The Irish budget deficit has rapidly grown to an enormous size. The growing
budget deficit is a symptom of the deepening global economic crisis. It is
not the cause of it. The crisis can only be solved by eliminating its cause.
But a budget deficit, in itself, is not necessarily a problem for a
particular capitalist economy. It largely depends on the economic
circumstances embedding it. It is not unthinkable for a relatively strong
and vibrant economy to have a budget deficit. There is no absolute
prescription engraved in stone dictating that the state must, as promptly as
is possible, eliminate its economy's deficit on the shoulders of the working
class.
There have been two policies advanced as to how to deal with the growing
Irish deficit. Both policies are advocated as ways to solve the problems of
capitalism. Ultimately both policies serve the class interests of the
bourgeoisie. The first policy seeks to rapidly balance the budget through a
mixture of severe tax increases and spending cuts. The other argues that the
best policy is to reduce taxes and spend more. It suggests that the deficit
can be compensated for by increased borrowing. This policy suggests that the
outstanding national debt can be largely cleaned up when recovery gets under
way.
The first policy is being pursued by the Fianna Fail dominated government.
In the short term it will inflict considerable pain on the working class and
may even lead to an even bigger hole in the state finances. It may even lead
to increased civil conflict. Demand may fall as a result of increased
taxation and spending cuts. This reduced demand may lead to greater
unemployment. This in turn may increase the size of the deficit. Therefore
the policy of balancing the budget does not necessarily solve problems.
The growing Irish budget deficit is a manifestation of an acute global
profitability crisis. It is only when this crisis is solved can budget
deficits such as the Irish one be eliminated (not that this necessarily
needs to be done). To think that the Irish budget deficit can be solved by
balancing the budget is to promote a forced separation between the world
depression and specific problems of the Irish economy. Specific economic
problems are a product of contradictions within the world capitalist
economic system. Generally speaking they are not a product of subjective
factors such as what the government did or did not do. The budget deficit
and many other economic problems are not independent of each other. The
deficit in the Irish finances will only be "solved" as a result of ongoing
world economic recovery. This is because it is inseparably connected with
the current world wide depression.
The present strategy of the Fianna Fail led government is inflicting great
pain on the Irish working class. It is a strategy not intended to eliminate
the deficit. The deficit is the pretext for reducing the living standards of
the working class and generally worsening its conditions of work. This, it
is hoped, will make for a leaner and meaner capital that is more profitable.
If Mr Cowan succeeds in achieving this he will have been a very successful
Taoiseach (prime minister).
The second policy is advocated by elements within the Irish Left. It
suggests that reducing taxes may tend to increase demand thereby partly
compensating for the falling demand due to depression itself. It calls for
increased spending, public works, as a means of providing a stimulus to the
economy in a time of contraction. It claims that the resulting deficit can
be made up for by borrowing from, say, the European Union. It also claims
that in the period of recovery the deficit will tend to shrink and can more
easily be paid out of state revenues.
Despite its plausible nature this policy is no more a solution than the
previous one. In the short term it will tend to lessen the intensity of
suffering inflicted on the working class. However it may tend to prolong the
pain by lengthening the time over which the deficit is to be, supposedly,
paid for by the working class. But there is a limit to borrowing. If this
were not the case there would never be any need to be concerned over
deficits. They could grow at any rate and to any size because borrowing can
adequately compensate for both rate and size. The same understanding can
apply to spending. Under these conditions there need never be depressions
because money or credit can be flushed into economies to prevent the crisis
from occurring.
Such an economic ideology fetishises money and credit. It falsely suggests
that the quantity of money or credit is the panacea for economic evils.
Money then is presented as the determinant of economic expansion. Production
is mistakenly presented as the derivative of money -not the reverse. This is
to mistake the appearance of capital for its essence. The valorisation
process, the production of surplus value, is the source of economic
expansion --not money and credit. This policy represents a more d
