General Strike Portugal 24 Nov 2010

In the aftermath of the Greek bailout there was a lot of talk about the other vulnerable European economies that could have followed the collapse into bankruptcy of the Greek economy. Top of the list of vulnerable Euro zone economies were Portugal, Ireland, Italy and Spain. Of these, the three Mediterranean economies had been controversial additions to the Euro zone, as their economies were seen as weak and problematic, bringing vulnerability to the entire Euro project. Ireland on the other hand was a small economy with a well educated English-speaking population, and of little concern to planners. Most recently though, some of the largest and most militant demonstrations have occurred in Britain, where the Tory-Liberal Democrat coalition has implemented a harsh round of austerity measures, described as the most severe since the end of the Second World War. A common thread of the anti-government actions throughout Europe has been the demand the workers should not be forced to pay for a crisis that they did not cause.

The British government’s announcement that the university fee maximum would be trebled brought tens of thousands of students onto the streets of London. A group of students stormed and briefly occupied the Conservative Party’s headquarters while thousands of other students outside hampered Police efforts to intervene. Students and opposition politicians have been particularly merciless in their condemnation of Liberal Democrat leader and deputy prime minister Nick Clegg, whose pre-election commitment to eliminating tertiary tuition fees has been replaced by support for the massive fee hike.

The university fee rise is part of an austerity package that has few precedents in British history. Public sector cuts of ten percent over four years are the deepest since 1921 and will result in the loss of thousands of jobs. Chancellor of the Exchequer George Osborne has declared that the cuts will be borne primarily by those best able to afford them, those with the broadest shoulders”, as he put it. However the Institute for Fiscal Studies has calculated that while the top two percent will feel some of the impact, it is the bottom ten percent who will suffer the most. They calculate that sixty percent of primary school and a phenomenal eighty seven percent of secondary pupils will experience funding cuts, a dramatic contrast with the government’s claim that education will be shielded from the cuts and that schools would in fact benefit from funding increases in real terms.

Ireland’s downhill path from “Celtic Tiger” to virtual bankruptcy has been a classic case of the failure of capitalism to deliver. Low (12.5%) corporate taxes and little oversight of the finance sector led to a massively inflated property sector and a huge bubble economy.  Low paid workers comprise approximately fifty percent of the Irish workforce and these people have seen little benefit from the fictitious wealth created by the bubble economy of the past decade. Barnados Ireland has warned that there are thousands of families living on or below the poverty line. Meanwhile, the Irish Trade Union movement jumped on the “partnership” bandwagon, signing accords with the government to guarantee productivity agreements and workplace harmony rather than fighting for the rights of their membership. Finally but inevitably, when the financial meltdown occurred, Ireland was one of the worst hit countries in Europe. Bank bailouts handed billions of Euros to the profligate finance capitalists and completed the process of destroying the Irish economy.

Normal tools available to governments to fine tune the economy are not available to the Irish government. As part of the Euro zone, Ireland is unable to use changes to its currency and can rely only on tax policy as a lever. Yet the government has been reluctant to tinker with its low corporate rate. Instead, austerity measures totaling €15 billion have been announced. Income tax on the country’s lowest paid workers is set to increase. Currently the lowest paid workers pay no income tax but that is set to change. As if that is not enough, the minimum wage is to be slashed by thirteen percent and benefits are to be cut by five percent. These proposals accord with an IMF prescription for Ireland which called for a cut in the minimum wage, “to make it consistent with the general fall in wages,” and the introduction of “a gradual decrease of benefits over time of unemployment spell and stricter job search requirements”. At the same time, nearly 25,000 public service jobs will be cut. In exchange for carrying out these attacks on the Irish working class, the government has been offered a loan from the EU and the IMF expected to total €85 billion, of which most will be used to further bail out the banks, with an estimated €35 billion being made available to the banks directly.

Ireland has seen a number of demonstrations over the past year but the protest on November 28 was huge. Over 100,000 people marched in freezing conditions to vent their growing rage at the planned austerity programme.

In Portugal, the trade union movement organised the country’s first general strike in twenty two years. Reports suggest that eighty percent of rail services were halted and many flights were canceled as air traffic controllers and airport ground crews walked out. Schools, factories and hospitals were all closed by the strike. Union sources reported that all ports were closed. No mass demonstrations were called by the union movement as part of the general strike but workers organised picket lines outside ports and other work sites in support of the strike.

Portugal is the poorest country in the Euro zone has been seen as one of the countries most likely to need a bail out. It has been suggested that any bailout of the Portuguese economy would be in the vicinity of €50 billion. The Portuguese prime minister Jose Socrates however has so far resisted pressure to accept a bail out, claiming that his Socialist Party government’s austerity measures will be sufficient to bring the country’s deficit down to a level acceptable to the European Union. The anti-worker measures proposed by this “socialist” include slashing public sector pay by an average of five percent, freezing state pensions and reducing welfare benefits.

Portugal though is only one country that finance capitalists fear could require a bailout. The fear of a “contagion” spreading throughout the weaker European economies has exercised the minds of bankers, economists and other representatives of the ruling class ever since the beginning of the current round of economic woes. Spain, which introduced austerity policies in July, but which is resisting pressure to implement more, is also considered a possible weak link in the Euro system.

Unfortunately, despite the significant, and inspiring, scale and militancy of the demonstrations occurring in various countries throughout Europe, there has been little sign of a militant left leadership emerging. In Ireland, most left parties have fallen into line behind the official trade union movement that endorsed the “partnership” model. In Britain, the leader of the student union responded to the storming of the Tory headquarters with a cowardly condemnation of “violence”. Until a strong anti-capitalist leadership emerges, such demonstrations of rage as we have seen throughout Europe recently will remain at the level of angry but ineffective expressions of frustration at a system that can never deliver.

10 November 2010

I Introduction

The Irish State is one of the most globalised in the world and for nearly two decades was held up as a model of economic development across Europe and further afield.  Now it is in severe crisis and faces bankruptcy.  The Irish Government has applauded its ‘first mover’ advantage in its efforts to enforce austerity – that it was taking the steps that sooner or later all other states would be forced to take.  The small and weak character of the Irish State means that it often exaggerates trends that exist elsewhere.  For all these reasons the Irish experience is an important one for others to study.

In particular because of the relatively early move to attack the living conditions of working people we have two years of experience of how this has been conducted, what reaction it has evoked from workers and what role the traditional workers’ movement has played.  The weakness of the economy and State means that socialists have been faced with a fundamental crisis in which piecemeal or reformist solutions are not credible.

II Nature of the Crisis

The Irish economic crisis has been expressed through a huge property bubble in which huge credit was extended to build commercial and residential property leading to a massive increase in the size of the construction industry.  This bubble became unsustainable with property being built for which there no market and house prices increased to the point that the loans necessary to purchase them could not conceivably be repaid.  The bubble burst, property prices – especially of commercial property – have collapsed, and the banks which financed this speculation have become bankrupt.

The Irish State in September 2008, faced with one large bank unable to finance its immediate obligations, guaranteed the liabilities of all the domestic banking institutions.  These liabilities had a potential cost of around €440 billion, which was over two times the size of the whole economy and could not possibly have been paid. The banks and the Government initially claimed that the problem was one simply of liquidity and not one of solvency.  In fact it was perfectly clear then, and obvious now, that the problem was that the banks were insolvent.

Despite ideological opposition to state ownership the Irish State has been compelled to take four of the six domestic financial institutions into state ownership.  In implementing the guarantee and carrying out nationalisation it has transferred the debts of the banks to the State. This means that the State has more than doubled the national debt in a couple of years.  Because the State also relied on taxes that were dependent on property the collapse of this sector has meant a collapse of State revenue and an annual budget deficit of around 12 per cent of GDP.

The determination of the Irish State to protect those who invested and lent money to the Irish banks and its equal determination not to tax corporate profits, especially those of multinationals, now means it faces insolvency, having been forced to stop borrowing on the international markets because of the high interest rates being charged. Many large investors will now no longer buy Irish State debt.

III The European Dimension

The specific character of the crisis in Ireland is due to local circumstances although property bubbles have also taken place in the Spanish State and, of course, in the United States.  The Irish crisis however could not have happened without the funding provided by the banks of the big EU countries, particularly Germany and France.  Banks in these large countries sought to make profits from the unsustainable Irish property boom.

The policy of the Irish State has therefore been to get Irish workers to pay for the speculation of not just Irish banks but also those from Germany and France.  The policy of the European Central Bank, just as with Greece, has been to bail out these large European banks.  This has been achieved indirectly by supporting the EU States, which owe these banks money or have taken on the debts of local banks which owe them money, or directly through accepting poor collateral for ECB loans.

The origin of the Irish crisis therefore lies in the accumulation of money capital generated in the large EU states.  The export of this has caused an asset bubble that is similar to those that have characterised economies across the world over the last few decades.  In the EU this problem is intensified by the superior productivity of cores States such as Germany and the use of a common currency which prevents adaptation to the competitive pressures faced by the weaker States through devaluation.  The EU was justified as a means of harmonising economies and achieving their convergence but the current crisis has shown that this is impossible under capitalist production.

In summary: the Irish financial crisis is the result of the accumulation of capital in the largest EU states which has not been applied to industrial investment and which is directed to profit from speculation.  The political power of the largest states projected through the institutions of the EU means that the capitalists of the largest countries are protected despite their reckless investments. The workers of Germany etc. are exploited to generate this capital and the workers of Ireland and the other ‘PIIGS’ are expropriated to ensure it reaps its reward from speculation.

IV Austerity

The bail out of the banks and sudden collapse of taxation revenue has compelled the Irish State to embark on a programme of massive austerity measures which have so far cut public sector wages, increased taxes, reduced services, cut public services and increased unemployment dramatically.  These measures have produced a return to emigration, which over the last decade or so had been reversed with the country witnessing large immigration from Eastern Europe.

None of these measures has been enough and the increased estimates of the cost of the bank bail out plus a large fall in the size of the economy has precipitated such an increase in Irish State debt that it is no longer able to afford borrowing on the international capital markets.  The State has enough cash until early next year but will be unable to afford to borrow if interest rates remain at their current high level – reaching over 8 per cent this month, higher than Argentina with its recent history of defaulting on its debt.  The Irish State cannot afford to bail out its zombie banks and is now taking the first steps to sell off its productive state enterprises in order to attempt to stave off bankruptcy.

The EU Commission has demanded a programme of four more austerity budgets to bring the deficit to within 3 per cent of GDP by 2014 as required by the EU Growth and Stability Pact.  Funding for the Irish banks and hence for the Irish State which owns most of them is completely dependent on the European Central Bank.  The Irish State is now completely dependent on the EU Commission and must seek its approval for its programme of austerity.  The Commission has sought to put pressure on all the large political parties in order to enlist their support for the current Government’s programme of cuts.  All but one party – Sinn Fein – has agreed that the 2014 target for deficit reduction must be met while Sinn Fein, like the Irish Congress of Trade Unions (ICTU), has simply asked that the timescale for its achievement be postponed for a further few years.

V Workers’ Reaction

The first attacks on public sector workers evoked enormous anger from the whole population and a demonstration of over 120,000 took place in Dublin at the beginning of 2009.  This is equivalent to a demonstration of 2.3 million in Berlin or 1.8 million in Paris.  It was notable that this demonstration opposed all the austerity measures implemented and involved many unorganised workers.  A number of public sector unions announced ballots for strike action and a number of strikes were due to take place simultaneously.  The prospect was raised of a fight for a general strike of all workers.

It was this logic that prompted the leadership of the trade union movement to call off the promise of strikes and enter negotiations with the Government.  They called for a continuation of the social partnership model which has involved a series of agreements with the Government and employers’ federation covering wage increases and other aspects of social policy including taxation and eliminating strike action.  The Irish workforce is heavily unionised by international standards; around 40 per cent of the workforce is in a trade union although this falls to only 25 per cent in the private sector.

The negotiations signalled acceptance of the cuts that had just been implemented and that the union leaders had no intention of taking effective action to stop further cuts.  The Government then introduced further cuts.  The trade union leaders once again called demonstrations which were again well supported and also a one day strike by public sector workers but once again went into negotiations with the Government with the same results.

Eventually the union leaders accepted all the cuts that had been imposed plus further cuts in public services, including privatisations, on condition that there were no more cuts in wages or pensions and previous wage reductions would be reversed if this was possible.  These last conditions could be broken by the Government if the economic situation worsened significantly, which it inevitably would.

The second round of protests, while large were not as widely supported as the initial demonstration.  They did not include unorganised workers or any significant support from workers in the private sector.  The Government had engaged in a strategy of divide and rule by blaming public sector workers for the budgetary problems that necessitated cuts.  The trade union leaders played right into this trap by accepting cuts in public services that would affect all workers, while seeking only to put a limit to the pay and pension cuts applied to workers in the public sector.  This made it look like the Government’s claims were true – that the trade unions were only interested in their public sector members.

The main reason however why the trade union leadership has been successful in demobilising and demoralising workers is that workers have failed to identify an alternative to austerity around which they could organise, mobilise and fight.  They have no economic or political programme and their anger has found no means of political expression, which can eventually mean that it will settle into pure cynicism, demoralisation or embrace of reactionary prejudices that blame immigrant workers.

The major reason such an alternative has not developed is that workers have accepted the ‘alternative’ programme launched by ICTU – ‘A Better, Fairer Way’ – which accepts that workers pay for the crisis but that the rich should also pay.  Since the bank bail out and budgetary cuts are designed to protect the very richest in society it is clear that the rich cannot be made to pay. It is also clear that since workers are not at all to blame for the situation they should not therefore pay anything.  The trade union and Labour Party position is simply that the cuts and the reduction of the budget deficit to 3 per cent of GDP should be accomplished over a longer period of time.

This is justified by a nationalist view that ‘we are all in this together’ and must work together to save the State from bankruptcy.  The capitalist assertion that Irish workers must be made competitive is not rejected but only contested on the narrow grounds that competitiveness is not determined solely by wages.  No political party has put forward an alternative to the core arguments of the Government and the workers have been left politically disarmed, reduced to claiming that what is happening is not fair.  This is not a basis on which successful resistance can be achieved.

VI Tasks

Irish trade unions are extremely bureaucratic and tightly controlled.  Workers political consciousness in Ireland has historically been quite low and this has been further depressed by decades of social partnership in which it is claimed that the interests of workers, State and bosses are compatible.

Trade union leaders have been placed on the Boards of Directors of State agencies as reward for their role in treating the State and bosses as partners.  This has included being placed on the Boards of newly privatised companies.  It has been estimated recently that the State has spent over €100 million in the last ten years on the infrastructure of social partnership which has generated enormous opportunities for fraud and corruption.  This has led to uncovering serious scandals in which State funding for training of the most vulnerable workers has been misused to facilitate enormous profiteering by private companies and overseas junkets by senior union officials.

The previous economic boom and the scale of the funding for the partnership process has ensured that the corruption that is most visible at the top of the trade union movement has infected lower levels of the union movement.  Workers opposed to the cuts have therefore had to face sabotage of their efforts to fight back from their own organisations.  Workers opposed to the criminal policy of betrayal by their union organisations have found it extremely hard to organise within the unions to reverse the betrayal.  They have been ill equipped to find the political and organisational resources not only to fight back against the State but also against their trade union leaderships.

The willingness of workers to fight back, their weakness in terms of control of their own union movement and their political weakness – reflected in acceptance of nationalist solutions – all point to the tasks to be accomplished.  They point to the need for militant workers and socialists to independently organise the rank and file of workers inside, across and outside the trade union movement and to fight an ideological battle to win them to a programme that can provide the political resources for a genuine alternative that can arm them in their struggle.

The small socialist movement in Ireland is ill equipped to address these tasks but this situation is made immeasurably worse by the fact that this diagnosis of the situation is not accepted by most left organisations.  Instead the major weakness of the working class over the past period has been identified by them as a crisis of working class representation.  This means identifying the major weakness of the working class as inadequate electoral representation.

This is badly wrong for (at least) 8 reasons

· It leads to a refusal to draw the necessary lessons above.

· It reinforces electoralist illusions that real power lies in bourgeois parliaments.  It necessarily downgrades and de-prioritises, the independent role of workers’ own action.  It fails to record that while real power does not lie in parliament for the capitalist class this is even more the case for the working class.

· It is even truer today in Ireland that real power does not lie in the Dail (Irish parliament).  The Irish State is now effectively being run through the instructions of the EU under the threats of the bond market.

· It leads to a search for electoral alliances which have involved surrendering socialist politics. Organisations calling themselves Marxist have even dropped references to socialism never mind gutted its content. This has meant lending false legitimacy to parties that have no claim to be progressive representatives of the working class in any respect.  In Ireland this has included Sinn Fein and the Green Party which are in Government, North and South respectively, and have therefore had a chance to be well and truly tested.

· Similarly it has meant conscious refusal to break from and challenge the trade union bureaucracy.  This has led to left organisations providing excuses for this bureaucracy by claiming that they have simply not acted strongly or bravely enough. Once again these organisations have lent legitimacy to the worst betrayers of working class interests.

· These organisations have fallen into the trap of the current Government which has clung on to power despite huge unpopularity knowing that it can impose austerity while workers opposition is imprisoned within the electoral calendar.  It is widely accepted that the alternative Governing coalition that will take office after the next election will be just as enthusiastic in implementation of austerity and that therefore the left’s strategy is based on elections that are perhaps another five years away – after all the major cuts have been implemented!

· This reveals the passivity that electoralism engenders. Elections simply register the balance of the class struggle.  If no successful resistance is created over the next period the elections that the left is pinning its hopes on will record demoralisation and further disorientation.

· The much needed unity of the left is much more difficult to achieve in the electoral arena, which brings to the fore the most narrow and sectarian instincts of left organisations.  The political questions which divide the left are posed in a way that makes their resolution more difficult.

VII Programme

Large economic crises provoke crises of policy not only for the capitalist class and its state but for working class organisations.  The current financial crisis has led to a vigorous debate within representatives of capital over the appropriate policy response.  It is important that socialists do not find themselves following one or other of these factions.

The following must be taken into account.

·  Nationalisation by the capitalist state is not a socialist measure.  In Ireland it has been used to transfer the debts of irresponsible bankers and property developers to the general population, threatening the capitalist state with bankruptcy in the process, and burdening working people with a debt they did not incur.

· Keynesian-type measures including quantitative easing and deficit financing have been employed by numerous governments.  Opposition to cuts should not lead socialists to support such measures since they are designed to reduce workers living standards through inflation and can at best only postpone austerity.

· Nationalist sentiments are stoked by particular policies which are designed to blame workers in other countries for the actions of their rulers.  For example Greek workers are portrayed as lazy and German workers are encouraged to believe that they are paying for this when what they are paying for is a bail out of German bankers.  Workers in every EU country are encouraged to compete with each other to lower wages and accept reduced public services and welfare.

The policy of socialists must be based on:

· Complete opposition to all cuts in wages, services, pensions and jobs.  Companies declaring redundancies must be occupied by the workers and the demand raised for workers’ ownership.  The state must be called upon to hep finance these worker enterprises and provide all other expert or logistical support that may be called for by the workers.

· A strategy of mass direct action must guide resistance with the perspective of a general strike  that would demand a workers’ solution to the crisis based on workers ownership of enterprises  and development of an economic plan drawn up by workers and other sectors excluded by  capitalist ownership.

· The crisis exploded in the financial sector and further explosions are inevitable. Where such institutions are nationalised we must demand workers’ control.  Instead of capitalist state ownership we should demand ownership by the workers with a workers plan developed to determine how the resources controlled by such institutions should be applied.  This proposal can be utilised as a means to win other sectors of society to a socialist alternative and mobilise them in support of workers’ action.

· The EU and its bureaucracy has become a means to impose cuts and through the European Central Bank to blackmail countries into imposing austerity.  The Stability and Growth Pact must be rejected.  The debts of the ‘PIIGS’ must be repudiated and written off. Socialists should call for a European workers’ bank.  We must demand a truly democratic European State and a United Socialist States of Europe.

Even the basics of such a programme are in complete opposition to the current leaders of the working class movement in every country.  It can therefore only advance by defeating these current leaderships while using the methods of the united front to do so.  This will require a long political struggle to organise and politicise the rank and file of the workers movement.  This is not possible through electoral initiatives which are based on existing levels of working class consciousness and organisation.  At most electoral initiatives can take a subsidiary role in such education and organisation.

The capitalist class, despite its division into competing capitals and competing states, is a thousand times better organised and united at the international level than is the working class.  The fundamental policy of socialists must be to change this.  Socialists must have a united approach to the crisis or they too will inevitably fall into nationalist ‘solutions.’  Socialists must have an international organisation and programme that rivals and surpasses that of the capitalist class.  We must recognise that currently we lag far behind in this respect.

At the very least the European sections and sympathising organisations must produce a joint analysis of the crisis and a joint programme in response.  Propaganda at an international level should not be beyond our organisational capacity.  A project that brings together rank and file initiatives across Europe is one idea that could address some of the tasks above.

20/11/10

ICTU Protest, Saturday November 27th, 12pm, Wood Quay, Dublin Budget Night Protest, March to Leinster House. Assemble 5.30pm, Tues December 7th, Wolfe Tone Monument, Stephen’s Green, Dublin Introducing the catastrophic €400 billion [£340 billion] blanket bank guarantee scheme in September 2008, Twenty-Six County finance minister Brian Lenihan was keen to offer reassurance to those genuinely fearful of the consequences of such economic recklessness.

Thousands demonstrate in Ireland against austerity measures

“There is,” he intoned, “understandable concern that the exchequer is potentially significantly exposed by this measure. I want to reassure the House and the Irish people that this is not the case.” The arrival this week of International Monetary Fund representatives’ in Dublin amply demonstrates the hollowness of Lenihan’s reassurance.

This was the same minister who, at various points throughout this crisis, suggested that the economy had “turned the corner” was “on the road to recovery” and who offered further reassurances that the bank bailout was “the cheapest bailout in the world”. Reckless incompetence coupled with a stout defence of the interests of Fianna Fáil’s financial backers, the bankers and developers, has been the hallmark of Brian Lenihan’s tenure as minister of finance. It is an office that, in recent times, has seated some notable proponents of crony capitalism: Brian Cowen, Bertie Ahern and Charlie McCreevy.

Well, it seems now that the cheapest bailout in the world has not only cost the Twenty-Six County state over €50 billion [£43 billion] and rising, but has driven tens of thousands of workers onto dole queues, exposed its citizens to the vagaries of international financial markets and has now resulted in the state surrendering its sovereignty to the IMF.

Having already imposed swingeing cuts to the public sector, the Dublin government confirmed last week that it intended cutting a further €15 billion [£13 billion] from the Twenty-Six County economy over the next four years, with €6 billion [£5.1 billion] of these cuts to be implemented in next month’s budget. It is this slavish adherence to free market ideology which has created a deflationary spiral in the economy, resulting in massive unemployment, currently at 13 per cent, and once again raising the spectre of emigration.

In order to save the failed banking system and bail out bankers and property developers, the Dublin government intends driving tens of thousands of households into penury. The McCarthy Report, published in July last year, has provided the template for the Dublin government’s programme of cuts. Right-wing economist Colm McCarthy presented Leinster House with a wrecker’s charter that proposed the effective dismantling of the public sector, the imposition of savage pay cuts on public sector workers, swingeing cuts in social welfare payments, increases in taxes on low paid workers and the privatisation of state assets such as the ESB and Bord Gáis. It is a charter that will be grist to the mill of the IMF, an organisation well versed in the economics of the madhouse.

Originally established following the ending of the Second World War, the International Monetary Fund came about as part of the Bretton Woods Agreement, its primary role at that time to provide short-term loans to states experiencing funding shortages and to manage the gold-standard currency valuation system. However, in recent decades the IMF’s role has been to provide long-term loans primarily to developing countries in return for the enforcement of ‘market discipline’ on vulnerable economies.

Its neo-liberal mania has forced governments across the developing world to prioritise debt servicing and the imposition of savage public spending cuts and widespread privatisation. Its legacy has been the impoverishment of millions and the prising open of economies to allow vulture capitalists to profiteer from the sell-off of state assets.

The neo-liberal doctrine promoted by the IMF played a notorious role in the Asian economic crisis of the late 1990s. The IMF encouraged developing economies in Asia to remove capital controls in the early 1990s, a decision which resulted in billions of dollars of speculative investment flowing into the Asian economies. However, when panic hit in the summer of 1997, the absence of barriers to capital control witnessed the outflow of approximately $100 billion from the economies of Indonesia, the Philippines, Thailand, Malaysia and South Korea in a matter of weeks. The subsequent imposition of so-called Structural Adjustment Programmes, which enforced public spending cuts, resulted in spiralling unemployment and drove millions deeper into poverty.

In more recent times, the IMF has imposed severe austerity programmes in Europe. The €7.5 billion [£6.4 billion] loan offered to Latvia in 2008 was conditional on the imposition of a significant programme of cuts that included: 20 per cent public sector pay cuts, staff cuts of between 10 and 15 per cent in government departments, the closure of schools and hospitals and an increase in fees for third level education.

Earlier this year, Greece was forced to accept an IMF/EU loan of €110 billion [£94 billion], which again came with austerity measures attached. These measures included an increase in the age of retirement from 63 to 67, swingeing cuts to public spending and public sector pay, alongside the privatisation of public services and state assets. However, the imposition of this austerity programme has driven the Greek economy into a deep recession; it is estimated that the economy will contract by 4.2 per cent this year and by 3.0 per cent in 2011, while unemployment has soared to over 12 per cent. It is increasingly clear that the austerity medicine is actually killing the patient.

This is the scenario facing the population in the Twenty-Six Counties. However, it should be emphasised that the Fianna Fáil/Green Party coalition and the so-called opposition parties in Leinster House are willing partners in the imposition of austerity measures; acquiescing in the EU demand for a reduction in the budget deficit to three per cent of GDP by 2014.

A consensus has been reached amongst the political establishment that the working class should shoulder the burden of a global capitalist crisis, one that has been exacerbated in Ireland by the decision to offer a blanket guarantee to the private banking sector. No amount of establishment hand wringing or wailing about the loss of sovereignty should diminish their culpability in the destruction of the economy and the impoverishment of the working class.

That said, the interference of the IMF into the affairs of the Twenty-Six County state is a serious development and should be resisted at all costs. It is an affront to democracy that this organisation, which has wrought misery and devastation upon nations across the globe, should be allowed dictate the affairs of a section of the Irish people. The IMF is an undemocratic and unaccountable enforcer of the neo-liberal doctrines of the small state, of deregulated markets and of privatisation. It has no constructive role to play in the affairs of the Irish people and will simply enhance the dictatorship of the markets.

While the IMF sets about driving the working class into penury, the rich in Ireland will be encouraged to invest their vast wealth into purchasing our public assets. The sell-off of state companies such as ESB will be encouraged by capitalist parasites such as Denis O’Brien, Michael Smurfit and Peter Sutherland, who will seek to make billions on the back of the privatisation of these state assets. There is no doubt but that the economic crisis and the IMF takeover will be used to create a further boon for the wealthy, an elite that continues to control wealth in excess of €120 billion [£103 billion].

The Irish Congress of Trade Unions has called a rally for Saturday, November 27. It is to be hoped that this is the beginning of a serious fight-back by the trade union movement in Ireland, whose leadership to date has failed utterly to respond to the establishment war being waged on the working class.

A sustained campaign of resistance is required to drive the IMF out of Ireland and Fianna Fáil out of office; to halt the planned savage programme of cuts and to appropriate the vast wealth currently in the hands of a tiny class of pilferers. The calling of a general strike by the trade union movement is a necessary step in commencing the fight back.

On 8 February, over 100 students at Sussex University in South East England marched up to the top floor of the university’s prestigious Bramber House conference centre and staged a “‘flash occupation”. They marched out 30 hours later, promising more actions to come in the future.

The occupation was part of the Defend Sussex Campaign, an ongoing fight by students and staff at Sussex against savage cuts that the university is planning. The cuts amount to £3 million this academic year, and £5 million next year, meaning course closures, job losses and fee increases.

However at the same time as proposing these cuts, the university administration is planning to spend £112 million on new buildings and refurbishments on campus, as well as raising the salaries of the top 14 managers to a combined £2.1 million per year.

Bin workers in Sussex, who had recently been on strike against cuts that they were facing themselves, got in touch with the occupiers to pledge their support. The students released a statement on the day of the action acknowledging the waves of university and workplace occupations sweeping across California, New York, Greece, Croatia, Germany, Austria and elsewhere:

We send greetings of solidarity and cheerful grins to all those occupation movements and everyone else fighting the pay cuts, cuts in services and jobs which will multiply everywhere as bosses and states try and pull out of the crisis.

But we are the crisis.

Profitability means nothing against the livelihoods destroyed, lost homes, austerity measures, green or otherwise. We just heard we’ve increased ‘operational costs’ – they’d set out the building for a meeting and now they’ll have to do it again

We’ll show them “operational costs.”

Occupy again and again and again.

NO CUTS ANYWHERE.

THE UNIVERSITY IS A FACTORY. STRIKE. OCCUPY.

-All the occupiers of the 8th of February.

To learn more, go to http://defendsussex.wordpress.com

GST a tax on the poor

(goods and services tax) from 12.5% to 15 percent, while lowering income tax for all and also reducing company taxes.  Key and his pals present this approach – lowering direct taxation and increasing the tax on consumption – in a populist way, as if it would benefit workers.  Key has added that the Working for Families package could be increased, along with some other measures, to help offset any losses for lower-waged workers and the minimum wage has been increased (minimally) by 25c an hour.  Once again, there is nothing for beneficiaries.

The first thing to note about GST is how it affects people on lower incomes the most.

GST was introduced into New Zealand by the fourth Labour government, back in 1986.  At the time it was set at 10 percent.  Whereas a similar tax in Tory-ruled Britain, VAT, excluded basic family items, the only things Labour here excluded from GST were financial services, real estate transactions and the operations of very small firms.  The low-waged and beneficiaries were to be especially screwed over by it.

The imposition of GST significantly raised the level of indirect taxation.  The proportion of government income derived from indirect tax rose from 22.5 percent before GST to 33.2 within just the first two years of the new tax.  In 1989, Labour increased GST to 12.5 percent and extended what it covered, leaving exempt some financial transactions, incomes from rental accommodation property and businesses with turnover less than $40,000.

Victoria University economist Bob Stephens has pointed out the overall effect in the 1980s of the partial replacement of income tax by indirect tax.  Between 1982 and 1988, “effective average tax rates including GST for couples on average earnings with two dependents increased from 18.7 percent to 24.1 percent.  Average tax rates for similar couples on three times the average income declined from 40.3 percent to 34.9 percent.”  So we can see that indirect tax means the wealthy pay less of their income in tax while workers, especially the poorest, have more of their income taken in tax.

This becomes even more clear if we compare someone on the dole and a top company CEO.  If an unemployed person is getting $200 a week on the dole and they buy something which costs $100 plus GST, then they are paying $12.50 in indirect tax and this is 6.25 percent of their total weekly income.  If a top CEO on a $3 million a year salary buys the same item for $100 and pays the same GST, her or his indirect tax payment only makes up about 0.0002 percent of their weekly income!

When GST is accompanied by reductions in direct tax – income tax, in particular – then it’s not hard to see why the rich favour indirect tax such as GST.

However, there is another vital aspect to the proposed series of changes in the tax system, whether GST or direct tax is involved. 

Workers’ labour-power under capitalism becomes a commodity and, like all other commodities, its value is determined by the socially necessary labour that goes into creating it.  Basically, this means that the value of workers’ labour-power is the value that is required to house, cloth, feed and otherwise maintain the worker in a sufficient state to turn up to work each day to produce profits for the employers.  If that value translates into $500 a week, this is the value of the worker’s labour-power and will be roughly reflected in the wage.  The worker, however, can create a value much greater than this – say a thousand dollars worth of goods or services.  The extra $500 is surplus-value, and in the hands of the boss.  (To simplify matters, I’m disregarding the part of total value that comes from the use of machines, raw materials, rather than adding that on to the $1,000.)  In good times, and with strong workers’ organisation, the tax on workers’ wages (PAYE) has to come out of surplus-value and therefore lessens the amount of surplus-value that the boss can convert into profit.

During boom periods, the bosses are OK about this because they have so much surplus-value and they are prepared to buy peace with the working class.  However, when capitalism goes into slump, the capitalists want to cut down on anything which reduces the amount of surplus-value they can convert into profit.  They do this in a number of ways – eg, by cutting government expenditure on health and education, since this is financed out of surplus-value, and by shifting tax from being a deduction from surplus-value into being a deduction from the value of labour-power.  Indirect tax is a useful weapon for doing this.

Now, instead of the worker getting the $500 value of their labour-power per week and, say, $150 income tax coming out of the $500 surplus-value, there may be only $100 direct tax coming out of the $500 surplus-value and $50 indirect tax coming out of the worker’s $500 wage.

What has happened is that the worker’s share of the $1,000 has fallen from $500 to $450, while the bosses’ share has risen from $350 to $400, and the government continues to get $150.

Moreover, GST allows the bosses to immediately pass on costs.  In this sense, it doesn’t really cost the bosses anything.  If they pay GST on some item they need for their factory or office, that cost is factored into the cost of their finished product.  A product costing $100 plus $12.50 GST, making a total of $112.50, will now simply cost $115, because the GST has risen by $2.50.   Workers, on the other hand, cannot simply ‘factor in’ GST to their incomes, because they don’t set the price of their labour-power.  You can’t turn up at the job and tell the boss that you’re now charging him an extra 2.5% for your capacity to work.  Or, in the case of beneficiaries, turn up at WINZ and tell them they have to pay you an extra 2.5%. 

GST shouldn’t be increased – it should be abolished.  What should increase is the minimum wage – to at least $15 an hour immediately.  These are things that we need to fight for.

More importantly, however, we need to think not about stopgap measures to improve workers’ incomes and living standards, but how we can get away from a situation where we’re always struggling to catch up and make ends meet.

We need to start about thinking about taking the whole of the economy out of the hands of a handful of rich people and the chaos of capitalism.  Workers create all the goods and services that make the world go round.  We should think about taking possession of the economy and reorganising it so we can have production, distribution and exchange based on providing us with the best lives possible.

The 25 cent government increase in the minimum wage from 1^st April was denounced by union leaders as “a cheap shot’ and “mean.”

The increase to $12.75 from April 1^st, 2010 is an annual increase of only two per cent. The NZ Institute of Economic Research inflation forecast is 2.3 per cent for the year to March 2010 and the average wage rose 2.8 per cent in the six months to September 2009 alone. That suggests the lowest paid workers are going to be relatively worse off than they are already.

Unsurprisingly, there’s increasing public concern about poverty wages. The January 18^th New Zealand Herald reported :

“Sixty-one per cent of people want the minimum wage lifted to $15 an hour, a Herald Summer Survey has found, weeks before the Government is to set the wage for this year.”

Grabbing his chance to score points, Labour’s Trevor Mallard blogged on January 20^th:

“I think it is time for the government to commit to $15 an hour from either 1 April this year, or 1 April next year at the latest.

From the safety of opposition Trevor talks tough. The real value of his words can be assessed by recalling Labour’s last election policy on wages:

“We acknowledge that there have been calls from a number of quarters to lift the minimum wage to $15.00 an hour. Labour would like to meet this target if possible, but in the current economic circumstances we are not able to commit to doing so”.

Following his hypocritical opposition call for a minimum rise, Trevor Mallard set out a recipe for fixing the problem altogether, claiming:

“Most employers know that lifting wage rates encourages investment in capital equipment and training to make their labour force more productive. It is all part of the movement to a high skill, high wage economy”.

Is Trevor right? Are “most employers” down with a combined programme of wage rises and training, so that eventually we all finish up happily ever after in a “high skill, high wage economy”?

If you suspect the answer to universal prosperity is not as simple as that, you’re probably not alone. In fact, Trevor Mallard’s politicking on wages is just self serving bollocks. His high skill/high wage formula is necessarily a fairytale, because exploitation is built right into the wages system of capitalism. Out of what fund does capital pay workers’ wages? Out of capital, of course. But capital by itself produces no value. Workers’ labour power is, besides the earth, the only source of wealth; capital itself is nothing but the stored-up produce of labour. So that the wages of workers are paid out of labour, and workers are paid out of their own produce. According to what might seem common sense ‘fairness’, the wages of the labourer ought to be the value of his or her efforts. But labour power has the special quality of producing more value than it takes to maintain itself. A worker selling forty hours of labour time to a capitalist for a payment of $600 produces the value he/she is paid for in a fraction of the working week, sometimes in less than one day. The rest of the forty hours is surplus value for the capitalist.

As the famous German socialist Fredrick Engels put it:

“the end of this uncommonly “fair” race of competition is that the produce of the labour of those who do work, gets unavoidably accumulated in the hands of those that do not work, and becomes in their hands the most powerful means to enslave the very men who produced it.”

Engels proposed as a solution:

“Possession of the Means of Work — Raw Material, Factories, Machinery — By the Working People Themselves.”

A sensible and logical solution, although obviously we can’t go out and take that possession tomorrow. Such an action would require the conscious militant unity of the majority of the working class. The achievement of a socialist solution to poverty wages is a monumentally huge struggle. The unavoidable truth is that a socialist solution, though difficult, is actually possible, unlike Trevor Mallard’s implied high wage for all under capitalism, which is completely impossible.

In the weeks and months ahead workers will continue to struggle for higher wages by means of the Unite union’s $15 minimum wage campaign, contract negotiations and strikes. These struggles deserve the support of all workers and will benefit some sections of the class, but cannot solve our overall problem. Growing poverty continues to haunt New Zealand and, as indicated in the beginning of this article, the trend for the lowest paid is ominously downwards.

Workers owe it to coming generations to face the challenge that history has left us – the need for a socialist solution to poverty. The alternative is the certainty of our children’s children’s children’s ragged children bewailing the government of their day as “cheap shot” and “mean”.

One of the issues that has arisen with the current recession is the responsibility of banks for the partial meltdown in the financial sphere.  Sections of both the left and the right had traditionally targeted banks, a practice that has become more pronounced with the new recession.  For instance, on January 19 this year the Financial Times in Britain even ran a headline saying “Shoot the bankers, nationalise the banks.”  In New Zealand, Federated Farmers has accused banks of “profit-gauging” – rather rich when you consider the amount of profit made by Fonterra!  Traditionally, in New Zealand, right-wing nationalists such as Social Credit targeted the banks, a reaction to the fact that the social base of that movement – small farmers and small businessmen – were often squeezed by banks in terms of credit, mortgages, loans and so on. 

 Right-wing nationalism in New Zealand also targeted foreign ownership, preferring New Zealand workers to be exploited by good old ‘Kiwi capitalists’ rather than Australian, British, American and – especially – Asian ones.

 It’s therefore rather disturbing, to say the least, to see a section of the far left, in the form of the Socialist Worker group, take up the cudgels against the banks as some unique evil and then wed this to NZ nationalism by targeting only Australian-owned banks in New Zealand through their launching of their “Bad Banks” campaign.  At the same time these socialists have decided to target Australian-owned banks, Kiwibank is playing on NZ nationalism to drum up customers, with a massive, politically ultra-nationalist publicity campaign against Australian banks. 

 The Australian banks have actually weathered the global financial woes relatively well.  This is partly due to the loss of tens of billions of dollars by Australian banks following the deregulation of banking there by the Labour government in the early-mid 1980s.  Deregulation led to banks making incredible loans to cowboy corporates, most of which collapsed.  That experience led to a new era of managers and greater fiscal caution.  Four of the top 11 banks in the world, in terms of credit ratings, are now Australian and Australia’s eight biggest banks are all in the top 20 banks globally.

 An increase in funding from Australian banks to their NZ subsidiaries is also a factor in the stability of the NZ banking sector.  Another factor in NZ is that the functions of different types of banks have been less combined here, and in Australia, than in the US.  Thus in New Zealand, finance companies carried out activities which have become increasingly prevalent among banks in the United States and elsewhere, and so it has tended to be finance companies which have collapsed here, not banks.

 Moreover, what exactly is the difference between Kiwibank and the Australian banks?  The basic fact about banks is that they are businesses and Kiwibank is certainly that.  Government-owned it may be but, like much else that is owned by the NZ government, it is run to make a profit, not to perform a public service.  This would help explain why Kiwibank, and not any of the NZ subsidiaries of Australian banks, had the highest net interest margin in the June-December 2008 half-year.  Kiwibank, like all other banks, pays low rates of interest to small depositors – workers, especially poorer workers – and much larger rates of interest to middle and upper class depositors.  Like all other banks, it lends out money at higher rates than it pays depositors.  Moreover, since it’s not dependent on foreign funding it escapes the higher costs associated with such funding in a period of credit crunch, while the fact that it is based almost entirely on deposits meant that when interest rates on term deposits and the Official Cash Rate fell it had more potential for profit-making.

 In any case, the fundamental cause of the global recession has little to do with banks.  At a time when the market is clearly not working and governments are being forced to intervene, there are expanded opportunities for socialists to explain to a wider audience the fundamental failings of the capitalist system – why go off at a tangent and scapegoat banks, let alone do so on an economic nationalist platform which obscures the exploitation of NZ workers by NZ capitalists?

 The fundamental cause of the current global recession is the stagnation of the real economy – the economy where new value is produced in the form of commodities, goods and services produced to be sold on the market to realise a profit.  It is the stagnation of the real economy, the sphere of production, that leads to the massive flow of capital into the artificial economy, which is where financial services, currency trading, stocks and share buying and selling etc are located. 

 The stagnation in the real economy is the product of the law of the tendency of the rate of profit to fall.  What happens is that workers’ labour-power (capacity to work) creates new value, since workers can produce more in a working week than what they are paid for in wages.  This is the basis of profit.  The other factors in production – eg machinery, raw materials – simply transfer their own existing value into the value of the new products.  So far, so good.  However, capitalists are forced to compete against each other, to produce more goods more cheaply in order to gain more market share.  This means their capital invested in new machinery, plant, technology (constant capital) etc grows in proportion to the capital they have invested in labour-power (variable capital), the source of new, expanded value.  They can produce a bigger mass of profits, but the rate of profit falls, because it is measured over the combination of variable capital and a substantially expanding constant capital.  Eventually the rate of profit falls to a level at which they can either no longer fund a major new round of investment in industry and manufacturing and therefore invest in the artificial economy or simply decide that since profit rates are, at this stage, higher in the artificial economy they will invest there, regardless of their ability to invest in the productive sphere. 

 Essentially, this process led to the end of the long postwar boom (late 1940s to early 1970s) and the onset of a massive global economic breakdown of the early-mid 1970s, a far more serious crisis than the current recession.  Since that crisis, there has been no new protracted boom in the real economy.  There have been mini-booms, usually in some sphere of the artificial economy, such as the boom in share trading in the mid-1980s which ended with the crash of October 1987.  What essentially happens with each of these mini-booms is that the paper values of whatever is being traded become vastly inflated; eventually someone can’t or won’t pay the vastly inflated price and the balloon is burst.  However, all these mini-booms in the artificial economy – whether around buying and selling shares, speculating in currency and property, dealing in subprime mortgages and bundling them up into toxic securities packages – are the product of the stagnation in the real economy and, ultimately, the contradiction between the stagnation of the real economy and the booming of some part of the artificial economy brings each house-of-cards boom to a dramatic end.

 Where you locate the most important problem in capitalism also dictates what you will argue is the solution.  For instance, if the banks – or even the wider financial sphere – is the most important problem then the logical answer is greater government regulation.  And if the problem is foreign-owned banks, then the solution, logically, is economic nationalism.  In neither case is the overthrow of capitalism necessary or desirable.

 If, however, the key problem is the capitalist mode of production itself, and the cause of crisis is ultimately located there, then regulation and economic nationalism make no sense but are dangerous diversions, leading people up a political blind alley.  If the key problem is the capitalist mode of production, then only the abolition of that mode of production can put an end to the boom-bust cycle of the system, to the grind of daily exploitation, and to the poverty and misery that capitalism inflicts globally on the mass of humanity.  It’s the job of serious Marxists to clarify, not obscure, the core problem and the solution.

As the recession has bitten, redundancies have risen and unemployment figures have begun to climb, Labour’s Darien Fenton has had her Private Member’s Bill drawn from the ballot. The Bill would enforce a minimum redundancy payout on all employers, starting at four weeks pay after one year of employment. The Labour Party of course is the party that introduced the Employment Relations Act, which does not even provide a definition of the word redundancy, let alone provide significant protection for workers. New Zealand workers actually have no legal right to redundancy compensation and very few have provision for it in their contracts.

Workers at LWR’s Wairarapa sites who were made redundant earlier this year have been told that they are unlikely to receive any more than seventy percent of their entitlement in redundancy and holiday pay. Approximately eighty percent of staff with written employment agreements (contracts) have no redundancy provisions at all according to a Massey University survey commissioned for the Department of Labour’s Restructuring and Redundancy Public Advisory Group.

The generally accepted legal definition of redundancy is the one provided by the Labour Relations Act of 1987. It states that a redundancy is “… a situation where…[a] worker’s employment is terminated by the employer, the termination being attributable, wholly or mainly, to the fact that the position filled by that worker is, or will become, superfluous to the needs of the employer…” New Zealand case law has always focussed on the position, not the worker, so it is the position that becomes redundant. What this means in effect is that it is the employer’s right to decide the structure of the business and, consequently, to make positions redundant, provided that the redundancies are “genuine” and are “carried out in a fair and reasonable manner”. The ERA added some largely worthless prerogatives to define “fair and reasonable”, primarily around the concept of good faith. Despite legal requirements for consultation with workers and their representatives and a 2004 amendment to the ERA intended to strengthen the definition of what a “fair and reasonable employer” would do, the Employment Court has consistently interpreted the law as placing the decision making power firmly in the hands of the employer:

“So long as an employer acts genuinely and not out of ulterior motives, a business decision to make positions or employees redundant is for the employer to make and not for the Authority or the Court…”

Those “genuine” reasons are very broadly defined: The introduction of new technology Rationalisations of staff to increase business efficiency Restructuring business operations Closure of the business Outsourcing Sale of the employer’s business

These conditions of “genuine” behaviour can be, and are, interpreted very broadly, making it very easy to define a job as a redundancy if it suits the employer to do so.

Workers cannot depend upon the Labour Party to gain them any improvements in their working conditions. Now in opposition after nine years in Government, Labour has suddenly discovered that the working people of this country have been having their rights and conditions eroded. Labour has proved time and time again that when in government they are both unwilling and incapable of delivering sufficient real gains for workers. That the Fenton Bill needed to be introduced as a Private Member’s Bill is itself indicative of Labour’s inability to deliver for workers. Workers will only get real gains when they fight for them as workers, because the Labour Party will not deliver.

The recession has been officially declared over, thanks to 0.1% economic growth in the last quarter. The government and various economic experts agree, however, that more jobs will be lost over the next year to 18 months.

In The Spark, we’ve consistently argued that the current global recession is nothing like on a par with the Great Depression of the 1930s nor is it the worst global downturn since then. Current trends suggest we made the right call, while many on the left vastly overplayed the degree of economic crisis. However, we’ve also pointed out that it is equally important to remember that this is actually about as good as it gets under capitalism these days – short mini-booms, often in the artificial economy, followed by recessions, with workers usually ending up worse off after each recovery than they were after the previous recovery.

A number of negatives are becoming increasingly typical of working class existence in New Zealand today. Take the lengthening of the working week. About 36% of full-time male workers and nearly 19% of full-time female workers now work 50 or more hours a week. Almost 16.5% of full-time male workers and almost 8.5% of full-time female workers actually work more than 60 hours a week. Over half of agricultural and fisheries workers and about 35% of plant and machine operators and assemblers work more than 50 hours a week and a majority of both these groups working more than 50 hours are actually doing more than 60 hours a week.

By far the largest number of male workers plus the largest number of female workers work 40-49 hours week (see chart). Instead of life getting easier, it’s getting more filled up with work. Over a century after the achievement of the 40-hour week, most workers are working more than 40 hours, while many other workers are under-employed through being in part-time and insecure jobs on low wages or are unemployed and struggling to get by on benefits.

While full-time employment has been declining since last September and is now about the same as it was in March 2006, part-time employment, although levelling out during the recession, has grown from about 450,000 in January 2005 to around 500,000 in June 2009.

While unemployment and under-employment affect the whole working class, particular sections of workers are hit especially hard due to racialised and other forms of oppression inflicted by capitalism. Thus the unemployment rates of Maori (12.6% in June 2009) and Pacific Islanders (12.8%) are over three times as high as those of pakeha (4%), but unemployment rates among workers of Middle East, African and Latin American origin (almost 15%) are even higher. Women at work still only earn about 80c for every dollar earned by men, with the capitalists happily pocketing the difference.

While hours of work, pay and conditions are all making life harder for workers, resistance to this worsening situation remains weak. In the year to March 2009, there were only 22 recorded work stoppages; they involved less than 5,000 workers and just over 8,500 person-days of work were lost. In the year to March 2007, there had been 40 work stoppages, involving nearly 8,700 employees and over 25,500 person-days of work lost.

Factory and other workplace closures and lay-offs continue to be met with a fairly passive response by union leaders. Instead of even making an attempt to rally workers behind a fighting perspective, most union leaders limit activity to helping manage the lay-off and shut-down process.

There is an urgent need for a new kind of workers’ movement – a real workers’ movement, one that puts the needs of workers first. One starting point would be fighting to defend every job. Another would be struggling to raise the wage of the lowest-paid workers, a struggle which has been begun by Unite union whose petition to bring about a citizens-initiated referendum to lift the minimum wage has the potential to put the issue of wages, and the wages system, to the forefront of public debate.

The government has made a deal with fast food giant McDonald’s in which young people receiving the unemployment benefit will be sent to jobs in McDonald’s restaurants, and have their ‘training’ subsidised by the state. Every beneficiary McDonald’s hires will get the company up to $16,000 which is the equivalent of about 8 months wages for a McDonalds worker. Social Development and Employment Minister Paula Bennett is citing the relationship with the golden arches as an example of “the Government’s commitment to getting beneficiaries into jobs,” but while the growing number of unemployed certainly need jobs, McDonald’s needs workers a whole lot more, and this is what the scheme is really about.

Fast food is a growth industry during this recession, as people who would have previously eaten at more up-market restaurants lower their budgets. McDonald’s in New Zealand is continuing to build on its profits, enough to open a number of new outlets. They need to employ an estimated 6,000 workers over the next few years. The reason? Those workers are where their profit comes from. The company can provide an investment to build a new store with all the cooking and food preparing equipment that requires, but it can’t see a return on that investment until labour (ie, workers) is added. A McDonald’s worker doing an eight hour shift for minimum wage will be paid $100, but by turning raw materials (buns, meat patties, frozen Happy Meals, that worker could produce $200 for the company. Without the worker, McDonald’s couldn’t realise a profit.

Shareholders always want a bigger return on their investment (or they would simply invest their money elsewhere) so workers are always being pushed to make more money for the company’s shareholders; partly through selling upsizes and extra fries, and partly through being made to work harder and faster.

Since in reality its not each worker producing an individual share of wealth for the boss, but a whole number of workers working collectively to produce wealth, squeezing more out of the workers is often done by taking a labour process done by, say, four workers, and having it done by three workers with the same expectation that the customer will get their order within 2 minutes. The ideal for McDonald’s, as for any employer, is to get the maximum amount of profit from a minimum amount of wage outlay. With this being the case, how is the government’s new scheme going to help more people gain employment? Well, hiring four people at minimum wage with one of them a former beneficiary on subsidised wages is certainly more profitable than hiring four unsubsidised workers, but then, hiring three workers with one of them a subsidised former beneficiary is even more profitable still. If this scheme really creates any more jobs than McDonald’s would create anyway — without the helpful hand of corporate welfare —it would be for the short term at best.

Even if we take Paula Bennet at her word, and believe that this scheme is all about giving a helping hand to unfortunate unemployed young people, then why McDonald’s? Is the expansion of the fast food industry National’s answer to capitalism’s economic woes? McDonald’s jobs are the archetype of the ‘McJob’ and of course, the originator of the term. The Oxford English Dictionary defines a McJob as “An unstimulating, low-paid job with few prospects, esp. one created by the expansion of the service sector.” McDonald’s restaurants are fast-paced and highly stressful workplaces, and there are stores with many health and safety hazards caused by hot oil, wet floors and intoxicated late night customers. While McDonald’s workers have fought to improve wages and conditions, the company is aggressively anti-union. In addition to all this, the food they sell is frequently associated with poor public health, and the packaging it comes in is a significant environmental concern. Yet this is the kind of job creation the government is putting resources into, at a time when polytechnics — places where people learn skills in carpentry, engineering, information technology and a huge number of other professions — are crying out for more funding and turning away students in their thousands.