By Peter Boyle
On June 1, finance minister Ralph Willis responded to the latest national accounts figures, which showed that the slow pace of economic growth (0.5% in the March quarter) would not make a dent in the high unemployment rate. Some people will have to be "adjusted into unemployment" rather than into jobs, he said with a straight face.
Just the day before, Prime Minister Keating had repeated his promise to make fighting unemployment the priority. Now Willis said that the government was determined to keep driving micro-economic and structural reform at the expense of jobs in the short term. This, he said, was the only way to ensure "sustainable growth" in the longer term.
Willis did not summon the colourful imagery of Keating's April 1986 "banana republic" speech, but his message was the same: Australia can't afford to remain dependent on exports of agricultural and mineral commodities, because prices for these commodities are on a historical decline, while the prices of the manufactures which Australia imports are rising. This has resulted in a sustained imbalance between the value of exports and imports and a rising foreign debt.
According to Willis, most Australians will have to swallow more years of sacrifice. This means that:
- Tariff cuts will continue to force uncompetitive industries to close.
- Government and private companies will keep shedding jobs.
- The ACTU will continue to help keep wages down.
- The government will give companies and the rich more tax cuts and simultaneously seek to reduce its debt.
The idea is to reduce costs for business and to "free" capital for private business to invest.
Restructuring
In the last budget, Keating boasted that restructuring was well under way. Workers had sacrificed and now the reward was in sight. The value of exports of goods and services exceeded that of imports for the first time in 12 years in 1991-92. The current account deficit would persist as a legacy of the 20-fold rise of (mostly private) foreign debt over the 1980s, but eventually Australia would export its way out of debt.
But while Labor has exacted the sacrifice, recent information raises doubts about whether restructuring is working. The figures show a worsening current account deficit.
The government argues that the problem is short term. Having gone into recession earlier than the rest of the world, Australia is recovering earlier than its major export markets. But when the world recovery comes along, everything will be okay. In the meantime, keep on sacrificing.
An alternative explanation is that Australian capitalists are not using their ALP/ACTU-boosted profits and greater access to borrowing to invest in the "national interest". The Senate inquiry into tariffs and industry development found that manufacturing industry is actually shrinking. In the 1950s it accounted for 28% of gross domestic product but by 1990-91 had fallen to 16%.
It appears that capitalists may have been using Labor's wealth redistribution in their favour to pad their profits rather than to restructure according to Keating's grand vision.
Over the 1980s the Australian Bureau of Statistics recorded a rise in import penetration (the ratio of imports to total sales) from about 9% to 12%. The proportion of manufactures imported rose from 74.3% at the beginning of the '80s to 81.2% at the end. The proportion of machinery and transport equipment rose from 38.6% to 44.7%.
This last statistic conjures up a frightening scenario for the Keating government. Not only will high unemployment persist with a recovery, but the associated rises in consumption and investment threaten to cause imports to shoot up, worsening the balance of payments. This would force the government to put the brakes on by raising interest rates. Unemployment would then rise even higher.
This scenario has credence because the latest rise in imports is based mainly on increased consumption. The private sector has yet to start investing significantly in new plant and machinery. Two-thirds of the 0.5% rise in GDP is accounted for by increased government spending. When and if private investment picks up, imports threaten to rise even more sharply.
Interventionists
The uncertainty about the government's strategy has given rise to discussion about alternatives. Hewson's proposal to let the market rip terrified the public into returning Labor in March. But there is also a call from independent parliamentarians, Democrats, left unions and quite a few economists and academics for a more interventionist economic policy.
The interventionists share the illusion that the solution lies in outcompeting other countries, instead of challenging the inequalities of the international economic order that are at the heart of falling commodity prices.
There are two problems with this. First, every other capitalist country is trying to do the same thing. Second, companies seek individual solutions which often contradict abstract national interest. Examples are Australian manufacturers' growing exploitation of super-exploited labour in Third World countries and the incurring of private corporate debt for speculative investment.
The interventionists argue for a continuation of "labour market reform" through enterprise bargaining, greater government spending on services, a pause in tariff reduction and greater government support for manufacturing industries. The traditional union response to unemployment — the demand for a
shorter work week — has been discarded for the timid call for a redefinition of the male jobless over 55 years of age as pensioners.
Most of big business remains suspicious of "industry policy". They want restructuring to be left to them, because (nudge, nudge, wink, wink) they know best. While Keating has paid lip service to industry policy, and even modestly increased government spending in the last budget, his government dismisses the interventionists as "neo-protectionists".
On June 2, at the opening of the annual ministerial meeting of OECD governments (of the world's 24 richest nations, now containing 35 million unemployed workers), treasurer John Dawkins berated other governments for not freeing up their economies as fast as Australia had.
Real solutions to unemployment lie outside the narrow framework of the debate between government and interventionists. The global problem requires a global solution in the form of a new international economic order based on social justice and environmental sustainability.
The Australian economy needs to be restructured, not to become more competitive, but to better satisfy social and environmental needs. Increased productivity should be matched by reductions in working time without income cuts. The alternative is what we see today: high unemployment and a two-tier work force, with some well-paid full-time workers and a growing army of poorly paid part-time and casual workers.