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Tag Archives: demand

Profit before people

The Abbott government’s economic policy is predicated on the assumption that any increase in the boss’s profits equals a corresponding increase in the workers’ wages – “a rising tide will lift all boats.” This assumes that the ratio between the share of GDP going to labour and that going to capital always remains constant, something that is not the case as we see the proportion of GDP going to wages dropping around the world.

In the USA, the last 30 years has seen a reduction from 70% to 64% of GDP taken by wages. Meanwhile Norway and Sweden, held up as models of “responsible” capitalism, have seen labour’s share fall from 64% to 55% of GDP and 74% to 65% of GDP respectively since the 1980s.

Wages and profit are closely interlinked because they are both paid out of the same pot – the nation’s GDP. This means that for a boss to increase his profit, the workers must lose out on wages, and vice versa. It’s not possible to increase profits without decreasing wages, and it’s not possible to increase wages without decreasing profit.

Corporations, pushed by their constant hunt for profit and their own internal competition, will always attempt to expand their share. This can be done through direct attacks on wages or by cutting welfare, increasing wages below the inflation rate etc. The workers on the other hand, have an interest in struggling to defend and expand their working conditions and standard of living in the face of constant attacks. The result is trade unions and workers’ movements that fight for the minimum/living wage etc, and bosses who fight for less regulation of employment conditions, and smaller pay increases.

Trade unions have lost a lot of the power that they once had 30-40 years ago, a direct result of the sustained attacks on unions by the powerful elite and media over that period. The result is that economic power has shifted in favour of capital, and away from labour.

Bosses, desperate to drive down wages to make bigger profits, turn to cheaper and less regulated labour in the developing world as a method for raking in higher profits and putting pressure on workers in developed countries to accept a lower wage. As Gina warns we beer drinking, cigarette smoking bludgers, Africans are happy to work for $2 a day in the mines.

By pursuing ever greater profits they inevitably drive down wages through automation and by access to new sources of cheap labour on the world market. The problem is that wages also make up the demand which keeps businesses afloat. With less money in the pockets of wage-earners, fewer commodities can be purchased and so less profit can be made.

The short-sightedness of capitalists trying to make as much money as possible out of each investment with no thought for the future is a fundamental feature of the system. If one business passes up an opportunity to make loads of money through greater exploitation of workers or the environment, another would seize the chance to make the profit and put its competitor out of business. This is the nature of capitalist competition – they cannot afford a long-term perspective.

Coalition governments are advocates of increased privatisation of public services. It’s true that privatisation often brings profit to the new private owners and those rich enough to afford shares in the business, but it is also true that privatisation brings worse wages and conditions for the employees of the newly privatised business. The reason why private ownership of businesses increases profit is because these owners curtail services and force down the wages of all the workers in order to pay the handful of people at the top obscene salaries and bonuses.

Developments in technology and innovation have automated huge numbers of jobs thus leaving correspondingly huge numbers without work or with a lower wage. If businesses were to invest in the education and training of highly-skilled workers they would be able to increase productivity, design new products and machinery and boost productive capacity overall. This, after all, is the point of any investment in a business. Instead we see sackings, closures and restructuring as business tries to produce less in order to maintain their profits.

Over 160 years ago, Karl Marx said that the “bourgeoisie is unfit to rule because it is incompetent to assure an existence to its slave within his slavery, because it cannot help letting him sink into such a state, that it has to feed him, instead of being fed by him.“

Capitalism has developed to a point where technology and globalisation, phenomena that have the potential to improve the lives of all people hundreds of times over, are actually making the lives of wage-earners worse. It has reached a stage where we have the capacity to educate and train people, produce and build everything we need, and give everyone a decent standard of living. But we’re not able to realise this potential because of the unrelenting pursuit of profit.

The impoverishment of the masses and the concentration of wealth and capital in the hands of a small minority is a growing problem and as long as the right of private ownership to the means of production exists, and governments move further away from regulation, this process will prevail.

Tony Abbott’s entire approach to governing is textbook Capitalism, from his attack on penalty rates, the minimum wage, and unemployment benefits, his refusal to give industry assistance (unless you are a fossil fuel producer), privatisation of public assets, deregulation and removal of “green tape” (aka environmental protections) – every aspect is a short term grab for cash dictated and ruled by the “market”.

Oh for a government that had the courage to protect its people with a long term plan for general prosperity and well-being instead of a smash and grab raid for your rich friends.

 

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