Stay Away From Australia, Neo-Liberalism!
Neo-liberalism in action
Earlier, I posted a couple of rants about how I hated working at Target during the Christmas Sale 2 week period. There I railed against certain aspects of it which I thought were influenced by neo-liberalist economic ideology espoused by Uncle Sam.
During the last term of the Howard government, Australia came under intense attack from neo-liberalism. This happened when the Howard government gained rare control of both houses for the first time in decades after the 04 elections. As a result, Howard tried passing WorkChoices, a set of very neo-liberal industrial relations policies.
I believe that Howard’s rhetorics and expectations that WorkChoices would increase the flexibility for employees and employers to design their own contracts are incredibly naive and unrealistic. Already, Australia’s ’socialist tendencies’ are considerably less pronounced when compared to other developed countries such as France or Germany. Strikes aren’t frequent occurrences, and even when they happen, they are usually quite accommodating and those unions provide skeleton crews to continue to man vital posts. Militant unionism are only a tiny minority in the national union body, and they are repeatedly marginalised by both sides of politics (yes, by Labor too).
One of the key ideologies underlying WorkChoices is that it sidelines unions in the contract bargaining between employees and employers. The Liberals argued that employees and employers knows best what each want from each other, and trade unions are an unnecessary party in these deliberations. However, especially for blue-collared workers, their bargaining powers are considerably less compared to their employers. Hence coming together in the form of a union is the only way they can compensate for their power disparity in these bargaining rounds to protect their wages, benefits and working conditions. Without unions, employers will easily steamroll over the concerns of a single employee in those areas. Here, the adage ’strength in unity, death in disunity’ holds very true. The Lib’s introduction of the AWAs seeks to eliminate the influence of unions in those deliberations.
Right now, as a result of Howard’s 11 years of gradual neo-liberalisationism, the workplace of Australia is increasingly becoming more casualised. This means that many jobs are on a ‘we’ll call you when we need you’ basis. Although this might be a neo-liberalist’s wet dream, it isn’t as erotic for the working-class. The casualisation of the workplace has resulted in unpredictable shifts and hours of work for them. These workers would also be subjected to an unpredictable income flow.
I used to be a bit critical towards the Australian restriction imposed on businesses to operate only between 9-5pm. However, my recent experience has persuaded me towards that camp now. True, extending the operating hours for shops is beneficial to consumers. But till what end? There has to be a balance with this. The employees in those shops are humans too. They need time to socialise, to rest, and to enjoy life in general. To swing too much towards consumer convenience (as well as employer profitability) is unfair. Constantly getting the late shift is no fun, I can tell you that. It restrict one’s social life. Luckily, Australia still hasn’t gone full ‘Asian’ in this regard atm. Its adoption of a one day a week late night shopping is a good compromise, IMO.
WorkChoices also seeked to eliminate penalty rates and worker’s prerequisite conditions. These aims are just blatant transferences of power to employers and pandering towards its voting bases. Penalty rates are fine as they are, which if I’m not mistaken are 1.5x for Sunday and after 5pm shifts, and 2x for public holidays. These are traditionally rest days for most Aussies but it’s cool if businesses want to continue to earn more profits during these times. They just have to pay their workers more for trading in their rest days to slave away on those days. It was this issue that played a big part in the ACTU and Labor campaigns against WorkChoices in the 07 election, which ultimately contributed to their victory over the Liberals.
WorkChoices have also transferred minimum wage setting powers from the National Wage Cases at the Australian Industrial Relations Commission (AIRC) to the newly created Australian Fair Pay Commission. Again, this body is just another unashamed attempt by the Libs to exercise their neo-liberal ideologue and has almost nothing to do with necessity as the AIRC has performed its role well in the past. I am not a diehard supporter of the minimum wage. Instead, I am a supporter of proper welfare net for the disadvantaged in society. Hence I’m open to other methods of achieving this. John Lee and Rajan seem to be big supporters of the income tax credit method of achieving this. After perusing it for a bit, I don’t really see why it seems so enticing to them. Basically, this model just transfers the tax burden towards the poor from businesses to the government, which in extension to the public taxpayers. Plus the increased complexity of this method will surely increase the cost of administering it.
The problem I feel with neo-liberals and such is that they tend to view the workforce as merely another commodity, when it so isn’t the case. Workers can never just be viewed as something which which companies can obtain and discard subject to economic conditions, however enticing this idea may be to the neo-libs. This is because there are serious flow on effects with those actions that adversely affect workers. The welfare of families are at stake when a worker is sacked. Societal ills could then easily follow suit. Therefore, increased consideration before the sacking of workers is, IMO, essential.
Of all the WorkChoices aims, I can say that I only agree with one. This is the exemption of companies with fewer than 101 employees from unfair dismissal laws. I guess this is because I can’t stand over-whining spoilt lousy workers who tries to screw their bosses with large payouts and costly termination processes. So sue me.
One of the simplest reasons why I’m not a supporter of neo-liberalism is the same reason why I’m not a supporter of communism: The examples of countries where they’re implemented leaves a lot to be desired. The USA is undoubtedly the champion of neo-liberalism. There, unions are castrated. Big businesses flourish. Minimum wage is peanuts.
And the results of all that? The emergence of the ‘working poor-class’, people who hold 2 or 3 minimum wage jobs (hooray, employment flexibility!). Ummn, doesn’t that kinda give us a clue as to how accurate their ‘minimum wage’ definition is?? A society where there exist a big and growing income disparity among its people. Where big corporations have undoubtedly demonstrated that they are incapable of ’self-regulation’, putting the neo-liberal’s beliefs of this to shreds. True, the USA is still the no. 1 economic power in the world, but what’s the point of that if the majority of its people don’t get a decent piece of the pie?
The mere fact that there are 3 major US presidential candidates on both sides of politics: Edwards and Obama for the Dems and Huckabee for the Reps, which based their campaign platforms on championing the interests of the ‘little guys’ says a lot about the very unequal wealth distribution in that country.
I take a look at the Human Development Index (HDI) ranking and what do I see? The top 10 countries consist of 5 strongly social democratic countries: Iceland, Norway, Sweden, Switzerland and France, with the rest consisting of countries with nominal social democratic traditions: Australia, Canada, Netherlands, Ireland and Japan (strong government intervention and partnership policies).
And where’s the great proponent of neo-liberalism on this list? The largest and strongest economy in the world is merely at no. 12. Unimpressive.
And therein lies the greatest flaw in neo-liberalism: Too much emphasis on profit generation at all cost and not near enough effort on wealth redistribution. This results in the formation of a ’super-rich’ class which merely reinvest their considerable wealth as capital to further accumulate more wealth, generating an impenetrable and under-taxed ‘wealth cycle’. The middle-class there have little chance of breaking into this ‘financial heaven’ due to insufficient income accumulation, while the working-class have nothing to look forward to except further exploitation of their labour in return for pitiful wages. Factor in the extra ‘barriers’ that the rich class have constructed to perpetuate their position in society: private schools, private healthcare services, exclusive suburbs, costly university fees, and you have a society that’s clearly divided into 2 (like what Edward has pickup up on in his ‘Two Americas” speech).
So do we really want to live in a society like this? My answer to this is a big, resounding “NO, THANK YOU“. I’ll take my $12/hour minimum wage, welfare safety net, union-involved social democratic country any day instead, thanks.
i only read your first 2 and last 2 paragraphs
so i am concluding that u’re into socialism
tsk
Comment by del — January 8, 2008 @ 5:10 pm
WorkChoices sounds like a mix of liberalism and corporate socialism. Generally I cannot see why you would want to interfere in the bargaining between labour and employers - this includes both shutting unions down or preventing them from striking, and also making union membership mandatory.
For this same reason, if workers are willing to work at odd hours for low pay, the government shouldn’t interfere. The outcome may be undesirable, but surely it is more desirable than not having jobs at all. That you took the job indicates that you found the costs acceptable; if you did not, you would quit. You can argue that you would not have the money you need to survive otherwise, but that is what things like the negative income tax are for. In any event, no strong evidence beyond a simple assertion has been given that “casualism” is increasingly prevalent (and I doubt it would be, considering most people do not shop at 3AM).
It is rather arrogant of anyone to presume that a social life is more important than earning a living. Making this sort of value judgment for yourself is absolutely fine; doing it for others isn’t. If people are willing to work at odd hours, I say by all means let them. They have found the costs acceptable.
I find it extremely stupid of people to support the minimum wage when it is such a blunt instrument for fighting poverty. It punishes big corporations and mom-and-pop shops equally; if anything, because it is an indirect tax, it is regressive and hurts small businesses more because they have to fork out a larger proportion of their profits than big corporations thanks to the minimum wage. Likewise, the minimum wage treats a student working part-time and a single mother as the same, when there is no reason to if you are serious about addressing poverty. The negative income tax makes infinitely more sense in this regard, and is infinitely more simple than most welfare systems in existence. If you want to punish businesses, then at least tax them directly. Several small businesses will probably be tax-exempt, while large corporations will have to fork out even more to support the social welfare net, which is surely a better outcome if you want to talk in terms of social justice.
That there is considerable friction associated with letting the market rip when it comes to labour is obvious, but the solution is not to stop the market (ending both the desired and undesired results), but address the undesirable effects. The negative income tax ensures people have a steady income to fall back on, and gives them the necessary resources to go back to school or otherwise retool themselves to find a new job. Workers should be easy to fire, because this makes them easy to hire - and there are better ways of taking care of the ills of sacking workers than banning the firing of employees.
I don’t know where you got this idea that economic liberalism holds that corporations self-regulate; Milton Friedman himself said that business is often its own worst enemy. Mainstream economic theory supports regulation of firms to maintain as open a market as possible.
Your claim that socialism is a superior economic system is utterly laughable simply because:
1. Correlation does not imply causation;
2. A number of the economies listed have rather liberal economic policies, especially Ireland and to a slightly lesser extent Switzerland
3. Free market liberals (the economists, anyway) typically support measures to ensure equality of opportunity, provided these do not interfere directly with the market mechanism. That is why we have the negative income tax instead of the minimum wage, school vouchers instead of public schools, and so forth - the idea is not that government should not help the poor, but that it should help them in a way that does not jeopardise the economy as a whole.
4. Those who invest in and thus make possible the things we take for granted, like our comfy homes, our cars, computers, and whatnot, ought to be rewarded. Railing against them for the sake of making someone the enemy of the poor (like Edwards) is just stupid.
Comment by johnleemk — January 10, 2008 @ 5:27 am
I don’t agree that it’s ‘right’ for a small select group of people to be rich beyond most of our wildest dreams.
However original their original inventions are, however hard they used to work, I think that a cap should be placed on how much wealth they should be allowed to accumulate. Rest assured I don’t mean an unreasonable cap, more like higher taxes on the super rich, something like a 50% tax rate on an income bracket that’s set to avoid affecting the middle-class, but to target the rich-class people accurately. Caps like these shouldn’t adversely affect their incentives to work hard, be creative, etc etc since the benefits of doing that would still be enormous (just not ridiculously enormous).
I believe no one needs to be billionaires. Or even multimillionaires. Therefore, the state that allowed them a safe environment to conduct their business, the workers who help those rich bosses produce the goods, the environment that’s been exploited for their profits, etc should all be compensated by these people through high taxes being levied on them.
In fact, there’s even an economic rationale for this. Up to a certain point, wealth should start losing its utility among those super rich. States should then be allowed to redistribute some of that wealth to be benefit of the wider society.
I’ve read through some literature about the negative income tax mechanism. Sounds interesting. But there are also problems with it. You should know them yourself by now but I’ll just list a short summary of them:
1. Even though NIT proponents criticize the dole welfare system, the NIT also effectively gives handouts to people without requiring them to work. Plus the NIT provides a disincentive for people to work, since every dollar they get reduces what assistance they would get out of the NIT.
2. Admin cost is very high. Under the welfare system, the govt only needs to run the dole system to service people who are out of work. It could then outsource the provision of what it deemed ‘adequate’ wages to anyone who works to the businesses who hire them. However, under the NIT, the government has to oversea the welfare of everybody.
3. Chances of people manipulating their income submissions are high.
But like I said, I am not against it per se.
Comment by sigma — January 10, 2008 @ 12:46 pm
I don’t have an issue with progressive taxation - but this idea that rich people don’t deserve to be rich sounds like complete crap to me. I don’t understand what is wrong with having the ultra-rich. If we can have a lot of rich people and no poor people, I would take that. I’d rather have a million billionaires than a billion penniless. To me, taxing the rich is not an end in itself; it is a means to an end. Inequality is harmful only insofar that it reduces equality of opportunity. If you improve the lives of billions of people, then by all means, you deserve to be rich.
Regarding the negative income tax,
1. This sounds like a criticism of a specific proposal to implement the negative income tax, and not the policy in general; the scheme I usually see proposed is progressive, in that as you earn more, though your benefits go down your overall income will continue to grow.
2. You seem to be underestimating the cost of running dozens, if not hundreds of different government programmes. Consolidating them into one lump payment makes more sense; you just maintain the inland revenue department, have them look at everyone’s tax returns, and then pay out a lump sum in proportion to the income of those below the cut-off point. (The negative income tax does not apply to those above a certain income, in case you forgot, so in this case your critique does not even really apply.)
3. I suspect it is the rich who can more easily evade taxes or otherwise manipulate their tax returns, and the negative income tax wouldn’t apply to them.
Comment by johnleemk — January 10, 2008 @ 3:32 pm
Oh yeah, this is an interesting blog post from a Harvard economics professor (and former chair of Bush’s Council of Economic Advisers until he got kicked out for saying that outsourcing is actually a good thing):
http://gregmankiw.blogspot.com/2006/05/corporate-tax-rates.html
The USA has one of the highest corporate income taxes, and this is even compared to the EU. In some areas, the US might actually be more socialist.
Comment by johnleemk — January 10, 2008 @ 5:18 pm