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October 2009



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The world crisis and the political situation in Australia

At the centre of the Australian political situation today is the contradiction between the deep crisis in world capitalism on the one hand and the ongoing stability and political quiet in Australia on the other writes Corey Oakley in Socialist Alternative.


As Tom Bramble has outlined in Crisis and contradiction in the world economy, the world economic crisis is deep seated and systemic – easily the most serious economic turning point since the Great Depression.

 The economic consequences have been severe, particularly for workers. But the crisis has also caused deep political convulsions in the world system.

This is what Mick Armstrong wrote on behalf of the National Executive of Socialist Alternative in the pre-conference bulletin last year:

The whole ideological framework – free market economics – which has been dominant for the last 25 years has been severely discredited. This puts the ruling class and its ideological hangers on very much on the backfoot. It will take time for them to regroup and to come up with a new ideological framework to defend their system. This opens up a space for alternative world views. Socialist ideas …  can potentially find a much greater resonance in the coming years.

However … Marxists don’t argue that recessions and cuts to living standards lead automatically to working class resistance. Mass sackings can make workers angry and embittered but they can also lead to demoralisation and a retreat into focusing on simply staying alive. But major crises rupture the pattern of everyday life and open up the potential for political turmoil and major struggles. The pattern will inevitably vary enormously from country to country but economic crises destabilise governments and commonly lead to sharp political polarisations both to the left and to the right.

In general terms, this outline stands. We were right to say that the crisis could cause political convulsions, but it was also important to point out that the way it flowed through could be contradictory, and differ widely from country to country.

It is also important to note that we raised the potential space opening up for socialist ideas in terms of “the coming years” – we never talked about it in terms of what would happen in the first 12 months of the crisis.

We have covered many aspects of the political fallout in the magazine Socialist Alternative over the past year – the general strikes in France, Italy and Greece (there was another among public sector workers in Romania in October); the MPs perks scandal in Britain; the collapse of the social-democratic vote in the European elections in June; factory occupations in Ireland, South Korea and elsewhere; and intensified class struggle in China, South Africa and Latin America, among other things.

In recent months, one of the most significant developments has been the resurgence of the American right, which has been running an intense, vitriolic campaign against Obama, drawing on the long history of anti-communism and racism in the US to denounce him as a socialist enemy of America.

This campaign is not, as it is often portrayed, simply a reflection of the anger of the grass-roots far right.

It is being driven by a section of capital which is pursuing a policy of class warfare, determined to crush any idea that the “big government” can intervene on behalf of workers, and trying to turn around the battering free-market ideology has received in the last 18 months.

In Europe we have just seen a number of elections that reflect the tumultuous political climate.

In recent elections the German SPD suffered its worst defeat in the post-war period, slumping to less than a quarter of the vote. While this put the right in power, it is of great importance that the disillusionment with Social Democracy found a significant outlet on the left. The Die Linke vote rose to 11.9%, which when combined with the Green vote is almost equal to that of the SPD.

In parliamentary elections in Portugal last week, the main social-democratic party lost 10% of its vote. But as in Germany, the left gained. The Left Boc vote went up to 10% and it doubled its number of MPs.

The German result in particular is a step forward from the mid-year Euro elections, where most of the disillusionment with social-democratic parties flowed to the mainstream or far right.

On the other hand, there is no indication that the rise of the far-right in Eastern Europe has been pushed back in recent months.

And we do not want to overstate the positives on the left. Things have gone forward in Germany – but Die Linke is far from being a revolutionary formation – and in most of the rest of Europe the far left has struggled to have an impact.

As well, while there have been working class struggles in Europe, they have not been of such a scale as to start to decisively turn the situation around.

Nonetheless, we can say that on a global scale there is widespread anger and disillusionment among both workers and sections of the middle class, though this has manifested in different ways in different countries, and has, as we predicted, found expression on both the left and the right.

If we combine that with the ongoing ideological turmoil among the bourgeoisie, we can say that, although there have not been any huge outbreaks that have transformed the situation one way or another, the economic crisis has had a significant political impact as it has worked its way through.


And yet when we turn to Australia the term “stability” seems among the best with which to sum up the situation.

The Rudd government remains dominant in the opinion polls. There have been virtually no significant social or industrial struggles, or polarising arguments around political issues. Neither the left or the right have made gains.

What we have witnessed instead is a deepening of the process that began in the last years of the Howard government – an increasingly depoliticised atmosphere in society, the ebbing away of significant ideological battles, and a general lack of intense feeling about politics. Why is this the case?

The economic situation

First, let’s look at the economic situation. There are a series of factors that have meant that, economically, Australia has avoided the worst of the world crisis so far.

  • Australia went into the crisis in relatively good shape economically – with low unemployment, and nothing like, for example, the sub-prime volcano that was bubbling away under the surface in the US.
  • The much talked about fact that the export market to China has held up better than expected has made a major difference. This has probably been decisive in holding the Australian economy up.
  • Australia’s financial institutions have not collapsed – indeed the Australian banking sector has done better than almost anywhere else in the world.
  • Counter-cyclical measures, in particular the stimulus spending and sharp reductions in interest rates, have had a stabilising effect.

As a result of these different factors, the Australian economy is undoubtedly better placed than most around the world.

Australia’s official unemployment rate of 5.7 per cent (it actually fell by 0.1% in September) compares favourably with Spain: 18 per cent, Ireland: 11.7 per cent, the US: 9.7 per cent, Germany: 8.3 per cent and Britain: 7.8 per cent.

The housing market and retail sales have held up. People are not losing their homes in large numbers.

There have not been major corporate collapses leading to mass sackings as has been seen in the US auto industry. This relative economic stability has led to and intersected with a series of political factors.

The political impact of the stimulus package

The stimulus package has bolstered the government’s credibility among voters.

Because there have not been major corporate collapses, and the financial industry has remained relatively stable, the government intervention has been focused on schools, infrastructure projects and cash handouts to workers.

There is no bitterness over handouts to the corporate crooks who caused the crisis, as is the case with the billions of dollars in bailouts handed to the Wall St bankers, who are blamed not only for the crisis, but for turfing millions of people out of their homes.

More social spending was always going to be popular, but what gave the government even more traction – and skewered the opposition’s scare campaign about debt – was the fact that the stimulus package is perceived to have worked.

There is no doubt that as the financial crisis hit a year ago, and into the first half of this year, there was a very high level of anxiety among workers – so the Liberals’ argument that we should “do nothing” and rely on market mechanisms was never going to fly.

One thing that definitely has flowed through here is the conviction that extreme free-market policies caused the world crisis, so the government’s spending measures have met with very little right-wing resistance among the mass of society.

The end result of this is that Rudd is one of the very few social-democratic leaders in the world to enjoy widespread support. Until recently Obama had been the other major exception – that cannot be said in the same unequivocal manner now, as the healthcare debate has damaged him on the left as well as the right.

Greece – where the social democrats were returned in elections in October – is an example, but social-democracy faces a considerable opposition on its left, making the situation vastly different to here where the Greens have been almost totally invisible since the 2007 election, and have done nothing to cohere a left wing alternative (ditto for the unions, who I’ll come back to).

Rudd’s poll ratings are formidable. The October 6 Newspoll had primaries running 46/35 to Labor, and a two party preferred of 58/42 the same way. The Greens are on 10%. This is at the higher end of what we have seen, but Rudd’s approval rating and the ALP TPP vote has been at extraordinary levels for a long period of time.

We should not draw from this, however, that Rudd is widely loved, or that he is supported with much conviction.

Within his own party and the union movement he is generally despised.

His ascent to the leadership was pure pragmatism on the part of the party powerbrokers, and it his only his success in winning the election – rather than any political loyalty – that keeps the party behind him. Although the union leaders are not willing to wage a struggle against him, few have much hesitation in laying into Rudd politically.

More broadly it is hard to gauge exactly how deeply held support for Rudd is.

On the one hand, his opinion ratings indicate a consistently high level of support. On the other, it is arguable that this is precisely the fact he is a non-polarising figure – he doesn’t stir up strong emotions either way – that explains his good poll results.

There must be a lot of Liberal voters currently backing Rudd who don’t mind him because he doesn’t seem that different to Howard. And while the Greens have been invisible, their poll numbers have improved since the election, indicating that there are plenty on the left who will preference against the Liberals, but are not particularly tied to Rudd.

There are other indicators that relate to Labor’s core support base. Labor party membership did not surge when Rudd won – in contrast, for example, to the 100,000 who (even if briefly) joined the British Labour Party after Blair took over.

When union officials slag off at Rudd at rallies or mass meetings there is no evidence of opposition from the crowd – usually quite the reverse.

If it is true that a lot of the support for Rudd is quite soft then there is the possibility that it can fall off very quickly if there is a major crisis, something that could be made worse for Rudd by the fact that most of his support in the party is based purely on his popularity with voters.

Ruling class backing for Labor

But if the Labor party and voters aren’t head over heels in love with Kevin Rudd, it’s a different story for the bourgeoisie.  

There has never been a Labor government in Australia that has had such unequivocal backing from the ruling class.

 That’s not to say that there are no conservative critics in the intelligentsia. Obviously the likes of Andrew Bolt and Janet Albrechtsen criticise him quite sharply. But they are isolated, ideological extremists. It is indicative that most critics of Rudd amongst the commentariat are also climate change skeptics – a view totally out of line with mainstream bourgeois opinion.

All the main spokespeople for the bourgeoisie are enthusiastic backers of the government.

Of the commentators, even ideological right wingers like Gerard Henderson, Dennis Shanahan and Paul Kelly have good things to say about Rudd. Other core members of the media establishment like Michelle Gratten are enthusiastic supporters.

Almost every economics writer has backed the government’s strategy for dealing with the crisis – and most have spent time ridiculing the opposition.

Turning to industry leaders, it is a standing joke in the ALP that Heather Ridout is the second most senior member of the government.

The Business Council and the Chamber of Commerce are not as enthusiastic, but nor can they be called critics. None of the major capitalists, sections of the government bureaucracy, the military or other component parts of the ruling class have campaigned against the government. The Treasury and the Reserve Bank, for example, have backed Rudd down the line.

This ruling class backing significantly adds to the sense of stability, and the lack of political polarisation in society.

It is in stark contrast to the US, where even though a large section of the bourgeoisie backs Obama, another section is prepared to create a highly volatile political environment by viciously opposing him, a situation that until now no section of the ruling class has been prepared to step in and decisively try to stop.

Union disquiet – but inaction

It is undoubtedly the case that many in the union movement – perhaps even most – are unhappy with the Rudd government.

The construction unions are up in arms about the ABCC, and feel betrayed by Labor. But more broadly, most unions are unhappy with Fair Work Australia, recognising privately at least that it keeps a large part of WorkChoices intact. (This reality, by the way, is part of the explanation for ruling class support for Rudd – he was able to succeed in implementing the industrial agenda that Howard began. Losing the Liberal government to achieve this was a price worth paying for the ruling class).

Union disquiet has meant that there are plenty of speeches made against Rudd and Gillard in various union forums, and precious few who will go into bat for the government.

The situation is nothing like what it was in the Accord years, when any bucking of the government was come down on like a ton of bricks.

But on the other hand, the unions have been without exception hopeless when it comes to standing up to the Labor government and launching some kind of fightback.

Even the construction unions, who seem to have done some things to try and resist the ABCC, have mostly done so behind the scenes. There has been nothing in the way of a sustained public struggle against any of Labor’s policies.

Continued contraction of struggle over social issues

On top of the low level of industrial struggle, there has been a continuation of the decline in protest and debate around other social issues.

Issues that have sparked passion and protest in the past – war, Aboriginal rights, refugees, student issues like fees and VSU, hostility to figures like George Bush – have almost all died away.

The main exception is the same-sex marriage campaign, which has been able to mobilise some numbers.

But it is hardly a burning issue in society, and although the demand for same-sex marriage rights is widely supported, its mobilising capacity has not gone beyond the gay and lesbian community, and there is little sign that it will anytime soon.

The other issues that there have been some mobilisations around are climate change and Palestine. In the case of climate change, there is little sense the campaign is going anywhere.

And with Palestine it is clear that even though the issue resonates with people from Arab and Muslim backgrounds (and to a lesser extent with non-whites more broadly) it has virtually no traction with the mass of the working class or students.

The reality is, because of this, that Palestine is not a major issue in Australian society, something that, again, is not going to change soon. And in all these cases we are talking about small mobilisations – in the thousands at best – nothing like the mass protests we saw against WorkChoices and the war.

In terms of an explanation for this ongoing decline, there are two factors. One is the general non-polarised atmosphere in society. The other factor is the more medium term decline of issues based struggle.

After WorkChoices, there were virtually no ideological battles or ongoing protests around any of the issues that dominated the earlier years of the Howard government.

The “culture wars”, as they were known, were in effect over long before Howard lost office. And in terms of issue-based protests, there was nothing of much significance after the defeat of the mass anti-war movement in 2003.

Element of continuity is important

In terms of coming to grips with the totality of the situation, it is important to grasp the continuity from the previous period that has impacted the political climate since the onset of the economic crisis.

Look at some of the examples of the turmoil in the world system. In Britain, disillusionment – even bitterness – with Labor existed before the crisis. Before the crisis hit in South Africa and China there was a rising level of struggle. In these cases the crisis exacerbated what were existing conflicts and tensions.

Australia, by contrast, went into the crisis following a long boom, which while hardly brilliant for workers, was not devastating.

The crisis also hit after a long period of contraction of the left, low strike rates, low unionisation and relative social peace – a social peace that existed in its most marked form in the 2 years immediately preceding the financial collapse last year.

Combine this with the fact that the downturn has been relatively shallow in Australia so far, and you can start to understand the situation that we are in.

No international ruptures that have cut through

The other factor to take into account in the Australian situation is that although there have been significant political developments internationally, none of them have cut through here.

There has not been a major war that impacts on Australian politics (the Gaza War palpably did not do this). There has not been a major working class uprising in any Western country, or in our region, to shake things up here.


While it is important to honestly assess the particular realities in Australia that have made the situation different here from elsewhere, we do not want to fall into the trap of thinking Australia is and will remain cut off from the effects of the world crisis.

There are a series of factors that indicate that the bubble insulating Australia from the world crisis cannot hold indefinitely.

The economy

While it is true that unemployment is relatively low here, this hides the true reduction in working hours, which is the more real measure of economic contraction. As we pointed out in our magazine in September:

More than 500,000 Australians stopped working long hours in the past year. The number of people working 50 hours a week or more has shrunk by 232,000, a fall of 13 per cent. The number working between 41 and 49 hours has shrunk 14 per cent, while the number working 30 to 39 hours has grown by more than 300,000. So while there have not as yet been wide-scale mass sackings, the living standards of large numbers of workers are being driven down.

And precisely because the world economy is still in a deep mess, facing the possibility of a double-dip recession or long years of stagnation, the Australian economy could still get into very serious trouble.

The response to the Reserve Bank decision to raise interest rates gave a sense of the true feelings of many capitalists and economists, who reacted with fear, and speculation that even a minor tightening of monetary policy could pull Australia into the global whirlpool.

In particular, the situation with China – whose ongoing growth is crucial to the Australian economy – is extremely unclear. The massive stimulus spending by the Chinese government may have worked so far, but it is far from certain this will last into the future.

In the US, the tone has started to change quite sharply over the last month, with many economists warning that the stockmarket resurgence was premature, and that the US economy is in for a long period of stagnation, or even another collapse.

But even if the most optimistic scenarios for the Australian economy play out, the measures taken in the last year have built in problems that will inevitably arise in the future.

 One that we have talked a lot about is debt. At some point, the government will have to rein in spending, and start to attack workers’ living standards in order to restore the surplus and cut down debt to acceptable levels.

Combine this with the effect of rising interest rates. Part of the reason the housing sector has held up is the low interest rate level. As rates go up, workers who have had their hours cut can find it increasingly difficult to make repayments.

This is made worse by the fact that unemployment is forecast to rise at least for the next 18 months.

And for workers who have taken advantage of the first homebuyers’ grant the situation could be worse. This grant was not actually a grant, in the sense that it was money to help people buy a home, but effectively just credit for a deposit – the reason being that the grant was immediately reflected in a comparable rise in house prices. That is, there is a credit bubble built into Australian housing prices that will likely burst at some point.

Add these things together – the prospect of falling house prices, rising unemployment, higher interest rates and sharp cuts in government spending  – and you have a combustible mix.

On top of the possibility that ongoing economic turmoil internationally can flow through here we need to add the potential for significant political developments that can start to reshape the political landscape in Australia.

It is hard to tell where the current flurry of sabre rattling about Iran and agonising about Afghanistan will go. But we definitely can’t rule out the possibility of a new war in the next year or two as the ongoing economic crisis and imperialist rivalries feed off each other.

And of course there is the possibility of workers’ upheavals or the rise of a new radical left internationally that could, particularly if it was centered in a country like the US, have an impact on politics here.

While we can’t speculate about the pace of developments, or the form that future upheavals will take, the underlying crisis in the world system means that at some point, major ruptures are likely. S

o we shouldn’t operate on the expectation that the current calm in Australian politics will continue indefinitely.

But on the other hand we have to work out how to deal with the situation as it is now. We need to avoid the temptation to telescope events.

It could be months or more likely years before a more politicised period opens up.



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Comment from Marco
Time October 30, 2009 at 4:53 pm

I find this analysis, while quite comprehensive, leaves behind an additional element, which could prove to be extremely important, in a political sense, in a relatively short term.

The RBA decision to raise interest rates should cause unemployment through two channels. The first one, orthodox economists usually take into account: higher investment costs, which imply less productive investment and slower growth of employment.

Note that by acting in this manner, the RBA could already be accused of being negligent in their duty to foster full employment, according to the Reserve Bank Act 1959.

According to the RBA charter, summarized in the RBA website:

“The Reserve Bank Board’s obligations with respect to monetary policy are laid out in Sections 10(2) and 11(1) of the Act.

“Section 10(2) of the Act, which is often referred to as the Bank’s ‘charter’, says:

“‘It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:

“(a) the stability of the currency of Australia;
“(b) the maintenance of full employment in Australia; and
“(c) the economic prosperity and welfare of the people of Australia.’ “[1]

In other words, by exclusively striving to control inflation (which contradicts the stability of the currency of Australia, item a above), to the loss of fostering full employment (item b), the RBA is opening itself to a very justified legal criticism: it is being negligent of its legal duties.

But the increase in unemployment through this first channel most probably underestimates the total effect, in the particular circumstances of the world economy.

This leads us to the second channel through which higher interest rates will cause higher unemployment: Australian exports are made less competitive internationally, as the Australian currency appreciates in relation to the US dollar.

In fact, some commentarists [2][3] have already observed that, independent to an eventual housing bubble, another bubble could be forming: a currency bubble.

Even after the RBA temporarily lowered the interest rate locally, Australia had interest rates considerably higher than in most other First World countries (in the UK, for instance, they went as low as 0.5%). As local interest rates go up, international hedge funds can make a profit by simply bringing funds into the Australian market and depositing them into local banks. This has been raising the exchange Australian dollar vs. US dollar.

This will further erode the competitiveness of Australian exports in international markets and will eventually cause a number of layoffs.

And as with any other bubbles, this one could also burst quite unexpectedly, causing additional disturbances in the financial system.

This leads me to another point: as mentioned in the analysis, the Australian situation has shown very little sign of a politization of the masses. The Greens have maintained a very low profile; more progressive parties like the Socialist Alliance (and the union movement) have very limited media presence. I believe the situation I mentioned above could be changed if either a progressive party or the union movement took the initiative of publicly challenging the RBA policy.

One form such a challenge could take could be a class action on behalf of unemployed workers as a consequence of higher interest rates.


[1] RBA: Overview of Functions and Operations. Accessed on 27-10-09.

[2] Davidson, Kenneth. Foreign speculation on our currency is a bubble set to burst. SMH. 26-10-09.

[3] Aussie Dollar Predicted to Match Greenback. 7:30 Report. ABC. 27-10-09.

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