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.
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 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
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?
This would indicated healthy growth rather than malfunctioning – and this is despite the continual end of the mining boom which was the engine that drove capital accumulation in Australia for the last two decades. And GDP growth is, I would attest, a mystified indicator of profitability. If the economy is growing it is because firms are investing; and they are investing because of a sufficient level of profit today and expectations of them tomorrow. So much for declining profitability then, so much for over-accumulation too, so much for looming crisis…
In part two of Australia You’re Standing In It I’m going to attempt analyse the relationships between state debt and social reproduction. In particular I want to argue that rising debts and continuing deficits provide a challenge to how social reproduction is carried out by the state. This directly flows on from the previous chapter as the core of my argument is that the rising debt and deficit of the Australian state are at least in part a product of the global stagnation of capital accumulation. This manifests in the drop in revenue caused by the winding down of the mining boom.
I want to emphasise the stakes of my argument. In mainstream debates in Australia debt is most often framed in one of the following two ways. For the Right debt is a cause, if not the cause, of economic stagnation and crisis. For the Left Australia’s debt levels are unproblematic and the panic over debt is a production of the fetid imagination of the neoliberals and/or a cynical manoeuvre to justify the sort of policies the Right always carry in their back pockets. Here I wish to reject both these arguments. Debt is not the cause of crisis but a particular manifestation or expression of it; but it is a manifestation that has its own contradictions. And debt levels whilst overblown by the Right do present a serious challenge to the state’s abilities to finance and carry out social reproduction. Also a new revelation for me, one often ignored in the debates about debt, but one that is obvious when you think about it, is the role that sovereign debt in the form of state bonds plays in the financial markets. The debate over state debt is also always a debate about securing the value and the profits generated by financial assets.
A limitation of my investigation so far is that since my methodology looks at the movements of capital from ‘above’ there is the risk that I can slip into a form of presentation that ignores the class struggle that goes on ‘below’ and throughout capitalism. There is a danger, from Marx on, that our analysis can be too ‘objective’ and not grasp the subjective role struggle plays in the corresponding unfolding of the dynamics of capitalism(Shortall 1994). (Perhaps it is possible to see class struggle as the struggle of humanity against its entrapment in the objective categories of capitalism). My challenge is to express how the ways the state funds social reproduction and the shapes social reproduction take are products and sites of class struggle. Spiralling state debt is an expression of our power – even if it is latent. We need to enlarge our understanding of class struggle beyond a model that sees it primarily happening within the confrontation between labour and capital in the work-place proper, that is move beyond a ‘factory-office-farm’ model (Caffentzis 2013, 242). We need to understand the complex and multifaceted struggles that happen across all of society.
Something is going on. Something is changing. There is a shift in the trajectory that capitalism in Australia is taking. At the recent National Reform Summit Martin Parkinson, a former head of Treasury remarked that ‘Unless we actually grab this challenge by the horns and really get concrete about what are the priority issues, we are actually going to find ourselves sleepwalking into a real mess’(Martin 2015). The metaphor of Australia sleepwalking towards recession is now resonating in the echo chamber of the political class and sums up their dual concerns: on the one hand a decline in the accumulation of capital; and on the other that the political apparatus and the broader society seems unable to do anything to change course, perhaps is even aware, and is moving without, or despite of, conscious control. Australia is slouching towards, or is already sunk in, political and economic malfunction.
Whilst the political class wants to address these dilemmas and act to save capitalism from itself we want to understand what is going on so we can overcome it all. Here I want to grasp the current conjuncture of capitalist society in Australia: in particular the current malaise of capital accumulation and the malfunctioning of official politics. What do these phenomena tell us about the current moment in Australian capitalism and the possibilities, overt or covert, for a radically different kind of society?
This is part one of a six party study to try to sketch an outline of the current conjuncture of capitalism in Australia. Part two will focus on debt, part three the crisis of mainstream politics, part four on the end of the ‘high credit, high work, high consumption deal’, part five on gender and social reproduction and part six on the most prominent fault lines of struggle. But here we will start by posing a hypothesis about capital accumulation in Australia and also try to take its pulse-rate.