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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

living off the fat « Previous | |Next »
December 6, 2013

The recent Keating interviews on the ABC indicates that it was the economic reforms of the Hawke and Keating Government that opened up Australia to the flows of the global capitalist economy. As Tony Shephard remarks:

We had a fixed exchange rate, tariffs [on imports] were still high, we were frightened of Japanese investment … our financial system was tightly regulated, our industrial relations system was centralised, complex and unproductive, and just about every service was provided by the public sector. State ownership extended to banks, insurance, telecommunications, airlines, ports, shipping, dockyards, electricity, gas etc.

Australia was an ''moribund, inward-looking industrial graveyard''. It was in economic decline. Quality reform was required, not just the empty political rhetoric favoured by the Abbott Coalition Government.

PopeDdebt.jpg David Pope

Hawke and Keating floated the dollar, undertook financial deregulation, privatised government enterprises, reduced tariffs and introduced labour market deregulation. They also reduced real wages, providing a social welfare net instead (Medicare, superannuation, tertiary education). This pattern continued under the Howard Coalition government during the China-fuelled Australian resources boom.

Looking back on that period of history from the perspective of the Keating interview we can see that economic globalisation is the game changer. Keating understood that, with global capitalism, the state had to make room for more powerful markets and the flows of international capital.

The state had to undertake an orderly, strategic retreat as an economic unit and shift to accommodating and harnessing the transformative capacity of global capital, rather than trying to fight it. The core policy issue then becomes one of how you globalize not whether you globalize.

It was the China-fuelled Australian resources boom that enabled Australia to enjoy the good times. This veiled the extent to which it is now the power of global markets that are more powerful than the state, which has political authority over society and the economy.

Although Big Mining said the boom would be eternal, Australia is now in the post boom adjustment period. Chinese growth is plateauing and that h means more straightened times of lower terms of trade, lower economic growth, declining revenues and lower living standards for Australia. Such an economic period post-GFC requires innovative ideas and new future industries. So where are the new growth corridors?

So what is the Abbott Government doing to prepare for the period that has emerged in the form of the iron cage of the Dutch disease? So far, it appears that they are pretending that it’s not happening. Are they hoping that something will come along with respect to innovation and entrepreneurship? Or does this denial signify a return to the period of the Great Complacency?:--namely, Big Mining (ie, the resources industry) will see us right once again.

The key concern here is that since world market economy has outgrown the authority of the state, national governments evidently lack both the power and the will to make good the deficiencies of inequality and instability that have always gone with growth and change in market economies. How is the Abbott Government going to address that now that it cannot afford to plough money into the endless trough of middle-class welfare?

| Posted by Gary Sauer-Thompson at 7:55 AM | | Comments (16)


"This veiled the extent to which it is now the power of global markets that are more powerful than the state".

Car manufacturing is a good example. The multinational or transnational firms call the shots. They (Nissan, Mitsubishi, General Motors-Holden) are leaving Australia, and there is little the state can do to keep their production plants here.

The episode of Big Mining successfully rejecting the Rudd -Gillard mining tax indicates that the domain of state authority in society and economy is shrinking.

What used to be the exclusive domain of state authority--the tax system-- now has to be shared with other sources of authority.

The effects of the shift, in which power has shifted from the state and is now exercised both by markets and by transnational institutions that lie beyond the purview of the state, is all around us and is felt by all.

Do the members of the Abbott Government know this?

The period of lower terms of trade, lower economic growth, declining revenues and lower living standards. means that the Budget will reveal further downgrades and larger deficits next week.

Hockey will blame it all on the ALP.

However, low income growth also makes our efforts to grow out of the low economic growth via the old sources of asset inflation and household spending unsustainable.

It also means that demand is not strong enough to support many retail businesses.

All that becomes Hockey and Abbott's problem. And the ALP will be sidelined in the Senate after June 2014

The closure of Holden, along with the previous decision by Ford to cease operations by 2016, would most certainly spell the death of the Australian car industry.

That leaves Toyota remaining as the last assembler in the country. However, feeder industries such as automotive parts makers would lack the necessary scale to continue viable production, leading to higher input cost.

So the most likely result is Toyota’s closure as well.

Difficult times are coming up for the Abbott Government.

Australia is facing the prospect of both the failure of its biggest manufacturing industry and a steep and prolonged decline in mining investment from record highs.

The ALP cannot be blamed for this. Slogans won't work either. Are they going to let the "free market" restructure businesses to make them more competitive?

"The multinational or transnational firms call the shots."

In the event that the local assembly industry collapsed it would place in jeopardy some 45,000 to 50,000 jobs just as the once-in-a-century mining investment boom is unwinding.

So how will the Abbott govt deal with that? Allow the local assembly industry to collapse because of high costs, low quality product and a high exchange rate?

Another example of international capital flows changing Australian society---could be a new era of Chinese private investment in Australia that includes real estate

The Australian home ownership dream is fading, at least in the inner city. Young Australians are being priced out of the apartment market or are reluctant to take on large amounts of debt. The new reality in the inner city is increasingly one of a tenant relationship with Chinese landlords.

the slogans don't work anymore.

Greg Hunt blaming the carbon tax for Qantas' woes and the subsequent job losses isn't persuading anyone.

It makes the Coalition look pathetic.

Holden should start making caravans. That's our future. A million transient families looking for work.

An aside but very relevant comment.
The ultra right-wing Cory Bernadi is now one of the most powerful members of the Abbott government - so too is the even more obsequious Kevin Andrews.
Bernadi has just published a book titled The Conservative Revolution. It is published by the right-wing "catholic" publishing outfit Connor Court which as far as I can tell is closely affiliated with (or owned by) Opus Dei. It also has close links with the "free" market fundamentalist IPA - John Roskam is its number one honcho.

As you have pointed out before they cant seem to begin to understand that it is "free" market capitalism, via its 24/7 propaganda vehicle TV advertising that has inevitably shredded the "traditional" values that they wish to resurrect.

Bernadi also claims/pretends that global warming is a "side issue".

The only sense that you get from the Coalition in government is that they are ''cleaning up Labor's mess''. It's still slogan time.

The Coalition still thinks in terms of its slogans and still acts as if its overriding mission is to disgrace the Labor Party.

There was little by way of hard policy work done during the opposition years and there is a sense of a lack of direction, of clearly thought-through goals, other than a return to Howard.

The world has changed since Howard.

Hockey's vision of a future Australia is one based on his ''economic plan'' that is focused on building economic growth. He says:

It is focused on getting rid of inhibitive taxes and inhibitive regulation that undermines our capacity to be at our best. We need to speed up the Australian economy and … if we repeal the carbon tax, it will add to economic growth … when we get rid of the mining tax it sends a clear message to the world that we need mining investment.

He's only thinking in terms of ''cleaning up Labor's mess''. His strategic policy is based on political trickery not long term policy.

"when we get rid of the mining tax it sends a clear message to the world that we need mining investment."

As growth slows and joblessness rises we can't expect Abbott + Hockey to wean the Australian economy off its reliance on mining. They still think in terms go the mining myth of the eternal boom even though the mining investment boom is slowing down due to China's slower economic growth. The mining tax isn't going to make much difference.

And the Coalition appears as if it is going to allow the car industry to close down in Australia with many more job losses (500,000?).

An example of the incompetence off the Abbott Coalition on energy policy.

So much of government policy making on energy – at state and federal level – is designed with little else in mind than to protect the interests of the incumbents. They are are doing everything they can to slow down the uptake of large scale renewables,