The Return of the State by Graeme Garrard, Yale University Press, 227 pp, £16.99, ISBN: 978-0300256758
We are almost entirely dependent on the state for our security and wellbeing. And yet it often seems to be an uncherished institution. If the Irish state is in any way representative, it has had a bad press in recent decades. A consent refrain is that ‘the state has let us down’. Aggrieved citizens blame it for shortcomings in healthcare, housing, minority rights, planning and other areas. The complaints in Ireland though are usually that the state is not doing enough rather than it is doing too much. The state is often viewed as, if not actually hostile to individuals and communities, at least uncaring, corrupt, incompetent.
The criticism seems to be almost universal. Tony Judt, shortly before his death in 2010, noted ‘a marked reluctance to defend the public sector on grounds of public interest or principle’. Although state and nation may be broadly interchangeable, the terms provoke different responses. References to the nation evoke feelings of pride, identity and nostalgia for past glories, real or imagined. Countries can have very different state administrations. Some have high levels of control over their society and economy, others very little. Liberal democratic states have tended to become ever more all-encompassing since the end of the Second World War. Is this a good thing? And if the state is in such bad odour, should radical alternatives be considered? Many whose politics would place them on the radical right think so.
Revolutionary change has traditionally been the territory of the Marxian left, but it is now more often groups on right that make the call. Their motivation is often based on nostalgia for some imaginary past. Nostalgia has broad appeal, as demonstrated by an IPSOS ‘Global Trends’ survey of twenty-five countries in 2021. Asked if they agreed with the statement ‘I would like my country to be the way it used to be’ a majority in most countries concurred. Irish respondents were among the few not in favour (41 per cent agreeing, 49 per cent disagreeing). The far right have created political platforms based on nostalgic sentiments, promising to ‘make America great again’, or to ‘take back control’. For them the enemy is the outsider, whether immigrants or ethnic minorities. Conspiracy theorists peddle myths about the ‘deep state’. Their fantasies are reminiscent of those of early twentieth century fascism. As with their predecessors, the tactics of the present-day far right involve undermining the democratic state from within, initially using elections. These campaigns are characterised by ferocious denunciation of democratic opponents and the stoking of anger and fear. Once a modicum of power is achieved it is used to undermine the independence of the judiciary (as in Kaczynski’s Poland) and restrict freedom of the press and other media sources (as in Orbán’s Hungary). Neoliberals, on the other hand, while laying claim to a democratic mantle, seek to diminish the state.
Graeme Garrard’s book, to give it its full title, The Return of the State: And Why it is Essential for our Health, Wealth and Happiness concentrates on the neoliberal threat. He justifiably defines the welfare state as one of democracy’s greatest achievements; one in which countries ‘wealthy enough to afford it and decent enough to provide it’ introduced universal publicly funded healthcare. This achievement was part of the postwar consensus in Western Europe, delivered mainly by social democratic and labour administrations. The welfare state remains a key element of the social contract in Europe, notwithstanding the subsequent electoral successes of right-wing parties. Garrard bemoans the neoliberal advances since the ascendancy of Margaret Thatcher and Ronald Reagan that led to a part-privatisation of health and welfare systems, although, within Europe, this was more a feature of British politics than elsewhere. The ‘return of the state’ is what occurred as a result of the banking collapses in 2008 and, more particularly, the recent pandemic. Never within democratic countries had the state taken such control. Financial institutions were brought under state ownership and, during Covid, travel was curtailed and non-essential businesses premises were closed. The market was effectively shut down. Self-evidently, these were temporary measures, but the experience has demonstrated the importance of a potentially strong state, one, as Garrard puts it, ‘that can provide for our health, wealth and happiness’. Right on, we say, although as to making everyone happy, well, good luck with that.
The book makes the case for a strong state, but the one favoured is not the one as currently (post-pandemic) constituted. For Graeme Garrard too is nostalgic. It might even be said that he, er, ‘wants to take back control’. His ideal world would correspond to pre-Thatcherite Britain, when the state had more direct control over the market through its ownership of strategic industries and services. This ambition has nothing in common with that of the Brexiteers, although strangely, he makes no mention of Brexit despite it being relevant to many of the issues he raises. The motivation of many of the leading advocates of Brexit went beyond exiting the EU and encompassed radical deregulation. Liz Truss’s short sojourn as prime minister made this clear, and although this farcical drama would have occurred subsequent to the book’s publication, Truss’s aims were evident during the prolonged Tory leadership contest. Although her quick exit was a setback for neoliberals within her party, the fact is that the Retained EU Law Bill ‑ the much-heralded ‘bonfire of EU legislation’ ‑ is still before parliament, albeit currently stalled. Its enactment, which is still being demanded by the Brexit ultras, would significantly reduce worker and consumer protections and reduce the remit of the state unless comparable replacement UK legislation was tabled, an unlikely event under a Tory administration. Given that the threat posed by neoliberalism is central to the case Garrard makes, it is strange that this evokes no comment.
The case for more state involvement is nevertheless well-argued and perfectly valid. It was at the core of Jeremy Corbyn’s manifesto during his period as British Labour Party leader. The problem is, how do you achieve political momentum for a policy that has been effectively rejected within the only party ever likely to have it implemented? And even if the political climate were to change, how would the enormous capital coats of renationalisation be justified when, for example, the health service is likely to continue to require a major additional investment well into the future?
The book is not all a polemic. It includes a well-informed and engaging description of the emergence of the modern state from its origins in the sixteenth century, when governments began to wrest control of education, rudimentary welfare and civic functions from the church. Early philosophical discourse on the role of the state is summarised, contrasting the view of Thomas Hobbes, who advocated a strong state in order to supress anarchy, with that of John Locke, who argued that the state’s role should be confined to protecting the citizens’ right to life, liberty and property. Locke feared an overbearing state would trample on people’s freedoms. It is a dichotomy that exists to this day, of which the book provides interesting illustrations from around the globe, although, at its core, it is UK-focused.
Garrard’s particular bête noire is the large and growing influence of multinational companies that are, as he sees it, resulting in a weakening of the state vis-à-vis the market. It is not clear if the increasing dominance of these companies is seen by him as directly linked to the perceived threats to the welfare state, except perhaps in relation to big pharma’s role in healthcare. But in a chapter titled ‘The rise of Private Governments’ the focus is not on this, but on major internet-based corporations such as Amazon, Microsoft, Alphabet (Gogle), Meta (Facebook etc) and Apple. Each of these, as the author explains in impressive detail, have incomes exceeding that of many smaller developed states. They have achieved dominance, indeed, virtual monopoly status, in a number of IT sectors. This development leads Garrard to declare that ‘we are now in a mixed era of monopoly and oligopoly capitalism’ as predicted by Marx. But if that were the case we would be witnessing the demise of the market (competition), as Marx envisaged. I think it’s safe to say we’re probably not there yet. Nevertheless, the vast profits and related political influence of these corporations, and not least their control of social media, has to be concerning. Ireland has, per capita, by far the highest level of FDI in Europe and is the location of the European headquarters of most of the US pharma and IT companies, including the big five listed above. The country doesn’t get a mention thouhg, although as a case study it could illustrate many of the benefits and the disadvantages of multinational investment.
The initial industrial strategy of the Irish Free State was one of autarky (self-sufficiency), with the protection of indigenous agriculture and industry a priority. That changed in the 1960s as the Industrial Development Authority (IDA) was charged with procuring overseas investment, offering as an incentive the prospect of a tax-free holiday on profit earned from goods exported, along with capital grants. Relatively low wages and a surplus of available labour would, at that time, have been an added attraction. Although the policy shift was seen as overdue given high rates of unemployment and emigration from the country, some of the early investments were controversial. A number of industrial disputes and factory closures in the 1970s raised questions about the viability and desirability of the policy.
In 1977, Dr Noël Browne, a strident and frequently lone voice on the left at that time, criticised the ‘preoccupation with bringing in multi-national companies’. He also portrayed the efforts of government, opposition, the Labour Court and Irish Congress of Trade Unions to persuade a particular company to keep its large factory open in Limerick as futile as ‘none of them could influence the decision taken by these people’. This was no doubt true, and it provides early evidence supporting Garrard’s conclusion that the state is relatively impotent when it comes to decisions taken by multinational companies, although in the particular case cited by Browne it is difficult not to have some sympathy for the employer given that an inter-union dispute had contributed to the closure and two years previously the general manager of the Dutch-owned plant had been kidnapped by the IRA. Further closures provoked further opposition to FDI, particularly on the left. However, as the more cynical among us postulated: ‘If there’s anything worse than multinational companies, it is no multinational companies.’
Despite the potentially chilling effect of disputes and kidnappings (an executive of a German-owned Belfast-based company, Grundig, was also kidnapped by the IRA in the 1970s and died at the hands of his captors) oversees companies continued to invest in Ireland. This contributed to a modest economic upturn, which was halted by the worldwide recession related to the oil price shocks of the 1970s. It wasn’t until the 1990s that FDI began to pick up again, this time disproportionately concentrated in the information technology sector. The US silicon chip manufacturer Intel purchased a site near Dublin in 1989 that was to lead to an investment, to date, of $15 billion. Apple opened a plant in Cork in 1980, beginning an investment that led eventually led to the creation of 6,000 jobs. More recently the location of the major social media giants in the greater Dublin area has resulted in over 17,000 direct jobs and thousands more indirectly.
The advantages ore obvious, a rapid expansion of mostly well-paid employment and impressive economic growth: even discounting some implausible GDP figures, Ireland’s growth rate has consistently been the highest in Europe during the past decade. Not all of this is due to FDI. Indigenous companies also prospered, with food and drink exports doubling in real terms over the last decade. Also, a major expansion of state- and EU-funded third level education during the 1970s and ’80s has led to significant upskilling. A series of social partnership agreements between 1990 and 2008 provided industrial harmony and instituted tailored training schemes for the unemployed. The extent of the growth in tax revenues has been extraordinary, principally from multinational companies, with corporation profit tax receipts more than doubling between 2019 and 2022, moving from just under €11 billion to €22.6 billion.
The outcome has been transformative, but at what cost? Regrettably, at least from this reviewer’s point of view, the influx of American corporations has contributed to a lower level of trade union density, with most, although not all, companies refusing to engage in collective bargaining. Is the state itself weakened vis-à-vis the market, as Garrard puts it? Most likely, to an extent at least. The multinational corporations have significant interests in respect of taxation policy, regulation and employment law which they will jealously guard, with the implicit threat of disinvestment in the background. Knowing this, governments act cautiously, consulting with the corporations in advance of any change that may impact on their business. This was evident during the process of ratifying the OECD framework relating to the minimum corporation tax to be applied to multinational companies. Clearly the Irish government wished to ratify the framework, if only to deflect accusations about Ireland being a corporate tax haven. The finance minister visited a number of the HQs of the corporations involved to get soundings about the likely rise in corporation tax from 12.5 per cent to 15 per cent. It appears that no major objections were raised, although we don’t know what was said since freedom of information legislation does not apply to such consultations. Despite all this, few in Ireland would argue that the impact of FDI has not been hugely beneficial overall, although Ireland is hardly typical in this regard.
In any event, issues raised above are not exclusive to multinational companies: governments will be equally obsequious to major indigenous companies. The particular problem with large multinational corporations, however, is the extra leverage their wealth and transnational nature provides. They can, as Garrard points out, play one government off against another in order to obtain favourable treatment, particularly as regard tax and regulation. The only way of countering this is for states to act in unison. The OECD framework on corporate taxation referred to above, a proposal strongly supported by the EU, achieved a modicum of success in preventing a race to the bottom on the issue of corporation tax. EU directives on consumer and workers’ rights restrict the freedom of manoeuvre of the most exploitative companies. But Garrard is opposed to international institutions that restrict states’ right to govern independently. As noted earlier, the EU is rarely mentioned in his book despite it being the best/worst example of states sharing/losing state sovereignty (delete according to taste). This relative silence concerning the EU may well reflect an unspoken Corbynist distaste for the EU and its market regulation. In contrast, Garrard doesn’t hold back in respect of other international organisations.
In a chapter titled ‘Preying on the weak’ he outlines in some detail the threats posed by organised criminal cartels in Latin America and elsewhere. He then goes on to equate this ‘Mafia Capitalism’ to the actions of the International Monetary Fund (IMF) in particular:
Weak states are often squeezed between well-armed criminal organisations within and the dictatorial economic institutions without. Both show little mercy towards states that are usually too weak to fight back in countries with some of the poorest and most desperate people in the world.
It is undoubtedly true that in many countries the terms imposed by the IMF as the price of securing its loans have caused great hardship, but there is a fundamental difference between these actions and those of organised crime. In the first place, the IMF did not cause the problem and, secondly, they were invited in by the recipient state and, further, the state could reject the terms on offer. In practice, of course, this is usually not a viable political option because, in the absence of a ‘bail-out’, the country concerned would experience a level of hardship far worse than the austerity caused by the measures prescribed by the IMF. This was the dilemma faced by the Greek government after 2009, the story of which is recounted in Return of the State. The terms proposed by the Troika (IMF, European Commission and European Central Bank) were harsh ‑ indeed, in the opinion of many, harsher than was necessary. The Greek prime minister, Alexis Tsipras, decided to hold a referendum. ‘Turn your back on those who would terrorise you,’ he urged his people. Not surprisingly, the result was a rejection of the terms, although, at 61 per cent, not an overwhelming one. Subsequently, Tsipras and his government accepted even more stringent terms. Garrard simply notes that the prime minister ignored the results of the referendum without speculating as to why. It was not that the government had no other options. It could have left the euro and re-established the drachma in order to print money. But that too would have been unpopular and almost certainly would have had much worse economic consequences. Every decision, or non-decision, has consequences.
None of the above should not be interpreted as a defence of the IMF or the Troika. Ireland and Portugal were in the same boat and, at the insistence of the European Bank in particular, Ireland was required to compensate junior bondholders in the defunct Anglo Irish Bank, bondholders who received a higher return on their investment due to the higher risk involved. This was reprehensible. Despite the scale of the losses involved in the banking collapse, estimated at €64 billion gross, Ireland recovered more rapidly than predicted, in part due to the resilience of the multinational sector.
Nor I do wish to appear overly critical of Return of the State. The case made for a rebalance in favour of the state is valid. Multinational companies have a surfeit of influence, resulting from their astonishing profitability. The public sector needs to be defended from neoliberal ideologues. But it is futile to look to the past for solutions. New ways of strengthening the public interest need to be found. Globalisation will not be reversed, so we need collaboration between democratic states if we are to safeguard the public sphere and protect the gains won by social democracy.
The convulsions of the last fifteen years have left scars and many citizens remain understandably angry. This is something the populist illiberal right are taking advantage of. The apparent failure of the international community to deal adequately with climate change is likely to cause more turmoil in the future. Our democratic and liberal institutions are in peril. We must learn from the mistakes of the past, when divisions on the left, and between democrats, facilitated the triumph of fascism. We may, in order to succeed, even have to temper our ambitions and align with all who all believe in democracy and human rights. Nostalgia, or at least the variety known as ‘restorative nostalgia’ – the attempt to recreate the past – by the left as well as the right, will only hold us back.
Tom Wall is a former assistant general secretary of the Irish Congress of Trade Unions. He is the author of Dachau to the Dolomites (Merrion Press, 2019) and Himmler’s Hostages (Pen & Sword, 2020).