Money

By Conor McCabe

Money is power. It shapes our world in ways that can leave the mind reeling. Indeed, the bank crisis and subsequent recession made clear the influence that it has over our lives. Yet despite this, money remains an opaque and abstract space, with its own language and gatekeepers to knowledge. As citizens we are required to support the profit-seeking strategies of banks and other financial institutions but we are not supposed to question those strategies, the logic that underpins them, nor the unequal power relations that envelop its world. This book seeks to do precisely that. It explains and questions the world of money, and does so in an Irish context. It then puts forward ways for progressives to come together and work for a better and more inclusive Ireland – one where the money system works for public cohesion over private accumulation.It will argue that money is a social technology, one that underpins a complex system of social relations, and the ownership and control of that technology gives those who hold it enormous social, economic and political power. It will show that there is a class in Ireland that has carved out a niche for itself within that system at a national and international level, and that class is deeply embedded in the institutions of the State. It will put forward alternatives that involve facing up to both the deep economic class divisions within Irish society and the gendered nature of economic inequality, as well as working collectively to transform the institutions and ideas which sustain and reproduce those divisions. Dr Conor McCabe is a research associate with UCD Equality Studies Centre. He has written extensively on Irish finance and is involved in activist education, working with political, trade union, and community groups in both the Republic of Ireland and Northern Ireland.

• Language: English
• Publisher: Cork University Press
• Release date: Oct 26, 2018
• ISBN: 9781782052845

Book preview

Money

Síreacht: Longings for Another Ireland is a series of short, topical and provocative texts on controversial issues in contemporary Ireland.

Contributors to the Síreacht series come from diverse backgrounds and perspectives but share a commitment to the exposition of what may often be disparaged as utopian ideas, minority perspectives on society, polity and environment, or critiques of received wisdom. Associated with the phrase ceól sírechtach síde found in Irish medieval poetry, síreacht refers to yearnings such as those evoked by the music of the aos sí, the supernatural people of Irish mythology. As the title for this series, we use it to signify longings for and imaginings of a better world in the spirit of the World Social Forums that ‘another world is possible’. At the heart of the mythology of the sí is the belief that laying beneath this world is the other world. So too these texts address the urgent challenge to imagine potential new societies and relationships, but also to recognise the seeds of these other worlds in what already exists.

Other published titles in the series are

Freedom? by Two Fuse

Public Sphere by Harry Browne

Commemoration by Heather Laird

The editors of the series, Órla O’Donovan, Fiona Dukelow and Rosie Meade, School of Applied Social Studies, University College Cork, welcome suggestions or proposals for consideration as future titles in the series. Please see http://sireacht.ie/ for more information.

Money

CONOR McCABE

Series Editors:

Órla O’Donovan, Fiona Dukelow and Rosie Meade

First published in 2018 by

Cork University Press

Youngline Industrial Estate

Pouladuff Road, Togher

Cork T12 HT6V, Ireland

© Conor McCabe 2018

All rights reserved. No part of this book may be reprinted or reproduced or utilised in any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in Ireland issued by the Irish Copyright Licensing Agency Ltd,

25 Denzille Lane, Dublin 2.

The right of the author to be identified as originator of this work has been asserted by him in accordance with Copyright and Related Rights Acts 2000 to 2007.

British Library Cataloguing in Publication Data

A CIP catalogue record for this book is available from the British

Library.

ISBN- 978-1-78205-282-1

Typeset by Studio 10 Design

Printed by HussarBooks

CONTENTS

Introduction

Money

Ireland

A Progressive Response

Conclusion

Notes and References

Bibliography

Index

Introduction

On 19 November 2010 the president of the European Central Bank (ECB), Jean-Claude Trichet, issued an ultimatum to the Irish government. He said that unless Ireland applied at once for financial support from the Eurogroup (the other countries of the Eurozone) the bank would withdraw all emergency funding from the state’s financial sector. Such a move would have forced a funding crisis, making Irish banks insolvent, with the country not far behind. The government had given a €400 billion guarantee to the banks two years previously but was in no position to make good on the promise. It was in a severely compromised situation and Trichet used it not only to force Ireland into a bailout, but also to insist that it commit itself to ‘fiscal consolidation, structural reforms and financial sector restructuring in agreement with the European Commission, the International Monetary Fund and the ECB’.¹ The government capitulated and entered into a three-year Troika² programme with serious social and economic consequences.

The naked threats of the ECB, the use of its money-line as a bludgeon for its own political and economic purposes, are a far cry from the standard definition of money as an asset that simply functions as a store of value, a unit of account, and a medium of exchange.³ This benign reading of money does not fit too well with the evidence we have of it being used to cajole and bully entire peoples into political and economic decisions that are clearly against their collective interests.

The price that Greece paid to stay as part of the euro was the decimation of its social supports through the implementation of the Troika’s austerity measures. ‘It is impossible to overlook the fact,’ wrote the International Federation of Human Rights in 2014, ‘that what started as an economic and financial breakdown has turned into an unprecedented assault on human rights and democratic standards in Greece and all countries sharing a similar fate.’⁴ The authors said that ‘limitations on human rights have increasingly been imposed and economic constraints evoked as cause for further restrictions’ and as a result ‘the founding principles of democracy, and the European project that builds on them, are dangerously and irretrievably at stake’.⁵

The imposition of austerity across Europe was justified by the argument that countries needed to be fiscally ‘prudent’ in order to have access to international credit lines. In reality, austerity was a scramble to save the international monetary system from its own internal failures. It was used to shore up distributional inequalities within the system rather than tackling the actual cause of the crisis which stemmed from ‘an unsustainable and flawed neo-liberal model of growth and development’,⁶ one that prioritised free markets and finance over the public interest. Austerity was an act of self-preservation by financial institutions that was implemented with zeal by central banks, politicians and bureaucrats. It amounted to a direct attack on the lives of hundreds of millions of people.

Money, it seems, is hardly a neutral space. The financial system works for those who wield the most influence over it.

In Ireland’s case, while the Troika bailout was foisted upon the state, the chain of events that led to it was of its own making. The decision in 2008 to give an almost blanket guarantee to six banks in Ireland – despite the severe problems that were known in relation to at least two of them, Irish Nationwide Building Society and Anglo Irish Bank – was itself a bailout of local financial institutions and a cohort of their property-based clients. It was an exercise in genuine political and economic power, one that put certain vested interests over the well-being of the state.⁷ It was an unconscionable act that was not repeated in scale by any other country within the Eurozone. As for the banks, however, it was nothing more than what they, with their heightened sense of entitlement, expected at the time.

Five days after the announcement of the Irish bank guarantee, Seán FitzPatrick, the chairman of Anglo Irish Bank, gave an address at the annual La Touche Legacy seminar in Greystones, County Wicklow, where he called for the ‘sacred cows’ of Irish society to be tackled once and for all. These were, in his opinion, universal child benefit, state pensions and medical cards for those over seventy. He also called for Ireland’s corporation tax rate to be cut to 10 per cent.⁸ The cost of guaranteeing Anglo Irish Bank would eventually come to around €30 billion, around half of the total bailout funds sourced from the Troika. The legacy debt of Anglo Irish Bank will be on the shoulders of the Irish people until 2054. It is certainly true that Ireland has sacred cows, and in 2008 they were the ones given a blanket guarantee to cover their disastrous investment plans while they waxed lyrical about child benefit and medical cards when the mood suited them.

The bank guarantee was a solo run by the Irish government. The state had not consulted its European partners on the measure, informing them only when it was a fait accompli. It was ‘a tendency towards economic nationalism and I regret that’, said the Minister for Finance, Brian Lenihan, ‘but we are on our own here in Ireland and the government has to act in the interests of the Irish people’.⁹ He added that while it is important for Europe to protect its financial system, ‘in the absence of a Europe-wide system there is an onus on the Irish government as the sovereign body with responsibility in this state to take action’. The unilateral decision by Ireland to give such a wide-ranging guarantee was one that other governments in the EU saw ‘as a beggar-thy-neighbour policy’.¹⁰ It was also seen as extremely reckless. The UCD-based academic Morgan Kelly wrote that the Finance Minister was ‘faced with a choice between rescuing two banks and the handful of developers through whom they placed real estate bets or recapitalising the financial infrastructure on which the other four million of us depend. He chose the former.’¹¹ It is not unreasonable to conclude that a tiny but powerful section of Irish society did everything it could to protect itself, even if that meant the financial collapse of the state.¹²

‘Real elites only enter the day-to-day operations of government in periods of crisis,’ wrote William K. Tabb in his seminal work on the 1970s’ New York fiscal crisis. ‘They move to the background as soon as possible, after they have restructured the context of decision-making in ways they find congenial.’¹³ Ireland during the 2008 financial crisis was no different. There was a rupture in the mechanisms and institutions that support economic class power in Ireland, and the political and economic strategy was to protect and rebuild those structures by whatever means necessary, regardless of the social cost. The nature of the crisis was such that some members of that class lost out – collateral damage, if you will – but the core remained, and the system was secured, albeit tentatively. This was done via an unprecedented transfer of collective wealth from the citizenry to the banking system, a transfer that was only possible through state direction and control. It showed us that class power matters when it comes to money and finance. It is real, it is ruthless, and it is protected by the state.

The purpose of this book is to expand upon and interrogate these issues. In doing so, it will make the following points:

• Money is a social technology, one that underpins a complex system of social relations, and the ownership and control of that technology gives those who hold it enormous social, economic and political power.

• There is a class in Ireland that has carved out a niche for itself within that system at a national and international level, and that class is deeply embedded in the institutions of the state.

• There are alternatives, but they involve facing up to both the deep economic class divisions within Irish society and the gendered nature of economic inequality, as well as working collectively to transform the institutions and ideas which sustain and reproduce those divisions.

The first chapter will look at how money, defined as a social technology, underpins a complex system of human relationships. Money cannot be separated from the society in which it operates. It is not a thing in itself but a mechanism for dealing with issues of social organisation and distribution, and one that is subject to conflicting interests. It gives support to, and is supported by, a dense network of institutions, systems and cultural practices that are themselves beholden to deeply unequal relationships of gender, power and authority.

These inequalities do not happen by accident. They are not some afterthought, but rather the result of how we constitute our social, economic and political worlds. The ownership of that technology and the control of the system gives those who hold it enormous power. Since the seventeenth century this technology has increasingly fallen under the influence of capitalism.

Capitalism did not invent money. It adapted it for its own purposes, in particular its obsession with the search for yield, that is, the search for a profitable return on investment, with that return expressed in money form. The investment can be returned as an interest payment, a dividend or a claim on profit. Money put to such use is known as ‘capital’. When capitalism invests in chickens it does not want more chickens; it wants more money, which it then reinvests in order to make more money. The purpose of capitalism, therefore, is self-expansion: capital begets capital. In the words of Immanuel Wallerstein, it is this ‘relentless and curiously self-regarding goal of the holder of capital, the accumulation of still more capital, and the relations this holder of capital had therefore to establish with other persons in order to achieve this goal, which we denominate as capitalist’.¹⁴

Capital (money