Repo: More on State Debt

When the Mid-Year Economic and Financial Outlook was published a great deal of attention was given to rising commodity prices contributing to a minimal deficit and promising a future of budget surpluses. Despite this having little to do with the actions of any politicians, it was celebrated, true to form, as evidence of the capabilities of the Albanese-Chalmers government.  It is the dogma of the all the smart and sensible that there is reinforcing relationship between good economic management, budget surpluses and positive social outcomes.^[i] So too the recent news of declining ore prices has produced the corresponding gnashing of teeth.

I think this can be explained partially by the deep idiocy of mainstream economics. At a basic level we can say that mainstream economics doesn’t understand capitalism. Mainstream economic commentators tend to read surface phenomena and take them as evidence of things being either good or bad – growth, productivity, debt, inflation. Rising growth means good, rising debt means bad – the reverse is true etc.

Chalmers himself but forward this logical non sequitur about debt and positive social and economic outcomes:

The 2023‑24 Mid‑Year Economic and Fiscal Outlook (MYEFO) is all about responsible economic management because that’s the best way to put downward pressure on inflation and ease cost‑of‑living pressures.

This responsible economic management has helped engineer an historic turnaround in the Budget position, but we know there’s more work to do. (2024)

Since the mantra of reducing debt is so often used as a reason for increasing misery it is very understandable that proletarian forces and partisans for a dignified life^[ii] respond by declaring the whole thing is just bullshit. And whilst there is plenty of bullshit being thrown around, we can’t ignore the real role state debt plays in the reproduction of capitalism. 

State Debt as an anchor point of Capitalism

Across society battles are emerging that are contesting the content of what ‘Living with Covid’ means. In NSW we see three fronts of class struggle: nurses, teachers, train drivers. All state employees, all working in what we could consider to be social reproduction, fighting over broadly the same issues: pay, staffing and quality of the service provided. They are specific fights which are also starting to construct the possibility of a common good and a good life. (Since writing these words a strike by Aged Care workers has been voted for – showing a movement of struggle into private providers of care services). On the other hand, we have a dwindling Freedom movement. Reacting against the state management of social life in response to COVID (and arguably the continual decay of the conditions of the masses in general) expressing their opposition to these restrictions through audacious protests – increasingly interpolated by an ideology of the Cosmic Right and enmeshed with the various fractions of Australia’s reactionaries.

Above this the state, the executive committee of capital, is attempting to manage the contradictions of both popular desire and accumulation. It does so in a condition of intellectual and theoretical disarray amongst the media and political caste. There is no clear strategy for capital at this historical juncture. Political fractions attempt to displace this lack by endlessly stoking culture wars, reactionary and progressive, and old ideas are recycled and reinflated (maybe another Accord?). This is a local version of a global illness: ‘I think what we must diagnose instead is a ruling class brain tumour: a growing inability to achieve any coherent understanding of global change as a basis for defining common interests and formulating large-scale strategies’ (Davis, 2022).

During the election campaign, we saw this play out at a distance as a debate over ‘economic management.’ In this atrophied public spectacle economic management boils down to a few questions – debt, productivity, IR reform, privatisation. Obviously, there is a discursive relationship between these issues, but it is debt (and moving from deficit to surplus) which has become the totemic economic question of the media and political caste. Thus, we see the reheating of arguments for the  necessity of paying down state debt.  Achieving a budget surplus, or at least reducing the level of debt and deficit, is seen as the very basis of good economic management. Though increasingly there is some questioning of this doxa, and some influence of Modern Monetary Theory (MMT) amongst the Left. However, this debate is a vortex of stupidity, the gravitational pull of which threatens to also suck in friends and comrades amongst proletarian forces.^[I]

Living The Dream After White Australia Part 1

https://www.podbean.com/media/share/pb-z3app-e57335

This is part 1 of our new reading series on race in Australia and the struggle against it. Over the next 3 or so months Jon (@JonPiccini) and Dave (@withsobersenses) will be reading A New Britannia by Humphry McQueen, White Nation by Ghassan Hage and The White Possessive by Aileen Moreton-Robinson.  In this episode we set out why we are doing this, our thinking at this point in time and briefly discuss what the White Australia Policy was and wasn’t and the whys and whynots.

We encourage all our listeners to read with us and join us in the discussion.

Correction: I mention Nelson Peery as being a member of DRUM/League of Revolutionary Black Workers. He wasn’t. You can find an interview with him about his life and works here

As for DRUM and the League you can find an interview with Darryl ‘Waistline’ Mitchell and Donald Abdul Roberts here

You should read Hard Crackers and its recent offshoot (split?) Gasoline and Grits too

Insurgent Notes has a special issue dedicate to the life and works of Noel Ignatiev

Music by Wyatt Waddell

Strike, Blockade, Shut it Down! Reflections on the Wollongong Global Climate Strike

The primary task of theory is to examine class struggle not merely as possessing a theoretical framework, but as itself theoretically productive. Workers today face the problem of figuring out how to extend and intensify their self-organization and struggle in the absence of a shared class project. The paths that action will take are not knowable in advance; they have to be creatively constructed, as necessary preconditions for the re-emergence of a communist movement. Theory should therefore seek to give retrospective accounts of concrete struggles: of what they did, as well as of how participants in struggles understood what they were doing. The point here is not to cheerlead struggles but rather to read them, focusing on how they confront the composition problem and attempt to solve it via the haphazard construction of new categories, new tactics, and new organizational forms, which resonate across society. What do these struggles, in coming up against their limits, tell us about the shape of the communist movement to come?
-Aaron Benanav & John Clegg

revolts now

By Mark Gawne & Nick Southall (with contributions from Sharon Pusell & Rascal Rowe)

The Wollongong Global Climate Strike on September 20 was the largest protest in the city since the 2003 anti-war demonstration. The Climate Strike fits into a recent series of protests in the region, specifically coming off the back of the earlier school climate strike in March, and the climate action demonstration in May, with some other smaller protests taking place over the year as well. Of these actions, the Wollongong Global Climate Strike was by far the largest and drew together a vast array of groups and individuals. It was organised by open meetings composed of people from several organisations and groups, as well as individuals, all working together. The largest meeting had over 50 people participate, and there was a consistent number of at least 25-30 people attend each meeting. The Strike itself expresses the…

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Skint 1.5 Smashed Avo

 

The 2018-19 Federal Budget predicted future wage rises of higher than 3%, however merely a week after it was released ABS data detailed that annual wage rises for the March quarter were only 2.1% and showed no sign of improvement (Jericho 2018). Not only does this take the shine off the Government’s panglossian numbers but it further highlights a fracture in capitalism in Australia. Low wage growth is starting to unpick the social order, contributing to rising insecurity and distress about current and future living standards (distress which is manifesting in, or at least is being channelled, by the ACTU’s Change the Rules campaign), worries about the stability of the financial system and trepidations about the impacts on consumption. It is also creating demand for an explanation of what is going on. For an ideological mainstream that struggles to see  the origin of problems within capitalism one of the answers that has been provided is… smashed avocado breakfasts (and/or brunches)! The problem is that people, especially young people, are spending wrong not that they aren’t earning enough. Here I want to show that not only is this a stupid idea, but it is a stupid idea that we can use to actually start to talk about what wages are and what is happening in Australian society.

Skint Part 1: Wages and Productivity

I Didn’t Go to Work Today | Fifth Estate. Detroit, MI. (1987)

Wage growth in Australia is in a pitiful state. Both the frequency and size of wage growth is at historic lows (Bishop and Cassidy 2017). The recent rise in inflation means that not only are wages growing at a lower rate than any time since the Second World War, they are now growing slower than the rate of inflation. This means that real wage growth is now negative.

(Fig. 1 & 2 Bagshaw 2017)

This is a grim situation for the vast mass of people as it means the effective stalling or decline in the material conditions of our lives. It also presents Australian capitalism with several complex and interlocking problems. First, while the overall share of national income shifted in capital’s favour throughout the late neoliberal period of the mining boom, the secret to social cohesion was the growth in the majority of households’ wealth as consumables became cheaper and incomes grew, as wages rose alongside the amount of people working and total hours worked. The disintegration of this deal poses the spectre of social and political disturbances, framed as ‘populism’ by spruikers of the political class. However, low wage growth threatens not just political stability in Australia, but the process of capital accumulation and the reproduction of capitalist society more directly.

While individual firms may wish to pay their workers with air, capitalism as a whole needs wages to be high enough to ensure there is enough money in people’s pockets and that people are willing to spend it. This is often called ‘aggregate effective demand’. The reproduction of capitalism requires that a sufficiently high level of commodities is sold to generate a profit that can be reinvested and so on. Declining wage growth directly threatens the profitability of retail businesses, and because retail businesses are part of a broader chain of capitalist firms, the health of the economy more broadly. The Reserve Bank of Australia are particularly worried about the impact the combination of low wage growth and high indebtedness could have on spending and Australian capitalism (Lowe 2017).

Another specific problem is that even as wage growth has stalled, house prices have soared, facilitated by the continual rise in household debt. Increasingly thinkers for capital are concerned that the capacity to pay this debt is faltering and that the prices of real estate assets are shaky. There is growing concern that a collapse in residential prices could hit the banks and destabilise the financial architecture of capitalism in Australia (Shapiro and Greber 2017) . Thus, the Australian Prudential Regulatory Authority has acted to reduce the percentage of interest-only loans that can be offered in an attempt to ‘address risks that continue to build within the mortgage lending market’ whilst ‘balancing the need to continue to moderate new investor lending with the increasing supply of newly completed construction which must be absorbed in the year ahead’(2017). APRA aims to slow down the risk of rising mortgage debt whilst simultaneously allowing the housing market to continue functioning.  Is it likely that such activity can both reduce the exposure of the banks whilst facilitating the continual accumulation of capital?

Low wage growth, continued housing price growth and high household debt all take place in the context of low investment in Australia. This is despite a rise in profits and in the context of a global situation that the World Bank describes as a ‘fragile recovery’ (Potter 2017, World Bank Group 2017).

This problem cannot be solved – for capital – just by raising wages. This would shrink profits and thus, accumulation.[i] Rather the challenge for thinkers for capital is to work out a way to increase aggregate effective demand and profits: to increase incomes in a way that ensures the continual accumulation of capital and thus the enlarged reproduction of the capital-relation. For us (meaning both those of us with nothing but our labour-power to sell and self-declared antagonists to capital) the problem is radically different – to work out ways of asserting our interests for a good life irrespective of capital’s requirements and to do this inside-against-and-beyond the whole totality of capitalism as a society and a way of living.

 

The Federal Budget, Changes to Welfare and The Labour-Crisis

And old blog post – relevant to how we think about the Budget and the role income management plays

assembly for dignity

On 10^th May the Federal Treasury Wayne Swan presented the government’s budget for 2011-12. Simply put the budget is how the Federal Government plans to spend its revenue over the next financial year. It does this through a reading of the general economic situation and attempts to create policy which it believes will help that economic situation. As such the presentation of the budget is normally a main event in the circus of Australian politics and is the target of a whole flurry of commentary, speculation and critique. Most often the discussion focuses on what kind of underlying ideology the budget is based on (does it confirm to neo-classical or post-Keynesian economic thought etc.?)[1], how much money is going to who and the voracity of the economic modelling that it is uses. Since the budget details where the government is spending its money it has a direct…

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Hot Air: Why increasing taxes for LNG corporations probably won’t work to create a better society.

The issue of tax has become a clear line of debate for mainstream politics in Australia.  The general malaise of global capitalism expresses itself in Australia in slowing growth and rising state debt. As 2016 came to an end, we have saw the first negative quarter of GDP growth in years, stagnating wage and profit growth and rising state debt and deficits (and Australia’s AAA rating is still vulnerable)(AAP 2016) . The decline in mining construction investment has not been effectively offset by resource exports, services exports or the inner-city off-the-plan unit investment boom. Apart from the drop in investment we saw during the early 1990s recession, investment as a percentage of GDP is currently at its lowest point in 50 years

Easy Money: The Reserve Bank of Australia and the tremors in capital accumulation

NAA: A12111, 1/1967/16/89

On the 2^nd of August the Reserve Bank of Australia (RBA) reduced the cash rate to the historic low of 1.5%. The actions of the central bank often seem either arcane or uninteresting to the vast majority of us – except perhaps for those playing the markets and various gold-bugs, currency cranks and other tin-foil hat aficionados. However we should pay attention to the RBA. The RBA’s action was an attempt to intervene on the level of money in a way to forestall a further decline in the prospects for the capitalist mode of production in Australia and thus dampen any intensification in social conflict or malfunctioning such a decline might contribute to. Therefore it also tells us much about the health of capitalism in Australia on a whole and gives us an insight into the terrain on which our efforts for emancipation play out.

 

It is important to place an understanding of money right in the centre of radical critiques of capitalist society. Money is a coagulant that holds together so much of capitalist society as well as the form in which capital finds its clearest expression. Money dominates our lives. ‘The individual carries his social power, as well as his bonds with society, in his pocket’ (Marx 1993, 157). In our world money is incredibly heavy: ‘the wealth of societies in which the capitalist mode of production prevails appears as an “immense collection of commodities”…’ and it is our access to money which allows us to access this wealth which is the collective product of our vast creative capacities and their metabolism with the world (Marx 1990, 127). There are very few moments of the day when the amount of money in my pocket, in my bank account and the level of debt on my credit card isn’t on my mind. Yet on the other hand money is now incredibly insubstantial: since the end of the direct linkage of the US dollar to gold and all other currencies to the US dollar money no longer has any other references than itself. This has facilitated a vast and dizzying explosion of liquidity. This contradiction was seen so starkly in the response to the crisis when vast sums of money were either willed into existence by states or appeared as state debts as the financial system was bailed out whilst money for many people evaporated and plunged them into poverty.

 

Anti-capitalists in Australia have not been very good at making sense of money and finance nor popularising this critique. We rely too much on very general arguments about the madness of markets or robotic interpretations of the tendency of the rate of profit to fall. We haven’t been very good at explaining the specifics of this crisis or why crises and malfunctions that appear on the level of money are actually products and expressions of much deeper systemic dynamics. This space has been filled by less savoury types: currency cranks, Larouchites, anti-Semites and other species of reactionaries. Part of our collective self-emancipation is demystifying the operations of capital on all levels.

On Budget Eve: Deflation & The Limits to Privatised Keynesianism

 

NAA- M3130, 81

Tuesday 3rd May will see the first budget of the Turnbull-Morrison Coalition government. It is also the date of the Reserve Bank’s next monetary policy decision. So it is an important day for fiscal and monetary policy. Like most people (including the well paid opinion-makers of the commentariat) I have no idea what the budget will contain. It is unlikely that the government will be able to break the impasse facing the state: a general tendency of slowing growth , rising state debt and a pool of sullen and largely inchoate opposition amongst the population to various attempts by the state to address both. The picture is complex. On this blog I have written a lot about ‘Capital’s Plan A’– the stimulation of the economy via infrastructure spending to be financed in part by cuts to social reproduction and through the ‘recycling’ (read privatisation or leasing) of state owned assets. This plan, at a Federal level is stalled, due in part to the 2015 defeat of the Qld LNP government on the question of leasing power assets. However the recent Victorian state budget is built around increased infrastructure spending financed by the leasing of a port and a higher level of debt[i]. Preceding the Federal budget there has been a warning from JPMorgan and from Moody’s about the potential for Australia to lose its AAA rating, projections from Deloitte about the size of the increase in both debt and deficit and,what surprised everyone, the release by the Australian Bureau of Statistics of the latest CPI figures showing .2% deflation in the last quarter (Australian Bureau of Statistics 2016d, Greber 2016, Janda 2016, Martin 2016). It is this last point I want to look at. What does this latest news tell us about the both the direction of capital accumulation and the tensions and fault-lines of antagonism that constitute capitalist society in Australia?