by News WeeklyNews Weekly
Part B: A history of economic rationalism in Australia
, January 13, 2001
The process of deregulating the Australian economy began in 1983. Australia was copying the blueprint laid down by Margaret Thatcher in the UK and Ronald Reagan in America.
The process began under the Hawke-Keating governments, starting with deregulation of the financial system. Subsequent Coalition governments have continued the process. Economic rationalism has a number of elements.Financial Deregulation
It was promised that the deregulation of the financial system would lead to lower interest rates and charges to consumers, and would allow in foreign capital investment to boost economic growth and our standard of living. Neither happened.
The deregulated banks have become investment houses, more interested in lending to and managing the funds of the top end of town. They have slashed their staff and services to the small customer and applied a whole range of fees and charges. The effective interest rate (when fees and charges are included) on loans to family farmers and small businesses is between 9.5% and 13%.
The deregulated financial system has not boosted manufacturing and agriculture. It has been used for speculation and to buy imported goods as manufacturing industry has contracted. Today we import over $57 billion worth of manufactured goods more than we export.
The result is a $294 billion net foreign debt as of September 2000. This debt has seen a loss of confidence by the international financial markets in Australia and caused the Australian dollar to sink to record lows. In 2000, this was as confirmed by reports of leading financial institutions like the Hong Kong and Shanghai Banking Corporation (HSBC); the US financial giant Solomon Smith Barney/Citibank; USB Warburg (AFR, October 26, 2000).
Should there be a further loss of confidence in our ability to repay this debt, Australia could face a mass flight of foreign capital, precipitating the sort of acute economic crisis that crippled Thailand, Malaysia, South Korea and Indonesia in 1997-98.
Just as a bank effectively owns the home of a householder who can't repay the mortgage, it is the foreign financial markets and the International Monetary Fund which will ultimately set our economic policies if we cannot service the foreign debt. In effect, they can tell us to sell off our banks, to double our taxes and halve our welfare to repay debt.
Hence, the rising foreign debt threatens, not only our standard of living, but Australia's economic sovereignty.National Competition Policy
National Competition Policy has been responsible for the wholesale privatisation of public utilities like electricity, gas, airports, railways, telecommunications, government banks, government insurance offices and orderly marketing boards for eggs, sugar and dairying. Many other government bodies have been corporatised or required to operate on a pay-for-service basis.
Certainly some enterprises do not need to be government-owned or regulated, but many do, for the common good of either those in the industry, or the society as a whole.
• The privatisation of Telstra has seen the erosion of services to rural and regional areas, and the axing of staff to the point where the company's long term competitiveness is threatened - all in the name of maximising short-term profits.
• Privatised electricity companies have cut staff and maintenance and run down their infrastructures. In New Zealand this led to a major power breakdown that blacked out Auckland for weeks.
• Deregulated agricultural industries have seen farmers forced to compete by boosting production allowing powerful supermarket chains to slash the price to farmers. Concern for farmers has reached the point where even the head of Woolworths, Roger Corbertt, now says that agriculture is in crisis (Stock and Land, December 14, 2000).Free Trade
Free trade policies have seen the slashing of tariffs, the emasculation of anti-dumping laws, the loss of government preferential contracting to Australian industries and the weakening of Australia's quarantine regulations.
Many manufacturing companies have moved offshore, been bought by foreign-based multinationals, or simply closed down. It is one thing to remove protection to and assistance for extremely inefficient industries; it is quite another to refuse to have an industry policy to encourage new, competitive replacement industries to provide jobs and incomes to workers and families. Such is the blind faith that economic rationalists have in the free market.Labor Market Deregulation
Labor market deregulation is a euphemism for breaking the power of unions so as to shift workers onto work place contracts, cut wages and conditions and shift increasing numbers of workers into casual and part-time work.
The argument is that economies do better and workers, while suffering displacement and possibly lower wages in the short-term, end up better off in the long-run.
This policy line received a strong push worldwide when the Organisation for Economic Cooperation and Development (OECD) published its Jobs Study report in 1994. However, in 1999 the OECD's leadership was embarassed when the organisation's labor deparment issued a report that found:
• many countries with regulated labor markets had lower unemployment rates, more stable jobs and less labor turnover than those countries with deregulated markets;
• that innovative and flexible working practices, considered necessary in the age of rapid technological change, are more likely to be introduced by those companies that work closely with trade unions.
>From the trade union leadership there have been only muffled protests. Many have become resigned to the effect of globalism - of their union members being forced by Labor and Liberal government deregulation to compete with low-wage countries.
Union leaders have failed to get even a Labor government to implement effective industry, banking, taxation and trade policies, to build new industries and to help exporters gain a competitive advantage against their foreign rivals.
Ironically, the Labor Party, the self-styled representative of the workers, at its year 2000 National Conference voted for "free trade" not "fair trade".
Economic rationalist policies are now profoundly affecting Australian businesses, workers and the fabric of Australian society.Contents of this Special Issue