It is now becoming radical to argue that the purpose of the economy is to serve the people says ACTU President Jennie George.
A few weeks ago the Prime Minister said:
“I cannot recall a period in the last 20 to 30 years when you’ve had such a fortunate conjunction of low inflation, falling interest rates, expanding growth, strong business investment and falling Budget deficits and a very positive International economic climate.
You take these five or six things together and you have an underpinning and a base for employment growth the like of which we haven’t seen for the last 20 years.” (The Age 17th July, 1997)
Well this may or may not be true. We’ve heard statements of this nature before, but it hasn’t translated into improvements for ordinary people I don’t believe it, but more importantly neither does the community at large.
It is now becoming radical to argue that the purpose of the economy is to serve the people. If we genuinely believe this, then it requires that the focus of our economic policy change, so that people matter more than adhering to the glib certainties of the economic textbooks and the global market players whose interests they express.
Globalisation And Economic Rationalism
The past two decades has seen a dramatic transformation of the world economy – a process known as globalisation.
The economies of the world have become increasingly interdependent through flows of capital and trade and through trans – border asset ownership. The flourishing of transnational corporations and the boom in world financial markets have been at the centre of this transformation. Globalisation has severely limited the ability of national governments to manage their economies in the interests of their citizens.
The enormous mobility of capital around the world has promoted an international competition for business investment that has meant that one nations policies are judged against the financial inducements and policy settings of other countries. Domestic economic policy has been wholly reoriented over the last 20 years to satisfy the requirements of this global competition for capital.
The ideological handmaiden of globalisation is economic rationalism, a doctrine which vests magical powers in private markets.
These two processes working in combination have meant that national governments have ceded a large measure of their sovereignty over economic management to global financial markets.
Government’s frame budgets primarily with the reactions of credit ratings agencies and foreign investors in mind. And of course global markets expect and enforce a range of economic and social policy measures believed to be in their interests. The preferences of citizens expressed through elected governments take second place to those of international financial markets.
The economist Fred Argy has argued:
“The net effect of financial globalisation has almost certainly been to put extra pressure on governments to adopt market – friendly policies and especially to give high priority to tough monetary policies directed at low inflation, reductions in government spending and radical labour market deregulation.”
Economic Rationalism – Its Main Goals
Some of the common measures promoted by the economic rationalists include:
- low inflation, even at the cost of sustained high unemployment;
- tight budgetary policy combined with lower taxes resulting in cuts in public services provided to the community;
- de-regulation of labour markets allowing so called ‘flexibility’ in wage setting;
- finance and trade liberalisation, with no regard for the social costs that are borne by others;
- micro-economic reform;
- withdrawal of government from a range of activities traditionally undertaken by the public sector.
The embrace of economic rationalism has been justified by a belief that it will increase the rate of economic growth and through that, the welfare of the citizens.
But two decades of experience with globalisation and the policies of economic rationalism now show that for the mass of ordinary working people, they have failed to deliver the promised economic benefits. More than that, there is mounting evidence that the social changes that have been the consequences of these processes have brought about a sharp decline in the welfare of ordinary people.
Winners And Losers
Ethan Kapstein, Director of Studies at the US Council of Foreign Relations, in a article last year put it in these terms.
“The global economy is leaving millions of disaffected workers in its train. Inequality, unemployment and endemic poverty have become its handmaidens. Rapid technological change and heightening international competition are fraying the job markets of the major industrialised countries.
At the same time systemic pressures are curtailing every governments ability to respond with new spending. Just when working people most need the nation State as a buffer from the world economy, it is abandoning them.”
For ordinary Australians the benefits of globalisation have been elusive. Mass unemployment has become chronic, inequality has increased, jobs have become insecure, working hours are longer, the extent and quality of services provided by the public sector has declined, real wages at the lower income levels have declined, more people are dependent on Government assistance, accompanied by a growth in the numbers of the `working poor, and a generation of young unemployed people has been virtually abandoned.
In this climate of economic uncertainty combined with changes occurring in their own communities, peoples sense of security and well being has been affected. It found political expression with the defeat of the Federal Labor Government at the last election.
There was a widely held view that the Labor Government was out of touch with the consequences of its economic agenda. The Government was seen as promoting the changes, rather than protecting its citizens from the inequality and insecurity they were experiencing.
The appropriate goal of economic policy is surely to improve the lives of people – But the reverse has occurred. While some at the top end have benefited, the majority have not.
The Views Of Middle Australia
Lets consider the preliminary conclusions of the most extensive survey ever carried out of Middle Australia. The initial results were released by Dr. Michael Pusey, Professor of Sociology at the University of NSW and reported in the Sydney Morning Herald on 22nd July, 1997.
What did he find?
- The preliminary data indicates that about two-thirds of middle Australians have negative feelings about what is happening. The responses point to some bafflement about the first economic recovery in living memory that has yielded no obvious benefits for the broad mass of the population – and which may, more probably have produced a great many more losers than winners.
- Middle Australians have a very clear idea of who are the winners and losers in the economic and social restructuring of the past 15 years. Most believe that big companies, rich people with assets and people on high incomes have been the main winners and people on social security, small businesses and people on low incomes have been the big losers.
- Their anger and resentment is directed mainly at politicians, the economic system, big business and the media in that order. Immigrants, their own inadequacies, employers and unions are the bottom of the blame hierarchy.
- The findings seem to show that people are not primarily materialistic or greedy. When asked what gives them most satisfaction in life, greater value is placed on social life, friendships, family harmony, interesting work and good health than on income.
- Though most are coping with the economic changes in terms of their incomes, 50.7% reported that their quality of life was declining and 63.5% thought that the incomes and job prospects of Middle Australians were falling, not rising.
- Most Middle Australian’s feel that governments can do “quite a bit” to change things for the better, especially to improve health and social services, support families, reduce unemployment and they make business pay fair wages.
Pusey argues that the data refutes the economic rationalist assumption that our Middle Australians will obediently agree to reduce their expectations of governments and throw in their lot with supposedly free market forces.
According to Dr. Pusey, the signals of “unsustainable social and economic” strain are clear. He feels that if peoples confidence in our institutions, communities, networks are too strongly eroded “anxiety and moral panic will fill the vacuum and spill over into social conflicts and scapegoating.”
We are currently witnessing this in the very divisive and cynical exploitation of the politics of envy and resentment.
Threats To Social Cohesion
In the 1995 Boyer Lecture Series Eva Cox argues that in a truly civil society we need to recognise the supreme importance of social connections which include plenty of robust goodwill to sustain difference and debate. She says “This possibility exists within Australia today, but we risk squandering it in our search for illusory economic development.”
She argues with force that there “is something wrong with making the market principles of social Darwinism the guiding principle of civilised society.”
“We should shift the debate from more and more competition to what levels of intervention are needed to sustain the social cohesion necessary for democracy.”
It is clear that the promotion of efficiency and competition in all spheres of our life has been at the expense of social cohesion and co-operation, and it is sounding alarm bells for the future.
George Soros who made his considerable fortune as a result of the deregulation of the financial and capital markets, cogently argues in a similar vein, that the spread of free market ideology is now the greatest threat to democratic societies. In a recent article published in “The Australian” March, 1997 he says:
“I now fear that the untrammelled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open and democratic society.
Too much competition and too little co-operation can cause intolerable inequalities and instability” he argues.
In the same article he decries the conflicting belief in what he calls “the magic of the market place” and concludes that “unless the uninhibited pursuit of self interest is tempered by the recognition of a common interest that ought to take precedence over particular interests, our present system is liable to break down.”
As For The Future
If we believe that economic policy should serve to improve the livers of people then where should the debate head? Where are the issues identified by Australians that should be exercising the minds of those in power, and those aspiring to govern the country.
Australians no longer believe in the magic of free market forces and want our politicians to respond with concrete plans and policies that address their sense of anxiety and insecurity particularly about their jobs, about unemployment, about growing inequality and their overall living standards.
In recent research reported in the Sydney Morning Herald, June, 1997 ANOP’s Rod Cameron identified 5 triggers giving rise to community concerns about the need for coherent industry policy.
- The “seemingly intractable” problem of unemployment and people’s “genuine fears” of job security.
- BHP’s planned closure of its Newcastle Steelworks and the accompanying “it is inevitable, nothing can be done” imagery of the Howard Governments response. Perhaps no single announcement by a company in recent years has had a greater unsettling impact on ordinary Australians.
- The absence of jobs from apprentices which they finish their time and what is seen as the general decline in the manufacturing industry.
- A nostalgia for in Australia that was seen as making things. “Combined with a worry about an over reliance on imported products, this is leading to an ever emerging popular consensus that “enough is enough” when it comes to tariff cuts.”
- The growing absence of Australian made goods and produce. “That concern is heightened every time an icon of Australian manufacturing is bought by a foreign-owned company. And when even governments join the sell out by privatising basic utilities like power and water into the hands of non-Australians, then confusion really grows.”
Cameron concludes that “these individual triggers are combining to create a state of mind in Australia that is far from relaxed and comfortable. Instead there is an insecure and vulnerable society in which there is:
- a genuine concern about he future of the country;
- a real fear of the permanence of growing youth unemployment;
- an emerging frustration that government cannot see the sense of supporting and encouraging Australian industry.”
“Australians are demanding that their leaders produce a plan – a plan for industry – that shows them how jobs will be created where they want them.”
It might be a good starting point to draw up a blue print for economic progress based on concern for human beings rather than theoretical economic formulae.
To that end the ACTU generally believes that any responses must include consideration of issues such as:
- active industry policy measures, including for the services sector;
- regional development strategies;
- a boost for infrastructure development;
- a national program of public works financed by low cost loans;
- active labour market programs;
- traineeships for the young unemployed, not Work for the Dole;
- addressing the paradox of overwork, underemployment and unemployment;
- a role for the public sector in job creation in areas of social infrastructure e.g. age and child care;
- greater investment in education, training and lifelong learning;
- retention of industrial and social security safety nets;
- governments maintaining their core responsibilities in areas like health and education including ownership in areas with social impacts such as communications, power and water;
- a tax system which is fair, progressive, based on wealth and which provides scope for hypothecated taxes.
In conclusion let me use two quotes that encapsulate the main themes I’ve raised today.
The first is from Tony Blair.
“I start from a simple belief that people are not separate economic actors competing in the market place of life. They are citizens of a community. We are social beings nurtured in families and communities and human only because we develop the moral power of personal responsibility for ourselves and each other.”
and from Eva Cox (in response to the George Soros article)
“I want to put a proposition which may be seen as more radical than the cautiously moving conservatives would wear – yet! Maybe the situation we find ourselves in with globalisation demands more intervention rather than less. We need to reconstruct the State, as part of a civil and civilised society and reinvent common good and purpose through more effective forms of the public sphere.”
Address By ACTU President Jennie George to NSW Teachers Federation. Saturday 9th August, 1997.