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John Passant

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November 2008



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My interview Razor Sharp 18 February
Me interviewed by Sharon Firebrace on Razor Sharp on Tuesday 18 February. (0)

My interview Razor Sharp 11 February 2014
Me interviewed by Sharon Firebrace on Razor Sharp this morning. The Royal Commission, car industry and age of entitlement get a lot of the coverage. (0)

Razor Sharp 4 February 2014
Me on 4 February 2014 on Razor Sharp with Sharon Firebrace. (0)

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Demonstrate in defence of Medicare at Sydney Town Hall 1 pm Saturday 4 January (0)

Me on Razor Sharp this morning
Me interviewed by Sharon Firebrace this morning for Razor Sharp. It happens every Tuesday. (0)

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Crap Corner – All praise capitalism’s creative destruction!

Janet Albrechtsen (“PM barking up wrong tree” The Australian Wednesday 12 November page 14) says the following about the collapse here in Australia of the nation’s major child care provider ABC Learning Centres and the Prime Minister’s comments about extreme capitalism, and shows us (sort of) the real truth at the heart of capitalism.

That business failure, though painful, is an inevitable and even necessary precursor to progress – part of capitalism’s creative destruction – has been forgotten.

Only painful?  

Let’s look at that in the context of ABC Learning Centres, a for profit childcare organisation.  According to the receivers about 40 per cent of ABC’s centres are uneconomic. It has around 130,000 places. That means over 50,000 kids could soon be out of the child care system if the profitable centres survive. Since there are no extra places available, if these places aren’t propped up by Government intervention (to date $22 million till the end of December) and nobody, profit or non-profit, takes over the uneconomic Centres, then perhaps 30,000 families will be without childcare in the New Year.  (These are back of the envelope calculations so anyone with more accurate figures please let me know. I suspect they are conservative.)

This could well force one partner (in the case of heterosexual couples almost invariably the woman), to leave work to care for the kids until alternative arrangements, arrangements that do not currently exist, can be found.

That’s more than painful, Janet.  That’s soul destroying.

Janet’s creative destruction is an accepted tenet of serious economic theoreticians like Schumpeter.  They don’t, like me, question its rationality.  Rather, like Janet, they praise its results.

The Great Depression is an example of the creative destruction Janet presumably loves.  Capitalism revived not through the New Deal but through the arms build up and the “creative destruction” of World War II.  Now I assume even Janet thinks World War II might be more than painful, but I have to agree with her that given the logic of accumulation under capitalism creative destruction in the form of war is, to quote Janet,  “an inevitable and even necessary precursor to progress.”  I just think it is too high a price to pay. 

Janet of course will deny the link, but let’s move on and look at the US State’s intervention into the financial system and the impending collapse of  Detroit car makers.

 What  if Bush had not bailed out Wall St?  The collapse of AIG and the merchant banks (which may well still collapse, despite the various bailouts) would have produced a tsunami around the financial world. The collapse of the Detroit car makers will destroy manufacturing in the US for years and possibly destroy the US economy.  The destruction might be so great that it will be irredeemable. (It was Rosa Luxemburg from memory who posited the alternatives as being socialism or barbarism.  The complete collapse of the US economy, if it occurred, would bring about a sort of barbarism not witnessed for centuries.)

There is also another factor about the  collapse of Detroit we need into account. It would, from the point of view of the military industrial complex and the US ruling class, undermine America’s capacity to impose its views on recalcitrant countries and defeat its so-called enemies around the world.

But propping up these behemoths of capital comes at a cost, including higher taxes and or deficits and or higher inflation, and higher unemployment. And of course the winding back of social spending. Most importantly it only makes the next slump worse since the crisis has not been able to destroy the weaker blocs of capital.  So in that sense Janet is right in analysis but wrong in prescription.

Marx identified two economic trends in capitalism.  The first, the boom/slump or business cycle, comes about because capitalism is unplanned and undemocratic.  High returns (booms) in certain areas areas see over-investment in those areas, leading to a contraction (slump).

But Marx also identified a tendency at the very the heart of capitalism, the tendency of the rate of profit to fall.  This comes about because in the realm of production labour produces all value, yet individual capitalists see the way to beat their competitors as being to invest in more and better technology. So over time more is invested in capital than labour, so the rate of profit will fall, other things being equal.

Of course other things are not equal.   There are countervailing tendencies.  These include things like attacking workers living standards, jobs, wages and conditions.   This has been going on since the early 80s in Australia as the wages share of national income has fallen dramatically (even though real wages have increased.)  The pressure from capitalists will now be on for real wage cuts, and the destruction of conditions the trade union officials have not yet traded off.  And for mass sackings so the remaining workforce are forced to do more with less.

Another way of improving profit rates is to increase the length of the working day without commensurate pay increases.  For example Australia has the second longest working hours of any OECD country.

The destruction of capital is another way to address failing profit rates.  Picking up assets on the cheap enables those surviving companies to operate from a lower cost base for a while until the whole cycle re-establishes itself.

And a good war physically destorying capital (like World War II) is another way to revive capitalism. 

There are other counter tendencies, but these seem to me be the more relevant ones at the moment. 

So politicians may be damned if they do intervene and damned if they don’t. 

Workers of course will bear the burden unless they fight to protect jobs, wages and conditions. On the evidence of the past twenty five years of class collaboration from the paid officials of the Australian trade union movement, there will be no push from them to organise a fight back.  That will have to come from rank and file workers organising themselves to defend their jobs, wages and conditions.

As Lenin once said (or words to this effect): Capitalism can survive any crisis if workers are prepared to bear the burden.

Is there an alternative?  If the profit motive is the problem, why not get a better system?

 What about a rational, planned and democratic society where production occurs to satisfy human need? 

This rational, planned and democratic society has another name – socialism.

And no, I don’t mean Stalinism, which, as state capitalism, was the antithesis of socialism.  But that’s a debate for another day.



Comment from billie
Time November 13, 2008 at 5:30 pm

It appears that the child care subsidy distorts the market. The subsidy is higher for parents who have lower incomes. In Victoria some lower income outer suburbs have 6 centres almost side by side.

So while some parents struggle to find affordable places in accessible locations other parents have choice.

If it’s important for women to work then fund preschool child care the way we fund schools.

Comment from John
Time November 13, 2008 at 8:21 pm


Thanks. Another point is that a for-profit organisation for pre-school kids is the wrong model per se. It of necessity puts pressure on not-for profits to cut their costs too in order to compete with the ABCs of the world. The latter of course are or were providing care on the cheap.

I think a fully funded state model appropriate here.

Given the HowRudd Government is backtracking on a modest program for maternity leave then such things as free child care and a real maternity leave scheme will only become a reality of workers mobilise around them.

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