By Diana O’Dwyer
Since his death on 8 January, the Irish establishment has been unanimous in its acclaim for former civil servant TK Whitaker. As Secretary General of the Department of Finance from 1956 to 1969, Whitaker promoted his Programme for Economic Expansion (written in consultation with the World Bank) based on Foreign Direct Investment, export-oriented growth, international ‘competitiveness’, and closer relations with Britain and the rest of Europe – a formula that has remained largely unchanged ever since. As the Irish Times (11 January 2017) approvingly pointed out, “The basic ideas that shape the State in the 21st century are his.”
Accordingly, the Taoiseach, the Minister for Finance, Micheál Martin, the President, the Archbishop of Dublin, the billionaire and state-owned media and regime economists and academics have all lined up to shower him with praise as ‘the architect of modern Ireland’ – by which they mean the capitalist economic consensus that they all follow.
A visionary model?
Whitaker’s promotion of FDI and international competition has been painted as visionary but in fact there was little new or original in his approach. Ex-colonies prostrating themselves before foreign capital and local elites acting as ‘compradors’ for foreign capitalists have long been the norm across the neo-colonial world and Whitaker’s strategy, in his own words ,“put export-orientated expansion, even under foreign ownership, before dependence on protected domestic industry”.
Such a ‘comprador’ strategy involves local capitalist elites internalising the interests of foreign capital as their own so as to derive benefits for themselves from helping foreign capitalists exploit the country and its workforce. Often this means inviting in foreign capitalists to extract a country’s natural resources, as has been the case across Africa and Latin America.
In Ireland’s case, this happened with oil and gas and, after joining the EU, with fish. However, Ireland, and Whitaker, also helped pioneer a new comprador development strategy of luring in FDI, not primarily with natural resources, but by offering the country up both as a low-wage export platform for the more developed economies of current and former imperial powers like the US and Germany, and a haven from tax and regulation. The latter included a deliberate strategy of ‘light touch’ or non-existent financial regulation, designed to attract in foreign banks and finance capital, that culminated in the disastrous 2008 banking crash.
Whitaker, like every right-wing politician and economist today, argued that ‘wage restraint’ was needed to keep wages here lower than in other countries in order to remain ‘competitive’ and attract FDI. Appointed to the Seanad by successive Fianna Fáil and Fine Gael Taoisigh, he used the well-paid sinecure to rail against “the inappropriately high real wage” in Ireland in early 1980s, complaining that “Amongst some of those fortunate to be at work one gets the impression at times, because of the frequency and trivial causes of unofficial strikes, for example, that there is not enough appreciation of how scarce a thing a job is.”
An admirer of Thatcher’s war on the British working class, he believed her “most creditable and enduring achievement was to re-establish the supremacy of government and parliament over sectional interests”. In 1979 he advocated that the army be trained to break strikes. As Whitaker saw it, “The community cannot allow itself to be forced to its knees by any group which finds itself in control of essential supplies of services and callously and selfishly uses this power to enforce outrageous demands”. Unfortunately, he was referring here to workers demanding decent wages rather than bankers or landlords holding the country to ransom. For Whitaker, as for every government and senior civil servant since, the interests of the minority capitalist class are synonymous with the ‘common good’ while those of the working class are always ‘sectional’.
Low tax economy
Out of Whitaker’s comprador economic policy sprang an indigenous capitalist class of landowners, property developers, distributors, wholesalers, hoteliers, retailers and other service industry bosses who got rich off offering premises to US MNCs and providing them and their employees with ancillary services. Supporting them all is an over-growing army of corporate lawyers and accountants devising ingenious ways for both foreign and domestic capitalists to avoid paying tax. The state they created sees the 12.5% corporation tax rate as the defining national interest – the one thing zealously protected from the Troika while savage cuts to public sector and minimum wages and social welfare were eagerly implemented.
This flowed from the underlying low wage / tax haven development model, which from the outset meant chronic under-investment in public services and indigenous public economic development. In a rare outbreak of mild criticism, UCD’s Professor Niamh Hardiman observed in her obituary that Whitaker’s “fiscal conservatism may also have limited somewhat his sense of the need for…investment in comprehensive social security coverage, and ensuring access for everyone to good-quality public services. Ireland is still sadly lagging on these fronts.”
Examples of Whitaker’s miserliness include his opposition to Donogh O’Malley’s announcement of free secondary education in 1966, his proposal in the Programme for Economic Expansion that funds for public investment in economic development be raised by cutting spending on social housing and hospitals – rather than raising taxes on big farmers and the rich. Later, as Governor of the Central Bank, he opposed introducing a wealth tax.
“Father of economic prosperity”?
Politically, Whitaker’s strategy spawned a Taoiseach whose “vision” is to make Ireland “the best small country in the world to do business” and a government that sees the role of education as training our young people to work for multinationals and ignored spiralling rents until multinationals complained of a lack of affordable accommodation for their staff. Perhaps the starkest example of the comprador nature of the Irish establishment is its siding with Apple against collecting €13 billion (plus interest) owed to the state in corporation tax – although Michael Noonan’s incomprehension of the public outrage about the €200 billion fire-sale of Ireland to tax avoiding US vulture funds, runs a close second. From the establishment’s perspective, both are just unusually successful examples of attracting in foreign direct investment.
The justification for this comprador approach and the worshipping of Whitaker is invariably that “it works”. As Labour leader Brendan Howlin, put it, Whitaker “was in many ways the father of our economic prosperity and growth.” Yet this depends on an incredibly selective reading of Irish history that focuses on the relatively brief periods of economic growth following the enactment of Whitaker’s policies in the 1960s and during the Celtic Tiger.
This argument pretends the economic stagnation and return to mass emigration of the 70s, 80s and early 90s, as well as the 2008 crash and the near decade of austerity that followed, never happened. As Fintan O’Toole points out in his obituary, “in 1988, 30 years after Economic Development, Irish per capita GDP was still more than one-third below the western European average, roughly the same ratio as in 1955”.
A rotten system
Reading the glowing obituaries of Whitaker, it’s striking how often mass emigration in the 1950s is invoked as the motive force for his approach, implying that in some way his economic policies resolved the problem. In fact, there was net emigration of 150,000 people throughout the 1960s while he was Secretary-General of the Department of Finance and there have been repeated episodes of mass emigration ever since with net emigration of nearly 212,000 from 1980-1991 and over 155,000 from 2010-2015.
Overall, since Whitaker’s Programme for Economic Expansion was published in November 1958, Ireland has experienced net emigration in 33 years out 57. The legacy of the comprador economic policies of Whitaker, and the Irish establishment in general, is that nearly one in five Irish-born adults live abroad – by far the highest percentage in the OECD.
The reason for this is the failure of comprador FDI-dependent policies to develop the Irish economy that would benefit the mass of the population in a sustainable way. All these policies have really achieved is to enrich indigenous elites by exposing the economy to the inevitable boom and bust cycle of the global capitalist system and making us all dependent on it. Irish elites argue this is preferable to the previous approach of inward-looking protectionism which failed to develop the economy at all.
However, the fact that inward looking stagnation or outward looking boom and bust are the only two options presented as possible exposes the inability of capitalism, whether globalised or otherwise, to deliver decent, stable living standards and fulfil the aspirations of the majority. What’s needed instead is an outward-looking internationalist programme of the socialist transformation of the economy and society that can lay the basis for sustainable socialist development on a global scale. It’s only by fighting for this that a new Irish and global economy capable of benefiting the majority rather than greed of a few can be developed.