Political Economy

 
 


Australia: The Looming Crisis

(Contributed)

There is a growing awareness in Australia the country is edging toward an economic crisis.
National income is falling, the economy is slowing. Unemployment has become a serious problem in many areas.

National decision-makers, however, have been slow to deal with the main cause of the problem: economic rationalist policies and their implementation at the behest of international financial institutions controlled by the United States.

It is as if the higher echelons of the Australian governmental system remain in a state of denial, actually believing political spin from a past age.

Income growth slowest in 50 years

Australians began the New Year with a warning the economy faced the slowest income growth in over half a century. Reliable estimates noted expected national income growth was only expected to increase by 1.2 per cent. (1) In fact, the historical depth of the problem was possibly far greater although impossible to verify as governments records only began in 1960.

The figures rested upon a similarly gloomy estimate Australian economic growth would fall 'well short of Treasury forecasts of growth accelerating from 2.5 per cent to 2.75 per cent in 2016-7'. (2)

Other reliable estimates about the Australian economy reveal a general slowing of GDP growth: in 2007, a total of 4.54 per cent was recorded, it has now fallen to projections of 2.88 per cent for 2017. The figures have coincided with global projections for the same period of 5.55 per cent, dropping to 3.34 per cent. (3)

It has become a sad fact of life for most Australians their economic fortunes fall in continued and prolonged decline beginning well before the GFC. Using the simple method of a ruler against a graph of peaks of GDP growth from the 1982 recession to the present time very few years rise above a general trend of decline. The only departure from the general trend of decline was a sudden one year spurt of growth in 1997. (4)

Longer term projections, likewise, reveal still further economic decline: global economic growth for the present decade is expected to average 3.6 per cent. It is projected to fall to 2.4 per cent by the decade, 2050-60. (5)

The figures are not a good advertisement for globalisation or the international financial institutions largely controlled by the US. Their dilemma can be noted from earlier times of the co-called New World Order, with economic considerations strongly linked to defence and security provision: a myriad of so-called Free Trade Agreements (FTAs) rest upon military alliances.

Economic arguments in support of imperialist finance capital

The economic arguments were not original. They were modelled upon Chicago School, free-market thinking of the inter-war period which was replaced by Keynesian economics after the Second World War. Previous economic thinking had become totally discredited following the turmoil of the inter-war period. Free market economic thinking suddenly, however, became fashionable again in the 1970s with a rising generation of right-wing theorists. Within a few years it became dominant orthodoxy, serving the purpose of defending and furthering 'US interests'.

Submitting a report for US Congress on 21 July 1994, then President Clinton defined the three main objectives of US Security strategy: to enhance security by maintaining a strong defence capability and promoting cooperative security measures; to open foreign markets and spur global economic growth; promote US-style democracy abroad.

The economic rationalist policies were imposed through international financial institutions with directives for subject governments to de-regulate, privatise and liberalise their economies. Australian political leaders, like many others, proved positively sycophantic and true believers in the 'new' model economic thinking; they therefore slavishly followed the every whim of those in Washington to fling capital to the four corners of the globe in search of higher and higher returns. The moves were accompanied by selling off state assets for quick profit through user-pays philosophies: health services, education, welfare, public transport.

World trade crisis revealed in shipping malaise

While the opening of foreign markets took place, it did not, however, spur economic growth. In fact, trade statistics reveal the origin of decline.

From 1986 to 2000, a one per cent increase in global GDP was associated with a 2.2 percent increase in world trade. In the period 2001-14, the same percentage increase in GDP has resulted in only a 1.3 per cent increase in world trade. (6) Global trade has dropped by about half during the period from before the GFC to the present day. (7)

In fact, further evidence of the decline in global trade totals can be assessed with the fate of the maritime and shipping industries. It is in terminal decline. In the period 2010-15, owners ordered an average of 1450 ships a year. This year the totals have dropped to only 293 vessels. (8) Many shipping companies are already scrapping vessels as the industry has become non-viable.

Those shipping companies remaining in the industry have been forced to become more competitive for reduced levels of trade. The immediate impact has been dramatic. A benchmark Europe-Asia trade pattern has required US$1,400 a container for viability. Present rates have dropped as low as US$575 this year from US$620 in 2015. (9) They are likely to drop still lower.

It is in this chaotic state of affairs the South Korea Hanjin Shipping Company, one of the largest in the world, has filed for bankruptcy in the US. The problem is symptomatic of far greater issues. A total of 84 Hanjin ships stranded at sea has created a backlog of over half a million containers with uncertainty about payment of docking and storage fees at ports. Maritime workers have not been paid. Some Hanjin ships have already been seized by creditors. (10)

Apologists for capital have no answers

The response to this catastrophic state of affairs by leaders of the advanced, industrial countries is a state of denial. Their excuses remain so implausible they undermine their own credibility.

A statement from James Pearson, CEO of the Australian Chamber of Commerce and Industry following the recent G20 meeting, noted that Australia and others could remove further trade barriers 'to reduce costs in their economies by freeing up trade'. (11) A pedantic individual and advocate of past economic theories, Pearson appeared an aloof figure from a bygone age of level playing- fields and ivory towers. Being ever economical with his words, however, he chose to not elaborate on which barriers he wanted removing. It is not difficult to establish the reason. In reality, there are few left. Most were 'removed' long ago.

International Monetary Fund (IMF) head Christine Lagarde, likewise, had to eventually acknowledge previous planning to boost economic growth by a paltry two per cent, had failed. Her only suggestion, nevertheless, for future provision was to continue on course with the already discredited policies and 'more action was required'. (12) Like Pearson, Lagarder did not elaborate on what type of action was required to bolster any semblance of economic growth. Idle political spin remained the name of the game.

What is even more revealing about developments is the fact those in control of financial institutions do not even bother to support the remnants of once thriving economies and businesses in which they have created mayhem. Business investment into Australia is almost at a standstill, despite low interest rates and frantic support from State governments to buttress their economies in the face of possible collapse. Business investors appear to have lost interest.

Looming crisis accompanied by attacks on workers

There is a looming crisis striking to the very heart of the Australian economy. Those responsible for creating it, however, do not accept responsibility. To the contrary, the business-classes attempt to shift blame onto others and ordinary working people, demonising and scapegoating trade unions. The real issue is not high wages, despite business propaganda. Wage-levels are much further down the business agenda. There is a bigger picture: their chosen economic thinking. They conveniently, for example, overlook the fact wage growth in Australia is now the lowest in over two decades. (13)

It is not difficult to find examples of how the beginning of the looming crisis is already having drastic effects upon ordinary working people. Employment statistics are perhaps the most apparent. The business-classes and their tame flunkies in the mass media, nevertheless, hide the true figures, for obvious reasons. It is not good publicity for economists in Canberra that ordinary working people have to pay for the endeavour of the business-classes. It is hardly a vote winner for political parties which advocate such economic thinking.

National figures for those without employment do not publicise that volunteers and those working a recorded one hour per week have their identities removed from official unemployment statistics. The unemployment figures pushed through mass media outlets are meaningless.

When questioned about the issue, AMP chief economist Shane Oliver, however, stated a more appropriate record was 'the spare capacity in the labour force'. It included 'both those without a job and those who would like to work more hours. This stands at 14.2 per cent'. (14) Oliver also noted the figure was relatively constant, not altering with movement in official unemployment statistics.

Other reliable sources have estimated only 68.1 per cent of the Australian workforce have full-time employment, with about 32 per cent being part-time. (15) Those without full-time employment are denied usual entitlements including paid sick-leave, holidays and other benefits.

There is also the further problem of casualisation which has become the norm in contemporary Australia. The business-classes view such planning as increasing workplace flexibility. In reality, it is solely concerned with maximising levels of exploitation, undermining trade-unions in workplaces and making labour even cheaper to employ.

It is high time there is discussion within the labor and trade-union movement about economic rationalist philosophies. The insidious thinking has even permeated our movement. Some prominent figures should be questioned about what is being advocated in our name. Ordinary working people have nothing to gain by their governments implementing economic philosophies which only favour the business-classes.

Suitable people to question might begin with Chris Bowen, opposition ALP Treasury spokesperson, who recently addressed a business lunch in Sydney to outline future ALP policy. He also spoke about 'Australia's economic success over the past 26 years'. (16)

Perhaps Bowen should be encouraged to go and wander around a few ordinary working-class suburbs and discuss with residents the finer details of the so-called 'success' and how it has affected their and their children's life-styles and opportunities.

A good place for Bowen to consider such a walkabout might be Adelaide. There does not appear to be much 'success' taking place in either the northern suburbs or southern region. Census material released in recent years has provided adequate evidence about how economic decline has already affected numerous households. Those in full-time employment receive well below average wages even for South Australia. Unemployment and casualisation has become generational. When Holden closes next October, the economic effect will be both immediate and devastating for even more South Australians.

Bowen might also like to consider discussing with residents the issue of a 'free lunch' and whether or not it also really exists.

Workers meanwhile must continue to develop their own independent class agenda and fight forsocialism and anti-imperialist independence.
………………………….
1. Income growth lowest in 50 year, Australian, 18 January 2016.
2. Ibid.
3. OECD Economic Outlook, 99, June 2016.
4. Australian Bureau of Statistics, ANZ Research, quoted, Taxpayer funds holding up economy, Australian, 8 September 2016.
5. OECD 2016 – Policy challenges for the next 50 years, Global economic growth forecasts.
6. Global trade stuck in the slow lane, Australian, 19 January 2015.
7. Shipping slumps as slowdown in global trade growth deepens, Australian, 11 January 2016; and, World Bank slashes global economic growth outlook, Australian, 9 June 2016.
8. Big ships pile up on scrap heaps, Australian, 16 August 2016.
9. Ibid.
10. $18 bn in Hanjin's cargo left stranded, Australian, 9 September 2016.
11. G20 nations urged to show leadership, Australian, 6 September 2016.
12. G20 must focus on growth and US must stay in Asia, Editorial, Australian, 7 September 2016.
13. Lowest wage growth delivered in 20 years, Australian, 18 August 2016.
14. ibid
15. Australian Bureau of Statistics data for July, 2016, quoted, Part-time job trend locked in, Australian, 19 August 2016; and, Low-wage economy taking a haircut, Weekend Australian, 20-21 August 2016.
16. Free trade facing a 'popularist crusade', Australian, 7 September 2016.

 

 

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