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Tag Archives: market forces

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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The government that doesn’t want to govern

On 1 October, the Affordable Health Care Act comes into force in the United States. It has split the US down the middle – by some polls, over half of the population hates the Act. Detractors call it “Obamacare” as if to identify it with a single person is to devalue the raft of policy and the nation-changing effects it will have. Republicans, quite simply, hate it outright.

I recently requested clarification from a right-wing, evangelical Christian blog as to why, if the Act is of so much benefit to the poor and downtrodden of America, the right oppose it.

I received in response a bullet list of seven reasons “Obamacare” is a disaster for America. Of these seven objections, one is a moral statement: the argument that some aspects of the law don’t suit all people, but will apply to all people. The argument was made that funding for abortions may be made available through the Act. This is highly arguable, at least in the law as enacted, but fair enough; this seems like a valid objection.

It is entirely legitimate to oppose legislation on the basis of disagreement with the moral outcomes. Two of the objections question the effectiveness of the legislation. Similar to the Australian Coalition flatly stating that Labor, even when in possession of a good idea, cannot turn it into effective action, opponents of the AHCA point to other countries with national healthcare systems and claim that they’re not perfect.

They argue that such systems will be open to abuse, rorting and fraud. You could argue that all systems are open to abuse, rorting and fraud and that this is a good reason to refine the legislation to progressively remove these opportunities; however, it’s not an entirely invalid objection.

And three of the objections boil down to the basic assertion: “We can’t afford it”. The policy will cost the US government, and thus the taxpayer. The US is already debt-ridden. The government ought to concentrate on paying down debt before engaging in further expenditure. Fair enough. That does seem a valid, and eerily familiar, objection. Except…

“We can’t afford it” has become a catch-cry of conservatives the world over. The Affordable Healthcare Act? Can’t afford it. National Broadband Network? Can’t afford it. Public servants? Can’t afford them. Social support and welfare? Can’t afford them.

Government is a case of competing priorities. All governments work within limitations of resources, in terms of finance and political goodwill and legislative time and personnel; every potential advance in society which government needs to enact comes at the expense of other needs. To evaluate whether “can’t afford it” is ever a valid objection to policy advances, let us take a step back and examine what it is that we have a government for.

The human species is gregarious by nature. Since the formation of the first agrarian communities, we have instituted some kind of authority structure. All governments throughout history have entailed a personage, or group of personages, to which the people voluntarily surrender power and authority. The people sacrifice their autonomy, their time, and their taxes, for the sake of the benefit of the whole.

For many centuries, the fundamental purpose of government was law and order, and peace/protection from invasion. In other words, government’s areas of responsibility went no further than setting the legislature and maintaining a standing army which, in addition to its function of protecting the people against hostility from outside, also enforced the law.

Some empires also dabbled in infrastructure. The ancient empire of Rome is famous for its network of roads; after the fall of the Roman empire, significant expenditure on roads would not be seen again in Europe until the 1800s. Rome also built aqueducts to service its wealthy citizens. The Roman empire was centuries ahead of its time, but in modern society, we expect governments to spend some resources on infrastructure. Roads, water, sewerage, power, telecommunications – these things that modern society relies upon are part of the bread and butter of modern government.

Governments of old, however progressive in their approach to infrastructure and law and defense, had no interest in some of the areas we currently consider to be expected parts of civilisation. Rome implemented a “corn dole” for citizens too poor to buy food; the Song dynasty in China (circa 1000 AD) managed a range of progressive welfare programs. Apart from a few stand-out examples such as these, however, social support was nonexistent.

Modern-day welfare came into being in the 19th and 20th centuries. We now consider a certain level of unemployment benefit, disability benefit, aged care benefit, etc. to be a reasonable imposition on society. Before the 1900s, the unemployed and the aged (and unmarried women) were the responsibility of their families, not of society as a whole.

It wasn’t until the 1700s that history saw the first public, secular hospitals being created. Prior to this, health care would have been taken care of by organisations other than government; primarily, in Europe, by the Church and the monasteries. Education is a similar story. Before the emergence of universal education for the populace – as early as the 1700s in some parts of Europe, but not widespread until the 19th century AD – education was reserved for the elite and provided by the churches.

It is important to note that for all of this time, the churches and other bodies responsible for providing these services – education, health care, welfare – were accepted and fundamental parts of society, and society contributed to them regularly and generously. Everybody gave alms to the churches. The monasteries were at the center of landholdings in their own rights and levied taxes upon their surrounds. In a way, these organisations were analogous to government – they received support from society as a whole, and in return, they provided certain necessary services.

In the modern world, the social bodies that would have been responsible for education and healthcare are declining or have died. Catholic schools and hospitals still exist, but not to the extent required to support our population. For the past 200 years governments have taken on these responsibilities, as the world gave way to secular sympathies, and governments took on these responsibilities as key determinants of national progress and success. A healthy, educated populace was the key to national prosperity.

Which brings us to the present. In 2013 we have conservative groups and political parties wanting the government to get out of the way while the market takes care of these things. On infrastructure – for example, the NBN – let it be driven by market forces. Environmental action, likewise: rather than a carbon tax operated by the government, a “direct action” policy will find the emissions abatements efforts that already exist and support them, rather than mandating change from the outside.

We have Republicans and Liberals wanting the government to get out of the business of mandating healthcare because it ought to be driven by market forces. We have governments of all persuasions pursuing privatisation and outsourcing of previously fundamental responsibilities in the name of efficiency and cost-effectiveness. And we have governments preferring to return the community its taxes in the form of tax cuts (to individuals; to business) and infrastructure spending. All of this comes with a wave of the hand and a “we can’t afford [whatever]”.

But can the government really abrogate its responsibilities in these areas? Without other bodies or structures to take on these responsibilities, it’s not ethical to stop providing them. So can the free market be relied upon to do this?

Money to pay for education, fire services, health, broadband, has to come from somewhere. The social structures – primarily church – which previously might have supported these things no longer have the resources or the popular support to be able to take up the slack. Charities around the country are crying out for support and berating the government for not providing enough basic resources/support; something has to give. In this environment, the idea of “small government” doesn’t make sense.

The government has to be big enough to do the things that the monasteries aren’t around to do anymore.

The Republican right in the US and the Lib-Nats in Australia run on a platform of “individual empowerment”. With the exception of a few big-ticket items, where they have specific, active policies – policies towards boat people come to mind – the Coalition’s ideology is to get out of the way, reduce government’s interference in society, reduce the tax burden on individuals and corporations, and let the free market have its way. It believes that everyone will benefit if there are lower taxes and more money moving.

Let’s put aside for a moment the fact that trickle-down economics doesn’t work. Even in some fictional world where successful humans were altruistic enough to plough their profits back into providing more employment and more productivity, rather than squirreling away the proceeds as profit, we still need these other functions to happen.

And these other functions – hospitals, schools, heavy rail, telecommunications infrastructure – don’t happen at the behest of successful capitalists. They happen because the community needs them and the community as a whole will pay for them.

Individualism is what you have when you don’t have strong governments. Individual empowerment is what you get when the strong ride roughshod over the weak.

Now we seem to be on the verge of voting in a Coalition government which will be forced to cut back on all sorts of areas of service provision and expenditure if it is to meet its overriding goal of bringing the budget back to surplus.

A government whose budget figures and estimates we’ve not been allowed to see, which is promising to repeal several sources of revenue and increase expenditure in several areas, whilst not increasing taxes. Something has to give. It seems certain that “We can’t afford it” will come into force after the election in a big way.

“We can’t afford that” is never a valid excuse. That’s what government is for: to find a way to be able to afford the basic things we need our government for. If that involves raising taxes in an equitable manner, then that’s what you do – it’s exactly why we pay taxes in the first place.

If it involves an imposition on businesses to achieve an end that the community desires – for example, a carbon tax – then that is why we have a government. The whole purpose of government is to place impositions on the strong to benefit the weak and to regulate the individual to offer benefits to the whole.

A government that doesn’t want to do these things is not governing.

A government that doesn’t want to provide these things is a government that doesn’t want to govern.

 

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