By FRANK STILWELL

The Albanese government’s Jobs and Skills summit was a welcome initiative, providing an opportunity for discussion of political economic issues. Although tough questions about fiscal and monetary policy were not on the agenda, holding the summit was a signal of the new government’s openness to a participatory approach to policy development, echoing the ‘national economic summit’ with which the Hawke government began its long period in office in the 1980s.

The task now is to widen and deepen the program for economic reform, addressing fundamental questions about the nature of the economic system, whether it serves social needs and operates within environmental constraints. Looked at in this way, questions of equity and sustainability should be at the forefront of future discussions, supplementing narrower concerns about productivity. A paradigm shift is entailed, setting failed orthodoxies aside and addressing questions about the nature of economic power and the creation of a more people- and nature-centred approach to material wellbeing.

A problem-saturated situation

Current wage stagnation and cost of living stresses are necessary starting points for considering what needs to be done, as the participants at the Jobs and Skills summit acknowledged. The existing economic arrangements are not well serving the interests and needs of most Australian people. While the official unemployment rate is low, so too is job security, with many workers dependent on casual employment or needing more hours of work than they can get. The share of labour in the national income, relative to the owners of capital, has plunged to an all-time low. Decades of rising house prices have made it ever more difficult for many people to put a roof over their heads, whether as renters or prospective home buyers. 

The same tendencies have resulted in great windfall gains for big property owners who hold substantial assets in the form of business enterprises, real estate, shares and other financial securities. Wealth inequality has continued to grow, making it harder to achieve any aspiration to social equity or fairness — however that is defined. Meanwhile, major environmental stresses result from the ongoing heavy emphasis on resource extraction as a primary economic sector. 

The Australian economy’s reliance on the mining industry — with its ‘dig-it-up, ship-it-out, flog-it-off’ character- is the most distinctive aspect of the overall sectoral imbalance. There is also strong over-dependence on industries having either a ‘knock-down-and-rebuild’ or ‘coupon-clipping’ character. The construction industry flourishes from urban demolition and rebuilding projects that impair the quality of everyday life in our cities, causing recurrent noise, disruption, dirt and distress for urban dwellers. The finance sector comprises banks and other financial institutions that prosper from ‘financialisation’ processes that bolster their own ‘bottom lines’ while rendering most people yet more powerless and perplexed. 

Without these three industry sectors — mining, construction, and finance — the overall economic conditions in Australia would be substantially more dire. However, with them, we are over-dependent on economic activities that accentuate economic inequality, insecurity and instability, while compounding concerns about ecological sustainability.

Does Australia have the political economic capacity for a major re-set? The COVID period has made everything more difficult, not only for health but also for household finances, tempered only by the massive income transfers made by the Federal government to keep the nation out of recession. Faced with the legacy of debt and deficits inherited from the Morrison government, how should the Albanese government respond? Is it a time for more caution or for bold initiatives? 

Analysing the causal factors

Understanding the factors underlying the current conditions and problems is a precondition for finding effective solutions. While these factors are many and varied, saying ‘it’s complicated’ won’t get us very far. Systematic political economic analysis must underpin assessment of what could be done to effect change. 

Three levels of analysis can be helpful to this process — focussing on the general character of the capitalist economy, its specific political economic features in the modern era, and the nation-specific possibilities for reform through public policies. Framing political economic analysis in this way sits well in the Fabian tradition, being based on the view that careful consideration of the roots of socio-economic problems, combined with strong commitment to achieving worthy goals through effective governmental action, can create ultimately transformative social improvement.

The universal characteristic of capitalism is the pursuit of profit, not production for the direct satisfaction of human needs. Private sector economic activities flourish only when the prospects for profit are buoyant. This is the source of both capitalism’s dynamism as an engine of economic growth and its problems as a system based on the exploitation of labour and nature, creating huge socio-economic inequalities and multiple environmental stresses. 

Capitalism, as a dynamic system, has also evolved institutional features that make it different now from when Marx and Engels, for example, analysed it. These temporal changes, somewhat paradoxically, both intensify its systemic tendencies and open more possibilities for progress in dealing with the social and environmental problems. The dominant capitalist institutions are now huge multinational corporations, using their vast resources and ‘global reach’ to increase their economic power relative to workers, consumers and governments. It is this power asymmetry between capital and labour, exacerbated by the relative weakness of trade unions in recent years, that most evidently lies behind labour’s declining share in the national income. Yet, possibilities for more broadly-based and inclusive political economic progress have also expanded because the extension of democratic processes has given state institutions greater power to set the ‘rules of the game’ within which capitalist enterprises operate. 

It is in this context that the politics of neoliberalism have been so important in reshaping the role that governments play in the economic drama. Neoliberalism’s dominant influence during the last four decades has been to provide an ideological cloak for capitalist interests pursuing high rates of profit and faster rates of capital accumulation with little regard to broader societal concerns. Governmental policies of privatisation, deregulation, trade liberalisation, and less progressive taxation have facilitated this process. They have created greater opportunities for profit-making and wealth concentration, thereby unleashing the processes responsible for increasing inequality and environmental stress. 

Yet, these outcomes are far from inexorable. The development of neoliberalism as a vehicle for expanding the power and wealth of capital relative to labour was itself the outcome of a power struggle and political choices. Further struggles and alternative choices can take economic policy in a different direction. 

The substantial variation between national economies is evidence of the potential for diversity within capitalism. Neoliberal tendencies have been most pervasive among nations within the Anglo-American sphere, including Australia. In European nations, especially the Nordic countries, the stronger traditions of social democratic politics have sustained public policies that emphasise broader social concerns, aspirations and goals, thereby tempering the basic capitalist tendencies. Hence the question — could this be a moment for seeking some sort of ‘Nordic turn’ with Australian characteristics? 

Towards a solution-focused approach

Could the new ALP Federal government develop and implement policies to substantially ameliorate the economic, social and environmental problems that have arisen during the neoliberal era? Could it restructure economic arrangements to get more equitable and sustainable outcomes? It is the failure to do so that has been such an obvious hallmark of recent decades in Australia, most particularly during the recent ‘lost decade’ when the conservative Coalition government’s policy vacuum was so evident. Time to change track now, moving on from the Jobs and Skills summit to the broader task of creating a more equitable and sustainable economy? 

As ever, optimism of the will must be tempered by pessimism of the intellect. Even with a coherent and comprehensive program of reform, the possibility of policies being knocked off-course by global and regional security concerns is ever-present. Moreover, the parliamentary and legislative paths to reform are inherently problematic; and policy formulation is not necessarily followed by effective implementation. The institutional impediments are much more than ‘grit in the wheels’: powerful political economic forces are at stake, having the potential to de-rail even relatively minor changes that are regarded as threatening to vested interests. 

Yet there is currently both substantial opportunity and need for beginning a new political economic reform agenda. The government could, for example, develop proposals for linking the vast pool of workers’ savings held by superannuation funds into a national investment scheme to drive transformation to a more secure and sustainable economy. A distinctively Australian ‘labour green deal’ (a label which adapts the US-centric term ‘Green New Deal’ to the local context) could facilitate a planned transition in industry and employment from ‘sunset’ to ‘sunrise’ industries, based on the development of ‘green jobs’, using ‘circular economy’ principles and the nation’s abundant renewable energy resources. The education and skills formation policies discussed at the recent summit would then necessarily have a key role in the planned industry transitions. So too would a strong commitment to redistributive policies that would make a ‘labour green deal’ into a broader program for ‘just transition’.

While none of this would fully satisfy the advocates of ‘degrowth’ or ‘steady state economy’, it could go a long way towards decoupling economic growth from environmental degradation. Of course, sceptics on the other political flank may argue that the huge fiscal challenge facing the nation means that ‘fiscal consolidation’ must precede any substantial public funding of a transitional program for structural economic change. But acceding to that argument would take us back to the discredited budget fetishism and austerity programs of the neoliberal era. Moreover, it would almost certainly undermine the political support and momentum that is needed for a progressive reform agenda. 

As proponents of Modern Monetary Theory point out — and as post-Keynesian economists have been saying for decades — national governments have the capacity to engage in extensive deficit spending when the prevailing conditions require it. Now, in the wake of the COVID crisis when many other countries are also learning to live with similar situations, it would be folly to try to rein in the debt and deficits too quickly. 

Some aspects of fiscal policy reform are important though. Particularly strong cases exist for the Albanese government to press on with requiring multinational corporations to pay more tax; and to abandon — or at least radically modify — the third stage of Morrison government’s legislated income tax cuts because of their untimely and patently regressive character. Both these progressive policy positions would signal that fiscal reform is integral to providing improved social services — including child-care and elderly care — that meet crucial social needs.

Monetary policy also needs a long overdue re-examination, coupled with the announced review of how the Reserve Bank of Australia functions. Relying on interest rate policy as the main instrument to control the level of economic activity is neither effective nor adequate. Indeed, it can have perverse effects, as evident with the RBA’s switch to a policy of lifting official interest rates, ostensibly to deal with surging inflation. This policy does not directly address the causes of the inflationary stresses that arise from supply restrictions rather than excessive aggregate demand in the economy. Its main effects are to intensify the stresses of servicing mortgage-debt, while benefitting wealthier people who have surplus capital on which they can now get more interest income.

Separate policies are needed to deal effectively with the chronic problem of housing unaffordability, rather than compounding them by using the heavy, blunt instrument of monetary policy. The housing market problems have resulted from allowing and encouraging the use of land and housing for wealth accumulation while subordinating the social goal of ‘decent, affordable housing for all’. The resulting growth of an ‘asset economy’ based on rising land and housing prices has intensified distributional inequalities intergenerationally. It is a problem that cannot be resolved without economic policies that target the sources of unearned wealth — certainly not by the Reserve Bank jabbing on the monetary policy brake.

These examples are indicative of the need for fundamental thinking about socio-economic problems and policy priorities. The standard approach to fiscal and monetary policies cannot suffice. The imperatives now are to set out a national recovery and reinvestment plan, focussed on redirection of investment, restructuring employment, reducing inequality, and creating both economically and ecologically sustainable outcomes. 

Processes of change

Developing a comprehensive economic policy program may appear a tall order. However, getting started on the process would be a signal of a purposeful government looking to at least two terms in office to carry through on the full development of the commitments and policy changes. The associated paradigm shift needs to be based in political practices as well as policy development.

Importantly, developing a program such as ‘labour green deal’ could open opportunities for engagement with First Nations peoples, drawing on Indigenous knowledge about sustainability and involving multiple Indigenous voices in developing the principles and policies for a just transition. The process of developing a ‘labour green deal’ could also include decentralised regional forums that identify local needs and draw on local capacities. Certainly, rural and regional Australia should not be left out of a process that would otherwise tend to have a metropolitan-centric character.

Developing more cooperation between the labour movement, business and government was a well-orchestrated feature of the recent Jobs and Skills summit, having strong echoes of The Accord process that flowed through the Hawke-Keating years of government. This time, however, the challenges facing the nation also require an inclusive approach to the environmental movement and community groups. Developing cooperative relations with Greens and Teal independents is essential for this process, notwithstanding the usual tendency for ALP parliamentarians to treat such ‘party outsiders’ as electoral competitors and personal irritants.

Sustained efforts will be necessary to build a culture of partnership, while respecting differences of emphasis. Adroitly handled, it could provide the basis for a progressive reorientation of Australian governance that consigns agents of reactionary politics to the Opposition benches indefinitely.

Onward…

Holding a Jobs and Skills Summit can be seen as a tentative first step toward developing an alternative economic strategy. It showed the new government’s commitment to broadening the range of voices that get a hearing; and created stimulus for wider public debate at a crucial time. Whether broader progressive outcomes are achieved depends on how effectively state power is used in relation to the more deeply embedded power structures of corporate capitalism. To achieve progressive change, pushing against the interests, inclinations and constraints of the latter, requires ongoing political judgments. 

No one should pretend that it is easy to achieve fairness and sustainability in a capitalist economy. We necessarily begin in the here and now, seeking to deal with existing political economic structures, including those vested interests opposed to any such transformation. Perhaps the main political lesson is that, even with ‘adults in charge’ in Canberra after a sadly wasted decade, activists will need to redouble their efforts to press for the deeper changes that Fabians, evolutionary socialists and social democrats have long espoused. 

Frank Stilwell is Professor Emeritus in Political Economy at the University of Sydney and coordinating editor of the Journal of Australian Political Economy. He is a Fellow of the Academy of Social Sciences in Australia and executive member of the Evatt Foundation.