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Today’s Wikileaks release includes a cable from 2004 extolling the virtues of Ireland’s economic boom. In hindsight, we see what a failure Ireland’s decision to give large corporations special tax breaks was. In 2004, US Treasury Secretary John Snow visited Ireland for the purpose of studying Ireland’s “secrets of success.” At the time, Ireland’s economy was soaring largely because their corporate tax rate of 12.5% is the lowest of any industrialized nation. The resulting boom brought jobs and prosperity, which in turn spurred building, which spawned mortgages, which rocked the banks when the entire world went into a global recession. The Celtic Tiger was reduced to a meow instead of a roar, bent to the mercy of the EU with a shotgun wedding to austerity. But in 2004, things were rosy and bright. It’s worth looking at this analysis in retrospect, since the right-wing would like to use the same strategy now. Step One: Strike when labor is at its greatest disadvantage Fianna Fail,’s “great advantage” at the time, said O’hUiginn, was Ireland,s economic crisis; with 18 percent unemployment and government debt at 130 percent of GDP, the political opposition, industry, and labor could not afford politically to impede solutions. The PNR,s linchpin was labor’s decision to accept a moderate wage increases in exchange for income tax relief, which became the basic approach to successive national wage-setting (Social Partnership) agreements. Step Two: Get organized labor’s buy-in by calling it a Social Partnership According to Cassells, a shared understanding between unions and the Government on the importance of decent wages and housing for workers was the basis of labor,s commitment to the Social Partnership approach. He added that the transparency and inclusiveness of wage-setting negotiations, in which even the most disgruntled union representatives were given voice, were also instrumental to success. This section goes on to note that the wealth of young, educated Irish workers was instrumental as well. Evidently the Irish haven’t gone as far as the right-wing in this country when it comes to education. This part is good, but as you’ll see, it’s not all that important to the real meat of the deal. Step Three: “Dictatorial Leadership” This involved incenitivizing industries to achieve efficiencies by exposing them to the full discipline of the market, even at the risk of bankruptcies. The challenge in this approach, explained McCreevy, was to press ahead with reforms in the face of elections, which provided temptations for politicians to adopt softer, more populist economic platforms. Secretary Snow observed that whereas the gains from economic reforms in any country tended to be diffuse, the losses were often concentrated in particular sectors or geographic areas, making it easier for those affected to organize political opposition. McCreevy commented that the test of any government was how well it explained to dislocated workers that the reforms responsible for their plight were good for the country. So we have the unrelenting “market” discipline at work, and when it worked its magic and bankruptcies resulted (it’s unclear whether the bankruptcies were personal or corporate, by the way), workers got a government line that their plight was ‘patriotic’. Steps Four and Five: EU Support and US Offshore Tax Breaks Step Four is self-explanatory. Step five should tell us all why it is we can’t have nice things. The U.S. policy of tax deferral for foreign subsidiaries of American firms, combined with Ireland,s 12.5 percent corporate tax rate, underpinned the large influx of U.S. investment to Ireland during the Celtic Tiger period , observed Padraic White, former CEO of Ireland,s Industrial Development Authority (IDA). White recounted his numerous trips to the U.S. House of Representatives, Ways and Means Committee to defend tax deferral, and h e argued that Senator Kerry,s plan to reverse tax deferral would have “killed Ireland,” had he been elected. White believed that complaints by the U.S. public about the job outsourcing that accompanied U.S. investment flows were wrong-headed. While our economy stalled, we built Ireland’s. But as Ireland discovered, markets are a cruel mistress. They are indeed dictatorial, and what markets give, they can also take away. It’s interesting to me that the Irish government chose to guarantee every penny of the big banks’ exposure, rather than letting the markets shake it out. The tone of this particular cable is almost celebratory and certainly full of puffed-up pride over the ‘success’ of the Celtic Tiger. Meow.