The Shipping Forecast

In recent times, economists have come to play a central role in Irish public life, for reasons that are easy to decipher. Over the past generation, the Republic of Ireland has been a developmental shapeshifter, from ‘the poorest of the rich’ (as the Economist dubbed it in 1988) to poster child for neoliberalism, from the epitome of Eurozone dysfunction to the Troika’s star pupil. For those who take the whole island as their reference point, Northern Ireland’s shift from the cutting edge of global manufacturing to its current status as an impoverished peripheral zone of the United Kingdom should be further stimulus for thought about the wealth of nations and classes.

Unfortunately, the dominant paradigm in which Irish economists have tended to function is the one that holds sway in the more populous states of the Anglosphere. The gatekeepers of neoliberal orthodoxy in Ireland sometimes adopt the persona of a maverick outsider railing against the status quo, but their prescriptions invariably tend to reinforce the social hierarchy: one such figure, Colm McCarthy, has been called in twice by governments to compose a supposedly objective rationale for dramatic public spending cuts, first in the 1980s, then after the crash of 2008. Neo-Keynesian perspectives are rare enough in the profession. Terrence McDonough’s successful career as an avowed Marxist in an Irish economics department, before his untimely death in September last year, was as surprising and impressive as the neglect of his writings by the Irish media was predictable.

McDonough was born in California in 1952, but as their surname might suggest, his family could trace its origins back to his adopted country: his great-great grandfather had left Roscommon in 1847, the bleakest year of the Great Famine, and settled as a farmer in Wisconsin. McDonough himself paid a brief visit to Ireland in 1974 for a semester as a student, where he first encountered his future wife, Marian. They reunited when he came back for a second trip sixteen years later, after he had received his economics PhD, and McDonough settled down for an academic career in Ireland, teaching first at Dublin City University and then at the National University of Ireland, Galway until his death.

As an obituary notice by Catherine Wylie in the Irish News affectionately observed, McDonough ‘comfortably fell into the category of the absent-minded professor, having once gone to see Riverdance wearing his bedroom slippers.’ According to Wylie, McDonough’s political engagement, stoked up by the civil rights and anti-war movements in the US, had already begun when he was a school student: ‘So enthusiastic was he that his school was unhappy with his activities and he was asked to leave after his junior year.’ During his time in Ireland, he regularly assisted trade unions and left-wing campaign groups with his expertise. After his death, Vicky Donnelly of the One World Centre in Galway recalled that she took to calling him ‘the Shipping Forecast’ in the midst of the financial crisis, because he would invariably deliver talks with the most alarming economic news and predictions in a calm and reassuring voice.

In his scholarly work, McDonough touched upon the social conditions that had obliged his ancestors to leave the island. In 2005, he edited a volume with the title Was Ireland A Colony? – the need for a question mark spoke volumes about the tenor of academic debate on such questions, after the revisionist challenge to Irish nationalism congealed into an orthodoxy of its own. Three years later, he co-authored a superb essay with Eamonn Slater for Irish Historical Studies about Marx’s view of nineteenth-century Ireland.

This was a subject about which one might expect everything worthwhile to have long since been said, given the volume of commentary it has attracted, but McDonough and Slater showed that there were still new seams to be mined. Their article concentrated on an 1867 talk on Ireland that Marx had delivered to the Educational Association of German Workers in London, shortly after the abortive Fenian uprising. It tracked the successive stages of English and British rule over the neighbouring island and the mutations it had undergone. The authors stressed that Marx did not rely on a strictly economic understanding of colonial domination:

Marx’s account of Irish history in the report indicates that there cannot be a general theory of colonialism, with a single ‘prime mover,’ because colonialism depends on the conjunction of the forces operating in the political regime with those in the local economy and civil society . . . what Marx provided in the report was a theoretical framework that allows scholars to go beyond the relatively narrow economic analysis of Marxian dependency theory: one that instead sees colonialism as a complex social process operating at differing levels within the social formation as these levels interact with each other in complex ways.

This was the kind of ‘revisionism’ that Irish historiography needs, not the self-conscious iconoclasm that suggests the culpability of British politicians for mass starvation in the 1840s is a nationalist shibboleth. The fact that Ireland diverged so sharply from its immediate neighbours and remained an underdeveloped country by any measure well into the twentieth century is also a vital part of its economic trajectory, which the high growth rates and GDP levels of recent decades have not consigned to irrelevance. One feature of neoliberal ideology in the Irish context is a brusque insistence that we must look at the country through the same lens as any developed capitalist state, even though the very term ‘Celtic Tiger’ implies that it has more in common with South Korea or Taiwan than with Germany or California.

In the wider field of Marxist economic thought, McDonough aligned himself with the Social Structure of Accumulation (SSA) school, co-editing with Michael Reich and David Kotz an important 2010 volume, Contemporary Capitalism and Its Crises, that sought to apply its theoretical insights, and contributing an essay of his own on the SSA framework. But for left activists in Ireland, McDonough’s greatest impact came through a series of articles that followed the crash of 2008. To give a flavour of his perspective on the contemporary Irish economy, I’ll focus here on two articles that span the years between the financial crisis and the Covid-19 pandemic.

In ‘The Irish Crash in Global Context,’ published in 2010, McDonough analysed the meltdown of the Celtic Tiger economy, depicting it as ‘simultaneously a manifestation of the global crisis of neoliberal capitalism and an expression of its own local dynamics’. His essay showed that it was perfectly possible to take account of national specificities without broadening the category of neoliberalism to the point that it became unhelpfully vague:

There is no necessity for the local institutions to directly reflect the global characteristics of neoliberalism. Indeed, one of the advantages for business of the global neoliberal order is the opportunity to fragment the firm’s production process, locating each part in the most favourable area for profitability. This strategy depends not only on the location’s integration into global neoliberalism but also on the existence of differences between locations.

In most respects, McDonough argued, the Irish economy during the boom years was a neat fit for generic definitions of neoliberalism. Its trade policy had been outwardly oriented since the late 1950s, with the active pursuit of foreign direct investment a long-established priority of government. Its regulation of business was ‘light-touch’ and ‘principles-based’:

Functions were divided, with the Central Bank evaluating threats to the banking system and the Financial Regulator dealing with individual firms. Central Bank evaluations were frequently ignored by the regulator, which concentrated on consumer issues rather than prudential matters such as capital adequacy or the soundness of loans.

In the Irish case, McDonough noted, this permissive framework blended ‘a peculiarly Irish anti-authoritarian populism with an ideologically neoliberal approach to regulatory matters’. The Irish state’s diminutive tax take – 31.2% of GDP in 2007, barely ahead of Latvia, Lithuania, Romania, and Slovakia at the bottom of the EU’s league table – offered further evidence of domestic conformity to neoliberal doxa.

The main exception to the rule appeared to be the involvement of the trade union movement in a corporatist structure known as ‘social partnership,’ which centre-left intellectuals had frequently celebrated as an alternative to Anglo-American union-bashing policies. However, McDonough stressed that the fruits of corporatism for the Irish unions had been ‘distinctly mixed’: union density continued to fall, from 62% in 1980 to just 31% in 2007, and the national agreements traded wage moderation by workers at a time of virtually full employment for cuts to personal taxation that further weakened the state’s fiscal capacity.

Ireland also conformed to the international norm in its embrace of financialization, and it was the ready availability of credit that enabled Irish banks and property developers to inflate one of the most spectacular asset-price bubbles in the years leading up to the crash. McDonough’s conclusion brought together the domestic and international factors behind a calamitous downturn. The Fianna Fáil–Green Party coalition was ‘both right and wrong in holding the international crisis responsible for our current economic woes’. The sub-prime meltdown was certainly the immediate cause of Ireland’s malaise, but the same factors that generated that meltdown had long since been at work in the Irish system:

Global neoliberalism may have been initially imported from abroad, but successive governments created an indigenous variety that deserved a guaranteed Irish label. Where the Irish crisis differed from the international crisis was in its particular low-tax regime and in the triumvirate of developers, bankers, and politicians that created our home-grown financial and fiscal crisis. Ireland’s golden circle cannot opt out of responsibility for this crisis: where they changed the global model, they, in the end, only intensified the local crisis.

Ten years later, McDonough looked at the fate of the Irish economy since the great crash. For international observers, the outcome of the 2020 general election must have been baffling: despite all the talk about Ireland’s miraculous recovery, its voters had made Sinn Féin the largest party on the strength of a left-wing economic platform, while downgrading the two centre-right parties that had superintended the much-vaunted ‘Celtic Comeback’. As McDonough explained, this carefully constructed image, so valuable for the dominant players in the Eurozone, had obfuscated the reality of Ireland’s economic performance.

He quoted Enda Kenny’s insufferable admonition to the Syriza leader Alexis Tsipras – ‘here’s a lesson from one small country that you can take some reflection on in terms of building your own economy for the future’ – before explaining what Kenny’s tame submission to Troika diktats had actually meant for his country’s citizens:

In 2015, the number of people employed was 10% below its pre-crisis peak. The official unemployment rate was 9.7%, but many people were mistakenly excluded from the labour force and hence not considered to be unemployed. Large numbers of part-time workers were unsuccessfully seeking full-time work. Adding these people to the ranks of the unemployed would have more than doubled the official figure. Factoring in those who had emigrated to other countries in search of work would increase the figure by another 3–4%. Most of these people were in their early twenties.

In the same year, the official figures for GDP growth purported to show an expansion of 26.3%, which ‘merely underlined the extent to which Irish statistics were deeply distorted by the globalization of Ireland’s economy and, more particularly, by transnational corporate tax-minimization strategies’. 2015 had been unusually replete with corporate chicanery:

AerCap, the world’s largest independent aircraft-leasing company, moved its entire €35 billion fleet of aircraft to Ireland for tax purposes. Of course, this happened entirely on paper. The planes stayed where they always were. Two major companies conducted corporate tax ‘inversions.’ This is where a large US company moves its headquarters operations to a much smaller Irish subsidiary, so that the Irish company now ‘owns’ its bigger parent, allowing the parent to pay the Irish tax rate on profits. Apple also had a big role in this story. It took advantage of a newly created tax scam, called the ‘Green Jersey’ because the island tax haven of Jersey was also involved. It involved transferring internal intangible property assets to Ireland and writing off the ‘cost’ against the Irish taxes, driving the already low Irish tax rate towards zero. Apple jumped at the chance in 2015, shifting billions in assets and pumping up Ireland’s measured GDP.

Similar if less spectacular gambits were clearly at work in other years, when the GDP statistics looked to be more plausible.

This meant that the employment rate was the only reliable benchmark for Ireland’s economic health. It wasn’t until 2018 that Irish employment numbers finally matched their 2008 levels: ‘A ten-year recovery period is nothing to write home about. Historically, most recessions are well over after two years.’ The austerity programmes of the previous decade, first homegrown then carefully adumbrated by the Troika, cut government spending by 13% between 2008 and 2014. They made the Irish recession longer and deeper than it would otherwise have been.

For McDonough, there was nothing mysterious about the Sinn Féin surge. One needed only to look at the experience of Ireland’s younger generation: unemployment for those under thirty-five was higher in 2019 than it had been in 2006, even though labour-force participation rates from this age bracket had fallen substantially. Those who did have jobs were almost twice as likely to be in part-time employment as their 2006 counterparts. Average weekly wages had risen by less than 8% in real terms since the crash, even though average rents were 36% higher (44% in the capital Dublin).

Now, as McDonough noted, Irish youth were ‘experiencing their second once-in-a-lifetime recession in the space of ten years’, with younger workers bearing a disproportionate brunt of pandemic-related unemployment, not to mention a severe housing crisis. Against that backdrop, it is no surprise that Sinn Féin’s vote has increased further since the 2020 election, from 24.5% to an average polling score of 31.6% in 2021 – five points higher than the party’s closest competitor, Fine Gael.

McDonough brusquely dismissed the emphasis of conservative politicians and journalists on Sinn Féin’s historic ties to the IRA as an implicit repudiation of the Good Friday Agreement (GFA):

They claim that party decisions are more heavily influenced by a cadre of veteran republican activists in Belfast than by its elected politicians in the South. This charge is controversial, but in any case, it ignores the fact that the goal of the GFA was precisely to bring these political forces into the electoral arena. Sinn Féin’s internal dynamics are hardly democratic, but this does not distinguish it from any other Irish party.

From his perspective, the real question was whether Sinn Féin would live up to the hopes invested in it by those who wanted a new economic model:

After the next election, Sinn Féin will likely have the option of coalescing with the rest of the Left, although the fragmented character of these forces will make the construction of such a government challenging. The party’s other option may be an alliance with a diminished and chastened Fianna Fáil. This may appeal as a more respectable choice to those who prioritize the goal of a united Ireland over the broader left agenda. This choice, if it comes about, will decide the fate of the Irish left for another generation.

With centre-right hegemony at the ballot box no longer guaranteed, the period leading up to the next general election will no doubt see the prize-fighters of Ireland’s ruling class produce article after article and report after report, purporting to show that the state simply cannot afford Sinn Féin’s modest reform programme, let alone more radical measures. It’s a tremendous pity that we won’t have McDonough with us to cut through this rhetorical fog.

Read on: Daniel Finn, ‘Ireland on the turn?’, NLR 67.