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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. http://sharonfirebrace.com/2014/02/11/john-passant-aust-national-university-canberra-2/ (0)

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Screw the banks, comrade Kevin.

National Australia Bank tells us it won’t pass on any more interest rate cuts. Screw them, Kevin.  And their mates at the other Big Four Australian Banks,  the Commonwealth, ANZ and Westpac.

How much of my money have the competition protected Big Four received to stay stable?  How much is the deposit guarantee from us through the Rudd Government really worth to them?  How much is Rudd Bank prepared to spend to prop up these parasites?

They charge us for using someone else’s ATM.  They impose fees when we blink, snore or fart.  (I pay lots of fees!) Despite five rate cuts since September credit card rates have not moved down.

And the banks haven’t passed on all of the rate decreases to mortgagors. Only some of it.

Well, Kevin, it’s time to squash these bloodsuckers.  If the Big Four Banks don’t pass on full rate cuts to mortgagors then withdraw Government support from them.  All of it.

Maybe you should think about setting up a people’s bank.  No, forget that.  It didn’t work from 1912 to 1990, did it?

So let’s nationalise the banks for the benefit of the Australian people.  I am sure you could do that under the corporations power, my good little social democrat mate.  So how about it Comrade Kevin?  Or is your newfound commitment to social democracy a smokescreen for neoliberal policies?

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Comments

Comment from Arjay
Time February 7, 2009 at 10:54 pm

I will agree with you again John.How is it that the least productive businesses in our economy make the biggest profits and are unaccountable?Banks,insurance companies, oil companies,Woolies West Farmers are allowed to practise preditory pricing,screw wholesalers etc.These practises are illegal in Canada yet both major parties in this country are toady boys when the Corps bark out their orders.

Large donations by the Corps to political parties should be banned.

Comment from John
Time February 8, 2009 at 7:25 am

Arjay. We agree again.

To be frank, the piece I wrote was a bit populist and lacking any real socialist analysis. Any pollie (except for the nationalisation bit) could have said the same thing. And nationalisation in the end doesn’t solve anything because it merely transfers ownership from individual capital to state capital, with the same logic involved.

Comment from juan
Time February 8, 2009 at 3:07 pm

John
Nothing wrong with a populist piece. I too pay exorbitant fees, and penalties if I get, even, a few cents short in my mortgage account. I understand that fees and penalties are now one of the biggest source of income for banks! Surely Kevin could do something about it.

Comment from Brett
Time February 9, 2009 at 2:43 pm

Arjay says:

“How is it that the least productive businesses in our economy make the biggest profits and are unaccountable?”

How do you define productive? How many people would be able to afford a house without a bank? Are you advocating that people store their money under the mattress until they’re ready to buy a house? What lunacy!

If people couldn’t afford a house, then the construction business wouldn’t exist, and we would have a lot less people in employment (and that’s just for starters).

The banks are therefore facilitators, and indirectly, are very productive. They are involved in every aspect of our society so saying they are not productive is nonsense.

And who do you think they should be accountable to? They are currently accountable to APRA, ASIC, the Treasury, and under a range of other provisions, the ATO and a whole host of other bodies. Not to mention our current national sport of bank-bashing. This is, of course, why the Prime Ministers recent rantings in The Monthly are irrelevant in this country – our banks are rock solid by comparison with those outside of this country. It’s also why our banks haven’t needed bailing out.

It’s also why ‘Comrade Kevin’ should never have put the bank guarantee in place’

That was a silly comment Arjay, and John you should know better than to agree with a senseless comment like that.

Now, nationalising the banks? How do you think you should compensate the owners of the banks, especially given that the workers own the banks via their superannuation?

Surely, unless you’re advocating theft, then the owners (including the workers) should be paid something for their share of the banks (be it an direct or indirect ownership)?

And if you’re paying fees for banking then you have no one to blame but yourself. I havne’t paid monthly transaction fees or interbank ATM fees for years, not because I have masses of debt with these institutions, but because I shopped around, and use only the ATMs of the bank that I bank with. As I said, if you pay fees then you have no one to blame but yourself.

Comment from John Passant
Time February 9, 2009 at 8:03 pm

Thanks Brett.

Banks are unproductive. They produce no surplus value – workers in productive industries do that. Rather the banks distribute that surplus value that workers in productive industries make around to capital depending on its needs.

They play a very important role – so much so that Lenin and Bukharin thought this was the age of finance capital.

Nationalisation is not theft. The Government can do what it wants, but the Constitution provides for just terms. pPrhaps the Government could nationalise the banks on just terms like those it gave for taking Aboriginal land (in the NT for example as part of the invasion.)

if workers take over running banks that is merely returning to them the value produced.

That is who banks would be accountable to – the workers councils that would democratically run society.

As to bank fees, they come with my small business (ie this blog) account. I can’t avoid them.

I haven’t forgotten your other post – I just haven’t had time to respond to it because I will have to develop my arguments a little more clearly.

Comment from Brett
Time February 11, 2009 at 10:03 am

John,

Could I suggest that you have a think about the message you’re sending. In a post titled ‘screw the banks’ you make the statement ‘They [banks] play a very important role – so much so that Lenin and Bukharin thought this was the age of finance capital.’ Then you say that ‘[N]ationalisation is not theft’ then compare it to the ‘invasion’ of Aboriginal land (invasion implying theft, be it land, ‘riches’ or whatever). Your message appears to be confused.

However, on the nationalisation issue, could you explain your answer to the following scenario: A worker has saved some money and has bought 100 CBA shares (which based on yesterday’s closing price would be approximately $3000) – in other words, they have an asset to the value of $3000. You then nationalise the bank. What does the worker have then? They will have $0 for their asset. That employee has had an asset valued at $3000 stolen from them – same as if you had stolen their $3000 cash. Do you think this is an appropriate policy? Are you really advocating theft?

And for your statement “That is who banks would be accountable to – the workers councils that would democratically run society.” Who are these workers councils? They are not unions – they haven’t been democratically elected and their influence and membership has been decreasing for decades which makes them even less representative. It’s not the government – they aren’t consistently unanimously elected! It’s only via a quirk in our electoral system that a minority government can be elected, and the wrangling and horse-trading that’s going on with the ‘stimulus’ package show’s exactly how well this structure works.

So really, you’re suggested an esoteric ‘council’ under which the worker is no more represented than they are currently are. In terms of accountability, the worker gains nothing.

Again John, I’d suggest that you to give this some more thought. Rudd’s recent essay in the Monthly was nothing more than an ideological rant with no real substance in it, and unfortunately your comments are tracking along a similar bent. As I showed you in our previous discussion, Marx is generally not relevant in the modern age. Looking to repeal past decisions like the privatisation of the banks in Australia either involve theft on a scale of hundreds of billions of dollars (the total market capitalisation of our banks) or a move which would bankrupt the government, neither of which are smart policy decisions.

I think you need to rethink your positions on these topics.

Comment from John
Time February 12, 2009 at 9:28 am

Surprise, surprise. Some banks are evidently enforcing penalties on fire victims who miss mortgage repayments.

These poor people may have lost their homes. Some are helping re-build their community or are in grief over the loss of family or friends.

The same miserly banks are making a bullshit show of giving and collecting donations for the very people they are now screwing. Like all businesses their grundnorm is profit, profit, profit, not people.

The Commonwealth Bank’s profit rose 8 percent between July and December last year. Why couldn’t they could shave a few million off that for the bushfire victims? The mad relentless drive for profit won’t allow them to, unless we force them.

What about it ‘Comrade’ Kevin?

Comment from John Passant
Time February 13, 2009 at 6:18 pm

Brett

Some comments. The banks in other countries (or maybe the finance systems) are slowly being nationalised, or some variant of nationalisation is being imposed.

My comment about just terms was a dig at the High Court who found that taking aboriginal land in the NT invasion was on just terms since the land title they had wasn’t transferable (ie had no value. Or at least that is what I think they said.)

The capitalist state taking over companies may provide some benefits (eg lower borrowing costs, possibly the ability to wear a lower rate of return for long periods etc).

(Sorry about the caps coming up – I must have accidentally hit the caps button. And I don’t know how to toggle so can’t adjust it easily.)

I don’t think workers should lose their superannuation investment in taking over banks, but I would point out the present crisis is destroying much of their value in super funds anyway. (It certainly impacted on mine.) secondly workers have no say in running the super funds let alone the companies in which their super funds invest. Thirdly super funds do not invest above a low level (ten per cent?) in any one company so have no control anyway over the company. Fourth compulsory superannuation was paid for by foregoing wage increases, wages increases which are lost forever and only partly recompensed through superannuation (ie compulsory saving for deferred consumption).

When it comes to superannuation I am in favour of a national scheme giving workers something like a decent living wage when they retire. To me this should be a defined benefit scheme, ie one in which the state wears the risk, not employees. This would mean it is paid out of general revenue and contributions from workers, not necessarily dependent on investments which,as the present economic crisis shows, can go up and down.

I don’t think your previous comments (eg the apple example) show Marx is no longer relevant. For a start there is a contradiction in your comments. On the one hand you say Apple offer nothing extra, then later on say they do. if people are paying extra money for something which doesn’t exist, they are paying for nothing. Most of the Apple innovations are in fact available in other machines. But i suspect they do add extra value to justify their extra price. But I’ll will respond in more detail. and of course we are talking about variations on a theme here. When a new song is written, these old themes become irrelevant. That is the point. And I’ll explain that when i get around to responding to your Marx is dead comment.

Workers councils have arisen during every major working class challenge tot the rule of capital. To run society workers et thee democratic councils up to divide important political and economic issues. Paris 1871, Russia 1905, 1917, various European countries from 1917 to about 1923, Spain 1936, various East European countries in worekrs rebellions against Stalinism. It flows naturally form the fact that production is co-operative and can only really be organised to satisfy human needs if it done democratically.

Comment from Brett
Time February 14, 2009 at 7:23 am

John,

“The banks in other countries (or maybe the finance systems) are slowly being nationalised, or soem variant of nationalisation is being imposed.”

That’s correct, however is as a result of a lack of prudential regulation and so the banks getting themselves in trouble. Australian banks, through the governance of the Treasury and APRA, are not in the situation that other banks (particularly in the US and UK) are in. Therefore, they are not currently under any threat of ‘going under’.

Please note, nationalisation is not being considered in those countries for the reasons your espousing – it’s for the banks survival. It’s is certainly not for a socialist objective.

Can we then please confirm that you’re no longer advocating nationalisation of Australian banks, and so not the ramifications that I outlined in my last comment?

“secondly WORKERS AHVE NO SAY IN RUNNING THE SUPER FUNDS LET ALONE THE COMPANIES IN WHICH SUPER FUNDS INVEST [sic]… It flows naturally form the fact that production is co-operative and can only really be organised to satisfy human needs if it done democratically.”

John, this is a silly argument. Through Choice Of Fund (COF), workers can choose which super fund they belong to, be it an ‘ethical fund’, an industry fund, a retail fund, and, failing all of that, they can set up their own fund. For arguments sake, the Socialist Alliance could set up their own fund! You can’t get much more democratic than that.

Regarding workers councils, you haven’t actually answered my question from my last comment: who are these councils? If they’re not unions or governments, then who are they?

The reality is that Australia, with it’s continually diminishing unionisation, is not culturally the place where these councils will ever exist again. It’s not in our nature. Maybe in somewhere like France, where unions are comparably strong, the notion could fly, however with the exception of Venezuela and France, there hasn’t been a workers council in coming close to 100 years.

It’s time to come into the modern world John.

Comment from Brett
Time February 14, 2009 at 7:53 am

Sorry John, just noticed that you updated your previous comment. I’ll respond a little later today.

B

Comment from John
Time February 14, 2009 at 8:50 am

Brett

A couple of points. It doesn’t matter how well the banks in Australia are regulated, the fact remains the global financial market is in crisis and that will have an impact on our banks.

So, Rudd is already supporting our banks and similar institutions. The bank deposit guarantee is one example. Rudd Bank (to protect property developers and the financiers who lend to them) is another.

As to workers councils, let me say Portugal in 74 saw them begin to develop; France in 68 saw workers take over and run their factories democratically; Hungary 1956 similarly, Poland 1970, 1980 the same. Egypt last year – in Malhalla a factory of 27,000 doesn’t run itself during a strike or occupation.

These democratic councils or embryonic councils (including strike committees) flow logically from the way capitalism organises production – cooperatively on a mass scale.

Unions at the moment have low membership in Australia. This may or may not be permanent. (I think it arises from the class collaborationist policies of the trade union leadership and the destruction of rank and file control.)

But in France in May 68 union membership was very low – less than ten percent from memory and it may have been only 1 per cent. This enabled workers to bypass or sidestep the stultifying conservatism of the Stalinist leadership of the unions, and produce the May days when workers began the process of challenging capitalism, a capitalism that eventually the thoroughly Stalinist French Communist Party saved.

Comment from Brett
Time February 16, 2009 at 4:06 pm

John,

Apologies for the long comment – there was a lot for me to reply to here.

As I requested in my last comment, could you please confirm that you are no longer advocating the nationalisation of the banks, and the associated costs to society that I mentioned earlier?

“When it comes to superannuation I am in favour of a national scheme giving workers something like a decent living wage when they retire. To me this should be a defined benefit scheme, ie one in which the state wears the risk, not employees. This would mean it is paid out of general revenue and contributions from workers, not necessarily dependent on investments which,as the present economic crisis shows, can go up and down.”

Firstly, to the original point about superannuation: your complaint in the lack of democratic process in how super funds are run, let’s look at some existing defined benefit super funds are run to see if they’re any more democratic. COMSUPER is no more and no less democratic in the way that it is run as compared to the retail/industry/DIY super funds. The Commissioner is appointed (not voted in), so from this perspective, your suggestion doesn’t generate a positive change.

However in terms of money in the fund, COMSUPER is considerably less democratic. Within retail/industry/DIY funds, you have the ability to move your money to another fund if you want to, however COMSUPER does not allow you to do that. Even after you’ve left the employment of the government, you cannot transfer your money elsewhere. So again, not exactly the model of democracy.

And the State funds are exactly the same. GESB in WA, VICSUPER in Vic etc. So the variety of comparable funds are not giving your argument much weight here John.

However from a financial perspective, history is against you on this one. One of the many reasons why Keating introduced compulsory super was that he realised that with an aging workforce, the costs associated with providing a pension for everyone was going to be too high, particularly when factoring in the cost of health care. So, unless you’re advocating (say) a maximum tax rate of 50% kicking in at 50,000, this is a wholly unachievable suggestion.

Additionally, coming back to COMSUPER, the reason for the FutureFund was because the previous governments hadn’t been able to keep their hands off and had taken the money from COMSUPER. This is why the CSS and PSS were known as ‘unfunded liabilities’ – they were liabilities to the government that had no funds to back them up.

Are you really suggesting that future governments would be able to keep their mits out of an enormous pool of cash the likes of which your talking about? Of course they wouldn’t. This would then mean that peoples pensions would be in danger, and we would run the risk of having an insolvent government. Not a palatable end.

So your suggestion makes no sense from a bugetry or economic perspective and there is no gain in democracy or transparency, and in fact there’s a decrease. In short, there is no benefit to your suggestion. I think you should rethink this too.

“For a start there is a contradiction in your comments. On the one hand you say Apple offer nothing extra, then later on say they do. if people are paying extra money for something which doesn’t exist, they are paying for nothing.”

I’ve reread my post about Apple and i’m not sure where you’ve got the idea that I’m suggesting that they don’t offer anything else. In fact, i’m suggesting the opposite: that Apple are innovators and it’s the innovation (in the form of different operating systems, new functionality, different products (e.g. the iPod, iPhone) etc) which customers are willing to pay extra for.

The point was twofold:

You have repeatedly said that the capitalists only generate additional profits by cutting costs – this is not true as Apple are generating extra profits by selling more expensive products which customers are willing to pay extra for because of the differences that are inherent in the products.

Additionally, capitalism provides the incentive for people to innovate so that they can generate these additional profits. This is the great failing of socialism – the incentive to innovate is removed, which of course then leads to stagnation.

Can you suggest to me how socialism promotes innovation?

“It doesn’t matter how well the banks in Australia are regulated, the fact remains the global financial market is in crisis and that will have an impact on our banks.”

Indeed there is an impact on our banks, however this is not a reason for socialising them. Things will have to deteriorate significantly before our banks will be in any danger of collapsing, which as I mentioned in my previous comment, is why other countries have their governments buying into their banks. So I’m not sure what your point is.

The bank deposit guarantee was a knee-jerk reaction which, in hindsight, is not helping anything. In fact, if anything it’s a hindrance.

“These democratic councils or embryonic councils (including strike committees) flow logically from the way capitalism organises production – cooperatively on a mass scale.”

Could I ask you to please explain this in terms of capital organising production. This intuitively does not make sense to me.

Comment from John
Time February 16, 2009 at 9:56 pm

Brett

I support nationalisation of the commanding heghts of the economy. It is more efficient and more democratic at least in the bourgeois limited sense of democracy. It can be cheaper and can if the Government implementing it is radical enough, be paid for out of taxing the rich.

Nationalisations tend to occur in two circumstances – during an economic crisis (as we now have) to save major capitalist institutions and seemingly capitalism itself, and during class polarisations when society, especially workers, move to the left. Taking over banks to rescue them is not nationalisation in the second sense I am using. I mean taking them over and running them for the benefit of working people – health, education, the finance system are all, or could be, examples of that. They are anti-market measures if you like, to ensure people’s needs are met, irrespective of the profitability or otherwise of the operation.

But nationalisations under capitalism almost always produce capitalist (ie sub-prime – pun intentional) outcomes. Nationalising the banks (or attempting to do so) in 1947 for example was Chifley’s way of making the finance system more efficient and to bend it to the will of the pro-market Labor government. Tame finance to benefit manufacturing.

As to super, I think you misrepresent me. I am for workers running society. The argument about defined benefits versus accumulation funds is about who bears the risk in present capitalist conditions, the boss or the worker. It is not about democracy and I don’t think I tried to link the two.

The whole process of capitlaist production is co-operative – in two senses. The chain from manufacture to consumption for example is one of capitalist cooperation through price and need. But more importantly capitalism creates a working class who, to produce what capitalism wants, must work cooperatively with each other. During a revolution you can’t as workers divide up the factory into little bits like peasants can the land. You have to run the factory cooperatively – ie democratically. And you ahve to do that cooperating with other factories too. And you do that work wise every day – working with others to produce cars, buildings, ore or whatever. So the first step to democratically running society is already built in to the way capitalist production is organised.

Australian Banks may survive intact, although we both agree there will be an impact on them from the global crisis. That impact involves tighter lending rules, more difficulty in borrowing and more cut throat competition for custom while at the same time trying to find more ways to extract profit from all of us. It’s true they may not be candidates for nationalisation in the first sense of that word i used above – ie save captialism nationalisations. But of course if the whole system falls over, it doesn’t really matter what we do with the banks. And the more I read, the closer I think we are getting to a deep deep recession. Japan losing 10 per cent of GDP, the UK 6 per cent, and the US – how much? Nationalising our banks wouldn’t save tuppence in the circumstances of a depression.

And the idea of working class pressure to nationalise as part of a leftward movement is non-existent, at the moment.

So let’s move on.

I will come back to Apple, I promise, since this is an important point. But you did say words to the effect that people could buy I-pod equivalents for much less but still bought Apple’s. Didn’t you? If so, that makes no sense. If your point was that Apple is in fact better because it innovates and so stays ahead of the pack, then I’ll deal with that soon. But not now – I must get some sleep after a day of exercise. (The get fit campaign started this morning.)

Please keep challenging me and my ideas. I enjoy it.

Comment from Brett
Time February 18, 2009 at 10:17 am

John,

Again, apologies for the long post.

“I support nationalisation of the commanding heghts (sic) of the economy. It is more efficient and more democratic at least in the bourgeois limited sense of democracy.”

Perhaps the problem here is that you’re (at least in appearance) making these statements in a philosophical/ideological way, whereas I’m arguing from a pragmatic perspective. I believe in my previous comments that I’ve shown that superannuation certainly isn’t more democratic when it’s centralised, with the example of COMSUPER being a clear demonstration of this point – COMSUPER is, infact, less democratic then the market based superannuation. Equally, the pragmatic effects of a policy of nationalisation of the banks would either involve theft from all bank share owners (especially the workers who either own bank shares directly or indirectly via their superannuation) or bankruptcy of the government – the market bank valuation is well in excess of $160 billion, and even factoring in a (hypothetical) 50% decrease in bank share price would still leave the government penniless for decades to come.

However, that aside.

Again, could you please confirm whether you support nationalisation of the banks. If you do, is your policy that workers have their investments stolen, bankruptcy of the government, or some combination of the two?

“I mean taking them over and running them for the benefit of working people – health, education, the finance system are all, or could be, examples of that.”

Unfortunately, health and education are not good examples of things being run by the government and are a product of our dysfunctional government structure. Having them run by the states is diabolical in terms of inefficiency and waste. Centralising them under the federal government and firing those who occupy the duplication in bureaucracy would make for an immediate cash injection for the school community. Same for health. And both areas are desperately in need of additional funds. This has been researched to the n-th degree, yet it hasn’t made it to public policy. There is certainly something that I would support you railing against.

“They are anti-market measures if you like, to ensure people’s needs are met, irrespective of the profitability or otherwise of the operation.”

Unfortunately, this is where your argument comes undone. I have had the unfortunate experience to work in two universities over the course of the last 6 months, one a Sandstone and the other a smaller university, and I’ve never seen, culturally, such failures in management and organisation.

Prior to the previous government, when a university overspent their budget, the feds just gave that university extra money. The railing of academia over this change by the last government is that of children crying when told that they can no longer have a lolly pop because they’re obese. To wit, in a workshop conduced with senior management of the sandstone university, I was told after making a suggestion “We don’t have a culture where managers manage”.

If you’re suggesting that banks and superannuation should be run like this then I can only object in the most strenuous manner. Particularly for banks, who deal in such extraordinary sums of money, but also superannuation for the same reason, but also because this is the mechanism that many will use (albeit in the future) to fund their own retirement. Loosening fiscal control to “ensure people’s needs are met, irrespective of the profitability or otherwise of the operation” is an exercise is madness.

“The argument about defined benefits versus accumulation funds is about who bears the risk in present capitalist conditions, the boss or the worker. It is not about democracy and I don’t think I tried to link the two.”

Unfortunately, there is much more to it than that as the risk is only one facet of this point, and unfortunately (or fortunately), when analysing an argument, all impacts should be considered. However, relevant to the argument, you did make the following statement:

“secondly workers have no say in running the super funds let alone the companies in which their super funds invest”

Re your last comment on the banks, sure the economies of Japan, the UK and the US are all contracting at the moment. Ours will too. But this has happened before and will happen again.

“But you did say words to the effect that people could buy I-pod equivalents for much less but still bought Apple’s. Didn’t you? If so, that makes no sense. If your point was that Apple is in fact better because it innovates and so stays ahead of the pack, then I’ll deal with that soon.”

Indeed. There are many different iPod variants out there, all of which are music players (and yes, they do other things too), however the Apple product has differences and that’s what people pay the extra for. In the consumers eyes, they are better.

However, I have to ask yet again: how does socialism promote innovation? Capitalism provides it by giving the innovator the opportunity to make a good deal of cash. But how does socialism promote innovation?

Comment from John
Time February 20, 2009 at 3:22 pm

Brett

Innovation and capitalism

This is not the correct post but it is your last post so Ii will address this issue here, and from memory as to what you wrote.

Your basic argument seems to be that Apple (as one example) stays ahead of its competitors (and thus receives more profit) through innovation. This may well be true. (I don’t know enough about the IT industry to confirm this or not.)

My point is that what is good for one capitalist is not good for the system.

What drives Apple to innovate? Competition. How does it innovate? Through more expenditure on teh means f production (machines, new machines, R&D, buildings etc) at a rate relatively greater than it expends on labour. If Apple produces a new popular product, this will give it a temporary edge over tis competitors who may or may not catch up before the next innovations arise. But its competitors will try to catch up. How? By mimicking Apple’s technology or producing their own new labour cost saving technology.

So, the point of importance here is the increasing expenditure on capital relative to labour. If, as Marx argued, labour produces all the extra wealth in the productive process then an increase in spending on capital compared to labour necessarily reduces the profit rate. So it might be good for Apple but it is crap for the system as a whole. This tendency of the rate of profit to fall is the dagger at the heart of capitalism.

Comment from Brett
Time February 20, 2009 at 5:07 pm

John,

I notice that you haven’t answered my questions again. I’m happy to address your point, and show that Marx was indeed wrong, however I’d appreciate it if you could answer my questions. They are:

* Could you please confirm whether you support nationalisation of the banks. If you do, is your policy that workers have their investments stolen, bankruptcy of the government, or some combination of the two?

* How does socialism promote innovation? Capitalism provides it by giving the innovator the opportunity to make a good deal of cash. But how does socialism promote innovation?

Comment from John Passant
Time February 20, 2009 at 5:58 pm

Brett

I support workers when they nationalise or drive the nationalisation of major productive sectors of society. I think I made that clear before. In any event I hope to have an article on so-called nationalisations going on at the moment (especially in the US and UK of banks and possibly motor car companies) on this blog by mid next week. It will argue these are not nationalisations in any progressive or left wing sense – they are the state taking over the role of the market in restructuring ‘inefficient’ industries. So I think the state will merge banks, take over the poorly performing companies in certain industries and merge them on the cheap with the better ones etc.

As to innovation, profit drives this. In your parlance, greed.

I envisage a society based on cooperation. For example where was the profit to most people – leave aside the likes of Coles – in helping the bush fire victims?

A world of cooperation could see (it would depend on what workers democratically decide) to continue using old technology to satisfy human need.

The drive to innovate would be to benefit society, not to make profit. That is a cooperative approach, not a competitive one. Innovation would still occur, but in areas of human need, not for profit.

Comment from Brett
Time February 24, 2009 at 11:02 am

John,

Apologies for the delay in responding, and once more for the long post.

If you’ll indulge me, i’ll summarise your last post:

You support nationalisation of the banks. This means that, if this was government policy, one of three things will happen:

* Workers will have their shareholdings, be they direct or indirect (via superannuation), stolen. Where previously they had an asset with a publicly tradable value, they will have nothing. In other words, theft.
* If the market rate is paid for the publicly available shares, then the government will be penniless, necessitating a large increase in taxes to generate some cashflow for other government activities
* Some combination of the above two points

These are the practical ramifications of that policy. Do you disagree?

“I envisage a society based on cooperation… Innovation would still occur, but in areas of human need, not for profit.”

While this is a nice sentiment, unfortunately, it’s not based in reality. In reality, it is profit which drives many to look for the new, or better ways to do the things that are currently done, be it corporate profit or individual profit. This is, of course, not a new thing – Columbus went looking for a new way to India to bring spices back to sell (as spices were comparatively expensive at that time) and there are countless other historical examples.

We need to recognise that man is inherently greedy and that the ‘advancement’ that this generates is long established in humanity. Evidence exists of this in early African societies, the dark and middle ages and to this day. If you’re suggesting that the next phase of our society will deny something that is this inherent in us, then I think you’re going to be sorely disappointed.

The simplest demonstration that greed is part of us was the looting that took place after Cyclone Katrina hit the states. Man is not the creature that your comment suggests.

Back to the discussion, today the big pharmaceutical companies spend billions of dollars to develop new drugs and treatments, and not at all for altruistic reasons. Additionally the CSIRO and universities, who also engage in innovation, collect patents to generate funds for their work, so this is a cross society pattern. A Socialistic society of which you suggest would not have this wealth of investment, and so the general society would end up going backwards for the simple reason that we wouldn’t be progressing in the fight against cancer, ‘bugs’ and a host of other conditions and other areas where innovation occurs (e.g. renewable energy, more efficient public transport, the entire information technology space (and all of it’s flow on effects), and a host of other areas).

I won’t suggest that there aren’t people out there who will create for the sake of creating, nor for the general good of society – clearly these people exist. However they are a drop in the ocean compared to corporates, universities, the CSIRO and others.

However this idea needs to be explored further: other countries, and I’m thinking particularly the Asian countries, would streak ahead of us, should this policy be adopted here. Culturally, in many Asian countries, titles and advancement are extremely important, so they would continue to move forward which would mean that we would not just go backwards in real terms, we would also go backwards in comparative terms.

So to wrap up, if you were to get a party together and go to an election suggesting that, in the name of socialising the banks, you will either bankrupt the government and so have to increase taxes to such a high level to generate any cashflow for the government to be able to do anything, or you will out-and-out steal property from the workers; and in the name of socialism make society go backwards via no further development (or innovation at such a slow rate), then i think you’d suffer a sound defeat.

This is amply evidenced by the lack of these policies in any party of any first world country. Even France, who I would consider to be the only real first world country with a socialist government isn’t suggesting anything like this.

“When it comes to superannuation I am in favour of a national scheme giving workers something like a decent living wage when they retire. To me this should be a defined benefit scheme, ie one in which the state wears the risk, not employee”

I don’t know if you saw the front page of the Financial Review yesterday, but the headline on the front page was about those companies who did offer defined benefit schemes in the past (I don’t know of any who still offer this other than the Reserve Bank and some grandfathered public service schemes which no longer accept new members) needing to put billions of dollars into those funds to top them up due to the recent ructions in the sharemarket! Are you still suggesting that all Australians should be in a fund which could be subject to this? If so then that’s surely another policy of yours which will bankrupt the government! And that’s even in spite of Keating (correctly) noting the rapidly retiring Baby Boomers.

The point is, of course, again that this is a nice idea, however impossible from a practical perspective.

I’ve noticed that you haven’t tried to address any of the practical objections I’ve raised – why is that John?

So, politically and practically, your notions don’t fly. Thankfully, we’re free from them for the foreseeable future.

Re Marx, of course, his positions need to be taken in the context of society of the time. In the 19th century, it’s understandable that he couldn’t have understood, let alone predicted, notions like Software as a Service (http://en.wikipedia.org/wiki/Software_as_a_service), cloud computing (http://en.wikipedia.org/wiki/Cloud_computing) the notion of producing products which do not require a physical production line (e.g. software galleries as outlined in this piece http://www.smh.com.au/news/digital-life/smart-phone/the-shape-of-phones-to-come/2009/02/21/1234633122209.html?page=fullpage#contentSwap1), and even things like modern banking and the service economy, all of which change the societal profit equation significantly. And the share of the economy that products like these (amongst others) is growing significantly which changes it even more so and so builds on, and enhances, Okishio’s theorem (amongst other counter arguments against Marx). Sure, for the foreseeable future, there will still be capital intensive working arrangements which could be used to support Marx’s ideas however these sectors will diminish as a proportion of society over time. A basic recognition is required that things have changed significantly over the last 150-200 years, and will change even faster in the next 50 years, let along 150 or 200 years. Marx has his day, but that day is in the past. It’s time to move on John.

Comment from John Passant
Time February 24, 2009 at 2:24 pm

A short response since I am preparing my talk on Economic crisis: Recession and rebellion. (For Canberra readers it i sat 6 pm Thursday 26 Feb room G 039 Copland Building ANU).

I do try as best I can to address your objections, but sometimes they do not appear that germane to the general discussion and appear more about trying to trap me into the ‘workers will lose’ paradigm.

As to nationalisations, I do not support the present state nationalisations, quasi nationalisations or impending nationalisations. They are the state taking on the role of managing capitalism’s restructuring, what Schumpeter called creative destruction. There is nothing, or very little, that is progressive in these nationalisations where the Government takes over toxic assets and forces mergers, acquisitions etc, much as the market would have done anyway. But the state may do it slightly less brutally, so maybe there is some benefit for workers. I want nationalisations under workers’ control. That’s the difference.

I support workers demanding nationalisations to provide real benefits (eg a national health scheme and a full pension scheme (which i think the less than radical Whitlam mooted in 74) or to run the system for workers (eg taking over the banks to provide more credit to working people at cheaper rates, and for some businesses)). The super issue is a minor one and can be dealt with in the detail but the aim is to benefit workers. Not bosses.

Of course capitalism has changed its spots since the mid 1800s. That doesn’t mean it is a different beast. Its essence remains the same. More on this later.

That makes Marx more relevant, not less.

For example, French polls show Olivier Besancenot (not sure of the spelling yet) as the most effective opposition to Sarkozy. He’s a trotskyist who has set up the Nouvelle Parti Anticaptaliste. From memory his support is running at about 23%.

And he wants another May ’68, although this time a successful one. He is in favour of nationalisation under workers’ control (as am I.)

Presumably you’d tell him to move on too. He is, back to basics to address the fundamental problems of humanity by overthrowing capitalism.

Comment from Brett
Time February 24, 2009 at 2:56 pm

John,

Appreciate that this isn’t a formal reply, however:

“There is nothing, or very little, that is progressive in these nationalisations where the Government takes over toxic assets and forces mergers, acquisitions etc, much as the market would have done anyway. But the state may do it slightly less brutally, so maybe there is some benefit for workers. I want nationalisations under workers’ control. That’s the difference.”

You seem to be asserting that our (Australian) banks are toxic assets. Under what basis are you making that assertion?

Also, you seem to be asserting that there is some other alternative ownership model than private (i.e. via owning shares) and public (government control). What is this third option?

Re the French, perhaps a Trotskyist is gaining favour within the French population, however I would be very interested in seeing what the financial ramifications of those policies on the broader economy, both from an international perspective and an internal one.

“Presumably you’d tell him to move on too. He is, back to basics to address the fundamental problems of humanity by overthrowing capitalism.”

By suggesting socialism, which will, as we’ve previously discussed, stop innovation and stop society moving forward? Hardly a forward step, is it?