependent on Britain; a small sector of industry consisting of diminutive enterprises catering for the domestic consumer market; and a small sector of exporting industries, based on food/drink, which was largely
After the Treaty of Independence the South became the Irish Free State, a Dominion in the British Commonwealth until 1949. The constitutional amendments of 1937, however, stripped this status of all but its most formal meaning For remained neutral during the Second World War.
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EMILL
foreign-owned or controlled.
This state of affairs led to repeated periods of stagnation culminating in a profound malaise during the 1950s. The alternative possibility of growth was to adopt a strategy of more comprehensive integration with international imperialism. This became all the more urgent in the 1950s because possibility of Britain joining the EEC was mooted. In 1961 a decision to seek membership of the EEC was readily supported by the two major bourgeois parties, Fianna Fail and Fine Gael.
EEC membership was sold to the Irish of economic grounds. It was argued that the contradictions of agriculture would be painlessly substantially higher stable prices; foreign capital would pour in and create a spin-off effect which would lead to a sound industrial base control; living standards would increase enormously
La comprehensive social welfare system would be possible. This was the promise of final de-colonisation.
would at last take its place among the nations of the world'.
EEC membership did indeed stimulate the Irish economy to some extent. But it could not overcome the forces of chaos torpor and social blight. Agriculture-artificial growth
Within the agricultural sector, entry into the EEC gave rise to historically unprecedented levels of investment and output plus some dramatic windfalls in income. (2) Yet behind this apparant suecess story lies a grim tale.
Initially price rises (up to 300%) sent Irish farmers into a flurry of modernisation and expansion. But given that the EEC is almost self-sufficient in beef and has a surplus of dairy products -which together constitute 68% of Irish agricultural output - the impact of the original price incentives was
From the mid 1970s prices began to level out.
This setback was compounded by a negative turn in the input-output price ratio. Despite a reduction in the use of significant bites out of farm profits.
After the initial hectic expansion, a new phase of crisis set in. For the past decade, as a whole, farm income in real terms has remained at the pre-entry level. Growth rates have tapered off and since 1978 have declined to an historic low. The nature of land tenure has remained the same and the variation in farm size has hardly changed at all. The composi tion of output and the division of labour between various groups of farms has stayed virtually as before. What has happened, however, is that the contradictions of agriculture have sharpened without any fundamental change in the structure of production. Insofar as the potential for such change did emerge, it has tended 16
Some farmers do well in the EEC (DR) than any long-term solution.
To get the full story it is necessary to penetrate beneath the surface veneer of
During the period of EEC membership the artificial support system of European agricultural policy has intensified a number of distortions in Irish farming which are concealed by statistical
Income. Agricultural income has been static in real terms over the past years. But within this context there have been striking changes. The two cattle crises of 1974 and 1978 played a major role in levelling out the overall returns to farmers. However, the EEC intervention support for beef ensured that the burden of these disasters would fall disproportionately on the breeders and rearers of cattle. The big capitalist farmers were able to sell their beef at guaranteed prices through EEC intervention while at the same time refusing to purchase any more young cattle for fattening. The bottom fell out of the market therefore only for the medium and, especially, small farmers. consequences for the viability of their
Today over half the income agriculture accrues to one fifth of the
*The fact that the average farm wage (one of the lowest in the EEC) gives an idea of the penury in which 80% of
Growth. Output fell dramatically to around 1% per annum after 1978. main feature of this trough was a huge the national cattle herd which fell by several hundred thousand, back to its 1970 level. Parallel with this, there has been a shift by big farmers into having a greater concentration of cattle on small farms. Indeed, an increasing number of small farms produce nothing but cattle. The decline of the sector therefore means that the number of farms producing absolutely nothing is bound to grow.
The structural anomaly is worse than that however. The fortunes of beef and dairying are interrelated. An important part of the viability of dairying depends on the provision of cows to produce calves for beef output. The shift from beef to dairying therefore closes off a vicious circle rather than opens up new
This vicious circle has become more significant recently. The medium sized milk producers have received some relief from the crisis mainly through subsidies to calves for beef breeding — the aim is to support dairying while renewing the cattle herd. At times the prices for such calves have been astronomically high. But there is no likelihood of significant beef price increases in the foreseeable
The market for calves is bound to collapse. This time there will be serious consequences not only for the small farmer purchasers but also for a large part of the dairying sector - this at a time when the milk Super Levy axe is about to
Land tenure. Land continues to be as immobile as ever despite a rapid fall in prices which in the mid-1970s were the highest in Europe. Over the past decade the average size of holdings have increased by only 2 acres. The effects of EEC membership have intensified this problem.
On the one hand a high level of debt servicing and general uncertainty makes the big farmers reluctant to purchase. To meet this situation they are turning
Garret FitzGerald, leader of Fine Gael and prime minister, recently stated that he consid ered the Common Agricultural Policy (CAP) as, 'one of the cornerstones of the Community. It is a lot more important for us, he continued, than for any other country. Participation in CAP has freed us from dependency on the policy on food prices pracuisea Great Britain, which had prevented the growth of our agriculture.' Le Monde, May 28, 1983.
International Viewpoint 23 April 1984
(albeit marginally) to a more intensive use of land rather than augmenting their holding. The problem of debt is the most immediate and fundamental cause of this. Farm indebtedness rose from 15% of total indebtedness in 1970 to a record
Farm indebtedness represented 40% of farmers annual income in 1970 and had increased to 120% by 1980. This debt is spread across the whole farming population but is concentrated in the medium and big farmers.
medium and small farmers, on the other hand, are gravitating towards subsistence farming. prepared to accept an income far inferior to the average wage. Changes in market prices for products or land do not exert substantial pressure on them to leave
Some 50% of farms, on one of the land farmed, contribute nothing.to growth of new output. bulk of growth is produced by 20% of
The 30% of borderline cases are particularly threatened by current
There is a real possibility that 80% of farmers could end up in the subsistence/part-time category. This will, under conditions of family ownership of
Combined with this, the division of labour between big and small farmers is roughly defined on a regional basis. The consolidation of small and medium farms into viable enterprises would have to take place through a differentiation among small and medium farmers themselves. The deep depression in which these groups have languished, virtually rules out such a struggle. The structural contradictions involved in the division of labour and the nature of landholding is likely to remain unchanged for some considerable time to come. Fool's gold from multinationals
The implications of the situation in agriculture will be enormous for the Irish
At the economic level, agriculture employs directly or indirectly 30% of the national labour force, accounts for up to 45% of output in the goods sector, and represents 50% of net
At the social level, nearly half the population lives in rural areas and it is there that a considerable section of industry, particularly manufac turing, is supposedly one of the big success stories of EEC membership. the 1970s manufacturing output grew at a rate of 4% per annum compared with
But this growth exhibited a number of defects and has caused more problems than it solved.
Manufacturing has undoubtedly creased its weight within the economy. But much of the growth is superficial. Away and by far the most dynamic component of this sector has been the foreign multinationals. Throughout the 1970s Southern Ireland easily attracted foreign firms (relative to population size) International Viewpoint 23 April 1984 with other EEC countries. These firms now employ over a third of the manufacturing workforce and account for 70% of exports. Indeed the significant growth of manufactured exports during the 1970s was almost exclusively generated by the overseas multinationals.
Nonetheless, this performance does not give much hope for long-term development. The performance of the multinationals in Ireland is strikingly similar to that in other so-called 'developing' (i.e. neo-colonial) countries:
Linkages with the rest of the economy are extremely low - only 16% of their inputs are purchased locally. In some branches, such as chemicals, only 3% of raw materials are purchased in
They are generally low skilled assembly operations and for the most part low-pay industries. Their valueadded content is extremely low.
They are generally small plants with restricted potential for employment - an average of 100 jobs per plant.
In addition to this very weak spinoff effect, the multinationals actually create barriers to growth:
- They supply only a third of the capital needed to set-up. Thus, they are in competition with local industry for the rest.
90% of their profits are tax-free -drastically. In tion) still exists.
ironic that the multinationals which dominate exports are a main contributor to it. Certainly in the short term, with the purchase of plant and material from capital snapped up in Ireland (two thirds of setting up capital and importers of large initial stocks, they contribute heavily to the payments deficit. This is probably true in the long term as well, given a steady departure rate and the constantly high proportion of new companies in this sector. Huge borrowing
As for the rest of the manufacturing sector - indigenous companies - it contributes relatively to economic growth and is dependent largely on the domestic market. The only other significant sector of industry is building and construction. It usually employs 10% of the labour force and contributes output at around 20% of the GDP. Since this sector depends heavily on developments in industry and agriculture and on the level of consumer and government spending, it is hardly surprising that it is going through the worst crisis in forty years. At the moment nearly half the workforce is
With over one million square feet of office space and three million square feet of factory space lying idle and with a thriving market in secondhand housing there is little hope of an early revival.
The most sobering aspect of the situation in industry is that a full reckoning with the results of reliance on foreign investment has still to be faced. A contraction of multinational operations is now underway. Most of the foreign owned plants in Ireland are subsidiaries of companies at the bottom end of the multinational spectrum (only a handful of the 800 firms figure in Fortune's top 500). At the best of times these firms had a redundancy rate of 30% over ten years. Now the rigours of recession and the general climate of depression is taking an even greater toll. A recent survey indicated that a quarter of Irish based foreign firms are already considering relocating elsewhere. On top of this, Ireland's share of outside investment coming to Europe has declined steadily over the past
This process is likely to accelerate in the future. The long-term decline in the economies and labour costs of some of advanced European countries notably Britain - plus accession of
Portugal to the EEC will competition for the location of multinational subsidiaries. ago reached the bottom line in the package of grants and concessions it can offer. The creation of 80,000 multinational has cost the Irish scope for increasing the bidding.
Under the lengthening shadow of this impasse a major debate on reorientating industrial strategy is in progress. The consensus emerging from this debate is in
17
favour of turning Ireland into a base for the provision of international services. The latest ten year plan of the Industrial Development Authority (the government's chief "job creating agency') foresees no more than 10,000 manufacturing jobs being created over the next decade. The development of luxurious medicare facilities and banking enclaves is being canvassed as a way of generating wealth to create services-type jobs. The dream of industrialisation is being buried unceremoniously. The so-called *Telesis Report, which initiated the debate on new strategy, commented that previous economic policy had turned Ireland into a 'small export haven'. For the Irish bourgeoisie the logical progression is to turn Ireland into a playground for the international jet set.
The way in which economic contradictions under conditions of EEC membership have sharpened is well illustrated in the dramatic growth of a crisis in public finances. Much of the controversy over government expenditure has focussed on current spending. The reason is obvious enough. The current budget has been rising steadily - from 30% of the GNP (Gross National Product) in the early 1970s to 40% in the 1980s. At the same time the current budget deficit has risen from zero in 1970 to 8% of the GNP by 1980.
However, at the same time Ireland has experienced a phenomenal growth in incomes. The high level of expenditure on health reflects a costly and inefficient service with too many small and outdated hospitals (50% of health spending goes on
This situation is maintained largely at the behest of conservative pressure groups such as local bourgeois religious orders and profes-
Although the level of Irish public spending looks satisfactory compared to general EEC standards, it is far from adeneeds of the Irish people. Southern Ireland has:
The greatest proportion of poor in the EEC - a quarter of the population poverty line, which is defined as two thirds of the average income (which is, in turn, only two thirds
One of the highest ratios of pupils to teachers and one of the lowest levels of expenditure on education.
Amongst the lowest use of such items as household electricity, private cars, telephones, televisions, etc.
One of the fastest growing populations and highest dependency ratios (over 40% of the population is either under the age of 14 years or over the age of 65
One of the highest rates of unemployment — at 19% it is greater than the entire manufacturing workforce.
The social situation in Ireland has not improved at all since EEC membership. A survey this year revealed that Ireland breath ahead of regional blackspots such as Sardinia.
The failure of industrial strategy means that there is no economic dynamic which can pull the nation out of this social backwater in which it is now floundering. On the contrary, the crisis of public finances will aggravate the situation still further.
The staggering size of the nationa debt has produced two new problems: foreign indebtedness and punitive taxation.
As government borrowing increased, the liquidity of the financial sector ser iously decreased, interest rates rose and credit became scarce. The private sector was in danger of grinding to a halt. Governments of the day then turned to international financial institutions. Suddenly, public foreign borrowing rose from practically nothing before EEC membership to over 40% of the GDP at present. Along with this, the servicing of foreign debt has grown to a dangerous level of 6.7% of the GDP. This level of external borrowing and debt servicing (equal to about two thirds of external reserves) could, if uncorrected, lead to a decline of confidence by Ireland's trade partners and consequent disruption of the whole economy.
Apart from borrowing, the only other source of finance available is tax revenue. Since EEC membership the level of taxation has risen steadily.
capital formation. In the 1960s it averaged 20% of the GNP and after EEC membership, it rose to over 30%. This growth has been motored by government expenditure. Throughout the past decade But small dairy farmers hard hit by EEC policy (DR) the public capital programme doubled its share of national capital formation and by the 1980s stood at 50% of the total.
Since the capital programme is financed largely through borrowing, the level of national debt has increased accordingly. It has risen from 66% of the GNP in the early 1970s to almost 100% of the GNP today. The fiscal logic behind this was the assumption that an increase in productivity would eventually produce a compensating flow of revenue.
In fact, public capital spending has risen faster than current expenditure. Furthermore, within the aggregate of capital spending the share going to manufacturing rose most rapidly. In sum, the aim of successive governments was to force march the pace of industrial development so as to sustain adequate expenditure on current services, etc.
It is precisely the failure of industrial strategy and not excessive growth of current outlays which is at the root of the disorders in public finances. Current spending increases were not exorbitant by EEC standards were necessary simply to prevent a worsening of already bad conditions. For example, social welfare was the fastest growing component of current spending but in the last five years some 40% of this growth was caused by an increase of recipients, due to higher unemployment and falling 18 as a whole is the most disadvantaged country in the EEC and is only a hairs-
At the beginning of the 1970s Ireland's tax level was lower than any of
International Viewpoint 23 April 1984