Time is running out for neo-liberalism

You get a sense as to why the public are confused about economic issues when you read this article in the Fairfax press this morning (February 3, 2015) – The brutal politics of privatisation stark after Queensland election shock – written in the aftermath of the conservative electoral bloodbath in the state of Queensland last weekend. The writer is a ‘well-respected’ business journalist, which just goes to show how ‘respect’ is easily gained if you sing from the appropriate hymn sheet. It is all in the conclusion: “The clock is ticking for Australia. With an infrastructure backlog and big budget deficits, we can build the infrastructure we need only by selling assets and attracting private capital”. Which is a barefaced (and ignorant) lie, even when applied to a state government that uses the currency issued at the federal level. Privatisation is not TINA. But while the public might be confused at the level of understanding (about how the monetary system operates etc), it is clear they are becoming increasingly focused at the level of feelings/sentiment. More and more people are seeing that neo-liberal remedies – privatisation, austerity, structural ‘reform’ etc – do not live up to their claims. Increasingly, we are seeing rising income and wealth inequality being associated with these attacks on workers. Several recent election outcomes around the world have categorically affirmed the obvious – citizens all over are starting to rebel against austerity and neo-liberal so-called ‘solutions’ (such as privatisation and public sector job cuts). In Australia we have just witnessed a remarkable electoral rout in the Queensland State Election where the neo-liberal, privatising conservatives were tossed out of office on Saturday exactly as a result of a widespread rejection of these policies. The Greek elections a few weeks ago provided a more profound signal of this trend. The European Parliament elections in May last year another. Time is running out for neo-liberalism. The smugness that the elites have had is

The Queensland election outcome was remarkable. In 2012, the governing Labor Party (ALP) was almost decimated. In a 90-seat parliament they were reduced to 7 seats. This is a party that gleans around 50 per cent of the vote at the national level consistently (after preferences).

The conservative Liberal National Party government took over and thinking it was unassailable launched into a program of fiscal cuts, massive public sector job cuts, cuts to health, education and other public services and proposed the privatisation of the electricity delivery system (actually they were going to offer 99-year leases, which amounts to the same thing).

It was clear that living standards were being attacked and income redistributed to the top-end-of-town. The legal firms, management consultants etc were licking their lips at the prospect of the largesse they would get from the leasing arrangements of the power industry.

There was the same smug arrogance displayed by the politicians as they went about implementing this program. The same sort of smugness you see from European politicians and technocrats.

They became over-confident.

The normal three-year election last Saturday saw a swing against them of around 12 per cent. The LNP government have just 39 odd seats left in the Parliament and are out of office. The Premier lost his seat in the rout. The ALP is poised to take office (counting is still in progress in doubtful seats) either in its own right or with the support of an independent.

This is the largest electoral turnaround in our political history.

The people signalled they no longer believed that privatisation was the path to better services and lower prices. They have looked south to Victoria to see how bad privatisation of the power industry has been.

They no longer believe that their is a ‘fiscal crisis’ that justifies the massive retrenchment of public services that actually deliver quality of life to their communities.

The conservatives have bombarded the citizens with the narrative that the State and Federal governments are facing a fiscal emergency and need to deliver fiscal surpluses immediately or else credit ratings will be cut, inflation will soar out of control, interest rates will rise to high levels etc.

All the usual nonsense.

The Queensland government even brought in the former conservative federal treasurer to head up a commission to cut the public sector. His recommendations were harsh indeed.

But people are watching inflation falling, interest rates remaining low (today they were cut to record lows), and the decimation of essential services, while facing the prospect of higher electricity prices under the leasing arrangements.

It is clear the neo-liberal narrative is wearing thin, even if the citizenry has an incomplete or zero understanding of why the sky hasn’t yet falling in the conservatives predicted.

Everywhere people are realising they have been ‘sold a puppy’ – and in this instance – it is a particularly ferocious one that bites then severely where it hurts the most.

The same goes for the European Parliament elections in May 2014. Who would have thought that a new party like Podemos could immediately gain 5 seats largely at the expense of the mainstream Spanish parties (PP and PSOE)?

None of the opinion polls saw that coming. They all predicted Podemos would win around 1.5 per cent or so of the total vote. In the end they won 8 per cent of the vote.

Podemos is campaigning on the rejection of TINA – their campaign slogan in that election was “Otra Europa es posible, juntos Podemos” – “Another Europe is possible, together We Can”. Another Europe – an alternative to the neo-liberal disaster.

That was May 2014. In January 2015, tens of thousands rallied in the heart of Madrid to support Podemos and tell the Spanish government and all of us that they are over austerity.

According to news coverage like – Spain’s anti-austerity Podemos stages show of force before elections:

one in four people who voted for the Socialists in the 2011 general election would today cast their ballot for Podemos. The rate would be one in two in the case of Izquierda Unida.

The choice is narrowing in Spain between the conservative People’s Party (in power) and Podemos, with the other ‘leftist’ parties being devoured by the grass roots campaign waged by Podemos.

People are sick of so-called workers’ parties (socialists etc) who turn out to be more neo-liberal than the conservatives.

In France, the problem is that this anti-austerity sentiment, which is eroding support for Hollande’s Socialist Party and the conservatives (both seen as being as bad as the other), is manifesting as rising popularity of the xenophobic and racist Front National (FN), led by Marine Le Pen.

That is the consequence of the fragmentation that the breakdown of support for neo-liberalism is causing. Just as the Nazis seized popular support in Germany as a result of the cruelty inflicted on the population by the Depression (on the back of the war reparations etc), the same sort of right-wing extremism is emerging again. FN in France, Golden Dawn in Greece, the various Neo-Nazi movements in Germany and further east, the Vlaams Bloc in Belgium and the Partij voor de Vrijheid in the Netherlands.

Then we have the Greek national elections a few weeks ago and the takeover of the country by Syriza, a combine of previously radical left-wing political fragments, in coalition with the Independent Greeks, who are a right-wing, national-conservative and populist party.

Where did the twain meet? At the austerity bridge! Both parties, however divided they are on most nearly everything, agreed to end austerity.

That compromise, in itself, sends a very powerful message to Brussels that the game is up, at least for the people who cast the votes that is their intention.

Whether Syriza keeps its end of the bargain is difficult to know. My friend the Finance Minister confused things yesterday when he told the BBC that he was in favour of privatisation. What?

The other problem for these against-austerity parties in the Eurozone is that they cannot achieve their aims within the fiscal rules of the zone. Once stabilised with low unemployment and sustainable growth rates, the fiscal deficits might be able to be below the 3 per cent threshold on an on-going basis.

But given the depth of the crisis in Greece, the fiscal deficits will have to be well above 3 per cent for an extended period to reach that level of stability in the real economy.

It is almost impossible to see how that can achieve real change while remaining under the yoke of the Stability and Growth Pact, the debt issues aside.

The same sort of trends are happening now all around the world.

In Australia, two conservative state governments have fallen in the last six months on the same sorts of issues. The conservative Federal government is in a terminally unpopular state and risks annihilation at the next election in 2016.

Neo-liberalism is no longer politically appealing.

We have been in that spot before albeit under somewhat different conditions. When the Industrial Revolution began there were strong narratives about how the breakdown of the feudal system and the rationalisation of markets would liberate workers.

After all, they were now free to work for whosoever they chose!

But Capitalism in its unfettered form was always an affront to the values of common people in that it was clear their capacity to live decent lives with adequate wages and occupational health and safety conditions and more general income support and security was not a core part of the push for profit by the owners of capital.

Even the doyen of orthodox economists, Adam Smith wrote in his 1776 classic – An Inquiry into the Nature and Causes of the Wealth of Nations – that there was a major asymmetry of power in the capital-labour relationship under Capitalism.

He wrote (Book 1, Chapter 8 Of the Wages of Labour, Page 58-60, Everyman’s Library 1957 Edition):

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour.

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment. In the long run, the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.

We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and, one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen, who sometimes, too, without any provocation of this kind, combine, of their own accord, to raise the price of their labour. Their usual pretences are, sometimes the high price of provisions, sometimes the great profit which their masters make by their work. But whether their combinations be offensive or defensive, they are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage. They are desperate, and act with the folly and extravagance of desperate men, who must either starve, or frighten their masters into an immediate compliance with their demands. The masters, upon these occasions, are just as clamorous upon the other side, and never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen. The workmen, accordingly, very seldom derive any advantage from the violence of those tumultuous combinations, which, partly from the interposition of the civil magistrate, partly from the superior steadiness of the masters, partly from the necessity which the greater part of the workmen are under of submitting for the sake of present subsistence, generally end in nothing but the punishment or ruin of the ringleaders.

Karl Marx considered this asymmetry justified the formation of trade unions as a primary protection for workers. He also considered the trade unions to be essential to the creation of a working ‘class’ fully conscious of its place in the struggle with capital.

Capital is a concentration of social power in Marxian analysis and confronts the dispossessed worker who only has his/her labour power (capacity to work) to survive on.

But workers are in the majority and can use that capacity to create their own countervailing social power. Solidarity required organisation and that was the role that trade unions were to play.

Trade unions originated in Britain, which was the first nation to embrace Capitalism as the Industrial Revolution ensued.

The famous 1894 study by Sidney and Beatrice Webb – History of Trade Unionism – documented the rise of British trade unionism.

The revised 1920 edition published by Longmans, Green and Co is available – HERE. For those interested in history it is an interesting book and takes the reader up to 1920 (updating the earlier study).

You can tap an excellent source of Marx and Engels writings – On the Trade Unions – assembled by the Marx-Engels archive.

The trade unions were thus not only seen as protecting industrial conditions on a day to day basis to counteract the inherent Capitalist tendency to erode the same, but they were also seen as being essential political infrastructure designed to represent the workers’ interests across a broad array of concerns in the emerging democratic processes.

Political parties formed from these union connections to undertake this role. In Australia, the disruption associated with the Great Maritime Strike of 1890 that followed vapid attacks by bosses on workers wages and their unions as wool prices plummetted was a pivotal political development.

The Strike failed and the governments of the states colluded with the employers to defeat the workers. It was clear that the unions had to form a political capacity to break the nexus between government and capitalist employers that always threatened to undermine progress in living standards for workers.

The 1890 Strike failure led to the creation of the Australian Labour Party (ALP), which is still one of the two major parties in Australia today, although its current ideology and policy set is unrecognisable relative to its origins. Neo-liberalism has undermined the workers’ political movements as free market economics has homogenous all sides of politics.

And the steady formation of trade unions with their effective political arms were instrumental in changing the worst aspects of Capitalism – for a time.

But while unions protected workers to some degree, in the more advanced nations, more was needed and the citizen power led to broader changes.

The State was now used as a mediator in the class struggle rather than an arm of capital.

In the UK, for example, William Beveridge, more famous for his famous 1942 Beveridge Report which defined the Post World War 2 Welfare State, had earlier written about the problem of income security and unemployment.

After all, trade unions do not represent those without jobs.

Beveridge wrote Unemployment: A Problem of Industry in 1909 – which was part of the development of national employment exchanges and unemployment benefits. Beveridge was no left-winger but he was also no neo-liberal and understood that a stable society could not abandon people to poverty.

Welfare States emerged in various forms – the Scandinavian version was more generous than the Anglo systems with the Continental European systems somewhere in between. These developments were in direct recognition that the economic system could not be left to its own devices. It was clearly understood that the State had a role to play in not only engendering conditions for full employment but also that those outside the jobs net – the sick, the unemployed, the aged – also had to be cared for with access to the distribution system.

The conservatives had to bite their tongues – but were also persuaded by the arguments that welfare support would improve the quality of the workforces and also shift costs from firms (who had previously, to various degrees including zero, provided health care etc) to the State.

By the end of World War 2, after seeing the ravages of Nazism and Fascism throughout Europe, politicians were empowered by a sense of social justice – to create new peaceful societies, which gave opportunities to all and ensured that the problems that emerge from unemployment and sickness etc were collectively solved through the State.

The private market was known to be a poor arbiter of social justice and was prone to failure. The State developed elaborate machinery to curb the excesses of the market and ensure the productive outcomes were broadly shared.

Prosperity broadly followed in the advanced world and development occurred in the low income nations – some making spectacular transitions to wealth (Korea, Japan etc).

It is those systems and institutions that the neo-liberal period has attacked.

The benefits of those systems and institutions have been eroded and the gains transferred back to the sectors representing capital (which by now includes financial capital).

Elaborate scams have been introduced to cover up what has been happening. Economists are wheeled out to preach the dangers of fiscal deficits, income support schemes and unions.

Business leaders are promoted as fonts of wisdom and their ideas have been privileged over the ideas of academics who know things because they research them.

Politicians have been captured by the likes of the Koch Brothers and their ilk who have large stockpiles of wealth and a dislike for the systems and institutions that grew up to curb the excesses of Capitalism.

Just like in the C19th when people saw the need for trade unions and state systems of income support and industry regulation as the way to protect them and allow the weak to access the wealth-generating machine of Capitalism more fairly, the latest trends are signalling a similar sentiment.

The neo-liberals have gone to far – been too confident – been too greedy by far – been too arrogant – been too corrupt – been too stupid when it comes down it.

They live in an ahistorical void of their own self interest. But the general populace have feelings and hurt and seek ways to stop hurting.

It was only a matter of time before the fightback against the ravages of austerity would begin.

We are, hopefully, now starting to see the emergence of new movements, which will create new ways of offsetting the power of the capitalist elites and reinvigorate the existing, though damaged systems and institutions that were built and implemented in the C19 and C20.

Conclusion

The problem is that this struggle is somewhat directionless at present and might lead to disagreeable elements gaining politicial prominence – such as those right-wing anti-people parties that are gaining popularity in Europe.

The hope is that same sort of pro-collective, pro-people parties form to take up the challenge.

In Australia, I hope the Progressive Party, which is learning about Modern Monetary Theory (MMT) and seeking to promote that understanding at the federal level, is successful in building a support base.

Things in Australia are not as desperate as they are in Greece and Spain, which makes the emergence of a new political power to offset the moribund mainstream parties (both left and right), more difficult.

Syriza’s rapid rise is a reflection of how morbid the conditions of austerity have been in Greece.

I hope all nations see a rise in anti-austerity politics and a restoration of a political class that genuinely wants to enhance the opportunities for all and sees people at the centre of the game rather than privileging these meaningless financial ratios (like deficit to GDP ratios etc).

It is in our hands. The people of Greece led off the struggle. The people of Queensland, on Saturday joined the march. Power in numbers.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.