Saturday’s socialist speak out
Posted by John, February 16th, 2013 - under Saturday's socialist speak out.
Well, you’ve made a right mess of it, haven’t you Wayne? And Martin. And Julia. The fallout from the Minerals Resource Rent Tax – a whole $126 million in the first six months compared to a projected $2 billion over the 2012/13 income year – has Labor in tatters.
Treasury testimony to the Parliament has blown Swan’s excuse about the dog eating his homework – sorry, about changing market circumstances being the reason for the fall in actual collections. First, the ‘compromise’ Swan and Ferguson reached with the big 3 mining companies means that they can value their old projects at current market prices, thus wiping out much of the ‘super’ profit.
For example, The Australian on Thursday mentioned that BHP had purchased some Queensland coal mines 30 years ago for $3 billion. That actual cost could be the base for working out super profits. Alternatively the current market value – what the mines could be sold for – could be the base. In the case of the mines in question that current market value is $18 billion.
The government compromise allows the mining companies to use the second figure in working out their super profits if they want. Let me give a highly simplified example based on these figures. Say the mines are really profitable and make a net return of $600 million. $600 million on an initial outlay, the historic cost, of $3 billion, is a 20% return, a super profit.
$600 million on today’s net present value – current market valuation – of $18 billion is a 3% rate of return. No super profit here, move on.
There looks like there’s another reason why the figure for the tax collected was so low. The government wants to tax the super profits that the mining companies make from the minerals just being minerals, not the value the companies add, for example by processing them, getting rid of impurities etc. But it looks as if the mining companies have been using this difference to claim most of their profits are arising from their downstream activities. That is a matter for audit.
The ALP tore itself apart over the original Resource Super Profits Tax. In response to immense pressure from the mining companies the party knifed Kevin Rudd, its Prime Minister, and the new leader, Julia Gillard, the Prime Minister for mining companies, oversaw the gutting of the RSPT and the implementation of the present debacle.
Many will see this in terms of personalities, but the reality is it tells us something about the degeneration of the ALP from a party of supposed social democracy to one of neoliberalism. This long road to market nirvana means that Labor as social democracy can no longer perform a vital role for the system – impose solutions on capitalists for the benefit of capitalism generally.
Another fall out from the MRRT debacle has been to give fuel to the Conservative cry of where’s the money coming from.
Having abandoned tax cuts for companies because the MRRT would not raise enough, Labor was going to use the revenue from the MRRT to fund the shortfall in revenue that will arise because of the increases in compulsory superannuation, and to contribute to Gonski and NDIS education and disability ‘reforms’. These are market based changes couched in the rhetoric of reform.
So the Opposition asked Swan would he rule out tax increases. He didn’t do so immediately. The proverbial hit the fan and a few hours later Swan ‘clarified’. There would be no tax increases.
A Treasurer with a bit of guts could have proclaimed there would be tax increases, on the rich. He could have made the point that taxing Gina Rinehart, a woman whose wealth increased by around $20 billion in the last 18 months, made perfect sense since her wealth is built on the back of our labour. But of course Labor can’t do that. It is the handmaiden of capital and can’t launch even a little skirmish against its masters these days.
What it will do as business tax receipts continue to drop markedly is to ‘exercise spending restraint’ according to left wing Minister Penny Wong. This is code for attacking welfare for poor people (remember single mums) and further cutting spending on public health and education to address the $10 billion deficit.
If Labor wanted a chance to win the election then the rhetoric of class war might help it. Such is its degeneration it can’t even utter words of opposition to its rich mates.
Australian Ben Zygier suicided in a suicide proof cell in Israel. Zygier held two passports, was a Mossad agent and may have turned. His suicide looks suspicious, as does the cover up from Foreign Affairs.
In other news, mass murder Barack Obama has continued his drone bomb spree; Israel executed an Australian citizen with nary a worry from Australia until the crime has been exposed; Los Angeles police executed Christopher Dormer – taste of things to come as the beast of US imperialism turns its attention to the ‘enemy’ within; the revolution in Egypt has quietened for a few days, both sides eyeing each other; Gillard negotiated a rotten deal to turn New Zealand into a warehouse for asylum seekers here, exporting our concentration camps to yet another country; union freedom fighter Bob Carnegie went on trial for contempt of court for organising a community picket; and climate change continues unabated despite rhetoric from war criminal Obama.
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Comments
Comment from John
Time February 16, 2013 at 7:46 am
It is the argument the mining maggots use. It is rubbish. Taxing a 20% return so the yield drops to 16% means the miners will continue to invest in mining unless they undertake a capital strike, which they might well do, for political rather than economic reasons. In that case, nationalise the mining industry. It is one of the options the Henry Tax Review mentioned, only to dismiss it as ‘inefficient’. If workers, who know about their industry, run it, the result is likely to be more efficiency, not less.
Comment from Dave
Time February 16, 2013 at 7:46 am
But can the end of social democracy be put just down to policy and ideas? Social democracy was a class deal ( a greater social wage for increased productivity and stability) that was only possible due to the global coordinates that arose post WWII. This deal was terminated by us when the struggles of the 60s and 70s went beyond its limits. It is impossible to return to.
Comment from John
Time February 16, 2013 at 7:48 am
I don’t begrudge superannuants their still inadequate pensions. I just think we need to udnerstand the level of subsidy the government makes to retirement incomes and the fact the benefits go overwhelmingly tothe top 5%, a group whom neither you nor I are members of.
Comment from John
Time February 16, 2013 at 2:41 pm
No, it arises because of the reassertion of the tendency of the rate of profit to fall, and the decline of profit rates from the late 60s and early 70s. The rise of neoliberalism is the political expression of the needs of capital to address this with marketisation, a strong state to curb if not smash unions etc, and we can see this with the election of Thatcher, Reagan, Hwke – all with a common aim and slightly different mechanisms for achieving it. In fact the RSP was an instrument of neoliberalism to distribute -,monopoly rent’ from one group of monopolists to the rest of capital through tax cuts. The economic roots of reformism might be dead but the political roots – the lived experience of work, the memory of the class, mean it isn’t. So the task becomes to use that to show an alternative world, beginning in its first steps with class struggle for reforms, defence of jobs, real wages etc.
Comment from Chris Warren
Time February 16, 2013 at 6:48 pm
Kay
You are way off target. There is no point trying to bribe people into capitalism by telling them they enjoy the benefits.
This only applies to the top of the pyramid, and is not sustainable. I suggest you have a look at the last ABC 4-Corners here:
http://www.abc.net.au/4corners/stories/2013/02/06/3684714.htm
This is the reality of enjoying capitalism. It is, in effect, a repeat of Ken Roach’s famous, 1966, BBC documentary “Cathy Come Home”.
Capitalism is not what you may be seeing around you today. It also includes seriously oppressed labour and desperate working conditions elsewhere.
Comment from Kay
Time February 17, 2013 at 10:33 am
Chris
Firstly, I was not defending the miners per se:
All I was saying was that in relation to shares I bought 24 years ago, there are two ways of looking at the yield – either based on the actual dollars spent in 1989/90, or in terms of what they are worth now (resale value on the market). You could also extrapolate the dollars spent in 89/90 and what those dollars are now worth in terms of buying power (CPI and wage increases). Based on the first two numbers (actual purchase price & current value – very easy to determine) you make a decision as an investor what to do with those assets – hold or sell. These are basic personal financial considerations. Most superannuants and would-be superannuants would be familiar with such considerations – which apply also to investment property, cash deposits and superannuation generally. And all of this ability to improve one’s financial situation occurs in a capitalist system. Probably more so in Australia than the USA.
My only mention of the miners was that they too are entitled to take into account these considerations. And if they can convince Gillard and Swan re the validity of such an argument, then they did well – but their arguments are not entirely out of court. Some Treasury officials in the room might have helped to point out the danger of such a consideration at a time of falling commodity prices etc given that the aim of the exercise was to RAISE TAX. Some more complex arrangement could have been devised to mitigate the effects of the market value calculation. Swan is an idiot!
Secondly – the very valid issue you raise – the benefits of capitalism for people such as John and myself, and the very different experience of many others in society, especially in the US:
As for poverty generally – as shown in the Four Corners – yes, it is a problem in many countries including the US, and, to a lesser extent, Australia. I certainly agree that capitalism is completely out of control these days. The gap between the obscenely rich and the dreadfully poor has been growing rapidly since Reagan was President. It amazes me that so many people actually support the Republican Party in the US – clearly a lot more than the 1% top rich people. I have no problem with increasing taxes on the very rich. But look at how impossible it was for Obama to increase taxes on those earning $250K or more – a reasonable move, I would have thought. If I had an income of $250K, I would consider it reasonable to get taxed a bit more for the overall good. But I would be more interested in heavily taxing those who receive incomes in the millions of dollars – but you also have to close loopholes that can be exploited by well-paid accountants and lawyers working for those people. However, for taxes to really help, you need to target large numbers of tax payers – hence those earning $250K and above. If I lived in the USA, I would definitely be a Democrats supporter, even though I no longer support Labor in Australia.
I agree that there are many millions throughout the world who are barely getting by. And this is a very valid criticism of rampant capitalism. How can that be addressed on a world-wide basis? I simply don’t know, but I don’t support major revolution or upheavals. Worldwide taxation regimes that skimmed off excessive incomes and provided no tax havens might help – and pigs might fly! But I believe that human greed is such that any social structure, including socialism, would inevitably degenerate into a totalitarian regime in which ‘some are always more equal than others’ as Orwell pointed out. So I favour a democratic system here in Australia with constant tweaking of the taxation regimes and other systems to improve the education and job prospects of the average person, and to close loop holes on the obscenely rich.
John and I both benefit from the current superannuation regime. Compared with overseas models, the concessions on savings and privately-funded pensions in Australia are not excessively generous – about middle of the road in comparison with comparable countries. But as John pointed out, we are not amongst the ‘rich’ in this country. I concede that I am ‘comfortable’ = I can pay my bills and can afford a new car every 10 to 12 years, and an occasional holiday. My concern is that the Labor government thinks I am ‘rich’ and attacks my fine balance of existence rather than taxing the truly rich (after all, they have more negotiating power than I have – Labor knows we self-funded retirees don’t vote Labor in general).
Hope that helps you understand where I am coming from. I wasn’t aware that I was trying to “bribe” anyone!! But the points you raised about poverty are very valid ones.
Comment from Chris Warren
Time February 18, 2013 at 1:57 pm
Kay
We have had decades of concern for the poor and homeless, but all too often, the concerned pretend, they don’t know what to do about it, or the solution is as if ‘pigs may fly’, and certainly never think of changing society because this will end up as a totalitarian state like Orwell said.
This is an old song.
Yes I understand where you are coming from.
Buying shares, 24 years ago, or renting investment property, etc are market transactions and can occur under market socialism, or feudal systems. They are not the essence of capitalism.
Capitalism works best (in maximising profits) when there is no market – just monopoly. Having to support competition and freedom for all manner of small business just gets in the way of big capital and they are steadily wiped out.
The government does not attack you, unless you want to keep all your wealth to yourself and not pay reasonable taxes.
It is not possible to support capitalism and democracy at the same time, because sooner or later one must collapse in the face of the other.
The superannuation you enjoy was presumably a one-off event that will not be available to the 20 years olds now starting on the same path you may have followed.
In the public service, the super scheme John Passant has presumably accessed is gone. It was a false condition of bygone capitalist lucky country fortune on the worl stage.
Comment from Kay
Time February 19, 2013 at 8:44 am
Well, I guess we’ll just have to disagree about capitalism and democracy – all today’s democracies have capitalistic economic systems. And, in my view, constant tweaking is more likely than complete collapse.
I don’t know what you mean by “The superannuation you enjoy was presumably a one-off event that will not be available to the 20 years olds now starting on the same path you may have followed.” In fact, today workers have the Superannuation Guarantee which was not available when I was 20! I did not start paid employment until I was 30 years old because I raised a large family full-time. At that point I started at the bottom of the pay scale and worked my way through several very different careers by hard work and further education. I was not in any superannuation scheme until I was over 35. And all the public service super schemes enforced a post-tax 5% contribution from all workers. I always ‘rolled over’ my super as opposed to spending it between jobs. As well as working, I made share and property investments, carrying huge debts for many, many years. At retirement, I cashed in many investments to add to my super. So is 30 years of effort a “one off event”?
How old are you? Education throughout life, adaptability, getting a job and keeping employed, careful budget management and investing carefully can give young people today significant security in old age.
Re your reference to John – I assume you are referring to the defined benefits schemes once the norm in the public service – but now only enjoyed by the politicians? I’m not sure what kind of super John has, but I chose to leave a defined benefit scheme. So most public servants and ex-public servants now have accumulation schemes or allocated pensions. The same as all other workers. The superannuation benefits for workers today are far more than they were when thankfully Labor introduced the SG legislation – before then, very few ordinary (non-PS) workers had any superannuation at all.
Comment from Kay
Time February 16, 2013 at 6:59 am
Well, if you want to work out whether or not an investment is working for you, you do need to take into account what alternative investment strategies might yield as a comparison. For example, $x dollars invested in shares 25 years ago appears to be yielding enormous dividends/return today. But what is also relevant is what better returns you might achieve if you were to sell your shares, pay your CG tax, and invest the (say) 5 x $x in some other investment strategy. Could you materialise your capital gain, and then get a better return from something else? You know, the old ‘interest foregone’ argument. So it is a relevant point – even for mining companies! Not that I want to support Wayne Swan!!!
No doubt this posting will get me accused of belonging to some ‘flat earth society’ or other common insult from you. Or, most likely, being a superannuant, that I too am part of this dastardly capitalist conspiracy to keep the ‘workers’ in poverty. But I suspect that you too enjoy the benefits of capitalism – just as I do, and do all other self-funded retirees, both rich and not-so-rich.