Kieran Allen explains how the Irish Government is preparing to prostrate itself to the Trump administration.
In left-wing circles, the author Mark Fischer was known for the phrase ‘Capitalist Realism’ which was used as the title of his book. It claimed there were no real choices which override the logic of the market. Modern politics had been reduced to accepting the ‘golden handcuffs’ that the market bestows.
I was reminded of this phrase when reading a report that the Irish government is sending a record number of Ministers to the US on St Patrick’s Day to ‘lovebomb’ Donald Trump. They are worried that Ireland’s tax haven status is under threat. Quietly, before certain audiences, they hint that they don’t like Trump, but realism demands a show of obedience.
Of course, representatives of the Irish government deny the tax haven status and cite the OECD blacklist. But only three counties appear on this list: Andorra, Liechtenstein and Monaco. In reality, Ireland has created special loopholes that allow US companies to get away with minimal taxes.
Two mechanisms stand out. First, US companies ‘onshore’ their Intellectual Property in Ireland and then charge subsidiaries in other countries. The Irish state gives the corporations a capital allowance for the purchase of this IP, and then allows them to ‘book’ the profits here even though the relevant products were made elsewhere. Second, US corporations are allowed huge ‘administrative expenses’ to write down their taxes.
The result is that they often pay a tax rate between 2% and 6%. Ireland got away with this scam for so long because it fell under the radar.
Not anymore. Ireland’s revenue surplus of €24 billion has become headline news in the global financial press, and Trump’s new Commerce Secretary, Howard Lutnick, has noticed. The former chief executive of Cantor Fitzgerald has been scathing about the Irish arrangements. ‘They make the parts in China, then they wave their magic wand and it all floats over to Ireland. Of course it does. They pay corporate tax on 3% of profit in America and Ireland announces a massive budget surplus for its population of five million people. Hahaha. It’s just not true.’
No wonder the Irish elite are worried. 30% of Irish exports, including those which are ‘booked’ from elsewhere, go to the US. If Trump was to impose tariffs or change the tax regime in the US it could have serious repercussions.
The answer to all of this from Fianna Fáil and Fine Gael is to grovel, to ‘lovebomb’ Trump. The consequences are already evident. When the US Embassy came out harshly against the Occupied Territories Bill, Michael Martin quickly promised to gut it. Trump’s Big Tech buddies are already demanding that any restrictions on data centres are scrapped. You can see which way this is going.
How should the left respond to this capitalist realism?
Let’s start with some facts. According to the IDA’s Report 2023 report, there were 209,948 workers employed in US-owned firms. That represented 8.2% of the total workforce. To listen to the mainstream, you would assume that ‘we’ are totally dependent on US companies. This is a story repeated by accountancy and legal firms, which have a predominant influence in shaping public discourse. But as even the Central Bank acknowledged, these same groups are the main Irish beneficiaries of tax dodging by US companies.
To put it baldly, about 90% of the Irish workforce are not dependent on US multinationals. True, multinationals from other countries employ many workers. And true, Irish capitalism is largely dependent on foreign investment. But we are dealing here with the issue of Trump’s blackmail. And as not all US multinationals would withdraw on Trump’s orders, we should keep in mind these figures. Moreover, even if they wanted to withdraw, it would take some time to dismantle physical plants.
Second, there is a basic moral approach. Many people think it is completely repugnant to bend the knee to a thug like Trump. Aside from everything else about the brand of bigotted, far-right politics he is attempting to force through, he is a self-identified blackmailer.
The problem with blackmailers is that they never stop. Concessions only encourage them to demand more. Let’s say Ireland guts its Occupied Territories Bill under US pressure: does anyone think that will be the end of the matter? When Trump demands repeal of the Gender Recognition Act or the scraping of all environmental regulations, do we also roll over and agree? Or that must we join NATO, ditch neutrality and dramatically increase military spending? The logic of the Fianna Fáil/Fine Gael position is permanent obsequiousness.
Trump blatantly promotes a US First agenda and demands submission. But every empire must compete with its rivals. Today, the US is a declining hegemon, worried that it is losing out to its Chinese rival. In other words, even within the limits of the current economy, there is room to manoeuvre rather than simply groveling.
Third, none of the above arguments addresses the fundamental issue of Ireland’s current development model. The model has changed over the decades from a protectionist one up to 1958, to an opening to British investment in the food and agriculture in the sixties, to an invitation to multinationals to physically locate in Ireland to gain access to EU markets. Today’s model is more openly based on tax dodging and is more reliant on the tech sector. The shifts in development models have been driven by the weakness of indigenous Irish capitalism which has always sought sheltered, risk-free forms for its own investment.
The problem is that the current model is unsustainable. It originally worked because Ireland was too small to be noticed. However, in an era of debt-induced growth, states look at where tax revenue is flowing. Lutnick’s calling out of the Irish scam is probably only the start of the finger pointing. No matter how much the Irish elite try to invoke a nationalist rhetoric to defend their right to be a tax haven, it will not work in the long term.
The left needs to propose a different model of development. We should envisage a world beyond US and multinational investment. As long as they control the levers of an economy, and specifically the employment of workers, we will always be at the mercy of economic blackmail. Trump is only unique because he is so openly blatant about his blackmail tactic.
A different model must be based on public ownership. Let’s take pharmaceuticals as an example. Why should we feather Big Pharma’s nest when it produces over-priced drugs and refused to supply vaccines to poorer countries during Covid? The skills of workers could be re-purposed in a public owned industry to supply generic drugs to the world. Or look at housing. The privately owned building firms just cannot supply the number of housing units needed. We need a state construction company to do the job.
Trump now personifies the way the system works. In the words of the Irish Times journalist Justine McCarthy, ‘This is the result of capitalism, a politico-economic system that enables an unscrupulous minority to disable the great majority.’
Too right. To resist Trump we need an anti-capitalist vision.
