Observations in the Wake of the Rudd Restoration

above: Julia Gillard

A Retrospective on the  Gillard Leadership - and Last Chance Policy Fixes for Rudd Labor

i)                    Much to be treasured from the Gillard Leadership: and Rudd’s motives more complex than recognised by some Feminist critics

Recently I read an article claiming that the core issue behind Julia Gillard’s loss of the Labor leadership was a ‘boy’s club mentality’; that is put simply: patriarchy re-asserting itself…  (See:http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia/10148541/The-boys-club-always-wins-in-politics-Julia-Gillard-is-the-latest-victim.html )

I think, though, that things are more complex than the author of that article acknowledges. I agree that Rudd took advantage of the ‘blue tie factor’ in response to the Gillard speech. Responding to male resentment following Gillard’s recent speech on the threat to women’s participation in public life, it was a clever ploy – underscoring impressions Gillard was being divisive, and appealing to a mass male demographic which felt threatened by Gillard’s stand.  I agree this was a form of destabilization – and even if effective, it was the [ethically] wrong ‘symbolic tactic’. And I agree there have been men – powerful right-wing men – who have subjected Gillard to constant mockery in order to weaken her authority and credibility – and sometimes in the most debased and sexist form.   And that sexism still comprises a problem in parts of the broader electorate as well.

But this was also personal vindication for Rudd in a way that goes way beyond gender… If Rudd had been ‘done in’ by another man his bitterness was have been just as palpable. Arguably, there was also bitterness in the 'Rudd camp' because it appears Rudd as PM was removed at the behest of Australia’s powerful mining industry – after he had attempted to introduce a Mining Super Profits Tax to spread the benefits of our mining boom… As I’ve said before – both ‘camps’ in Labor tried to set a precedent.  Each side attempted a ‘political scorched earth’ strategy against the other – and that only escalated the division and crisis. That an accommodation and reconciliation was not achieved earlier led us to this point – with the caucus elevating Rudd as their ‘only hope’ due to his consistent ascendancy in the polls.

Importantly – the monopoly mass media in this country (largely controlled by Rinehart, Murdoch etc) exploited the internal conflict to destabilise the ALP.  But now that Rudd has returned he is enjoying a ‘honeymoon’ courtesy of previous ‘oxygen’ he was provided by that very media establishment… But will the media continue to ‘give Labor a fair go’ now?  Some are talking of Rudd reforming the compromise mining tax we ended up with – But what chance of this with Rinehart dominating the traditionally (and still relatively) liberal Fairfax media assets?

IN the final analysis, though, Gillard deserves credit for pursuing education reform, implementing disability insurance, promoting a better deal for low paid workers (mainly women) in the community services sector and elsewhere, and improving diplomatic relations with China. Though there were bad policies too: Sole Parent Pensions reduced; Disability Pension eligibility narrowed etc… Recognition of all this is part of the answer for future healing in the ALP – for the same reason that the former Labor leaderships’ past attempts to ‘airbrush’ the Rudd governmentt’s prior achievements only escalated and deepened the internal conflict… And in any case Gillard DESERVES recognition for her policy achievements under the most difficult circumstances of minority government…

Here’s hoping Labor now has a chance of fending off the prospect of an Abbott Liberal Government – which could be the most right-wing government we have had in decades should it come to pass…

ii)                  Conclusions: Possible Election-Winning Rudd ‘Policy Fixes’ as the ‘Day of Reckoning’ Draws Nearer

above:  Will Rudd take the Opportunity for Bold Reforms that take the Fight to Abbott?

Superannuation Concessions Reform to pay for ETS reversions: and Tax Breaks to pay for wage cuts flowing from Superannuation Increases

To go early? Or go later and maybe reconvene parliament?

I believe it would just be good for Rudd to "get some reforms under his belt" before the election if possible; including restructuring the tax and spending mix in such a way as to pre-empt Abbott... (For example: if we remove superannuation concessions from the wealthy and the upper middle class to pay for winding back the carbon tax to an ETS...)  If we don't do this and Abbott wins - he can use fiscal pressures as a rationale to wind back social expenditure and welfare. So if possible we should get the reforms in place while taking away the Abbott excuse/rationale for austerity. Getting 'reforms under his belt' could also give Rudd more credibility - a concrete indicator of the direction he intends to take Labor should he win the election.

Not to mention we should have an interest in distributive justice for low and middle income Australia regardless of pragmatics. In 2012 Dr Richard Denniss of the Australia Institute argued that removing superannuation concessions from the top 5% would save over $10 billion.   (See: http://www.abc.net.au/worldtoday/content/2012/s3568235.htm )

Meanwhile, today that figure would be significantly higher: and targeting the top 10% demographic would presumably bring in much more.  

So not only could this money pay for an early reversion to an ETS. (which is a very regrettable political imperative)  The removal of subsidies/concessions for the wealthy and upper middle class could pay for an expansion of the Clean Energy Fund. And it could also pay for improved welfare - and make room for tax cuts for low income groups to overcome the effect of the increase to 12% superannuation contributions for these already-struggling families.   

To clarify on superannuation: veteran Fairfax journalist Ken Davidson made the point in 2010 that those on low incomes cannot afford to lose disposable income.  And he has pointed out that the extra employer contributions will largely be ‘swallowed up’ as bosses hold back on wage increases.  (see: http://www.theage.com.au/federal-politics/political-opinion/super-rise-no-blessing-for-workers-20100516-v6az.html )

Davidson is right that today the superannuation industry comprises a private pension system – where risk is privatised – and within a highly inegalitarian framework.  While the Aged Pension was once a great leveler – in the future retirement income will be greatly stratified and effectively discriminate against women, and low income, part-time and casual workers.  The Aged Pension itself faces potential future marginalisation as a second-class, residual system. 

And as Davidson notes there is growing pressure for governments to privatise their remaining assets by selling them to the superannuation funds.   This is presented as saving governments from the need to invest in future infrastructure. But what would the ultimate consequence be?

There remain potential problems, here, even where those funds are union-controlled.  There is the potential that they may increasingly comprise ‘corporate interests’ – which pursue their own particular interest rather than the general interest. 

As the important socialist thinker Eduard Bernstein pointed out as far back as the 1890s - as the “mistress of a whole branch of production” even unions theoretically have the potential to  become “a monopolist productive association…antagonistic to socialism and democracy…”  Here,  “Associations against the community are as little socialism as the oligarchic government of the state.” (Bernstein; pp 114-119, pp 138-141)    Of course there is a difference between Bernstein’s example here, and that of Australian unions – but the theme of general versus particular interest is the same. (the answer, of course, is natural public monopolies where appropriate)

Referring to the Superannuation Industry, Ken Davidson wrote for the Sydney Morning Herald in 2012:

“Specifically, the superannuation industry has its eye on existing water, road, rail and port assets, which are largely monopolies with assured income streams. To reveal what is at stake, assume that, as state monopolies, these assets earn 5 per cent on capital for the government and would be expected to earn 10 per cent on capital for private investors… This means that the assets worth $100 billion on the government's books, would only be worth $50 billion to the private operators if the prices for the services remained the same. The government might get $100 billion for the assets if it allowed the new owners to double prices for the services.” (Read more: http://www.smh.com.au/federal-politics/political-opinion/its-about-time-super-funds-stepped-up-20120729-235y4.html#ixzz2YFLdAnnr )


It is too late to substantially alter Labor’s 12% superannuation promise, and too difficult to sell Davidson’s complex message to the electorate on the eve of the election. Especially when Labor has been selling this policy unequivocally for so long, and many of our supporters are convinced it is ‘free money’.

But the government has options in creating a more egalitarian system.

Again this should involve cutting superannuation concessions for the wealthy and the upper middle class – which could bring in well over $10 billion. (I have no modeling beyond Richard Denniss’s figures ** – but extrapolating from that a minimum of $15 billion seems credible for 2014) And using some of those proceeds, in addition to paying for an early reversion to an Emissions Trading Scheme, and an increased Clean Energy fund - it must also mean further restructuring of the tax mix. Further, it should also involve easing of means tests for some partial self-funded retirees. And what is more, this could involve another real increase in the Aged Pension, and improvements in social wage benefits for pensioners of all kinds. This should include improved cost-of-living subsidies (energy, water), and free or discounted access to the NBN and public transport. Finally, here, the funds released by superannuation concession reform could be ploughed into infrastructure and completely bypass pressures for privatisation.

Concluding, though, the most industrially strong unions could attempt to hold onto their share (ie: the labour share) of the economic pie – even in the context of increasing superannuation contributions from employers - but also in the hope that this could occur in the context of a squeeze on profits, rather than a squeeze on consumers. Whether or not this happens also depends on how profitable and how competitive the economic sectors in question are. Competitve sectors with lower profit margins would have little room to move.

The election is far from over; and neither are Labor’s policy options exhausted even at this late point in the electoral cycle. Let us hope Rudd Labor governs and reforms in the interest of justice and equity for most of what remains of 2013 – and that the consequence is another reforming Labor government.

References:

Allison Pearson from ‘The Telegraph”

http://www.telegraph.co.uk/news/worldnews/australiaandthepacific/australia/10148541/The-boys-club-always-wins-in-politics-Julia-Gillard-is-the-latest-victim.html

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

Ken Davidson at ‘The Age’ and the SMH::

http://www.theage.com.au/federal-politics/political-opinion/super-rise-no-blessing-for-workers-20100516-v6az.html )

http://www.smh.com.au/federal-politics/political-opinion/its-about-time-super-funds-stepped-up-20120729-235y4.html#ixzz2YFLdAnnr )

** Denniss argues removing superannuation concessions from the top 5% income demographic alone could bring in $10 billion in 2012; For my purposes I am assuming the top 10% should be targeted in the reforms I am suggesting.

Fighting the recession - The rights of the needy

Debating the Stimulus

This February, Kevin Rudd’s Labor Government passed a formidable stimulus package through the nation’s parliament amounting to $42 billion. Included was money for social housing, school infrastructure, and home insulation. Without going into detail, this stimulus provides a good start in minimising the global recession’s domestic impact for Australia.

Perhaps, though, it does not go far enough. As veteran economics journalist Ken Davidson explains:

The collapse in private-sector demand must be replaced by a corresponding increase in government spending to avoid lower economic growth and higher unemployment.

On this basis, the $42 billion package introduced to the Parliament by Treasurer Wayne Swan was about half that necessary to sustain non-inflationary growth without rising unemployment over the next four years.

Finance Minister, Lindsay Tanner, meanwhile, has argued for a cap on new spending of “2 per cent of GDP” (some what in excess of $20 billion).

Considering the substantial share that welfare reform should comprise in the upcoming Budget, surely there is scope to provide for other initiatives beyond this “self-imposed cap” (many of which, in themselves, would contribute to economic stimulus.)

Options include building the National Broadband Network, modernisation of public transport, more ambitious social housing programs, and essential infrastructure in areas such as water and renewable energy.

Also, regardless of abstract economic principles, there are many other areas which are central to our real quality of life. Such areas include: more hospital beds, quality of aged care, better nurse to patient ratios, universal provision of health care including dental health (socialised-medicine and not-for-profit community providers), support of public, participatory and community broadcasting and media; provision for community groups, education programs and public libraries.

Of course, some of these might not be able to be realised quickly enough to provide the immediate stimulus we need. But considering the possible depth and length of the recession, such measures could nevertheless be integral to our response. Failure to invest in infrastructure and education now will impact negatively on productivity and capacity into the future and will feed into a “recessionary spiral”.

A global crisis

Around the world governments are facing the reality of financial and economic collapse. Critically, reflating unsustainable speculative “bubbles” - whether in housing or elsewhere - is not the answer.

In a ground-breaking essay on what he calls the new “global social democratic consensus”, Walden Bello supposes the financial meltdown has critically discredited the neo-liberal ideology. For years, the systematic stigmatisation of socialism and social democracy has been so entrenched that even the most progressive voices had to compromise with the neo-liberal ideology in order to be taken seriously. But today Bello believes there is a “fluidity” unknown for the past half century or more. Bello supposes a new global economic order, promoting equity, as well as environmental and social conditions upon trade. And yet he also believes that Global Social Democracy (GSD) needs to orient itself towards further democratisation of economic decision-making.

But Bello is uncertain what the ultimate consequences here will be. He queries:

[Will] government ownership, intervention, and control be exercised simply to stabilise capitalism, after which control will be given back to the corporate elites?

Fred Mosely, writing for the American economics journal Dollars and Sense supposes a role for “tax-payer friendly bank nationalisation”. Socialised banks could then be run “according to public policy objectives” rather than private profit maximisation. In this he includes affordable housing and green energy.

Furthermore: unbound from the short term imperative of maximising profit, Mosely holds that nationalised banks would invest responsibly - rather than feeding speculative debt-induced bubbles.

An Australian response could be to promote a “mixed” banking sector. Such a sector could include a public banking enterprise which would provide real competition along the lines of the former Commonwealth Bank. Such developments might also mitigate tendencies towards oligopoly and collusion. And profits could be re-invested to benefit customers and workers.

Furthermore, deep tax breaks and assistance could be provided for democratic credit unions. Such enterprises could provide substantial relief from fees for members. In tandem with socialised banking, over time, they could come to cover a dominant portion of the overall sector.

Despite the current crisis, though, in a new economy there will still be a need for financial markets: to “mobilise savings”, “allocate capital” and “manage risk”.

But risk, here, needs to be transferred to those most able to afford it.

In the United States, vulnerable poor and working class American families were the victims of predatory and irresponsible lending practices.

Where “the market” did not provide for such people, this is no fair rationale for exclusion. Instead, social housing ought to have “filled the gap” which was not bridged by the markets. In Australia, such an increase in supply would also have provided a counterbalance to any speculative property bubble.

In Australia, and elsewhere, housing markets were characterised by over-valuations which were destined to end in bust. As Australian interest rates rose, scores of mortgagees experienced extreme stress in servicing their debts. This also impacted upon consumer confidence.

On top of the current catastrophe, Walden Bello supposes there are about 4 million US “sub-prime” mortgages that will go into default over the next two years. These are the people the Obama-led US government must assist as a matter of moral urgency.

Regardless of any legitimate role, it is clear that the finance sector has become “decoupled” from the “real economy” and has a largely wasteful, parasitical function.

As Ramas Vasudevan notes in Dollars and Sense: “The profits of the financial sector” (in the US) grew from “14 per cent of total corporate profits in 1981 [to] nearly 50 per cent” in 2001-02. This growth of the finance sector was also matched by an explosion of debt, in private households, businesses, and in government, which “rose from about 1.6 times the United States’ GDP in 1973 to over 3.5 times GDP by 2007”.

Debt finance is a legitimate means of building the kind of infrastructure which can support increased productivity, capacity, and sustainable improvements in material living standards.

But where debt accumulates unsustainably, or where “bubbles” promote an “on paper” economy without an anchor in real production, the system ceases to be viable.

Considered only on a private level (the sum of household and business debt - including corporate bonds), the ratio of Australian debt to GDP - according to Steve Keen - has been building for many years - to peak, at the time of publication,  at 177 per cent.

“Corrections” are inevitably painful - and the current meltdown demands a far more robust and direct role for government in minimising impact of cyclical economic crises in future.

Private pension funds such as superannuation, meanwhile, carry too much risk for ordinary retirees: risk could be better spread and managed through a public system.

Responses to the global crisis

There are other problems which go to the heart of the capitalist world economy. One such failing inherent in the capitalist system is what Marxists call “over-accumulation”.

As Bello explains it, capitalism develops “tremendous productive capacity that outruns the population’s capacity to consume owing to income inequalities that limit popular purchasing power”.

Again: this manifests as a “recessionary correction”, which neo-liberal purists suppose is a necessary, and in fact desirable, process.

Even in the face of recession, though, there are many - such as the wealthy and those with secure employment - who will not bear the brunt of the crisis.

Further, such is our productive capacity, even accepting that unemployment will rise, we have the means to act in social solidarity with each other.

Because those on lower incomes generally spend a greater proportion of their income on domestic consumption, tax and welfare reform in their favour can provide the economy with greater buoyancy, while also providing for human need.

There is no need for Australians to face the kind of destitution widespread in the Great Depression of the 20th century. It is a matter of whether or not government has the political will to do what is right.

It is also a matter of whether or not the people will stand up for justice.

An Australian response

Taking the scenario of unemployment rising by an additional 300,000 by mid-2010, it is worth asking: how can such structural impositions on the Federal budget be sustained without tax reform?

Again: Tanner’s “2 per cent cap” on additional expenditure - taken as a ceiling of $20 billion - is probably insufficient if taken in addition to the cost of welfare reform. And given the long-term benefits of investment in education and infrastructure, there are solid arguments in favour of greater expenditure here and now.

While Labor might hold off on increasing taxes now - to maximise the stimulus - in the long run the Government must act. Tax reform is necessary to sustain the Australian welfare state and to provide critical services and infrastructure, which are key to our economic and human needs.

A global effort - a flawed system

In both the short term and long term - global co-operation is required to breathe new life into consumer demand, global liquidity and investor confidence.

Standards need be set to ensure that events such as the US “sub-prime” disaster are not repeated. Prudential regulation and a substantial role for credit unions and public banking can assist here.

And globally - widespread nationalisation must provide public benefit in proportion to the public cost of “bailout” commitments. A democratic and mixed banking sector should emerge as one positive and lasting legacy.

Finally, the stimulus effort must be co-ordinated as well as global. This must include investment for the future - in the kind of social programs and infrastructure which will provide the foundation for future growth. With future growth, debt incurred from such interventions can be serviced sustainably.

Recovery, though, could be a long and painful process - perhaps lasting years. Such is the scale of the catastrophe, and of the necessary process of adjustment: there is no easy way out.

Capitalism remains a flawed system: a system characterised by exploitation, cyclical crises of over-accumulation and waste; crises of over-production, and concentration of economic power in the hands of a few.

“Free trade” is extolled as a virtue: and yet workers are denied what are among the most basic rights of all: to withdraw their own labour. It is a system where human - and environmental - need is consistently given a “back seat” in favour of accumulation as a “principle in itself”.

And yet these flaws need be considered alongside the right for ordinary people to invest the proceeds of their labours as they will and the innovations which spring from competition.

As Labor considers its next course of action leading to the upcoming Federal Budget, commentators and politicians should not be reticent in condemning the deep flaws of neo-liberal capitalism, and in suggesting progressive alternatives.

But such is the power of the dominant ideology, most cannot imagine a future without “capitalism”, whatever they may conceive it to be.

Nevertheless, we need alternatives which - as Habermas might explain it - place the “life-world” of human and environmental needs ahead of abstracted economic “systems”; which minimise exploitation by investing economic and political power in the hands of ordinary people; and which avoid destructive and parasitical speculative practices.

Whether we call it “Global Social Democracy”, “democratic socialism”, or something else - the need for change is immediate. The time for change is now.

by Tristan Ewins

Infrastructure, taxation, stimulus: Tanner caps tax and expenditure

This article concerns caps on expenditure and tax - mooted by Labor Finance Minister, Lindsay Tanner... Browsers are encouraged to read and discuss.

For further analysis of Labor's stimulus and the recession - also see the immediately prior entry: Debating the Stimulus - and the rights of the needy

Labor Finance Minister, Lindsay Tanner has 'ruled out' any increase in taxation to service debt as a consequence of the government's $42 billion stimulus package.

Furthermore, the Minister has ruled out any additional expenditure beyond a 'cap' of "2 per cent" until the Federal Budget is again in surplus."

The conservative Opposition, meanwhile, has criticised Labor's stimulus package as landing future generations with the cost of servicing debt.

Such claims comprise a cynical attempt to 'posture' politically for the future - with no concerns for the needs of workers, families, pensions - in the here and now.

In light of the enduring benefit to future generations from the infrastructure we build now, Turnbull's posturing appears all the more so absurd.

But there are significant questions, also, which arise with Lindsay Tanner's 'self-imposed restraints'. For instance - what does a '2 per cent cap' refer to? Does it refer to 2 per cent of GDP? (somewhat over $20 billion?)

And what would be the consequences of this for welfare reform, as well as new infrastructure programs - such as a public 'National Broadband Network'; or massive investments into renewable energy?

Setting a minimum standard for single pensions of 30% of Male Average Total Weekly Earnings (MATWE); just what kind of budgetary comittment will this require into the long term?

Assuming Labor borrows in order to get broadband 'off the ground' - what kind of commitments will be necessary to service this debt into the future? Here, even 'part-private monopoly' is undesirable. Therefore, it is worth asking: what would be the costs of funding such infrastructure fully with public funds?

Taking the scenario of unemployment rising by an additional 300,000 by mid-2010, how can such structural impositions on the Federal budget be sustained without tax reform?  

If we are to see meaningful welfare reform, including provision for hundreds of thousands of unemployed, there must be cutbacks elsewhere; or otherwise there must be an increase in progressive taxation.  The only other option is to let pensioners 'bear the brunt' of austerity.

Regardless of this, one option is to 'do more with less': restructuring the taxation progressively around the current base.  In so doing, Labor could provide greater assistance for low-income earners.   Here, means tests for pensioners could be eased - effectively cutting back on tax - while making up for the shortfall by increasing rates at the higher end of the spectrum.

Because those on low incomes generally spend a greater proportion of their income on domestic consumption, such moves could provide the economy with extra buoyancy.

But even this would be insufficient for those overwhelmingly dependent upon their pensions.

In the long run, Labor's commitment to hold taxes down is irresponsible. It is a policy which is driven by focus groups and polling.

Who knows when - or if - Australia will return to the kind of minerals boom which allowed for our dependence on Company Tax receipts under Howard?  Systemic restructure is necessary to maintain - let alone expand - the tax base.

Given extraordinary circumstances, Labor would be better advised to place a cap of no less than 4% of GDP on additional annual expenditure - with an expansion of the total tax base by 2%. 

The dilemma faced by Labor is encapsulated well by veteran columnist, Ken Davidson, in a column in 'The Age' for February 16th.  

Mr Davidson supposes the need for an even more robust package than would be allowed for by a 4% cap on additional expenditure.

As Davidson explains:

"The collapse in private-sector demand must be replaced by a corresponding increase in government spending to avoid lower economic growth and higher unemployment.

Rationally, the problem is the size of the hole that will be left by the collapse in private spending. This should dictate the size of the stimulus needed to fill the gap and avoid growing unemployment.

On this basis, the $42 billion package introduced to the Parliament by Treasurer Wayne Swan was about half that necessary to sustain non-inflationary growth without rising unemployment over the next four years."

Clearly an even more formidable stimulus package is necessary to sustain growth.

Interestingly, though, Davidson holds that it does not therefore follow that taxes must rise.

This is hard to understand - and is confusing given Davidson's usual support for tax reform, and an expanded social wage.

Ultimately, social democratic governments are elected to enact just and progressive social reform.

This means: improving public education, transport and health care; providing communications infrastructure and participatory social media such as with the ABC; providing generous and just welfare; ensuring decent and humane care for the frail and vulnerable; 'bridging the gap' in indigenous health and education; promoting public pension funds - which minimise individual risk; promoting economic democracy through tax subsidies and low-interest loans for co-operative enterprise, mutual societies and the like.

Excellent infrastructure and services ultimately come at a price - even regardless of the long term benefits they provide.

While Labor might hold off on expanding overall tax now - to maximise stimulus - in the long run the ALP must 'deliver the goods.' 

Failure to do so could see Labor left behind - as the social democratic mantle is taken up by the Greens: and/or other parties of the Left.