Editorial comment from the March 2016 edition of ‘The Socialist’
The recent stock market dives across the world are an indicator of deep problems facing the global economy. Whereas in 2008 the global financial crisis stemmed from the US, the problems that persist today are centred in China.
That poses huge issues for Australia as the economy is heavily reliant on Chinese growth. During the 2008 crisis Australia avoided the worst thanks to huge amounts of exports to China, high commodity prices, and Chinese and Australian stimulus programs. Today none of those buffers exist.
Exports of raw materials have slowed significantly and commodity prices have fallen through the floor. As a result billions of dollars have been wiped off the values of Australian mining companies and the big banks.
At the same time falling tax revenues have sent the federal budget even deeper into deficit. There is no scope for further stimulus measures without building even more problems into the situation.
While China was once seen as a saviour, today it is Australian capitalism’s biggest headache. A slowdown is already well underway in China and this has begun to have an impact. But if a more serious economic crisis was to engulf the country Australia’s economic fortunes would quite quickly take a turn for the worse.
With unemployment already on the rise even a mild slowdown in Australia would be a huge blow to ordinary people. Not only are jobs being lost in the mining sector but tens of thousands of manufacturing jobs are hanging in the balance as the major car companies prepare to wind down production. Even parts of the retail trade are in trouble with companies like Dick Smith recently going under.
The official unemployment rate is sitting at about 5.8% but some surveys put the real figure at more than 10%. It is estimated that somewhere close to 2.5 million people (almost 20% of the workforce) are either unemployed or under-employed. This is far from a great starting point when even tougher times lie ahead.
One of the only things keeping the Australian economy out of recession is the construction of new homes and apartments. The property sector however is driven by huge amounts of speculation.
Prices are significantly out of sync with construction costs and wage levels and the bubble that has been created in recent decades threatens to burst. Both unemployment levels and the risk of a further downturn in China are just two potential triggers.
The bursting of the property bubble would not only mean job losses in the construction sector but it would further impact on the banks and plunge many mortgage holders into negative equity.
With the property sector vulnerable, and China slowing down, the strategists of the capitalist class in Australia are now focused on how to open up new profitable outlets in the economy. The government is also focused on this task as a means to maintain tax revenues and plug the federal budget deficit.
Unfortunately for big business and the government there are no quick fixes to these problems. The government’s main goal is to protect the interests of their big business backers and shift the economic burden onto ordinary people via budget cuts and austerity measures. But such an approach has huge political ramifications.
This has actually been a major issue facing the ruling class globally: how to make ordinary people pay the cost of the crisis without provoking resistance and revolts? In many countries people have engaged in mass struggle to resist austerity and in a number of places this has been accompanied by the collapse (or near collapse) of the old two capitalist party system.
Even in Australia, where the full effects of the economic crisis have not yet been felt there is a severe crisis facing the political establishment. Only six months into his time as PM, Turnbull’s government is wracked with division. That a total of 13 ministers have left their jobs on Turnbull’s watch gives an indication of the political instability that exists.
The latest polls show Labor and the Coalition neck-and-neck at 50-50 on a two party preferred basis. When Turnbull replaced Abbott big business hoped that he would be able to use his more skilful approach to deliver reforms in their interests.
Not only has he been unable to sway the crossbench senators on much but proposals like increasing the GST proved to be deeply unpopular with the electorate. The Liberals have had to face up to the fact that politics is not merely about sales skills!
In an attempt to break the deadlock in the Senate the government is seriously considering a double-dissolution election as early as July. With this being the case it is likely that the government will have to frame the May budget very sensitively.
This inevitably puts more pressure on Turnbull as many of his big business backers understand that there is somewhat of a race against time. It is not a matter of if problems in China will come to the fore, but when.
In order to avert a repeat of the last election, which produced a number of independent and minor party Senators, the government (in cahoots with the Greens) has developed plans to reform Senate voting laws. These changes will make it harder for minor parties to get elected via preference deals and help to shore up the position of the established parties.
Big business hopes that a Senate dominated by the major parties will be better placed to push through reforms in their interests. While such electoral law changes may buy the major parties a bit of time they will not be able to overcome the problem that lies at the heart of the political instability.
The underlying issue is that the Coalition, Labor and the Greens all support the capitalist market system. That system prioritises the profit interests of big business before the needs of ordinary people.
No matter how much their rhetoric is masked in populist language, at the end of the day the major parties do not represent the interests of the bulk of the population. In times of economic prosperity this contradiction can be covered over but in an economic downturn the allegiances of political parties become much clearer.
This process has already developed in places like Europe with huge swathes of people ditching the major parties and new parties coming to the fore. The rise of anti-establishment candidates like Sanders and Trump in the US is also a reflection of the crisis facing the traditional capitalist parties.
We are only at the beginning of this road in Australia and with the economic situation set to worsen the real motivations of the major parties will begin to be exposed to greater numbers of people. Here too people will first seek to punish the major parties, but after that they will look to create movements and political organisations that genuinely act in their interests.
While such a process will open up huge opportunities for parties of the Left, the lack of a strong pole of attraction in the first instance could also see the Right attempt to take advantage of the situation.
A contest of ideas will take place with some on the Right seeking to blame minority groups for society’s problems. The challenge for socialists will be to explain the true nature of the crisis and who the real culprits are. Side by side with defending the economic interests of working class people it will be necessary to continue to combat divisive racist ideas.
The only real way to address the crisis is for ordinary working people from all walks of life to come together and organise to defend their living conditions from those who seek to take advantage of us all.
A united struggle against big business interests is the only way to stop the burden of the crisis being shouldered by ordinary people, and it is also the best way to lay the foundations for a new type of society that prioritises people’s needs instead of profits.
As we move into a pre-election period in Australia it is still open as to which major party will win on polling day. While Turnbull is still more popular than opposition leader Bill Shorten, a potentially long election campaign can involve all sorts of twists and turns.
Either way whichever major party wins the next election they will be under huge pressure from big business to implement their reforms. At the same time they will come to power in the midst of an extremely volatile situation. The period we are moving into will be markedly different from the relative stability of the past couple of decades.
Many more people will be forced to engage with politics and an increasing amount will see that capitalism does not work in their interests. The alternative of democratic socialism will be seen as a much more attractive option.
If socialists are able to relate to the new situation, and intervene in the developing struggles in a principled way, it will be possible to win many more people to our ranks. On the basis of a strong socialist movement in Australia it will be possible to transform society in such a way to ensure economic crisis, poverty, war and environmental destruction become a thing of the past.