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Monday, March 2, 2015

Will Labor Stand Up against Small Government and Austerity? And Reflections on Greece, Anti-Semitism and more

above:  Shadow Assistant Treasurer Andrew Leigh has been unfortunately equivocal on the issue of tax reform needed to ward off austerity under a future Shorten Labor Government.
In the following reflections the blog publisher, Tristan Ewins considers the dilemma faced by Labor on tax reform; as well as the Greek economic crisis, rising anti-Semitism and other issues.  He also calls for readers to register their support for a genuinely progressive Labor Platform at this year's National Conference.  Without such a Platform Labor will lack the flexibility on fiscal reform it needs in order to hold off against austerity - and instead improve the social wage and welfare
by Tristan Ewins

Reflecting on this week’s QandA episode raises crucial questions as to whether or not Labor will seriously resist pressures towards austerity and small government amidst a manufactured ‘debt crisis’.  Tony Jones repeatedly pressured Assistant Shadow Treasurer Andrew Leigh to respond on that very question.  And sadly Leigh was largely evasive in response. (probably under pressure from his Shadow Cabinet colleagues)  Statements regarding a crackdown on corporate tax evasion were somewhat encouraging, yes.  But Sydney Morning Herald columnist Michael West is correct to proclaim approximately $2 billion of savings over three years as ‘pocket fluff’.   That tax policy is not going to ‘turn the tide’ on small government, punitive welfare and austerity.  In the context of an economy valued at approximately $1.6 Trillion the effect will be relatively marginal if there is not additional progressive tax reform elsewhere.  Empty rhetoric and tokenistic policies will make little difference for those who need our help.  I believe Leigh is better than this - and am hoping for a less equivocal stand into the future.

Of course Liberal proclamations to the effect that it is ‘cleaning up Labor’s mess’ also need to be met with healthy scepticism.  Current fiscal strains can be traced to repeated tax cuts and ‘middle class welfare’ during the Howard/Costello years.   Rather than capitalising on the China mining boom, investing the proceeds for the future, Costello and Howard implemented a series of tax breaks – largely for the relatively well off – resulting in today’s structural deficit.   Because from the outset it was clear the boom would not last forever, the short-term focus adopted by Howard and Costello condemned Australia to its current fiscal crisis.   (nb: the fiscal crisis is not the same as the ‘manufactured public debt crisis’; debt is serviceable; but there is a need to reform tax to maintain the social wage, welfare, public infrastructure) The situation was further worsened as a consequence of Liberal opportunism over the Mining Super Profits Tax -  which saw a responsible policy destroyed – further locking Australia into a fiscally unsustainable footing.

Labor’s next National Conference will take place mid-year 2015; and it is critical for Labor to reflect on what it stands for; and how it can defend services and social welfare against the Ideological Liberal drive towards austerity.  There is also a need to address an infrastructure crisis – with fiscal pressures locking the country into polices of infrastructure privatisation which pass on inefficient cost structures onto the broader economy. (the consequence of profit margins and inferior costs to finance via the private sector)   

What is most important is for Labor’s 2015 National Conference to endorse a Platform which keeps Labor’s options open!  Locking into a small government, low tax policy will provide Labor with no room to move in response to fiscal pressures; and consequently pressures towards brutal austerity. Without a reformed Platform this year, Labor will lack the mandate to pursue the necessary change after the next Federal election. At the blogs ‘Left Focus’ and “ALP Socialist Left Forum’ last year we initiated a campaign in favour of progressive tax reform, reform of superannuation concessions and more; including an expansion of progressive taxation in a first Labor term by about $40 billion.  (or by 2.5 per cent of GDP in the context of a $1.6 trillion economy)  

Such a policy would see Australia only ‘edging towards’ average OECD levels of government social expenditure – and should not be viewed as being ‘too radical’.   But failure to embrace a reform footing would inevitably mean sustained austerity even under a Labor government.   And a lack of meaningful opposition to the fiscal policies that underscore Liberal austerity would only strengthen the Conservatives’ hand, with policy convergence on austerity, punitive welfare and the like. 

Finally – the fiscal reform we have suggested here would provide scope for other progressive policies.  This could include (but not be limited to)

·         a National Aged Care Insurance Scheme,

·         comprehensive Medicare Dental

·         alleviating poverty for the welfare dependent and for low-wage workers

·         properly implementing Gonski and the National Disability Insurance Scheme without resorting to punitive policies against other vulnerable groups

·         developing a policy with the aim of ‘closing the gap’ on life expectancy for those with mental illness

But without progressive fiscal reform  Labor could only provide the same drift towards austerity; even albeit more reluctantly.  Certainly Labor could not pose as the party of social progress; and would stand to cede further electoral ground to the Greens; while also damaging its attempts to renew and inspire its membership base.

Other issues also arose from the most recent QandA.  For instance the argument was forwarded that childcare subsidies only worsened cost pressures as private providers pocketed the money without passing on the savings.   The obvious response is that greater emphasis on public and not-for-profit childcare would help do away with those pressures. 

Similarly, it was no surprise that while the question of housing affordability was raised – and even the question of negative gearing – there was no consideration of the potential role of a big investment in public housing to promote urban consolidation (helping to address social problems like increasing transit times to work that damage families and communities); and also increase housing supply and drive down prices.

Greek Depression and the Eurozone

All these questions around austerity are also relevant for Europe, and especially for Greece. Unfortunately Germany had tried to tie an EU financial bailout package to austerity and privatisation – to the point of severely impairing the ability of Greece to repay its debts sustainably.  The Social Democrats in Coalition with the Christian Democrats in Germany need to question this; and promote a new policy. With Greek unemployment at over 25 per cent, the consequence is economic Depression, loss of tax revenues, and unnecessary and extraordinary human suffering.  For Greece and other similarly affected economies (eg: Spain), the answer is one of sustainable economic restructuring, and sustainable repayment of debts on the basis of full employment.  The wealthy must also be made to shoulder a fair part of the burden.  This must mean active industry policies around creating new export industries – that improve these nations’ balance of trade.  Hence employment could be kept high, and the improved balance of trade could aid in the repayment of debts without a downwards deflationary and recessionary spiral; or forced privatisations and the like.   By comparison austerity is a ‘double whammy’: hurting the Greek and Spanish people while also destroying their ability to repay debts.

Importantly there remain broader questions of disproportionalities in capitalist economies: the consequence of competitive pressures which drive constant renewal of the means of production.  The Euro-zone economic crisis also provides an opportunity to question neo-liberal Ideology; and indeed to question capitalism as we know it.

Anti-Semitism Resurgent

Finally, this week’s QandA also saw a question in reference to growing anti-Semitism not only in Europe but also in Australia.  Anti-Semites appear to have been emboldened by the military policies of the State of Israel in its conflicts with Hamas particularly.  In Europe Jews increasingly feel unsafe – and are targeted violently ‘simply for being Jews’.  But this turnaround has not resulted in the same degree of public consternation on the Left as has  Islamophobia.   And indeed while there is a great deal of damaging ignorance and fear with regard Islam in Australia, the Left nonetheless needs to be careful and vigilant with regard this emboldening of anti-Semitism.  A new generation is being desensitised to the past sufferings and persecution of the Jewish people; and hence some may be open to historical revisionism on the Holocaust into the future.

The targeting of Orthodox Jewish communities appears to be especially fruitful for the anti-Semites – because significant numbers have always been fearful of what is clearly at variance with the ‘mainstream’ and is ‘different’.   On the Left there are periodic qualifications to the effect that while we condemn the military and other repressive policies of the State of Israel, we do not accept hate crimes and violent attacks against Jews.  But we need to be much more consistent and forthright.  We need to confront where the current tenor of debate on the State of Israel and its policies is leading.  For genuine Leftists certainly it is not in any way our intention to legitimise anti-Semitism.  But we have a responsibility to confront the emerging Anti-Semitic trends just as forthrightly and consistently as we confront bigotry against Islamic communities.  And just as consistently as we criticise human rights abuses by the State of Israel under its current right-wing leadership.

Closing Appeal:

Our Campaign in favour of progressive reform of Labor’s platform is approaching the goal of 500 supporters on Facebook.  See HERE for our ‘model Platform’.  And See HERE to register your support. 

To help us ‘get over the line’ and maybe even go further depends on your support!  Please ‘Like’ our page at Facebook; and let all your friends and networks know about our campaign.  It is crucial to achieve a Labor Platform this year which at the very least keeps our options open on tax reform, progressive welfare reform, and extensions of the social wage.

nb:  independent socialist blogger John Passant has also written a piece on the insufficient nature of Shorten's proposed tax changes.   Readers may be interested in taking a look:

"Labor's tax avoidance crack down statement was the old pea and thimble trick. It wants to give the impression of doing something about big business tax avoidance (always a popular issue among ordinary workers) without really frightening the big business horses"


  1. Nothing wrong with smaller government, provided the reduction is in the Ministers & Top & Middle Departments (the shiny bums)

    Frontline services, the part we require from our Public service need to be of a size appropriate to population.

    Austerity - well depends on how you see the governing system - Revenue must always be as close to expenditure as possible with only small periods of deficit.

    Want to understand where to short falls are - Coles & Woolworths gross about $56 & $57 Billion respectively.

    Added together the is $113 billion - now if they paid the full 28% tax like the local baker or butcher, then just from these 2 we would se revenue of $31.6 billion.

    Considering from Business & Corporate tax we only receive $85 billion and there are at least 200 Corporations grossing over $50 million & I know of 30 over $1 billion, then we know how to fix Austerity.

    Anti-Semitism - media beat up. Just because people are against a GOVERNMENTS actions, doesn't make you Anti-Semite. It makes you a responsible & considerate human being.

  2. Thanks Jason. :) When I talk about 'small government' I'm referring to the nglect of what you call the 'frontline services'. Health, education, aged care - and hopefully infrastructure such transport and communications; 'natural public monopolies' and strategic government business enterprises etc. There are solid reasons for all of these - from countering oligopolistic collusion to eliminating wasteful duplication of cost structures. We have very 'small' government compared with the OECD average - and that actually passes on inefficiencies which hurt people - which hurt our economy.

    re: deficits - well it depends on whether the debt is serviceable over the long term. Also - we'd be hard pressed to pay for the entire National Broadband Network upfront.... Hence it makes sake to pay it off over, say, a couple of decades. And what's more the NBN would also pass on productivity benefits to the entire economy - and probably contribute to whole new areas of economic activity. But its true the expansion of debt cannot go on forever - else it will get to the point eventually where its not serviceable. So there needs to be a balance. Though interestingly PRIVATE debt is a much bigger problem than public debt - and this receives VERY little attention - I wonder why? more coming...

  3. I wasn't aware of what you said about Coles and Woolworths - and what you suggest is good so long as the revenue is passed on to those on low incomes and welfare - because Coles and Woolworths would of course pass the price of increased tax on... If we could really reap $31 billion from that it could be a 'game changer'. But there are other possible strategies as well - Target superannuation concessions for the well off; halve dividend imputation; tax mining and banking; reform the Medicare levy; introduce a National Aged Care Insurance Levy; restructure income tax; slightly increase company tax; seriously crack down on corporate tax avoidance - though I think what's been announced so far is largely symbolic - and $2 billion over 3 years won't go far... We need more in the vicinity of $80 billion new annual progressive taxation - building up to that over say 10 years; And reform of the spending mix as well (including a crack down on the superannuation concessions).

    IT would be agreed, though, that the size of government cannot increase forever. There has to be scope for personal discretion re: expenditure - and the proper functioning of markets when it comes to consumables. But there are MANY areas where people have non-negotiable needs - where collective consumption through tax can provide a better deal... Think health - including dental and mental health, aged care, education, transport infrastructure access, access to communications infrastructure, child care and so on. We are currently nowhere near the optimal 'size of government' in this sense. We are not even anywhere near the OECD average.

  4. And of course there's the need for energy and water as well - where privatisation has seriously ramped up cost of living pressures. Can't believe I forgot to mention that. :)

  5. re: Anti-Semitism - I agree on the genuine Left there is resistance to the State of Israel's policies. But I think the tenor of debate is providing an opening for anti-Semitism. That's not to say that we are such on the Left ourselves. But when Jews in Europe are being harassed, vilified - even shot down - that's deserving of the same attention we provide re: Islamophobia.