Chapter 2: Nodding off to sleep — Unions embrace economic rationalism

In this changing climate, governments tell trade unions to change their practices or get out of the way. This is ironic because the tactics of old fashioned unionism, seen to be out of date, are becoming attractive for workers facing government policy. Governments are turning society back to the era of the robber barons, the unregulated era prior to the Great Depression of the 1930s.

The danger for workers, 70 years later, is not the threat of the minor crises that occurred post World War II, but is a savage repeat of major crises of the distant past, where poverty was seen as necessary for economic success. As Gore Vidal put it: ‘It is not enough for some to succeed. Others must fail.’7

Contrast current times to the period of the 1950s and 1960s when there was strong wages growth during the post World War II capitalist boom.

Wages were keeping pace with growth in profits. Real wage increases were achieved by strong trade unions and weaker unions benefited from the actions of stronger unions through the flow-on decisions of a centralised wage fixing system. That is not to say that the survival of trade unions themselves was any easier. The jailing of many communist trade union officials is evidence of this. However those leaders were not so ready to adopt reformist tactics in periods of crisis. It was the likes of Ted Roach, the assistant general secretary of the Waterside Workers Federation who was sentenced to 12 months jail for contempt of the courts penal powers that led strong rank and file unions.

In 1954, the Waterside Workers Federation embarked on its greatest strike when union membership was at its peak. It had 27,000 members working on the waterfront. Compare this with 1998. In that year, there were only 3,000 wharfies in an amalgamated MUA of about 10,000 members which included seamen, clerical workers, tradespeople and hospitality workers on ship and shore. The MUA, like other unions, in recent times, has only been able to secure real wage growth through the acceptance of redundancies and subsequent sacrifices of conditions such as the working of ‘double’ and ‘triple headers’ by its members.8

Australia’s modern economic rationalist wage relations began in 1983 with the Hawke Labor government’s social contract (the Accord). Compare consequences of the Accord with the world wide pattern above:

• wage restraint;
• redundancies;
• loss of a progressive tax system9 ; and,
• amalgamation of unions.

Initially jobs were protected by tariffs but trade barriers were later lifted resulting in loss of more jobs. The trade-off that came with the Accord was that the growing unemployed were begrudgingly given the dole and the general population received Medicare. This was the social contract. Eventually more funds were channelled away from social needs with big cuts in education and welfare spending. Labor Prime Minister and former ACTU chief, Bob Hawke, commenting on TV in the early days of the social contract, said that workers up to this time were receiving a disproportionate share of the economic cake and more had to go to capital. Workers were told to tighten their belts in the interests of the country.

The Labor government, upon advice from its economic rationalist treasurer, Keating, attempted to reduce wages as a percentage of Gross Domestic Product (GDP) because of a fear that recession would result from higher incomes for workers. Wages as a percentage of GDP had increased under both the Labor government of Whitlam and the Liberal Government of Fraser. However, armed with the Accord, Prime Minister Hawke and Treasurer Keating were more adept at wage restraint.10 During the period of the Accord wages did not get near the 60% of the GDP figure of the 1970s. Despite this, Keating’s ‘recession we had to have’ occurred in 1990-91.11 This was a period of many union defeats. It coincided with a change of direction by unions to a corporate structure and emphasis on individual needs over the needs of the collective. There were still some unions that ranked solidarity above services for individual members like union shopper, but the general trend has been toward a new direction in unionism.12

Now, on the speaking circuit, Paul Keating touts his role as Treasurer and Prime Minister in the following way:

“Globalisation is the intensifying of international linkages in trade and finance and increasingly in culture, which has been evolving apace since the mid 1980s.

In Australia, it is virtually impossible to think of an area of commerce which has not been affected by it and which has not had to adapt to its effects. Whether it be banking, agriculture, mining exploration or the provision of public services, education and infrastructure, the old compartmentalisation of business by work type or national boundary is a thing of the past.13

The amalgamation of unions in the 1980s and 1990s , often with unnatural alliances across industries, was associated with the development of corporate structures.

Theorists of the capitalist firm have always proposed corporate structures. This blunted the political focus of class struggle in bureaucratic companies and allowed governments and employers to manage unions more easily. They played on the willingness of union leaders to seek respectability as heads of large institutions that paralleled the bureaucracy of the companies where their members worked.

With managed wages and low administration costs (no strikes) the firm will prosper. Workers must be able to be treated as a resource like coal or plastic.14 The economist Thurow states:

“The function of firms is to purchase resources or inputs of labour services for sale. Resources owners (workers and owners of capital, land and raw materials) then use the income generated from the sale of their services or the other resources to firms to purchase the goods and services produced by firms.”15

Having achieved this goal the firm, in a rational economic environment, expects its reward — profit. This is the reason profit is rational: someone must prosper from the process and who better than its managers and the persons who devised the firm, the owners of capital? Once again Thurow explains:

“The primary goal or objective of the firm is to maximise wealth or value of the firm…”16

Translating this model to the real world, the firm suffered limitations and constraints including:

“…the availability of essential inputs. Specifically, a firm may not be able to hire as many skilled workers as it wants, especially in the short run. Similarly, the firm may not be able to acquire all the raw materials it demands. It may also face limitations on the factory and warehouse space and in the quantity of capital funds available for a given project or purpose.’’17

Legal constraints can be an additional problem.

“Beside resource constraints, the firm also faces many legal constraints. These take the form of minimum wage laws, health and safety standards, pollution emission standards as well as laws and regulations that prevent firms from employing unfair business practices.”18

Added to this is ‘the problem of inducing an agent [worker] to behave as if he or she were maximising the principal’s welfare.’19

Enter the coalition government, with Australian Workplace Agreements (AWAs).

These agreements limit workers’ ability to bargain and at the same time cut a swathe through minimum wage laws. The government seeks to use its power over statutory law to impose on the free market limited bargaining power for wage earners. This shows it is alright to divert from free market theory in the interests of owners of capital.20 The aim is to make workers act as passively as other inputs, such as a piece of land or a hunk of capital.

While collective organisation of the owners of capital is strengthened by the government role in the market, workers’ organisation is limited by preventing their right to collectively withdraw their labour.

To sell the change and push the real purpose of the legislation to the background the government turned to spurious statistics about real wages growth during its term of government.

It asserted that a real wage increase statistic of 14.9% during the years 1996-2005 represented a corresponding improvement in workers’ living standards.

The real wage figure is arrived at by measuring the change in average weekly wages 1996 to 2005, less the CPI increase, over the same period. Average weekly wages increased by 40.6% while CPI increased by 25.7%. Or so the conservatives’ statistical argument goes.

What are the problems of using this statistic?

The ABS statistic looks only at:

• full time earnings during a period of significant increase in casual and part time jobs. This category of low wage workers is conveniently excluded.
• the skewed average, the mean. It does not look at the median or midpoint (meaning the wage earner with as many people earning more as are earning less).21 The median income is the middle of the distribution of all incomes. This measure is less sensitive to the skewing effect from highly paid professional or skilled workers or with talents in high demand and short supply. It is the bottom 50% of Australian workers who will be the victims of new industrial relations environment.

The statistic ignores:

• those on the social wage including unemployed workers, the disabled and single parents.
• the situation of women workers who on average receive two thirds of the male wage.

Moreover, the CPI as an index impacts differently on each worker because it is confined to a limited basket of goods whose use varies from household to household. This also does not differentiate between consumption patterns of rich and poor.

The average wage does not reflect the hours worked to gain the same income.22

What is beyond doubt from the statistics and not disputed is that company profits rose 500% (1993-2005) at the same time as the current Federal Coalition Government boasted a 14.9% increase in wages.23 One example is Patricks, the stevedore company that sacked its workforce in 1998, was forced to re-employ them, later halving their number in a settlement with the MUA. Patricks forecast a 22% increase in profits for the 2005-2006 year alone.24

Statistics can be used to give an indication of reality but they can also be used to distort reality. A more adequate analysis would be required to determine the real plight of workers under Howard government policy. Clearly wages as a portion of the income cake have declined significantly.
More telling for Australian workers are figures on whether housing, food, education, health and transport are affordable.

Peter Saunders states that evidence from Australian Bureau of Statistics (ABS) income data in the 1980s reveal a growing inequality overall and less protection for lower paid workers in particular. Based on the ABS data, from 1985 to 2001, male wage earners in the top 5% experienced growth in earnings of 45% whereas males in the bottom 10% saw their earnings decline by almost 10%.

In fact, across the three wage categories of men, women and people under 25 years of age, all experienced increases at the top while those at the bottom barely recorded an increase over a 15 year period.25 This has been confirmed by similar studies showing top wage earners getting ten times greater increase in wages than lower wage earners.26

As the wage for many has gone backwards so too has the social wage on which many depend for income and health services. At the same time the cost of health services has risen markedly, now matched by growing transport costs.

In many cases, even where growth in wages has resulted, this has been at the expense of lost working conditions, increased work hours, loss of holidays, reduced shift allowances and loss of penalty rates. In some parts of the economy different sectors have benefited while others have faltered: mining compared with manufacturing for example. Regional areas have suffered. Coal miners and construction workers in large cities have been able to advance their wages through tough union bargaining and buoyant conditions. Often these have been at a cost of longer working hours or the result of high productivity.

A construction worker put it like this:

“I know that we are shitkickers but we can put up a high rise building faster than any construction workers in the rest of the world. Yes we get good money but only got that because of our union (the Builders Labourers Federation [BLF]). Now the government and the bosses don’t want shitkickers like us to get decent money. They want to pay us shit money again. Why should doctors and lawyers get more money than us?”27

The debate in the media is not about real facts that a building worker could relate to but a smokescreen of statistics, averages and indexes. More telling for the ordinary worker is the ALP leadership and trade union leaders losing sight of the real debate and falling prey to the same statistics, averages and indexes.

In following the economic rationalist agenda and entering the debate on these terms and accepting some of the argument of these theorists in government, the ALP and the trade union leadership opened up the trade union movement to compliancy and the full frontal assault conducted by a conservative government.

Lost in all this theory is the reality that ‘intrinsic problems of capitalism visible at its birth: instability, rising inequality, a lumpen proletariat are still waiting to be solved.’28

Not surprisingly in the background of the WorkChoices legislation are tools to assist capital in times of crises. These include the right to dismiss workers without reason and removal of redundancy payments. These clauses weaken workers’ entitlements on downsizing or liquidation.

Even more prominent than the easily identifiable problems of capitalism referred to above is a central contradiction between self interest to promote profit and need for cooperative behaviour to achieve production in the firm.

On one hand, self interest is promoted and workers’ cooperative behaviour, collective bargaining, is suppressed; on the other hand, vast corporations rely on complex social interaction and the cooperation of huge numbers of workers to advance the self-interest of distant shareholders.

The managing of this contradiction can threaten to cause rebellion of the many against the few, so the role of the mass media becomes important. The central contradiction has to be hidden and the workers distracted:

“Abetted by the electronic media the ruling ideology is moving towards a radical form of short term individual consumption maximisation at precisely the same time when economic success will depend upon the willingness and ability to make long-run investment in skills, education, knowledge and infrastructure.”29

Such is the lament of one theorist. But why are people so uncritical? It is, after all, only a theory.

ALP adopts free market philosophy

Another facet of the Labor Party’s ”mission” is to encourage the belief that workers have a stake in, are a part of, the capitalist system. The Party has been ably assisted in this by trade union leaders from Hawke to the present day. Sharan Burrow and Greg Combet are two skilful exponents of the art of presenting the union movement as an essential part of the market system. They are willing to demand compensation from employers for injuries suffered in the workplace (e.g. the James Hardie asbestos case) but will not insist that it was the workers who built the workplace and therefore ought to control it. Instead they have relished their role as advocates at the annual living wage hearings, taking great pride in achieving pay rises of $17 per week (year 2005) but ignoring the fact that the entire surplus value of industry belongs to workers.

They bolster the view that workers are just one part of a market economy and therefore have a ‘right’ to a ‘fair’ share of that economy. This was explicitly stated by Bob Hawke who, when president of the ACTU, famously declared that he had no quarrel with capitalism as such just so long as workers got their fair share of it.

The ALP leadership elevated naked self interest to the detriment of the philosophy that inspired Ben Chifley’s ‘light on the hill’. Examples of this abound. We select two below:

“At the end of the day, the neo-liberals believe, as Margaret Thatcher the Friedmanite said, there is no such thing as society. Neo-liberals are the emperor without any clothes if you strip back neo-liberalism to its core. Social democrats have a different view. I believe we are the genuine inheritors of the [Adam] Smithian tradition [of modern-day capitalism]. We accept price. We accept markets. We accept the legitimate pursuit of self-interest.” — rising Labor star, Kevin Rudd.30

“In my early years of political activity I made innumerable speeches condemning Capitalism for tending to enslave man as the servant of the profit making system rather than subordinating the system to serve him… Along the way of a busy thirty-six years in public office I became more and more interested in seeing that things worked more efficiently… I confess there was a fascination for economic growth, efficiency and thus all of us being better off.” — Former Labor leader, Bill Hayden.31

ALP leaders fell under the influence of advances in human production achieved by the capitalist joint stock company and forgot the exploitation of workers involved.

The ALP, together with the trade union leadership, moved down a path to economic rationalism. This can be simply demonstrated by reference to its program, in government, on banking and finance.

The Commonwealth Bank, founded by Andrew Fisher’s Labor government in 1911, provided banking services all through a vast and successful public sector organisation. In the late 1940s, the Chifley Labor government attempted to nationalise all banking and finance. This failed in the High Court with a constitutional decision in favour of private sector banking. The private sector mobilised all its forces including mass rallies of bank employees to support its High Court challenge.

In the ensuing thirty-four years, from the defeat of the Chifley Labor government by Menzies’s Liberals in 1949 until the Hawke/Keating period (1983-1996), the ALP was in power for only a brief period (1972-1975).

The Hawke-Keating Labor government privatised the Commonwealth Bank making it a public company in 1991. The Labor government issued shares first in 1991 and again in 1993. In the first months of 1996, the Coalition Government completed the process with an issue of a tranche of shares. It was the Hawke-Keating Labor government that deregulated banking and finance giving a free hand and high profits to the private sector. Labor floated the Australian dollar in 1983 with open access given to foreign monopoly capital.32 Chifley must have turned in his grave.

As Federal Treasurer and later as Prime Minister, Paul Keating championed this change program like a reformed drunk espousing the evils of alcohol. After losing the 1996 election, Keating took every opportunity to claim these banking and finance policies as the crowning success of the ALP government from 1983 to 1996. Since then Keating has hailed them as pillars of the economic program that ushered in the ‘prosperity’ claimed by his Liberal successors, Howard and Costello.

What Keating saw as success was the ALP’s capitulation to the power of capital and the economic rationalist agenda. The ALP’s turnaround left workers dependent on the whims of capital and left trade unions set up for a full frontal assault by capital to force wages down and to increase profits.

What drove Hawke and Keating to lead the ALP on the path to economic rationalism?

The brief rule of Whitlam Labor (1972-1975) was trumpeted by their opponents as a period of poor economic management.33 This characterisation was largely successful, forcing the ALP from office and traumatising the party sufficiently to cause it to alter its economic program towards economic rationalism.

At this time, unemployment was growing in the industrialised world. In Australia unemployment moved from less than 1.6% in early 1972 to more than 4.5 % in 1975.34 At the same time, inflation reached double digits.

The Australian establishment moved from indifference to shock in response to the election of a Labor government with a ‘radical’ agenda. The ambivalence at first of some was shattered when a wages ‘breakout’ occurred and the reality of an independent foreign policy was realised side by side with a wide ranging social program.

This led the establishment to conclude that the ALP might not be able to control the working class masses. In hindsight the threat was paltry but at the time it assumed massive proportions in the eyes of those who formerly held power. What followed the realisation that a different elite was in power was a fightback by the former elite. The most turbulent period in Australian parliamentary history, at least since the Second World War, resulted.

Inspired and prodded by establishment judges, captains of industry, and the Liberal party, the governor general used his reserve powers to sack the government. This broke political conventions. The ALP was at first enraged but later traumatised when it lost the second early election forced on it: Labor won the first in 1974 but lost the second in 1975. The majority of the public, including backward sections of the working class, responded to a fear campaign that the security and prosperity of the nation was at threat. The constitutional coup, as it was called, was successful.

Seeking legitimacy for the third time in four years, both Labor and Whitlam discovered it was third time unlucky. Tactically, the ALP response was poor. Led by Whitlam and Hawke (then ACTU president), they suppressed working class rage. The ALP leadership pulled back in fear of the working class taking political power. They refused to answer the breaking of political convention, by the establishment, with a similar response from the working class.35 The system itself was not to be challenged, not surprising when the background of the two ALP leaders is examined: Whitlam, a lawyer by profession, was a ‘silvertail’ by comparison to ALP members and even previous leaders; Hawke was a former Rhodes Scholar resulting in an education at Oxford University.

Hawke had begun the tradition of ACTU leaders without ‘shop floor’ experience in the labour movement. So there is little wonder Hawke did not call for a revolt of the rank and file when the Tories, ignoring the rules of the fight, had Labor on the canvas with the dismissal of the Whitlam government.

The ALP economic program that followed the constitutional coup became confined to mainstream economics.

It was inevitable the ALP, without an ideological alternative, would go along with the turn to neoclassical economics when it became mainstream theory in advanced capitalist countries.36 The trade union leadership, side by side with the ALP, went with the flow.

Under the weight of this new aggressive individualism, working class organisations and trade unions began to change. Membership began to decline in many countries, including Australia. In a confused and perhaps contradictory response, trade unions, the collective organisation of workers, also turned to individualism to try to survive. Union shopper became an important tool to retain membership. A poorly led, divided, and weak labour movement championed home ownership as a want not a right.37 Workers began to value cheap goods as more important than quality of life.

In government, the ALP actively promoted the rundown of public sector infrastructure. The need to sustain working class organisation was downplayed.

In this power vacuum in Australia a Coalition conservative government was elected in 1996. This government was returned in 1998, and 2001. It was re-elected for the third time with an aggressive agenda in 2004.

Among other ‘reforms’ the government set out to pare back welfare by forcing disabled people and single parents into the workforce. They were required to stand up and benefit as individuals rather than depend on the social wage. This clarified the next stage of the agenda to force all towards heightened individualism.

The ALP, having capitulated to economic rationalism in government, dutifully followed the same course in opposition. In Government, Labor had advocated mutual obligation for welfare recipients; the Coalition Government pursued similar policy aggressively. Labor introduced tertiary education fees in the form of a Higher Education Charge (HECS); the current Federal Coalition Government increases fees to full cost payment and abolished compulsory student unions. Labor introduced the enterprise bargaining model for workers; the Liberal/National Coalition legislates ‘free’ choice and virtually made individual agreements compulsory at the whim of the employer.

So while those dependent on the social wage had to show a lopsided mutual obligation now the workforce was subjected to lopsided contracts. Australian Workplace Agreements (AWA’s). Even the temporary collective of student unions was to be abandoned and student services to be provided by the private sector or lost.

Under this vision all citizens were to be elevated to individual contributors and consumers whose earning capacity is to be used to advance the capitalist firm and whose recreational pursuits will be limited to shopping for goods and services. To support rampant consumerism amid impoverishment, low-paid workers are needed 24 hours a day and seven days a week.

To create this Utopia workers must be forced to abandon collective bargaining, abandon standard wage fixation and standard work practices. Trade unions must accept their role as representatives of the individual in the free market.