A Takedown Of Government Spring Economic Outlook

Most people won’t have the time or energy to plough through the government’s 71 page “Spring Economic Outlook”. Don’t worry. We’ve broken it down and explain the main arguments in it. The government starts by pointing out that we live in an unstable world: “Even before conflict in the Middle East, it was clear that transformational shifts were gaining momentum and that economic policymaking was increasingly intersecting with geopolitics.”

A.I. had the capitalists happily replacing workers with machines: “The macroeconomic data had pointed to some resilience in the global economy, in part fuelled by tech optimism.” But now the actions of the US Empire against Iran are damaging the global economy: “The large upward shift in energy prices is likely to impart a stagflationary impulse to the global economy.”

The term “stagflation” means economic slowdown with rising prices. The problem is that the government can’t pin this on the military conflict in Iran. Events like that can trigger underlying structural weaknesses. We need to understand how the surface event connects to underlying tendencies. There has been a falling rate of profit across all Western economics for decades and this weak profit rate makes economies vulnerable to external shocks.

The only way out of a period of low profitability is a crisis where capital and labour are massively devalued and the companies that survive buy up their rivals at bargain basement prices, upping profit rates in the process. But companies are so big now that when a crisis comes the state steps in to save them in fear that the whole system could go down.

They’re damned if they do, damned if they don’t. If they allow a crash the dominoes could just keep falling, if they don’t they get sluggish growth and low profit rates. That’s why they bailed out the banks even though market logic said let them fall. The war in the Middle East, the Irish government continues: “is transmitting to the Irish economy mainly via higher energy prices.”

We don’t get our oil and gas from that region but “oil and LNG are internationally traded commodities, with prices set globally.” Higher prices will curtail consumer spending. They argue: “Higher inflation is likely to result in more subdued consumer spending and, in doing so, to weigh on demand.”

But if us workers had higher wages then we’d spend more. This is always a dilemma for the capitalist bosses. They see their own workers as a cost and so want wages to fall but they see everyone else’s workers as customers and so want wages to rise.

Total demand in any economy is the wages of all workers plus the profits reinvested by bosses in the next round of production. When profit rates are high the capitalists are inclined to invest as much as possible. When profit rates are too low they pull investment and go on strike. The total level of demand in the economy is an indication of underlying profitability.

Next the government boasted about their response to the cost of living crisis: “Government has responded in a timely manner, deploying its balance sheet to cushion the impact of higher energy prices on households and firms.”

But it took small employers, private bus operators, agricultural contractors and farmers shutting down half the country to get the government to cough up. They’re boasting about the “timely manner” in which they responded? The package they offered doesn’t do anything for workers. They extended the fuel allowance season by a measly few weeks.

While people on pensions and welfare will be grateful for that it does nothing for most workers. It will take mass mobilisation by workers to get the government to “respond in a timely manner” to our needs. The Irish Congress of Trade Unions needs to get up off their arses and start fighting. But that will only happen if grassroots members kick up a fuss.

The government argues: “The geopolitical events of the past year or so highlight the shifting global economic landscape – most notably the trend towards a bi-polar (or even multi-polar) world alongside a greater prevalence of economic coercion.”

But economic, political and military coercion have been built into capitalism from day one. The Irish ruling class are sad about this: “From an Irish economic perspective, this is far from optimal: few countries have benefitted more from global economic integration than Ireland.” The big Irish employers have globe spanning economic operations and want an Irish state that’s aligned with the US, EU and NATO to defend their profit making across the world.

Economically and politically they’re torn between Washington and Brussels. They’d prefer if the West united and got back to the business of encircling Russia and their big rival and ultimate enemy, China. The war on neutrality will continue.

The document then claims the Irish government is set on “reducing – and eventually eliminating – key infrastructural bottlenecks (in housing, transport, utilities).” This is a nice way to package up missed housing targets, pandering to the private sector and throwing cash at companies like BAM who complete projects years late and at huge extra costs. More of this to come!

They boast of “complementary reforms designed to accelerate delivery” but all this means is removing barriers to the private sector to profit from the various crises ordinary people face. They talk about “accelerating the transition towards renewable energy sources” yet later in the document boast about all the data centres that will be starting up here. They were already consuming 22% of all power in 2024.

The government claims they want “transformational” shifts in the economy including “productivity growth” that will “be key to sustaining continued improvements in living standards into the future.” But the bosses only invest in new tech if they’re guaranteed a rate of return they’re happy with. Once the rate of profit drops below a certain level they pull investment and sit it out until the economy hits rock bottom and they can start the ball rolling again. Investment follows profit not need.

While they claim there needs to be more investment in housing and infrastructure they warn of over-investment and overheating the economy. They’re saying “we want to invest - but not too much!” How are we supposed to solve the housing crisis with that kind of economic nonsense in the policy driving seat? In reality they want the state sector to stay out of the way of the market so their masters can profit.

Secondly, the government claims they want “a greater focus on intergenerational equity.” The housing crisis is the greatest intergenerational inequity. But the government actually means encouraging saving. Workers can pay tax for a lifetime but don’t expect public services or support, no you better start saving because while rising productivity will fill the pockets of the bosses, the Irish government will leave them to it.

We predict rising productivity, they say, but don’t expect any of the extra profits being made will be used to protect the workers who generated those profits in their old age, no you better start saving! Their message to young workers is to say save because the state won’t help you!

Ireland has surplus savings, a mass of profits and at the same time a housing crisis and infrastructure gaps. Market driven policy means investment happens where it is profitable not where it is socially necessary and the Irish government follows the lead given by those who control investment - the bosses.

They then boast about the fact they bailed out the banks and then when the banks started making profits again they jumped ship and left them to it: “an important milestone was reached in April this year, with the Government disposing of its final equity stake in the domestic banking sector.” Great, so we socialised the debts of the bankers and made sure the profits remained private!

They then say that with Ireland assuming the rotating Presidency of the Council of the European Union that the “Irish Presidency will be structured around the three broad pillars of values, security and competitiveness.” What “values” are these?

They talk about democracy and the rule of law but you can expect the market to be a key value. Security is just code for destroying neutrality, ramping up military spending and upping the potential for future conflict with China. And we all know what “competitiveness” means. It’s always code for dismantling worker protections and driving down wages. Yet earlier they complained about limited consumer spending?

The next section dealt with the government’s upcoming budgetary outlook: “The outbreak of war in the Persian Gulf at end-February, however, has once again exposed weaknesses in global supply chains, notably those associated with ‘choke points’.” The concept of “choke points” in economies should be noted by every worker. If a choke point can bring the system to a halt then we should think about which workers operate such choke points and how we bring the government to heel to give in to our demands.

They’re running a surplus by bending over backwards for multinationals, they write: “Turning to the budgetary outlook, tax revenue is projected at €110.8 billion this year. Nearly one-third (€35.3 billion) of this revenue stream is sourced from the corporate sector.” They put their proposals before their EU mates before doing anything: “The Government submitted its medium-term fiscal plan to the European authorities in January as part of its obligations under the revised fiscal rules.”

They admit that “the exceptionally large corporate tax-take is masking underlying fiscal vulnerabilities.” They also have a mountain of debt: “Government indebtedness amounted to €210 billion (62 per cent of GNI*) last year. The Irish government owes €210 billion. That debt equals 62% of the country’s GNI (a measure of national income adjusted for Ireland’s multinational-heavy economy).

To explain “Gross National Income” they start with GDP, then adjust for money flowing in and out: they add on any income residents earn from abroad and then subtract income that goes to foreign owners. The government admitted that: “Debt service costs are projected to increase over the forecast horizon: this is mainly due to the refinancing of debt instruments issued during the pandemic (and during ‘quantitative easing’).”

Next they follow the IMF and blame China for imbalances in the world economy: “While not a major export market… developments in the Chinese economy can have indirect effects on the Irish economy. The correction of its property bubble has not yet fully played out, while the authorities continue to prioritise export-led growth. China’s balance of payments surplus, therefore, is one of the main reasons behind widening global imbalances.”

Basically they’re arguing low demand in the Chinese internal market and their export-led focus isn’t fair because it’s too competitive with the West! We Reds are no fans of the Chinese bureaucrats but it’s hilarious to hear the West complain that China is being too “competitive” when that’s one of the key “values” of the Irish EU Presidency stint! And wasn’t the Irish government complaining about low consumption here too?

“Weak internal demand alongside the foreign sales of excess production resulted in a goods trade surplus of $1.2 trillion last year, the largest ever recorded. Importantly, over-investment in the manufacturing sector has given rise to the so-called ‘involution’ problem – fierce competition among domestic manufacturing firms that has triggered excess supply, price reductions (and deflation) and the associated shock to profitability (and firm viability).”

The Irish government is claiming that demand inside China is weak and that companies don’t have an internal market and orient towards export. China has a record trade surplus because they sell goods and take in money from other countries. “Involution” is a stupid trendy phrase economists are now using that means that firms compete so intensely that they drive each other down, leading to falling prices. This from the champions of capitalist competition in the West! Oh no, falling prices!

China is too productive, they argue. They’ve “involution” (falling prices) and excess goods are going to export markets leading to China having a massive trade surplus with the rest of the world. “It’s not fair!” say the governments of the West. The Irish government is complaining that China produces too much, competes too fiercely, and exports the excess. Isn’t that what neoliberals want?

But as Chinese economist Yu Yongding has recently argued, demand is created by production. He argues that there’s no such thing as a “consumption led” economic model because economic growth comes from further investment in production, labour and technology. A growing productive economy generates more new value that then as wages and profit is the demand of the next round of production.

The Irish government continued, writing: “Last year, the EU ran a trade deficit of more than €350 billion with China. This is putting significant pressure on European firms, including in the automotive, green technology and advanced manufacturing sectors. European firms face an uneven playing field: they receive far less state support, have more stringent regulations, and face higher production costs than their Chinese competitors.”

This is not just about economics but future military competition with China: “From a European perspective, the issue is not just about manufacturing employment, but also strategic autonomy and defence goals.”

A lot of people may find it surprising that the Irish government’s Spring outlook had a big section on China but they copy-pasted it from the IMF and it reveals the general concerns of the capitalists of the dominant nations. They want China to stop exporting cheap goods and buy Western goods.

But if workers in the West can’t provide a sufficient market for Western goods and prefer to buy cheaper Chinese goods then maybe the neoliberals should raise wages in the West and worry about consumption patterns here? Ireland runs a large surplus too due to corporate tax takes, the government’s own framing on China should see them complain about their own actions too?

But China isn’t the reason Ireland can’t build houses or deal with the cost of living crisis.

They then return home to talk about employment here, noting that: “The level of employment in Ireland reached 2.83 million in the final quarter of last year, its highest level ever and 57,000 more jobs than in the same period a year earlier. The unemployment rate meanwhile stood at 4.6 per cent in the final quarter of last year.”

While the “working age population in 2025 stood at 4.1 million – an increase of almost 350,000 persons (9 per cent) since 2020” they predict a “projected fall in net migration”. The introduction of A.I. will see changes to employment and far more data centres gobbling up our energy and water. The government wrote: “In the last decade, Ireland has become a significant location for data centre investment.”

On A.I. vulnerabilities they write: “The Irish economy has a high concentration of employment in knowledge-intensive services, including in ‘highly exposed’”

What the government doesn’t do is drill down into how increased investment in A.I. can lead to firms replacing workers with machines, which increases the productivity and profit rate of the first adopters. If you make a certain commodity in one hour and then you can deliver it in half that time you can sell a commodity worth half as much at the old generalised market price and make an extra profit. But once every capitalist adopts the new tech the advantage disappears and the cost of tech to wages pulls down profit rates in the economy as a whole.

The A.I. boom, like any other new tech boom, inevitably leads to the A.I. bust. On this, the Irish government has nothing to say. They next talk about William Baumol’s 1967 “cost disease” theory. This says that some sectors, like manufacturing, experience rapid productivity growth while other sectors, like services have slower productivity growth.

The theory argues that high productivity sectors raise wages to attract workers which pulls them out of low productivity sectors who then also have to raise wages. The theory claims these higher wages then raise the price of services. They’re blaming wages for high prices. This is an argument as old as capitalism. But if wages go up and profits go down then the price of a commodity stays the same. If productivity increases and there’s less labour per unit then the price of a commodity falls. Productivity differences in different sectors account for differences in the price of commodities.

If productivity increases lead to the reduction in the cost of consumer goods then the price of labour also falls as it “costs less” to feed, clothe and “produce” a worker. But wages represent a spectrum with workforces who fight making it to the top end and those who don’t fight getting less. The lowest paid workers, in the least productive industries, can pull wages up by organising and fighting back.

These raised wages can lower profits while the price of the commodity in question stays the same. The capitalists think workers are a mere cost instead of the source of profit. They think machines are productive because machines capture more profit. But the introduction of a new machine allows you to sell your cheaper commodity at the prevailing higher market price and capture extra profit.

The machine creates no new value, it simply transfers its existing value. If a machine is bought for €1,000 and depreciation over 10 years then the books of the boss simply stick €100 on the other side of the ledger every year. It doesn’t grow. New machines help capture extra profit and this incentivises adoption of new tech. But once every has it the general rate of profit falls and we’re one step closer to the next crash. It’s coming.

The government’s Spring Economic Outlook is full of Thatcherite mantras, idle boasting, and hypocritical warnings about the rise of China. We need an economy with workers in the driving seat, where we can plan changes in productivity, protect young and aging workers and deal with external shocks. To get that it will take a revolution.