Contributed by Joe Montero
Perhaps some people are a bit tired of hearing about the weakness in the Australian economy. But alongside the emerging climate crisis, this is one of the two most challenging and important matters of our time.
Keeping up with what is happening is important The economy determines how we live and relate to each other, affecting us on the day to day and playing a crucial role in shaping our future. We have good reason to take note of how it’s performing.
And if the answer is not good, in that it doesn’t meet the need of the most of society and prevents us from looking to building the future, we must look for alternative answers.
Negative indicators have been blowing our way for a while. I will refrain from including a mountain of statistics to make this point. They are easily accessible from the Australian Bureau of Statistics (ABS) and a whole range of analysts, banks etc.
Collectively, they point towards an Australia where economic growth is in decline, real wages are going backward as are jobs, the is a private debt crisis is getting worse, sales continue to fall, the real estate and other bubbles rule, it’s getting tougher on the land, manufacturing has dwindled to a fraction of what it once was and still shrinking, and the economic activity is dominated financial transactions and the transfer of assets from one hand to another.
The latest news is that the Reserve Bank is heading towards lowering interest rates further, as far as down to 0.25 percent. They could fall below 1 percent before too long, and compel the government to induce the banks to spends big on government bonds. This is called quantitative easing. It is being talked about a lot these days.
Quantitative easing moves some of the existing money supply out of circulation. A smaller amount of money in circulation will pressure interest rates up, in an attempt to restore some balance.
The poor problematic relationship between money and the real economy, has brought about an excessive growth of the finance. This is turn, exaggerates the problem.
All of this tells us one thing. The problem is not merely one of economic management. Bad economic management is certainly part of it. But more important still, is that the problem is systemic. There are not going to be solutions, until Australia comes to terms with this. Until this comes about, the prospect for the future is that it will probably get worse.
The systemic problem is that the way in which and the purpose for which the economy is organised, has come into growing conflict with the needs of society.
This contradiction is best explained by stating what an economy is in the simplest terms . It is the means that human beings use to access together what nature provides to obtain food, shelter and other needs. The emphasis is how we do this together.
We must also acknowledge the close connection between humanity and nature.
History has thrown up a succession of economic systems. When they can no longer provide the needs of society or breech the connection between humanity and nature, they fall into crisis.
Considering Australia’s economy in this context, it is obvious that its capacity to meet the needs of society is declining, and quite rapidly too. The gap between the haves and have nots is widening. For the first time, the new generation can expect less than the generation before it got. This is a living reality.
At the most basic level is that the technical capacity to produce has accelerated beyond the capacity of society to absorb. Products are now made far more cheaply than ever before. This makes their real value and therefore real prices fall, and the return to business, in the form of net profits declines along with it.
The mechanism causung this, is a long period of increasing capital intensity of production (that is substituting of labour for technology), has lowered the per unit cost. Technology can be spread out over units without a rise in the per unit cost. It is not the same for labour.
Falling returns have led to fierce competition over markets, where getting bigger is the means to fill the gap. This leads to excess, the rise of the disposable economy, an increase in the monopolisation and an increasing power of finance over everything.
The rate of increase of this rising capital intensity has lessened, but its effects are still being felt and will be for a long time.
There is also the reality that Australia is operating in a sluggish global economy, and its problems are imported into Australia.
When these features are pronounced, corporate profitability becomes more dependent on shifting the share of wealth from society to the corporations, rather than on creating new wealth. In terms of economic policy, this is reflected in what is being called neoliberalism.
A disconnection between how the economy is organised and the needs of society exists, and this gives solid ground for suggesting that capitalism is not working.
It is dominated by competitive war between capitalists, and in the world of corporate capitalism, between corporations, hampered from acting in their own collective interest. Individual interest conflicts with the common interest and begin to bury the conditions that sustain them.
A clear examples is the tax evasion industry. Paying tax is in their collective interest. It would provide a centralised fund that could be used for their benefit. But no individual corporation wants to pay its share.
Just as important, is that the same factors are affecting the relationship between humanity and nature.
The economy we have is harming the environment, and what gets in the way of fixing it and restoring a healthy relationship, is neglected in the pursuit of profit.
The separation of humanity and nature takes another important form.
We are social beings depending on each other. The way the present economy is organised breeds a ‘me’ culture. While individual need is important, this is put at odds with collective needs. We deny our dependency on each other to meet our own needs. Both collective and individual needs are sacrificed as a result.
We become increasingly separated from each other and become cogs performing in a machine, doing performing a life we often have little connection with. Socially isolated and miserable at work, we try to fill the gap with gadgets. It doesn’t work and it never ends. This is the situation in Australia. We need to be reconnected with our true natures, and only a different kind of economy can do this.
If we acknowledge these problems, solutions can be found to connect the economy to the needs of society and restore our proper relationship to nature.
It involves taking steps to build a social economy, as the driving force for the future. This means changing the way the economy is organised and putting the priority on collective action. This cannot happen without driving for a democratic economy, which means, those who do the work, must have a major say on how it’s organised, and for what purpose.
Communities and society as a whole must have an input, to ensure that their needs are met. The financial system must be put in line with the needs of the social economy. This would at the one time, provide the necessary investment and counter the harm of speculative bubbles. It would provide funds top restore the environment.
This does not mean that there is no scope for privately run businesses, which can operate in ways complimentary to a social and democratic economy.
This is the best way to promote healthy economic growth, based on building a sustainable economy.
We need an inclusive society, where there the opportunity for participation by everyone, and there are be economic and social rewards .
Such an economy would emphasise quality of life, equality and fairness, instead of private greed and the meaningless illusion of fulfillment through excessive consumption.