[Sinn Fein]

18th January 1999

Poverty Makes Ireland Poor

Sinn Fein Submission to
National Anti-Poverty Strategy
Interdepartmental Policy Committee

Contents

  1. Introduction
  2. Unemployment is not working
  3. Colonial legacy - from union to union
  4. Women, Poverty and Social Welfare
  5. Learning Poverty
  6. An Unhealthy Society
  7. State, Market or Local Democracy?

 

1. Introduction

Poverty is on the increase, not only in the Third (and Second) World, but also in the advanced capitalist economies, including Ireland. This result of a regression to ``free-market'' policies is a threat to world peace and to social harmony in our own society.

While average living standards in Ireland have increased in the past few years, the gap between rich and poor has widened. This is well demonstrated by some figures for the past year: sales receipts went up 7.9%, growth in GDP was over 6%, inflation 2.7% but Social Welfare benefit increased by a meagre 2.5%.

This rise in relative poverty is unacceptable, not only because of the obvious misery and exclusion suffered by the poor, but also because society eventually pays in increased crime, drug abuse, alcoholism, ill-health and their associated costs. There is also the wasted talent of about 30% of our people which otherwise could be harnessed for the betterment of the whole country.

With the advent of New Right Thatcherite economics in Ireland as in Britain, USA and many other countries, the focus of economic policy seems to have narrowed to the lowest-possible-cost production of more and more wealth. But the generation of wealth on his own will not reduce poverty. Indeed, the evidence of the past ten years shows that it will make things worse if measures are not taken to redistribute the wealth that is generated.

Sinn Fein warmly welcomes the establishment of an Anti-Poverty Strategy as many of our members are unemployed and most of our support comes from areas seriously afflicted by poverty. We hope that the government will listen to the views of those directly affected and take serious action to eliminate this blight on our society.

We are making this submission to show that there is a real alternative to this failed system. An alternative that can provide our people with jobs and show that there is no justification for the right-wing agenda of privatisation, cuts in public services, social welfare cuts, etc. We invite comments and constructive criticism from all who are interested in ending the scourge of unemployment and poverty in Ireland.

 

2. Unemployment is not working.

The chief cause of poverty in Ireland is lack of employment with an adequate income. Unless this fundamental cause is tackled, all the alleviation measures in the world will not restore dignity and self-respect (not to mention a proper standard of living) to those marginalised by poverty.

For Sinn Fein one of the basic aims of economic policy must be to provide a decent standard of living for all the people. In this the Irish economy has been a miserable failure for over one third of our people. Unemployment is still close to 300,000 and shows no sign of being significantly reduced under present policies. Poverty affects over one million people and many more struggle to live on low paid, temporary ``yellow pack'' jobs.

Unemployment and poverty affects the whole of society, not just the unemployed and poor. It is no co-incidence that crime, vandalism, drug abuse, suicide etc have all increased at the same time as the numbers out of work have increased. Then there is the financial cost. Every redundant worker means a loss of income tax and PRSI as well as the cost of miserly social welfare payments, nearly all of which comes from the PAYE worker as the well-off have mounted very successful campaigns against paying their share. High unemployment means the waste of our ``greatest national asset'' - a well educated work force.

If the world economy returns to growth it will mean subsidising foreign competitors by exporting this labour force to them. FAS has already been directed to find 10,000 jobs in Europe. Making this jobs crisis worse is the huge national debt now standing at £29 billion. Interest payments on the national debt are crippling taxpayers. If as the government claims, jobs are the top priority, then every government policy should be aimed at creating new jobs and maintaining those still here. But the government are doing the opposite by shedding jobs in the public sector and privatising public companies.

Jobs have been cut in health, education and local authorities leaving working people with run-down services and thousands out of work. The whole policy of privatisation and cuts in public spending is based on the failed monetarist ideology whose aim was to create the ``right climate for business''. This was done by de-regulating the financial markets, lowering taxes for the rich and privatising the public sector. Inflation, not unemployment, was the considered to be the greatest threat to society. Trade Unions were the enemy as they were judged to be inflating wage demands and wrecking the economy, an array of repressive legislation was introduced to deny workers the right to organise themselves as a political force. The wealth created by Thatcher's free markets did not ``trickle down'' throughout the British economy. It stayed in the banks, insurance companies and finance houses while the poor got poorer. Wherever this monetarist experiment was repeated - in the US, the less developed states in Africa and South America and Ireland - the results were the same.

Right-wing politicians, economists and businessmen blame high unemployment on: too much taxation, too much state involvement in business, high costs for business, over generous dole payments etc. Sinn Fein rejects these arguements as weak excuses for the private sector's failure to create jobs.

Since 1987, the business sector in the 26 Counties have had most of their demands conceded through the PESP, the PNR and the PCW in order to create the ``right climate for business''.

Unemployment levelled out during the time of the PNR (1987 to 1990), due to high emigration (1989 saw 46,000 people leave the state). However unemployment rose over the early 90s as job opportunities in foreign economies dried up and has remained stubbornly high since. The claim that dole payments are too high is an insult to the unemployed. How many of Ireland's captains of industry could survive on £62.50 a week? If there is no incentive to work, why are there hundreds of applicants for every mickey mouse job advertised?

 

3. Colonial legacy: from Union to Union

The real causes for Ireland's constant high unemployment are closely inter-related and have their roots in our colonial history. British rule blocked the autonomous development of modern industry in the 19th Century. In 1922, the conservative counter-revolution defeated the radical republicans and the progressively orientated Democratic Programme of the first Dáil was abandoned. Instead we got a conservative government based on big farmers who wanted to maintain our economic dependency on Britain. The conservative mentality has been maintained until today, except that the dependency has shifted from Britain to the EU.

Ireland's high dependency on external forces, which has been encouraged by Dublin government policy since the 1960s, leads directly to one of the major obstacles in trying to develop Irish industry and create lasting jobs at home: the colossal outflow of wealth which is produced by Irish workers - in 1994 £4.168 billion was siphoned out of our economy by Multi-National Companies and native investors.

A related cause of unemployment is the failure to utilise the wealth that is kept in the country. Between 1981 and 1991 GNP more than doubled. This doubling in national wealth did not trickle down to the workers and the unemployed as wage increases and social welfare payments were consistently restricted well below the annual inflation rates. The results can be seen in the March 1992 Combat Poverty Agency report on ``The Wealth of Irish Households''. The report revealed that 10% of households owned nearly half the personal wealth in the state, while 20% owned virtually nothing. The report's author, Professor Brian Nolan of the ESRI, estimated that the top 2% owned up to 30% of all personal wealth, but the bottom 50% of households owned only 12%.

The partition of Ireland is a major cause, direct and indirect, of the underdevelopment of the country. The most obvious effect is the reduction of the home market and loss of economic scale. A joint CII/CBINI study has found that more north-south trade alone could create 75,000 extra jobs. Other commentators, such as George Quigley, chairperson of Ulster Bank have called, for purely economic reasons, for a single market in the island of Ireland. It is strange that some of those who say that political union is needed for economic integration in a much more diverse Europe reject any kind of political union in Ireland. Partition has caused wasteful duplication and competition between the IDA and the IDB , who often compete for the same multinational company (eg, DeLorean, Seagate) by offering higher financial incentives. Board Fáilte and the Northern Ireland Tourist Board also compete for business. Partition has devastated border areas from Donegal/Derry to Newry/Dundalk where unemployment and emigration is the worst in Ireland.

Some Transitional Measures

Given the extent to which the viability of the domestic economy has been eroded and the distorting weight of the multinationals, instant radical change is not possible. But transitional short term measures can be introduced to initiate a new era of economic change. First the outflow of profit, interest and capital must be staunched. The wasteful pampering of big business must be halted. Finally the country's resources, north and south, which have been left dormant or stunted and abused, must be liberated, mobilised and put to work in creating a dynamic indigenous manufacturing sector. Such transitional measures would include:

  • Rescheduling of Foreign Debt. Despite the cuts in public expenditure and reduction of the debt/GNP ratio, external debt continues to grow and now stands at around £14 billion. Repayments over the past decade have cost about £8 billion in current terms. In 1990 alone repayments were over £1 billion. To give an idea of what this loss means, we can translate it into jobs lost by pricing a new job at £48,000 (from the IDA's figure of £14,271 for 30% of the cost of a job). Thus foreign interest payments of £1 billion represent 28,000 lost jobs. This is an indication of the scale on which foreign debt preempts domestic resources. Anyone seriously concerned with job creation is obliged to consider the option of rescheduling - unilaterally if necessary. At the very least, interest payments should be suspended until employment and poverty have been substantially reduced. This would immediately release significant funds for major employment projects.

  • State control of the banks. This proposal is usually a red rag to a bull as far as establishment politicians and economists are concerned. But the Programme for Government has now conceded the principle at stake with its own suggestion for a State Bank.

    It admits that ``state controlled banks are commonplace in the EC, discharging both a commercial and developmental role, particularly for small and medium-sized enterprises. State involvement in banking has economic and fiscal benefits and would provide necessary competition to the commercial banks''. All this is true and long overdue, but the so-called ``State Bank'' proposed is a con-job with only 10% state holding, no state representation on the board and a buy-back clause to pamper the private investors. It is on too small a sale to dislodge the stranglehold of the private banks.

    The ``State Bank'' is more likely to be on the receiving end of the private sector's cut-throat practices. The £3 billion assets credited to this new bank would only be a fraction of the assets at the disposal of the major banks, eg, AIB £18 billion, BoI £14.8 billion. The top ten financial institutions (leaving aside the Central Bank, the Post Office Savings Bank and the TSB) in the 26 Counties have combined assets of £53 billion. In 1993 these companies made a massive £652 million in profits. Converted into employment equivalents this sum would produce 13,500 jobs. From these figures it is evident that if a state bank is to have resources capable of having a real impact on job creation, then the major private financial institutions will have to be brought under state control.

  • Controls to limit the export of capital. In addition to the £billions profit being repatriated each year, there are also billions of pounds in private capital being exported for speculative and other purposes which give little or no stimulation to the 26 County economy. This export of capital has gained pace in recent years. The run-down of the domestic economy means that the home market is too restricted for the bigger native companies to reinvest.

    Since profit is their only motive, these companies have no compunction about moving assets, badly needed by our underdeveloped economy, abroad. Very little of the profits made are ever reinvested at home.

    Whatever sense overseas investment makes in terms of an individual company's ambitions, it makes no sense from the point of view of an underdeveloped economy. Action to stop it is perfectly legitimate in terms of our need for manufacturing investment. In 1990 £1.8 billion of private capital was exported. As potential employment this figure equals 37,500 jobs.

  • Taxation of profits repatriated by multinationals. Between 1985 and 1991, multinationals repatriated £7 billion. For 1994 alone, the figure escalated to £4.168 billion. This sum, taxed at the normal rate of 40% corporation tax would yield about £1.7 billion which translates into 34,000 jobs.

  • An increase in corporation tax. In 1994/5 tax on business profits amounted to only £1,140 million out a total tax take of over £10,000 million, ie, only 11%. The Sunday Tribune of 27/12/92 listed ``the top of 500 companies in Ireland for 1992''. Of these it identified the profits of 246 firms which came to almost £2400 million. A corporate tax of 40% (the norm in most countries) on these profits alone would have yielded nearly £1000 million, ie, twice the sum actually handed up by the entire corporate sector in that year. In the light of this, a doubling of the corporate sector's share of tax is not unreasonable and would bring in an extra £1,000 million or 20,000 jobs.

  • More resources to tackle the problem of endemic tax evasion. The 1995 report of the Comptroller and Auditor General indicates that there was a total of over £2 billion in self-employed, corporate, capital and property taxes outstanding from the previous year. Making the tax dodgers pay up would realise a sum equivalent to 40,000 jobs. The government should allow the Comptroller and Auditor General to publish information about the audit he conducted about the tax amnesty to enable effective action to be taken against tax fraud.

    Starting from a perspective quite different from the establishment consensus, we have proposed budgetary measures which would mobilise finance to the tune of just over 100,000 jobs. We are far from imagining that all this finance could be acquired instantly or painlessly.

    The orchestrated campaign against the meagre increase in Property Tax and increased powers to detect fraud shows the kind of media furore that can be whipped up by the powerful rich. The government's craven caving in to such pressure has made it more difficult to instigate real reform - but it MUST be done if poverty is ever to be seriously tackled.

     

    4. Women, Poverty and Social Welfare

    Gender and social class are the two most important determinants of a persons life chances. In terms of income and material security men generally do better than women of the same social class. More women than men are living in poverty. Men experience poverty because of unemployment or incapacity, women generally experience additional poverty because of their dependant status and/or role as single parents. Many women can find themselves living in poverty in households where the `family income' is above the official poverty line, where there is an uneven distribution of income within the family. No research has so far been carried out in Ireland as how income is divided within families. There are no figures are available for women living in poverty while engaged in home duties.

  • The social welfare system must be completely restructured to remove the concept of the dependant adult. Long-term high unemployment has contributed to making the idea of income support as a form of insurance against unemployment obsolete. All social welfare payments should be targeted to deal with poverty irrespective of the cause of that poverty whether its as a result of unemployment, or inability to work because of domestic responsibilities or sickness. If this view is taken it becomes possible to change the methods of payment. Payments no longer have to be channelled to one (usually male) partner, and women can be treated as individuals experiencing poverty without the need to define them in terms of their marital status or relationship to a man.

  • The recommendations of the Commission for Social Welfare (now nine years old) should be implemented in full at today's prices.

  • The government should support detailed research into the concept of Basic Income to ascertain whether it can fulfil the requirement of fairly redistributing wealth.

     

    5. Learning Poverty.

    One of the contributary factors in the perpetuation of poverty through successive generations of families is the lack of access to educational opportunities for working class children. Third level gets the higher proportion of funding while primary and secondary are starved of resources - ``free'' education is becoming something of a joke with ``voluntary'' fees for books, equipment and even heating. In this regard, the abolition of university fees, which will mainly benefit middle class students, was another example of the government pandering to well-heeled lobbies at the expense of the poor. The result of this this is that unemployment or low-paid casual jobs are the only realistic prospects for the children of deprived families. Provision for pre-school education is even more inadequate - again this impinges more on the poor who can't afford private creches.

  • We propose a major transfer of resources from third to first and second levels to give deprived children a chance to even get on the first rungs of the ladder.

  • Proper funding for community-based pre-schools would create jobs, allow lone-parents out to work/education/training and give working class children a more fair start in education.

  • Real training (rather than just time-filling schemes) needs to be integrated with a job-creation strategy. This can best be done at a local level where the affected community have decision-making powers via strong local government.

     

    6. An Unhealthy Society.

    There is a close relationship between poverty and poor health. It is a viscious circle where poverty leads to ill-health because of bad nutrition, bad housing, second-class public medical service, lack of prevention, etc, and ill-health inhibits the efforts of the poor to improve their lot.

  • There must be an end to the two-tier health system where the rich can jump the queue at the expense of the low-paid PAYE worker who often subsidises private health insurance.

  • The rip-off of the tax-payer by consultants (who often use public facilities to run their lucrative private practices) and by the drugs companies must also be ended.

  • With the closing of many wards in mental hospitals, the burden has fallen on deprived communities. Community care needs proper funding and the communities involved should have should have a say in how these funds should be used. Again, decentralisation of real powers to newly revamped local councils could provide a vehicle for such participatory community involvement.

     

    7. State, Market or Local Democracy?

    There has been an ongoing political debate has been about the relative roles of state and market in economic development with a peculiar result in Ireland. There is a high level of state involvement, but mostly in support of private (native and foreign) companies. It comes through grants, tax reliefs, marketing and consultancy supplied by state agencies and funded by tax payers. If all these resources were invested directly in manufacturing and traded services, the return in wealth and job creation would be much greater.

    The claimed benefits for the free market are incentives to work hard and good information on what goods and services to produce. But this market mechanism is initially distorted by predetermined inequities such as education, social status and family wealth. The information system has obvious inefficiencies such as many useless consumer products being put on the market and then huge amounts being spent on advertising drives. Firms which have the resources can concentrate the power of markets to make profits, while the goods and services that people actually need are not available or else are too costly.

    A prime example of this free market failure was the de-regulation of financial markets in the industrialised world during the last decade. State controls of the financial community were lifted in the USA, Japan and Europe. In the 26 Counties the 1989 Building Societies Act was introduced. What resulted was a frenzy of investment for short-term profits. Property investment was the target of these unleashed financial speculators. The price of property was inflated, putting home ownership out of reach of many families and workers. The market collapsed, the mechanism failed and banks and financiers from California to Stockholm ran up huge debts. These debts have been since funded out the levys and charges imposed on ordinary retail customers.

    State socialism is often posed as the only alternative to the market system. This old-fashioned choice ignores the real causes of inequality, exploitation, inefficiencies and environmental damage in modern society. Failed economic systems have a common feature - a lack of real democracy. A simple mixed economy model which does not address this democratic deficit will be inadequate. There would still be an inefficient, alienating, top-down structure in both industry and the community.

    In local communities there are many individuals and groups with information and ideas on what products and services are needed and some skills for producing them. What they lack are the resources to put the ideas into action. The state has a role to play here, not as bureaucrat, but as facilitator with state agencies to harness the people's local knowledge, skills, intelligence and energy with the state's resources in training, marketing, management and long-term capital in the form of equity to support communities - not to undertake temporary make-work schemes, but to get directly involved in producing goods and services.

    The objectives of more jobs, equity and environmental control converge to a common conclusion: the need for a bottom up, participatory democracy. This focus on communities builds on the traditional republican vision of society, incorporating strong local democracy which decentralises political and economic power to the lowest possible level. Sinn Fein strongly believe that such a coherent ``power to the people'' policy could provide an answer to many of the problems of Ireland, north and south. Urban alienation, rural underdevelopment, the urban/rural divide, the defeatist mentality of being unable able to do anything but emigrate, the exclusion of women and unionist fears of alienation and exclusion could be dissipated by the creation of strong local democracies which empower all Irish people to control their own lives.

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