Review: Ozonomics

Reading Time: 4 minutes

Ozonomics, Andrew Charlton’s new book on the Australian economy, is written in a light, almost pop-economics style. Yet it has some great insights, useful facts and figures, and demolishes economic myths pushed by the Coalition and other myths pushed by ‘leftwingers’ like Doug Cameron and the leaders of the Australian Manufacturing Workers Union (AMWU).

Charlton is a young and clever Keynesian economist who, as he explains in his Acknowledgments, has been slightly influenced by British Marxist economist, Oxford academic and ex-CWI member Andrew Glyn.

He rejects a crude neo-liberal economic model (he calls them ‘the sink-or-swims’); he also rejects the economic nationalism of Pauline Hanson, the Nationals and sections of the Left (the ‘sandbaggers’); and he rejects any socialist alternative, as he mixes up the experience of Stalinism with the ideas of genuine democratic socialist planning of the economy.

His critique of a socialist society is that: “if we all knew that our income would be distributed evenly among everyone in society, there would be fewer incentives to work hard and earn more, and there would be fewer reasons to study to increase our skills.”

Socialism, however, would increase not decrease the standard of living for all (bar the super-rich), and the surplus value (profits over and above wages) would be owned and distributed not by individual capitalists but by society as a whole through democratic management. In the early stages of socialism there would be financial incentives (higher wages) to encourage people into more skilled or difficult employment and this would stay until consciousness changed.

Charlton’s alternative is that of the Third Way – ‘capitalism with a conscience’ type. Nevertheless don’t let this put you off the book as there are a lot of complex truths simply and well explained here.

His potted history of Australian capitalism in the 20th century is good: the three props of mining and agricultural exports; arbitration; and tariff protection that were so undermined in the 1960-70s by falling commodity prices and rising globalisation.

He argues, as SP has done, that the main capitalist restructuring of the economy to deal with the end of the post-war boom were introduced by the ALP governments of Hawke and Keating from 1983-96. He explains that the neo-liberal measures of Howard and Costello were modest in comparison and their image as capitalist economic superheros rests in reality on the luck of presiding over a structural economic upswing; the benefits to big business of the changes introduced by Hawke and Keating; and lots of spin.

Charlton explains the importance of productivity to the economic strength of an economy: “Productivity is the ratio of outputs to inputs: that is, it measures how much we can produce given how many labourers and other resources we put to work. It’s the most important concept in economics.”

Leon Trotsky made the same point in Chapter 4 (The Struggle for Productivity of Labor) of his brilliant Revolution Betrayed; the best analysis of Stalinism yet written. See link below.

The fact that the productivity of labour in Stalin’s Russia lagged behind the West meant this society could not be described as socialist – despite the fact that capitalism and landlordism had be abolished in the 1917 Revolution. The importance of high and every growing labour productivity to a socialist as well as a capitalist economy is explained by Trotsky.

Charlton criticises Doug Cameron on the issue of productivity. Desperate to find a non-socialist alternative to the neo-liberalism and capitalist globalisation that is devastating the membership of the AMWU, Cameron points out that labour productivity in western Europe (where there are higher levels of unionisation) is greater than in the US.

But the reason is that there is higher unemployment in Europe and unemployed people are de facto less productive (in an economic sense!). So, as Charlton writes, “if a country has a large fraction of the least productive people outside the workforce, then of course the average productivity of the remainder will be higher, Cameron’s observations are absurd.”

Ozonomics outlines useful facts and figures on the growing social inequality as a result of the neo-liberal economic changes since the 1980s. It also exposes the lies of Howard about interest rates: the truth is that interest rates are set by the Reserve Bank not by the government and they reached 13% when Howard was Treasurer.

Most importantly, the key point is not simply the interest rate but also how much one is in debt – today interest rates are lower than in the 1970s and 1980s but people have more debt so the amount of interest payments they Australians pay as a percentage of disposable income has risen dramatically under Howard and Costello as Charlton proves in Ozonomics.

Charlton shows out the misnamed ‘workplace reform’ of Howard has made little impact on labour productivity. The Federal Government’s own Treasury Department admits that the impact is: “slow and difficult to quantify”.

What is true is that the share of national income going to profits has risen from 18% in 1980 to 27% in 2005. The share of national income going to wages has dropped from 63% in 1982 to 54% by 2006. Charlton believes the real reason for IR reform is to weaken trade unions and thereby weaken the financial base of the ALP.

Ozonomics, despite the political limitations of its author, is well worth reading. It has a concise history of the modern Australian economy. It has a good critique of economic nationalism; of neo-liberalism; and of the economic ‘superhero’ image of Howard and Costello.

For an alternative economic model that meets the interests of working class people, you will need, however, to look at the socialist ideas of the Socialist Party.
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By Stephen Jolly

By Andrew Charlton
Radom House Australia, 2007
RRP $34.95