Search This Blog

Saturday, July 22, 2017

Labor Turning Left on Inequality ; Let’s Make Sure the Policies Match the Rhetoric

In a very-welcome move, Bill Shorten (above) is talking about Action on Inequality (specifically progressive tax reform) ; Labor Activists need to support this move, while at the same time appraising the associated Policies, and engaging in such a debate as to ensure the Policies match the Rhetoric. 

Dr Tristan Ewins

Apparently Federal Labor under Bill Shorten is considering significant reform of Australia’s tax system to bring in potentially billions in new annual revenue, and to address the scourges of disadvantage, inequality and poverty.   

Labor had already long since committed to reform on capital gains tax concessions and negative gearing ; with some modest changes on superannuation tax concessions as well. 

But according to ‘Age’ journalist, Peter Martin, additional possible options now being canvassed include:  (‘The Age’ 22/7, p 17)

·         cracking down on the abuse of family trusts by the rich, bringing in maybe over $3.5 billion a year

·         and “ending the diesel fuel rebate” for miners and farmers ; again bringing in perhaps over $4 billion

These would be very-welcome announcements should they eventuate. Though to aspire to an extended social wage and welfare state Labor really needs to be considering ‘in the ballpark’ of 5% of GDP in progressive new annual spending – arrived at over several terms. 

And a figure of increasing Federal Government expenditure by 2% of GDP may be appropriate and realistic under a first term Labor government.  (ie: increase progressive tax and associated expenditure by around $32 billion in a $1.6 trillion economy)

We will consider other possibilities to reach that vicinity later in this article.

The Herald-Sun has responded to this recent positioning on distributive justice by Shorten ,  proclaiming that: “Bill Shorten has ratched up his class warfare rhetoric”. For the Herald-Sun instead Labor must cut “wasteful spending”  and not target “so-called” “rich and big business”.   Here inequality is to be considered not a reality. Rather according to the Herald-Sun it is Shorten who is “dividing us” into a “Have and Have-Not nation”.   (Herald-Sun, 22/7, p 12, 38)  There is talk of rewarding and not punishing “aspiration” ; and a rising cost of living is blamed on renewable energy.  (as opposed, for instance, to abuse of market power and inferior cost structures in the wake of privatisation)

But  ‘the Australian’ (22/7, pp 1, 8)  talks itself into a corner while unwittingly providing ammunition to refute the Herald-Sun’s suggestion that ‘inequality is a mirage’ conjured up by Shorten , and is not real. 

It quotes labour market economist Professor Robert Wilkins to the effect that inequality has not been “ever rising” since the Global Financial Crisis. (2008)  But then has to concede that the portion of national income going to the top 1 per cent has approximately doubled since the 1970s to over 8 per cent.  Wilkins also interestingly concedes that inequality is “high by modern standards”. 

Wilkins also concedes that we do have wage stagnation. And when you add a rising cost of living the reason inequality is becoming a far more urgent and resonant issue is clear.   

Further ; ‘The Australian’ observes that Shorten and Bowen are drawing on pre-tax figures on inequality ;  But if anything taxes have long been becoming lower, more broad-based, and less progressive ; at the same time as we have observed a growth in the application of the ‘user pays principle’ for everything from education to water.

Briefly, arguments about ‘the size of government’ also flounder in the face of statistics.  Whereas Australia enjoyed a general tax rate of 26 per cent of GDP and expenditure levels of 35 per cent of GDP in 2014,  the figures for Finland were at 43 per cent of GDP and 55 per cent of GDP respectively.   Meanwhile Germany enjoyed a total tax take of 37 per cent of GDP, and expenditure levels of 45 per cent of GDP. 

So Australia is lagging behind some of the most successful economies in the world in this respect. Despite Ideological claims to the contrary from the Business Council of Australia (‘The Australian’, 22/7/17) and elsewhere, the reality is that ‘bigger government’ can be good for the economy, and even ‘good for business’.

While Labor has recently only been courageous enough to target the very rich with admittedly very-modest reforms, ACOSS observed in a 2015 report that inequality was marked in our supposedly-egalitarian nation. 

Drawing on ABS (Australian Bureau of Statistics) research, ACOSS depicted the average income and wealth according to five “quintiles” ;  “a statistical value representing 20% of the population, of which the first quintile represents the lowest fifth of the population, 1-20%; the second quintile represents the second fifth, 21-40% and so on”.

Here the bottom 20% of Australian households enjoyed a total averaged income of under $34,000/year ; while the quintile immediately above enjoyed a total averaged income of only $67,113.  The middle or third quintile amounted to $97,570  ; the fourth to $134,127 ; and the final and wealthiest layer $232,175.

Household wealth was similarly measured ; and here the bottom 20% enjoyed average total household wealth of $31,100, but the top 20% enjoyed average wealth of $2,212,200.

This gives us some idea of the extent of income and wealth inequality.  Though these statistics may also admittedly be influenced in the context of ‘asset rich, income poor’ households ; those who may own a family home for instance, but who may fall into one of the bottom two quintiles for income. 

Also the top 20% wealth and income quintiles may be affected by the weighting of the extremely wealthy.  Again: after all, research quoted by Robert Wilkins in ‘The Australian’ (22/7/17)  has it that the top 1 per cent alone account for over 8 per cent of total wealth in Australia.

Labor needs a nuanced approach: assisting the income poor and the asset poor ; while redistributing from those who are income and asset rich.  Deflating the housing bubble and making home ownership a real prospect for families again is crucial. Labor’s Negative Gearing reforms are essential here.  Expanding public housing is necessary to assist low income families and vulnerable individuals as well: while also boosting supply ; with a ‘flow on effect’ to affordability for everyone.

But that’s not the end of the story.  In short Labor needs to redistribute from a broad enough economic base to fund redistribution via the tax mix, tax-transfer system, social wage and welfare state.  That must mean redistribution from the upper middle class as well as the outrageously wealthy.

Yet tax may need to rise for the ‘middle income’ layers as well. 

The rationale for this is as follows.

Tax comprises not merely a burden as if taxpayers received nothing in return.  It is also the means of funding collective consumption and social insurance.  Despite complaints from the banks,  the recently-implemented Federal tax upon them was a way of paying for an effective ‘government guarantee’ – a form of ‘economic insurance’ which originated with the Rudd Labor Government during the Global Financial Crisis of 2008. (GFC) 

Morally-speaking, the ‘middle income layers’ should also show some solidarity with those who are struggling.  That’s part of the picture. But by ‘collectively consuming’ infrastructure, services and social insurance they also ensure they get a much better deal for their tax dollar than they would as atomised private consumers. Consider communications, transport, water, energy infrastructure, health and education infrastructure - and the costs of the associated services. And taxes also must be levied so citizens are ‘covered’ in the case of accident, illness, disability, job loss and so on.

Also there is a growing crisis of what some would call ‘corporate welfare’.  Ostensibly in order to be ‘competitive’ in attracting capital we have seen an increasing phenomena of tax payers, workers, citizens – effectively subsidising business. Governments ‘look the other way’ on tax evasion, tax havens, abuse of trusts and so on.  Or ‘talk the talk’ while taking only token action.  (Labor could do with some introspection here as well) 

Corporate Taxation falls lower and lower to ‘remain competitive’. A ‘race to the bottom’.  The ultimate consequence of this is that business is no longer paying its fair share for the services and infrastructure it benefits from.  That means workers and other tax  payers have to ‘pick up the tab’. 

But as well as being unfair, ironically this ‘comes back around’ to harm certain businesses as well.  Workers and taxpayers therefore have less disposable income , which means less scope for discretionary consumption.  This is why some businesses are beginning to worry about falling wages. Though others remain narrowly self-interested – looking only at their own sectional interests, and for instance supporting attacks on penalty rates.   

The other possibility is that crucial services and infrastructure will just be neglected.  But much of that infrastructure and services is a ‘drawcard’ for investment as well.  For instance an educated workforce. ‘Social disintegration’ can also mean added costs in the form of crime, ill health and so on.  This is without even considering the question from the viewpoint of striving for ‘The Good Society’ and not just ‘economic goals in abstract’. 

There are other possibilities for tax reform, also, not examined by Martin’s article. Those could be crucial in lifting Australia closer to the examples set by successful economies such as Germany and Finland. We will consider a number of those:

·         further (and genuinely substantial) cuts to superannuation concessions for the unambiguously well-off (the upper middle class and higher); with the potential to save tens of billions a year with that one measure alone

·          Fix the Company Tax rate at 30 per cent and take serious action on corporate tax evasion, use of tax havens etc.

·         Gradually wind back Dividend Imputation (tax credits ostensibly to stop ‘double taxation’ – the rationale of which has weakened with falling Company Tax rates);  That would have the potential to save $5 billion a year from reducing Dividend Imputation to a 75% rate alone in a first term Labor Government ; and much more over time depending on the reaction

·         Seriously restructure the PAYE income tax mix for progressivity ; including indexation of the bottom two or three brackets thereafter – to prevent future unfair bracket creep ;

·         Raise and restructure the Medicare Levy into a more-progressive multi-tier tax; and index to prevent unfair bracket creep ; Also cover Aged Care costs within the Medicare Levy – and raise enough revenue to eliminate unfair user pays costs for lower income, middle income and working class families , while improving services, and hence improving quality of life and happiness for residents , and those remaining at home.

·         Introduce a progressively-scaled ‘infrastructure levy’ to provide for all manner of infrastructure (transport, communications, energy, water etc) ; and to stem the trend towards privatisation – which is worsening cost structures and arguably fuelling nepotism.

·         Introduce a modest inheritance tax on inheritances valued over $2 million ; again indexed for progressivity ; perhaps excluding the family home

·         Introduce a ‘Buffett rule’ – or ‘minimum income tax’ affecting the wealthy

Importantly, though, Labor’s consideration of increasing the top income tax rate by 2 per cent is not substantial enough to make serious inroads into the deficit , provide for social wage and welfare expansion , or to render indexation of the income tax mix sustainable thereafter.  Compared with other taxes, income tax has great progressive and redistributive potential ; and its significant reform must be prioritised to achieve the best outcomes.

It’s encouraging that Labor is considering serious reform of the tax system for fairness.  We need such reform to promote distributive justice, and provide the means for social wage and social security expansion.  But Labor activists need to hold their politicians to a high standard as well.  There is a history of rhetoric on these issues, combined with a failure to match that rhetoric with the necessary action in the 'end analysis'.   Not every measure considered here will be implemented by a first term Shorten government.  But extension of progressive tax and associated social expenditure by 2 per cent of GDP, or $32 billion in a $1.6 Trillion economy, is a very good place to start.

Sunday, July 16, 2017

Unpublished Letters from a Labor Activist ; March-July 2017

The following are a series of unpublished letters to ‘The Age’ and ‘The Herald-Sun’ from Labor activist Dr Tristan Ewins from March to July 2017.

They are presented chronologically.

Increasingly I'm finding it impossible to get any of these letters published ; I hope at least they may spur some discussion here at this blog.
Please feel welcome to link to this page via Facebook.

The position of modern Christianity is complex

(Herald-Sun, March 2017) As a democratic socialist I am loathe to concede anything to Andrew Bolt.  But regarding his recent op-ed on Christianity I had to concede there is a growing ‘cultural assault’ against the faith.  In some quarters there seems to be a double standard in how Christianity is treated in comparison with other faiths.  During the French Revolution – which Bolt alludes to – Catholic clergy enjoyed entrenched privileges as the so-called ‘First Estate’.  More recently (from the 1930s) the Roman Catholic Church was involved in fascist regimes in Spain (Franco) and Austria (Dolfuss)   The Papal Encyclical “Rerum Novarum” also alienated many Catholics from the Left.  But there is more to Christianity than this.  Churches – including wings of Catholicism – have been vehicles for progress also.   Consider Martin Luther King Junior,  Desmond Tutu, Oscar Romero ; and even consider Francis’s attempts to reform Catholicism.  And across the country various churches and various denominations have embraced causes like indigenous rights, the environment, civil rights, peace, the fight against poverty and homelessness, queer rights and so on.  Today’s diverse Christian church is not uniformly the bastion of privilege and conservatism it once was.  That said, Christians must enjoy the same dignity and liberal rights as everyone.

What’s wrong with the Swedish Model?

J.Muir (Herald-Sun ,Letters 18/4) suggests those who look to the Swedish (democratic socialist) model have let go of all “logical thinking”.  Yet for decades Sweden’s famous welfare state has been the source of greater happiness, equality and security compared with the US, Australia and Britain.  At its height the ‘Swedish model’ also achieved close-to genuine full employment (hence ‘running the economy at full bore’) ; and that was comprised largely of high wage jobs thanks to Sweden’s interventionist industry policies.  The Swedish welfare state and industry policies also meant Sweden could revolutionise its industries without displacing and impoverishing workers in the process.  The Swedish welfare state’s universality also meant there was little in the way of resentment from the well-off.  All this was not a disincentive to work ; but nonetheless Swedes have enjoyed very high quality public health, education, and social security systems.  What is ‘illogical’ about all that?

What does Peta Credlin know about ‘Australian values’?

Peta Credlin (Herald-Sun, 23/4) argues we must “Stand Up for our Values”. (that is, ‘Australian Values’) But who determines what Australian Values are?  Traditionally we have thought of ourselves as an egalitarian nation.  Historically that was confirmed with our labour market regulation (with a fairer go for the low paid) ; through the rights enjoyed by workers and their trade unions ; and through our progressive welfare state (including Medicare), and our mixed economy. ( which involved cross-subsidies for the poor)  Further ; Australian POWs in Changi survived through human solidarity ; which is the opposite of the ‘survival of the fittest’ Ideology preached by today’s Right-wing. Those egalitarian values have been under siege for a long time now ; including from Peta Credlin’s Liberal Party. Just remember when you hear Conservatives speaking of ‘Australian values’ that we don’t all agree on what those values actually are.

Bolt wrong on Education Again

Andrew Bolt (4/5/17) argues there is at best little connection between levels of funding for schools and actual results.  And yet there has been a trend to a growing defection of parents to the private school sector on account of better infrastructure (eg: libraries, computers and so on), as well as better student to teacher ratios. Some private schools also offer better wages and conditions which enables them to ‘take their pick’ when hiring staff.  Clearly the emphasis on ‘teacher quality’ is a means of distracting from the question of funding ; providing an excuse for education austerity which is destroying ‘equality of educational opportunity’ in this country.  Here Malcolm Turnbull’s ‘Gonski 2.0’ needs to be considered in its context of an actual multi-billion dollar  annual cut compared with the original Gonski agreements. Further: If we are to attract the best teaching staff arguably we need to hold the profession in higher esteem. And more could be done, here, with reductions in course fees and improvements in wages, conditions and career paths for teachers. Instead the government is putting tertiary education fees and repayment schedules through the roof : even for those on roughly HALF the average yearly salary.  (ie: approx. $40,000/year)

Is Turnbull really ‘Turning Left’?  Ask Abbott: ‘What happened to Catholic Economic Centrism?”

Andrew Bolt (11/5) claims Turnbull and the nation are ‘turning Left’ on the basis of insufficient austerity and new tax measures intended to ameliorate the deficit. In reality, however, Turnbull is hitting students and the unemployed hard – with policies which target students on half the minimum wage for thousands ; and which could force low income earners to exhaust their meagre savings before receiving Newstart only after 6 months should they lose their job.  Despite this the Budget does move the Government closer to the relative economic centre in the sense that overall cuts are ameliorated by comparison with the disastrous Hockey Budget of 2014.  And there is finally acceptance that there was ‘a revenue problem’.  Ironically,  the “Abbott Purists” will likely claim the austerity has not gone far enough. Though they may be upset by the attacks on Catholic education.  But it is THEY who have abandoned ‘traditional Catholic Centrism’ on welfare, labour and the economy.  (a tradition which interestingly had parallels with other ‘Christian Democratic’ parties in Europe)  By comparison Abbott, Bolt and others would have us drift into a US style scenario with a class of utterly destitute, and a class of working poor.

Robert Menzies was a Social Conservative ; But might appear ‘leftish’ on the Economy by Today’s Standards ; Bolt wrong again

In the Herald-Sun (May 22nd) Andrew Bolt compares today's Liberals with Robert Menzies - and finds them wanting. Specifically he infers that Menzies would have nothing to do with narratives of fairness. (narratives Bolt rejects)  But in reality Menzies presided over a much more steeply progressive income tax system than we have today - with a top rate around 67 per cent.  Both Labor and the Liberals have moved way-Right on the economy since then.  In reality 'market forces' do not guarantee just economic outcomes. And as against narratives of meritocracy, most of the very rich inherit rather than earn their wealth.  Inequality is not 'natural' or 'inevitable'.  But a degree of redistribution can ensure equal opportunity in education, equal outcomes in health, and 'baseline' living standards that no citizen should be allowed to fall beneath. It is a matter of compassion ; but also of decency and justice. Australia's egalitarian traditions and culture are worth saving. Bolt is wrong.

Slashing the HECS Repayment Thresholds is Unjust by any Reasonable Measure

Ross Gittins (‘The Age’ , 24/5) rightly condemns the Federal Government’s assault on job seekers, including requirements that those people exhaust much of their personal savings before receiving a cent. It received very little coverage in Budget analyses.  Perhaps there is a cold calculation that ‘no one has sympathy for job seekers’ given the constant resentment and callousness whipped up in much of the monopoly mass media.  There wasn’t a word from Labor that I saw. But I don’t understand Gittins’ attitude towards students.  Someone on $42,000 a year is better off than a person struggling to feed themselves on Newstart.  But the Government is abrogating basic principles of progressivity by reducing the repayment threshold to $42,000/year ; or approximately only half the average wage.  Those on half the average wage are not receiving a significant financial benefit compared with workers and tradespeople who had not attended university.  And given other pressures – including housing unaffordability and a rising cost of living – surely HECS repayment thresholds and rates need to be fairer.  Just because you can make ends meet doesn’t mean principles of progressivity and fairness should not apply.  The minimum repayment threshold should be raised to at least $60,000/year ; then indexed.

Root and Branch Reform of Tax and the Social Wage Necessary

“Peter Martin (‘The Age’ 25/5) makes a good case to get rid of poverty traps in the tax and welfare systems which hurt vulnerable groups like single parents and provide little incentive for work.  We have a tax system which needs root and branch reform.  The whole tax mix needs to be restructured for fairness ; as do the PAYE income taxation scales on their own – which thereafter ought be indexed.  Dividend Imputation could be gradually withdrawn to a 50% rate (maybe more over time), saving  $10 billion a year. Superannuation concessions could be withdrawn for the wealthy , but also the upper middle class ; saving over $20 billion.  A ‘Buffet Tax’ (minimum income tax for the wealthy) could bring in over $2 billion.  The Medicare Levy could be reformed on a progressive scale ; where everyone contributes – but by an increasing proportion depending on income.   Finally inheritance taxes ought be reconsidered for those with truly large inheritances ; say over $2 million.  All this could be passed on with a mix of tax cuts for low to middle income earners, improvements in social security , and improvements in the social wage.  (including infrastructure, health and education)”

Terms like ‘Class Warfare’ and ‘Soak the Rich’ Demand Criticism

Peter Hartcher (‘The Age’ June 13th) seems critical of the recent upsurge in Left-wing politics, with good performances by Sanders and Corbyn , and the return of democratic socialism to ‘respectability’. Terms like ‘class warfare’ and ‘soak the rich’ are thrown around without any real critical consideration of the meaning, assumptions and historical context behind that kind of language.  Progressive taxation hence appears summarily dismissed, despite the fact  that taxes were effectively more steeply progressive under Menzies then they ended up being under any government since Hawke and Keating.   Regressive taxes, ‘small government’ and austerity are today considered ‘natural’ despite impacting negatively against the majority on lower and middle incomes. There is no talk of ‘class warfare’ where it is workers and the vulnerable under attack.  But somehow a fairer spread of taxation is dismissed as ‘redistribution’ – which apparently has been established as a political and economic ‘cardinal sin’.  Australia needs a new culture of social solidarity – where everyone contributes on the basis of their capacity – and where health services, aged care, social security, education, social and public housing – as well as transport, energy and communications infrastructure and services – are made fully available on the basis of need.

Terms like ‘Labor Lite’ to Describe Turnbull Expose Loaded Political Assumptions around the Australian Economy

Andrew Bolt describes Malcolm Turnbull as ‘Labor Lite” - ‘big spending’ and ‘high taxing”.  (3/7)  But in reality taxes and spending have over the long term been falling effectively by tens of billions under both Labor and Liberal Governments.  Compared with the OECD average Turnbull is low spending and low taxing.  Policies that Abbott and Bolt describe as ‘Left’ would be considered ‘neo-liberal right-wing’ in much of Europe and Scandinavia – including by Christian Democrats and Centrists.  Is so-called ‘small government’ really a good thing?  Paying for goods and services: including health, aged-care, education, infrastructure – through progressive taxes – gives citizens in general better value for money than if they paid for these as private consumers.  Look at the outrageously-expensive US private health insurance system for proof of this. This ‘social wage’ also means we don’t have a US-style underclass.  To get an ‘angle’ from which to undermine Turnbull Abbott is also betraying the traditions of Christian Democracy and Catholic economic Centrism which have historically supported welfare and labour market regulation.

What does Bolt know about Socialism?

Andrew Bolt (13/7) writes of Venezuela that it should “be taught in schools” how “socialism ruins countries”.  But surely that kind of official indoctrination would itself be a hallmark of totalitarianism? Instead we need a curriculum that informs students about the interests and value systems of both the Left and the Right , and of different social groups – and encourage them to make their own commitments – in an active and informed democracy. As for socialism: done correctly it has resulted in full employment, high wages, equal educational opportunity, and health care based upon need.  Consider Sweden, Finland, Denmark, Norway. But capitalism increasingly survives on unsustainable private debt ; and ‘corporate welfare’ as big business escapes taxation for the infrastructure and services it benefits from. (the rest of us must pay)  Also there is abuse of market power in the wake of privatisation of natural public monopolies.  (eg: energy) ; and this is why those on lower incomes are suffering.

Sunday, June 25, 2017

Neither Opportunism nor Self-Destruction - Standing up for Socialism in today's ALP

Dr Tristan Ewins

This is a response to comments at the ALP Socialist Left Forum Facebook page where contributors argued to the effect that Labor is "a party of government" ; that being a defining difference between us and the Greens. But do we sometimes take compromise too far?

I'm hoping this leads to some genuine debate.

As we argue in the ALP "We're a Party of Government".  But how do we govern? Do we press democratic socialist reform as hard as we can? Do most of our MPs even believe in democratic socialism anymore - let alone talk about it openly and publicly? Do we walk the best line between opportunism and self-destruction? Or are we too opportunistic?

There have been improvements under Shorten ; for instance action on Negative Gearing. But we need more ambition. For instance - aspire to raise progressively sourced revenue by 5 per cent of GDP over several terms ; to fund progressive social wage and welfare state initiatives from that. To remove regressive policies such as superannuation concessions for the unambiguously well-off.  (including the upper middle class) And re-regulate the lower end of the labour market.

The Greens can make proposals they will never have to implement, yes. Though the inverse of that is that they say things we feel we cannot ; Whatever their flaws (there are many ; including the occasional distortion of the truth to better their position as against us in marginal inner city seats) - at least it adds to debate and puts more radical ideas up for open deliberation.

But there is a long history of regressive tax restructuring and tax cuts ; privatisations ; deregulation and user pays ; capitulation to the Ideology of small government.

As the Socialist Left we are meant to be the main internal obstacle to opportunism in the ALP ; and the main impetus for democratic socialist reforms.

We need more policy and ideological ambition ; but to further this we need tolerance and acceptance of internal debate and the rights of our rank and file to mobilise around socialist ideological and policy agendas.

We look to SL MPs to lead and inspire ; but they are also caught in a bind ; in Canberra they represent the Party ; they compromise heavily when pressed if that is what is dictated by the ambition of taking government in the midst of disinformation from the media and elsewhere.

Yes compromises need to be made. But do we take it too far? And if we don't maintain a robust internal culture and a more general counter-culture - how long before we abandon socialism entirely? How long before young small 'l' liberal activists declare 'the Emperor has no clothes' ; Because we mouth platitudes about socialism - but so many of us no longer know what it means. Already many speak of 'the Left' and not only 'the Socialist Left'.

The relative centre has shifted in this context where progressive ideas were seen as a 'threat' to the dictates of opportunism. Internal discipline and structures of patronage will not save the cause of socialism ; the ground will shift under peoples' feet ; and what remains of the radical edifice will collapse. Unless WE stop it from collapsing ; by working to restore a socialist counter-culture within the Party ; within the Left ; and more broadly as well.

And if we see the job of building a counter-culture as the work of a Party and not of a Faction ; Well what happens when there is no one significant left to do that job? What happens is that our ideological and cultural base is eroded until there is nothing left. Or we are only a 'tendency' within a much broader ALP 'liberal-left' which views us as an anachronism.

We cannot accept this.  Both the development of a counter-culture and participatory development of socialist inspired public policy are goals we must advance at every opportunity"

Wednesday, May 10, 2017

Scott Morrison’s 2017-18 Federal Budget:  Some Good Measures Amidst the Typical Austerity

Admist the Usual Austerity there are some Welcome Surprises in this 2017 Morrison Federal Budget. Though the monopoly mass media is tending to overstate any perceived 'leftward shift' ; inappropriately using terms like 'Labor lite' , where in reality there are very significant assaults on the rights of students and job seekers.

by Dr Tristan Ewins, 10/5/2017

Many media commentators are responding to the 2107-18 Morrison Federal Budget by branding it as ‘Labor Lite’ or ‘worse’.  But how much of that actually stands up to scrutiny? 

Yes the Government is attempting to appear ‘fair’.   And many media figures are throwing around terms like “cash splash” which are commonly reserved to use against Labor governments.  There are pressures in the right-wing monopoly mass media for a ‘right-turn’ in response to any moderation of economic policy under Turnbull.   Bernardi’s ‘Australian Conservatives’ and the libertarian ‘Liberal Democrats’ stand to gain most from this.  But despite years of conditioning from the monopoly mass media Australians may resist these trends given the remnants of our ‘egalitarian spirit’.   The point of all this appears to be stigmatisation of social investments and expenditure ; ultimately leading to a US-style political culture.  Which in turn would support a US style class system based on the absolute destitution of many , and the blatant exploitation of a class of working poor. To the extent Turnbull and Morrison resist pressures for an ‘economic hard right turn’ then that is welcome.

Some Budget changes do appear at the least superficially ‘Labor-esque’.  Many of the billions in cuts and savings originally proposed in the nightmare 2014 Hockey Federal Budget are laid to rest permanently here. The increase to the Medicare Levy will be welcomed by many, and will help provide for the NDIS. (National Disability Insurance Scheme)  The Government claims a ‘$56 billion shortfall’ for the NDIS ; though most of that could have been made up for immediately by jettisoning the Government’s $50 billion in planned corporate tax cuts over 10 years.  (much more over time) $8.2 billion will be taken via the Medicare Levy increase over the first four years.  
A so-called ‘Google tax’ targeting corporate tax evasion is also expected to net more than $3 billion over four years.   (though it is quite insignificant compared with corporate tax  cuts elsewhere)

Further, the ‘big banks’ (including CBA, ANZ, Westpac, NAB) will be hit for $6 billion over 4 years ; apparently including an effective payment in return for the ‘government guarantee’ for the sector. (which began with Rudd’s response to the Global Financial Crisis)   In response there is the question : will the banks hit customers or will they hit shareholders?  If somehow larger shareholders could be targeted that would ensure the most equitable outcomes.  A payment by the big banks in return for an effective government insurance policy makes sense.  Without it ultimately there could be impositions on workers, citizens, tax-payers.  So on this front at least the Government is doing the right thing.  And if the Banks respond by upping fees and charges arguably the co-operative and mutualist sector could ‘step into the breach’.   Were the Commonwealth Bank still in public hands then assuming a ‘competitive charter’ it could have held the rest of the sector accountable , countering tendencies to pass costs onto consumers.  That’s also a good reason for Labor to consider restoring a public-sector bank – perhaps taking advantage of existing Australia-Post infrastructure.

Meanwhile, foreign home owners who leave properties vacant six months or more will be taxed – a measure apparently borrowed from the Andrews Labor State Government in Victoria.  As well as raising some revenue, this measure should also influence investor behaviour ; and effectively increase available housing supply ; with downwards pressure on housing and rental affordability. 

The ‘Gonski 2.0’ measures, meanwhile, are a significant improvement on past Liberal policy, and include needs-based funding.  David Gonski is due to present another report by the end of the year.  The Catholic sector appears to be in the firing line.   More broadly, Shorten points out that despite the gains, here, (including some cuts to some of the richest private schools) the proposals nonetheless still involve an overall $22 billion cut to the sector over ten years compared with the deals previously negotiated by Labor. 

Other constructive policies include significant tax breaks for ‘empty nesters’ to ‘downshift’ to smaller, lower-maintenance accommodation.  That could also increase effective housing supply.  The housing bubble will eventually deflate (or ‘burst’ disastrously). But government could step into the economic breach with public housing.  There is still the need to expand supply to meet underlying human need.  Planned Negative Gearing and Capital Gains Tax reforms from the Government are welcome, but do not go anywhere near far enough, saving just $1.6 billion over 4 years . Stronger action on Negative Gearing is necessary to lessen competition between first home buyers and investors , correcting the Housing Bubble over time.

Also there’s $10 billion for rail as part of a suite of infrastructure commitments. (though these are not as significant as some think when compared relative to infrastructure investment under a ‘traditional’ Labor Government)    

A once-off payment of $75 for singles, $125 for couples – to assist with energy costs – is very insignificant when you consider the rising cost of living.  The Liberals point to renewable energy as the alleged ‘culprit’ here ; but what of privatisation? 

Finally ;  Annual TV Licenses are scrapped in favour of a much lower ‘spectrum fee’ – which makes sense given the changing media landscape – which is hurting traditional media. Arguably the licenses aren’t worth as much anymore.  But diluting media ownership laws will still enable the likes of Murdoch to dominate traditional media.

The Down-Side

But there’s a very significant ‘down-side’ to this Budget as well ; including ‘traditionally Liberal’ attacks on vulnerable groups ; and treating tertiary students like ‘cash-cows’.
Higher Education stands to lose almost $3 billion a year – with students hit hardest.  The Turnbull Federal Liberal Government claims that its fee increases – and its reduction in the minimum repayment threshold to $42,000 a year (down from $55,000) “better reflects the lifetime benefits reaped by higher education graduates”.  But these measures will start ‘kicking in’ affecting people on approximately half the average wage.  Hence in places the measures really bear no relation to any alleged private financial benefits for students. The logic behind these measures also neglects entirely the gains by business and society at large from a more highly educated populace.   There is some progressivity as those with much higher incomes will repay at a significantly higher rate.  But this does not excuse or make up for a 7.5% average increase in tuition fees.  In response Labor needs to raise the threshold somewhere much closer to the average wage ; and higher over time ; while entrenching a progressive scale in the rate of repayments.   Exceptional groups such as the disabled should probably be forgiven their debts, here : or at least have them frozen. The inevitable effect of this will be to deter many poorer students from study, reducing the nation’s pool of ‘human capital’ over time, and impacting on ‘equal educational opportunity’.  It is dubious at best to consider educational investments a ‘bad debt’.

The 0.5 per cent increase in the Medicare Levy is supposed to reassure voters that Labor’s warnings on health are only a ‘scare campaign’.  But while the Levy is re-indexed the forsaken increases to Medicare’s coverage in recent years are not made up for.  Medicare might still be eroded by stealth ; and that is ‘de-facto privatisation’ in the sense of intermittently eroding the coverage of ‘socialised’ public health proportionately.  This was always what Labor alluded to , but for some reasons ‘the waters were always muddied’ in the mass media, with throw away lines like ‘Mediscare’.

Also , while the Medicare Levy is rising, the 2 per cent Deficit Levy is gone – directly benefiting the wealthy in the final balance. There are ‘traditionally Liberal’ distributive  outcomes, here, despite claims of the Budget being ‘Labor Lite’.   (that is, the Budget favours the wealthy) 

Payroll tax on foreign workers will also be replaced with a levy of $1500 to $5000 per employee raising $1.2 billion over four years “to improve Australian workers’ skills”.  To an extent this will take some of the wind from Labor’s sails on related issues. 

Other measures include punitive attacks on the rights of the  unemployed, with the threat of payment suspension for those who miss a job interview or refuse a job offer they don’t want.  And reversion to a ‘cashless welfare card’ for anyone found to have illegal drugs in their system.  5000 people will by thus tested – and effectively humiliated – in order to create a ‘Trojan Horse’ for the introduction of cashless welfare.   Already Australia has one of the most negligent and punitive unemployment benefit regimes in the advanced capitalist world.  But ‘cashless welfare’ will see Australia revert to Depression era ‘Susso’ style ‘payments’.  The ‘Susso’ basically provided threadbare material subsistence (rations and vouchers) for the long-term unemployed.


Claims to the effect this Budget is ‘Labor Lite’ do not really stand up in the longer view historically when you consider pre-1980s relativities on the Economy ; and more recently with the ‘relative economic centrism’ of former Liberal leaders like John Hewson. The reality is ‘convergence’ on right-wing, economically Liberal policies ; though Shorten has begun to ‘break away’ to something more recognisably ‘left of centre’. Ironically,  the “Abbott Purists” will likely claim the austerity has not gone far enough. Though they may be upset by the attacks on Catholic education.  But it is THEY who have abandoned ‘traditional Catholic Centrism’ on welfare, labour and the economy.  (a tradition which interestingly had parallels with other ‘Christian Democratic’ parties in Europe)

This government is restrained by its own inflexible “small government no matter what” Ideology.  (spending is set at no more than 26 per cent of GDP ; well below the OECD average)  This drives various ‘cuts to the bone’ (as Gillard would have put it) , because it leaves no other option than harsh austerity.  Ultimately, Scott Morrison will have to make a choice: real people or Economically Liberal ‘small government’ Ideology.

Terry McCrann of the Herald-Sun calls the Budget ‘a disgrace’ for not sufficiently addressing government debt.  And Jeff Whalley (also of the Herald-Sun) argues that government debt amounts to “$375 billion” or “$15300 for each man, woman and child” .   But while government spending can have a positive ‘multiplier effect’ on economic activity,  austerity also has a negative multiplier effect ; dragging the broader economy down in sympathy.  

Also we must remember  that private household debt is the much bigger problem, and is connected with falling real wages.  (Why the cuts in Penalty Rates, therefore, we might ask! ; which will lead to lower tax revenue also)  And reducing investment in PUBLIC owned infrastructure presents its own associated problems of passing inferior cost-structures on the broader economy. Indeed, investments in some services (eg: Education) and infrastructure add to productivity – and the public sector (natural public monopolies) can often do the job more efficiently.  So Morrison’s ‘good debt’ and ‘bad debt’ has some substance. (a pity in the past they did not apply those principles to Labor governments!)

In conclusion ;  The Herald-Sun reports with an air of alarm that taxes will be up $23 billion over four years ; and spending up $15.7 billion over four years.   Indeed, Commentators are complaining that income tax is becoming more significant proportionately.  Though really, this need not be a problem if total income tax is progressively restructured, and also the rest of the taxation mix.   Also keep in mind the economy is worth approximately $1.6 trillion.  So in reality spending is up by less than a quarter of one per cent of GDP.  The revenue gap has at least been appreciably narrowed.

In some ways this Budget is better than we might have expected from the Liberals after the horror Hockey ‘Lifters and Leaners’ Budget from 2014. But a lot of that Ideology is still there.  And the cuts are still significant ; with the introduction of ‘cashless welfare’ setting a precedent for the further future humiliation of job-seekers.  And shutting many lower-income Australians out from Higher Education.  An Opposition with strong, traditional Labor policies on distributive justice can still ‘outflank’ a Liberal Government which cannot help but govern primarily in the interests of its core constituency: the unambiguously well-off.

Friday, April 21, 2017

Social Democracy and Capitalism : A Critique

originally written for a Fabian Society Forum ; Melbourne ; 19/4/2017

A finalised version of this will be submitted to ALP policy development bodies for consideration ; PLS provide feedback if you think it may help me improve the final version...

Restoring 'a traditional social democratic mixed economy' is part of the solution to current economic maladies ; but at the same time it is only the beginning of the journey...

by Dr Tristan Ewins , April 2017

Capitalism and its benefits

1)     Capitalism is an economic system based on the private ownership of the means of production, exploitation of labour by Capital, and markets as vehicles for distribution and exchange.  

2)     Capitalism has benefits and failures ; which can be maximised or ameliorated via economic policy, and by the struggles of ordinary people for justice

3)     Capitalism as we know it has the benefit of promoting innovation through the dynamics of competition ; The competitive market system drives capitalists to innovate and respond to the intricacies of consumer demand.  It also leads to the development of the means of production.

4)     Capitalism also has the benefit of driving efficiency and productivity gains via those same dynamics of competition

Capitalism’s Flaws

5)     But Capitalism’s failures include the following

Canadian economist Jim Stanford estimates that ‘the capitalist class’ of top owners and management dominates control of the economy despite only comprising about 2 per cent of the population.  This has implications for the viability and meaningfulness of democracy.

Capitalism has also always involved a ‘business cycle’ ; characterised by fluctuations in consumer demand and investor confidence. This could be sparked by the collapse of investment bubbles and the spread of ‘bad debts’; and in response to the use of interest rates to contain inflation , or because of ‘supply shocks’. (eg: the Oil Shocks of the 1970s)   And these crises spread in the context of world capitalism because of increasing global economic interdependence.  At its worst this has occurred in the context of Depression , and more recently with the Global Financial Crisis.  These were only eventually overcome in the context of stimulus , government guarantees and other interventions , and in the past (eg: WWII and post-war reconstruction) also because of the ‘boost’ provided by rearmament and war.   The Great Depression put paid to the economic Liberal argument that ‘perfectly free markets’ ensured the full mobilisation of all ‘factors of production’. Arguably the right kinds of stimulus, intervention and regulation can reduce the severity and duration of the associated downturns.   This includes what Keynesians call ‘demand management’.  Downturns are a good time to invest in infrastructure, for instance ; though there are arguments to invest in productivity and quality-of-life enhancing infrastructure outside of that context as well.  Indeed stimulus can create ‘a multiplier effect’, creating jobs indirectly as well as directly.  But government (or ‘the people’) should not shoulder all the costs and risks, here ; with little in return.  Some of the concerns socialised to restore stability during the GFC should arguably have remained socialised.

6)      Left to its own logic capitalism leads to economic monopolisation or oligopolism – which in turn can lead to the abuse of market power.  It also leads to systemic inequality.  Though this can be ameliorated through labour activism , labour market regulation , progressive tax , and the social wage and welfare systems.  And also by competition policy ; or enforcement of competition via Government Business Enterprises with charters on promoting competition. Again, though, the ‘capitalist class’ as such comprises only 2 per cent of the population ; and yet has the power directly or indirectly to veto any public policy through destabilisation and/or a ‘capital strike’.  Unless ‘the people’ are sufficiently conscious and organised to oppose those strategies.

7)     Nation States also pursue their economic interests attempting to extend their economic sphere of influence through control of – and access to -markets in other countries (including key strategic resources) ; or in the past through more direct expansionism.  This can involve military force or economic and cultural pressure ; and was described by the British liberal social theorist John.A.Hobson as “Imperialism” ; a term which was then seized upon by Vladimir Ilyich Lenin to explain the First World War.

8)     Marxists once believed in ‘absolute pauperisation’  and ‘absolute bifurcation’  under capitalism; with the destruction of the middle classes through the dominance of monopoly capital and the inability of small business to compete.  In reality the ‘middle classes’ have re-emerged in diverse forms.  Via the professional classes ; via emerging small businesses in new industries where monopolies have not yet consolidated ; and more recently as contractors who compete against each other to provide goods and services for monopoly capital , or in other contexts via small jobs for private consumers and households. Meanwhile, the working class generally includes all wage labourers – skilled and unskilled, manual and mental.  The wealthy , and Ideological economic Liberals and capitalists, try to play the middle classes off  against the working classes and the disadvantaged.  As well as playing the working classes off against the most vulnerable with ‘anti-welfare’ narratives ; and using narratives around ‘political correctness’ as a wedge against the progressive liberal, social democratic and socialist Left.  Also capitalists try and play manual labourers against intellectual labourers ; appealing to intellectual labourers that they are ‘middle class’. (and hence do not share the same interests)  In democracies the challenge is to build a stable progressive electoral bloc to fight this.  Swedish sociological theorist Walter Korpi referred to a ‘democratic class struggle’. Arguably Labor could do better to consolidate its support bases around the working classes and the vulnerable by playing more directly to their interests and challenging dominant Ideological themes; while maintaining the support of middle class liberals.

9)      Current emphasis on ‘no real wage rises without productivity improvements’ leaves some labour-intensive professions (eg: cleaners) with little or no prospect of a real wage rise, ever.  That is: without increases in the intensity of labour – a disturbing notion given we are already talking about some people who are engaged in hard and demanding physical work. Hence the creation of effective poverty traps. Workers in other areas like Primary and Secondary Teaching would also be hard pressed to achieve ‘productivity gains’.  It also leads to absurd scenarios ; for example in higher education ; with academics measured by  their ‘academic output’ ; often excluding deep thought and study of particular areas ; and getting in the way of good teaching.

The Imperative of Capitalist Expansion ; and the Associated Waste

10) Capitalism involves a dynamic of expansion ; Its survival depends on it.  Waste at various points in the production process means capitalism must continually expand into new markets – or more thoroughly exploit old markets - to remain viable.  That waste includes cost structure duplication because of competition, and also the cost of continual revolutionisation of the means of production to maintain competitiveness.  There are also areas of unnecessary costs in areas such as marketing, dividends, executive salaries, and so on.  Getting rid of this waste and duplication could arguably be qualitatively good for the economy, and for consumers : freeing resources to be deployed elsewhere.  Decisions need to be made as to where natural public monopolies are viable (eg: transport and communications infrastructure) ; as well as where existing corporate competition (eg: Samsung versus Apple) actually does drive innovation which improves peoples’ lives.

11) There is also extensive waste in other areas.  For example the fast food industry involves enormous waste ; and domestic food consumption alone also involves $8 billion of waste every year.   But approximately 2 million Australians depend on food aid every year.  Also there is the spectre of planned obsolescence (for instance white goods and electricals): that is, things are not made to last because that ‘would be bad for business’.  This might warrant some kind of regulation re: minimum warrantee length for said electricals, whitegoods and so on.

12) But also there are limits to how far capitalism can succeed by extending its reach into new markets or more thoroughly exploiting old ones ; Over the past century capitalism has driven greater labour market participation: for instance that of women.  It has integrated most of the world economy also.  Now capitalists are demanding changes which grate against social democratic principles, interests and values.  This led to what social theorist Jurgen Habermas called a ‘Legitimation Crisis’.  That is, capitalism could not or would not deliver any longer on the post-WWII social democratic historic compromise.  This was dealt with in the form of attacks of social democratic Ideology ; that is – convincing people to renounce their own social and industrial rights on the basis that neo-liberalism, greater inequality, privatisation, and austerity were ‘natural’, ‘inevitable’ and according to Margaret Thatcher that ‘There is no Alternative’. (‘TINA’)  This also involved twisted Ideological narratives of individualism and meritocracy which ‘naturalised’ and justified inequality and exploitation.

13) In response to the systemic imperative to expand into new markets – or more thoroughly exploit old ones - capitalists are demanding increases in labour intensity, longer working lives, and longer working days.  Capitalists are also pushing down on wages, conditions, welfare, the social wage and so on – to ‘create room’ for profits.


14) But this creates as many problems as it solves. Cutting welfare, the social wage, and so on may provide a short, local boost to profits of particular enterprises.  But it also reduces consumer demand and consumer confidence , and probably increases the costs of crime.  As well there is an intensification of inequality, and a hit to quality of life.  We are producing more on this planet than ever; and yet we are told we most work longer and harder ; and not simply enjoy the benefits of greatly improved productivity in some areas.  Also capitalist measures of production (eg: GDP) often take no account of social capital, and the benefits of voluntary work, and ‘intangibles’ (to capitalism) such as free time, happiness and the environment.

15) Left to its own logic capitalism creates great inequality. Certain social democratic policies can ameliorate this without a full transition to a qualitatively different economic system or mode of production.  (which is not currently an option)  Though we should not feel inhibited in imagining alternatives ; and discussing where current problems could ultimately lead.

Socialisation  and the Welfare State could still  ‘Save Capitalism from Itself’

16) Firstly, a bigger public sector can actually be ‘good for capitalism’ to a significant degree.   Reversion to natural public monopolies in several areas could reduce cost structures, creating efficiencies which flow on to the broader economy.  This includes in communications, transport infrastructure, energy, water, and potentially with a single public-sector job search and welfare agency.  Cost structures would be reduced because of a cut in waste, duplication and unnecessary or inappropriate competition (eg: in energy) ; as well as because of a superior cost of borrowing for Government.  Again there are some areas (eg: energy) where ‘competition’ is ‘anti-intuitive’ for consumers ; and confusion leads to abuse of market power by energy retailers.  For policy makers there is also the danger of nepotism through the privatisation process ; including Public Private Partnerships which facilitate the ‘fleecing’ of consumers.

17) Secondly ; while capitalism needs to expand into new markets to survive, at the same time it undermines itself insofar as in its current form it is failing to create full time work for all those who want it. It is also failing to create full employment for all who want it; and indeed depends on ‘a reserve army of labour’ to discipline workers into accepting its demands on wages and conditions.  Proactive industry policies should endeavour to create full employment , and full-time employment for all who want it.  This involves the more thorough exploitation of old markets and well as taking advantage of new ones.  And with real creativity government can act as ‘employer of last resort’ through programs which provide for genuine social goods ; not merely pointless schemes ‘painting rocks’ and the like.

18) Further, strategic government business enterprises in areas like banking, general insurance, medical insurance – could counter attempts by private oligopolies to exploit their market power and fleece consumers.  That would mean more disposable income for average consumers upon whose demand the economy depends.

19) Finally, as the Nordics have shown , growing the social wage and welfare state is also good for people ; good for the economy. Greater equality can mean greater happiness ; and also greater consumer demand – as those on lower incomes spend a greater portion of their income.

Through these strategies capitalism can be made ‘more survivable, more fair, and more stable’.  These do not provide a final answer for capitalist instability and injustice.  But ‘with no way out’ for now to a qualitatively better system of production the amelioration provided by such responses is crucial for those who will have to live and work under capitalism.

Better Outcomes for Consumers, Workers, Taxpayers…

20) The Social Wage and Welfare State can also contribute to happiness and well-being by providing a living income for the disadvantaged and vulnerable , and support for carers.  The social wage, welfare state, and other areas of state provision (eg: infrastructure) can also provide a vehicle for ‘collective consumption’ by taxpayers via the tax system – providing much better value for money than were the associated goods and services purchased by atomised, private consumers.  As already alluded to ; the same applies in relation to ‘collective consumption’ with regard natural public monopolies re: certain infrastructure and services ; and in areas of health, education and so on.  Even if people pay more tax over the short term, they end up better off – with more disposable income after non-negotiable needs are provided for. 

The social wage and welfare state demand higher taxes as a proportion of the economy ; but for the reasons stated actually tend to leave most people materially-better-off.  And with more choice ; that is, more purchasing power – not less - after essentials are provided for.

Democratic Socialists and Social Democrats must look to the best tax mix also. The overall tax mix must be progressively structured.  Arguably for fairness corporations and the wealthy must pay more ; as far as it can be sustained. If there are consumption taxes, for example (perhaps to prevent tax evasion), the bad distributive effects of this must be fully offset through progressive taxes and social wage measures elsewhere.  A bigger role for progressive income taxes, taxes on dividends, taxes on wealth and capital – is desirable.  Social security, welfare and the social wage (perhaps including a guaranteed minimum income) must raise the ‘floor’ of inequality as high as can be fairly sustained. (that is, higher minimum wages, including the effect of the social wage)  Currently there is exploitation of the low paid and unreasonable inequality in the labour market and in wealth ownership ; but there are arguments that reasonable reward for effort, unpleasant labour, past study and skill - should be factored in. (as most people accept)  There should be much less inequality ; but some inequality is justified even under democratic socialism.

Tax can also comprise a ‘lever’ for gradual socialisation over the long term in strategic areas of the economy.

Finally the broad Left and Centre-Left cannot morally abide by a system which uses the threat of descent into an ‘underclass’, or classes of ‘utterly destitute’ and ‘working poor’ – as a way of ‘disciplining’ other workers. Neither can we tolerate ‘middle income’ demographics having their material living standards (interpreted here as material consumption) rest upon exploitation of the working poor. What is needed is broader solidarity to the point where there is no class of working poor or utterly destitute. 

21)  As well the social wage and welfare state can provide the following:  High quality, comprehensive universal health care for all ; Providing  high quality Education for all – including education for personal growth, political literacy,  and hence preparation for active and informed citizenship; as well as education to meet the demands of the economy and the labour market.  Other important areas include public and social housing, legal aid , child care, financial services, access to information and communications services and technology , assistance for equity groups , Public sector media such as ABC and SBS with charters to maximise participation, support extensive pluralism, support local culture ; Broader support for diverse local culture, recreation, sport, and so on.  Creating ‘the good society’ involves more than ‘hands off’ and ‘leave it to the market’. New needs are also always arising as the economy and technology develop.

22) Further ; there is a growing push for a ‘guaranteed minimum income’ for all ; which makes sense given the looming problem of distributing the productivity gains of future automation ; But also providing a ‘basic floor’ below which no citizen will be allowed to fall.

Automation is inevitable and governments must intervene to ensure the full economic benefits are passed on to workers and consumers.

23) The emerging economy should provide flexibility where possible on workers’ terms.  Again ; Those wanting part-time work should be so provided.  And those wanting full-time work should be so provided.  All people should have the prospect of a fulfilling life ; with a mix of varied manual and intellectual labour.  There should be scope to devote time to personal growth ; including creative labour , study and recreation.  Industry and labour market policies must aim to update skills, and also strive to nurture new industries which draw on existing skill sets where jobs have been lost. 

24) As Professor Andrew Scott explains in his work ‘Northern Lights’, the Danes have a policy they call ‘flexicurity’. Rather than focusing narrowly on 'flexibility for employers to dismiss workers', the Danes also emphasised 'the provision of generous unemployment benefits for those who lose their jobs' and 'the provision of substantial and effective Active Labour Market Programmes (ALMPs), [with] quality training to help unemployed people gain new skills for new jobs …'  (Andrew Scott, p. 135, (pp. 152, 154-55).  By contrast Australia suffers 'the lowest level of unemployment benefits  in the OECD for a single person recently unemployed.'  Furthermore, ‘Work for the Dole’ programmes are punitive and provide little in the way of relevant skills for job placement. (Andrew Scott ; pp. 136-38).  Denmark’s active labour market programmes are expensive says Scott, but are worth the investment in radically higher workforce participation.   Achieving an economy which operates at ‘full bore’ – as the Swedes achieved for a significant time - also means more revenue for social programs.  Industry policies ensuring more high wage employment also enhanced those outcomes.

25) The Housing Affordability Crisis is driving an economic wedge between Housing Market Investors, Home Owners, and those struggling to (or unable to) purchase their own homes.   Simply releasing new land (the traditional Liberal ‘solution’) is not a viable answer unless services and infrastructure investment matches it.  Large public and social housing investments in growth and transport corridors could increase supply, however, and if introduced in phases may be able to ‘deflate’ the boom without a ‘crash’.   Labor’s negative gearing policies would also mean less competition between first  home buyers and housing portfolio investors.  Again , Combined with increased investment in public housing, and implemented properly, it should be possible to ‘deflate’ the bubble without a crash.   Public housing construction should  involve expansion of ( largely ‘non-clustered’) public housing stock to at least 10% of total  stock over several terms of Labor Government. ‘Non clustered’ stock aims to avoid traditional stigma against public housing, as well as the creation of poverty ghettos. Though there is the opposing argument that (implemented properly ; with the right infrastructure and services) clustered housing can create thriving communities.

26) There are those who argue capitalism cannot deal with looming environmental crises.  As a system based upon growth and the production of ever-more consumer goods, with a ‘growing environmental footprint’ , there are reasons to take these claims seriously.  That said: renewable technologies are advancing.  And information, culture and service industries – if emphasised – could involve much less of an ‘environmental footprint’.   A guided shift of emphasis to those industries could be key to environmental sustainability.  At the same time, though, we want to remain an economy which ‘makes things’.  Manufacturing will remain necessary ; and working conditions in manufacturing tend to assist the organisation of labour.  But we do not know yet just how far automation will go.  Automation could be good for people in their capacity as consumers, but bad for organised labour.

The Big Picture and ‘The Good Society’

27) Finally, Labor needs a vision of ‘the good society’  which includes redistribution and rights of labour – including labour market regulation (with an increased minimum wage) ; But at the same time goes further.  Marxism involved an implied moral critique of exploitation. But also of what was called ‘alienation’ ; That is, the impact of physically onerous, repetitive and/or mentally punishing labour.  And the lack of creative control workers enjoyed over their labours, and the products of their labours.  This ‘alienation’ could be addressed partly through increased free time for workers in such demanding areas.  And increased opportunities to explore such diverse areas as philosophy,  science, art, and leisure.  Though Marx also envisaged a time when fulfilling labour would ‘become life’s prime want’.   ‘Automation’ could actually create opportunities here IF implemented properly.

Also Labor should have an appreciation both of the importance of constitutional liberal democracy ; but also of its limits.  Democracy needs to be extended into production and work.  This could involve support for diverse models of co-operative enterprise and mutualism – on both large and small scales. Not only would this model by-pass exploitation: it could also provide workers with creative control over their labours ; including the kind of intimate control and identification that may go with co-operative small businesses.  (eg: co-operative cafes)   Furthermore, mutualist and co-operative associations could contribute to full employment in a situation  driven by contextual human need , and not only ‘share value maximisation’ – which is the modus operandi for capitalism-as-we-know-it.

Large scale co-operative and mutualist associations could also occupy crucial points in the economy in areas like health, motor insurance, and general insurance, and  credit/banking.  Government could play a central role of ‘facilitation’, here) Strategic ‘multi-stakeholder’ co-operatives could also be created through co-operation between Government, Regions, and workers.   That model might have been applied in the case of SPC-Ardmona ; and may even have been applied (much more ambitiously) to save Australia’s car industry.  Ambitious ‘mutli-stakeholder co-operatives’ should be considered by Governments, Workers and Regions for the future.

Other options for economic democracy include: growing the public sector , promoting ‘democratic collective capital formation’ (for example, like the Swedish ‘Meidner wage earner funds plan’) – though perhaps inclusive of all citizens and not only workers.  As well as ‘co-determination’ (worker reps on company boards).  Sovereign Wealth Funds or Pension Funds also socialise wealth and investment, and could be crucial to fund expenditure and investments (eg: infrastructure) into the future. 

Superannuation is entrenched now, and provided for peoples’ retirement without the political problems of raising taxes. It was seen as having democratic potential ; but it also had problems of reinforcing inequality in retirement (also affecting women) ; requiring low income workers to make contributions they could not afford ; and reinforcing the capitalist focus on share value maximisation regardless of other need.  Arguably pensions need to be more generous and broad-based ; but the superannuation system may lead to the marginalisation of the Aged Pension into the future.

In conclusion ; We should talk of capitalism and not only ‘neo-liberalism’. Because to name capitalism is to make it relative.  And one day the way may open for something better to become possible.  At the end of the day all wealth does derive from labour and Nature: and now just as in ‘the Heyday of radical Social Democracy’ this implies a moral critique of capitalism and class.

Dr Tristan Ewins has been a  Labor activist for over 20 years. He has written for many publications including 'The Canberra Times' ; but most prolifically for 'On Line Opinion' ;  see:


Scott, Andrew,
  'Northern Lights: The Positive Policy Example of Sweden, Finland, Denmark and Norway',   Monash University Publishing, Melbourne, 2014

Stanford, Jim
  "Economics for Everyone - A Short Guide to the Economics of Capitalism" , Pluto Press, London, 2008