Feeble reality of Irish capitalism

Ireland’s weak economic base and reliance on foreign direct investment has defined our general self-perception just as Marx said it would.

Karl Marx famously said that the economic “base” of society determines its “superstructure” – the culture, politics, social institutions and so on. This has proved to be a compelling and often fruitful theory, even if its empirical justification is still a matter of debate. I’m not going to try and prove the proposition here, but I think it provides an interesting framework through which we can examine the contemporary Irish self-perception. Marx truly was “all about that base.” For him the nature of the economy – the level of technological development, the power and sophistication of the capitalist class and its relation with the working class, the technical structure of production and the composition of the commodities produced – determined, in a general sense, things like the culture, political system, dominant ideologies, social conventions etc. of the given society.

Is this the case? Could we say that the bold, self-assured storytelling of FitzGerald and Hemingway reflected a period of growing American economic power, and, later, hegemony, while the perpetually refracting irony and hedging of contemporary American novelists, obsessed with writing (physically) big novels that supposedly sum up the condition of contemporary America, reflects the decline of US dominance and the growing feeling of uncertainty in a world where the dollar no longer commands the respect that it once did? Maybe. The interaction between economy and culture seems more apparent in the case of human geography. Think of the commonly accepted process of gentrification. A previously undesirable urban area is colonised, first by pioneering artistic types, leading to an exciting confluence of creative activity and a vibrant cultural scene (sometimes at the expense of the original working class inhabitants), which then attracts soulless young professionals, eager to fill the vacuums of their lives through their preferred method of unreflective consumption. House prices and living costs are driven up further until the penniless artistic types are driven out and the area officially becomes high class and boring. Think of Montmartre today, or Berlin in the not so distant future.

One of the most interesting consequences of this theory is that, as Marx puts it in The German Ideology “The ideas of the ruling class are in every epoch the ruling ideas.” In other words, the dominant ideas in society are those produced by the members of the dominant class.I won’t try and launch a defence of this statement here, but it is not unitutive. As Terry Eagleton points out “It would be odd to come across a thriving feudal society in which most of the ideas in circulation were vehemently antifeudalist.”

Weak capitalist class

Perhaps this approach can tell us something interesting about Ireland. But before discussing its culture and institutions, we need to first take a look at the economic base. The first point to note is that Ireland is, by the standards of other OECD countries, a relatively feeble economy with a weak capitalist class. The country’s industrial development was delayed as burgeoning industry was suppressed by British colonial administration to prevent competition with their own industry, and so as to gear Ireland’s economic resources towards feeding its rapidly expanding workforce. By the time that the act of union eliminated trade barriers between the isles, British industry had developed such a large competitive advantage over its distorted neighbouring economy that most Irish firms who weren’t involved in non-traded or primary processes were wiped out.

The economy remained weak and disproportionately based on agriculture well into the twentieth century. Protectionism, introduced by the first Fianna Fáil in the 1930s, actually led to relatively significant industrial development. But, as has been pointed out by economists such as O’Malley and Crotty, this kind of development – based on replacing imported goods, which are priced out of the market by heavy tariffs, with domestically produced substitutes – is inherently limited and leads to stagnation. While the rest of the Western world enjoyed the fruits of the postwar boom, Ireland sunk into depressing economic circumstances. Growing unemployment, faltering production, and snowballing emigration led to a situation described at the time by Garret Fitzgerald as a “crisis of national self-confidence.”

The economic slump of the 1980s revealed that the new turn had not only not solved the structural weaknesses in the Irish economy, but also had probably exaggerated them.

The resultant opening up of the economy, today identified with the efforts of the civil servant TK Whitaker, led to a boom period as foreign direct investment poured in. The opening up was supposed to lead to the development of new export-oriented industries, competing on a world stage at every level of the supply chain. However, the economic slump of the 1980s revealed that the new turn had not only not solved the structural weaknesses in the Irish economy, but also had probably exaggerated them. Unemployment skyrocketed to 18% in 1987. Employment in manufacturing was hit particularly hard, falling by 20% between 1979 and 1987. Yet according to O’Malley, the average annual growth rate in industry was over 6% between 1982 and 1987, and Ireland often had the fastest rate of growth of industrial output in the OECD in that period.

Foreign firms

How to explain the huge increase in industrial output occurring simultaneously with a significant decrease in industrial employment? The answer lies in the composition of the new firms producing the Irish export market. From the 1950s until the 1970s, indigenous Irish firms were steadily squeezed out of every sector except naturally protected ones (such as the processing of primary goods, or non-traded products), with a few exceptions. The new foreign firms which replaced them and which took the lion’s share of the new export market were very capital intensive and did not generate much demand for labour, or for indigenously produced inputs. According to one report by the National Economic and Social Council, Irish industry employed proportionally fewer workers than any comparable economy.

Irish capitalism is parasitic, reliant on foreign companies who pay low or negligible amounts of tax, create little demand for labour, and import most of their inputs.

Thus the huge increase in foreign direct investment and the new foreign export-oriented firms did little to augment the industrial base. The indigenous industrial development all took place in naturally protected markets, or in areas such as packaging, cement, glass, clay, and metal fabrication – ie: supplying packaging for the new export-oriented firms, or materials for building new plants and for supplying the burgeoning construction industry. Construction was the other aspect of economic growth in the period of “opening up.” As has been well-documented in Conor McCabe’s book Sins of the Father, this was the period in which the unhealthy nexus between the finance and construction industries and with the political establishment – particularly Fianna Fáil – developed.

So we can see the structural frailties of the Irish capitalism. It is parasitic, reliant on foreign companies who pay low or negligible amounts of tax, create little demand for labour, and import most of their inputs. The indigenous capitalist class is either directly reliant on the foreign firms, or engaged in low-tech, low value-added, usually naturally protected activities, or part of the unhealthy and unsustainable finance-construction-politics nexus which, beside being incredibly corrupting and anti-democratic, fuels cycles of boom and bust that ultimately only benefit a small, well-connected elite.

What does this say about our country with regard to Marx’s formula outlined above? Well for one thing this state of affairs in the economic base seems to be mirrored in the societal superstructure. One overlooked aspect of modern Irish culture is the huge gap between the town and the country – or more precisely between the large urban areas, Dublin in particular, and more rural areas, including the provincial towns. Because our collective self-perception is manufactured by media and cultural elites generally based in Dublin, we have come to think of ourselves as being far more liberal, secular, and progressive than we actually are.

Catholic Ireland

In reality, conservative ideas hold a much greater sway in rural areas than in urban ones. In the countryside and in the provincial towns you will find greater proportional mass attendance amongst self-professed Catholics, and you will also find a greater proportion of the population identifying as Catholics. Although there is now broad support for same-sex marriage in Ireland, there is still a significant difference in the levels of support between Dubliners and people in the other regions. Mass attendance too is still much higher than you probably think. According to the last census (2011), 3.86 million people identify as Catholic. The fourth round of the European Social Survey (2009/10) reported that circa 52% of Catholics go to mass at least once a week, and a further 21% go at least once a month. Thus, 2.82 million people (albeit many of them children or teenagers) go to mass at least once a month.

Go into the small town or the village, and you will still see the traditional pillars of 20th century Ireland intact: the Catholic Church, Fianna Fáil, and the GAA. This is more difficult to prove with quantitative data, but anyone with even secondary personal experience of small town and rural Ireland will confirm this. All this chimes with the reality behind the notion, so popular amongst political elites, that Ireland is a successful small economy competing with the big boys on the international market. In truth, the economy is in many ways undeveloped and contradictory – just as the country is much more reactionary and conservative than we might think.

 It is interesting to note the similarities between the Irish economic base and societal superstructure: both are insecure and riven by a contradiction between a conservative and anachronistic simulacrum of the past and a feeble, second-hand version of liberal modernity.

Irish artists are, in my opinion, also caught up in this contradiction, particularly in the narrative arts – literature, television, and film. The most celebrated Irish authors generally don’t come to terms with contemporary Ireland in a truly successful way. As the satirical writer Julian Gough (who has, in his fiction, directly addressed issues of modern political economy in the post-2008 era) pointed out in a 2010 interview, most Irish writers are still stuck in an imaginative universe invented by John McGahern decades ago. For example, John Banville, probably Ireland’s pre-eminent living author, seems not to be aware that the internet has been invented. Where is our Great Gatsby – a contemporarily relevant book about a midwestern boy drawn to the brights lights of the east coast where his life is wrecked and torn asunder? Most of the commercially successful authors seem stuck in this nowhere version of Ireland – living neither in the stagnant and introverted past or the cosmopolitan and internationally-integrated present. Irish TV is simply derivative – the latest overrated IFTA bait Love/Hate is an embarrassingly amateurish rip-off stuff that American television did over a decade ago.

I do not present the above as cast-iron evidence of Marx’ formulation. But I do think that it is interesting to note the similarities between the Irish economic base and societal superstructure: both are insecure, parasitic, and riven by a contradiction between a conservative and anachronistic simulacrum of the past and a feeble, second-hand version of liberal modernity. Our general self-perception – the ruling ideas of our society – are in accordance with the ideas of the political, cultural, and economic elite, all of whom  are, at the very least, caught up in the contradiction which I outlined above. All countries like to indulge in national delusions. In the case of modern industrialised countries, these delusions are born of positions of relative strength. In the case of Ireland, the delusions are born out of a weakness, a weakness which the delusions themselves hold to be a strength.

William Foley

William Foley studies Philosophy and Economics. He is deputy editor of Trinity News.