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Philipp Fink, Irish Social Dichotomy in:

Philipp Fink

Late Development in Hungary and Ireland, page 238 - 239

From Rags to Riches?

1. Edition 2009, ISBN print: 978-3-8329-4173-4, ISBN online: 978-3-8452-1720-8 https://doi.org/10.5771/9783845217208

Series: Nomos Universitätsschriften - Politik, vol. 168

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238 the process has implications for Irish democracy. On the one hand, the democratic legitimation of the involved groups as well as the criteria of their selection to participate is questionable (Ó Cinnéide 1999: 48). On the other hand, the extension of the social partnership process to include the controversial issue of social equality should be seen within the general thrust of the Irish state to depoliticise controversial issues by outsourcing the debate on these issues to actors beyond the political system (Clancy/Murphy 2006: 10; Murphy 2002: 84). As a result, the role of the Irish legislative, the Dáil, in debating the central issues of social equality is further marginalised (Ó Cinnéide 1999: 45-46). Moreover, the inclusion of community and voluntary actors also acts as a fig leaf for the government. In the case of criticism, it can point to the consensual agreements and silence organised dissent (Kirby 2006: 194; Murphy 2002: 85). Despite the importance attached to the agreements, the last word rests with the government, displaying the primacy of politics (Hardiman 2006: 348) and the autonomy of the state on socioeconomic issues. In difference to other corporatist regimes, tax cuts have never been negotiated on in detail. Indeed, the participants have had no influence on the level, form and distributive results of budgetary policy. Government can thereby sideline the recommendations in the accords in order to continue to follow the interests of its key voters, the middleclass and the affluent, by “[defining] the budgetary allocation to support them” (Hardiman 2006: ibid.). Finally, whilst the social partnership process has managed to maintain a floor for basic social rights, the agreements suffer from their voluntary nature and nonuniversal coverage. As shown, the agreements are irrelevant for the majority of TNCs, who constitute the most important private economic actors in the Irish economy. Similarly, the increasing number of members of the highly skilled and remunerated professional and managerial class, characterising the winners of economic expansion in the 1990s, are also beyond the agreements (Ó Riain/O’Connell 2000: 338). Increasingly able to negotiate above average wage increases outside of the social partnership process, this traditionally privileged social class has additionally benefited through the substantial decreases in income taxes to increase their net incomes (Ó Riain/O’Connell 2000: 339). 4.5.4 Irish Social Dichotomy The analysis of the social outcomes of the Irish FDI-led development strategy poignantly displays the incapacity of the Irish state to cater for increased social equality. The large sum of FDI inflows led to an unprecedented level and duration of economic growth. Affluence expanded to levels unknown in Irish history. However, the resulting increase in national income was not spread equally. Ireland remains one of the most unequal economies in the EU and belongs to the top three unequal countries within the OECD, portraying the dichotomous nature of Irish society. On the one hand, income inequality reflects the differences in remuneration along the lines of skill attainment, economic sector and nationality of employer. The high- 239 est wages are paid in the foreign-dominated, skill intensive manufacturing branches and in international services. The large levels of high technology FDI inflows into the Irish economy greatly increased the demand for qualified labour, leading to a rise in educational differentials during the 1990s. As a result, direct market incomes for skilled labour increased considerably. However, the Irish case shows that inequality measured in the distribution of disposable household income did not reach the same levels as the dispersion of earnings. On the other hand, the reduction in unemployment and poverty levels was not the result of increased state efforts. Instead, direct market income inequality was mitigated most notably by the rise in employment due to very strong labour demand. Economic growth also increased the employment of traditionally marginalised low skill labour. As a result, increased labour market participation also considerably reduced Irish poverty rates. In contrast, the persistence of high levels of social inequality in Ireland is the result of the regressive nature of state redistribution and institutional failures. The latter refers to the inability of social partnership process to influence redistribution owing to its deficient institutional design. The former relates to the squandered historic opportunity to rectify the traditional social imbalances by the state in the light of the largest budget surpluses in the history of the Irish state. Hence, the state’s incapacity to cater for increased social equality was voluntary, as the increased fiscal means were spent along the lines of traditional political efficacy. Accordingly, the incomes of the middleclass and the affluent, already benefiting due to their skill profiles, were additionally advantaged via tax breaks and the widening of privatised services. In contrast, the lower income groups with a disproportionate share of low qualified and transfer dependent households saw their incomes fall behind. They have to contend with a minimal standard of public services, as the country’s welfare effort has been reduced. Furthermore, economic expansion masks the polarised nature of Irish society, where social mobility defined by education continues to be the result of class-based inequality of educational opportunity. Success and failure are, therefore, socially reproduced. 4.6 Results of FDI-led Development in Hungary and Ireland The analysis of the results of the Hungarian and Irish FDI-led development regimes reveals the dualistic nature of growth in both countries. TNCs in both cases have undoubtedly contributed to the favourable development of aggregate economic figures. However, they mask the underlying dichotomous nature of growth. Ireland and Hungary display distinct features of dualism in the form of industrial and social dichotomy. In contrast to the presumptions on the merits of the FDI-led development strategy, developmental inputs from investing TNCs do not diffuse into the indigenous sector. Instead, they remain within the foreign-dominated export enclaves. The low level of interdependence between the modern and indigenous sectors is linked to two external and internal factors.

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Zusammenfassung

Irland und Ungarn verfolgen eine Entwicklungsstrategie, die in bewusster Abhängigkeit von Globalisierungsprozessen in Form von ausländischen Direktinvestitionen steht und sich als Paradigma in der Peripherie durchgesetzt hat. Doch dieser Entwicklungspfad hat zu einer ungleichen und abhängigen Entwicklung geführt. Dies ist laut dem Autor das Resultat des mangelnden Gestaltungswillens beider Staaten, für einen gleichgewichtigen Wachstumsprozess zu sorgen. Die historische Analyse zeigt, dass eine auf ausländische Firmen fußende Entwicklungsstrategie nicht ausreicht, um traditionelle Peripheralität zu überwinden. Der Autor fordert eine Reform des Entwicklungsparadigmas, um eine gleichgewichtige Entwicklung zu ermöglichen.