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In this submission from former Communist Party of Australia leader, Eric Aarons, the financial sector is put under scrutiny for its amoral pursuit of profit - but at the cost of society at large. As the author explains, some of the world's largest banks' actions sometimes verge on the criminal.
It is the new form being taken by
capitalism, in which a worldwide coterie of Mega-rich individuals takes a far greater
part of the socially-created wealth than can be justified on any national
interest or social justice grounds.
It is taking us on a path that endangers
the capacity of our natural environment, our planet, to continue supplying the
quantity and quality of resources we will always need for our own existence,
and the continued existence and health of the wider natural environment we
require to be able to flourish.
We need to know for some purposes the cash value of the items we use, but to
actually live we need to have the things themselves, the solid entities, that
weand other living species require
for life itself, and to develop, over this and coming centuries, the full
potential of Homo sapiens – a project which we have only just begun.
If my memory serves me, the economist Gary
Becker said that a money equivalent could (and should) be put on marriage and
other inter-personal relationships. We know that this indeed occurs, but is it
in any way a recipe for achieving genuine community happiness?
The general concept of ‘financialization’
(a new and rather ugly word as well as a repugnant concept) arose from the
rapid rise in the proportion of GDP occupied by financial transactions,
entities and ‘products’ following the victory over fascism in the Second World
War. From about 2 percent in 1940, it rose in the US, which led the way, to 8
per cent at the turn of the present century, where financial markets have dominated
the traditional industrial, agricultural and social ones.
It also plays on a naïve belief, derived
from the phenomena of interest and credit, that money can, of itself, make more money. A knowledgeable sales person can make
up endless tales that seem to make sense of this for the unwary, and many are
paid by their bank employers on that basis, being sacked if they fail to succeed
in doing so.
multi-billion dollar fraud
But as well as the theoretical fundamental
weaknesses of the concept, it has now become, through the banking system, a
centre of widespread, multi-billion, even trillion-dollar crime that, unless
rigorously dealt with, threatens far worse catastrophes than those we have recently
seen in this early part of the second millenium.
In his renowned biography of John Maynard
Keynes, Robert Skidelsky quoted an unsourced remark that Lenin was reported to
have made: ‘that there is no subtler, no surer means of overturning the
existing basis of society than to debauch the currency’. (page 239)
I doubt that Lenin ever made such a remark,
and in any case he did not have the means to actually do it. But the centres
for financialization, the big banks, are doing a more than competent job in
that direction, of which I give many instances below.
The intention is to treat all values
exchanged, including tangible or intangible, future or present promises, as if
they were a form of currency. Promises are morally expected to be kept and
agreed processes observed, with legal penalties sometimes available to enforce
them. But today they increasingly take on illegal form as instanced below, or
that of `betting, which has now, among other evils, penetrated all forms of
sport, degrading the site of one of humanity’s most pleasurable, even noble, manifestations.
There are plenty of past examples of
financial fraud, but both the scale and the source today are unprecedented in
scale and the source – modern banking, which is well advanced in corrupting the very basis of the currency,
with potentially lethal social disasters.
Before giving instances of the scale of the
crimes, we should note that they only became possible when Paper currency –
that is fiat money – became
universal when gold became impractical. The word describes an edict in which a government declares ‘let
it be so’ , or ‘let it be done’, derived from the Latin word ‘fieri’.
Britain takes the reins
Though Britain was near-bankrupted by the
Second World War, its long-standing banking credentials gave it the call over
the USA to be the world’s international financial centre. One of its tasks in
this capacity was to determine, through a top level bankers’ committee, the
rate of interest to be charged on the widely used temporary unsecured loans that
banks make between themselves. This in turn became a guiding benchmark for a
myriad of other financial transactions. It was called Libor – the ‘London inter
bank offered rate’, set each working day at 11 am. (There is also a ‘Euribor’)
Many banks were caught out by the GFC,
partly because the official economics had arrived at the point of a Great Moderation in which the
boom-bustpattern of development of the
past would no longer apply. How wrong they were!
If a bank’s assets fail to exceed its
liabilities, by law it has to cease trading. Details are not available, but many
banks found that loans and purchases made in earlier and better times (say in Greek
or Spanish government bonds) were losing up to halfof their value, so that the bank itself (Barclays
for example) could have found itself technically insolvent and would have had to
cease trading. Then, in 2009, when Bob Diamond, a former CEO of Barclays was in
charge of setting Libor, he arbitrarily fixed the rate to boost the value of
some of the bank’s holdings.
The prestigious American organization Council
on Foreign Relations later published a background paper ‘Understanding the
Libor Scandal’ updated on December 5, 2013 which said:
In 2012, an international investigation
into the manipulation of interbank offered lending rates revealed a widespread
plot undertaken by multiple banks – most notably Barclays, UBS [Union bank of
Switzerland], Rabobank [Dutch] and the Royal Bank of Scotland – to leverage
these interest rates for profit … Regulators in the US, UK and EU fined banks
more than $6 billion for participating in rigging interest rates. Barclays
agreed in late June 2012 to pay a $453 million fine to settle allegations that
it had systematically rigged The ‘London interbank offered rate’ – Libor – between
2005 and 2009.
other banks joined in:
From now on space limitations will
confine me to giving only the name of the bank; but further information is
readily available on the internet.
(a Dutch bank with a long name)
Royal Bank of Scotland
Bank, JP Morgan and Societe Generale were also involved .
Though, so far as we know, no major
Australian bank has been directly involved in such criminalities, its general
approach is similar. Known before privatization as the ‘People’s Bank’, some
employees of the Commonwealth Bank of Australia in October 2008 sent an
anonymous fax to the Australian Securities Investment Commission ‘citing fraud
at Commonwealth Financial Planningandalleging a “high level” of
coverup within CBA. The culmination of
that action was a damaging report from the Senate economics committee. It
sensationally found that the bank repeatedly sought tokeep the regulator and the public in the dark
and its credibility was so tarnished that only a royal commission or judicial
inquiry could get to the bottom of what really went on.
Suisse is reported to have misled Fannie Mae and
Freddie Mac on the quality of loans worth $16.6 billion in mortgage bonds. (The Australian, 24 March, 2014).
Bank of England has become embroiled in the escalating foreign exchange
scandal after it suspended a member of staff and launched a new investigation
into allegations that its officials condoned or were aware of market
manipulation. The move is the latest twist in the $US 5.3 trillion per day
forex [foreign exchange] industry, the world’s largest financial market.’ (The Australian, March 7, 2014)
HSBC (Hong Kong Shanghai Banking Corporation) may be outstanding in this field.
It laundered an as yet unrevealed number of billions of dollars of illegal Mexican drug money into the United States. Found out, in 2012 it paid fines for multiple offences of $1.921 billion (The Australian, June 1, 2014).
TheRoyal Bank of Scotland ‘had to pay large fines, bringing the total
penalties paid in Libor settlements to more than $3.7 billion. (Wikipedia, December 5, 2013)
Bank of England has become embroiled in the escalating foreign exchange
scandal after it suspended a member of staff and launched a new investigation
into allegations that its officials condoned or were aware of market
manipulation. The move is the latest twist in the $US 5.3 trillion per day
forex [foreign exchange] industry, the world’s largest financial market.’ (The Australian, March 7, 2014)
BNP (BanqueNationalde Paris) + Paribas(Banque de Paris) $US 8.97 billion. TheAustralian
reported (July 2) that, legally, the prosecutors could have sought double that
‘US authorities are pushing for BNP Paribas to pay more than $US 10.7 billion to end a criminal probe into allegations the bank evaded US sanctions’. (The Australian, June 1, 2014)
On July 3, The Australian revealed how much worse than I have so far revealed
the situation with the banks really is. It wrote ‘The French government which
had warned that disproportionate sanctions could destabilize Europe’s took
credit for the limited scope of the dollar ban, but “BNP Paribas will continue
to be able to finance economic activity in satisfactory conditions” said France’s Finance Minister Michael Sapin.
And the paper claimed, straight-faced, that bankers ‘think that criminal
charges are now like financial penalties: a painful but manageable cost of
I think it likely that accounting-wise these fines might be classified as a ‘business expense’. If, for example, the scam netted $3 billion profit, evea a fine of $2 billion would leave the bank $1 billion better off, with none of its operators in danger of being jailed, For in the banking field it is rare for anyone to be even charged, let alone actually tried, and even then ever sentenced. In no other field are fines accepted in lieu of jail for major crimes. This conduct clearly trashes the basic principle that we are all equal before the law.
Until people in banking are duly prosecuted for transgressing the law, and jailed when found guilty of the sorts of crimes described above, I believe the debauching of the currency and the consequent social collapse foreshadowed by Skidelsky will become increasingly likely.
There is much more information available
on the internet, but the above should be enough to show that unless the banks
are rigorously policed, with prosecutions and jail terms for the guilty
imposed, the financial system is threatened with the debauched state predicted
by Keynes, but today in reality inflicted by the greed of the banks in
particular, and the mega-rich that own them.
Some may hold to the view ‘the worse the
better (for social change)’. But history does not support that stance. It is
always the mass of people that suffer most in such circumstances, so we must,
rather, struggle to avoid such outcomes with positive alternatives. I hope that,
among others, trade unionists and their supporters will see the potential of
the above facts to negate or diminish major features of the assault the Abbott
government is developing against trade unions and the left in general.
All the guilty should be punished; but on this count
the Left should be firmly on the front, not the back foot as it is at present.
Joe Hockey is promoting a 'Social Civil War' - pitting even low wage workers as well as the well off and the middle class against the welfare-dependent. In response to this regressive campaign, Labor cannot accept the Liberals' 'terms of debate' but must propose its own policy agenda for just and socially fair Australia.
nb:an Apology to 'The Australia Institute'; In a typo I accidentally referred to that left-wing think tank when I should have referred to the right-wing 'Sydney Institute'. The typo has been corrected.
Treasurer Joe Hockey has been “on the attack” recently; targeting Australians
who for whatever reason have
been welfare-dependent, or have benefited from welfare during their lives.Specifically, Hockey asserted that one in ten
Australians were welfare-dependent in some way, with a total welfare bill of
$146 billion a year in a $1.6 Trillion economy.
Apparently, this is meant to produce a ‘shock and horror’
effect amongst an electorate which is considered to be ‘narrowly
self-interested’, without any sense of social solidarity, or of the gains to be
had through such reciprocal solidarity and also the various forms of collective
Interestingly, though, Minister for Social Services, Kevin
Andrews himself has observed that cash payments in Australia comprise
around 7 per cent of GDP, compared with approximately 19 per cent in France;
and approximately 14 per cent in Sweden!Though in Denmark, for instance,
there is a much more substantial social wage, with social expenditure at approximately 31 per cent of GDP compared with approximately 19 per cent in Australia.(also approximately 33 per cent in
France,and approximately 29 per cent in
particularly Hockey has alluded to those dependent of Youth Allowance,Newstart, the Aged or (military) Service Pension, and
the Disability Support Pension. Apparently in an attempt to stir up division
and resentment, Hockey argued that “the average Australian”, whether “a
cleaner, a plumber or a teacher” works over a month every year to provide for
the nation’s welfare bill. (Herald-Sun, June 12th, 2014, p3) This ‘political play’ to narrow financial
self-interest ignores the benefits of reciprocal social solidarity via welfare.
a speech to the right-wing Sydney Institute Hockey launched into a tirade
against those he describes as “leaners” as opposed to “lifters”. For Hockey it is claims that the wealthy must
‘pay their fair share’ that comprise ‘class warfare’; and not the Federal
Government’s attacks on welfare, as well as their assaults on Medicare and rights
and conditions for labour.Rather than ‘social
solidarity’ Hockey proclaims ‘individual responsibility’. (ie:‘sink or swim’)
In an infuriating
furphy, Hockey promoted his personal interpretation of “equal opportunity” as
opposed to the ‘straw-man’ of “equality of outcomes”.On
this basis he also attempted to defend the Federal Government’s Higher
Education ‘reforms’ – which will see a fee deregulation (some of the highest fees probably reaching well over $100,000), as well as a reduction in the repayment threshold for
student loans, and also an increase in the rate of interest paid on those
outstanding loans.(‘The Age’, June 13th,
2014, p 8)This will affect women - whose
working lives are often interrupted.
In the same
vein, there will be those with significant university debts who for various
reasons (eg: disability) may not be able to continue their pursuit of a career
in law, medicine etc. These peoples' university debts could easily spiral way out of control. The element of ‘risk’
here means that many young students from disadvantaged backgrounds will not
dare to take on a university debt. Those that do also may be distracted from gaining their most from study because of the necessity for part-time work. And ‘equality
of opportunity’ in this context is a lie: because those students tend to be
concentrated in lower socio-economic zones, with relatively under-resourced
schools.(they may also lack the
support of parents who have enjoyed a tertiary education)
to Hockey one of the most important of his assertions to deal with is that ‘straw-man’
argument of ‘Equality of Outcome OR Equality of Opportunity’.Instead of this false dichotomy it is much
better to frame the issue as a matter of Fairness. Pretty much no-one – even on the far Left –
full ‘equality of outcomes’.Rather there is support for redistribution via the social wage, welfare
state, social wage, and forms of social insurance for the sake of distributive
justice. (as opposed to full
equality) ‘Equality opportunity’ is part
of the picture; but so too are ‘fair
justice’ assumes that the outcomes gained in the labour market through ‘supply
and demand’ of skills – and ‘consumers’ capacity to pay’ are not
necessarily just.For cleaners, as well
as hospitality, child care, and aged care workers – people whose work deserves
respect –there is an argument for intervention and redistribution as the means of achieving fairness. (not absolute equality)Those
measures of redistribution – through the social wage, tax-transfer system, welfare state, labour market regulation - do
not have to put the remuneration of a cleaner ‘on par’ with a surgeon, for
instance.But all workers who face
disadvantage and injustice in the labour market deserve fair outcomes; and
those means of intervention are effective means of providing those fairer
Hockey is is attempting to ‘divide and rule’ the nation. An element of divison is inevitable – perhaps even
desirable – in a democracy.The point of
democracy after all is ‘to set oppositions free’ and resolve them through
is inciting resentment against the vulnerable – no matter what he has said to
the contrary. This is qualitatively different than attempts
to tax the wealthy – which Australia’s Conservatives try and dismiss with hypocritical
howls of ‘class warfare’.
specifically, Hockey’s approach comprises a ‘bold gambit’. Low-income workers themselves are to be ‘played
off against’ the welfare dependent. Rather than raising minimum wages and
conditions, or improving the social wage – they are urged to express resentment
against the vulnerable.The ‘endgame’ is
a US-style class system.The very
wealthy are to be ‘untouchable’ and largely untaxed lest we be bombarded with cries of ‘class warfare’.Taxes are to be ‘simpler’ and ‘flatter’ – that
is, more unfair. The middle class are to provide ‘the base of stability’ for
Conservative political forces: their lifestyles supported by the exploitation
of the working poor. And the working poor – indeed, the ‘underclass’ - are to
be ‘disciplined’ by fear of homelessness and destitution – with the erosion of
the ‘social safety net’.
also likely escalate as a consequence of desperate inequality; but this insight
is to be ignored for the sake of a warped, and ultimately immoral, notion of ‘meritocracy’.How this ‘meritocracy’ is meant to work
without real equality of opportunity (especially education); while
there is ‘hyper-exploitation’ of the working poor; and amidst ‘windfall’
inheritances in the most privileged families - is not really considered by
today’s Conservative Ideologues.It is ‘an
In Hockey’s ‘grand
statement’ to the ‘Sydney Institute’ those designated as ‘leaners’ are to be
reviled.There are Aged Pensioners. (who
have largely paid taxes their whole working lives) And yet no mention of self-funded retirees –
whose liquid assets alone can range well over a $1 million – but who receive enormous
tax concessions. The total bill of
those concessions will
soon cost the nation over $40 billiona year. As Richard Denniss of the Australia Institute observes:"the top 5 per cent of income earners get a third of
the benefit, and the bottom 20 per cent get literally nothing."
there are the disabled. Underlying resentment against Disability Support
Pensions is the notion, for instance, that ‘mental illness’ is not to be seen
in the same way as ‘extreme physical disability’.We’re talking about people
with anxiety disorders, depression, schizophrenia, bipolar disorder... Something Andrew Robb could probably advise
the Parliamentary Liberal Party about: and yet from a cursory web-search he
does not appear to have done so.
Often the ability of these disability pensioners to work
is intermittent at best. And the underlying assumption that they are to
be looked upon suspiciously – as ‘rorters’.Hence ‘Disabilitywatch’
has noted moves by the Federal Government to ‘tighten up’ assessment for
eligibility, including ‘work for the pension’ for those deemed able to work at
least 8 hours a week. (now to be reduced
from 15 hours a week)But arguably if a person is living in poverty
due to disability, and may be capable (intermittently) of some work, then
perhaps their payments could be complementedfairly in return for voluntary
community work, without the threat of losing that pension altogether. Instead we are getting another dose of labour
conscription – this time for some of the most vulnerable of all.
In conclusion: a movement is building against Hockey’s ‘Robin
Hood in Reverse’ Budget.In Melbourne
the day before this article was written the ‘Bust the Budget’ rally amassed
around 20,000 attendees – perhaps more.The ‘Your Rights at Work’ campaign against John Howard’s aggressively in
egalitarian ‘Work Choices’ labour market legislation attracted the support of
millions. Today the same is possible if
we stand collectively against Hockey’s cynical ploy to ‘divide and rule’ the
Yet Opposition Labor Party leader Bill Shorten is ‘treading lightly’
around Joe Hockey’s appeal to divide the nation – a ‘nation at war with itself’;
a war of so-called ‘lifters’ against so-called ‘leaners’. So far he refuses to
reject this characterisation of Australian society outright.
But Labor cannot accept a political discourse which is
propagated on the Liberals’ terms. Labor needs to respond to Hockey with its own
powerful narrative:of a society based
on mutual and reciprocal social solidarity.This means promoting social security and social justice through a range
of measures including labour market regulation, welfare, a progressive tax mix,
the social wage, and various forms of ‘collective consumption’.Not a society of ‘absolute equality of
outcomes’ – but a FAIR and JUST society!
a practical sense that must mean a decisive break on the part of Labor with the
mindset of ‘small government’.Labor must
‘go on the policy offensive’: advocating both old and new policies.That includes Gonski and the National
Disability Insurance Scheme.But it must
also include National Aged Care Insurance and Comprehensive Medicare Dental,
amongst range of other policies.The way is open for a progressive counter-offensive
mobilising millions.Labor, the unions,
the welfare sector, and all progressive social movements - must seize the
above: Expect this to become more common on Australia's streets with the implementation of the 2014-15 Abbott/Hockey/Cormann Austerity Budget.
The Government of Tony Abbott has proposed a Budget
that makes a mockery of his claim to ‘spread the burden’ of ‘reform’ fairly.The
Budget has also made a mockery of the government’s claim to ‘credibility’
regarding its mandate – and the extreme violation of that which is now going on
before our eyes.Massive cuts to health, education and welfare
fly in the face of the Government’s pre-election commitments.
We will now go through some of the most alarming
aspects of that Budget drawing on the observations from ‘The Age’ and the
Health:The Abbott Government is imposing an
additional $7 charge for each GP visit, and an extra $5 for those needing
pathology services. (eg: blood tests)For those with no option but to regularly visit the doctor, and have
blood tests taken, this could add up to $120 extra a year. An awful lot if you’ve just been forced onto
Newstart, or had all support payments withdrawn!
Indeed, in ‘The Age’ Ross Gittins argues health austerity
may lead the ‘poor sick’ to delay seeking help until their conditions become
acute.And for those who do not care
about anything without a dollar sign attached to it – this could cost the
Budget and the economy over the longer run.
The rationale of providing a disincentive for
‘spurious’ visits to the GP is also very doubtful given the already-widespread application of
co-payments;and it is open to question
whether pathology services are used ‘spuriously’ in any case.If the government had balanced these changes
with increases to pensions and progressive reform of the tax mix the policy may
have sidestepped its otherwise regressive and counter-productive
consequences.But the opposite is now
Education:In higher education university fees will be
deregulated leading to a ‘two tiered’ system at best. ‘Elite’ universities will
be free to charge whatever they like – with the very real possibility of
$100,000 or even $200,000 degrees. This ‘user pays’ aspect will also be applied
to make up for an average 20% cut in Federal Higher Education funding
supporting the cost of degrees.
Abbott and Pyne argue there will be scholarships;
but the reality will be a quality of education generally dependent on the depth of a
students’ pockets – rather than merit.(as a consequence of the prohibitive cost) Arguably ‘equal opportunity’ should involve
extra and widespread subsidies and quotas for students with disadvantaged
backgrounds.And an understanding of
education as ‘a social good’ beyond labour market requirements.
Student Loan repayment thresholds will fall
regressively and interest rates on loans will sit around about 6 per cent.For someone whose life is disrupted by
disability, for instance, (or perhaps parenthood) university debts could easily
spiral out of control.The Conservatives
claim students must ‘contribute’ towards the cost of degrees.But surely this occurs already through the
tax system; and progressive tax is the best way to ensure students (and
business) contribute proportionately to the financial benefit gained.
The ‘united ticket’ on Gonski is also to be dropped
assuming the Coalition wins the next election and has the opportunity to do so.(though to be honest even Labor was not fully
implementing the Gonski recommendations)
Finally on Education the School Chaplains program
will receive a boost of approximately $250 million over five years.But the contempt for which this government
holds the poor and vulnerable exposes the lie of their upholding ‘Christian
Government: $1 billion over four years withdrawn –
probably leading to an increase in Rates or user pays – or otherwise a
degradation of services
Pension and Retirement:The age of retirement will rise gradually to 70 by 2035; and Pension
means tests will be frozen for three years – making it difficult even for part-self-funded
retirees with limited means.Arguably
we are now living in conditions of great‘material abundance’ compared with many decades ago.Aside from the systemic imperative of endlessly
expanding markets under capitalism, abundance means arguments to ‘work us into
the ground’ are not practically or morally defendable.
Welfare:This is where the
Abbott/Hockey/Cormann austerity really begins to bite against some of the most
vulnerable of all.Despite offensively deceitful rhetoric of ‘spreading the burden’ the
vulnerable will be driven into the most spiritually crushing poverty; and ACOSS
has argued this will lead to a possible sharp rise in homelessness given the
withdrawal of ‘the social safety net’.
The measures include:
·A six month waiting period for under 30s
applying for Newstart; and then ‘Work for the Dole’
·Very tough eligibility criteria for the
Disability Support Pension;particularly
for those under 35
·Unemployed under 26 forced on to the
abysmally inadequate ‘Youth Allowance’
Furthermore: the *formula* for determining pensions will be
altered by the Coalition Government.Pensions will be indexed to inflation rather than Average Male Weekly
Earnings – with a gradual fall in payments ‘by attrition’.John Collett at ‘The Age’ believes this
could cost pensioners $100 a fortnight “in several years’ time”.
The consequence will be utterly desperate circumstances for the jobless;
especially the young jobless.And those
without family to fall back upon will probably end up homeless.(those forced to move away from the support
of family to find work will be hit doubly hard) This is the ‘American model’
that the Conservatives seem to be aspiring to.The creation of a desperate class of working poor – motivated by the
very real fear of falling even further down the social ladder – into
homelessness; and the destruction of all hope.But for neo-liberals this desperate ‘reserve army of labour’ is
‘functional’ in weakening the bargaining power of workers.
It is also becoming apparent that the Federal Coalition’s $300 million cut to pensioners’ concessions will apply to everything from water to energy. (so much for fighting ‘cost of living’ pressures) Some ofthe Victorian Conservatives are outwardly angry with Abbott, as $73-$75 million in cutbacks to pensioner concessions will flow on to Victorians specifically. This could be the beginning of an internal rift within the Conservative parties: whose ‘endgame’ could include driving (or for some others providing a pretext) for desperate state governments to lobby for an increase in the GST rate, or a broadening of the GST base.
Theoretically the GST can increase in the context of a more progressive tax and welfare mix to compensate the poor and vulnerable, and average workers. But the odds are more in favour of a regressive mix – with GST ‘reforms’ hurting low income earners and pensioners again who had already been hit hard. Arguably a more regressive mix for Hockey involves a swipe at ‘the undeserving poor’ – in favour of those ‘millionaire wealth creators’, and some ‘self-funded retirees’ whose very comfortable conditions of retirement are effectively subsidised by taxpayers to the tune of tens of billions in tax concessions every year.
Also importantly: with cuts in the Carbon Tax, Mining Tax and Company Tax overall revenue is still likely to fall. The question that follows is thus: Will the GST be promoted to overcome ‘the infrastructure deficit’ – or will infrastructure privatisation reach previously unheard of extremes; with the public being fleeced in the context of ‘user pays’, and the relatively unfavourable cost structures of private enterprise? Few in the Liberal Party (or even Labor) look set to accept the proposition that a mixed economy is better for capitalism, and better for workers and the disadvantaged at the same time. So this Budget is likely only ‘round one’ of a protracted assault upon Australia’s social wage and social insurance.
Those enjoying incomes of around half a million a
year will have to pay $6400 extra in tax. But again in a morally abhorrent
fashion the government is contending that this has seen a ‘spreading of the
burden’.While millionaires will barely
notice the ‘mosquito bite’ that is the temporary, so –called ‘budget repair
levy’ – the effect on the poor and vulnerable will be utterly crushing and permanent.
‘The Age’ argues that the Coalition is now set to
withdraw $80 billion “from schools and hospitals over the next decade.
Hockey argues Australia is “a nation of lifters, not
leaners”.He has little appreciation of
the fact some of us have no choice to lean lest we fall down.He is willing to judge the vulnerable; but he
is unwilling (and probably unable) ‘to walk in their shoes’.Under
such circumstances the civilised and compassionate thing to do is to provide
support for those who have the need.Altering the formula for calculating pensions
as they are, the Conservatives instead exhibit contempt for these people.
The Liberal Government would likely want to play
down the legitimacy of claims to disability pensions on the basis of mental
illness, for instance – playing upon popular misperceptions in order to
legitimise a callous agenda.Liberal MP
Andrew Robb could possibly set them straight on that were they willing to
listen…If he has it in his heart
perhaps he should make some kind of statement against these attacks against
disability pensioners.(many of whom do
not have relative material wealth to fall back on)
Abbott’s radical abandonment of the welfare state
comprises both a rejection of ‘Catholic social welfare Centrism’, and also of
the very-conservative but welfare-minded tradition of the Democratic Labour Party
from which Abbott originally emerged.It
flies in the face of Pope Francis’s warnings about the dangers of unbridled
capitalism lacking of social conscience.
What remains to be seen now is how Labor will
respond over the coming years. Will Shorten ultimately capitulate on welfare,
social wage and social insurance in order to maintain ‘small government’; or
will he follow the principled path instead of ‘short term opportunism’?
In the meantime progressive social movements need
to coalesce and prepare for the fight of their lives.
Hard Copy Sources:‘The
Age’ and the “Herald-Sun'; May 14th and 15th
But is Shorten ‘backing Labor into a corner’ on
future tax and social welfare reform?
Above: Shorten in theRed Tie, Abbott in theBlue Tie -
But what's the substance come Budget-time?
is coming under increasing pressure with regard his proposed tax measures as
well as his overall agenda of austerity.The Sydney Morning Herald
observed the following proposals under consideration by Abbott for the 2014-15
Federal Budget.(Some comprised very probable
items for the May Budget - following the “Commission of Audit’; others might be
considered ‘longer term aspirations’ for the sake of an Ideological commitment
to ‘small government’.Some may even be
rejected as ‘too hard-line’ to be ‘electorally viable’)
there is Abbott’s ‘debt levy’ impacting on those on incomes over $80,000
·Attacks on universal health-care, with extra upfront payments for those visiting a
GP, or a Hospital emergency department
in the Aged and Disability Pensions, and also to Newstart – a more austere
formula for pensioners; but also cuts in eligibility;(Also there is talk of ‘slowing’ NDIS
implementation - a cut by another name)
in 70 as the age of retirement, with the family home included in an assets test
– even where such assets are way below average property values….
increases in university fees – but also reductions in repayment thresholds – so
poorer graduates are put under extreme financial strain even where there is not
a proportionate financial benefit stemming from their education
cuts in the minimum wage; moving towards a permanent stratum of ‘working poor’;
a divided Australia similar to the United States -where middle class lifestyles rest partly on
intensifying exploitation or the poor and vulnerable
the young unemployed (25 and under) from the austere ‘Newstart’ and onto the
even more austere “Youth Allowance”.(approx
$207/week for those living away from home)(Even more severe changes appear
to have been dropped: changes which would have forced young unemployed to move
house to find work – even where ‘live at home’ was the only way of ‘making ends
meet’ for the barest necessities)(‘The
Age’, May 4th, p 13)
tolls (effectively flat ‘user pays’ mechanism) – In my opinion probably leading
to further extensive privatisation of transport infrastructure (rail, road etc)
·Privatisation of what few
federal assets remain:“Snowy-Hydro, the
Australian Submarine Corporation, Defence Housing, Australian Rail Track
Corporation, Australia Post, Medibank, the Royal Mint and the National
infrastructure and central government functions are concerned these will likely
be leased back to the Australian people – but at enormous financial cost –
revealing the privatisation agenda as essentially Ideological – with the public
fleeced in the final analysis)
·Industry Assistance cut in
areas like the auto industry.(We
already know this may ‘flow on’ with a cost of around 50,000
Howard era tax cuts went well into the tens of billions.‘The Australian’ observed how in the dying
days of the Howard/Costello government $34 billion in tax cuts were promised – and then matched by
Rudd Labor. Even the usually-biased
‘Australian’ noted the impact this had upon the Federal deficit.
Australian’ also noted more recently howthe final 2013-14 Labor Federal
Budget “would [have been] in surplus by at least $25 billion, with an
estimated $40 billion in extra revenue, if income tax cuts introduced
between 2005-2008 had not been put into place.”
(Wayne Swan would have made his budget surplus by a
country mile were it not for his own insistence on ‘small government’)
The consequence of these unsustainable tax cuts was
a Labor Government that largely ‘trod water’ when it came to overall
progressive reform of welfare and of the social wage.Restructuring of income tax, improvements in
pensions, and subsidies for disadvantaged workers (eg: in aged care) – were
important exceptions.And Rudd Labor
deserves credit for its response to the Global Financial Crisis; with its
timely investment in infrastructure.Yet
there were also attacks – such as cuts to Sole Parent pensions.And implementation of Gonski and the NDIS
were committed to ‘into the future’ at a time when Labor seemed bound to lose
office in any case. Labor did ‘put
Abbott on the spot’ – pressuring him to commit to these popular polices. But now it appears Abbott never had any
intention of keeping his promises.
Peter Martin in ‘The
Age’ explains that ‘Net Debt’ is now set to peak at 16 per cent of GDP or about
$280 billion.The consequence of this is
that 2.2 per cent of GDP must be devoted to servicing that debt : or about
$9 billion a year.(The Age, May
4th, pp 29-29)
“net debt is the
sum of all liabilities (gross debt) of an organisation, less their respective
financial assets (cash and other liquid assets).”
To get this in perspective Australian Gross Domestic
Product is now worth overUS $1.5 TRILLION;
and by comparison
Japanese ‘general government debt’ is
over 200% of GDP; and US ‘general government debt’ at over 100% GDP.
There are a number of factors worth considering amidst
the panic and deception surrounding the issue of government debt:
a)Lower gross debt under Howard/Costello needs
to be considered alongside greatly reduced government income and income bearing
assets – the cost of unsustainable tax cuts, upper middle class welfare, and
b)We need to consider our capacity to
SERVICE the debt; and the ‘trade off’ from public debt compared with greater
productivity which would flow from public investment in infrastructure,
education and the like.
c)The Liberals attempt to compare the
Federal Budget with household budgets. And yet those families who can still
afford it (since the Howard era housing bubble) need to make long term
investments in the family home; servicing and repaying debt in a sustainable
fashion over decades.Families ‘having a
roof over their heads’ is a fairly un-negotiable need.By comparison, if governments fail to invest
over the long term in infrastructure and education – the cost to the economy
(and to real people) is greater than had those governments ‘opted out’ in order
to cut debt.And if the private sector
is brought in ‘to pick up the slack’ – the cost to the Australian people as
private consumers is greater than had they ‘collectively consumed’
infrastructure and services via progressive tax.To clarify: there are additional private
sector costs such as profit margins, marketing, executive salaries and a higher
cost of borrowing
d)Finally: issuing government bonds over
the long term is arguably a fairer way of financing major public infrastructure
– as the cost can be staggered over several generations with those who will benefit in the future
paying their fair share.
All these facts combined also reveal the falsehood
of our supposed ‘economic crisis’ and insincere cries that we must cut
radically in order to ‘live within our means.’
But there ARE alternatives.
If the regressive subsidies for wealthy retirees via the Superannuation
Concessions regime are taken into account; and if unsustainable tax cuts
flowing largely to the wealthy and the upper middle class are considered;it becomes clear that Australia has the means
to provide for the Aged and the disabled without vicious austerity. That is: without
attempts to whip up resentment against vulnerable welfare recipients.
observed that over $15 billion in superannuation concessions go to
the “richest ten per cent”;and arguably
even more if we consider the upper middle class.
And according to the Sydney Morning
Herald the overall“Commonwealth bill
for [superannuation] concessions is projected to rise at a staggering 12 per
cent annually to be $50.7
billion in 2016-17. “
On the basis of the figures already considered:
progressively raising government revenue to pre-Howard levels (as a proportion
of GDP); and winding back regressive superannuation concessions alone could
claw back well over $50 billion.From those measures alone, the Federal
government could meet increasing demands in future decades on health, welfare
and aged care .It could also meet the cost
of providing key infrastructure and social services publicly – without the
extra (regressively structured) costs on private consumers that flow from privatization.
There are several areas of urgent need which will
certainly be neglected should the Abbott administration continue to ruthlessly
pursue its Ideological ‘small government’ agenda:
·Roads, rail (including Fast Rail), and
other public transport
·Better funded State schools; greater Tertiary
educational opportunity; make HECS fairer by raising rather than lowering the
·Better resourced public hospitals,
universal health care with comprehensive Medicare dental and improved mental
health facilities and services
·National Disability Insurance, and
National Aged Care Insurance
·A National Broadband Network ‘to last
the long term’ instead of a ‘second best’ option
·Pensions maintained without cutting
payments and eligibility for vulnerable Australians; and without regressive
assets tests that include ‘the family home’ even when it is roughly equal to or
lower than average property values
·Free burials or cremations to save
families unfair costs and stress when they are grieving for their loved ones
·massive investment in public housing to
increase supply – finally correcting the Howard-era bubble and making housing accessible
and affordable for more Australians again
·Continue to invest in renewable energy
for Australia’s future – and for the planet;the Clean Energy
Finance Corporation is not a ‘drag on the Budget’ anyway – and reported a
profit of 7 per cent
·Invest in pure and applied scientific
research; for example into a cure for dementia
broken faith with the Australian people. And unlike with Julia Gillard, he has broken
that faith without the Greens ‘holding him over a barrel’ lest he lose
Government.Just as Gillard was hounded
until the very end on her carbon tax promise – Labor needs to ensure Abbott –
and the Australian people – never forget this broken promise.
The Government’s plans to raise taxation slightly
for the upper middle class and the wealthy while ‘coming down like a ton of
bricks’ against welfare recipients is also offensive.
Oscar Wilde once said:
“To recommend thrift to the poor is both grotesque and insulting. It is like
advising a man who is starving to eat less.”
He could just as well have been speaking to Abbott,
Hockey or Cormann.
A wealthy taxpayer might barely notice a marginal
increase in tax.But for the poor and vulnerable
the impact of welfare austerity would be crushing.
“Increasing taxes on working
class and middle class Australians is a terrible mistake and people will not
forgive Mr Abbott for breaking this very big promise to increase taxes.”
Again: Abbott must be held accountable for the breach of
But Shorten’s apparent opposition to any increase of tax on the
middle class is also deeply concerning.Yes, removing superannuation concessions from the most wealthy could
save over $15 billion.But a more ambitious program of welfare,
infrastructure and social wage expansion would necessitate a broader base.And
over the longer term even ‘treading water’ on welfare and social wage provision
would require a proportionate increase in tax.The ‘good news’, however, is that
tax increases on the middle class don’t have to be too severe – because of that
Labor should never have abandoned its support for a
retirement age of 65. Arguably for retirees there are ‘quality of life’ issues
that go beyond the drive to extract more revenue and press ever-growing
consumption.Under these circumstances the middle class
would have to shoulder partof the responsibility for making Australia a truly ‘Good Society’.If Shorten does not take account of this the
Greens most likely will.And Labor will
progressively ‘lose ground’ to the Greens ‘on their Left Flank’; while
floundering in its attempts to inspire a rush in membership levels and
All said, though, it is the austerity rather than the tax
measures which are the most concerning aspect of the Conservative agenda in
Australia.The tax measures on their own
could provide a ‘silver lining’.Some
debt is arguably necessary to spread the cost of infrastructure over
generations.But cutting debt servicing
costs in half could be workable, and arguably see all that money saved (approx. $4.5 billion) redirected every
year toward the most vulnerable and needy.For instance: for those in need of Aged Care.
With Hockey’s priorities, reduced debt servicing costs would
likely be passed onto corporations, the wealthy and the upper middle class
rather than the poor and vulnerable.But
if there are those in the Government who would rather aspire towards ‘Catholic
social welfare Centrism’ – then this would be a crucial issue on which to take
an uncompromising stand. (both on social
welfare; and in opposition to US-style exploitation of the working poor) (And the same would apply to others identifying as 'compassionate Christians' - though there is a very significant Catholic representation in the Government)