IAN McAULEY.  Don’t call economic reform “class war”

Those who accuse Labor of having engaged in “class warfare” in its election campaign are trying to stymie economically responsible taxation reform and to deflect attention from the corrupting influence of big money on our democracy.

When Bill Shorten lashed out at “corporate leviathans … a financial behemoth, spending unprecedented hundreds of millions of dollars advertising, telling lies, spreading fear”, anti-Labor voices were quick to accuse him of “class warfare” and “the politics of envy”.

I don’t recall at any time in the campaign when Shorten, or anyone else in the Labor Party, called on the oppressed proletariat to march on Point Piper or to storm the Melbourne Club.

Tax reform is not “class war”

What I did hear, although in the muddled messages of the Labor campaign, was a recognition that our tax system has at least two bad distortions. One is a set of incentives for people to become heavily indebted in order to speculate on housing, rather than to invest in wealth-creating enterprises. (The Coalition and its media supporters call such naïve property speculators “aspirationals”.) The other distortion relates to retirement incomes: a “hard-working Australian” with an income of $100 000 pays around $25 000 income tax, while a retiree (possibly the same person a few years later), living off $100 000 of earnings from $2 million of superannuation and other investments, pays no tax. Something very wrong there.

If the Liberal Party and its media supporters can’t understand the difference between tax reform and class war, there is little hope of any meaningful tax reform while Morrison, Cormann and Frydenberg are in charge of economic policy.

When Shorten complained about “powerful vested interests” he wasn’t talking about the  tradesperson with a couple of apartments or the retiree who has pulled together $2 million of superannuation and other saving. Such people, who are well-off in comparison with most Australians ($2 million puts one at the 90th percentile in wealth distribution), may have disproportionate political influence, but only in a collective sense. They don’t have the individual means to determine political outcomes.

These are the people who may donate, say, $1000 to a political party or an interest group because they agree with the party’s or group’s cause. A receipt and a standard “thank-you” e-mail is about all the recognition they can reasonably expect.

But the same proportionate donation from someone with $2 billion of wealth would be $1 million, and that is something quite different: it’s about buying influence.

Just two days after Shorten made his complaint, the Financial Review produced its annual “rich list”, revealing that there are now 39 Australians with personal fortunes of $2 billion or more: Shorten wasn’t talking hypothetically. On that list, at position #15, is Clive Palmer, who quite unashamedly – proudly in fact – says that his multi-million dollar campaign was specifically to keep Labor out of office.  (Had he been more strategic he probably could have spent far less – perhaps the comparatively modest $1 million Turnbull is reputed to have spent when the Coalition was in trouble before the 2016 election.)

Shorten’s point has nothing to do with “the politics of envy”. The only people who would envy those on the “rich list” are the also-rans who didn’t quite make it. (Envy is a real emotion, but we are envious only of those who are near to us in social rank or means: the corporal may be envious of the sergeant, but not of the colonel; the leading hand may be envious of the foreman, but not of the CEO.) Rather, the issue is about the influence of money on politics.

A struggle that goes back to Federation  

As Joseph Stiglitz warns, the link between market power and political influence must be severed. That link is starkly on display when just one person can do what Palmer did, and perhaps we should be grateful to Palmer for putting that power on display, because for the most part the influence of money is much less visible.

Maybe the super-rich are responsible citizens: their biographies provide plenty of examples of their good works, but it takes just one who puts his or her own fortune above the national interest to do what Palmer did. When we look at the potted biographies of those 39 we see many who made their fortunes in tough, competitive markets such as high technology and retail, but we also see many – almost half – who have made their fortunes in the wealth-extracting activities of real estate and mining, where there are huge returns in securing privilege from federal, state and local governments.

What we have seen in this election is an ideological conflict at least 120 years old. It’s not the traditional Marxist class conflict – although we had elements of that in the first half of last century. Rather it’s about the struggle we had at the time of Federation about what sort of country we were to become. Were we to go down the path of industrialisation, with its benefits of decent wages and prospects for people to advance through their enterprise and effort, or were we to go down what may be called the Argentinian path, with an established plutocracy living off rents from extractive industries?

At Federation we made a choice for the former, but as the scholar Ian McLean points out, in “settler societies” like Australia where fortunes have been made from land speculation and mining, the deal which made that choice is fragile. It’s hardly coincidental that the geographic divisions in 2019, between the resource states of Queensland and Western Australia, are the same as they were in 1901. In the election the Coalition and conservative independents hold a 35 to 11 majority in Queensland and Western Australia, while in southeast Australia, where 70 per cent of Australians live, Labor and more progressive independents hold a 59 to 43 majority.

And there’s a global aspect

In many ways the Palmer campaign was a re-run of the hysterical opposition to the Rudd Government’s resource rent tax – an opposition led not only by some corporations and mining lobby groups, but also by Gina Rinehart, who in that year topped the rich list.  While corporate and lobby group power has been a constant backdrop of capitalism, the power of wealthy individuals has grown tremendously in recent years. In 1984, when the rich list was founded, Kerry Packer topped it with a fortune of $200 million. Scaling that up by a factor of nine, to account for growth in nominal GDP, would give him a 2019 fortune of only $1.8 billion, competing with Gerry Harvey for #40 spot, and a long way from the present $16 billion top spot.

Worldwide the number of super-rich has grown tremendously since 2008, when, in response to the Global Financial Crisis, the monetary authorities, trying to stimulate economies teetering on the brink of a 1930s-style depression, flooded the world with money, through vanishingly low interest rates and “quantitative easing” (a polite term for Venezuelan-style money-printing). Australia’s latest instalment in this process was on Tuesday when the Reserve bank reduced the cash rate to 1.25 per cent. Cheap money has allowed for a massive re-distribution of financial wealth, without doing anything more than keeping the real economy from falling over the edge. Urban real-estate prices have boomed, as have sales of Monet paintings, ocean-going yachts and luxury cars, but job-creating investment in the real economy has been sluggish.

While the Coalition and its media cheer squad will go on about “class war” and “the politics of envy”, more reasonable people will call for campaign finance reform, and a ban on how-to-vote cards to stop preference deals and to remove the opportunity for the rich to pay to man polling booths. They would both be welcome reforms, but the more basic problem relates to structural weaknesses in our economic model, and the failure of 30 years of neoliberal economic policies, which have left us with no alternative but loose monetary policy to stave off economic collapse.

Ian McAuley is a retired lecturer in public sector finance at the University of Canberra.




Ian McAuley is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy Development.

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3 Responses to IAN McAULEY.  Don’t call economic reform “class war”

  1. Richard Barnes says:

    Not only the Coalition and their media fan club, Ian. Tom Iggulden, for example, in an ABC opinion piece seven days ago, referred to “Mr Shorten’s class warfare strategy”. Sadly, it seems this will become the prevailing view of what went went wrong for Labor.
    So in 2022 we’ll be offered a small-target Labor which aims to appeal to ‘aspirationals’ and ‘faith communities’.

  2. Wonderful stuff from both Ian and Michael. This is the main game.

  3. It’s not the traditional Marxist class conflict !

    No you are correct but the Marxist elements are there never the less! especially if you look at it in terms of what is to be done with capitalism and who is going to do it.

    The major issue which is what is to be done and who is going to do it relation to the anti-capitalist struggle which means weaning us away from a mode of production, the laws of which are driving us into environmental disaster and into a really serious kind of economic and political as well as social problems.

    There is therefore a search for an alternative mode of production which is going to if you like satisfy human wants and needs but do it in a way in which the negatives of the capitalist system are going to be abolished without necessarily abolishing some of the positives.

    Where we are right now after 30 or 40 years of neoliberalism it would seem that an anti neoliberal stand might be a really good place to start on that whole kind of quest for an alternative. One of the things that’s happened over the last 30 or 40 years is the commodification of everything and the increasing commodification and marketisation of everything.

    The insistence that activity should actually be mediated through the market in almost all different spheres that this world is one which in itself has transformed life in some ways that are highly negative.

    The initial step on the question of what is to be done would be to try to roll back that which has occurred under neoliberalism which we might find most objectionable.
    If commodification is one of those things which are most objectionable then this would mean that a politics of decommodification and if you like the movement of activities away from the market should be one of the immediate objectives of where we’re at now!

    Anti-capitalist struggle is being waged all over the place not in one specific place but in many different places.

    Struggles occur over monopoly pricing and fact pricing generally in the market. Some examples in the United States in recent years famous examples a hedge fund manager who purchased this drug company that created a drug an anti HIV drug which was a very important one and it was selling for something like $7 50 a pill. The hedge fund manager bought up the company turned it around and then started to market the same pill for 750 dollars; a pill now 750 as opposed to $7 50 a pill is a huge increase it was something like a 5,000 percent increase in the price of the pill!

    Now what does this then do it means that there is going to be some struggle over the price of the pill in this instance a social argument ensued but in terms of the market that is irrelevant it is not illegal!

    In this case there is a human equation and ethical point so a struggle emerges at the point of realization and those struggles which occur in the market are very often about market power and socialism is about structuring that market power to give equitable income outcomes.

    These scenarios and there are many of them in health in reality bare no relationship with the cost of production.

    Who are most vulnerable to this market place con working people!

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