Welfare changes and the critique of political economy

This piece is a critique of an argument around the welfare changes put forward by prominent Australian socialist blogger John Passant and suggests an alternative way to understand them

Submitted by With Sober Senses on January 11, 2013

They all turned their papers over and drew more squares. When Kollberg was ready, he looked at Martin Beck and said, ‘The trouble with you, Martin, is just that you’ve got the wrong job. At the wrong time. In the wrong part of the world. In the wrong system.’

                ‘Is that all?’

                ‘Roughly,’ said Kollberg. ‘My turn to start? Then I say X – X as in Marx.’

                                                                                     (Sjöwall and Wahlöö, 2007: 323-324)

 Principles and Particulars

There’s allus two sides to every question

and recognisin’ the principles be easy

whilst understandin’ particular particulars

and takin’ appropriate steps

calls for much collective wisdom.

(Sharp, 2010: 75)

Welfare in Australia has been going through substantial and profound changes. These changes have produced little if any public debate – until very recently when the changes to the provision of the single parent payment generated more than a ripple in the press and a flurry of noise from the commentariat. In this context John Passant, a prolific socialist blogger at En Passant and a member of Socialist Alternative, which is if not the largest socialist group in Australia then probably the one with the largest public profile, had a column published in The Age entitled How the poor are shunted into deeper poverty just for political capital. The publication of explicitly far-left views in a major newspaper is a rare thing indeed and unsurprisingly it circulated widely on Facebook. I am very critical of Socialist Alternative for both its formal politics and its mode of operation. However Passant writes in a fairly friendly manner and seems to be seriously attempting to express a critique of capitalism in a way that is accessible and connects with as many people as possible.  Now this seems sensible enough – as a real movement to transform society must be popular and thus those who hope to aide in its construction would require the ability to communicate the radical critique of that society as coherently and clearly as possible (and equally important, and most often forgotten, also require the ability to listen and to learn). But often such an approach becomes an excuse for poor politics and fairly shallow assumptions about the intellectual capacity of the audience and the processes of radical education: i.e. the assumption that the masses are just too dumb for the real thing and aren’t interested in anything challenging or difficult. The terrible state of  activist Marxism in Australia is in part due to this idea that Marx’s work is just too hard for people so we better give them something light and we can read Marx later….and this later never happens. Strangely this not reading of Marx leads to his deification. Rather than Capital and the Grundrisse being working books they become theological texts. Now let’s be clear, Marx is only important to the emancipatory project as his work pioneered the critique of capitalism, and it is this critique (whoever it comes from and under what ever name ) which can help us understand and change our society. The problem with Passant’s piece is that rather than understanding these changes as being in relation to the structural dynamics of capital accumulation he argues that they are due to bad ideas – something call ‘neoliberalism’. And behind this there seems to be a great confusion about what capitalism actually is and how it works and more importantly what the struggle to overcome it consists of.

Passant makes a number of claims: that the purpose of these welfare changes is to save money; that the reasons for these changes is the dominance of bad ideas or ‘neo-liberalism’; that government policy is the main reason for the growth in inequality between the share of income going to capital and labour; and that the solution is tax policy aimed heavily at the rich which can be won by ‘through a massive societal and industrial campaign to put the poor and working class before the rich and business’(2013).

As I have argued here, the driving rationale behind the welfare changes is not the desire to save money but rather to use the state to address the labour-shortage, which if anything has involved numerous increases in spending. This is in no small part because the reproduction of labour-power is incredibly complex involving management, training and discipline on an individual and social level and involving very complex dynamics of gender, sexuality and race as well as the manipulation of internal hierarchies within the working population (Federici, 2004).

But the point that Passant raises about cutting spending is also worth addressing – especially now that the budget is no longer predicted to enter into surplus due to the ‘substantial hit to profits that Australian companies have experienced in the early months of this financial year, and this isn't just in resources, it's right across the board – companies, in particular, being hit by the high Australian dollar’(Swan, 2012). There is of course a debate about the importance of the government meeting its commitment to achieving a surplus. In the mainstream political debate achieving a surplus is the benchmark of good economic management – a sentiment that plays to a population worried about rising interest rates and the impact that might have on their mortgage payments. The Business Council of Australia, that is one of the collective voices of real capitalists rather than right-wing ideologues, seem to support the government in a press release quoting their Chief Executive Jennifer Westacott saying: ‘The confirmation of a write down in tax revenues as economic conditions soften comes as no surprise and in these circumstances a return to surplus in the current financial year is not the right policy’(2012b). Undoubtedly those that actually own capital are worried that cuts to spending might impact on demand and thus the realisation of profit. But she continues that:

It is critical that a credible medium-term fiscal strategy include the structural improvements required to deliver sustainable surpluses over the medium term. This process also needs to be accompanied by policies focused on improving productivity and competitiveness and reducing business costs. A strong and believable fiscal strategy is an essential underpinning of business confidence. It adds greater certainty to the business and investment environment

The tension that is being expressed here is what we might, drawing on the work of Ta Paida Tis Galarias(2010), call an Australian manifestation of the crisis of social reproduction. Though in the Australian context it is probably correct to talk of barriers or limits rather than crisis. But in part it means there is a difficulty between carrying out the actions the state needs to do to guarantee the accumulation of capital and funding them in a way that doesn’t interfere with profitability. Since the 1970s globally the answer to this could be found in finance: capital, workers and the states all borrowed more and invested more into financial markets (Marazzi, 2011). But mired in a global crisis of accumulation the path is more problematic and even though Australia maintains a AAA credit rating all debtors must act like good debtors.

To flesh out this picture more broadly capital accumulation in Australia remains strong, driven as it is by the export of resources to the growing economies of Asia, but the perilous conditions of the global economy are beginning to have an impact – witness the decline in prices for iron ore and coal. This is the basis of my ‘precarious prosperity’ thesis: the boom continues however the impact of the global economy makes its future insecure, and this insecurity is felt amongst capitalists. In this context a number of internal barriers to accumulation are having an impact – the labour-shortage specifically and funding of social reproduction generally. The added complexity is that not only does social reproduction need to be funded but also in this context there is a push to reorientate the activities of the state.

What is this reorientation?  In the Mid-Year Economic and Fiscal Outlook   the government planned to achieve a surplus so it could free up its future intervention in the economy in case of future crises. ‘Keeping Australia’s public finances strong will also support the Government’s capacity to respond to unanticipated events in uncertain global economic times (2012: 8).’  This seems to suggest that to ensure the future of capital accumulation – and capitalists’ feelings of security – the state has to be ready to intervene to stimulate the economy as required. So too the BCA argues (representing of course not policy but an attempt to shape policy):

The government should prepare the Budget in a way that allows it, if necessary, to make a one-off contribution (equal to 3 per cent of GDP) to the economy, roughly every 13 years, to assist in weathering the impact of a possible  major economic shock.

History would suggest that the federal government will be required to make a fiscal  every 13 years or so, just as it did during the global financial crisis.

The immediate objective of fiscal policy – set with an appropriate medium-term perspective in mind – should be to target the generation of budget surpluses with a view to paying down debt.

Having done that, the target should be to accumulate fiscal reserves that could then be deployed should the need arise in response to a major economic shock.  (2012a: 4)

(Is this, in the realm of thought then, the genesis of the ‘intervention state’?)

A scan of recent documents coming out of Treasury, the Productivity Commission and business organisations, such as the earlier quote from the BCA are articulating a desire to refocus the state towards some of immediate needs of productivity and the lowering of costs of business. Most obviously there is increased industry pressure to improve infrastructure. Thus, to quote a speech by Jim Murphy (2012) the Executive Director of the Markets Group form Treasury, ‘Recognising the importance of infrastructure investment, the Australian Government has allocated more than $36 billion to roads, rail, and ports over the six years to 2014.’

There is certainly then a tension over the prioritisation of the various different tasks of social reproduction. As the Secretary of the Treasury argued in a speech in October-

The first is about what we - as a just and democratic society - want or expect our governments to provide. The incomes of Australians will continue to grow, albeit at a slower rate, and we will increasingly demand better quality goods and services. While, at times, debate has presumed that these services will always be publicly provided, this is not a presumption we can afford to make. There are many very worthy and constructive programs that governments could potentially fund. Explicit prioritisation is required on what can, and what can't, be funded by governments as opposed to individuals.(Parkinson, 2012)

It is unclear how this will be solved. There is a growing market for the private provision of social reproduction – see for example social benefit bonds. The same speech from Treasury on infrastructure calls for greater private ownership and funding through user-pays. ‘In light of the fiscal challenges facing governments, user charging is also an effective way that governments can create opportunities for increased private sector investment in infrastructure, because it leads to revenue streams that widen the scope of commercially attractive projects.(Murphy, 2012).’

(I intend to carry out more research on this question. The question of productivity needs further elaboration as it will, I suspect, be one of the key front lines of 2013, in both direct conflicts in the workplace private and public, transformations to legislation that is seen as holding back investment and also what the state spends money on.)

In short then, in the condition of precarious prosperity, the state has to find a way to fund reproduction, address the shortage of labour-power, help facilitate the functioning of capital and do this all in a way that maintains a ‘healthy’ business environment.

But isn’t Passant calling for increasing taxation and wouldn’t this extra revenue solve all these problems? I will address this below.

Can all this be explained by references to ‘neo-liberalism’? Perhaps once neo-liberalism as a concept was useful in opening space to make a critique – but now it seems to confuse a group of ideas, an epoch, types of policy, a method of governance and an insult.  What does Passant mean when he refers to ‘neoliberal Labor and Liberal governments’?  He seems to say it is both one of ideas and policy then makes three deeply confused claims:

  • On the changes to welfare he says ‘This has little economic rationale but lots of political rationale for Labor as the servants of capital.’
  • ‘Is there a solution? Taxing the rich and distributing some of the wealth we create for them to the 2.2 million below the poverty line or creating hundreds of thousands of well-paid including renewable energy jobs, or both, would address poverty’
  • ‘The time has come to tell the very, very well-paid Jenny Macklin and the ruling class she represents that the poverty she and the rest of the Gillard Labor government create through their deliberate policies has to end now. ‘

This seems to suggest at least two things: 1) that the economy and the interests of capital are separate; and 2) that the outcomes of economic equality or inequality is primarily determined by state policy. Thus the solution to our problems is the previously mentioned ‘massive societal and industrial campaign’ for one assumes the implementation of positive and progressive policy. The further implication is then, bizarrely, that some kind of good society can be achieved within capitalism and rather than abolishing the state the state is the tool for its realisation. And what kind of society is this in which the state simply redistributes incomes and/or becomes a major investor in ‘renewable energy’? Now I am aware that many will suddenly jump up and say ‘Transitional Demand’ – that odd Trotskyist tactic to fight for something within the terrain of capitalism knowing you can’t win it in the hope that defeat will lead to radicalisation. But for a demand to be a demand there must be some force demanding it. This is just an essay. Its sum result then is to sow confusions about the actual nature of capitalist accumulation.

Passant’s argument both misunderstands the nature of the specifics in relationship to capitalism and it seems capitalism on a whole. It simply makes no sense to separate out something called the economy from the interests of something called capital. Indeed this is part of the problem of our time. ‘What better proof of the total triumph of capitalism than the virtual disappearance of the very term in the last 2 or 3 decades? (Žižek, 2007).’ The whole point of Marx’s critique is to blast away the veneer that says there is something natural and ahistorical called the economy and to show that the apparently neutral categories of the language of economics are actually expression of social relationships.

Capitalism is a historically specific set of social relationships (Marx, 1991: 953-954).What is expressed in the language of economists are these social relationships of domination. These social relations are antagonistic, torn internally between owners of capital and the rest of us and they move due to the rhythms of its own internal logics.

Inequality doesn’t arise mainly from state policy but rather from where people stand in these social relations most specifically if they own capital or have only their labour-power to sell. The differences in these incomes that derive from these positions have to do with the complex picture of the actual composition of how capitalism works in a specific society, that location of this society within the global circulation of capital and the intensities and histories of struggle (which always include a racial and gendered edge). Policy is just part of this.

This brings us to the point of arguing for increased taxation. I have a number of problems with this. Let’s focus on two. Arguments for major reforms in capitalism often look back to the social democratic period (from the end of WWII to the end of the 70s) and I certainly detect of whiff of this thinking in Passant’s work. The problem is that it fails to understand the material and political dynamics of this period. Social democracy was a class ‘deal’ between capital and labour (Midnight Notes Collective, 1992).  A social wage, the welfare state and job security was offered as long as workers delivered class peace and increased productivity. This was possible in the 1ST world because of the hyper-exploitation of the 3rd world and the massive reconstructions needed, and the return to profitability, due to that vast destruction of the WWII. A reason for this deal was the combined fear capital in the West had of home-grown workers movements and the fear of the expansion of ‘really existing socialism’. This deal ended because of revolts from below, struggles in the factory often against and outside the unions, on campuses, in the home, prisons and asylums. These struggles ‘transcended the limits of capital’s historic possibilities’(Midnight Notes Collective, 1992: 320). This means that for such a period to return there would need to be both struggles of a threatening size and also the capacity for capital to make a new deal. If there was the first, wouldn’t we perhaps aspire to something more than such a deal? Secondly it is very unclear that mired in global crisis that capital has such a capacity in it. (I also wonder if general demands that come from the activities of socialist groups have much to add to the construction of such a movement anyway.)

What Marx gives us are the tools to understand that in a specific society like Australia, whilst never conforming purely to the model of capitalism in laboratory conditions of Capital, contains the same basic directions and tendencies, the same driving imperatives. Part of what radical critiques can do it is to show that ultimately no one really rules, that even the owners of capital are subject to its dynamics as little more than ‘capital personified and endowed with consciousness and a will’ (Marx, 1990: 254). And as such we need to emancipate ourselves from these relations on a whole. The work that we need to do is the very difficult task of understanding the core categories themselves but also how they manifest in our daily lives – to pick how the numbers are expressions, manifestations, of relations between people. To see that what we call the economy is driven by and determined by the structural logics of these relations and is dragging all along with us. We are all caught in a ‘totality of the social process’ and thus experience ‘the social relation of individuals to one another as a power over the individuals which has become autonomous, whether conceived as a natural force, as chance or in whatever other form, is a necessary result of the fact that the point of departure is not the free social individual.’ (Marx, 1993: 197). And most importantly of all to search out the antagonisms, the struggles overt and covert, which offer the possibilities of a way to a radically different society. This last point seems far more useful than the propaganda mode common to socialist groups.

Finally of course ‘ideas’ matter, of course ‘policy’ matters. But how are we to understand them especially since, and this is a most confusing question, in a capitalists society one can’t really say that capitalists, that is the class that owns capital, actual rule if by rule we mean hold state power? A question which deserve serious reflection….

image taken from the Assembly for Dignity
reblogged from With Sober Senses

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