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John Passant

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January 2010



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

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Crisis and the Left in Australia

I am a fairly excitable person. I can mistake the moment for the month; the ephemeral for the eternal.

But I am not alone there. Capitalism regards itself as immutable,as something that will exist forever.  It mistakes now for the future and ignores the contradictory dynamics contained within the system.

It also views the past through the prism of the present.

Yet capitalism has really only become the dominant mode of production in the last two centuries.  This is about 0.02 percent of the time humanity has been on earth.

So my tendency to take the global crisis as an indicator of systemic failure in Australia then and there is understandable,and indeed defensible. I would add I did write that capitalism was not dead but rather was sick. Curing one ailment does not cure the others – the patient is still sick.

Others, like the head of the International Monetary Fund, call the global economic problems the Great Recession.

The latest job figures in Australia got me thinking about my own personal failings and the more general economic and political position.

Unemployment here has fallen to 5.5 percent.  This is the lowest figure since April last year. It is much lower than in almost any other developed country.

In Labor’s Budget last May Treasurer Wayne Swann predicted unemployment would reach 8.25 percent – just under one million – in June 2010.

 It won’t.  Some economists think it may in fact have peaked a few months ago and that it could end up below 5 percent.

It wasn’t just the Government who got the figures and analysis wrong. Here’s what a leftist not too far from yours truly wrote after the Budget last May:

The 16 year boom in Australia, the speculation, the unproductive financial activity and long term low profit rates, have all contributed to the Great Recession, with no foreseeable return to recovery.

It gets worse.

[The bourgeoisie] miss the point that this is El Gordo – the big one.  El Gordo does not wait for growtho; it destroys it.  That is its pre-ordained role.

In a general sense this is true. It just wasn’t true of Australia in May 2009. While it may be true that the economic crisis is a slow moving wreak waiting to happen the facts in Australia at the moment clearly indicate an expanding economy.

This means talk of crisis per se does not resonate today with most workers and others. A questioning of the system in Australia has disappeared, even if only temporarily, from the general discourse.

Australia’s position is somewhat different to the rest of the developed world.  The $52 billion stimulus package has had some small positive effect on growth.

Yet other major developed countries had much larger stimulus packages and they have sunk into recession.

Australia’s relationship with China – one of its major minerals and energy suppliers – has also helped keep Australia out of recession.

Since these are capital intensive industries and the flow on effect from them may be low, the impact on employment may not be that great.

There are other factors which may have helped Australia.

The steady increase in the value of the dollar has cheapened imports, increasing working class purchasing power.

The rewards of the previous 16 year boom have gone disproportionately to capital at the expense of labour. This historic shift sees capital’s share of national product at its highest since data was kept, and labour at its lowest.

This shift has helped counterbalance the stagnating profit rate.

Personal debt in Australia is one of the highest in the world.  Low interest rates and fairly low unemployment rates have seen workers use debt as a mechanism to claw back some of the loss of national product share they have suffered.

Further the success of the Australian ruling class in increasing the working day to the highest in the world without having to pay too much for it has further eased for the moment the crisis of profitability. 

While the standard working week in Australia is 38 hours, the average full time employee works 44 hours,  Most of this is unpaid.

Again this has helped mask the problems of profitability.

Productivity has increased, although the rate of that increase has fallen of late.  This increase in productivity has two components.

One is forcing more and more out of workers from their current machinery and work practices. The other is innovative technological and similar changes to reduce the amount of labour in the productive process of individual firms.

On the waterfront for example this process has managed to speed up cargo movement at great human cost – suicides, illness, broken bodies.

This loss of any vestige of workers’ control in the workplace is a common feature of Australian industrial relations over the last 30 years. It has been one of the factors in the success of capitalism here during its 16 year boom and in the last year avoiding the global recession.

The economic recovery in Australia has postponed the attack on living standards and the devalorisation of capital that from the ruling class’s point of view are necessary for addressing low profit rates and providing sound foundations for the next boom. 

Globally, the situation looks a little less optimistic for capital, apart perhaps from the resilience of China and some other Asian countries.

China’s economic gains reflect its move from a peasant based to a low wage capitalist country. The dictatorship has destroyed independent unions and repressed any major union activity that might challenge this old strategy.  

The tension in China between nationally generated profit centres and global ones is being resolved slowly with the growth of a consumer market that demands goods and services for itself.  This will over time require increased wages, perhaps with the working class as the agency of that increase, or the state, or a combination of both.

In the US and Europe however the recovery is weak.  The increase in the stock market has not resulted in any improvement in employment.

Some of the outlier countries like Iceland, Ireland, Greece and some in Eastern Europe have major economic challenges ahead. There is a danger of a slow domino effect into the heartlands of capital.

Bank bonuses do not a recovery make. 

They are the symptoms of a malaise at the centre of the system – the need to reward the criminals (those who gave us the great financial crisis) to prevent a further crisis, but at the same time laying the groundwork for the next instalment in financial and productive crisis. 

The global economic situation has stabilised,  but it is the stability of the high wire.  The balancing act may work for a while, but the international bourgeoisie want to be standing on solid ground rather than teetering above it.  Dream on.

Bourgeois economists are unsure about the long term or even short term prognosis for the system. Keynesian Paul Krugman thinks the chance of the US sliding back into recession later this year is 3o to 40 percent and th chance of unemployment increasing is greater than even. He said:

Stimulus we know starts fading and goes negative around the middle of the year. Inventory bounce, which is driving things right now, will fade out as inventory bounces do.

If it happens this will have implications for the global economy. The intertwining of the US and Chinese economies, with 20 percent of Chinese production dependent on exports to the US and to a lesser extent Europe, and the Chinese and Middle East financing US debt, makes any further decline in the US economy a problem for China. 

And that is a problem for Australia.

The revolutionary left in Australia is very small.

It does not have the resources at hand like the State to examine the system and the way its works. It does have an understanding of the major drivers of the economy, and Marx’s analysis of the tendency of the rate of profit to fall, together with countervailing tendencies.

This disjuncture between principle and on the ground facts, together with our lack of connection to the working class, contributes to a sense in which every decline in the economy proves Marx right.

Of course I don’t want to overplay this. Australia is not the global economy.  I am not a Marxist economist. 

My tendency more generally did proclaim that this was and is a crisis of profitability. That remains true.

They did so in a sober and realistic assessment of both the trends and the politics that would flow from it. In Crisis and contradiction in the world economy Tom Bramble from Socialist Alternative, after a wide ranging analysis of the global economy, argues:

The crash of late 2008 was not simply the result of a financial meltdown but had its roots in a crisis of profitability and excess capacity that has plagued Western economies since the 1970s. The devalorisation of capital that has occurred has been huge but still insufficient to restore vitality to the system. This is why the bailouts, stimulus packages and low interest rates can work for a while, but they cannot end the crisis. It is why unemployment is forecast to keep rising. It is possible that the latter half of 2009 going into 2010 may see positive growth, but it will be relatively anaemic and prone to worse shocks.

Capitalism in crisis may just be resting.

Readers might also like to look at the July article A W-shaped recession?



Comment from Dave Riley
Time January 16, 2010 at 4:29 pm

“The revolutionary left in Australia is very small.” If they are so small, clarify your argument and name them.

Comment from Dave Riley
Time January 16, 2010 at 6:40 pm

As an afterthought: not everyone on the Australian far left is in panic mode. This vox pop video explores a rich vein of optimism and confidence which also celebrates some small but significant advances pout of the left ghetto. The issue as always is to do something by trying to change the world by best of the any means available to us rather than be hole up in a patented banker .

Comment from John
Time January 16, 2010 at 6:59 pm

Thanks Dave. I was trying to make the point that there is sensible analysis of the crisis out there and my tendency here in Australia is part of that. That’s not panic mode nor is it sectarian.

As to naming the revolutionary left. Well, there’s you. And then there’s me, and maybe a thousand or so other people who identify as such and want to rip the head off the bourgeoisie.

The crises of capitalism may better test us on that in practice.

I am trying to be inclusive and you attack me. Oh well back to my bunker. Patented no less.

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Comment from Dave Bath
Time January 16, 2010 at 8:13 pm

Hmmm. Recovery? The way I see it, if the politicians are saying we have not yet recovered from the recent screwup, yet “The Economist” a week or two ago has a cover-story about a bubble that is yet to burst, then I’ll trust “The Economist” every time and say “the real crisis hasn’t hit yet you fools, and unless you regulate everything to the bare minimum required for human decency, which would turn capitalism into something approaching socialism anyway, then the real crisis is going to make the so-called Global Financial Crisis look like a fairly harmless ripple.”

Comment from John
Time January 16, 2010 at 9:20 pm

That may be right Dave. I am not arguing there is a global recovery. My point was that at the moment with unemployment dropping in Australia it is difficult to get traction with talk of economic crisis. It’s almost as if 2008/09 didn’t happen, in Australia at least. Now that may be temporary and indeed Krugman, Stieglitz, Roubini and others, plus Tom Bramble from Socialist Alternative, all make the case that the crisis may worsen in 2010. It is time for sober assessment, and I think that has to start with stagnant profits rates and the capitalist cures tried so far.

Comment from John
Time January 16, 2010 at 9:24 pm

From Norman on facebook:

John, it is the foremost obstacle for the left; it is the war machine of imperialism and the engine of repression for all sorts of workers’ and human rights, It perpetuates class rule, and until we address that with some collectivist action, we will continue to flounder in impotent subjugation.

Comment from John
Time January 16, 2010 at 9:26 pm

Norman, you can’t just hobble together a coherent socialist current in Australia from diverse groups merely because they all say they are socialist or even anti-capitalist.

I see the push for organisational unity as an expression of the weakness of the left in Australia at the moment and a misguided attempt to break out of our isolation.

I think it is perfectly legitimate for socialist tendencies to argue for their own versions of society, and unite around actions as necessary.

I don’t think you can hurry history in this regard. In fact unity without clarity may actually lay the groundwork for disaster in the future when the working class does begin to move.

It might be better to have this discussion on my blog site. If you agree I’ll put the comments there.

Comment from John
Time January 16, 2010 at 9:27 pm

From Norman on face book:

We need to explore more what we have in common rather than what divides us. A starting point,for me, is oppositon to capitalism.

Comment from John
Time January 16, 2010 at 9:28 pm

Maybe Norman. Santamaria was opposed to capitalism.

Comment from John
Time January 16, 2010 at 9:29 pm

From Norman on facebook: So is Al Quaeda

Comment from John
Time January 16, 2010 at 9:29 pm

Yes. I take the point. But unity around anti-capitalism alone is insufficient I think.

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