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Sunday, June 26, 2011

Double Standards when its comes to talk of ‘Class War’

above: Prime Minister Julia Gillard

Increasingly - in the Murdoch press especially - there has been talk of 'class war' in response to even modest proposals for progressive economic redistribution.  But redistribution against the interests of the disadvantaged and ordinary struggling workers has been going on for decades; intensifying under Liberal governments.  In this article Tristan Ewins works to illustrate that point, showing such examples as the increasingly regressive tax mix, and falling minimum wages.  Ewins argues for Gillard Labor to be brave in pursuing distributive justice for the disadvantaged, and orindary struggling Australian workers.


Tristan Ewins

June 26th 2011

In a column appearing in both the Herald-Sun and The Daily Telegraph recently Miranda Devine has had another go at Julia Gillard and the carbon tax.

Condemning Gillard and the proposed tax, she characterises it as:

“Wealth redistribution, pure and simple. A year on, there’s no secret what Gillard stands for. It’s just no one can believe it.”   http://blogs.news.com.au/dailytelegraph/mirandadevine/index.php 

And this isn’t the first time Miranda Devine has used such language either.

For instance in the Herald-Sun on May 12th 2011 she beats up the spectre of “class war taxes” in response to Labor’s Budget. ( see: http://www.heraldsun.com.au/news/special-reports/federal-budget-2011/story-fn8melax-1226054252544   )

 In response:

Briefly, the main aim of the carbon tax is to create market signals to drive changes in investor and consumer behaviour: to do our part (as all nations must) in reducing emissions .

But that established: it is possible that modest distributive goals could be pursued as a by-product of overcompensation. And why not?

This brief article will consider inequality, redistribution and the double-standards at play with language of ‘class war’ which has been so common recently.

It’s interesting, isn’t it, how attempts to tax the wealthy and relatively wealthy – to give a fair go for ordinary workers and the poor; or improve the wages and conditions of the most disadvantaged workers – is labelled “class war” in the right-populist monopoly media. And yet all these years that Australia has been drifting towards greater polarisation of wealth and income, and greater disadvantage for the poor: this has not aroused the same kind of ‘outrage’.

The wage share of the economy has been falling for decades; with an accompanying intensification of the rate of exploitation. 

Larvatus Prodeo reported this year that the wages share of national income was at its lowest level since 1964; slightly over 52%.  And to be fair the wage-share of the Australian economy had been contracting for decades under both Labor and Liberal governments; as the leadership of both parties accepted the notion that wages need be depressed to restore profitability.


Yet if structural forces in the capitalist economic system were driving these changes; why then were workers not at least duly and properly compensated with collective capital share? 

 Even under Hawke in the 1980s, celebrated increases in the ‘social wage’ came in the form of tax cuts; and so necessarily led to a smaller pool of funds for welfare and services. A veritable ‘double-edged sword’.

But there is more. 

Under both Labor and Liberal governments – but especially under the Conservatives - the ‘tax mix’ has been restructured as to be less progressive. Income tax had been gradually ‘flattened’. Dividend imputation has reduced the proportionate tax burden of the wealthy; and the GST in taxing consumption has affected the poor disproportionately. Accompanying compensation for lower-income demographics, here, was largely neutralised by regressive restructuring of the tax and welfare mix elsewhere.

Meanwhile, concessions and incentives in superannuation for the relatively wealthy and the outright wealthy have come at the cost of potential social programs in health, education, aged care, infrastructure and welfare.  

Privatisation of retirement pensions may well lead in the future to the marginalisation of the public aged pension, with impoverishment for many women, and those disadvantaged whose labour market participation has been sporadic, or who have been trapped in ‘low-end’ jobs. 

It begs the question of whether the government should rather be pursuing a more progressive and democratic model of collective capital formation.

Furthermore for decades there has been increasing labour market deregulation, and an end to the old style of progressive cross subsidies for essential utilities as a consequence of privatisation – or of corporatisation in-anticipation of future privatisation.

Privatisation has also resulted in falling government revenues for vital social programs, and increased costs for everything from power and water, to the use of private toll roads.

‘User pays’ ends up having the same effect as regressive-flat taxation.  And demand for increased profit margins with privatisation have seen structural increases in the cost of basic necessities; while the added cost of borrowing for the private sector in order to modernise infrastructure has also been passed on to consumers.  And in these new markets – eg: for power – ‘small consumers’ are disadvantaged due to their limited purchasing power.

With regard to minimum wages, recently the ACTU has noted:

“While the average Australian income has jumped 21 per cent in real terms since 2000 and company profits have increased by 50% in the past five years alone, the real value of the minimum wage has increased just 7.1 per cent.” 

And also importantly during the Howard years:

“Average award wages dropped by around $30 a week and some award workers had their real wages cut by almost $100 a week.”

The ACTU has observed that falling minimum wages have affected over 1.4 million workers in recent years.  (See: http://www.actu.org.au/Issues/MinimumWagesCase.aspx )

And in addition to all this -  there are many workers – including on low incomes – who have faced reduced wages and/or conditions under the government’s ‘Award modernisation’ process – despite promises to the contrary.

Importantly: There are many who have no sympathy for the unemployed as a result of constant campaigns of vilification on the pretext that ‘dole-bludging’ is rife. And yet Australia has stringent active labour market policies, pursued under both Labor and Liberal governments, with provisions that could reasonably be described as ‘punitive’.

Under recent changes long-term unemployed will be compelled to work two days a week ‘for the dole’, and yet no corresponding increase in payments for these people has been announced.  http://thecourierpigeon.com.au/government-gets-tough-on-the-unemployed/851664/

The OECD has seen fit to criticise Newstart as woefully inadequate compared to unemployment pensions elsewhere.  Writing in late 2010 for ‘Inside Story’, Peter Whiteford reported how under Newstart “unemployed adults receive about $470 per fortnight”, and how  

“Since 1996 the level of Newstart for a single person has fallen from around 54 per cent to 45 per cent of the after-tax minimum wage.”  (despite the fact minimum wages themselves have fallen)


Finally, during the Howard years a number of programs sprung up that were lambasted as ‘middle class welfare’. Included, here, were Family Tax Benefits ‘A’ and ‘B’ – introduced to assist in the costs of child-rearing- and provided even to those on high incomes. http://en.wikipedia.org/wiki/Child_benefit

There has been confusion, here, on the Left, with some arguing in favour of ‘universalism’.  But while many of us (this author included) support in-principle Swedish-style social-democratic universalism, the facts ‘on the ground’ in Australia are those of a relatively tight social wage and tax regime.  With a limited scope to expand progressive taxation, and hence expand welfare and social programs - a higher degree of targeting and means testing is necessary in the Australian context.    

Interestingly, though, Bernard Keane notes at ‘Crikey’ how Labor has failed to markedly reform the Family Tax Benefits regime.  He concludes how:

“In [Labor’s recent]…budget…[Family Tax Benefit payments are] forecast to cost $18 billion in 2011-12.”

And thus

“…FTBs are now Labor’s as much as they are Howard’s, which makes the “war on the middle class” rhetoric from News Limited and its journalists even more risible.” http://www.crikey.com.au/2011/05/12/why-labor-now-owns-middle-class-welfare/

All these years ‘redistribution’ has been going on.

Redistribution from low and middle income earners to the wealthy, and to the upper middle class. 

Redistribution from workers to the ‘corporate bottom line’ as a consequence of eroding real wage share, labour market deregulation, privatisation (including ‘Public Private Partnerships) and user pays. 

And more redistribution from workers to big corporations with effective ‘corporate welfare’, as corporations no longer contribute adequately or proportionately towards the costs of education and infrastructure from which they benefit.

 There has been impoverishment of pensioners – and especially the unemployed. (again I reiterate: despite stringent and indeed punitive active labour market policies)

 And there has been vilification of trade unions and stigmatisation/criminalisation of industrial action even where only used as a last resort.  This has resulted in a greatly reduced capacity for workers to fight back in the face of these changes.

So amidst all these changes over the past thirty years or so: how often have we heard terms like ‘class war’ thrown around in the mass media as a response?  

The answer: Not often. Not often at all. 

And yet if there is the prospect of  even a mild degree of redistribution in the context of overcompensation for the proposed carbon tax, the ‘class war bogey’ is brought out just as it always is when it comes to the interests of the privileged, and the relatively privileged. 

If those on lower and middle incomes are to receive a ‘fairer slice of the pie’ in terms of the tax mix, provision of social services, and welfare for those in need, it is only reasonable that those in the top 20% of incomes demographic pay their fair share one way or another.  If those on low to middle incomes are to enjoy a ‘fair go’ it can be no other way.

That said, Prime Minister Julia Gillard has recently announced that families on incomes above $150,000/year will miss out on carbon tax compensation. That’s roughly 10% of Australian families. (‘The Age’
25/6/11)  

 Unfortunately – as far as redistribution via overcompensation goes, the kind of strategy it seems Gillard is suggesting would provide a far shallower pool of funds to work with than would be the case were the top 20% incomes demographic excluded. 

Perhaps given this context pensioners will miss out on overcompensation even under Labor; and those on low to middle incomes won’t receive the more robust degree of overcompensation they deserve.  This could prove a missed opportunity for Labor – in maximising the reconsolidation of its ‘class base’.  Although doubtless Gillard sees it as a strategic choice to keep more voters ‘on side’.

Nonetheless, perhaps it’s not too late for compromise. Perhaps if pressured by the Greens and Labor’s Left Prime Minister Gillard could strike an agreement to withhold compensation for the top 15% of households, to be redistributed to those genuinely ‘doing it tough’.  A higher carbon tax rate in this context could be another option - an alternative to lower compensation 'cut-off thresholds' - to increase the total pool of funds available for redistribution from the top 15% to those in genuine need.

Regardless of the very cautious and modest nature of Gillard’s proposal, doubtless it still will not please critics such as Miranda Devine, and other Murdoch writers.  Devine seems to have an aversion for the very concept of progressive redistribution – no matter how mild.  But as far as this author can tell she has barely considered the situation of those who have been left disadvantaged by decades of “neo-liberal reform”; and the very real process of redistribution which has occurred to the detriment of workers and the poor.   Indeed: After all these years of redistribution from low and middle income groups TO the wealthy and the upper middle class, the modest forms of progressive redistribution suggested here should simply be seen as a tentative move towards some kind of 'correction'.

Yes Labor is struggling in the polls. Elements of Labor’s core class support base have been drifting away gradually for a long time under the perception that Labor no longer represents their interests.   But the prospect of progressive redistribution to the advantage of the vast majority of Australians who are on low to middle incomes is what the conservatives are scared of.  They’re afraid of a Labor Party which takes action to re-consolidate its class base.

By contrast when the Conservatives speak of cutting taxes to reward ‘hard work’, they’re usually talking of ‘relief’ for those on higher incomes. The underlying assumption is that ‘the market is just’: that those on higher incomes deserve increased benefits for their effort.  The implication is that they work harder than others. 

 But in an Abbott ‘tax reform’ package, you can be certain that it is those on low incomes – including some very hard working people – who would miss out in outright terms compared with upper-middle class and wealthy taxpayers. 

We speak here of people on minimum wage and thereabouts: cleaners, child care workers, retail and hospitality workers, textiles workers, and many manufacturing workers.  These are the same people who would suffer from a winding back of the social wage, or the effective introduction of ‘flat taxes’ with user-pays mechanisms in the context of Public Private Partnerships.  And Abbott’s proposed tax cuts must draw from the Budget bottom-line somewhere.

Too many people have been disadvantaged and suffered injustice in recent decades. And it is a process which always accelerates under Conservative governments.

Increasingly, though, there are those who once felt they could depend on Labor to defend their rights and interests – who no longer believe this to be true.  This is even undermining Labor’s membership base; its mobilisation as a social movement.   

Now, though,  is Labor’s opportunity to re-establish its credentials as a party with values; a friend of the disadvantaged, and true to its class base.

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