Last week (June 11, 2014), the Australian Treasurer gave a speech at the right-wing Sydney Institute entitled – A Budget For Opportunity. The Treasurer was attempting to spin the impossible – that the May Fiscal Statement was fair (equitable) in that all Australians would be contributing to the deficit reduction. That is patently false. It is clear that the largest burden arising from the fiscal reduction will be borne by those with least income, including those reliant on public income support to scratch out the barest of existences. But in trying to make this impossible case, Hockey also invoked the classic divide and conquer strategy that conservatives use to segment and coopt certain sections of the population into agreeing with policy changes that will not only undermine their own prosperity but devastate the prosperity of other ‘segments’ who they manage to vilify. And while that is going on, the high income earners and wealthy, who are more likely to support the conservative political parties sit back sipping on their gins laughing their smug heads off. What a world it is.
This is not really a discussion of the economics of the fiscal statement but rather about the societal vision that it attempts to create. It is a distasteful, shocking vision of society and humanity. But neo-liberal to the core.
Suffice to say the economic myths are summarised by this statement:
It is nonsensical for government to continue to spend money at existing levels with the knowledge that this spending will not be sustainable and that in the years to come we will not be able to adequately assist those in genuine need.
It is deceitful to claim that the federal government will not be able to “adequately assist those in genuine need” if it continues to run deficits now. It might not be able to assist in the future if there is a shortage of real resources but that is a separate issue altogether.
It is also probable that the numbers in “genuine need” will rise as the government implements austerity via cutting back employment opportunities; makes it harder for people to receive education; and undermines the public health care system etc.
The currency-issuing Australian government will always be able to provide whatever is the best quality assistance to those in need as long as the necessary real resources are available and there is a political will to do so.
Australia is a deeply unequal society. In the last week, Oxfam released new research that showed:
1. “The wealthiest one per cent of Australians together have more money than 60 per cent of the nation’s population.”
2. “Australia’s richest nine individuals have a net worth of $58.6 billion (US$54.8 billion), more than the bottom 20 per cent (4.54 million people).”
Not yet American proportions but on the road.
The Treasurer claimed that the current Federal government was about providing “equality of opportunity”, which is one of those myths that make us feel better – that we all have a chance – it is a level playing field – and what happens after that is our own doing. Work harder and life will be sweet, bludge and you get what you deserve. That sort of narrative permeates the conservative propaganda.
With the sort of inequality noted above there is no way that all citizens have the same starting points. Our capacity to influence decision-making, to access education, health care, employment etc are significantly different because of where we are born and who our parents are.
Hockey main task was to develop his ‘them and us’ thesis – the divide and conquer strategy. He said that:
We must recognise that this spending comes out of the pockets of someone. Either it comes out of the pocket of today’s taxpayers, or the pocket of tomorrow’s taxpayers who will repay this debt along with the interest bill.
This year the Australian government will spend on average over $6,000 on welfare for every man, woman and child in the country. Given that only around 45 per cent of the population pays income tax, the average taxpayer must pay more than twice this amount in tax to fund welfare expenditure.
In other words the average working Australian, be they a cleaner, a plumber or a teacher, is working over one month full time each year just to pay for the welfare of another Australian.
Is this fair?
Obviously, there are two lines of attack.
First, the economics is wrong. Government spending does not “comes out of the pockets of someone”. It comes out of thin air via electronic transfers between the central bank and the commercial banking system at the request of the Treasury. Tax revenue does not fund government spending.
It just reduces the amount of purchasing power that the non-government sector has at its disposable and thus creates ‘space’ in real resource terms for the government to spend (and utilise the real resources freed for its own socio-economic program).
Please read my blog – Taxpayers do not fund anything – for more discussion on this point.
With that knowledge, it is clear that his claim that a part of our working day/week/year is a deadweight loss to us because it is necessary to support someone who receives income support from government is a misnomer.
That sort of accounting would only apply in the case of personal charity where, say, I donate some of my weekly salary to a particular cause. Then it makes sense to say I worked x minutes a day to make that donation and that I had to do that because I am not a currency-issuer who can make dollars appear out of thin air.
Second, and quite independent (but consistent with) the economic issues, are the moral arguments embedded in the Treasurer’s statement. The ‘them’, by implication are the lazy welfare-dependent individuals who won’t work – the ‘leaners’, and the ‘us’, are the workers, the ‘lifters’.
Hockey actually said that:
We must reward the lifters and discourage the leaners.
In that sense, Hockey was attempting to channel our longest serving Prime Minister Robert Menzies, who was a conservative from a well-off background. Private school educated, best university, vehement royalist and anti-communist, and Nazi-appeaser.
Menzies was Attorney-General in the Lyons Government which in 1938 was pro-appeasement. Menzies actually said after visiting Germany that he was prepared to “prepared to give Hitler the benefit of the doubt …” There is a fierce controversy about Menzies Nazi sympathies with the conservatives all trying to revise the historical record.
In the Tuesday 15 November 1938 edition of the Melbourne Argus newspaper there was a report on a speech Robert Menzies had made the day before – No Dictator Here!. Menzies was criticising his own government (while conducting an internal power struggle with the then Prime Minister Lyons who he was aiming to topple) and said that
If we pit inefficiency against the efficiency of dictatorship states we will put democracy and its religions and institutions in jeopardy …
I am constantly astounded to realise how difficult it is for most people to realise that there are two sides to every question …
He claimed Germany had acceptable grievances against Czechoslovakia and that France was not always right and Germany always wrong on these international issues.
He said that during his recent visit to Germany he had been “impressed with German industrial efficiency and with the attitude of responsibility of the big industrial enterprises to the welfare of their employees”. He didn’t qualify this with – as long as they weren’t Jews, Gypsys and other minorities being targetted by the Nazis).
He said that Australia was no better than Germany or Italy:
Democracy might be the form of government which suited Australia, but that did not mean that it suited everyone else. Before a dictatorship had been introduced in Italy democracy had sunk to the lowest level of corruption and incompetence. Italy was fundamentally more prosperous and better governed now than it was 10 or 15 years ago … As for Germany, the majority of the people there were satisfied with their Government … The young men and young women particularly I were enthusiastic followers of Herr Hitler and armed government, and regarded the State as all-powerful and all-glorified.
On July 15, 1939, after the Anschluss of March 1938 (invasion of Austria), the October 1938 annexation of the Sudetenland, and the completed invasion of Czechoslovakia, on March 16, 1939, Menzies gave an important speech in Perth.
It was reported in the July 15, 1939 edition of the Mirror newspaper as the column – Mr. Menzies “Departed Friends” where he said:
Let us judge Hitler soberly and fairly … History will label Hitler as one of the really great men of the century … As far as the German people are concerned, Hitler has proved himself a great man and a tireless worker. He dragged his nation from bankruptcy and revolution, and I think he has too much intelligence lightly to cast them back into another war … …
The article reports that Menzies’ views on Hitler were met with a hostile, placard carrying audience who drowned him out with cat calls. Thanks that some Australians were horrified by his opinions. The Mirror wrote “Definitely, Herr Hitler wasn’t popular with the audience.” Menzies at one point asked the police present to eject those who were expressing horror at his views. The audience was thinned out by the cops.
Further revelations of Menzies’ views on Hitler came to light when G.W. Mahoney, who was the House of Representatives member for Denison asked a question in Parliament on April 22, 1940 about the ‘Mechanisation of Australian Imperial Force’. The Commonwealth Hansard records (in part) the following speech by Mahoney:
… the war was forced on Britain and France by flagrant international law-breakers. We must recognize that the root of this war lies in the Nazi ideology, which would destroy everything that is dear to the people of this country, and to those of the other democracies. Naziism is carrying out organized propaganda which is designed to destroy the religious beliefs of the people, and to substitute the barbarism of the Middle Ages, whilst Russian ideology, which can be described as atheistic communism, is spreading throughout the world. In the early stages of the great move by Germany to destroy the world, where did some of the leading representatives of Australia and Great Britain stand? … To-day the Prime Minister (Mr. Menzies) delivered an oration in relation to the coal industry. Some time ago the right honorable gentleman visited England, and I understand that he also went to Germany, for after his return to Australia he spoke to the people of Australia from one of the Christian churches and told them that the Germans were a wonderful people, and that the Nazi organization was playing a great part in world civilization. But the Nazi was just the same then as now. At that time Germany was preparing to destroy the smaller nations of the world by force, but the right honorable gentleman was captured by Naziism because at heart he is a Nazi. He is responsible for encouraging the Nazi organizations that exist in Australia to-day, using mean and contemptible methods to destroy the nation. When I walked along one of Canberra’s streets with him some time ago he said, ” I have a great admiration for the Nazi organization of Germany. There is a case for Germany against Czechoslovakia. We must not destroy Hitlerism or talk about shooting Hitler, the gunman of Europe.” In this address to the people of Australia, the Prime Minister put up a case on behalf of Nazism. He attacked the party of which I am a member because it opposed Naziism from its inception. We pointed out how Naziism had interfered with the religious liberties of the Christian people of the world. He poses as the saviour of this nation, yet he has encouraged German people to march into smaller countries.
In 2001, a letter was discovered “written by the former Australian prime minister and father of the Liberal Party Sir Robert Menzies” to Australia’s representative in London, Stanley Bruce, which indicates his pro-appeasement approach. In the current affairs segment on ABC AM program (April 19, 2001) –
Letter revealed Menzies’ view of Hitler – we learn that the significance of this letter relates to when it was written.
It was written “after the outbreak of World War II and the invasion of Poland”. On September 11, 1939, Menzies wrote:
… we can either say yes or we can say no. If we say no, we must settle down to a war in which Germany’s defensive position is incredibly strong, in which in the long run millions of British and French lives would be lost and which the economic force, which will be our ultimate weapon, will tend to effect us almost as severely as it does generally. But I have a horrible feeling that by the time we have sustained three years of carnage and ruin, law and order will tend to be at a discount in every competent country and our last state may be worse than our first.
Anyway, that is the sort of character that the modern liberals eulogise and get their inspiration from.
In 1942, Menzies gave a series of weekly radio broadcasts to the nation under the title ‘The Forgotten People’ to the Australian people, as a way of pushing his political agenda. One of his famous lines was:
If the motto is to be, “Eat, drink and be merry, for tomorrow you will die, and if it chances you don’t die, the State will look after you; but if you don’t eat, drink and be merry, and save, we shall take your savings from you”, then the whole business of life will become foundationless.
Are you looking forward to a breed of men after the war who will have become boneless wonders? Leaners grow flabby; lifters grow muscles. Men without ambition readily become slaves. Indeed, there is much more slavery in Australia than most people imagine. How many hundreds of thousands of us are slaves to greed, to fear, to newspapers, to public opinion – represented by the accumulated views of our neighbours! Landless men smell the vapours of the street corner. Landed men smell the brown earth, and plant their feet upon it and know that it is good.
So leaners and lifters. The leaners are fat, lazy and immoral, while the lifters are muscle-bound and hard-working.
It was a version of the Ayn Rand ‘Atlas Shrugged’ theme. That novel written in 1957 and rambling on for a thousand pages or more describes the life of one – John Galt – who is the defender of oppressed, the disinherited, the exploited. The problem is that Galt is one of a group of businessmen who hate government and label themselves the oppressed.
The setting is the Great Depression and the reader is taken to a world of oppression where the nation’s biggest contributors – the industrialists – are forced by government intervention and regulations to abandon their businesses, which leads to the collapse of prosperity for all. The Atlas analogy relates to Rand’s view that the businessmen are the giants who hold world on their shoulders.
The, initially mysterious John Galt becomes the central organiser of a strike by the industrialists against the government. The government captures Galt and tortures him but eventually it collapses and Galt emerges as the savour of the free world.
So the strikers are the oppressed business captains who are seen by Rand to be the “noble producers who are unfairly oppressed” by regulations and the rest of us are not much more than parasites who “use government to mooch and freeload on the labors of the virtuous capitalist”. Rand claimed that “workers didn’t build America … businessmen did”.
She wrote (page 680):
We’ve heard it shouted that the industrialist is a parasite, that his workers support him, create his wealth, make his luxury possible – and what would happen to him if they walked out? Very well. I propose to show the world who depends on whom, who supports whom, who is the source of wealth, who makes whose livelihood possible and what happens to who when whom walks out.
The last ‘whom’ refers to the industrialists.
In the book, Galt makes a radio speech to the nation, outlining why he is organising the strike. He opines about the “men who have vanished” (the striking industrialists):
You have heard it said that this is an age of moral crisis … All the men who have vanished, the men you hated, yet dreaded to lose, it is I who have taken them away from you. Do not attempt to find us. We do not choose to be found. Do not cry that it is our duty to serve you. We do not recognize such duty. Do not cry that you need us. We do not consider need a claim. Do not cry that you own us. You don’t. Do not beg us to return. We are on strike, we, the men of the mind … We are on strike against self-immolation. We are on strike against the creed of unearned rewards and unrewarded duties … We have granted you everything you demanded of us, we who had always been the givers, but have only now understood it. We have no demands to present to you, no terms of bargain about, no compromise to reach. You have nothing to offer us. We do not need you … Are you now crying: No, this was not what you wanted? A mindless world of ruins was not your goal? You did not want us to leave you? You moral cannibals, I know that you’ve always known what it was that you wanted. But your game is up, because now we know it, too.
Galt particularly hates the slogan “From each according to his ability, to each according to his need”. He claims this means that the creative and productive who create the wealth (the ‘lifters’) have to give to the lazy and unmotivated (the ‘leaners’).
Rand’s terminology is a bit different. The “Producers” create the wealth, whereas the “Looters” are the government who confiscate it and the “Moochers” are those that live of the wealth created by the Producers. The Moochers and Looters are also called parasites.
This is the world of Joe Hockey, the Australian Treasurer who appeasl to the aspirations of the ‘lifters’:
Everyone should know that they grow up in a country where it is possible, through hard work and diligence, to achieve their dreams.
Which is a clearly a false representation of Australia. Millions of Australians cannot achieve their dreams because of lack of opportunity.
An indigenous child growing up in remote Australia mired in unemployment and social disadvantage has very little chance of achieving anything remotely like a child who grows up in the better suburbs of our big cities, goes to private school, then university and has all the parental wealth to assist them throughout life.
This divide and conquer narrative really re-emerged in the 1980s when we began to live in economies rather than societies or communities. It was also the period that unemployment persisted at high levels in most OECD countries and people became more dependent on government income support for longer periods because of the lack of jobs.
The two points are not unrelated. Unemployment arises because there is a lack of collective will. It does not arise because real wages are too high or aggregate demand too low. These are only proximate causes, if causes at all (in the case of excessive real wages).
The lack of collective will has been the principal casualty of the influence of economic rationalism or what we now call neo-liberalism.
The rising disadvantage associated with persistent unemployment arose because we allowed governments to pursue excessively restrictive fiscal and monetary policy stances driven by Monetarist ideology.
As policy makers became captive of the resurgent new-labour economics (supply-side thinking) and its macroeconomic counterpart, Monetarism in the late 1970s, the goal of low inflation replaced other policy targets, including low unemployment.
This resulted in GDP growth in OECD countries generally being below that necessary to absorb the growth in the labour force and labour productivity. The battle against unemployment was been largely abandoned in order to keep inflation at low levels.
The GFC has only exacerbated that state.
But the underlying cause is that the reemerging free market ideology has convinced us, wrongly, that government involvement in the economy imposes costs on us – to support the Moochers (or Leaners) and we have thus supported governments who have significantly reduced their involvement in economic activity via spending and tax cuts and widespread deregulation and privatisation.
The only way we will return to full employment, with everyone sharing in the benefits, is if the public sector increases its role in the economy.
Paul Ormerod argues in his 1994 book The Death of Economics that the Post-WWII period of strong GDP growth, balance of payments stability, and high investment could have occurred without the low unemployment. “The sole difference would have been that those in employment would have become even better off than they did, at the expense of the unemployed.” (pp.202-203).
The higher tax rates and buoyant government sectors allowed the flux and uncertainty of aggregate demand to be shared.
While the bulk of the OECD has abandoned this method of sharing, some economies have maintained high levels of employment into the current period. Ormerod (1994, pp.203) suggests that Japan, Austria, Norway, and Switzerland, among others have (in their own ways) “exhibited a high degree of shared social values,, of what may be termed social cohesion, a characteristic of almost all societies in which unemployment has remained low for long periods of time.”
Most significantly, Ormerod says that “the countries which have continued to maintain low unemployment have maintained a sector of the economy which effectively functions as an employer of the last resort, which absorbs the shocks which occur from time to time, and more generally makes employment available to the less skilled, the less qualified.”
This is the Job Guarantee capacity.
Governments redistribute real resources from private households to the public sector to advance a variety of collective actions. The desirable size of the government (and the amount of resources redistributed) is a political choice, rather than an economic issue.
The Keynesian full employment commitment was buttressed socially by the development of the Welfare State, which defined the state’s obligation to provide security to all citizens.
Citizenship embraced the notion that society had maintained a collective responsibility for individual welfare and replaced the deserving-undeserving poor dichotomy.
Transfer payments were provided to disadvantaged individuals and groups and a professional public sector, provided standardised services at an equivalent level to all citizens.
So even if we disregard the macroeconomic arguments relating to the capacities of the currency-issuing government, there is still an argument to be made in terms of moral philosphy. If there is no hope of equality of opportunity while there is significant inequality, then what is the problem for individuals helping each other out as part of a collective will to keep everyone moving in the same direction?
The divide and conquer strategies that conservatives use is an effective way of diverting our attention to the real underlying dynamics of capitalist systems.
The reality is that we work unpaid hours for capital to generate surplus value which the owners take for their own enjoyment (realised as profits if sales are as expected) and for which they do no productive work.
The real inequality is between labour and capital and the fact that the latter does not have to work to eat while the former cannot eat unless they work. Trying to segment the working class into groups of Leaners and Lifters and similar nomenclature is the way that reality is obscured and citizen is turned against citizen.
The divide and conquer also constructs the reasons why some of us have to rely on income support as being intrinsic to the individual – they are to blame.
Modern Monetary Theory (MMT) shows us that it is a compositional fallacy to consider that the difference between getting a job and being unemployed is a matter of individual endeavour.
Adopting welfare dependency as a lifestyle is different to an individual, who is powerless in the face of macroeconomic failure, seeking income support as a right of citizenry.
We are entering a dark age where the conservative forces are accelerating their agenda to reinstate the concept of a deserving poor (from the C19th). Marx will have to be reinvented to break this down again.
Meanwhile the progressive side of politics, who created the space for the conservatives to bring all this Ayn Rand nonsense back into vogue, are lost and attempting to talk tough with a direction to take that toughness.
They should start by reading Capital Volume 1 and taking it from there.
Australia Post – nonsensical discussion
Our national publicly-owned postal service is reporting that its operating loss is rising as a result of a decline in use of written mail these days and will
A news report today (June 17, 2014) – Australia Post deliveries could be reduced to three a week by end of year – said that:
Australia Post, which last week announced 900 job losses, is lobbying the government to remove rules requiring the company to offer a uniform rate for standard letter deliveries and to deliver mail five days a week to 98 per cent of the population. It is pushing for regulatory change by the end of the year on the grounds that plummeting letter revenues make the situation an urgent one.
Australia Post believes the reforms will allow its regulated mail business, which lost $218 million last year, to approach a break-even point over the long term.
Relevant Macroeconomic Principles:
1. Australia Post delivers a public service. It should only be evaluated in terms of the quality of that service and whether it is cost effective, which means whether the ‘real’ resources that are used in the operation are being used to their capacity. It has nothing to do with the financial rules that one would use to evaluate a private, for-profit company. Those rules are irrelevant.
2. Clearly there are lower letter volumes now, which might suggest that less deliveries are tenable. But that has to be considered in the light of the benefits of the public service being offered. If so, that should not be a ‘financial decision’. It should be based on the value of the public service being offered by the publicly-owned postal service.
3. There is no sense that Australia ‘cannot afford’ for Australia Post to run at an accounting loss. What does that mean? Merely that government spending is greater in this area of public service than the revenue it raises from stamps, etc. That means that the ‘subsidy’ to the postal service is not only broadening the scope of that service relative to a ‘break-even’ situation but is also adding to economic growth (a deficit is expansionary after all).
4. Is the subsidy inflationary? Clearly not.
5. What happens if Australia Post sacks the 900 workers to achieve a break-even accounting position? First, the reduction in government spending (currently equal to the loss) would be contractionary and via the multiplier effect will reverberate in a negative way throughout the economy. Second, it is likely the public service will diminish.
In general, public trading enterprises should not seek to achieve rates of return on capital commensurate with a private, profit-seeking company. The two entities are entirely different in aims. The former should only seek to maximise the social benefit from its operations while using the least real resources possible. It should never make its decision on whether it can reduce its ‘accounting loss’.
It is highly likely that delivering mail five days a week generates a higher social net benefit than cutting back to three days and sacking 900 workers. The case would need to be made. But that case has nothing to do with ‘accounting losses or profits’.
That is enough for today!
(c) Copyright 2014 Bill Mitchell. All Rights Reserved.