June 13th 1998

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Articles from this issue:

Free markets: the ups, the downs

The threat to sovereignty

Living in a globalised world

The new economic freedom

Globalisation: the downside

ASIA: What Happened?

Taking control of our destiny

Policy 2: Using the Reserve Bank to boost capital investment

Policy 3: Boosting national savings

Policy 4: Justice for families

New Struggle, New Agenda, New Strategy

EDITORIAL: An idea whose time has come


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The threat to sovereignty

by Patrick Byrne and Brendan Rodway

News Weekly, June 13, 1998
“For Keynes, the most important element in his critique of economic orthodoxy [was] its willingness to accept high levels of unemployment as beyond the control of governments ...

“What is clear is that any country taking Keynes’ advice and using up the margin in more satisfying ways than paying a lot of people to be unemployed would have to introduce tight controls on capital movements and on imports that would bring it into immediate conflict with all the world’s major international economic institutions. Not only socialism in one country but even full employment in one country is now out of reach.”

— Brian Barry, “The Feasibility and Desirability of Global Free Trade”

The ability of Australians to determine their own affairs through the parliament is once again under threat. This time the danger comes not from a military aggressor, but from an ideology which argues that the world is one single economic unit and, just as the wind moves unhindered across national frontiers, so too should capital. In the economic textbooks “globalisation” seems to make sense, but in practice it ignores the political role of the nation-state as well as the ties of loyalty and identity which are — in most nations — very deeply-held.

This clash between those forces which aim to make the world one large, borderless market, and governments (whose authority is circumscribed by these same frontiers) is the central political issue of our time.

In this new world, governments are being impeded from fulfilling their responsibilities to their electorates of facilitating adequate economic growth, full employment, a just distribution of income and wealth and stable exchange rates. Meanwhile, profit maximisation sees multinational firms either moving their production around the world to the lowest cost nations, usually developing nations, or using the threat to do so to secure advantageous arrangements with governments and workforces.

For nations like Australia, this means that the middle class must accept large scale downsizing and lower wages as they are forced into competition with low wage workers in the developing nations. “Efficiency” has become the animating spirit for this revolution and it is invoked to excuse a multitude of ills. The productive sectors of the economy — manufacturing, agriculture and mining — are the most vulnerable as Australia transforms itself into a land of services, where the growth in the workforce is weighted heavily to part-time work.

The idea of finding new export industries to provide employment sounds logical but, as a leading exporting nation like Germany has discovered, it is the export sector which is most under pressure to cut costs and margins (and, hence, jobs).

Moreover, government tax revenue is decreasing as companies minimise their liabilities through transfer pricing and the repatriation of profits to low-tax destinations — the burden inevitably falls more heavily on ordinary workers and their families who have no access to such schemes. Sixty per cent of multinationals operating in Australia pay no tax and the remainder hardly pay any. Yet the Federal Government is congratulating itself for delivering a budget surplus without attributing it to bracket creep and asset sales.

Treaties and conventions have been initiated to streamline these processes. They are intended to remove a government’s ability to legislate to regulate foreign investment, control capital flows and favour local over international firms.

The capstone was to be the Multilateral Agreement on Investment (MAI) — the brainchild of the Organisation for Economic Cooperation and Development (OECD). It would have greatly accelerated the process of globalisation. Fortunately, after a concerted campaign by mainly small players, it seems to be floundering.

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