IRELAND INC. GOT a big thumbs-up this week. Forbes magazine, currently for sale, described Ireland as the best place on the planet to do business.
Gratified, enterprise minister Richard Bruton said the accolade was a “testament” to our capacity for “hard work and innovation”. Tough policies here were yielding “tangible results”.
Bruton should go carefully. The Editor-in-Chief of Forbes is Steve Forbes, a man described in Time magazine as “wacky, saturated with money and ultimately embarrassing to all concerned”. Time added that he was like a “mad scientist constructed by a dark robot”.
Who is Forbes anyway?
Forbes might best be described as part of the hard right in the US. He supports flat taxes, thinks the rich should be exempted from social security taxes, dislikes the UN and has his own programme on Fox TV which goes out Saturdays and is called ‘Forbes on Fox’.
He’s a trustee of the Heritage Foundation, a right-of-centre think tank which along with Freedom House and the Property Rights Alliance provides much of the research which supports the findings of the Forbes survey which last week ranked Ireland as first out of 145 countries.
If Bruton wants an alternative view of where we stand he should consult the unreported sections of Tánaiste Eamon Gilmore’s opening speech at last weekend’s Labour Party conference in Killarney.
Lashing out at Sinn Fein whose demand soak the rich in taxes, Gilmore said that “Ireland has the most progressive tax system in the OECD with the top 5% of income earners paying 44% of all income tax, and the top 1% paying almost 20%”.
Gilmore is right
He’s right. In Ireland the top rate of income tax kicks in at the extraordinary low level of €32,800 a year gross. The net marginal rate of tax applying to vast numbers of workers, when you include USC at 7% and PRSI at 4%, is a whopping 52%. For some self-employed workers the top rate rises to 55%.
Gilmore added: “Thanks to the campaigns we ran for tax justice, the limits we set on tax reliefs mean that high earners are now paying more than twice the tax they were paying before.”
In the most significant passage of his speech, Gilmore said that “those who demand a wealth tax don’t appear to have noticed that we have in fact taxed wealth. We have tapped the main reservoirs of wealth – property, high pensions, financial assets. Now and for the first time we are imposing PRSI on unearned income”.
What Gilmore means here is that Ireland is now applying social security taxes to dividends, rents and deposit interest as well as applying levies to pension savings regardless of underlying pension fund performance.
The bailout made us “attractive”
Forbes takes a completely different view of what’s been happening in the emerald isle.
The magazine claims that the ECB/IMF bailout has made Ireland a more attractive, not a less attractive, place to do business. In a quasi-Marxist part of its analysis, which appears to rely on what’s called the labour theory of value, it claims that nominal wages dropped 17% in the four years to end-2011 keeping labour costs in check.
What counts to the well-heeled readers of Forbes magazine of course is the dollar denominated cost of hourly wages in Ireland. If those costs expressed in nominal terms have dropped by roughly 4% a year since the austerity programme commenced in mid-2008 then the real post-inflation decline in Irish wages arising from our six-year wage free will be substantially higher, perhaps 6% per year. That would mean that the true cost of paying for Irish labour dropped by over a third in that time.
Profits in Ireland are taxed at a nominal flat rate of 12.5% but substantial amounts of accumulated capital can be removed from the jurisdiction virtually free of tax in the form of dividends and royalties paid to firms based in more remote tax havens. And lowering the real cost of wages is perhaps the surest route to higher levels of profit accumulation.
Marx’s reserve army of the unemployed
In another passage which would have warmed the hearts of economists like Marx and Ricardo, Forbes magazine says that the collapse of the labour market since 2007 means that there is a large ‘pool’ of surplus labour to be absorbed in Ireland. Is this Marx’s reserve army of the unemployed?
This sort of free market triumphalism by Forbes will surely not go unremarked by the likes of Jack O’Connor, the SIPTU boss who sat in the front row in Killarney last week, listening to Gilmore explain how – under the very noses of his Fine Gael masters – Labour had commandeered a large part of the wealth and income of Ireland’s elite.
Whom should you believe? Gilmore or Forbes? One man’s meat is, after all, another man’s poison.
The Forbes analysis might, under close inspection, prove to be somewhat shallow. It hails the 44% growth in values on the Irish stock exchange, for example, conveniently ignoring the low statistical base from which this number is derived.
Is Forbes right?
It praises what it sees as Ireland’s commitment to private property rights, to investor protection, to personal freedom and to fighting red tape. But is it right?
It is absolutely true that deValera’s 1937 constitution Bunreacht na hEireann places an enormous emphasis on the right to private property. But it is equally true that in time of crisis that asserted right can simply disappear.
The Stalinist-type bank reconstruction laws enacted since 2008 are a case in point, allowing the state to commandeer the assets of financial corporations and thereafter to revalue and re-assign them to other bodies at its whim. These banking laws further allow judges sitting in private and without the presence of the press to dispense ‘justice’ in this way even in cases where the rights of the owners of capital are to be diluted and ultimately eliminated.
Special laws have always been in existence in Ireland. As long ago as the 1980s the contents of private bank accounts were seized by the State as part of the battle against perceived attempts to subvert the State. This process stepped up a gear in the period since 1996 which saw the creation of the Criminal Assets Bureau which provides the basis for quite arbitrary seizure of assets.
Power to seize and shut
Does Forbes know about these laws? Or about the very extensive powers possessed by Ireland’s tax authorities to seize and shut enterprises and to confiscate business records on an ex parte basis?
These laws are, of course, exercised judiciously by the Irish authorities. Dublin governments will insist that laws designed to be applied to subversives or criminals won’t be applied to ordinary business. But it is unlikely that many red-blooded American capitalists would approve of the very existence of such laws.
Forbes also goes big on questions such as red tape and corruption and again Ireland gets a good rating. There is no space here to treat of such matters. But the magazine’s researchers should ask themselves why, in a small country like ours and over many years, people who wanted to invest capital in building new property and who wanted to create very big enterprises in certain sectors were frequently forced by law to acquire a licence to do business from a largely unregulated army of public service pen-pushers and grubby local politicians.