Australia: The Case For Re-nationalising Communications
by Tristan Ewins
January 30, 2009
Even now it does not seem so long ago that a genuine "mixed" economic model prevailed across nations the world wide.
In the wake of Depression and World War II, the challenge posed by communism - and emboldened social democratic and labour movements - framed the parameters of a virtual consensus.
On the one hand, policies of Keynesian, state-guided demand management, and full employment were combined with strategic public ownership. Areas were broadly accepted as being the realm of "natural public monopoly": especially infrastructure and utilities. This included transport services and infrastructure, welfare services, power, water and communications.
"Natural public monopoly", here, provided for nation-building and the minimisation of underlying cost-structures. Progress was also achieved elsewhere: progressive tax transfer and welfare systems, free public education, socialised health care, and so on. Strong investment in public infrastructure, goods and services also complemented attempts to preserve a "full employment economy".
Additionally: in Australia, there was the Commonwealth Bank and numerous state banks; and there were also state-owned insurance providers, state lotteries, public broadcasters, public housing and the like.
Importantly, it was recognised that provision for human need cannot be reduced to the working of "free markets". The poor and the marginalised, and minorities, in particular, do not commonly wield significant "market power" as consumers.
The benefits of the "mixed economy" model were many. Public enterprises provided dividends that could then be redirected into vital services. Cross-subsidisation helped ensure that essential services such as water and power were available on the basis of need. Public housing was provided for many who would otherwise go homeless.
Government ensured support for pure and applied scientific research - while there remained a role for public and home-grown defence industries - which some might have identified as being a matter of "national security". In banking, insurance, and elsewhere - strategic intervention actually complemented competitive forces in markets which otherwise might have been characterised by oligopoly and collusion.
Communications infrastructure - the focus of this essay - was provided as a matter of natural monopoly - reducing potential cost structures, and venturing into rural Australia: where "free markets" would refuse to go. And despite claims that the private sector was being "crowded out", public ownership - considered broadly - was strategic. Despite hysteric cries from the neo-liberal Right, there always remained a deep, pivotal, and ongoing role for responsive and competitive markets.
For most on the social democratic Left, this was never in question. Indeed, there was a productive tension between the socialist aim of eliminating exploitation, and the liberal preference that ordinary people be free to invest their wealth as a matter of personal choice. However, in the wake of the second oil shock and stagflation, the old consensus was all but wiped away by a new one: neo-liberalism.
The proponents of the new orthodoxy waged war on the mixed economy model, as well as upon the role, influence, and perceived legitimacy of organised labour.
In Australia, labour and financial markets were deregulated. State-owned banking interests and insurance agencies were privatised. Gas, water, and electricity - were all privatised - or otherwise corporatised - in anticipation of privatisation at a later date.
In many areas there dawned an ideological fetish with privatisation and markets that defied sense. Competition in energy and water, in particular, was "anti-intuitive" for consumers; and is, in many ways, unworkable without great waste.
Other social objectives such as full-employment - were also abandoned by many so as to provide "anti-inflationary discipline" in labour markets; but it is beyond the purpose of this paper to analyse such ramifications in depth.
The Logic Of Privatisation - Australian Telecommunications
Of particular interest for this paper is that communications services and infrastructure were gradually privatised. Over time, this process unfolded only with the rise of private oligopoly and wasteful cost structures because of duplication. Notable here was Telstra's continued monopoly interest of the copper-wire network, and the sheer waste of competing mobile phone networks owned by Telstra and Optus.
While there was an explosion of new communications technology in Australia around the time the sector was opened to "competition", this was not merely the result of market forces. The same services that have arisen since the advent and spread of mobile phone telephony and internet technology would arguably have proliferated anyway had a public monopoly of infrastructure remained. Indeed, it is certain that more efficient cost structures would have resulted in cheaper services for consumers.
"Competition" no value for consumers
Writing in 2005 in the wake of the agenda of privatisation and competition, veteran journalist and economist Ken Davidson noted that:
Since the [1990s] ... [when] Telstra was a regulated monopoly ... OECD figures show that the cost of a representative basket of services ... increased relative to the average by 15 per cent - equal to about an extra $140 a year on the average household telephone bill.
Davidson described this as an "effective tax households pay annually to subsidise the Government's competition fetish". Furthermore, Davidson noted how, in the name of competition, Telstra has been forced "to pay a higher wholesale price for access to its own network than its competitors do". He cites the example of Optus, which "paid $800 million to get a cross-subsidy from access to the network worth about $2 billion".
Such arrangements provide a massive subsidy to "rent-seeking" retail communications enterprises, which has come directly at the cost of consumers and citizens. While regulators have attempted to combat the tendency towards monopoly in the sector, Telstra has been prevented from delivering the full benefit from its economies of scale. It seems, thus, that consumers lose either way: facing the risk of exploitation by a private communications monopoly, or otherwise suffering the costs of maintaining artificial "competition".
As a fully public concern, monopoly did not necessarily pose a problem. Before corporatisation, privatisation, competition - Telstra (formerly Telecom) - was accountable to government, and hence to citizens. It could be bound to a public charter, and could provide benfits from its economies of scale without any cause to exploit consumers or workers.
The debacle of telecommunications in Australia shows that whatever legitimate role there is for innovative and responsive markets - there are places private markets will not, and sometimes should not go.
Options for the "National Broadband Network"
Now, though - with Rudd Labor's promise to invest in a National Broadband Network - we have the opportunity to break with flawed assumptions, and to establish a natural public monopoly in the new fibre optic broadband infrastructure.
Such a massive undertaking could also be a central force driving employment in difficult times.
Before the 2007 Federal Election, Rudd Labor had promised to provide what it estimated as around half the necessary funding for a new "fibre to the node" network: roughly $4.7 billion. The cost of providing a National Broadband Network to all Australians, however, may have been underestimated.
Telstra spokespeople themselves have insisted that the government must "[increase] the size of the tender from $4.7 billion to about $15 billion" to provide full coverage to 98 per cent of the Australian population.
Should further funds be committed, this might also imply the alternative option of full "fibre to home coverage"- as opposed to "fibre to the node". Such technology would most likely have greater longevity, greater speed, and would place Australia at the forefront of the ongoing global communications revolution.
As Monash University senior lecturer Nicholas Beaumont suggested: "[with] faster speeds ... I believe it would be [a] huge driver of innovation." He continues, arguing that the formidable investment can be justified: "when people have built other infrastructure like railways, people were aghast at the sums involved but they drove our productivity into the future." The flexibility of "wide area wireless" technology should also receive consideration as demand for internet use "on the go" becomes greater. Increasingly, there is likely to be demand for the convenience of wireless, and the higher speed of fibre-optic broadband. Seeing as so many consumers will likely want "the best of both worlds", there is strong cause for both such networks to complement each other in the form of one nation-wide authority.
In building the National Broadband Network, such implications must be given due consideration. Rudd Labor needs now to "get the policy settings right", to provide maximum speed, quality, and flexibility to all Australians - and affordability as well.
And, whereas it is essential that communications policy not discriminate against rural communities, the spectre of public investment on such scale raises the question: why not simply establish the new network as a fully public concern?
A natural public monopoly - bridging wireless and fibre-optic networks - with cross-subsidies for low-income consumers would provide flexibility, speed, breadth of access, and affordability. Even regardless of the prospect of wasteful infrastructure duplication -surely a private monopoly - or even a part-private monopoly - should not be acceptable given the danger of such market power being abused.
Re-socialising Telstra ...
While any new public network might depend partly upon access to existing Telstra infrastructure, Labor Communications Minister, Stephen Conroy supposes Telstra could be bypassed in any tendering process.
The need for such new infrastructure would not have posed a problem had Telstra remained a fully public concern. The only question, then, would indisputably have been the public interest. Now over a million Telstra shareholders could stand to lose. But, private investment typically involves risk: and the public interest, considered more broadly, must prevail.
Importantly though, there is an alternative: a re-socialised Telstra.
Such an organisation could capitalise on the company's deep pool of talent and equipment, overseeing a generational shift to state-of-the-art communications infrastructure.
Two options include the following:
o structural separation: with a public monopoly of infrastructure; or
o full re-socialisation including retail arms of the enterprise.
The first option may seem attractive to some as it represents a rearguard compromise with the dominant neo-liberal ideology. Hence there is likely to be less immediate resistance. Such compromise could be seen as a necessary stage en route to a regroupment - and ultimately establishing a new dominant paradigm of the "mixed democratic economy". Importantly, such moves could also garner broader support as there is still some residual popular preference for the concept of "natural monopoly" in the case of such infrastructure.
The second option, however, represents a more immediate shift towards such a paradigm: reclaiming a role for strategic and competitive Government Business Enterprise, as well as socialised infrastructure.
Apart from a prevalent ideological opposition to the mixed economy - and even to public ownership "in principle" - arguments for re-socialisation are strong. (Although Optus' mobile network cannot but remain private as duplication here is entrenched beyond remedy).
A re-socialised Telstra with a new natural public monopoly in fibre-optic cable communications infrastructure - and wireless infrastructure - could potentially provide cheaper and higher quality service. Partly, this could be the consequence of rigorous scrutiny from consumers and government: and partly following more efficient cost-structures. A public Telstra, under such circumstances, would have no cause to abuse its market power.
Following re-socialisation, subsidy for "rent-seekers" could be wound back - with the public carrier once again being released to provide the full benefit of its economies of scale. Again - the consequence could be cheaper service for consumers.
And importantly: many consumers are conservative in preferring the Telstra "brand" and hence there is strong demand for ongoing Telstra involvement in concerns such as Big Pond. Government should be sensitive to popular sentiment in this regard.
Finally, we are on the verge of a new digital entertainment and communications revolution. Old communications and entertainment paradigms are likely to decline with the fusing of digital television with internet services and content. The new paradigm looks set to be interactive, participatory, open, and consumer driven. Imaginably, consumers will be able to shift seamlessly from "pay for content" services, to free-to-air content - if necessary sponsored through pinpoint advertising - adapted to consumer profiles, or where such information is unavailable, adapted to suit the content.
Of course there is need for the involvement of public enterprise, here, alongside co-operative and community enterprise, and private enterprise as well.
Public communications/entertainment enterprises need to be especially bound by a charter. This includes quotas and funding for local content, and content for minorities. It is much easier to bind public concerns to such a charter than it is in the case of private concerns - which pursue profit and share-value-maximisation ahead of provision for an inclusive and diverse tapestry of human need.
Under such circumstances, there is a potentially core role for a public Telstra, along with public and community broadcasters working together: taking the lead in the provision of content.
It is time for Rudd Labor; and for Communications Minister, Stephen Conroy in particular; to divest themselves of neo-liberal shibboleths - and reconsider the meaning of social democracy, and the democratic mixed economy - for the "new frontier" of telecommunications.
Tristan Ewins is a freelance writer based in Australia. He describes his politics as 'liberal socialist' and 'left social democratic'. He has been published widely - including in 'On Line Opinion', Australia's 'Centre for Policy Development', 'The Canberra Times', and others. He can be reached by email at tristane@bigpond.net.au
.
January 30, 2009
Even now it does not seem so long ago that a genuine "mixed" economic model prevailed across nations the world wide.
In the wake of Depression and World War II, the challenge posed by communism - and emboldened social democratic and labour movements - framed the parameters of a virtual consensus.
On the one hand, policies of Keynesian, state-guided demand management, and full employment were combined with strategic public ownership. Areas were broadly accepted as being the realm of "natural public monopoly": especially infrastructure and utilities. This included transport services and infrastructure, welfare services, power, water and communications.
"Natural public monopoly", here, provided for nation-building and the minimisation of underlying cost-structures. Progress was also achieved elsewhere: progressive tax transfer and welfare systems, free public education, socialised health care, and so on. Strong investment in public infrastructure, goods and services also complemented attempts to preserve a "full employment economy".
Additionally: in Australia, there was the Commonwealth Bank and numerous state banks; and there were also state-owned insurance providers, state lotteries, public broadcasters, public housing and the like.
Importantly, it was recognised that provision for human need cannot be reduced to the working of "free markets". The poor and the marginalised, and minorities, in particular, do not commonly wield significant "market power" as consumers.
The benefits of the "mixed economy" model were many. Public enterprises provided dividends that could then be redirected into vital services. Cross-subsidisation helped ensure that essential services such as water and power were available on the basis of need. Public housing was provided for many who would otherwise go homeless.
Government ensured support for pure and applied scientific research - while there remained a role for public and home-grown defence industries - which some might have identified as being a matter of "national security". In banking, insurance, and elsewhere - strategic intervention actually complemented competitive forces in markets which otherwise might have been characterised by oligopoly and collusion.
Communications infrastructure - the focus of this essay - was provided as a matter of natural monopoly - reducing potential cost structures, and venturing into rural Australia: where "free markets" would refuse to go. And despite claims that the private sector was being "crowded out", public ownership - considered broadly - was strategic. Despite hysteric cries from the neo-liberal Right, there always remained a deep, pivotal, and ongoing role for responsive and competitive markets.
For most on the social democratic Left, this was never in question. Indeed, there was a productive tension between the socialist aim of eliminating exploitation, and the liberal preference that ordinary people be free to invest their wealth as a matter of personal choice. However, in the wake of the second oil shock and stagflation, the old consensus was all but wiped away by a new one: neo-liberalism.
The proponents of the new orthodoxy waged war on the mixed economy model, as well as upon the role, influence, and perceived legitimacy of organised labour.
In Australia, labour and financial markets were deregulated. State-owned banking interests and insurance agencies were privatised. Gas, water, and electricity - were all privatised - or otherwise corporatised - in anticipation of privatisation at a later date.
In many areas there dawned an ideological fetish with privatisation and markets that defied sense. Competition in energy and water, in particular, was "anti-intuitive" for consumers; and is, in many ways, unworkable without great waste.
Other social objectives such as full-employment - were also abandoned by many so as to provide "anti-inflationary discipline" in labour markets; but it is beyond the purpose of this paper to analyse such ramifications in depth.
The Logic Of Privatisation - Australian Telecommunications
Of particular interest for this paper is that communications services and infrastructure were gradually privatised. Over time, this process unfolded only with the rise of private oligopoly and wasteful cost structures because of duplication. Notable here was Telstra's continued monopoly interest of the copper-wire network, and the sheer waste of competing mobile phone networks owned by Telstra and Optus.
While there was an explosion of new communications technology in Australia around the time the sector was opened to "competition", this was not merely the result of market forces. The same services that have arisen since the advent and spread of mobile phone telephony and internet technology would arguably have proliferated anyway had a public monopoly of infrastructure remained. Indeed, it is certain that more efficient cost structures would have resulted in cheaper services for consumers.
"Competition" no value for consumers
Writing in 2005 in the wake of the agenda of privatisation and competition, veteran journalist and economist Ken Davidson noted that:
Since the [1990s] ... [when] Telstra was a regulated monopoly ... OECD figures show that the cost of a representative basket of services ... increased relative to the average by 15 per cent - equal to about an extra $140 a year on the average household telephone bill.
Davidson described this as an "effective tax households pay annually to subsidise the Government's competition fetish". Furthermore, Davidson noted how, in the name of competition, Telstra has been forced "to pay a higher wholesale price for access to its own network than its competitors do". He cites the example of Optus, which "paid $800 million to get a cross-subsidy from access to the network worth about $2 billion".
Such arrangements provide a massive subsidy to "rent-seeking" retail communications enterprises, which has come directly at the cost of consumers and citizens. While regulators have attempted to combat the tendency towards monopoly in the sector, Telstra has been prevented from delivering the full benefit from its economies of scale. It seems, thus, that consumers lose either way: facing the risk of exploitation by a private communications monopoly, or otherwise suffering the costs of maintaining artificial "competition".
As a fully public concern, monopoly did not necessarily pose a problem. Before corporatisation, privatisation, competition - Telstra (formerly Telecom) - was accountable to government, and hence to citizens. It could be bound to a public charter, and could provide benfits from its economies of scale without any cause to exploit consumers or workers.
The debacle of telecommunications in Australia shows that whatever legitimate role there is for innovative and responsive markets - there are places private markets will not, and sometimes should not go.
Options for the "National Broadband Network"
Now, though - with Rudd Labor's promise to invest in a National Broadband Network - we have the opportunity to break with flawed assumptions, and to establish a natural public monopoly in the new fibre optic broadband infrastructure.
Such a massive undertaking could also be a central force driving employment in difficult times.
Before the 2007 Federal Election, Rudd Labor had promised to provide what it estimated as around half the necessary funding for a new "fibre to the node" network: roughly $4.7 billion. The cost of providing a National Broadband Network to all Australians, however, may have been underestimated.
Telstra spokespeople themselves have insisted that the government must "[increase] the size of the tender from $4.7 billion to about $15 billion" to provide full coverage to 98 per cent of the Australian population.
Should further funds be committed, this might also imply the alternative option of full "fibre to home coverage"- as opposed to "fibre to the node". Such technology would most likely have greater longevity, greater speed, and would place Australia at the forefront of the ongoing global communications revolution.
As Monash University senior lecturer Nicholas Beaumont suggested: "[with] faster speeds ... I believe it would be [a] huge driver of innovation." He continues, arguing that the formidable investment can be justified: "when people have built other infrastructure like railways, people were aghast at the sums involved but they drove our productivity into the future." The flexibility of "wide area wireless" technology should also receive consideration as demand for internet use "on the go" becomes greater. Increasingly, there is likely to be demand for the convenience of wireless, and the higher speed of fibre-optic broadband. Seeing as so many consumers will likely want "the best of both worlds", there is strong cause for both such networks to complement each other in the form of one nation-wide authority.
In building the National Broadband Network, such implications must be given due consideration. Rudd Labor needs now to "get the policy settings right", to provide maximum speed, quality, and flexibility to all Australians - and affordability as well.
And, whereas it is essential that communications policy not discriminate against rural communities, the spectre of public investment on such scale raises the question: why not simply establish the new network as a fully public concern?
A natural public monopoly - bridging wireless and fibre-optic networks - with cross-subsidies for low-income consumers would provide flexibility, speed, breadth of access, and affordability. Even regardless of the prospect of wasteful infrastructure duplication -surely a private monopoly - or even a part-private monopoly - should not be acceptable given the danger of such market power being abused.
Re-socialising Telstra ...
While any new public network might depend partly upon access to existing Telstra infrastructure, Labor Communications Minister, Stephen Conroy supposes Telstra could be bypassed in any tendering process.
The need for such new infrastructure would not have posed a problem had Telstra remained a fully public concern. The only question, then, would indisputably have been the public interest. Now over a million Telstra shareholders could stand to lose. But, private investment typically involves risk: and the public interest, considered more broadly, must prevail.
Importantly though, there is an alternative: a re-socialised Telstra.
Such an organisation could capitalise on the company's deep pool of talent and equipment, overseeing a generational shift to state-of-the-art communications infrastructure.
Two options include the following:
o structural separation: with a public monopoly of infrastructure; or
o full re-socialisation including retail arms of the enterprise.
The first option may seem attractive to some as it represents a rearguard compromise with the dominant neo-liberal ideology. Hence there is likely to be less immediate resistance. Such compromise could be seen as a necessary stage en route to a regroupment - and ultimately establishing a new dominant paradigm of the "mixed democratic economy". Importantly, such moves could also garner broader support as there is still some residual popular preference for the concept of "natural monopoly" in the case of such infrastructure.
The second option, however, represents a more immediate shift towards such a paradigm: reclaiming a role for strategic and competitive Government Business Enterprise, as well as socialised infrastructure.
Apart from a prevalent ideological opposition to the mixed economy - and even to public ownership "in principle" - arguments for re-socialisation are strong. (Although Optus' mobile network cannot but remain private as duplication here is entrenched beyond remedy).
A re-socialised Telstra with a new natural public monopoly in fibre-optic cable communications infrastructure - and wireless infrastructure - could potentially provide cheaper and higher quality service. Partly, this could be the consequence of rigorous scrutiny from consumers and government: and partly following more efficient cost-structures. A public Telstra, under such circumstances, would have no cause to abuse its market power.
Following re-socialisation, subsidy for "rent-seekers" could be wound back - with the public carrier once again being released to provide the full benefit of its economies of scale. Again - the consequence could be cheaper service for consumers.
And importantly: many consumers are conservative in preferring the Telstra "brand" and hence there is strong demand for ongoing Telstra involvement in concerns such as Big Pond. Government should be sensitive to popular sentiment in this regard.
Finally, we are on the verge of a new digital entertainment and communications revolution. Old communications and entertainment paradigms are likely to decline with the fusing of digital television with internet services and content. The new paradigm looks set to be interactive, participatory, open, and consumer driven. Imaginably, consumers will be able to shift seamlessly from "pay for content" services, to free-to-air content - if necessary sponsored through pinpoint advertising - adapted to consumer profiles, or where such information is unavailable, adapted to suit the content.
Of course there is need for the involvement of public enterprise, here, alongside co-operative and community enterprise, and private enterprise as well.
Public communications/entertainment enterprises need to be especially bound by a charter. This includes quotas and funding for local content, and content for minorities. It is much easier to bind public concerns to such a charter than it is in the case of private concerns - which pursue profit and share-value-maximisation ahead of provision for an inclusive and diverse tapestry of human need.
Under such circumstances, there is a potentially core role for a public Telstra, along with public and community broadcasters working together: taking the lead in the provision of content.
It is time for Rudd Labor; and for Communications Minister, Stephen Conroy in particular; to divest themselves of neo-liberal shibboleths - and reconsider the meaning of social democracy, and the democratic mixed economy - for the "new frontier" of telecommunications.
Tristan Ewins is a freelance writer based in Australia. He describes his politics as 'liberal socialist' and 'left social democratic'. He has been published widely - including in 'On Line Opinion', Australia's 'Centre for Policy Development', 'The Canberra Times', and others. He can be reached by email at tristane@bigpond.net.au
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Posts
In 1983 Bob Hawke introduced us to the market rationalist turn in his Curtin Lecture: ‘Social Democrats have no reason to deny the capacity of markets to allocate resources efficiently … I see no virtue in regulation of economic activity for its own sake and I believe that where markets are working efficiently they should be left to do their job.’ The question is whether markets ‘work’ or not.
ReplyDeleteBarack Obama bookended this notion in his inauguration speech: ‘The question we ask today is not whether our government is too big or too small, but whether it works’. The question is whether government ‘works’ or not.
Both of these perspectives demonstrate a fundamentally instrumental view of life. Both of Tristan’s recent posts—on finance and communication—take the same tack. The strongest expression of this is his entirely instrumental view of markets (notwithstanding his references to Marx).
‘Even in a social democratic society there must be a role for innovative and responsive markets that can provide qualitative improvements in material living standards,’ he says. ‘Any alternative economic model must be both mixed and democratic [. . .] For most on the social democratic Left, this was never in question.’
The question of having markets or not having markets isn’t a question about how best to allocate resources efficiently. It isn’t about rational economy—as Mises and Hayek argued, or the empty question: can socialism work?
Rather, the question is to do with politics. If we decide for markets then labour is commodified and its allocation—that is, the sorts of lives people get to live—is determined by the aggregate choices of individual capitalists. If we decide against markets then we must democratically organise social reproduction.
In the first instance, the Left abandons politics and commits to policy proposals and the sophistry of the ‘least worst’; it agrees that history ended in 1989. In the second, the Left is a political force; in that it aims to create a new situation—the situation being: what it is to live a sort of life.
These are the questions that resonate in Tristan’s recent posts. But his answers leaves us in the logic of economic rationalism. It remains essential to reaffirm Marx’s view that the market is not a neutral instrument of social allocation, but is the generic appearance of a bad social form.
Jonathon.
Dear Jonathan - and everyone else...,
ReplyDeleteI appreciate your contribution. I believe, though, that in the case of a 'mixed democratic economy' that we can fight for the best of both worlds.
Being a liberal as well as a socialist, I consider that for ordinary working people to invest as they will (within ethical constraints) – is in itself a right.
But it is a right that conflicts with that of workers to retain the right over their surplus.
Even if we could have an ‘ideal’ form of social and economic organisation – these rights would conflict with each other.
Yes, I am concerned with ‘what works’. To this end, markets can help drive innovation – and yes, this is a desirable quality… And ‘what works’ should not just be taken in terms of efficient resource allocation – but in providing for human need – material, emotional, social, spiritual… And to concern ourselves with such things – is also to confront the issue of alienation.
But it’s interesting that Jonathan raises this – and contrasts it with politics - because it was Marx himself who believed that politics could be replaced by ‘the administration of things’.
For my part, though, I see no ‘end of history’: we will always be faced with political and ethical questions. So here, I guess I am with Jonathan anyway.
The ‘mixed democratic economy’ might combine many features that make it far superior to neo-liberalism – and also what people call ‘state socialism’… (a term I really find reprehensible – because it suggests a shallow stigmatisation of the state – and the many constructive, liberal, humane and democratic purposes which a democratic state could imaginably serve…)
Generous tax breaks and cheap credit – for co-operatives, mutual societies, credit unions – could see widespread economic democratisation...while delivering greater creative control into the hands of workers… Sometimes these would operate within a market context… But in other cases the principle of mutualism would transcend market relations.
Other possibilities include Government Business Enterprises, and social services and infrastructure. Theoretically – these could be held democratically accountable – via the combination of liberal democracy and a participatory public sphere.
Finally – public pension funds or other means of democratic and collective capital formation – could minimise risk, while also reducing class stratification in retirement.
The point, here, is that all these democratic and participatory forms of economic organisation – deliver power into the hands of ordinary working people. (some of these – eg: co-operatives – even in market contexts) This democratic control. in itself, is a counter to alienation…. Note: it is possible to have markets without a ruling capitalist class…
That said – in building a cultural and electoral bloc – we have to deal with ‘the art of the possible’. We cannot impose socialism ‘from above’…
What we can do is to develop many layers of progressive and radical discourse – complementing each other – so as to relativise the prevailing form of social organisation – and making an alternative seem possible.
Social democrats, Greens, democratic socialists, left liberals, Fabians – can all co-operate and complement each other’s efforts… And in fighting for hegemony – even the discourse of relatively conservative forces – is critical…
Most importantly, though, we need to build such a culture so that working people – and ordinary citizens – are so mobilised as to consolidate and extend the gains we make at times such as these.
Now after years of neo-liberal triumphalism – such ideology could find itself discredited– and finally socialist ideas might again find their way into peoples’ consciousness. But it is a difficult task… Old ideas – old lies – are deeply ingrained…
Thus Rudd finds himself calling for a ‘social capitalism’… Assuming the tide is turning, though, this is but one facet of a ‘multi-pronged’ counter offensive.
Radicals need to enter into discourse with such perspective if we want influence and change over the long term.
Without progressives and radicals leading the cultural struggle, Labor will simply follow its focus group findings…will not provide sufficient leadership…even in the midst of crisis. We need to push Labor to the limits – but not so far as to make it unelectable… To this end, the cultural struggle for hegemony – sets Labor’s real limits…
Hope this clarifies somewhat.
Tristan
Also Jonathan - you're welcome to write to me re: authorisation to post leading Blog entries... I could really do with your participation - and the participation of others - under circumstance of respect and good will.
ReplyDeleteTristan
I think that a lot of people will disagree with you on this one.
ReplyDeleteThe state-run banks and insurance companies were a disaster and as Freddie Mac and Fannie Mae show in the US - divergent goals are rarely a good thing.
The key question is this: has deregulation and liberalisation of markets made service provision to the user any better? The resounding answer would be in the positive.
The key issue for left-wing individuals is this: how can the government provide the best possible service comparable to the free market but without the overriding emphasis on profit?
Are you saying Medibank Private is a 'disaster'?
ReplyDeleteAnd what about GIO?
And even where public banks have collapsed - private banks were collapsing besides them. This was the case under Keating - but whereas the private banks received assistance - Keating used it as a pretext for privatisation.
That's not to say there's no role for markets... I hope to see credit unions and socialised banks alognside private institutions...
re: deregulation - after all that's happened - are you saying there should not be regulation in the provision of credit? Really?
Thanks for your comment, though. I really encourage readers to comment about the posts on this site.
sincerely,
Tristan
Medibank Private is an impressive public policy - along with the 30% rebate to provide critical mass of customers/clientele to provide a win-win. I concede that point readily.
ReplyDeleteGIO is an interesting issue. Insurance firms suffer from even wilder swings in profitability. The privatisation was and is a G correct because when insurance profitability swings wildly to large losses (eg. Lloyds of London, HIH) a government-owned firm will require the public purse to pay it's way. GIO was not run as poorly as, say, Commonwealth Bank or the respective State Banks.
The public banks collapsed at a worse rate than the private banks because their lending was for "social good" while the private bank was for the profit motive. So what provides the difference? When the private banks were collapsing in the early 1990s, they were readily taken over with the equity owners being wiped out. In the current era what has happened is that not only has risk deepened, but that people have assumed that the government will step in to save the institutions. This means that when they actually collapse, in the case of Lehman Brothers, the market participants rush to the exits, rather than actually pricing into their capital reserves the real risk of banks collapsing.
I want to add something very important though. Half of all the subprime mortgages made in the US were underwritten by Fannie and Freddie. There have been $1.2 trillion worth of subprime junk that was dished out, 50% in 2006 alone, and of this $600 billion were underwitten by two companies who get the profits from this but who had an agreement with the government that the taxpayers will subsidise the losses. This is unacceptable and there would never be so many subprime mortgages had this government guarantee not been in place.
Regulation of credit must focus on stopping GIGO - Garbage In, Garbage Out and the Government must demand relatively high levels of capital reserves. When this crisis started, companies needed 8% of capital to cover their loans. This will reduce the likelihood of another credit crunch, strengthen the lenders and provide systemic prudence (that is, the market won't collapse if a single company does).
The real issue is this. If the Government goes back into running banks, insurance companies and takes over the "commanding heights" of the economy. What will they do to prevent the same old problems of poor and inefficent services, little innovation and stiffling bureacracy?
'Commanding Heights' means different things to different people...
ReplyDeleteFor me - there needs to be a mix of natural public monopoly, public infrastructure, democratic private enterprise, and private enterprise... With the right mix of co-operative AND competitive enterprise...
Going back to the old social democratic consensus is not so radical, here, as the kind of scenario imagined, say, by Stuart Holland... Holland was one of the major voices arguing for socialisation of the commanding heights in Britain in the 70s...
But perhaps somewhere in the middle??? (including a major role for co-operative enterprise, mutual societies etc) A mixed economy is what I aim for - but a democratic mixed economy to be more precise...
Here, the aim would be such as to spread economic power and ownership - to the point where it no longer made sense to talk of a 'capitalist ruling class'....
But on the issue of the Commonwealth Bank - what proof have you that it was managed less-competently than the private banks?
And what of the current situation - Victorian government not able to secure investment in the Desalination plant - because of the credit crunch?
A public sector bank, here. could step in and mobilise credit with the backing of government... Governments can almost always mobilise credit at cheaper rates than private operators. The cost of delivering returns to private investors would also be such as to double the price of water... Under such circumstances - surely it is a good thing for utilities to be run on a not-for-profit basis....
Also - there are the needs of rural and disadvantaged banking customers - who deserve better service? And what of the potential savings that could flow to consumers and workers?
re: bank regulation - absolutely but government then needs to step in to make sure that the disadvantaged aren't left out in the cold by 'the market'...
Socialisation of the "commanding heights" of the UK economy was achieved in the 1940s and that is why there was greater privatisation than ever before or since in the 1980s. The reason was that people emerged from the war wanting stability and believing that a managed economy will be just as efficient and effective as a private sector-based economy. Unfortunately what we saw was inefficiency and huge amounts of losses being run up - what pressure is there to be efficient if the Government is prepared to fund subsidies to cover losses?
ReplyDeleteWhat expertise does, say, an MP who has only ever been in politics have to control energy?
I never said that the Commonwealth Bank was poorly run. I just think that GIO was better run. Though, from personal experience, there was some "fat" in the bank that meant it was moving quite slowly in the late 80s and early 90s.
What is the middle? Government regulates private industry, it directs contracts for a whole range of Government services and it still has monopoly supply over public transport and energy? Where does the Government stop interfering and allow the free market to take over? Where are the limits of Government competence?
The problem with public sector banks is that they tend to be worse than private sector banks. Fannie Mae and Freddie Mac in the US were responsible for half of the subprime mortgages made and look at the consequences!
The State Government cannot raise the capital because investors are looking at the yields on the bonds and are saying with a loud voice that the returns are not high enough.
What the Government needs to do is to provide the framework for economic and social growth - a strongly funded education system, tranport, communication and energy infrastructure and well-funded public sector pensions scheme. This will provide that framework for greater equality over the long run with a Government focusing on what it is competent in running and reducing the cost for the public for using transport etc.
What we need to do is ask how we can improve savings in our economy, how we can improve education across the board and how we can enjoy the benefits of being in Australia - eg. going to Bondi without waiting 1/2 for the first of many trains.
The way you talk - about the experience of MPs - makes it sound like you're in favour of a technocracy above and beyond democracy. I hope that wasn't your intention - so you're welcome to elaborate. What's important, here, is that MPs - esp Ministers - get excellent and varied advice... And that they have the intelligence and discipline for the job...
ReplyDeleteAlso: As far as I'm aware Freddie Mae and Freddie Mac were private concerns ... Correct me if I'm wrong...
Your comment re: returns not being high enough - in itself this is a good argument for a bolder public sector... There are plenty of services which are absolutely necessary - but which some in the financial markets don't think they can make ridiculous and parasitical returns from...
The reticence of the finance markets also makes it clear that public intervention is necessary to 'get the wheels of credit going again'.... And once this has been achieved - what harm is there in keeping a mixed banking sector?
Talk about 'public sector inefficiencies' is sometimes down to ideology - something that's been said so many times that we just give up and believe it...
That said - I agree with a democratic mixed economy - so yes - there is a substantial role for markets...But those markets themselves ought be democratised in the context of a mixed economy....
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