ECONOMICS: by Bob BrowningNews Weekly
Victims of the "new economy"
, April 21, 2001
Bob Browning looks at the rising gap between the "doing-nicely thank-yous" and the "left behinds".
F or many people, Harvey Norman's warning was just another sign of the times - further evidence that the new economy is fast distancing the doing-nicely-thankyous from the left-behinds.
The price-cutting mass retailer warned that few if any household consumer durables would escape price rises. Even the minuscule proportion of goods still manufactured in Australia would become more expensive due to price rises for petrol and other imports, thanks to the tumbling Australian dollar.
A number of other retailers joined Harvey Norman in predicting harder times. More people will "defer consumption" as they try to manage the rising cost of accustomed living standards.
Many people's incomes are not only falling in real value but are increasingly insecure. Too many Australians are on casual and part-time wages. Even those with better-paid full-time jobs are anxious. They are increasingly conscious of how precarious the prevalence of business takeovers, downsizings, relocations overseas, bankruptcies and closures are making their jobs and income. Preparing for crisis management is becoming a routine part of planning for the future.
Some retailers however remain unfazed. Others are positively optimistic. The price of luxuries will also rise - Ferrari cars, for example, will rise upwards of $5000 or so. But as far as Ferrari car dealer Lance Dixon is concerned (The Age, April 4, 2001), it's a question of, so what?
A mere $5000 price rise does not worry those buying Ferraris. The cars cost from $340,000 to over half a million dollars each, but business is so good now for the Lance Dixon dealership that it has sold out for 12 months ahead. There are not enough Ferraris to meet unfilled orders.
Obviously those on the right side of the growing redistribution gap are doing nicely under policies euphemistically referred to as free trade and rational economics. Free and rational for whom?
Those seeking to understand what is happening to the Lucky Country can no longer treat American politics as a matter of academic interest.
The United States is the superpower epicentre of the globalising new economy. It leads the G7 group of wealthy nations which are globally propagating the ideology that, they purport, legitimates what they call rational economics and free trade.
Anglo-American neo-liberal ideology is a major factor in the current restructuring of the world, including Australia, economically and socially. Foreign interests have already grabbed nearly half of Australia's private financial corporations and almost a third of all stocks in public companies. US corporations are mainly responsible for snapping up Australian assets.
A fire sale of Australian assets has been raging for some time. Australian governments have not merely permitted the current fire sale of the country's assets, they are positively encouraging it. The Howard Government has rejected fewer than three per cent of the 21,423 foreign investment bids over the last five years.
Apart from taking over Australian companies, US corporations readily attack any Australian policies and practices they think impedes their operational freedom and profits. Note, for example, the recent attacks on Australian administrative bodies assessing pharmaceutical drugs and regulating the marketing of processed foods. Some corporations are pressuring the US government to put Australia on its Watchlist of potential trade offenders.
Moves are afoot in the United States to temper the political power of US corporations. Whether they will succeed and how effective they will be in curbing corporate power over US domestic and foreign policy, remain to be seen.
Republican Senator John McCain and Democrat Senator Russell Feingold have led an up-hill battle over the last six-years to ban the large, unrestricted political contributions known as soft money. For years, filibusters led by Republicans in the US Senate have killed off their efforts to get control legislation adopted. Political injections of soft money reached a record of nearly $500 million in the last election.
Even while the Senate was debating an overhaul of the nation's campaign-finance system, the Republican Party held a fund-raising dinner with Vice-President Dick Cheney as Guest-of-Honour. It raised nearly $7 million in little more than three hours.
Such political funding comes in the form of soft money. This is the sort of unregulated, unrestricted political contributions that comes predominantly from corporations seeking policy favours. This is what the McCain-Feingold reforms seek to ban.
If the reforms succeed in an effective form, then, in the words of The New York Times (March 29, 2001), the Republican dinner would be "one of the last soft-money extravaganzas - events that have come to dominate fund-raising for the two political parties since they began collecting soft money in earnest in the late 1980s".
Funding of political parties, lobbies and policy think-tanks enables the big corporations to influence disproportionately the political process in key areas of policy. George W. Bush, however, seems less concerned to curb corporate power than to cut company taxes. He also wants to give the lion's share of a $US1.6 trillion tax cut (A$3,200,000,000,000) to the American rich. Economist Paul Krugman comments (New York Times, April 4, 2001) that "more than half of the benefits of the tax cut will go to the wealthiest one per cent. Or to put it in raw numbers: We're talking about a tax cut that would be worth nothing to the poorest quarter of families, which contain one-third of the nation's children; that would give an average of $616 per year to families with incomes between $30,000 and $40,000 but would probably give more than $60,000 to families in the top one percent, whose average income is more than $1 million."
Bush also proposes to repeal estate tax, a move that will make it easier for the rich to utilise various tax schemes to avoid income taxes.
None of this encourages those around the world who are on the wrong side of the new wealth divide. President Bush claims that he is leaving the door open to signing any campaign finance bill that "improves the system". But he has been neatly sidestepping the question of whether he will support a bill banning soft money that would help reduce the disproportionate influence of the big corporations on US policy.
Even if the move against soft money succeeds, the corporations are unlikely to be too worried. They know there are many ways to skin cats.