ga('send', 'pageview');
John Passant

Site menu:

April 2011



RSS Oz House



Subscribe to us

Get new blog posts delivered to your inbox.


Site search


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

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

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

Time for a House Un-Australian Activities Committee?
Tony Abbott thinks the Australian Broadcasting Corporation is Un-Australian. I am looking forward to his government setting up the House Un-Australian Activities Committee. (1)

Make Gina Rinehart work for her dole

Sick kids and paying upfront


Save Medicare

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

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

I am not surprised
I think we are being unfair to this Abbott ‘no surprises’ Government. I am not surprised. (0)

Send Barnaby to Indonesia
It is a pity that Barnaby Joyce, a man of tact, diplomacy, nuance and subtlety, isn’t going to Indonesia to fix things up. I know I am disappointed that Barnaby is missing out on this great opportunity, and I am sure the Indonesians feel the same way. [Sarcasm alert.] (0)



Labor, profit rates and ruling for the bosses

The Labor Government back-down on the Resource Super Profits Tax (RSPT), dumping its Prime Minister and imposing a more mining industry compliant leader, the adoption of a much watered down version of the RSPT – the Minerals Resource Rent Tax – and the move towards a carbon tax reflect a couple of long term trends in society and for the Australian Labor Party.

The first is the decline or death of its social democratic role. The second is the challenge to its other traditional role as the party that rules for capital, not for particular capitalists. Another role has been to distribute some crumbs from the table of capital to labour, but that also depends on the level of class struggle and consciousness among the organised sections of the working class.

The company tax rate cut on the back of the resource rent tax – a regressive tax redistribution – that Labor proposed and proposes from the resource rent revenue and more generally the development of tax policy in the context of the extraction of surplus value from workers flows from and is driven by the logic of the capital accumulation process and the tendency under capitalism for the rate of profit to fall. Drawing on the work of Fred Moseley, Thomas Michl, Anwar Shaikh and Ertugrul Ahmet Tonak, Gérard Duménil and Dominique Lévy, Ufuk Tutan and Al Campbell, Robert Brenner, Edwin N Wolff, and Piruz Alemi and Duncan K Foley, Chris Harman argues:

There is general agreement [among those writers – JP] that profit rates fell from the late 1960s until the early 1980s. There is also agreement that profit rates partially recovered after the early 1980s, but with interruptions at the end of the 1980s and the end of the 1990s. There is also an important area of agreement that the fall from the mid-1970s to the early 1980s was not a result of rising wages, since this was the period in which US real wages began a decline which was not partially reversed until the late 1990s. Michl, Moseley, Shaikh and Tonak, and Wolff all conclude that the rising ratio of capital to labour was an element in reducing profit rates… “Capital intensive” investments by capitalists aimed at raising their individual competitiveness and profitability have had the effect of causing profitability throughout the economy to fall. Marx’s basic theory is validated.  (Footnotes omitted).

Progressive reform depends on a social surplus sufficient to redistribute to the working class. Falling profit rates both reduce that surplus and mean that governments become more interested in using the surplus to address the needs of business, not workers.

Hence a magic pudding tax like a resource rent tax might appeals to social democrats – not as a measure to help the poor and working class but as a redistributive measure to address capital’s low profit rates at least in the short term by cutting company tax rates.

The reality of the campaign by one section of capital – the mining industry – against the RSPT and the acceptance of their misinformation by significant sections of society, including workers, saw Labor capitulate to that powerful section, but at the expense of capital as a whole. This undermines Labor’s traditional role of ruling in the interests of capital generally.

The RSPT would have raised in the order of at least $12 billion a year. The MRRT was estimated at the time to bring in over $10 billion. Later Treasury figures tell a very different story and estimate the difference in collections between the two taxes is much greater – about $100 billion over ten years or on average $10 billion a year.

$10 billion a year would have wiped out the Budget deficit and had enough left over to fund extra spending on public health, education, transport and renewable energy. Instead the Gillard Labor Government is now warning of a horror Budget and the Prime Minister has foreshadowed attacks on the unemployed and disabled.

The mining tax back down highlights the changing nature of the role of social democracy in Australia from social democracy with reforms to a group now captured by specific and powerful interest groups. It questions the role of Labor as ruling for capital in general, not specific sectors of capital. 

To summarise. The pressure to redistribute from one very profitable section of capital to less profitable sections comes from the long term trend of profit rates to fall. Since the early 70s there has been a global tendency, bought about by investment in capital being at a greater rate that investment in labour, for profit rates in developed countries to decline and then stagnate.

This has left less social surplus to distribute, and of that which does remain the pressure from business is on Government’s to redistribute it within the capitalist  class rather than to the working class, in an attempt to address the tendency of the rate of profit to fall, at least in the short term.

Social democracy and capital are caught in the grip of generalised falling profit rates. Julia Gillard is its logic.



Comment from Liz Ross
Time April 18, 2011 at 9:20 pm

Very true. Also worth commenting on the resources available to the capitalists in the industry superannuation funds – forced on the working class by the ALP (and the ACTU, and union officials, many of whom got jobs in the super funds afterwards) to be the slush funds for capital by diverting part of workers’ wage rises into enforced ‘saving’. The building industry has benefited from C-bus in this way, meaning construction companies don’t have to risk ‘their’ money.

Comment from Ross
Time April 18, 2011 at 10:26 pm

Why no mention of a super banking profits tax John? Our banking system creates over $180,000 million pa out of thin air, to equal our increases in GDP + inflation.They produce nothing of tangible worth.Is the banking industry a sacred cow or are they just too powerful?

Comment from Tony
Time April 18, 2011 at 11:13 pm

‘Forced saving’ is explicitly identified in Keynes’ General Theory as an instrument of the neo-classical doctrine to keep that good old engine cranking over. Our superannuation system is a highly volatile manifestation of this.

If I recall correctly, John suggested the annual superannuation subsidies are of similar order to the cost of paying a government pension.

The Government, as Shorten recently stated, has agreed in at least one case to underwrite compliant fund members who fall foul of fraud causing investment vehicles to collapse, but will not underwrite DIY super fund trusts with units in exactly the same investment vehicles for exactly the same purpose. The key difference between the two: an intermediary rentier (some retail, some industry). In neither case did the nominal holder of an interest in vehicle know the intricate details of the vehicle.

The double standard is ludicrous.

Comment from Graham Dooley
Time April 19, 2011 at 1:06 pm

Mr Passant, are you certain of this?

“Since the early 70s there has been a global tendency, bought about by investment in capital being at a greater rate that investment in labour, for profit rates in developed countries to decline and then stagnate.”

I’m no economist but what about productivity improvements?

Comment from Calligula
Time April 21, 2011 at 7:43 pm

Hey Gra –
What about productivity inprovements then?
You seem to have missed that aspect.
I demand that you tell me what the rest of us don’t know – this minute.
Hurry before we all turn purple in the face.

Write a comment