Dependence on private corporations to fix inequality and climate change will be a dead end

Global economy faces $19tn corporate debt timebomb, warns IMF

Here we have the IMF warning the capitalist class, and the governments that protect it, that they have a problem. Interest on corporate debt that cannot be repaid.

It’s yet another problem of their own making.

The IMF is a capitalist institution and is one of the chief governors of the 21st century system of gross exploitation so that it stays in place. It is one of the 3-4 global coordinators of the neoliberal form of capitalism that we have had since the mid 80’s. It is sending the warning in order to keep this system of exploitation (of the mass of humanity and their natural world) together.

In Australia there is no public discussion about how serious this corporate debt problem is in our economy. However, we do know that total profits are very healthy and, despite that, corporations have been failing miserably to invest those profits in productive capacity.

In this context, The drift to a global recession continues and Australia will be a part of that.

The trouble with the growing corporate debt problem is that it will make the recessión currently taking shape a very serious big problem for 90% of humanity, and also nature.

We are talking more unemployment and underemployment, idle productive ability, even more downward pressure on both industrial wages and the social wage (for example, adequate housing), and intense search to exploit new land and rivers and oceans.

All of this coincides with the worsening climate emergency and, in Australia, a national government that is in wilful denial of it because that suits the fossil fuel corporations, and others in their supply chain.

The movements of the 90% against inequality – eg unions – and against global warming must keep growing and grow even tougher to make sure there is a rapid and democratic just transition driven along by big public investment (job creating) and where necessary takeovers of private corporations that hold productive capacity but are otherwise falling apart.

Global economy faces $19tn corporate debt timebomb, warns IMF

Just transition and green new deals – “Plan B AAA-Rated”: workers taking charge

The Australian school students strike on September 20 put forward 3 general demands for climate justice, that they have repeated since:

“But words aren’t enough to stop the devastating impact of climate change. Which is why we need movements. To keep on pushing for real action on our demands:

  1. No new coal, oil or gas projects, including Adani’s mine.
  2. 100% renewable energy and exports by 2030
  3. Funding for a just transition and job creation for fossil workers and communities.”

Since then this is the best response I have seen from Australian union leaders, which included this:

“Australian Manufacturing Workers’ Union state secretary Steve Murphy said meal rooms across regional Australia were filled with workers worried about their jobs and futures due to inaction on climate change.

“They are sick and tired of it being workers versus the environmental movement, or workers versus change,” he said. “We have a real opportunity for workers to be at the forefront of this change, and if there is going to be renewable jobs, for these jobs to be made here.

“We’re talking to our people in power stations, and they’re saying ‘we’re not loyal to coal, we’re not rusted on, but we just don’t see another job we can move to.

“I don’t think our members are particularly loyal to what their current job is, but what they don’t see is a plan for what their future job is.

“If we have a plan for the future then we can create a plan B for these workers who might be displaced. The truth is that renewable energy is coming at us and it’s not something we can stick our head in the sand and deny.”

The objective need for rapid transition is well established in the ongoing scientific research on climate change.

It is time, and we are entering a new phase now, for workers, their unions and their communities to take command of the situation. That’s Plan B … triple A rated.

Rapid Transition

Rapid transition (and the effects of a recession) could have a dramatic impact on job security for workers directly involved in raw resource extraction and the downstream industries and occupations that flow from it. These are workers in coal mining, and oil and gas, and in jobs dependent on these industries. That’s the Illawarra story but there are others also, for example workers in universities dependent on mining industry subsidies, gifts and donations.

The concept of “just transition” has been developing as a concept by groups within the union movement. For example there is the International Confederation of Trade Unions (ITUC, see here starting at page 22 and here), Trade Unions for Energy Democracy, for Australia look at the NUW, AMWU, NTEU.

More unions have endorsed “just transition” and, associated with that, strike and other workers’ action in solidarity with secondary students.

Loosely associated with “just transition”, a “Green New Deal” has been developed in the USA by political and social forces associated with the rising socialist left in the Democrats, expressed by personalities like Bernie Sanders and Alexandra Ocasio Cortez. In Germany and Spain at least, strong initiatives are under way to shut down fossil fuel industries with union support.

Thus, it is useful to think through, from a working-class point of view, what all of this means, especially how much workers from within their present jobs can themselves effectively shape the content and pace of strategy to stop and reverse climate change.

The recent Australian national election brought the issue into sharp focus, when coal mining dependent electorates vigorously rejected a “green caravan” of southern state activists that tried to win them to vote so that the giant new Adani coal mine in their region would be prevented. They then voted against the modest, vague and confusing proposals from the ALP to start slowing down Australia’s contribution to climate warming.

Just Transition in Brief: 2 core ideas for workers and their unions

The first is that climate change is real and is happening at a rate that makes it an emergency from the perspective of the 90%, including those in mining and energy producing communities.

The second is that carbon based energy production must be replaced by some mix of solar, wind, tidal, thermal and hydro power. In the transition there will be immediate new jobs that require the skills workers already have, new ones that quality training in the new skills, in a healthy and safe working environment, and without loss of income.

Four Options for Australian Workers

  • Reject the science and go with the fossil fuel corporations striving to survive and even grow.
  • Accept the science and trust that an LNP government, stacked with denialists, that prides itself on opposing “green tape”, and relevantly also red tape, can ally with corporations and conservative think tanks to fix the problem.
  • Observe the proposals and plans that come from governments, employers, union centres, political parties, experts in the field, and social organisations and go with what makes the most sense. That is, endorse “just transition” plans that make a bit of sense, at least, especially if they are enabling a rapid transition into new jobs in which they can use existing skills and knowledge and quickly learn new ones.

In the main, this third approach is developed by others for or on behalf of workers in their industries and communities. At the best the proposals are brought to the workers for endorsement in some way or another.

For anyone who wants urgent action to deal with the emergency this is the minimum that is needed.

However, this approach is problematic. It is based on the idea that progressive technocratic know how is enough to bring on the fundamental changes that are necessary. Just Transition is something that is done to workers rather than by them. The fundamental assumption, explicit or otherwise, is that workers are not capable of driving just transition. “Just” does not include much democracy.

There is a fourth option. Its plan B, a la Steve Murphy (above), but triple rated.

“Just transition” is driven by workers themselves, both from within their workplaces and from within their communities. The role of “experts” of various kinds is to enable, advise, guide, support. The decisions, and implementation, are in the hands of democratically formed worker and associated “community organisations”. This option says that workers at work and in their communities have immediate skills and knowledge to drive the transition process and also, most importantly, the capacity to rapidly acquire new ones. Unions, even with low union density, are in good shape to start these worker and local councils.

This fourth option can be developed in 2 ways. First to enable worker intervention into transition initiatives that are already under way because of government or investor action, whether they be imperfect or good. Second, where nothing currently exists but is needed, to establish momentum for worker-controlled transition.

Worker controlled transition – essential ingredients

Some of the essential ingredients of this fourth option can be identified.

Before doing so, let’s look briefly at the role of government and employers  in this fourth option.

At each level, government’s role is as funder, enabler and supporter for workers at their workplaces, and in their communities. Its task is to open up new democratic possibilities relative to the limits of “technocratic transition”, “just” or otherwise. Of course, government funding and new public investment will be essential. (Look here for recent Canadian discussion about this.)

For employers, the primary interacting concerns, whether we like it or not, will be profitability and control. At the moment Australian employers are not committed to new productive investment. They will resist transition which workers and community groups are governing. They will see any link to unions as a barrier. They might push their own form of worker participation in processes they control for their profitability needs. This will threaten Just Transition because it threatens job security and skills formation.

Essential ingredients of democratic Just Transition

Democratic Just Transition (DJT), plan B AAA, raises workers at their work and in their communities as the protagonists in this socio-political process. “Workers and their communities” have a clearly defined geography, either as a region, or an employer, or a network of employers.

DJT places the technocratic, outside experts as assistants, educators and enablers at the service of the protagonists.

Workers in their community design and implement the plan for transition from fossil to renewable, and other related projects. The worker-community protagonists are encouraged and enabled to rapidly and democratically develop a spiral (not cyclical) planning process. See here for an example.

The plan has a defined goal that is determined by reality: zero dependence on fossil fuel over ten years replaced by renewal energy that provides secure, skilled and well-paid jobs.

The plan sets out associated specific objectives that are set by the protagonists against the primary criteria: rapid transition, continuous job security, new skills formation, including vocational training, strong health and safety, at established standards of living.

The associated objectives are the specific demands and their elaboration constitute the content of transition for each protagonist entity, and the content of negotiation and other action with employers and governments.

If there is limited or no momentum from community, a technical support team can stimulate the process with foundation education about democratic transition: community training days, door to door discussions, kitchen table – lounge room, and street meetings. This phase of the plan aims for deliberate handover to the workers in their industry / community.

Steps in the Process

Step one in the transition sequence is to study in detail the existing reality within the location (region), including a hierarchy of industries and businesses, and the interaction of the location with others, including overseas.

Step 2 is to develop a first draft of the specific objectives relevant to this workplace(s) or community and the associated thinking and decision-making structures. It would bring forward the “first look” of possible options for the course of action to achieve the objectives. This would include budget requirements, possible sources of funds, growing community participation in preliminary planning and action units. All is driven by mass meetings of the communities (that may start as quite small), and election of the governing democratic transition council.

This council would be the guiding entity between the mass assemblies. Its members would increasingly reflect the composition of the industries, associated and dependent groups (e.g. indigenous peoples and school students). It would initiate reports from the planning and implementation groups, including experts, and set tasks and, receive, consider and decide on technical assistance.

Step 3 presents the options to all or most of the constituents to determine which options will be implemented, and the order of priority and urgency for each project.

Then, each plan is implemented and reviewed. There is a continuous spiral of review, plan development, project selection, and project implementation and evaluation.

Immediate dilemmas

In the Australian context this framework would meet serious problems, but not insurmountable. Very low union density is one. The embryonic decision-making structure associated with high union density is not necessarily available. This is an objective reality and begs serious questions for unions that would want to lead the process, for example their stance regarding workers who have not joined being in the process. Would joining a union be conditional? For unions (defined as union members interacting with their union centres) who are willing to lead there is little organising know how for this type of strategy about job security. Leading unions could attract members and solidarity.

Another dilemma is workers’ own doubts that they can create and drive such a process; that they themselves are not capable of creating a new industry, of being the protagonists; that the whole process should be left to employers and their governments.

The irony is that most workers, justifiably, have little trust in employers, their managers, and governments, and know, when they discuss it with each other, they have unique and shared insights about how they could do it better.

All of us in the union movement and active in the struggle for climate justice can help transform this justified distrust from votes for right wing populists into new momentum for Steve Murphy’s Plan B.

Australian bosses and “their” profits: capital strikes are good

Introduction and acknowledgement

In this article I take a close look at what’s been happening in Australia with profits and investment. I have done this out of some frustration with the way in which the economy in general and specific parts of it are reported without any meaningful connection to bosses and their profits. I stress that I am an amateur economist, that is with no formal training. I thank Jim Stanford (Centre for Future Work) for his helpful comments on an earlier draft of this article. Of course, this version is my responsibility alone. It is a work in progress and I welcome comment and criticism.

In brief, why are profits and investment important?

In a nutshell this story is about the Australian private sector going on strike. Rather than being the dynamos of the Australian economy they are its laggards; even having been gifted workplace and industrial relations laws that are heavily stacked in their favour.

Successive Liberal – National Party governments, using their “good economic management” perspective, have (until recently) let this strike of capital go merrily along. In their DNA , employer control of the investment decision is the natural order of things.

There are two big reasons why profits and investment are important. First, the private sector’s failure or refusal to invest usually means a recession is not far away. Recessions are really bad for working people (the 90%), those with jobs and those trying to get one. It usually means more people out of work, and those in work agreeing to fewer working hours and associated pay cuts. Workers’ bargaining power declines at the enterprise, industrial and social level, and with that weaker wages, conditions and safety.

Second, against the trend, massive investment is necessary – and still possible – to ensure that global warming is reduced, stopped and reversed, and that must happen in the next ten years.

Union members and environment activists must come together to jointly understand why investment, including from the private sector, is very much their business, and that both should not trust the private sector to deliver. 

Remember as we go that the Labor government under Rudd started in late 2007, the global economic crisis started around mid to late 2008, and the LNP’s self styled “good economic management” started in late 2013.

I use data from the Australian Bureau of Statistics to tell the story.

What’s been happening with profits?

Let’s start with total profits, focusing on the economy in general.

The first chart comes from the Australian National Accounts (ANA’s) that are released quarterly. There are other data sets for profits, but these are commonly used.

Profits: non-financial corporations

A quick detour: profits and wages … the rate of exploitation

Before digging more into the profits and investment story, let’s check the profits – wages relationship. Here we look at the profits made relative to the wages paid to the workers who have produced them. This is called the rate of exploitation and across the whole economy here it is.

We can see generally high rates of exploitation but driven upwards vigorously since the LNP government of 2013.

Rate of exploitation – recent

Why “generally high rates of exploitation”? Because here is what has been happening since 1973.

Rate of exploitation – long term

On this occasion I leave aside further discussion about how to understand exploitation. However, check previous posts, here for example.

Profits are extra healthy, what about productive investment that should come from those profits?

First, new business investment in general. Again, there are other data sets, but I stick with the commonly used one.

New business investment

Total investment includes several different types. 3 types of investment, in particular, are commonly accepted as critical for the productive capacity of the Australian economy. These are non-dwelling construction including new engineering, new equipment and machinery, and research and development.

So, let’s take a closer a look at the critical new investment in productive capacity, first in non-dwelling and engineering construction and engineering, and new machinery and equipment.

New private business investment – productive types

The very flat new investment in machinery and equipment is a serious problem: it shows a weak commitment to modernisation.

When we turn to new business investment in research and development, we see another sorry tale.

New private business investment – research and development

However, these totals don’t tell us anything about the rate of investment.

The rate of investment: growth, profits and investment

To start we look at new business investment as a proportion of GDP (i.e. all new value produced in the economy. Again, there other data sets but these tell a very similar story.) Comparing new business investment against the total new value (GDP) in the economy is the common method used by mainstream economists. The picture tells the story.

Rate of business investment : GDP

Digging into the same critical types of productive investment we see a very poor situation.

Rate of productive business investment : GDP
Rate of productive business investment : GDP – research and development

However, this approach does not tell us about productive investment relative to the profits that have been earned. Private sector productive (and other) investment comes from the profits part of GDP.

Productive investment and profits

I have not been able to find any ABS data that directly helps us with that. Therefore, I have taken data from one ABS data set and joined it to another. (GOS means gross operating surplus, i.e. gross profits.)

Rate of private business investment profits – recent

In particular, we have serious falls in productive investment during the years of recovery since the last economic downturn. Thus we see Australian capital on strike.

And, this has been happening over the longer term.

Rate of private business investment – long term

The situation is even more serious when we look at those key types of investment that are all about a modern, broad based economy.

Rate of private productive business investment types : profit

So, the years of profits increases coincides with a steady fall in the rate of new productive investment. Employers are not investing productively, anywhere near to the level required for a healthy economy.

And this coincides with the LNP’s so-called “good economic management”

“What have they been investing in, instead?” and “Why?”

These are two of the big questions that arise from this description of what has been going on.

It is certainly true that the failure to invest coincides very much with the LNP governments we have had since 2013.

LNP governments have knowingly supervised this situation because they fully believe that bosses should be allowed to spend their expropriated profits as they decide. Similarly, Labor governments have accepted that they should not interfere with this employer “right”.

Neither governments nor unions nor environmentalists should be allowed to interfere with employer’s control of investment. It is core LNP business to protect that.

However, quite recently, the Treasurer has woken up that this is a problem.

He worked out that employers were not spending the profits productively but in share buybacks and other forms of gambling in the local and global money markets, that is in “finance”, not in production. And, oh so softly, he criticised them for it.

Not surprisingly, he made his corporate supporters quite angry.

On behalf of Australian capitalists, Mike Kane (CEO of Boral), replied:

“I don’t wait to be told by politicians as to what we’re supposed to do,” he said. “What we’re doing is what’s in the best interests of Boral and its shareholders in the long run.”

Kane is also a leading figure driving the government to attack workers and union rights, especially construction workers and their unions, and is the recipient of big bonuses on top of his CEO base salary.

Summing Up

The question still remains. Why has employer productive investment been so weak when profits have been growing in the years of “recovery” since the global financial crisis of 2008-10, especially when, relatively speaking, the Rudd Labor government acted quickly and somewhat effectively to prevent its worst effects.

In a conceptual sense the answer seems clear: corporations will only invest productively if productive enterprises deliver more profits relative to that investment and the cost of workers needed to make it happen.

The “why” is another part of the story of profits and investment, the dynamic of economic and ecological crisis, and, continued downward pressure on wages and conditions.

It’s actually a big deal if you are fighting inequality and global warming, or both.

We can see that there is no shortage of money available to create skilled and safe jobs in the urgently needed renewable energy systems and associated technologies and industries to control and reverse global warming. Much of its is being gambled and frittered for private gain. The private sector as a whole, and those in government and institutions like the Reserve Bank and the Productivity Commission who support them, simply cannot be trusted to invest for the social and ecological good.

How should society as a whole gain control of that socially produced wealth for reproduction and improvement of life as we know it?