Abbott Government in Crisis as the End of Year approaches

Above: Jo Hockey's Ideological fiscal agenda will hurt workers, and the most vulnerable Australians

Tristan Ewins

As the year draws to an end the new Abbott Conservative government is in something of a crisis, perhaps ameliorated only by the favourable treatment it continues to receive in the Murdoch press.  The forced backflip on Christopher Pyne’s planned dumping of the ‘Gonski-derived’ education reforms suggested a government which was breaching its trust with the public even at this early stage.  That the Conservatives maintain the fiction that education standards are purely about teacher quality, and has nothing to do with resources – is simply a smokescreen for a class-driven agenda.   This is also evident in the Coalition’s decision to cut superannuation subsidies for low-income workers – and to shift those resources instead towards superannuation concessions for the wealthy.

More recently, General Motors Holden has made clear its intention to leave the country.  The result will be a loss of economies of scale in the components industry, with the probable consequence that what remains of the auto industry will also cease to be viable.  There is a possible ‘multiplier effect’  here: with job losses in components and small businesses (combined with core auto-industry job losses) adding up to approximately 50,000 jobs gone  (a conservative estimate ), and maybe as many as 90,000.   In this context, government investment of $150 million a year seems reasonable compared with the cost of losing the industry. 

Abbott and Hockey have made themselves clear that they (supposedly) oppose ‘corporate welfare’. But the meaning of ‘corporate welfare’ is up for interpretation.  Arguably cuts in corporate taxation, as well as wage restraint, and ‘user pays’ mechanisms for students all amount to a subsidy for corporations with regard the infrastructure, labour and services they benefit from.   But there is little objection from the Abbott government with regard this trajectory.

By comparison the ‘corporate welfare’ Abbott refers to has been characterised by Labor shadow-minister Kim Carr as an ‘investment’.  Perhaps the truth with regard the auto-industry was somewhere in the middle.   There was an effective subsidy – but the government and the people received much more in return than what they lost.  Again: because of a positive economic multiplier effect flowing on to communities, businesses, government, citizens – from relatively high wage manufacturing jobs, and the strategically important capacities involved.  

Abbott will try and shift the blame to Labor now.  Already we are hearing about Labor’s ‘reckless spending’ as a trigger for savage cuts.  But it is Abbott and Hockey who have chased the auto-industry out of town; and they must take responsibility for the falling employment and the falling revenue which follows.   

All that said: it is not as if they didn’t have options.  The floating dollar could have been temporarily suspended – and maybe pegged at 75 cents US – to bolster struggling industries – also including tourism for instance. But this was ruled out for frankly ideological reasons.  And there are plenty of revenue options to plug the structural deficit without savage cuts.  Hockey’s admonition that ‘no jobs were ever created by raising taxes’ is ridiculous.  Contrary to neo-liberal ‘common sense’ public sector jobs in health, education, welfare, public works/infrastructure – ARE ‘real jobs’.  And for instance funding cuts to Centre-Link will result in waiting periods for clients of over one hour for advice and service.   Probably the ‘welfare bogey’ will receive special attention now – as the government seeks to vilify the most poor and vulnerable in order to pay for its ‘big ticket’ policies like Parental Leave, and Corporate tax cuts.

It’s also interesting how amidst all this the Conservatives are considering raising the GST.  Perhaps they realise that things cannot go on as they are – because of a huge infrastructure deficit – that will hurt business and not only workers and consumers.  And yet they have an Ideological opposition to progressive taxation.  Again: for all their talk of Labor and ‘class warfare’, it is the Conservatives who have the class agenda.

Meanwhile Qantas is also on the brink.  Qantas is important not only because it is ‘iconic’, but for the practical reason of having reserve air lift capacity. 

Unfortunately the ideological climate is not supportive of nationalisation.  But arguably the Holden brand could be re-acquired, and workers convinced to take a partial stake in a revivified Holden by degrees (paid for through a wage-restraint deal), re-orientating towards the production of smaller, cheaper, energy efficient vehicles.  The result would be a joint co-operative/public enterprise.   With the support of the federal government, theoretically at least Holden could play a trail-blazing role in developing energy efficient, environmentally friendly transport.  But we have an Abbott government, and frankly even under Shorten Labor such a scenario would likely remain ‘purely theoretical’.

But there are also other reasons behind the Abbott Conservative government’s attempts to ‘soften us up’ for savage cuts next year.   To begin with the Howard era tax cuts had locked in a structural deficit; and the situation has been made even worse by the current government’s decision to slash the mining tax, and to significantly cut back Company Tax.  Then there are instances of ‘middle class’ and even ‘upper middle class’ welfare; with the elimination of private health insurance means tests for upper income earners for instance. Also notable, here, is Abbott’s plans for Parental Leave on full pay for the wealthy; potentially paid for through cuts to the National Disability Insurance Scheme. Finally – both Labor and the Liberals refuse to touch superannuation concessions for the wealthy – whose removal (for the top 5% alone!) would rein in at least $10 billion (Richard Denniss’s figure). And depending on the scope of measures (eg: perhaps removing concessions from the top 15%) taken – perhaps even $20 billion.  (a rough estimate)

Also interesting amidst all this is a shift in the media (especially the Herald-Sun) and the rhetoric of the Napthine Conservative government in Victoria – to ‘get tough’ on East-West link protestors and ‘make them pay’.   There is a real danger, here, of a gradual reversion to the kind of draconian laws that were common many years ago under the government of Joh Bjelke-Petersen in Queensland.  If governments escalate civil conflicts by violently repressing relatively peaceful civil and low intensity disobedience actions – eg: pickets, sit-ins etc – then  Australia’s relatively liberal political culture could be sacrificed, leading to a culture of fear and intolerance – cultivated by the monopoly mass media.   For the Conservatives especially – there is a choice between liberal conservatism – or outright reaction.  Politically liberal conservatives especially should be raising concerns about this escalation of intolerance and repression.

And yet there are objections to Victorian Labor’s strategy of paying for transport infrastructure through privatising the Port of Melbourne as well.   Years ago such plans would have provoked protest and hostility on the Labor Left.  Today there is barely a whimper.  As usual with privatisations of this kind the competition that flows in reality will be minimal – even assuming two major ports in to the future.  Consumers could also have to pay over the long term, and it would make more sense for Labor to borrow in order to fund its public works agenda.  Yet this is also ‘ideologically difficult’.

As the New Year approaches, though: at least amidst all this it is cause for hope. Hope that Abbott’s administration  could well turn out to be a one-term government.   To make that a reality, however, what we need now is a Federal Labor Opposition which stands up on tax reform , distributive justice, infrastructure and services, civil rights.

The Abbott Agenda: Is this what Australians voted for?

Above:  Tony Abbott playing "Robin Hood in Reverse"

Tristan Ewins

During the 2013 Federal Election Campaign the Liberal camp attempted to play down Labor suggestions of their ‘cutting to the bone’ on attaining government as ‘fear mongering’.  But now – with the Abbott government ‘settling in’ it is becoming clear that austerity will follow – even amidst the most gratuitous middle class and corporate welfare.  The Abbott government is playing at ‘Robin Hood in Reverse’ – as a number of observations demonstrate.

On November 6^th ‘The Age’ and the ‘Herald-Sun’ reported that the Abbott Coalition government was going ahead in its restoration of Superannuation tax concessions for those very few (16,000) who make over $100,000 a year from superannuation investments.   The cost of this largesse is no less that $300 million in public money – which will largely be made up from attacks on vulnerable Australians, and 3.6 million of the most lowly paid workers.  This includes removal of superannuation concessions for those low-paid workers.   The Liberals say this is necessary to pay for shelving the Minerals Resource Rent Tax. But they have prioritised tax concessions for the wealthy over tax concessions for the working poor. 

Other Liberal measures include the restoration of Private Health Insurance Rebates for those on high incomes – with the removal of Labor’s means test.  According to their own figures, restoring the Private Health Insurance rebate for wealthy Australians will cost the Liberal government over $3.8 billion. Even given the Liberals’ preferred framework of private health insurance rebates, an alternative could have been higher subsidies for those on lower incomes, and the removal of penalties for welfare dependent and low income Australians whose private health insurance lapses.  But again: the Liberals are in the business of taken from the poor and giving to the wealthy.

Further, the Liberals have not committed to the full implementation of the Gonski education reforms, with no commitment to the final two years of the program. (ie: when most of the funding was to be concentrated; hence depriving state schools of billions in funding)   Labor’s ‘schoolkids bonus’ – which delivered $820 per child a year for families - will also be cut.  The result is that the government must be seen as accepting (or promoting!) the trend towards a tiered education system: where an under-resourced state system is increasingly seen as the inferior option.  The ongoing leakage of students to the private system will only exacerbate this tendency – with its consequences for the life chances of opportunities of hundreds of thousands of disadvantaged students.  This will cost the country over the long run. 

Importantly, the government is also moving to save $4.5 billion by slashing our foreign aid budget – with a callous disregard for the most desperately vulnerable people on the planet.   In the same spirit the Liberals are poised to slash the country’s humanitarian refugee intake by 6,250 places a year to 13,750.

On the environmental front, the Coalition’s ‘Direct Action ‘ emissions reduction policy will ‘rob Peter to pay Paul’ – in the sense that money returned to taxpayers from dropping the Carbon Tax will be taken back by the government through other taxes to pay for the new policy.  Rebates for micro-renewables are to be cut; as well as billions in funding for the Clean Energy Finance Corporation, and for other renewables research.   Specifically the program – including investment in ‘soil carbon’ and ‘positive incentives’ (ie: subsidies - but with no guarantees!) for business is estimated by the government to be costing tax payers just under $2.9 billion. But independent research shows the program will need a minimum $4 billion extra to meet its (already modest) targets. 

Labor must pressure the government not only to adopt a cap on pollution via an Emissions Trading Scheme (ETS), but to pursue more genuine and robust ‘direct action’ – funded progressively. The abolition of the Clean Energy Finance Corporation is short-sighted; and generous feed in tariffs for energy, and public investment in renewables research and infrastructure could make a real difference.  The Carbon Tax was good policy – producing results on emissions reduction.  But it has been rendered politically impossible given Gillard’s 2010 pre-election promises; and Abbott’s ruthless disinformation campaign.

The government blames the carbon tax for cost-of-living pressure in energy – but like Labor and even the Greens - will not face up to the role of privatisation. (ie: duplicated administration and marketing costs, profit margins, higher cost for finance etc)

Meanwhile Abbott’s Paid Parental Leave scheme aims to provide six months leave at full pay for some of the country’s richest women:  those on $150,000 a year.  Though amendments by the Greens could see a ceiling for women on $100,000/year – with the consequence of a $50,000 maximum payment over six months.   ‘The Australian’ argues that  “the new flagship paid parental leave scheme will cost $5.5 billion a year” – as opposed to $6.1 billion as originally intended.   A fairer cap on the scheme would be $35,000 – or six months full pay for working women up to $70,000/year. (close to the average wage)  Perhaps Labor should support such a policy.

Here, the Coalition’s levy on big business is welcome. But it could be far better spent:  on national aged care insurance for instance.  And it makes little sense in the context of larger Company Tax cuts (another 1.5%; costing about $5 billion ‘over the forward estimates’), further entrenching a culture of corporate welfare.  

While Abbott believes this will create some private sector jobs, it will undeniably cost public sector jobs. For instance, big Centrelink cuts will cut deep into the quality of customer service – with the return of ridiculous waiting periods of over an hour for clients seeking assistance.  How can Abbott ‘come down hard’ on poverty-stricken job-seekers at the same time as ‘taking the rug from under them’ in terms of support?

Interestingly also, Australian Company Tax is significantly below US levels, and the forsaken revenue from Company Tax cuts must be made up elsewhere – as otherwise services, welfare and infrastructure cannot be paid for.  Insofar as corporations benefit from services and infrastructure – the consequence is ‘corporate welfare’ – in the sense that ordinary taxpayers are subsidising corporations. That is – they are making up for corporations’ proper share of the tax burden.

At the same time Abbott is on the verge of withdrawing  government support for the car industry – with a projected $500 million in cuts.   Estimates hold that this move could see unemployment rise by 1.5%, costing the economy $21.5bn a year. And while car industry support may also be seen by some as another example of ‘corporate welfare’ itself, it is a special case – because of the multiplier effect with regards jobs, and the fact that core jobs are relatively high-wage compared with manufacturing elsewhere.  The skills and capacities are also of strategic value for the Australian nation. 

Meanwhile, the Liberals have signalled their intention to significantly increase Defence expenditure: at a time when they are claiming a ‘budget emergency’ as a rationale for wide-ranging austerity. And yet previously announced Gillard government subsidies for Aged Care workers will be withdrawn in an attempt to undercut unions: with the probable consequence that the sector will lose more skilled workers; and aged care residents will suffer the consequence.

Abbott has declared that:  "the carbon tax will go, but no-one's personal tax will increase and no-one's fortnightly pension or benefit will reduce.

It is beginning to look unlikely, however, that welfare will remain untouched.

There is a uncomfortable reality that both the Liberals and Labor were reluctant to talk about during the election campaign.  When fully implemented, Disability Care Australia will peak with a price-tag over $22 billion, with roughly half coming from the Federal Government.  What is more, an ageing population and a growing population must mean additional expenses when it comes to health, aged care, and infrastructure.

All this is by no means unmanageable or unfundable with an economy valued at over $1.6 Trillion. And certainly a regressive GST is not the only option. Removing superannuation concessions for the wealthiest 5% would bring in about $10 billion alone. But the looming crisis has consequences for an administration trying to ‘reduce the size of government’ as an Ideological imperative. Those consequences are especially dire in the context of a previously highly-targeted welfare state – under siege from middle class and corporate welfare.  It means some already tight welfare provisions stand to be narrowed even further – with the most vulnerable and disadvantaged of all paying the price.But as this author has argued elsewhere:

“Looking back to the 1950s it is interesting to note that the conservatives and ‘centrists’ of that time were often more ‘radical’ on the economy than today’s avowed social democrats: and even of some avowed members of the Socialist Left.”

 Specifically, a “social market” model was adopted by the German Christian Democrats in the 1950s”. This included providing for a mixed economy, social wage and welfare state. Not a ‘traditional socialist economy’ by any means. But at least the poor and vulnerable were not sacrificed for the sake of corporate and upper middle class interest, and/or ‘Ideological purity’. (Aarons, Routledge, 2009, pp 33-34)

The time has come for Abbott and other self-avowed Christians in the Coalition to search their consciences. The time has come to confront the fact that given the developing social and economic pressures, ‘small government’ at all costs is neither compassionate, rational or just. 

What is the 'Democratic Mixed Economy'?

above: newly published by Connor Court - 'Turning Left or Right'


The essay that follows was an original draft of an essay on 'The Democratic Mixed Economy' - written for “Turning Left or Right – Values in Modern Politics”: a book edited by Carlo Carli, Tim Wilson and Paul Collits, and published by Connor Court. That essay was very significantly cut back to be much more concise; so I am hoping readers may get some idea of the intentions of the original draft.

But firstly – the abstract below is an account of that book, and I urge readers to consider purchasing it; The “Democratic Mixed Economy” essay follows:

Democracy is about choice. But today it can appear to be a choice between personalities as major political parties squabble over different shades of the same policy. Is the great political contest of ideas over? Or are the divisions less obvious than they once were?

How does the left balance competing ideas like free speech and avoiding offence? Why do classical liberals want to abolish the ABC and Australian Institute of Sport? And where do the left, liberals and conservatives agree, and why?

Turning left or right asks these questions, breaks through the wall of sound bites and explores how century-old political philosophies connect to practical policy for the 21st Century.

Each chapter includes three essays from some of Australia’s most engaged political thinkers who explore contemporary policy issues, find the dividing lines and reinject values and ideas. Importantly, every author’s essay provides insight into the solutions they think are needed to make Australia a better country for future generations.  

To order and for more info see:  http://www.connorcourt.com/catalog1/index.php?main_page=product_info&products_id=262#.UnCWhUG4aUk


By Tristan Ewins

Historical Background on the Mixed Economy


The Left has had an often ambiguous relationship with the State when it came to matters of political economy. Marxists sought centralisation of industry in the hands of the State under socialism en route to ‘stateless communism’. Yet there were those among them who believed that under capitalism the ruling classes would never allow socialisation of any form to progress beyond what was necessary to protect their own economic interests. In the Marxist view the state was not seen as an impartial arbiter between civic interests nor as a ‘neutral’ vehicle for the common good. Marxist views of the state as a vehicle for specific class interests contrasted with the socialism of Ferdinand Lassalle – the German socialist who – after the German philosopher Hegel – saw the State as a vehicle for reconciliation and ‘the universal interest’. And both Lassalle and Marx were at odds with libertarian anarchists such as Proudhon who saw in the co-operative movement the potential to transcend capitalism without the trappings of the State. 

In the 20th Century, however, Greek Marxist Nicos Poulantzas was to suggest that states themselves could be marked by internal contradiction due to the logic of class conflict. This went both beyond liberal notions of a ‘neutral’ state and beyond orthodox Marxist notions that state apparatuses under capitalism by their nature served only narrow bourgeois interests. From this it follows that contested states could advance working class and civic interests even under capitalism depending on the balance of class forces. It is on this basis that this author intends to argue that a ‘historic compromise’ is possible in the form of a ‘democratic mixed economy’. Universal suffrage is one potential basis for working class power – and affects the ‘balance of class forces’ - but is best utilised under circumstances of high social democratic and class consciousness and organisation.

Regardless of all this, however, in the course of the twentieth century progressive liberals and socialists alike became associated with ideas of (relatively) ‘big government’ – of a progressive public sector and social wage. Successive World Wars had demonstrated the potential of central economic planning; indeed of ‘state capitalism’. And classical economic liberalism stood discredited by the experience of Depression. This lent a degree of prestige to social democracy and its ambitions of strong welfare states, and an advancing public sector. Much of the world adopted a Keynesian approach involving a key role for the state sector in bringing forward public works: stimulating aggregate demand to counter cyclical downturns. This also required higher (often progressive) taxes – in order to source public investments and service debt. As opposed to the classical economic liberals and Austrian School economists, for the Keynesians there was no natural ‘equilibrium’ – achieved through the winding back of so-called ‘distortions’ such as tax, the public sector, labour market regulation and so on. The classical Keynesian economy was ‘mixed’ – but as yet not democratic – in the sense of delivering true popular control.

In Sweden especially Rudolf Meidner and Gosta Rehn developed an approach to economic management involving full employment, growth, high incomes and the containment of inflation. In Sweden security and growth went hand in hand as a steadily expanding welfare state developed alongside one of Europe’s most robust economies. Strong industry policies aimed to create high wage jobs in the place of unviable industries which could not survive without cheap labour. Full employment was accepted by both employers and employees as part of the Swedish ‘historic compromise’. This was opposed to the previous reality: of capitalism founded on insecurity – with a ‘reserve army of labour’ resulting in ‘labour market discipline’ – but at great economic and social cost.

Swedish social democracy was to advance steadily for decades – achieving ‘political citizenship’ (through universal suffrage) and ‘social citizenship’ (through the welfare state): and finally attempting to achieve a regime of “economic citizenship” through innovative measures of economic democratisation and socialisation. But Sweden’s march forward was brought to a halt over the issue of Meidner wage earner funds. Through these funds, Rudolf Meidner and the powerful unions who promoted the cause sought to compensate Swedish workers for past wage restraint – which had resulted in ‘super profits’ and concentration of ownership – by according to them collective capital share. This held the potential of gradually socialising investment in Sweden – leading to what in retrospect could legitimately have been called a “democratic mixed economy”. The defeat of the Meidner initiative by militant employers, here, was ‘the high water mark’ for Swedish social democracy.

Around about the same time (the 1970s and 1980s) social democracy underwent a succession of defeats through much of the advanced capitalist world. The First and Second Oil Shocks hit western capitalism hard, underscored by an ongoing tendency of profits to fall as anticipated by Marx as far back as the 19th Century.. (This ‘falling rate of profit’ remains the consequence of the cost of constant revolutionising of the means of production; although capitalists can get away with intensifying the rate of exploitation as a response - in a context where new technology improves productivity and living standards in absolute and qualitative terms at the same time; Favourable terms of trade can also serve as a protection at a national level – as historically with Sweden - but not a comprehensively global level) Wage restraint and a falling wage share of the economy, as well as attacks on industrial liberties were promoted as a means of restoring profitability. So too was ‘corporate welfare’ – funded through attacks on the welfare state, implementation of ‘user pays’, reduction of corporate taxation and like measures. Profits were restored and inflation contained – but through much of the world this was at tremendous social cost. (Sweden was not unaffected, being forced to drastically reduce the value of the Krona to remain competitive; but its welfare state remained resilient, and cushioned vulnerable Swedes against the ‘economic storm’)

The rise of neo-liberal ideology meant the progressive stigmatisation of the public sector; of the welfare state and social wage; of industrial rights and of progressive taxation. User pays and more regressive tax mixes hit the vulnerable hard. Even in Australia the Accords entered into by the unions and the Hawke Labor Government did not deliver the ‘Nordic’ outcomes some had hoped for. Wage restraint was rewarded with tax cuts – but those very tax cuts also reduced the revenue base from which the social wage and welfare state might otherwise have been expanded. Stigmatisation of labour militancy – on the grounds of ‘reconciliation’ – also led to a growing intolerance for industrial action. Furthermore – the most rudimentary ideas of social democratic redistributive justice became virtually ‘unspeakable’ – let alone a more robust critique of capitalist instability, exploitation, waste and centralisation of power.

Fast forward to 2013, however, and there were growing ‘cracks in the neo-liberal ideological edifice’ despite decades of its Ideological hegemony. In Australia robust intervention by the Rudd Labor government managed to steer Australia through the 2007-08 ‘Global Financial Crisis’ relatively unscathed. But stigma against major tax reform remained; and an ill-timed attempt to introduce a ‘super profits’ tax on mining saw the end of Rudd Labor with Prime Minister Kevin Rudd’s replacement by Julia Gillard. Following this, Prime Minister Gillard’s carbon tax was successful in reducing emissions – and yet its introduction was politically damaging in light of previous promises not to introduce such a tax; and with Conservative disinformation about the proportionate effect of the tax on cost of living pressures)


What kind of Democratic Mixed Economy for Today?

All this said, what kind of ‘democratic mixed economy’ should Leftists be aiming for today? Certainly the Left would be well advised to exploit any weak points in the ‘neo-liberal edifice’ as the basis for and ideological counter-offensive. Importantly: many arguments for the old kind of mixed economy remain relevant – and Labor needs to reassess its previous commitment to the neo-liberal Ideology; including its own past rejection of the mixed economy.

Firstly we will observe the centrality of the welfare state and social wage for ‘social citizenship’. 

Public sector intervention can provide ‘social insurance’ – for example in aged care, disability support and services, comprehensive socialised medicine, legal aid, social housing and various forms of welfare. Arguably these services must be provided to all on the basis of need – as a matter of human decency, and of distributive justice. At the moment the quality of aged care in Australia is a hidden shame; and one which would spur much greater social outrage if working class voters realised what quite possibly awaited them and their loved ones in their final years.

The strongest welfare states are found in the Nordic nations (Sweden, Finland, Norway, Denmark) as well as in the Netherlands. Australian social democracy as embodied in the Labor Party has a long way to go to deliver Nordic levels of social security; and falls short in its scope of social expenditure compared to many other OECD countries as well. And yet the class base necessary as a foundation for a strong welfare state remains viable in Australia. Tax reform aimed at the wealthy and the upper middle class (in the vicinity of the top 15% income demographic) – would have a broad enough base to deliver tens of billions in funds for comprehensive social wage and welfare reform to the benefit of the remainder of the population.

Modern abundance also provides the economic foundation for greater cultural development and popular cultural participation than ever before.

As early as 1892 the Marxist scholar Karl Kautsky proclaimed:

“We must not think of the socialist society as something rigid and uniform, but rather as an organism, constantly developing, rich in possibilities of change, an organism that is to develop naturally from increasing the division of labour, commercial exchange, and the dominance of society by science and art.” (my emphasis) (Kautsky, P 141)

 In the information age Kautsky’s words appear prophetic. And yet modernity in its capitalist guise also warps culture, including science and art themselves. Even science and art are increasingly commodified to fulfil the ends of profit maximisation. In the field of academia, Arts and Social Sciences not ‘functional’ to capitalism are increasingly marginalised. But free education, including liberal education and education for ideological literacy and active and critical citizenship - could accommodate a plurality of wide ranging criticism – including of capitalism itself - as part of the project for a ‘democratic mixed economy’.

This brings us to the matter of public infrastructure and enterprise.

There are ‘natural public monopolies’ – especially in the area of infrastructure – where competition just doesn’t make sense - and private monopoly even less so. To elaborate – competition can duplicate cost structures – the physical cost of infrastructure; the cost of duplicated administration; the cost of profit margins. And private infrastructure (also Public Private Partnerships) tend to pass on an increased cost of borrowing on to consumers. On the other hand private monopoly can be just as damaging – lacking the corrective functions of competition, and also potentially leading to profit gouging and abuse of market power. To be specific, current areas of potential natural public monopoly include communications infrastructure; as well as water and energy; roads and public transport; ports and airports. In Melbourne it is notable that emerging working class suburbs are lacking crucial infrastructure including public transport, health services and schools because the state has abrogated its responsibilities – in order to hold down tax. Private infrastructure is the more-costly option; and if funded through user pays mechanisms can be highly regressive.

Large public sector corporations can also potentially compete in the global marketplace – delivering social dividends to the public – and made viable by the economies of scale provided in the context of government investment - without removing the corrective and refining influences of competition. Social investment in mining via a Sovereign Wealth Fund could potentially capture tens of billions for social purposes which otherwise are largely diverted overseas. It could even be financed in part via a reformed mining tax.

There are other areas where public sector intervention makes sense – not always to form a ‘natural public monopoly’ – but to enhance competition and outcomes in otherwise monopolistic or oligopolistic sectors. Sometimes there is also the need to counter possible collusion. Examples include public sector banking; state owned general insurance; state-owned private health insurance. State enterprises have also historically involved cross-subsidisation for the disadvantaged. Municipal as well as co-operative and not-for-profit child care and aged care can also ‘deliver a better deal’ to consumers. (where necessary with state subsidy)

State funding can also be essential in areas of pure scientific research where the immediate commercial gains are not clear. And public sector media and broadcasting can provide a corrective influence – pursuing goals beyond mere profitability, or the ‘cultural power-plays’ of a handful of billionaires. This can include the goals of an authentic and inclusive pluralism, as well as ensuring quotas for local content, and the genuine promotion of participatory media.

Finally, today most Australian families would prefer to own their own home. But the Howard-era housing bubble has put housing out of reach for many. Substantial investment in social housing could provide for disadvantaged families, pressing urban consolidation, while also increasing housing supply, and helping to correct the market failure of unaffordable housing.

Manifestations of Economic Democracy: Consumer and producer co-operatives

But the public sector alone is not ‘the last word’ on the democratic mixed economy. To be truly ‘democratic’ an economy must rest on real popular control. There is no ‘play of class forces’ favourable enough currently to result in the socialisation of the big transnational corporations – the ‘economic commanding heights’. (for instance as envisaged in the 1970s by British Labour thinker Stuart Holland) And engagement with the transnationals is necessary in order to make available their innovations for the general public. But there are a number of possible strategies which could gradually extend the ‘democratic sector’ of the economy. We will mention co-operative enterprise, mutualism and collective capital formation, co-determination and economic regulation. 

Karl Marx had argued at one point that co-operative productive enterprise attacked capitalist exploitation “at its very roots”. Though socialist revisionist Eduard Bernstein observed that co-operative enterprise under capitalism faced the same contradictions as private enterprise. To elaborate, Bernstein – who had refuted important parts of the Marxist orthodoxy – nonetheless observed of Marxian economic analysis:

“The fall of the profit rate is a fact, the advent of over-production and crises is a fact, periodic diminution of capital is a fact, the concentration and centralisation of industrial capital is a fact, the increase of the rate of surplus value is a fact.” (Bernstein, Pp 41-42)   

So as opposed to comprehensive socialisation under socialism, co-operatives under capitalism would face competitive pressure due to the economies of scale of their private sector rivals – who tended increasingly towards monopolism. They would be affected – and potentially ruined – by cyclical crises. And they would have to reserve greater proportions of their profits for investment (ie: internally financed investment) in the means of production – to retain co-operative status and still remain competitive.

Bernstein also feared co-operatives – for instance as anticipated by Lassalle - could become ‘corporate interests’ which actually gouged and exploited consumers. Specifically he considered the scenario of union-run co-operatives coming to dominate “whole branches of production”. 

In reality, though, co-operatives have achieved nowhere near monopoly status. Even the largest co-operatives can be held to account through competition in local and global markets. Corporate monopolisation on a global scale is the real threat. And mutual societies have no incentive to ‘maximise profits’ – as all revenue is reinvested for the benefit of members. Canadian economist and labour movement activist, Jim Stanford has observed several examples of successful co-operative enterprise. As of 2007 this included ‘Rabobank’ in the Netherlands, with 55,000 staff and 600 billion Euros under management. Also notable was the ‘Mondragon Co-operative’ in Spain – a worker-owned co-operative network employing over 80,000 people. (Stanford, p 329) 

While subject to capitalist pressures, existing co-operatives do away with the expropriation of surplus value by capitalists. Generally under the co-operative model any profits are duly socialised; and workers maintain democratic control. And while small co-operatives may be subject to greater risk, participation in that context can be rewarding insofar as direct control overcomes the kind of alienation resulting from the division of labour under capitalism.

Meanwhile consumer co-operatives can provide ordinary people with greater market power; and mutual societies can provide voluntary social solidarity while cutting out the profit motive and indeed the profit mechanic entirely. Mutualised automotive societies, mutual credit and mutual insurance all have long histories.

Arguably, though, robust state-aid is necessary to support these endeavours, and ensure such democratic enterprise retains strong market share, and a higher market profile. Ideally this should involve concessional loans, financial advice, tax concessions, and assistance with marketing. This is suggestive of potentially visionary policies favouring economic democracy by a future Australian Labor government, and other potentially progressive future governments worldwide.


Collective Capital formation

Another area of potential economic democratisation is collective capital formation. This involves workers and citizens coalescing to invest in the economy; and in the process potentially delivering economic power to those people collectively. Collective capital formation can take many forms: some radically redistributive; others barely challenging the logic of capitalism.

In Australia it is true to argue that industry superannuation funds (private pensions) hold the potential of delivering economic power to organised labour – which administers many funds on a not-for-profit basis. This is a common argument. And yet there is a downside as well. Public pension funds hold the advantage of socialising (rather than privatising) risk faced by workers; and also of not replicating labour market inequalities in retirement. Policy makers also have to deal with the future prospect of an Aged Pension marginalised along class lines. And there is the potential for rent-seeking behaviour when it comes to fund involvement in Public Private Partnerships which simply cannot provide the best value infrastructure for citizens.

However: returning to ‘Meidner’; wage eager funds in Sweden were based on far more radically redistributive premises, with 20 per cent of annual company profits set aside for workers. In decades, this would have led those democratic funds to a dominant position in the Swedish economy. But Meidner was arguably flawed in its apparent ‘productivism’ – its focus on Swedes in their capacity as employees - as opposed to their capacity as citizens. Arguably ‘citizens funds’ – marked from the start by a cap on the projected level of fund ownership – may have won over more voters, and averted the unflinching opposition of employers. At the time they were ‘wound up’ the funds only controlled 7 per cent of the Swedish stock market. (see: http://newleftreview.org/II/34/robin-blackburn-capital-and-social-europe )  

But learning the lessons of Meidner, the time could be right for a reconsideration of democratic and redistributive forms of collective capital formation.


‘Peeling the Onion’ of bourgeois property rights: Nils Karleby

Swedish social democrat Nils Karleby was well-known for his characterisation of economic ownership of the means of production not as an ‘indivisible’ phenomenon – but rather as a ‘bundle of rights’. The consequence of this is that socialisation ought be approached piecemeal – and that infringements upon the ‘prerogatives’ of private ownership can proceed gradually – with labour market regulation, health and safety standards, accident insurance, an eight hour day and so on. (Tilton, pp 79-81)

Hence there was Karleby’s powerful metaphor that: Social Democrats should:

“[strip] away the prerogatives of capitalists, like layers of an onion, until nothing remains.” (Karleby in Tilton, pp 80-81) 

However in Australia far-reaching economic deregulation – including labour market deregulation – and tax cuts contributing to a regime of ‘corporate welfare’ – have restored these prerogatives. Meanwhile Financial deregulation and uncontained finance market speculation led to the Global Financial Crisis disaster in 2007-2008. (the legacy of which we are still living with)

A democratic mixed economy does not simply leave these matters to ‘the market’ when the consequence is an intensification of exploitation. Restrictions on union rights of organisation, withdrawal of labour, and access are intended to facilitate this intensification and overcome resistance.

Growth is always considered ‘good’ as it facilitates the endless expansion of consumption and of the world market on which capitalist self-reproduction depends. But proponents of a democratic mixed economy question the assumed “rights of property” and the social consequences of this. Increasing levels of over-time for some and promoting casualization and job insecurity for others; with a steadily-rising retirement age - all contribute to the logic and imperatives of capitalist accumulation - to the detriment of the ‘life-world’ of real people. Work/Life balance across peoples’ entire lifetime conflicts directly with these ‘prerogatives of capital’.

Further – neo-liberal capitalism is self-destructive in the sense that the inequality it produces dampens aggregate demand – and hence the very growth upon which its systemic logic depends. (as those on lower incomes tend to spend a greater portion of their income)

In response to these phenomena strong unions could be well advised to pursue an optional shortened working week for those unionised workers who so choose; and a more robust minimum wage; with recognition of the hardship faced by some workers enduring unpleasant and or inconvenient hours and conditions. (for example cleaners) Further government subsidy of wages in areas such as child care and aged care - largely feminised industries currently involving high levels of exploitation for skilled workers - could also comprise a welcome reform. (as of writing the Gillard Labor government had made some progress on this front; but the new Conservative Abbott government is rescinding subsidies for Aged Care workers)

Also co-determination as has been attempted in some countries – very notably Germany – could involve mandatory employee representation on the boards of major companies and employee input into safe work practices amongst other areas - ameliorating the ‘absolutism of capital’. Though it is no permanent or comprehensive solution for antagonisms of class interest.


Conclusion

Looking back to the 1950s it is interesting to note that the conservatives and ‘centrists’ of that time were often more ‘radical’ on the economy than today’s avowed social democrats: and even of some avowed members of the Socialist Left.

In his important work, ‘Hayek Versus Marx’ former Australian Communist leader Eric Aarons considers the “social market” model – as embraced by the German Christian Democrats in 1950s, and the German Social Democrats “after 1959”. As Aarons explains, this approach suggested “a social vision couched in moral as well as economic terms…”, and “recognition of the fundamentally social nature of organised production”. Further, it implied a “moral community” “required to legitimate the social order…” , and the“[prevention] of the emergence of a ‘two-tier’ society” including a layer of permanently poor. A consequence of this was that “resources are allocated through both the political and economic system.” And yet it also involved “recognition that desirable public ownership should not be seen as a bridgehead to full public ownership and a traditional socialist society”. (Aarons pp 33-34)

Talk of a “traditional socialist society”, here, is presumed to infer comprehensive state ownership and central planning. This author does not seek to replicate the errors of the old Communism – for instance the virtual usurpation of peoples’ right to determine their own needs structures to a reasonable extent via market-mediated channels of consumption. Even though increasingly there are many areas – for example the energy market – where the promise of ‘choice’ has rung hollow – simply providing a cover for needless duplication, profiteering and waste. And while comprehensive central planning stifled individual consumer choice, it did make more sense in economies marked by greater scarcity.

A moderate form of the ‘democratic mixed economy’ could well conceive of itself in the tradition of the ‘social market’. Although what this author does aspire to – at least in principle – is significantly more radical. As Leftists we should probably seek to shift the whole relative centre of political discourse – ultimately striving for a new hegemony. So when we speak of a ‘democratic mixed economy’ there is a potential plurality of interpretations. But a common denominator should be a robust public sector, and a commitment to substantial democratisation in a wide array of forms as outlined in this chapter.

Again: in addition to an strategically extended public sector this could involve a mix of co-operatives, mutualism, collective capital formation, co-determination, economic regulation, a progressive tax system, welfare state and social wage; extension of liberal rights to the industrial sphere; and appropriate economic regulation – including labour market regulation – to ensure fairness.

Importantly: the language of a "democratic mixed economy" brings together a notion which is still relatively mainstream - (the mixed economy) - in combination with "economic democracy" - which has radical connotations. In so doing, that combination is creating a space for radical and progressive ideas - possibly introducing radical ideas to a broader audience. The ‘democratic mixed economy’ has strategic value both as a political discourse and as a strategy for economic management, democracy and liberation.

Concluding, though: Arguably there is a place for co-operation and competition: planning and markets. And yet large scale co-operation (at the level of the largest multinationals, say) looms as ‘the economic undiscovered country’. Who is to say that the refining logic of competition and self-interest is the only guarantor of quality, and will remain so forever? What future potential is there for economic activity based on altruism and co-operation? Only the future will tell.

Bibliography:

Aarons, Eric; Hayek versus Marx And Today’s Challenges; Routledge. New York, 2009

Bernstein, Eduard “Evolutionary Socialism”, Shocken Books, NewYork, 1961

Kautsky, Karl, “The Class Struggle” (Erfurt Program), the Norton Library, Toronto, 1971

Stanford, Jim; Economics for Everyone – a Short Guide to the Economics of Capitalism, Pluto Press, London, 2008

Tilton, Timothy; “The Political Theory of Swedish Social Democracy – Through the Welfare State to Socialism”; Clarendon Press, Oxford, 1990

Responses to the ALP Leadership Election Result

above: The winner of the Opposition Leader election - Bill Shorten

With a 'mixed mandate' from the ALP's first experiment with a rank and file component in electing the parliamentary leader, Bill Shorten needs to move straight away to implement the reforms he promised to 'Local Labor', Race Mathews and others - in order to keep the Party unified and with high morale - as we rebuild and aim to retake government in three years.

Tristan Ewins


With Albanese getting about 60% of the membership vote there's a 'mixed mandate' here. Importantly, I read that the Right was enforcing 'pairing' to ensure their members were voting for Shorten in the caucus. That said, I don't know why some members of the parliamentary Left decided to vote for Shorten. Hopefully the full story will come out in the coming days and we’ll have a fuller appreciation of how this process has panned out….

But we agreed to this process, and this is what we've got to work with. 50% of the vote for the rank and file is still a step forward. Especially if we get more far-reaching reforms as part of the deal over the coming months......

Another matter is that with Albanese recording such a strong vote amongst the members he deserves recognition. There's the option of the Deputy Leadership. Though Shorten has already committed there to Plibersek - and Plibersek is certainly incredibly talented - and could have had a go at the leadership herself if she'd been inclined to do so. Perhaps whoever misses out should receive a shadow ministry of their choice? Though that's complicated by the fact Bowen did a good job as Treasurer.

Albanese overwhelmingly won the rank and file vote on the basis of unequivocal support for direct election to Conference and other reforms. Shorten supported reform too - giving personal guarantees to Race Mathews which were then communicated to the membership and to ‘Local Labor’.

Perhaps Albanese could also be given the job of heading a Committee to oversee democratic Party organisational reform between now and the next Conference. And maybe Conference could be brought forward so that whatever policy positions we adopt - we have plenty of time to campaign on difficult issues which nonetheless are a matter of principle. (for example: increasing Newstart in the face of Conservative attacks)

On the plus side Shorten will make a very articulate leader; But he has to overcome the 'Bill the Knife' tag; He needs to break through against those perceptions early on to stop it from undermining his position.

If we get direct election for National Conference the victory for Party democracy will still be great. (so long as the Parliamentary Party then accepts the policy parameters set by Conference)

At Facebook Glenn L. McGrath reports that: "Bill won by 4 MP votes, 55/86 = 63.95, it would need to have be 51/86 = 59.3% for Albo to have won." So if the Left had held it really would have been down to the wire. I'm trying to confirm whether there were three Left supporters of Shorten or more.

In any case – again, it is done now; Bill will be an articulate leader;  Bill Shorten has tried to overcome the ‘Bill the Knife’ tag  today; And I hope he succeeds - for him and for the Party. On the night Shorten supported Rudd he looked like a ghost. I'm certain it was a very difficult decision which weighed heavily on him.

 

Of great importance:  With such a close vote the pressure needs to be on to implement further internal democratic reform quickly - starting immediately; With such a strong rank and file vote for Albanese Shorten needs to move quickly on democratic reform to keep the party unified at this point and into the future.

A Committee made up of members genuinely committed to democratic reform ahead of the next National Conference – and with a brief to achieve this - would be a the best thing;  So long as it isn’t distorted into a mechanism for ‘burying’ reform rather than implementing it ASAP.

 

If Albanese is at the helm of such a committee here’s hoping that won’t happen that way…
 

PLS Debate!!!

nb: 'Christian Kunde' at Facebook writes:  "1 caucus vote = 350 member votes. Albo lost by 700 votes/2 caucus votes. If 3 from the Left voted Shorten, that would have easily been enough"

I'm still trying to work out just how close it really was...

   

ALP Leadership Update: Candidates Commit to Organisational Reform

Just to let readers know we have been made aware of statements by Anthony Albanese and Bill Shorten – both claiming they will work to implement organisational reform if elected as Labor Leader.  This was in response to the "Local Labor" Survey of Candidates.

Nb: In the two posts immediately preceding this one I published a series of policy questions which unfortunately have not been answered. 

I also wrote an analysis of the commitments made by Shorten and Albanese. 

which can be found here:

http://leftfocus.blogspot.com.au/2013/10/what-are-strengths-and-weaknesses-of.html


But there is new information in this post!

The following is a summary of many of the commitments both Albanese and Shorten made in recent Statements:

Albanese

·        Albanese specifically indicates he will implement the recommendations of the 2010 Carr/Faulkner/Bracks Review.

 

·        He argues he will maintain the direct election component for parliamentary leader.

·        He indicates he will “give members a direct vote in electing ALP National Conference delegates”.   (A crucial commitment for this ALP member)

 

·        He says he will provide grassroots members with  “training, resources and support”;

 

·        He supports further trials “of community preselections”.   (I’m not so sure of this one for reasons I’ve given in the earlier article)

·        He  indicates he will bring National Conference forward to 2014 to discuss these organisational issues, and policy issues as well.

Shorten

I sent some questions to Shorten on these and other issues and didn’t receive a reply (and not from Albanese either!!) ; but upon having found a statement by Shorten I believed it important to let readers know what his stated positions were.

·        Shorten argues he will “act on the reform commitments made at [the] last National Conference; and will maintain the direct election component for ALP Parliamentary Leader

 

·        He argues he will ; work for “a bigger ALP”, with “discounted rates” for pensioners, the unemployed, students and union members; and with “training” with regard the party’s “history, structures, principles and processes”  Also he claims he would  create a “supporters” category – a “low cost option” that would aim to turn Labor into a larger mass party.

 

·        He argues he will provide flexible options for involvement (eg: internet) for people who have trouble regularly attending branch meetings

 

·        He also argues he will involve members in policy development

 

·        Like Albanese he would continue the “community pre-selection trials” (which I personally fear would divert our resources and lead to the scenario where the ‘big fundraisers’ would dominate.)

nb:  I hope this update is useful to ALP members who have yet to vote!  Importantly it seems to me that while Shorten is making some very constructive commitments to mobilising and involving the grassroots (and Albanese likewise), I could not find an explicit commitment to Direct Election for National Conference from him. (ie: Shorten)  If I am mistaken I would appreciate being corrected - because I want to get accurate and comprehensive information out to members!  But we really need a direct statement from Shorten in order to confirm his position on this issue.

Tristan Ewins



UPDATE; DICUSSION AT 'LOCAL LABOR':
 
posted here 7/10 1:07pm
At the "Local Labor" Facebook Group Stuart J Whitman has posted the following:
 
"FINDING COMMON GROUND
Yesterday, BILL SHORTEN gave his commitment to support direct elections of delegates to National Conference. This had not been spelled out in his original response to the Local Labor ALP Reform Survey. Now I wonder if we can get ANTHONY ALBANESE to address gaps in his response and commit to establishing an Implementation Committee to ensure the reforms are achieved in the coming year, and to open the way to further review of standards of integrity and conduct in the application of rules and Party office holders carrying out their responsibilities?  Then we have a Win-Win for reform."

But Don Alma McAllister responds:  
 
"I'm confused here. Albo's response seems to be unequivocal support of the 2010 National Review document (31 recommendations excluding the withheld sections.) But Shorten is saying "I will:
• act on the reform commitments made at our last National Conference;
• encourage our state branches to align their commitments and rules with these changes; and ..etc etc “which seems to be offering support only for the remnant bits cherry-picked out of the document by his faction at the 2011 Nat. Conf."


Yet Race Mathews has written at 'Local Labor':
 
Memorable day – in fact the day for which I’ve been waiting ever since writing my first party reform paper, back in 1965. Full house attendance at the ALP leadership contestants debate in the Trades Hall Council Chamber. Heard great contributions from Anthony Albanese and Bill Shorten to frequently passionate applause. Proud to belong to a party that can produce prospective leaders of so outstanding a quality. Realised halfway through Bill’s speech that he and Albo now on the same page in support of direct election of conference delegates. Couldn’t catch Chair Jane Garrett’s eye for a question, but confirmation in brief conversation with Bill and aide Steve Michaelson following the meeting. So grateful to have been present after all these years at the true dawning of the party’s democratisation. Or as Bill has it, not just a party but a movement. Music to my ears. Tears in my eyes.


NEW UPDATE: 
Race Mathews of 'Local Labor' and the Australian Fabians has said that Shorten and Albanese are "on the same page" on Conference Direct Election.  But in light of this I'm not certain what to make of Don Alma McAllister's contribution.  Race wrote to me this afternoon that Shorten had indicated to him personally that he would support some form of direct election - But he did give specifics on implementation, including what model.

SO the offer still stands  - for a clear statement from both candidates on the issue of direct National Conference delegate election - and what specific form they would have this take.

LATEST UPDATE:  9/10/13

The following has come through from the Sydney Morning Herald; It reports Shorten is NOT prioritising Rank and File Direct Election of ALP National Conference delegates.

But Race Mathews insists Shorten had given him a personal guarantee. He's trying to clear things up today; I will post again here if we get a clarification - some kind of direct clarification from Shorten.

QUOTE: "Mr Shorten said he wanted to make it easier to join the party, commenting that it was ''crazy in the 21st century that it's difficult to join the Labor Party online''. He also said he wanted to involve more people in preselections.

''I believe that we do need to open the party up, that we do need to make it easier to participate in and we do need to give people more say,'' Mr Shorten said.

But a spokeswoman for Mr Shorten's campaign later contacted Fairfax Media to clarify that while Mr Shorten supported the recommendations of the Bracks, Carr and Faulkner review ''in principle'', allowing members to elect conference delegates was not one of his priorities. His focus was on growing and diversifying the party membership, the spokeswoman said.

Read more: http://www.smh.com.au/federal-politics/political-news/labor-leadership-candidate-bill-shorten-commits-to-extending-party-reforms-20131008-2v507.html


FINAL UPDATE

I guess we're not going to get a direct and public confirmation from Bill Shorten on ALP National Conference Direct Election and we'll have to deal with that; Given what one of his staffers said, it may well just be as they put it "it is not a priority". Such that he felt no urgent need to clear that up with a direct, public and personal statement. A lot of people will already have voted for Bill Shorten on the understanding he WILL introduce direct election to Conference. It will be incredibly demoralising and divisive if Bill doesn't try and push it through after this - try and get the Party and the factions behind him on the reform apparently he has promised privately to Race Mathews.... I hope Race Mathews and other people are right! But why else would Shorten not make a public statement?