Labor Culture at a Senior and a Student Level

above: what's wrong with ALP culture?

Nb: the following is an intervention regarding the culture of organised factions on the Left and Right of the Australian Labor Party. (ALP) It considers the perspective of student politics and the observances the author made when he was involved in that context many years ago. But all the observations are of relevance for the broader labour movement and ALP as well…

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By Tristan Ewins

Rivalry between the factions in the Australian Labor Party (ALP) often gets in the way of productive dialogue on issues, values and strategies. Early on young Labor activists are encouraged to become part of an almost 'tribal' culture. The result is entrenched and inflexible positions and rivalries; a lack of engagement.

But along the way in the 1980s and 90s Labor 'lost the plot'. Some leading parliamentary figures from the ALP Right painted a picture of the Left as stuck in a ‘state socialist rut’. According to this interpretation anything apart from the most minimalist position on the role of the state left one branded a ‘statist’. But in the 80s and 90s it was the traditions of mainstream social democracy that the party lost sight of. Privatisation and tax cuts became ‘the answer to everything’, and gradually – over many years – the party lost sight of its commitment to a mixed economy; a fair labour market & the dignity of labour; a fair tax system and social wage – based on principles of social justice, compassion and redistribution.

For my own part there is also today a commitment to economic democracy, participatory media, liberal education and active citizenship – But I want to focus here on the way Labor traditions and identity were ‘emptied out’ – including in the Left.

Today the Left is also losing sight of past values and traditions: and a mix of liberal multiculturalism and equal opportunity – while important – are not enough to fill the void. The electoral challenge posed by the Greens, and their mobilisation of an important part of Labor’s traditional membership and electoral support bases are making some sit up and take notice – but there is little recognition of the need to reclaim our traditions and values in response.

And yes Labor does need to balance an electoral support base involving more internal contradictions than do the Greens; but we have all but walked away from most issues of social and distributive justice, including the class interests of our core supporters.

ALP National Conference is still highly-stage-managed and considered non-binding, and there is little scope for real grassroots mobilisation and influence despite any rhetoric to the contrary. The Labor grassroots are withering as attempts to control the tenor of debate leave many disillusioned, sidelined, frustrated.

To begin, we might like to start making a changes at the level of student politics. Being a PhD student I think I’m in a position to put some positions based on past experience in the 1990s. So many people learn the ‘factional ropes’ of patronage and tribalism early on.  The intensity of the 'tribal' influence is used to discipline factional and sub-factional support bases.  This culture is fostered at the expense of grassroots activism and engagement on the level of ideas between ordinary members across factional lines.

To promote a shift in culture at the senior party level, at a grassroots and student level – across factional lines - we need to develop an activist culture; a culture of engagement; a culture which draws from Labor’s social democratic, social liberal and democratic socialist values and traditions. And we need a vision for social justice that is deeper than educational equal opportunity. (valid but on its own not enough) But by reproducing the culture of tribalism and patronage we instead often become part of the problem.

A good place to start bridging the gap between the factions is to encourage rigorous debate on values; but also a realistic appraisal of how such values might be applied in policy, and in various levels of mobilisation in the party, the broader labour movement, and other social movements.

The commitment of the Labor student Left to free education is often put forward as a defining distinction between they and Student Unity. (ie: the relatively right-wing faction) In terms of values – providing free education is an admirable objective. Education – after all - is more than a commodity.

Assuming the ambition of progressively broadening the tax base by as much as 1.5% of GDP over the course of each term of reforming Labor government, though – with the aim of improving the social wage – what are our priorities?; How much can we achieve, and how soon?

As well as free education, then, we have welfare reform for the unemployed, the aged and the disabled; a National Disability Insurance Scheme for both recipients and carers; provision of quality Aged Care for all with the need; investment in public primary and secondary education; investment in public housing with the aim of boosting supply and making home ownership affordable again…

Then there’s the need to make water and energy affordable for all. (possibly involving strategic re-socialisation) And there’s dental care, the mental health crisis, ‘closing the gap’ for indigenous peoples, and tackling climate change – including through investment in renewable energy and public transport, and through smart urban planning.

And there’s the claim by women unionists in the community services sector for fair pay, and against effective gender discrimination in the labour market. Reform here in the community and public sectors would involve a serious amount of money.

Even with an inflow of approximately $15 billion of new revenue every year (in the context of an economy worth well over $1 trillion) we couldn’t achieve all of this in one term of Labor government. We could only achieve all of this over the long term; with sustained reform of tax and the social wage. (Although there’s an awful lot we COULD achieve with that kind of money as well!!)

That said – assuming all these priorities – what kind of policies for reform in higher education are achievable – desirable in the ‘big picture’ of a medium to long term vision for reform? And where do we begin the journey – ‘right here and now’? When we consider competing priorities – for instance the indignity and suffering experienced by many in Aged Care – it is clear that some issues take precedence.

Instead of free education ‘right here’ ‘right now’ the Student/Youth Allowance is a critical area. The insufficient nature of the payment forces students to take up part-time work; and this can detract from studies – in which the community and individual students have made an investment. So increasing the Student Allowance is critical.

Then there’s HECS. HECS was originally introduced to finance a massive expansion of higher education. But since its original incarnation it has become ever more regressive. Repayment thresholds have gradually lowered in relative terms – and regardless of any real financial gain in the labour market. And the level of student contributions has also spiralled out of control beyond that imagined by those who originally established the policy.

On the other hand – HECS is like “a tax you have without having a tax”. Structured correctly, it could have the same effect as progressive taxation; while slow and strategic increases in progressive taxation elsewhere could fund other crucial priorities. So it’s the tiers, thresholds, and level of contributions that need reform for the here and now – rather than an absolute withdrawal of the entire policy.

These are the kind of areas where we need dialogue ‘across factional lines’. Movement on these fronts isn't likely without a change in party culture; and that means we need figures in Unity to take the lead in changing our agenda and culture as well as figures in the Left. And we need to start from the premises that we are all in that spectrum that ranges from Centre-Left to Left; and in this we have common purpose.

We also need recognise that electoralism alone is not sufficient. What is needed is ‘movement politics’: mobilising a cross section of social forces - unions, progressive parties, social movements and lobby groups -in support of a reform agenda.

So ‘right from the word go’ we need to recognise that back-room deals and back-stabbing are not going to deliver reform. A disciplined alliance of party activists, social movements, lobby groups and organised labour on the broad Left/Centre-Left need to co-ordinate their cultural and electoral efforts with a shared long-term plan for reform until all joint aims are achieved via mobilisation and solidarity.

Consider for a moment at the student-political level in Australia - What’s really most important in the big picture, then?: This cultural struggle or ‘who gets NUS (National Union of Students) President’? That I even have to pose that question is indicative of the problem that demands the attention of us all…

Tristan Ewins is a PhD student, freelance writer, and veteran ALP activist; He maintains this - the 'Left Focus' blog

What our Fathers did not tell us about the Economy– Economic liberalism is post-Soviet Russia

above: 'progress' in the new Russia

In this submission by Russian political economist, Boris Anisimov (translated from Russian to English), the author considers the pitfalls of economically liberal capitalism as experienced in post-Soviet Russia. While command economies could be deeply flawed, it seems the indecent haste in adopting a Western economic model in Russia has involved an abandonment of those insights from the Marxist tradition which remain crucial. For our Western readers this contribution provides an appreciation of a perspective we are rarely exposed to…

by Boris Anisimov   (edited by Tristan Ewins)

In my previous articles, I have expressed quite unequivocally my indignation that market fundamentalism had been accepted by emerging economies as the official economic ideology. As years go by, it becomes evident that the reckless opening of developing, and thus still fragile economies was serving the purposes of countries which have many decades, if not centuries, of deliberate protectionism to their names.

For this post, I am going take Russia, my home country, as an example again, but what I am going to address now relates to many developing countries and even to some of the developed ones.

The younger post-Soviet generations raised by TV commercials and glossy magazines appear to be at a loss as to what is happening to the global economy. As they grow older, a large portion of them begins to realize that, with the way things are going economically, their adult life will be no picnic at all. The temporary euphoria of the boom years has faded, but no new hope has come. Most young people do not see any light at the end of the tunnel, and this hopelessness acts as nationalist street gangs' best recruiter.

The economic reality does not match the elegant theories meticulously translated from English-language economics books. Economists recognize the existence of the massive gap between the prosperity of the economically-advanced countries, and the utter devastation of their own economy. But as they attempt to identify the underlying causes, they fall back on the same theories that made that devastation possible in the first place. The years of new post-communist economic propaganda have certainly left a trace, but very few realize that this trace only leads to destitution.

The ironic thing is that some of the answers to today’s most fundamental economic questions these young people of my generation might have can be found in what our fathers eagerly put on the shelf of history: i.e. political economy. In Soviet times, political economy was sometimes compromised in supporting the government of the day - and, as a result, was unsuitable for meaningful economic analysis. The numerous economic crimes committed in its name have discredited political economy in Russia. The desire for material possessions and comfort combined with unceasing, aggressive advertisement of consumerism fostered a new culture unwilling to heed the lessons of the past.

In that frenzied strive to pull themselves out of poverty and despair, our fathers forgot to pass to us the knowledge that they did possess back then, but considered irrelevant because they did not know how to improve their lives with it.

So these are some of the things about the economy that our fathers did know but did not tell us:

1. Our fathers did not tell us that no market can be 100% free. Even though, with reservations, some markets back in the days were close to that ideal, most economies have never become free of any governmental influence. Look at 19th-century Britain, considered by some the “cradle of free-market capitalism”, where the government did not interfere with market forces directly, but was the generator of a significant portion of the solvent demand on local markets by means of spending up to a quarter of the country’s budget on the famous Royal Navy. I hope it is clear what financed numerous orders with local entrepreneurs and craftsmen and made up for embezzlements by navy and treasury officials – the plundering of colonies did.


2. Our fathers did not tell us that market is only a mechanism for distribution of material and financial resources within the economy, not a panacea for economic problems nor a condition for economic development. Markets work when there are resources to distribute, not when an economy is resource-barren.


3. Our fathers did not tell us that any development of a capitalist economy is only possible with massive concentration of capital. Only countries that see significant inflows of material and financial resources for an extended time can show ‘miracles’ of economic and social development. Technically, it does not matter where that capital should be coming from: foreign demand for local products, investment from other countries, an issue of money backed with national debt, foreign debt, the plundering of colonies, etc. No economy whose capital is being drained out has a chance of pulling itself out of the gutter. If the local solvent demand is low and does not generate sufficient profits, while access to foreign markets remains limited, such an economy is doomed to debt slavery and living from hand to mouth by selling raw materials.

4. Our fathers did not tell us that capitalism requires constant growth. If no further growth is possible for whatever reason, capitalism starts falling apart at the seams and looks for ways to expand by force regardless of how many thousands of human lives that expansion is going to ruin.

5. Our fathers did not tell us that a bourgeois democracy is a democracy of the rich only. Figuratively speaking, the poor are never invited to the party in the first place. It is fat cats that make decisions in corridors of power, in corporate offices of industrial giants as well as on trading floors of stock and commodity exchanges.


6. Our fathers did not tell us that social development is based on economic development and comes with a hefty price tag - which the impoverished masses cannot afford. Reforms get easily stalled when there is no one willing to foot the development bill. Besides, it turns out that mentality comes with a price tag too. It is not enough to adopt a new law or start one more bureaucratic initiative to effect positive changes in the way people think. Revolutionary ideas and innovative breakthroughs will require a substantial economic foundation and enormous expenditures. A civilized society with the rule of law and respect for a fellowman's property rights is never possible if it is only a minority that has any property and rights.

7. Our fathers did not tell us that political freedom does not guarantee prosperity It is one thing to have one's freedoms inscribed on an official piece of paper decorated with coats of arms and sprinkled with cheesy democratic slogans. But to exercise one's freedoms is quite another thing - especially when you are mired in abject poverty. The mighty golden calf opens up doors that will forever remain shut for the less fortunate. (Editor; I assume by this the author is suggesting some kind of corruption) Paying your way through red tape solves things faster, connections with the right crowd protect better than a court ruling, and expensive PR compaigns usually generate higher turnouts at polling stations.

8. Our fathers did not tell us that “business” and “economy” are not the same thing. The economy is a system developed by society to provide for their material and some spiritual needs, while business is merely the art of money-making and is only interested in financial returns at any cost. In prosperous times, businesses eagerly take what the economy can offer in order to thrive and proliferate. But when hard times come, businesses do not give a damn about the economy nor the society with its material and spiritual needs. They still care for returns, and that is true for both small and big businesses.


9. Our fathers did not tell us that debt can be an effective way of postponing crises of over-production by stimulating fictitious demand, which I define as solvent demand beyond the natural limit of consumption, i.e. beyond one’s means. As credit rates fall as a result of boosted money supply, the economy continues to grow and everybody is happy – until the next crisis breaks out.

Boris Anisimov

Boris Anisimov is a Russian political economist and writer

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Sport: The Last Refuge of Community in Our Society ?

above: Indigenous Australian football players

Firstly: Happy New Year both to regular and new readers. :)  The following article - our first for 2011 - is an exploration by past-contributor Geoff Drechsler - of the decline of community in modern society (especially Australian society)  - and of the potential place of sport in rectifying this.

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article by Geoff Drechsler

Revolutionary killjoy, Leon Trotsky believed that sport was an inappropriate diversion for the toiling masses from the erstwhile business of politics. Comrade Leon would be in a philosophical quandary if he ran his eye over 21st century Australian society. In our atomized society, we compete against our co-workers for the next step up the corporate ladder, then do a solitary Iphoned commute to get home. Under these circumstances - where we are more likely to live alone than ever before, organised sport may in fact be one of the last refuges of community in Australian society.

Now hold on - you’re thinking: 'what about the destructive front page rock star drug habits of professional football players?' What of the corporate machine that now ruthlessly markets sport ? And even the shameless genital exposure that seems a regular post match weekend event ? While all BBQ stoppers, they are far removed from the more 'middle of the road' Saturday afternoon reality for the suburbanites of the quarter acre block, where every weekend, people pull on a jersey, or guernsey, or goal attack bib together, whether slipping into full forward or goal defence. Think of another time when we work so tirelessly together, in unison, in an egalitarian way ? (And devote weeknights to it together so we get better at it as a team). Pretty much, we start participating as soon as we enter the school system too, whether we make the team or just have a kick around at play lunch, and the shared centrality of the clubrooms in our weekly ritual even offers a forum for community education.

In other aspects of our life, like the world of work, things have changed for most of us. Gone are the road crews and production lines that required us to work together as a team - with the need to get along over the long term in our “job for life”. "In" are the workstations where we work alone at our PC in a 9 to 5 world populated by individual performance assessments, individual work contracts - even eating lunch at our desk on our own…….

In parenting it is now rare to pass a crying infant around extended kin - who in the past all probably conveniently cohabitated under the same roof.  Instead we tough out the sleepless nights and greet the dawn on our own. To unwind, we retreat, alone, into the online world of the first-person shooter, PSP and online poker...  And yes - I know social networking is a form of interaction between people - but the intermediary is a soulless liquid crystal monitor.

While different sports certainly have an obvious social class bias (compare the down to earth 'Marngrook-ness' of AFL to the private school elitism of rugby union), all still encourage a togetherness that's quite alien to other aspects of our social life now.   (nb: 'Marngrook' was the name for the indigenous Australian game which many believe to have been the inspiration for Australian Rules Football)

Who would have thought that a whole lot of guys sitting around in the nude, drinking stubbies together on a Saturday afternoon, could be a social movement ?

The other aspect of sport that reinforces the togetherness is the phenomenon of mass spectating that occurs in Australia. The MCG is one of the largest sporting arenas in the world (Old Trafford, Manchester United’s home ground, the crème de la crème of English Premier League, the biggest league in the most popular sport on the planet, only holds 75,000). So this is the other dynamic of sport as community, spectating or “barracking”. (What other language has the equivalent expression to Australian English’s “footy mate” ?) You only have to spend any time in a country town to see organised sport also operates in this way, where sporting fixtures offer those members of the community who don't participate directly, an opportunity to come together nonetheless, watch and socialise. And our glorious weather encourages both.

So cast your mind back to last October, when you were throwing another banger on the barbie last at a Grand Final party, or more recently watching the seeming (seaming ?) demise of the Australian national test team with mates, and take a moment to ponder that that might be your community.

Geoff Drechsler is a veteran Australian labour movement activist

Supported Wage System exploits workers with disabilities

Helen Said, an Australian socialist activist has written to us asking us to help an important "cause [become] better known around the Left."   Specifically she is concerned with "the issue of the 'Supported Wage System' which is embedded into most industrial awards."  As she explains: "The System involves paying a worker with a disability a percentage of the award, depending on how they measure up in a productivity assessment. The worker is then asked to enter into an "agreement" to work for a lesser rate of pay and regularly reassessed. Their pay can be cut at any time through such reassessment."  Helen believes this system is unjust; and the following article explains why... 

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submitted by Helen Said

The Supported Wage System allows employers to legally underpay workers with disabilities, depending on how they measure up in a DEEWR productivity assessment.

The federal government’s Job Access program portrays this ruling as part of a progressive package of egalitarian policies, like funding workplace accessibility improvements. The Job Access website describes The Supported Wage System as “a process that allows employers to pay less than the award wage by matching a person's productivity with a fair wage.”
http://www.jobaccess.gov.au/Services/A-Z_list/pages/Supported_Wage_System.aspx

The Centrelink Website further elaborates: “This system incorporates a process of productivity-based wage assessment. For example, if a person involved in Supported Wage System (SWS) is assessed as having a productivity level of 70 per cent compared to co-workers performing the same duties, the worker and the employer can agree to ongoing employment at a pay rate of 70 per cent of the normal rate.”

The Job Access website hails case studies of two workers with disabilities, who earn 70% and 80% of their respective award’s wages, as SWS “successes”. One of these workers was described by her employer as being “able to perform her duties with limited supervision, is reliable and is considered one of our best back area staff, able to cope with busy workloads and she demonstrates that she enjoys her job.”

Job Access further assures employers that “people with disability can have fewer accidents at work—the workers compensation costs for people with disability can be as low as four per cent of the workers compensation costs of other employees …. people with disability can have lower absenteeism and often take less sick leave than other employees …. employing people with disability can build staff morale, raise management awareness of workplace practices and conditions, and increase customer and staff loyalty.”

Yet these are not the attributes that employers and governments consider in deciding how much to pay employees with disabilities. As described in numerous federal government worksites, including this Fair Work Australia report, the sole criteria in deciding how much a worker with a disability gets paid is productivity as measured by a DEEWR-contracted assessor.
http://www.fwa.gov.au/sites/wagereview2010/research/5_2010_diability_report.htm

According to this report “an employee assessed at 10 per cent capacity would have a minimum wage of 10 per cent of the relevant classification wage specified in the award.” This legalised work-for-pocket-money industrial legislation goes against the grain of the equality and deinstitutionalisation policies which operate in every other sphere of society. People with disabilities are being brought up to participate in all aspects of life as equals. Many marry and have families to support. Our industrial legislation on wage levels hasn't caught up. If anything it is going backwards.

Since its inception in 2005 approximately 5000 DEEWR productivity assessments have been carried out on workers with disabilities annually. The majority of SWS participants are male and aged between 15 and 25, mainly living in Queensland, NSW and Victoria. They typically have “intellectual learning disability,” and work an average of 20 hours per week, mostly as trades assistants or factory hands. Assessments of capacity between 40 per cent and 70 per cent are most common, and the average assessed capacity is 53.3 per cent.

Before undertaking an initial SWS assessment to determine the percentage of the award a worker will earn, the worker may be employed on a trial basis of up to 12 weeks for as little as $71 per week, with a possible extension of a further four weeks. This provision effectively grants employers the right to employ workers with disabilities on a casual basis at third world rates of pay, with no chance of ongoing employment, if these workers are deemed to have failed their “trial”.

Employees with disabilities are regularly reassessed by DEEWR “to ensure the employee’s level of productivity is accurately reflected in their remuneration.” But this has nothing to do with granting workers with disabilities incremental pay increases. In fact some workers with disabilities are having their wages further slashed after reassessment for failing to keep up with their employer’s productivity race. Even underpaid workers at sheltered workshops have had their wages slashed when they were brought under the SWS.

The union movement has largely accepted the SWS in the mistaken belief that it gives job seekers with disabilities a fair go. But the SWS sets up workers with disabilities for life long poverty and stigma, ignores the quality of their work, ignores their attendance and reliability as employees and fails to acknowledge the equal or greater economic burdens faced by workers with disabilities. Workers with disabilities need full protection under equal opportunities provisions, including provisions surrounding rates of pay. Any incentives needed to assist with their employment should not be granted at the expense of their wage levels.

Zombie Economics: How Dead Ideas Still Walk Among Us

above: the author - economist, John Quiggin

The following is a summary of a new book:  'Zombie Economics: How Dead Ideas Still Walk Among Us' - submitted to Left Focus by its author, John Quiggin.  John Quiggin is amongst Australia's most accomplished economists;  and a long-time critic of the dominant neo-liberal ideology.  The Global Financial Crisis has shown that something has to change; and Quiggin seeks to refute right-wing economic shibboleths once and for all.  His book is published by Princeton University Press. (more details below)

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Ideas are long lived, often outliving their originators, and taking new and different forms. Some ideas live on because they are useful, and become more so as they develop. Others die and are forgotten. But even when they have proved themselves wrong and dangerous, ideas are very hard to kill. Even after the evidence seems to have killed them, they keep coming back in zombie form.

If we are to understand the financial crisis, and avoid the kinds of responses that set the stage for a new and even bigger crisis in a few years time, we must understand the ideas that got us to this point. My book, Zombie Economics: How Dead Ideas Still Walk Among Us describes some of the ideas that have played a role in the crisis. They are

* The Great Moderation: the idea that the period beginning in 1985 was one of unparalleled macroeconomic stability;

*The Efficient Markets Hypothesis: the idea that the prices generated by financial markets represent the best possible estimate of the value of any investment;

* Dynamic Stochastic General Equilibrium: the idea that macroeconomic analysis should not concern itself with economic aggregates like trade balances or debt levels, but should be rigorously derived from microeconomic models of individual behavior;

* The Trickle-Down Hypothesis; the idea that policies that benefit the well-off will ultimately help everybody; and

* Privatization; the idea that any function now undertaken by government could be done better by private firms.

Some of these ideas, such as the Efficient Markets Hypothesis and Dynamic Stochastic General Equilibrium belong to the realm of technical economic theory. Others, such as Privatization are policy prescriptions, derived from these abstract ideas. Still others like the Great Moderation and Trickle-down Economics, are catchphrases for claims about how the economy works, or, at least, how it worked in the thirty years or so before the current crisis.

Together these ideas form a package which has been given various names: ‘Thatcherism’ in the United Kingdom, ‘Reaganism’ in the United States, ‘economic rationalism’ in Australia, the ‘Washington Consensus’ in the developing world and ‘neoliberalism’ in academic discussions.

It is clear that there is something badly wrong with the state of economics. A massive financial crisis developed under the eyes of the economics profession, and yet most failed to see anything wrong. Even after the crisis, there has been no proper reassessment. Too many economists are continuing as before, as if nothing had happened. Already, some are starting to claim that nothing did happen, that the global financial crisis and its aftermath constitute a mere ‘blip’ which should not require any rethinking of fundamental ideas.

A simple return to traditional Keynesian economics and the politics of the welfare state will not be sufficient. It is necessary to develop both theories and policies that respond to the realities of the 21st century economy.

The ideas which caused the crisis and were, at least briefly, laid to rest by it, are already reviving and clawing their way through up the soft earth. If we do not kill these zombie ideas once and for all, they will do even more damage next time.

The book can be purchased via the Princeton University Press website. 
See: http://press.princeton.edu/titles/9270.html

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland. He is the author of Zombie Economics: How Dead Ideas Still Walk Among Us, recently published by Princeton University Press.

for more info on John Quiggin see:  http://www.bing.com/search?q=John+Quiggin&src=IE-SearchBox&FORM=IE8SRC

Latest News: The Labor Party in the recent Victorian State Election seems to have suffered a massive swing against it and a conservative government now looks very likely. Labor figures are holding on to a slim hope that a hung parliament may be possible.  In the context of a swing against it of over 6% Brumby Labor needs to hang on to a swathe of ultra-marginals.  The 'wild card' in all this is 900,000 pre-poll and postal votes yet to be counted.  We'll be providing more commentary on this in the near future...

Last look at Labor and Greens Policies before the Victorian election

above: Does Victorian Labor Premier John Brumby have what it takes to win government for the first time in his own right?

The following article in an analysis of a number of Australian Labor Party and Greens policies which may be crucial to the outcome of the 2010 Victorian State Election; and the kind of legislative agenda that is enacted thereafter.  Crucial issues include social housing, aged care, and renewable energy. Feedback and opinions from readers are welcomed.  And if anyone representing the Australian Greens can provide more information re: modelling for the funding of proposed programs that would genuinely be welcome too!

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by Tristan Ewins


Greens policies for the Victorian State Election

On November 14th the ‘Sunday Age’ carried a feature regarding Greens policies for the coming Victorian State election. On the plus side these policies addressed issues that have been long-neglected – including by Labor. On the downside, Michael Bachelard doubted the affordability of the entire range of policies taken together.

As the Victorian State election approaches, this week we consider Greens and Labor policy in more detail.

In his article in the ‘Sunday Age’ Bachelard listed the following as Greens policies:


• subsidise low-income earners to pay increased power bills

• Increase health funding

• Reduce hospital waiting lists

• Build birth centres everywhere that needs one

• Increase mental health funding

• Fund mental health workers in schools, police stations, prisons

• Aged care for everyone who needs it

• $1 billion a year more for public education

• Free preschool

• Better pay for teachers

• No TAFE or school fees

• More for social housing

• $13 billion for more public transport

• Peak-hour trains and trams to arrive every 10 minutes

• Boost to legal aid funding, providing ‘justice for all’


Bachelard noted that few of these policies had actually been costed. Further, these policies are forwarded in the context of promises to actually cut tax in some areas: “with less gambling revenue, stamp duty and payroll tax”…

But on the other hand: “Taxes on carbon dioxide and electricity transmission would go up, though low income people would be protected from higher energy prices…”

Bachelard explains that the Greens are also assuming a national carbon tax (presumably implemented by the Federal Labor government) with significant funds “[flowing] back to the state”. ‘Wriggle room’ is also assumed in the context of a $43 billion state budget.

The critical question is how these strategies balance out on the budget bottom line if implemented. And with a swathe of new initiatives “holding the line” is not good enough. What would be needed is new revenue. And while Victoria can afford new debt so long as those debts are serviceable, dependence on debt-financing cannot go on forever.

There isn’t scope here for me to consider all the Greens policies listed by Bachelard, but we will look at a selection.

Firstly let’s consider Greens policy on public housing. According to Bachelard this Greens policy would involve a shift “towards social housing, including the construction of 29,000 more ‘affordable’ properties by 2014.” In the Bachelard article “professor of urban studies…Terry Burke” describes this ambition as “financially impossible to achieve”, with a price tag of “over $6 billion” (presumably for Victoria alone), putting “impossible” pressures “on the Commonwealth.”

In response to these claims, though: doing nothing is not an option. And considering the scale of the problem – neither are ‘half-measures’.

The crisis of housing affordability is amongst the worst of the Howard government legacies. The housing bubble has left a lasting impression not only for home buyers, but in the rental market as well.
Partly because of speculation encouraged by the Howard Conservative government, and partly because of undersupply, housing prices have spiralled out-of-control over the past decade or so.

And unfortunately – even considering an investment by Rudd Labor in public housing – Labor governments have not done enough.

In March 2010 ‘The Age’ noted that: “House prices in Australia climbed 13.6 per cent in 2009 alone after a decade in which they posted increases of about 170 per cent, according to the Australian Bureau of Statistics.” In the same article it was observed that Australia suffered a “current shortage of 200,000 homes and an annual shortfall of 60,000”, and that this “would balloon to 800,000 by 2020, if no reforms were undertaken.” http://www.theage.com.au/business/property/australia-faces-housing-affordability-time-bomb-developer-20100317-qdii.html

But assuming the level of investment suggested by the Greens was a ‘once in a generation strategic commitment’, replicated interstate and with the support of the Federal government, then it is reasonable to assume such a project would be worth the devotion of resources.

Notably, though: assuming maintenance of the relative effect on supply, lower but sustained levels of investment would need to continue thereafter over the long term – sufficiently as to keep pace with a growing population.

Even if a ‘once-off surge’ of investment reached the vicinity of $20 billion nationally, the crisis is genuinely such as to warrant it. Housing affordability must be a priority; and simply releasing new land at the urban fringe is not enough if government will not commit also to funding the necessary infrastructure.

Greens prioritisation of public transport is also admirable: but with a growing population and an inevitable degree of urban sprawl can new investment in roads be put off forever?

And it will be interesting to see the form power subsidies for those on low-incomes would take. One option could be to create ‘quotas’ for renewable versus dirty (but cheaper) energy. By allowing those on welfare and low incomes to draw fully from non-renewable sources, and by promoting ‘quotas’ of renewal energy use for others - an effective subsidy could come in to play. Perhaps further subsidies should be applied for those on welfare AND low incomes in the case of water as well.

In an area apparently not canvassed by either Labor or the Greens, it is also notable that cross-subsidies could be best applied in the context of a return to natural public monopoly in energy and water. Such conditions could also encourage better value for consumers generally.

Social-commentator Dick Nicholls, in a 2008 article noted how:

“In the corporatised New Zealand industry the wholesale price of electricity declined 17% in real terms between 1987 and 1997, but the retail price increased by 20%.” http://www.greenleft.org.au/node/39055

And in an Australia-specific example, Nicholls explains that:

“In South Australia, between 1994 and 2002, residential tariffs increased by 40%, with the state's regulator claiming that 20% of the total tariff was due to privatisation.” http://www.greenleft.org.au/node/39055

Even where efficiency gains have been delivered under private utility ownership, gains have been diverted to maximise profits and share value instead of flowing to consumers.

Re-socialisation of utilities under these circumstances makes sense: and there is a need amongst the major parties (including the Greens and Labor) to scrutinise and ultimately reject the neo-liberal ideology which rules out ‘natural public monopoly’ in order to maintain a ‘pure’ position on the theme of exclusively private markets.

So many of the policies canvassed by the Greens are crucial; but the final policy we’ll consider, here, is Aged Care.

I’ve already considered the Aged Care crisis at this blog elsewhere. Readers are welcome to consider earlier ‘Left Focus’ articles of mine at the following URLs:

See: http://leftfocus.blogspot.com/2009/02/avoiding-austerity-caring-for-our-aged.html

And also: http://leftfocus.blogspot.com/2009/02/another-look-at-aged-care-crisis-call.html

A ‘total package’ for Aged Care must include support for carers; mandatory heating and air-conditioning in all hostels and nursing homes, free dental care, as well as more staff and a better ‘staff mix’ – with more registered nurses, and better pay and conditions to attract these into the system.

Other ‘quality of life’ issues include privacy, and access to individual rooms; as well as: “access to the “simple pleasures”…[such as] parks [and] gardens. Access to television, music – and into the future access to information and communications technology (ICT) must be considered a basic right.

But the broad range of initiatives canvassed by the Greens would cost money – and lots of it.

Amidst all these issues, the bottom line is that crises involving an ageing population (with related health and welfare costs); and involving housing supply and insufficient urban fringe infrastructure – cannot be addressed without an increase in revenue. Increasing the retirement age is not fair, though – and the timid response to such proposals in Australia by the labour movement is mind-boggling.

A rising cost-of-living also demands welfare reform as well as further tax-rebates for those on low incomes. The best place to address this is at the Federal level, with progressive tax restructure, and vital grants flowing through to the states for provision of services.

If the Greens are serious about the reform agenda they propose they need to consider how these ambitions can be realised in the context of Federal and State government co-operation. To provide these kind of outcomes we need a progressively-structured increase in taxation nationally; rising for this term of the Federal Labor government in the vicinity of 1%-1.5% of GDP.

The Greens have the right kind of ambitions, and their policy writers look to have their hearts in the right place. But they need to be clear on how they are going to deliver. If any of their spokespeople are able and willing to elaborate on this, they are most welcome to do so via Comments at this blog.

Labor policies for the Victorian state election

Looking to the Victorian ALP website it appears that Brumby Labor is putting a lot of emphasis on Liberal costings, and the sustainability of their promise to slash Stamp Duty. The Labor line seems to be that Ballieu is making promises he simply cannot deliver; and that it is Labor who enjoy a 'proven history of fiscal discipline.'

In response on Stamp Duty, Labor is promising a targeted and focused (hence smaller) reduction of their own – tightly focused on newly-built first homes in regional Victoria. This is smart urban planning, also: as by focusing on the development of regional centres, pressure is lifted from the Melbourne housing market, while partly-containing urban sprawl. http://www.alpvictoria.com.au/news-events-media/news/baillieu-s-stamp-duty-hoax-will-break-the-budget/

Brumby Labor is also claiming to hold the ‘high ground’ on the environment; re-iterating their commitment to reduce emissions by 20% based on 2000 levels. As part of this commitment, Brumby Labor is emphasising their plans for a “staged closure” of the ‘dirty’ Hazelwood power plant. http://www.alpvictoria.com.au/news-events-media/news/baillieu-embraces-tony-abbott-s-climate-scepticism/

For the Greens these measures have not gone far enough; but the dilemma for voters is whether to ‘reward’ Labor in expectation this will encourage further action; or whether to apply greater pressure by supporting the Greens. There are issues of ‘electoral synergy’ between the ALP in Greens which I raised in the ‘Left Focus’ instalment immediate prior to this.

Meanwhile: with fear of violent crime spiralling, public transport safety has also become a major issue. In response to Liberal policies, Labor has committed to “returning staff to every station on the electrified metropolitan rail network” and “delivering a central CCTV control room that will make our trains safer for commuters.” Further Labor are promising to “fund 100 additional Transit Police for a total of 350 across the network.” http://www.alpvictoria.com.au/news-events-media/news/ted-baillieu-reneges-on-pso-train-station-policy/

And yet today’s ‘Sunday Age’ (21/11/2010) – on its front page - exposes the fear campaign around violent crime as being founded upon false and exaggerated claims. While Victoria’s overall crime rate has fallen by 29.9% since 2000-2001, Victorians are being confronted with a “law and order election”. The Liberals imagine they could be swept to office upon a wave of fear; and Labor has done little to question this trend – for fear of inviting a backlash in the face of what for many is ‘indisputable’ and ‘common sense’.

The role of the media for cultivating these perceptions also needs to be scrutinised.


What is also notable is the extensive record of Victorian Labor when it comes to support for Public Private Partnerships. (PPPs) Columnist for ‘The Age’, Ken Davidson, has long taken Labor to task on just this issue, accusing the government of ‘fleecing’ the public. In March 2010 Davidson observed that “[according the the government’s budget papers] there are now $10 billion worth of public-private partnerships on Victoria's books as liabilities.” (approximately $4 billion of this related to the Wonthaggi desalination plant) http://www.theage.com.au/opinion/politics/lenders-fudges-facts-on-ppps-20100504-u71f.html

Davidson continued:

“On the assumption that the overall return to investors on these projects is a conservative 10 per cent, the cost to Victorians as taxpayers and water consumers will be of the order of $1 billion a year. Given that the government's AAA credit rating means it could borrow the same amount of money for an interest expense of $500 million… “Half a billion dollars could finance the interest expense on $10 billion - enough to transform Victoria's transport, education and health systems.” see: http://www.theage.com.au/opinion/politics/lenders-fudges-facts-on-ppps-20100504-u71f.html

Meanwhile -- Davidson’s proposed alternative

“involves piping water from north-west Tasmania that can supply the whole of Melbourne. This frees up 90 per cent of Melbourne's water from the Thomson and Upper Yarra dams.” http://www.theage.com.au/opinion/society-and-culture/not-too-late-to-stop-the-disaster-that-is-our-desalination-plant-20101010-16dxd.html


The trend towards Public Private Partnerships – which originally gathered pace under the Kennett Liberal government – has rarely been subjected to proper scrunity. Public debt finance has always been cheaper (this is usually the case for governments, and especially given Victoria’s ‘AAA’ rating); and provision for private profit margins has always meant that the public pay comparatively more for PPPs over the long-term.

Arguments for ‘PPPs’ based on diverting ‘risk’ also seem empty in the face of contracts which bind Victorian taxpayers to pay billions for desal plant water even when there is no demand – and when there is an abundance of supply.

On the other hand, Victoria’s population is growing, and there will be expanded demand for water into the future.

Furthermore, with stress upon the Marray-Darling basin, some have argued that Tasmania may arise as the country’s new ‘food bowl’. These matters were discussed on the 7:30 Report in September 2010. (see: http://www.abc.net.au/7.30/content/2010/s3024352.htm )

The consequence of this is that Tasmania may need its supply of water into the future.

But even assuming this, a fully-public desalination plant would have provided better value for tax-payers. And the project might also have been deferred until such a time that the need was more immediate and indisputable.

Finally, Brumby Labor is trying to claim the ‘high ground’ on social justice – pointing to its ‘Fairer Victoria’ initiative, and refuting claims that it ‘no longer stands for anything’. Specifically, Labor is pointing to investments of “$1 billion a year for the past five years under the Fairer Victoria package.” Professor David Adams describes this “co-ordinated and preventive” “umbrella of investment across vulnerable communities, childhood development, education opportunities, mental health and disability services” as positioning Victoria nationally ''just ahead of the game''. http://www.theage.com.au/victoria/victoria-state-of-the-fair-go-or-the-fob-off-20101023-16ynd.html

And yet while overall Victorian investment in public housing is seen by some as lagging, the Liberals are also portraying Labor’s homelessness policy (a $42 million package; see: http://www.theage.com.au/victoria/brumby-to-spend-42m-helping-homeless-20100922-15myv.html ) as having ‘come too late’. There are around 20,000 homeless people in Victoria alone.

Conclusion

This article has only involved a small sample of Labor and Greens policies. There has not been sufficient scope to provide an exhaustive exposition. But hopefully the analysis here will have provided for some a deeper understanding of the issues at stake.

The ‘Sunday Age’ editorialised today (2/11/2010) under the heading “Labor? Liberal? What difference would it make?” Although drawing to this editorial’s conclusion there was at least the observation that – 'unlike in NSW' – “[Victorian] Labor offers a competent managerial government.”

Years of Public Private Partnerships, outright privatisations and policy convergence have left much of Labor’s core support-base deeply cynical.  Many have defected to the Greens. And even now some are speculating about future private toll-roads under Labor.

The Liberals would be no better. Their commitment to the neo-liberal ideology means there will be no scrutiny of ‘privatisation gone too far’. And their ‘tough on law and order’ policies represent crass and dangerous population at its worst.

What is more - Labor’s ‘Fairer Victoria’ programs – while needing to be expanded upon – could also imaginably be targeted by the Conservatives to pay for their $750 million in Stamp Duty cuts. (which are several times the scope of Labor’s proposal)  see: http://www.heraldsun.com.au/news/victoria/parties-fight-to-cut-stamp-duty/story-e6frf7kx-1225957471507

No-one seems to be talking about utility re-socialisation to restore natural public monopolies. Hopefully it’s not too late for Labor and the Greens to reconsider these issues into the future.

Again: The Greens are mostly making ‘all the right noises’ but have to come up with a workable model for funding. Conceivably this might involve co-operation with Labor at a Federal level to provide funds for water and energy subsidies, aged care, public housing and other priorities. Progressively-structured tax reform (ie: expansion) over the coming three years of the scope of 1.0%-1.5% of GDP could provide room for these initiatives.

It would also be refreshing were the Greens to take a high-profile position against infrastructure privatisation.

Despite the rivalry, Labor and the Greens actually need each other if progressive reform is to be achieved.

Here’s hoping Labor/Greens co-operation in the Victorian parliament ‘bears fruit’ with real, tangible and genuinely realisable change over the coming years.

Debating ‘Red’ and ‘Green’ politics – Have your Say

This week at ‘Left Focus’ I’m posting excerpts from discussions I’ve had recently at Facebook. In particular I’ve been talking about electoral competition between the Greens and the ALP (Australian Labor Party) – including the state of Victoria – where an election is due later this month.

What I’m hoping is that this week’s post spurs some real debate here at Left Focus: about the state of Australian politics, and broader issues regarding Green parties, and parties of the traditional Left. These dynamics are now of truly international dimensions. So please have your say!

Compiled and largely-written by Tristan Ewins


The ALP and the Politics of Class

Carlo Carli – the retiring Member for Brunswick (in Victoria) - was promoting the blog post linked to below as part of a debate over whether or not the Greens in Australia were ‘Left’, and what difference (if any) there is between ‘progressive’ and ‘Left’ politics: http://jewellofanstey.wordpress.com/2010/11/09/progressive-v-left-wing/

I responded to Carlo with an analysis of the decline of class politics within the ALP; the thrust of my arguments being that with the abandonment of class politics as a point of reference, the ALP stands to alienate significant areas of its traditional support base.

"Carlo - I'm also worried about the decline of class as a 'point of reference' on today's Left. And many of our own people have been complicit in this; There are arguments like "post-industrialism means the end of class"; or there is a stigma against class struggle which in some ways we contributed to with our emphasis on 'conciliation' in the 80s. But if we REALLY want to reclaim the mantle of class politics, and for the ALP to revivify its ties with the broader labour movement [and working class] - we have to deliver the goods; And class politics needs again to become a day-to-day part of our rhetoric and discourse. What practically then? Well at a Federal level - what about bringing forward the dissolution of the ABCC? (nb: this stands for ‘Australian Building and Construction Commission – a special body set up by the former Conservative Australian government which acts as an ‘industrial star chamber’, and which can send workers to jail for failing to inform on their mates)


What about allowing pattern bargaining? And what about observing our original promise that no-one would be worse off under Award modernisation? Finally: What about restructuring tax to help those on low incomes; but also give a fairer deal to average workers? (and by this I don't mean people on $80,000/year and more....) If we want to take this line of promoting our 'red' politics as against 'green' politics - we need to deliver the goods - and rebuild our credibility."

Federal Left ALP MP and former Secretary of the ACTU (Australian Council of Trade Unions), Greg Combet, was also trying this week to re-emphasise a sense of Left/ALP values in response to a growing sentiment that today’s ALP ‘doesn’t know what it stands for’.

Combet’s contribution can be found here:

See: http://alp.org.au/blogs/alp-blog/november-2010/labor-values/


There was a lot of criticism from the radical/militant Left in response to Greg. I responded with an analysis of the potential synergy I believe could be set in motion between the Greens and ALP.

"Labor's record in government has to be held up to scrutiny, but at the same time I think Greg's trying to promote a narrative and identity for the ALP to encourage a return to Left values across the whole party. Without such a return Labor will continue to leak voter support the Greens - and there are some who are only now waking up to the fact that this is reaching critical proportions. My feeling is that there needs be a synergy between the ALP and the Greens in producing outcomes for social justice. An electoral threat to Labor from the Left could drive it to the Left on policy. These pressures will remain only so long as the Greens remain a threat to Labor; but at the same time the pragmatists in Labor need to see gains from a move to the Left. It's a delicate balance: but I hope these forces combine to promote real and ongoing progress."

In this same Facebook thread focusing on the Greens and the ALP Fernando Rodriguez Magallan wrote in response to Socialist Alliance activist Terry Townsend. Magallan’s position appeared to be an ALP/Centrist position which I am critical of; but I think it’s appropriate to reproduce some excerpts to put my response in context:

"There seems to be this overly-optimistic perception that [an alliance between the ALP and Greens] would bring about more social progressiveness - swinging Labor back towards the Left and give the Greens an all-time-first nudge towards Centre, whereby the two would meet somewhere along the way and exchange and embrace ideologies and miraculously create a modern, moderate, Centre-Left party however the reality would be far from this.

…The main problem I believe would be the Greens lack of patience for sustainable transition and that they are detrimental to many of the working class….The Reds…join a party that can make a bit of noise every so often enough to be noticed but not enough to ever win in the political realm…

Does the ALP need a refresh? Why of course. Should it be criticised for its failures? By all means, but there should equally be credit given, where and when credit is due. By this I mean there should no longer be a monopoly of media in Australia that always paints the glass-half-empty picture when it comes to the ALP's policies… The far Left, play right into the hands of the conservative moguls… Because of this, [they] end up (perhaps inadvertedly) batting for the other team - I guess this is why they say that in politics both extremes the furthest possible away from each other will eventually meet.

In the end - I am convinced more and more each day when seeing what the clowns at either end of the political spectrum have to offer - that Labor, the Third Way, is the only way forward. (nb: Readers might like to debate this issue of the ‘Third Way’ as well)"

I responded Magallan as follows:

"Fernando - there's some truth in what you say; which is why I've written elsewhere that the Greens should give 'reasonably conditional' support for Labor. (ie: compromising enough to hold together an electoral coalition which can maintain power)

(Comment: for me this is part of the politics of ‘alliance building’; building what Gramsci would call a ‘counter-hegemonic historic bloc’; or in the context of parliamentary politics – ‘an electoral bloc’. This refers to the kind of synergy I was talking about before; but with an understanding by all parties that they need to ‘pitch their message’ in a way which makes overall success possible…)

But just recently there are issues where I think we've failed and could have done better. For example: Failure to ensure no worker be worse off under 'modernised' Awards; Failure to debate a rising cost of living (housing, water, energy), and to sufficiently reform tax and welfare in response; Failure to address the housing bubble legacy and make housing affordable - especially for those on low incomes; Failure to build sufficient infrastructure in the context of urban sprawl.

I could go on - and I'll give one more example: Aged Care - which is supposedly a 'second term issue' - but I've heard nothing, and we have the most vulnerable people of all living in conditions of neglect and indignity - An ageing population means tax MUST rise to provide adequate Aged Care, broader Health care, welfare - But there's not even a DEBATE.... So where is all this leading in 10 years time???...

BTW - there's nothing wrong with being 'a bit red' - and I maintain my earlier statements re: possible 'ALP/Green synergy'. But look at it this way: Someone has to appeal to the relative centre to construct a majority; But we should always be trying to shift that relative centre towards social justice; And the Greens at least can make more radical arguments which we cannot because of this play of electoral forces; The Greens need us, and it seems we need them - But I think it's good at least that more radical arguments be heard; that's in the interests of a Labor social justice agenda over the long term..."

Doug Cameron speaks up in favour of open debate in the Labor Party:

Finally, ALP Senator, Doug Cameron has recently (ie: late last month – October) intervened on the question of whether the ALP is seen to stand for anything; and how too-much discipline in ‘towing the party line’ could actually be detrimental. Cameron was speaking on Radio National in the program ‘The World Today’.

See: http://www.abc.net.au/worldtoday/content/2010/s3047219.htm

The following are excerpts:

“There are issues that certainly for a progressive party there should be more debate about and not just be stifled and we need to reach out to progressive people in the community and have a strong voice on progressive issues…”

“…I still don't think it is sufficient just to have behind-closed-doors debates on key issues…. I've always taken the view that difference of opinion is not a weakness, it's a strength and I think that has been lost in the party….”

“we've helped establish [a] culture…where no one speaks out…[Then] if someone does speak out, it becomes this great disastrous split in the party and I don't think that is good for democracy in this country. I don't think it is good for the Labor Party and we really need to address this.”

“[Progressive voices] are stifled in the caucus, they are stifled in the public and so people see the Labor Party having no values and no vision on a whole range of issues and I think that must change.”

Please discuss these issues!

Firstly: International readers please feel welcome to raise your own national contexts as they relate to the issues raised here!;

The point of this week’s post at Left Focus is to spur productive discussion of the issues raised! Assuming your position is ‘broadly left’ - your opinions on the ALP and the Greens – whether at a national level – or with reference to the coming Victorian election – are welcome here! PLS feel welcome to respond to the specific issues I raise here to: ‘Labor/Greens synergy’, and also ‘alliance building’ in the ‘counter-hegemonic/cultural’ sense, as well as that of forming an ‘electoral bloc’. Also: What are the situations in other countries? (eg: Sweden, Germany , Italy etc)

Your opinions are also welcome on the issue of the decline of class politics in the ALP, and also more broadly. (again: also internationally) What should the response of the Left be? What positions should the ALP and Greens take? Can class politics be revivified?

Finally: What about Doug Cameron’s comments? Should there be more freedom in the ALP for Left MPs to speak out? And if so – what should they be saying? And what about the position of the Left in the ALP more broadly?

Looking forward to your comments!

AND BEFORE YOU GO!!: If you enjoyed this article PLS join our Facebook group - to link up with other readers, and to receive regular updates on new material.
see: http://www.facebook.com/group.php?gid=58243419565

A Honey Pot and a Swarm of Bees

above: an image expressing the dynamics identified by Anisimov in this article

This week's contribution has been submitted by Boris Anisimov - a Russian-based political economist who manages the website 'National Political Economy'.  'National Political Economy' states its purpose as being "to facilitate understanding of the modern economic reality outside the boundaries of the conventional economic paradigm."  This article considers the dynamics driving investment internationally, including core-periphery economic relations which effectively facilitate the exploitation of under-developed and developing economies. Anisimov explains how these dynamics in capitalism are linked with a constant search for new markets - as asscociated with the ecomonic phenomenon of 'over-production' or 'over-accumulation'.

by Boris Anisimov

Modern economic theories believe that developed countries are rich because extensive small- and medium-size businesses are the driving force of market economy. In my article, I argue that things are quite the opposite - enormous capital inflows into developed countries cause higher profitability and breed small- and medium-size businesses as a result.

After the collapse of the Soviet economy, several countries (so-called countries in transition) have pledged their allegiance to market economy growing more and more fascinated by the developed economies of Europe and North America. The new pro-Western governments did not have to spend time convincing their people of the benefits of free market. The Bolsheviks’ economic and political experiment undertaken in 1917 had in fact turned out to be a complete fiasco and was considered worthy of nothing else but scorn and ridicule.

The preachers of free market liberalization would passionately explain that only the market free of any government intervention is capable of bringing about prosperity and successful economic development. The newly-converted countries promised to uphold liberties and private enterprise and, without further delay, inscribed them into economics textbooks as the obligatory prerequisites for any successful market economy. Nobody bothered to give the free market fundamentalism a second thought as economists were joyfully pushing political economy aside and embracing economics – the gospel of the rich. Seasoned marxists would turn into devout monetarists in a twinkling of an eye.

I admit I also shared that optimism when those changes were taking place. Eventually, the bleak reality of what was happening started standing out to me as I observed a very peculiar thing – the liberalization of markets had hardly anything to do with the enormous profits of countries proselytizing in the name of laissez-faire capitalism. There appeared to be some mechanisms (hardly ever mentioned in the new "free-speech" media) that distributed wealth globally on conditions that Adam Smith could hardly consider conductive to the unrestricted exchange of goods and services among equal and independent market players.

So is it free market that brings about prosperity and abundance? What was it that developed countries did to prosper? Was it political freedom and maximum deregulation that made those countries so successful? Let me share with you some of my observations from the standpoint of political economy. Here, I claim neither monopoly on the truth nor a comprehensive reflection of all the factors involved in this matter. If you feel like treating these thoughts of mine presented below as food for thought, be my guest. If you look at things from the standpoint of mainstream economics, there is no need for you to continue reading – you are most likely going to get upset and angry. And I will have to bid you farewell, since I do not claim any right to tell people what they should believe in or think about.

What sparked my renewed interest to the subject of what makes rich nations rich was statistical data that I needed for my term papers on the world economy. I later went to the official UNCTAD site to check the numbers for myself because I was quite stunned when I first saw it. I compared data on the stock of global foreign direct investments (FDI) for the year 2008 and saw that the developed economies’ share is 68.5%, the developing countries’ share being 28.68% with transition economies left far behind with a meager 2.82%. Since 1988, similar average proportions (70%, 29%, and 1% respectively) have been preserved unchanged. In 2008, 56.69% of global FDI flows went to developed countries, 36.57% went to developing economies, while countries in transition accounted for only 6.74%. Again, the average numbers from 1980 show that the developed world accounts for the overwhelming majority of all global FDI flows with a clear increase in FDI outflows from developing countries and economies in transition.

My initial bewilderment was not due to the size of the respective proportions. Mainstream economists explain them by the rule of law and thriving democracy in developed countries. It was something else that puzzled me – the relative stability of those proportions. They have remained almost unchanged for decades. It seems as if, no matter how much wealth is created, it ends up being channeled into the same groups of countries in exactly the same proportions. Isn’t that strange? Where are the unpredictable market forces that elevate the most efficient economies and bring down the inefficient ones?

Again, mainstream economists would now start babbling about democratic institutions installed by the developed countries in order to create conditions conductive to free entrepreneurship, which entail investments being made in countries with the most favorable business environment, etc. But, for political economy, that is not an explanation – it is utter nonsense. Political economy considers institutions, political and business environment to be derivative of underlying economic processes. In Marx’s terms, it is an economic base that determines a superstructure, not the other way around. So I dismissed the mainstream babbling and went on to investigate this subject further.

Now, let us take Marx’s general formula of capital (M – C – M’) and apply it to a hypothetical economic system (let it be called “Economy A” or “Market A”) with closed economic borders (i.e. no exports or imports, no foreign investments, no cheap illegal immigrant workforce, etc.) and the golden standard. For certain, I am going to allow certain generalizations in this model. So capital in the form of money (thus M) gets transformed into a commodity (for the sake of generalization, services are also included here) (thus C), which then gets transformed back into the money form but at a greater exchange value (thus M’). To assign some roles in this play, business owners (including the government that protects their interests) invest their money in production of goods and services, which they then sell to consumers (hired employees) directly or indirectly at a price that covers costs and brings in profit. A major portion of the sum thus returned gets re-invested again for more profits. So in this particular economic system consumer spending generates investment resources essential for financing further reproduction of profit for business owners and the governments.

So the economic cycle can be represented with a diagram (see above). Here, for the sake of further reference, I have added the (I) quadrant called “income distribution”, which is responsible for distribution of investment resources. It does not really add anything to the formula since investment resources are also in the form of money, but it will be important to separate it from the other quadrants when we open the economic borders of this closed-door economic system and change the nature of money circulating in it.

Considering constantly rising competition costs as well as the fact that hired employees in our hypothetical economic system are the only consumers and that total production costs include additional expenses besides salaries and wages, we will have to come to a logical conclusion that the economy will not eventually be able to generate enough investment resources relying solely on its domestic consumers. The total amount of salaries and wages will not be able buy all the goods and services produced in the economy. This is called the crisis of over-production (or over-accumulation) – in other words, the system’s ability to produce exceeds, in a natural way, its ability to consume what it has produced. As a result, deflation destroys profits throughout the entire economy while business owners lay off employees thus bringing consumption to even lower levels and causing even more deflation. The economic collapse triggers a financial crisis and eventually leads to social unrest and very unpleasant times for the entire economic system. This is the logic behind Marx’s criticism of capitalism.

Of course, the real economic life is more complicated then the presented model. In reality, no economic system can be utterly closed. And now we are going to see why. So now let us imaging that the elite in our hypothetical economy realizes that the system is incapable of increasing consumption thus being incapable of generating sufficient investment resources to finance further profit-making. They decide to find a nearby economic system that would be willing to buy some of their unsold products. It gets even better if that other economy (let us call it “Economy B” or “Market B”) turns out to be able to increase domestic consumption, which naturally speaks of more profits to be generated.

While Market B can still grow, Market A’s problems are temporarily solved. Businesses will proliferate, new technologies will be developed, and new institutions will be created. Why? Because somebody has paid for that? Overtime, an increased number of external markets will make Economy A indifferent towards domestic spending because foreign sales are now generating enough investment resources. The booming Economy A will create new jobs, spend more on infrastructure, raise life standards and increase domestic consumption. Like bees around a honey pot, small businesses will be swarming around the increased inflow of capital into the economy.

Economy A in relation to Economy B (and its counterparts) is thus similar to a business owner (M) in his relation to a consumer (M’). This type of relations implies a transfer of money from the (M’) quadrant to (M) quadrant via the (I) quadrant. So in other words, we can see a flow of investment resource from one economy to another at the expense of the former. Economy B, whose economic cycles (as they are renewed over and over again) ends in the (M’) quadrant, is giving away its investment resources and will not be capable to finance its further economic growth unless it relies on some other economic systems to finance its growth.

The problem is that as soon as consumption potential of Economy B is exhausted, the expanded economic system A will need to expand even further. But new economies may not be as compliant or there may be other economies looking for ways to expand their economic systems. This situation can potentially lead to military conflicts. Besides expanding an economic system is not a cheap undertaking. So other ways to provide an unceasing inflow of capital must be invented.

And they have been invented. For example, the elite in Economy A may demonetize gold and grant its central bank a monopolistic right to issue fiat currency. If effective mechanisms for removing excessive liquidity out of Economy A are introduced (implying that there is natural or artificial demand for its currency outside its borders), its central bank can constantly increase the money supply thus bringing down credit rates and boosting both (M) and (M’) quadrants through cheap credit. In this situation, some business owners will no longer be interested in the (C) quadrant at all preferring to ever stay in the (I) quadrant. As long as consumers are able to increase (M’) by taking new loans and refinancing old loans, Economy A’s problems are temporarily solved.

Once economies become deeply integrated, Economy A may decide to use its growing investment resources to finance expensive R&D projects thus obtaining a competitive advantage over Economy B by implementing newer technologies. Lack of capital will not allow Economy B to compete with Economy A in these markets, and Economy B will be permanently put on a “technology needle” paying for rapid constant innovations initiated by Economy A. As long as Economy B is lagging behind in technologies, Economy A’s problems are temporarily solved.

Another approach to integrated economies has to do with international division of labor. Economy B may be rich with natural resources but incapable, for whatever reason, to process them upon extraction. Economy A, on the other hand, may have been investing heavily in innovations to boost its processing industries. So Economy A will be able to process Economy B’s natural resources and sell processed products back to Economy B thus making it pay through the nose for its own natural resources as well as “outsourced” processing works performed by Economy A. In this situation, the winner is the economy with the largest added value of its products. As long as Economy B is lagging behind in developing processing industries, Economy A’s problems are temporarily solved.

There can be other capital-channeling mechanisms. I do not intend to discuss them all here and now. Let us now apply these theoretical models to real life and see what we will get.

As international competition pushes countries’ economic development further towards greater accumulation of capital and investment resources on the global scale, we end up living in a world different from the idolized free-market ideal – the world with a rigidly structured world economy, where countries (even entire clusters of countries) are assigned specific roles, which they play according to the rules established by those distributing investment resources in the global economy, i.e. members of the transnational financial elite.

And this is where foreign investment resources in form foreign direct investments or foreign credit come into the picture. In the modern economy, they turn out to be playing a significant role in boosting further economic development of a country they are flowing into. A developing country cannot possibly rely on its own economy to generate enough profits to get such a boost. That is why modern developed countries resorted to attracting foreign capital in one way or another in the process of economic development. Note that most of the rich and influential countries these days used to have colonies or are former colonies themselves. The colonies’ role was to provide their mother countries with cheap resources, which, in a sense, are similar to FDI’s, the only difference being the method of their extraction. Obviously, more sophisticated mechanisms are employed these days.

So a developing country has no other way but to seek inputs from outside, narrow domestic markets being unreliable as a source of economic growth. While it is true that foreign investors prefer to invest in countries with a predictable political and economic environment, we must remember the reciprocal nature of the symbiosis between an institutional climate and objective economic conditions. In other words, some institutions claimed to be prerequisite to market economy always come with a bill, which developing countries will never be able to foot. You simply cannot export democracy and the rule of law if they are backed by nothing but slogans and promises. At the outset of their economic development, modern affluent countries could hardly boast of following the noble ideals they seem to be upholding now. As their prosperity grew, so did their ability to foot the development bills. It also works the other way – if a developed country’s profits shrink for whatever reason and stay low for a long time, it can easily turn back into a developing country with all its institutional and economic problems.

Obviously, this center-periphery relationship between countries is not mutually beneficial. The economic logic of market economy proves that the best way to beat a competitor is a monopoly, so as soon as a country climbs up to a particular level of economic dominance, it always seeks ways to “kick away the ladder”, as Friedrich List, a famous German economist of the 19th century, has eloquently put it. In particular, this what he wrote about Great Britain, the maritime superpower of his time: “Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.”

I think the picture will get even clearer if we remember that Great Britain had numerous colonies throughout the world and abolished slavery a couple of decades prior to the industrial revolution. Could it be possible for tiny local markets of the 19th-century Britain, which did not yet formed a unified national market at that time, to generate enough investment resources so as to drive the industrial revolution? Obviously, it was not free market alone that was involved.

In fact, the modern developed world and the newly industrialized countries seem to have long put Adam Smith back on the shelf and pulled out Friedrich List’s Das Nationale System der Politischen Ökonomie initially published in 1841. Their rapid expansion into other markets, while their domestic markets remain safe and sound under protectionist measures, seems to be a significant factor of their economic development. That explains the enormous role of the US as the largest consumer in the world economy. As American consumers were able to constantly increase their spending (first by reducing savings, and then by running debts), many countries could boost their sales, provided that the worldwide trust in the US currency remained adamant. No wonder that business gurus cite the American experience as a prime example of how to do business. Considering the inflow of investment resources (often in the form of Fed-issued greenbacks), starting a small consumer-oriented business does not appear difficult – just find the right product, market it, and consumers are sure to run your way scattering their money all over the place. But as soon as US consumers get a bit jittery about their future spending ability, the rest of the world gets a massive bumpy ride down their market graphs.

Globally, the US alone accounted for 13% of all FDI inflows and 18% of all FDI outflows in 2006. The same indicators for the EU consisting of 27 member-states show 43% and 47% respectively. Combined, these two global market players were responsible for 56% and 65% respectively. After such an extensive analysis above, these numbers do not seem surprising – they are quite natural.

Going back to where I started, the current crisis showed once again (as in the 1930’s), that markets are neither rational nor efficient. The analysis of national economies in globalization is pretty unequivocal that there are other forces at work besides the market. A country that attributes its success to unique entrepreneurial skills it possesses can instead thank its lucky starts that there are still fools out there willing to pull out their wallets and pay its bills.

This reminds me of a story I read some time ago about a shrimp fleet and seagulls. At a sea port, generations and generations of seagulls were able to feast on shrimp stuck in the nets and they would teach their young to do the same. The gulls seemed to live the happiest life of all as no actual fishing was necessary any longer. Guess what happened when the fleet was relocated…The gulls all perished.

So it is not the market that determines economic development. On the contrary, it is economic development that conditions the market. To put it metaphorically, while it is true that a swarm of bees can bring about a pot of honey, as soon as you open a pot of honey, it quickly collects a swarm of bees around it. From the standpoint of political economy, this makes perfect sense.

Boris Anisimov

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A Chilean Miracle - but accompanied by Sober reflections

In this reflection, AMWU industrial officer Don Sutherland celebrates the rescue of 33 Chilean miners. But these sentiments are accompanied by a sober consideration of Chilean political history: of the rights of workers in Chile today, and of a Chilean government which he sees as the inheritors of Pinochet's terror, and callous disregard for workers and the poor.

Dear Friends,

Along with many others I wept with joy and admiration watching the remarkable rescue of the 33 Chilean miners.

Since the mid 70's I have been friends with a number of Chileans and their families who have lived in Australia since then. I met them because they were poltical refugees from the bloody military dictatorship of General Pinochet established by a military coup in September 1973. As political refugees they were organisers and supporters at the level of their unions and communities of the democratically elected government of President Salvador Allende. Thousands dead. Tens of thousands, even more, scarred physically and mentally.

I have talked with some of my Chilean friends and shared their joy and pride in this achievement. We remember how leaders and members of Chile's mining unions were among those arrested, tortured and executed by Pinochet's military and civilian thugs. The USA watched over and advised on the strategy for the coup, especially the then Secretary of State Henry Kissinger.

The fascist dictatorship of Chile provided it's people as the crucible for the first neo-liberal economic program ( followed soon after by Thatcher and Reagan) massive cuts to the social wage, extensive privatisations at basement prices to the big corporations, many of them from the USA). What we know now as neoliberalism could only have been born out of the barrel of a gun and beneath the scream of the jet bombers blasting the Allende government to death.

Our union - the AMWU - played a great role in the solidarity movement in support of the Chilean people, the refugees and for the restoration of democracy, including high risk deputations to political prisoners and industrial action in support. (I have more on this for anyone interested.)

The current President of Chile - the billionairre Senor Pinera - and his government is the far right inheritor of Pinochet's legacy. This should never be forgotten.

John Pilger explains more in this article:

http://www.onlineopinion.com.au/view.asp?article=11111

He starts:

The accident that trapped the miners is not unusual in Chile and is the inevitable consequence of a ruthless economic system that has barely changed since the dictatorship of General Augusto Pinochet. Copper is Chile’s gold, and the frequency of mining disasters keeps pace with prices and profits. There are, on average, 39 fatal accidents every year in Chile’s privatised mines. The San Jose mine, where the men work, became so unsafe in 2007 it had to be closed - but not for long. On July 30 last, a labour department report warned again of “serious safety deficiencies”, but the minister took no action. Six days later, the men were entombed.

For us, the equivalent of watching Pinera and his Mining Minister greeting each rescued worker would be like watching John Howard, Peter Reith, Peter Costello and Tony Abbott doing so. It would make me sick to see it. And you also?

In Solidarity,

Don Sutherland
National Industrial Officer,
Australian Manufacturing Workers Union

above: AMWU industrial officer Don Sutherland