Class and Capital in Australia
Bulletin #1 (March, 2023)
1. From the Editors
The following study is the product of a research group which developed out of the reading of the Angry Workers book ‘Class Power on Zero Hours’. Though inspired by the practical organising at the heart of their project, the participants of our reading group were too separated by geography and life circumstances to replicate it collectively. Nevertheless, we were also drawn to the research aspect of the Angry Workers’ endeavour, wherein the collective attempted to grapple with what capitalism actually looked like in present-day London. The Angry Workers rightly recognised that this is surely worth understanding if we want to think about where our opportunities for struggle are. Likewise, they realise that we should be seriously considering how we might realistically make revolution in a world of complex, just-in-time supply chains and amidst the looming chaos presented by the unfolding climate disaster.
We similarly believe it is worth investigating the structure of Australian capitalism, with the hopes that this might better inform our understanding of the current situation and the economic reality our class is tasked with transforming.
Are we in a crisis of capitalism? If so, what are the causes? What opportunities or challenges do these pose? Are there fragile choke points within the economy where we may be able to exercise our power most effectively? What does the ruling class make of its situation, and how do governments and capitalists intend to continually reproduce their dictatorship of private property and accumulation?
These are the kinds of questions we have been asking ourselves and that we want to pose to friends and comrades. This is only the first bulletin in a publication that we hope to make a series, with each instalment tackling a different aspect of Australian political economy or the position of the working class. We hope that our findings and commentary will spur further debate and research, rather than satisfy readers as the last word. It is an attempt to begin asking two key questions: What is the situation that capital confronts us with as a class? And what does this mean for those of us who wish to abolish these categories — capital and class — so that we may establish a society of freedom, which we would call communism, or anarchy?
- Capital and Class in Australia, Editorial Collective
2. Introduction
This first bulletin begins our project by considering the point of view of the ruling class itself. We do not take this as our starting point out of a technocratic fetishisation of the State, financial institutions, or policy-making. We agree with Mario Tronti that our starting point should be the working class. It is not the responsibility of revolutionaries to intervene in the management of capitalism, but rather to provoke crises to which the capitalist state system is forced to respond. We could similarly cite Errico Malatesta on this point, who argued that a revolutionary – always opposed to government – must ‘snatch the enemy-occupied territory in its path’ like an ‘advancing army’.
We begin by looking at official government documents and related research papers only because government departments and financial institutions are incentivised by their structural position in the reproduction of capitalism to monitor its condition as accurately as they can within the limits of their ideology. Though such documents can make for extremely dry reading, they can also contain numerous hints as to the mounting pressures threatening to throw capital into crisis, and which, therefore, necessitate the continual recomposition of both class and capital to meet the never-ending drive for accumulation.
We have tried to select the sections we consider most relevant, provocative, or worth interrogating. Our summary covers a wide selection of reports, ranging from statistics concerning the concentration of capital within Australian agriculture, to the views of the Reserve Bank of Australia regarding inflation, slow growth, and tight labour markets. A recurring theme in these government reports, as well as other papers consulted, is the mounting ruling class anxiety over an inability to boost productivity. Though not often referred to explicitly, we can interpret such concerns as being grounded in the threat of declining profitability.
In preparation of this bulletin, we read reports on gender, labour force participation, the wage gap, and child care, each of which, for us, posed important questions around social reproduction and its place within Australian capitalism. Similarly, we considered reports on the stability of the Superannuation system (which took on particular resonance given the economic crisis in the UK). While the focus of the present bulletin does not address these issues directly, we will cover them in future publications.
At the centre of this bulletin we present an essay reflecting some of the preliminary conclusions we drew from our findings and subsequent discussions. The essay places our project within the broader critique of global political economy, and, in particular, engages with the debates around declining profitability, the notion of a ‘long downturn’ and, in particular, the work of Robert Brenner.
Finally, we conclude with an Appendix, Surface Conditions of Capitalism in Australia, that collects the main points from all the documents read in the preparation of this bulletin.
3. Reports Consulted (see the appendix for a wider range of snapshots from the reports)
The reports that we have read in putting together this bulletin include:
RURAL INDUSTRY FUTURES: Megatrends impacting Australian agriculture over the coming twenty years
RBA Statement on Monetary Policy
RBA Financial Stability Report
PC PRODUCTIVITY INSIGHTS FEBRUARY 2020 | ISSN 2652-5461 | No. 1/2020
Treasury Round Up Overview: Understanding productivity in Australia and the global slowdown
Andrews D, Hambur J, Hansell D and Wheeler A (2022) ‘Reaching for the Stars: Australian Firms and the Global Productivity Frontier’, Treasury Working Paper
Productivity Commission’s ‘Trade and assistance review’
4. Class and Capital in Australia #1
Recent decades have seen slowing productivity growth and weakening conditions of competition across the Australian economy. Productivity remains a primary concern for planners for capital as it is often used as a key variable to understand the overall growth of the economy, the distribution of wages, and it is also a way by which economists understand the relationship between wages and profit. Ideologically they believe productivity is one of the few ways that growth can be influenced, and wages can increase without causing instabilities in the system on a whole.
From our perspective, an interest in the productivity and profitability of capital takes an inverted and negative form. It is expressed not as concern for the recuperation of profitability but rather as a means of interrogating the shape of the dictatorship of capital, its symptoms and contradictions, and by extension perhaps plotting some coordinates on the terrain of struggle.
Within Australia, productivity slowdown across the economy is evident at the level of both labour productivity (output per worker or per hour worked) and multifactor/total factor productivity (output to combined input of labour and capital). In the market (non-state funded) sector, both categories of productivity fell in 2018-2019, this is the first absolute decline since the peak of the mining boom in 2012-2013. Slowing labour productivity in key sectors has contributed to the overall slowdown: manufacturing and agriculture have had a notable slowdown and make up a shrinking component of the economy. Electricity, gas, water, and waste services have also seen declining productivity. This continues the trend of slowing productivity growth since 2012-2013.
The following graphs are from the Productivity Commission’s 2021 Insights report:
And:
Along with slowing productivity growth, capital investment in Australia, taken as “the purchases of new plant and equipment by firms, as percent of GDP”, has also been declining.
For the past decade the decline is as follows:
Since 2014, capital investment has shrunk as a percentage of GDP from 26.74%, to a low of 22.27% in 2020, rising again in 2021.
Taking a slightly longer view, a similar trend is visible:
There has been a general decline in capital investment as a percentage of GDP since 1960. However, the decline is not overly sharp and has not been without periods of recovery.
Percentage changes in rates of investment have not followed a secular trend, but have declined since 2010s:
Two implications of declining investment in the past decade are worth commenting on here. First, that the persistent levels of growth in Australia have been underscored by the intensification of work, measured in the amount of hours worked, rather than through capital investment. Second, that demand really seems to hinge on consumer spending not capital investment, which is slowing.
The past 3 decades have seen the economy shift from a dominance of the production of goods to services. Services make up over 60% of GDP, and nearly 80% of employment (World Bank). However, the category of services is notoriously vague and heterogeneous. It incorporates a range of activities across a range of fields, and some forms of work that were once done in-house (ie not considered a part of services) and then outsourced now fall into services even though the concrete labour performed has not changed. In short, that figure does not mean much on its own. Breaking down the analysis of the service sector is beyond the scope of this bulletin, though it is worth noting that the reports did not identify the expanding service sector as a causal factor in slowing productivity at the same time as noting that limited options for automating the service sector withheld productivity gains for services in general. The public sector in Australia is significant in terms of employment and government expenditure, making up 16% of jobs in Australia (AFR and ABS). Health and social services workers make up the bulk of public sector employees, followed by teachers.
Based on what we have presented so far it is too premature to fill in detail on any longer-term trends of accumulation and productivity in Australia, or to make precise arguments regarding specific trends of profitability and related questions. However, we can begin to sketch further pathways for analysis and clarify questions for what we have shown so far as to where trends might go, and to consider the research and its implications in relation to prominent debates regarding capital accumulation, the so-called long downturn, service work and productivity, and the implications of these for class composition and struggle.
While the conditions in Australia are unique, especially considering the impact of the mining boom (some comments on this in the Appendix), the general trend of slowing productivity is in common with trends across the global economy. This poses several questions as to how conditions within Australia both coincide with and deviate from general trends of accumulation, productivity, and competition at the global level; the specific compositions of capital within Australia; and how questions of class and capital composition are influenced by these trends.
Overcapacity, productivity, and the so-called long downturn
Global trends in economic dynamism indicate slowing growth, declining productivity, and overcapacity in industrial sectors. In turn, these trends have come to inform debates about the general profit rate for capitalism at the total/social level, value production and secular decline, and possibilities and strategies for class struggle.
For many on the left, one key point of reference in explaining the long-term trends of capital accumulation is found in the work of Robert Brenner. Given the commentary on slowing productivity growth and capital investment in the reports we read, we also thought it would be useful to consider some of Brenner’s arguments.
Drawing from a wealth of data concerning dynamics of profitability and productivity since the end of the post-WWII boom, Brenner has contributed much to theorising and analysing declining profit rates and productivity in the US and world economy, hinging on an identification of generalised overcapacity in industrial sectors.
Industrial overcapacity is a significant index in Brenner’s analysis. It refers to the limits of industrial expansion in the manufacturing sector and the impacts on employment, capital accumulation, and profit rates: overcapacity manifests in slower or declining rates of industrial expansion, declining rates of return on capital investments and leads to slowing or declining rates of accumulation and profit. Traced historically, industrial manufacturing was the ‘dynamic engine’ that drove capitalist expansion in the initial decades of the post-WWII economy. For the US, industrial manufacturing grew rapidly in both scale and output in the immediate post-WWII context, but expansion rapidly declined by the 1970s (Benanav, 2020). As already industrialised countries were reaching peak productive capacity, later industrialising nations were able to produce goods at cheaper rates than those of the already industrialised nations. This in turn led to the rapid economic development of late industrialised economies. However, Brenner points out that they did this via competing for the same markets as those already industrialised countries, and as such the advantages drawn by later industrialising countries also drove the tendency toward global overcapacity.
Reflecting on the global economic crisis of 2007-08, Brenner argued that ‘the current crisis is rooted in the steadily declining vitality of the advanced capitalist economies over more than three decades—a long downturn which finds its fundamental source in the decline and stubborn failure to recover of the average rate of profit in the private sector as a whole’ (Brenner, 2010). For Brenner, the inability of capital in general to recuperate rates of profit arose from the general conditions of overcapacity in manufacturing industries set in motion via global competitive conditions since the 1970s.
Brenner’s construction of the profit rate both informs his analysis of investment and productivity, which in turn informs his theory of profit. As Brenner (cited in Barker) states,
“the growth of demand in the private sector as basically resulting from the growth of investment, dependent upon the profit rate. The growth of investment creates both the growth of employment and, by way of the growth of employment and the growth of productivity, the growth of real wages. So, the growth of investment creates the growth of demand both for capital goods - plant and equipment - and for consumer goods.”
In the conditions of decline, secular or otherwise, the implication of this for workers, famously outlined by Marx, is the expulsion of labour from production. Industrial overcapacity is therefore relevant for analyses of contemporary class composition, underemployment, and surplus populations, and in considerations of contemporary forms of class struggle.
Services, productivity and accumulation
The other expression of manufacturing overcapacity is what some call the process of deindustrialisation. As the absorption of labour within manufacturing slows and then sheds workers, a process of deindustrialisation ensues whereby industrial manufacturing makes up a smaller component of the economy and employment. In the wake of deindustrialisation, it is the broadly defined service sector that has grown and tended to absorb this labour. As noted in the presentation of the data above, most of the reports and institutions of capital grappling with the slowing rate of productivity in Australia, do not note the service economy as a causal factor. Nonetheless, it is worth considering how service sector jobs (broadly defined), might be related to the conditions of slowing productivity and downturn at the level of value production.
The automation of services, as noted by the Productivity Commission, is difficult and in many instances not possible. As Endnotes have put it,
“services are, almost by definition, those activities for which productivity increases are difficult to achieve otherwise than on the margin…as the economy grows, real output in “services” tends to grow, but it does so only by adding more employees or by intensifying the work of existing employees…In most of these sectors wages form almost the entirety of costs, so wages have to be kept down in order for services to remain affordable and profitable.”
Framed this way, it is possible to conclude that services will not lead to a new wave of accumulation, via automation or otherwise, and that service labour must necessarily be locked into low wages. One problem with this framing is that the technical composition of service work, of high labour costs and low capital investment, is seen to overdetermine the conditions of struggle. It almost sounds like wage levels, as one example, must remain low due to its composition and small productivity gains. The framing risks eliding the possibility of struggle and class power as determining factors in the composition of class and capital.
Some Problems in the Brenner Framework
As has been pointed out elsewhere (Mitropoulos 2017), a persistent methodological nationalism underscores Brenner’s analysis. One issue with a methodological nationalist approach, is that the very notion of a profit rate at the level of total capital cannot be derived from national accounts. While it is possible to extrapolate from strong data at the national level, through aggregation of various national data, to construct a general profit rate, this does not form the basis for a general rate of profit in the Marxian sense. While national account analysis does not tell us about the profit rate in the Marxist sense, it nonetheless can be useful to consider a more general category of profitability (Chuang, 2020).
Recently, questions have been raised regarding the extent to which a concern with a general rate of profit and an overall slowing of accumulation should be seen as the principal factor shaping contemporary capitalist dynamics and the decisions of capitalists. Tim Barker (2022), for example, has pointed out how “it is…unclear why the profit rate (defined as Brenner defines it) is the most relevant signal guiding actual investment decisions”. One implication being that the general rate of profit, unknown to individual capitalists, does not determine their activity. Another, more concrete, implication from Barker, is that it is not clear why returns on economy wide capital stock determine decisions.
A further limitation to account for in Brenner is the limited conception of the ‘real economy’. The real economy in this instance is restricted to the private sector, presumably as it is considered the sphere that produces value, and from which profit and other revenues derive. For example, in terms of analyses of both profitability and productivity of the economy, as well as in characterisations of class struggle, the public sector has occupied a contested position owing to the fact that public sector wages and costs are traditionally covered via taxes, they represent a claim on total surplus value that is not reinvested in the private, profit making sector, and in turn do not produce surplus value – the source of profit in the first place. While this offers one way into analysing the limits to government expenditure to recuperate profitability (Mattick, 1978; Neel, 2022), as well as informing critiques of various theories of financialisation, as Melinda Cooper (2022) has pointed out, there is a risk here of missing the dynamics of class struggle arising from contemporary forms of public finance and the public sector.
In terms of recent waves of class struggle in Australia, the US, and many other places, the public sector has been pivotal. Transport workers, hospital workers, teachers and education workers have all been on strike in recent periods. The implications of this are significant and tend to challenge the focus on the private sector as the key terrain of class struggle. Following Cooper again on the political implications of these struggles, she argues that
“Public-sector unionism is sometimes dismissed as peripheral to the real work of anti-capitalist struggle on the grounds that the fulcrum of capitalist power relations lies in the profit-making private sector. This anachronistic assumption misreads the last century of economic organization, which saw “private sector” surplus-value production massively underwritten by the state, whether through direct subventions, tax expenditures or government contracts, and thereby misses the hidden affinities between public- and private-sector unionism.”
Continuing, Cooper argues that
“as a movement that includes large numbers of women and minority workers, public-sector organizing has the potential to transcend the gender- and race-based trade-offs of earlier worker insurgencies. The sector’s visible dependence on government support—historically seen as a vulnerability—also offers unique opportunities. Public-sector movements are forced to dredge up problems which are usually submerged: the relationship between labor income, asset prices, and government spending; the distributional stakes of taxation and credit creation; the contradictory imperatives of reproducing an increasingly unequal society.”
Given the composition of labour in Australia, the issues raised by Cooper are important.
Conclusion: What does this mean?
Productivity slowdown is a real concern for the planners for capital in Australia. The concern works its way through all of the reports we have read so far. This gives reason to further explore the implications of this in terms of class and capital composition in the near and long term, and to break down this general trend to a more granular analysis in future bulletins.
Texts Cited (excluding reports listed above and below in the Appendix):
Tim Barker, 2022, Basic Questions About Brenner and the Profit Rate. Origins of Our Time (Substack)
Aaron Benanav, 2020, Automation and the Future of Work. Verso
Robert Brenner, 2002, The Boom and the Bubble. Verso.
Robert Brenner, 2010, The Long Downturn: The Roots of Crisis in the Real Economy. New America Foundation.
Chuang, 2020, Measuring the Profitability of Chinese Industry: Data Brief.
Melinda Cooper, 2022, The Last Days of Sound Finance. Phenomenal World
Endnotes, 2010, Misery and Debt: On the Logic and History of Surplus Populations and Surplus Capital
Paul Mattick, 1978, Economics, Politics and the Age of Inflation. Merlin Press
Angela Mitropoulos, 2017, The Decline of America First Socialism
Phil Neel, 2022, The Knife at Your Throat. Brooklyn Rail.
5. Appendix: Surface Conditions of Capitalism in Australia
This appendix offers a wide range of snapshots concerning the various symptoms apparent in Australian capitalism at the present moment. As we have said, the information presented here is not necessarily free from the ideological trappings of the reports they have been harvested from. It is, for instance, worth highlighting the absence of what we consider the most important category for capitalism -profit. However, we believe that collating them here will help both the development of analysis and the critique of dominant ideology: it is a presentation of the surface conditions.
General Economic Situation
Growth: (Information taken from November 2022 and February 2023 RBA Statements on Monetary Policy)
Global Inflation at multi decades high.
There is evidence of global uptick in wages.
Central banks have started to remove stimulus and raise interest rates.
Demand remains resilient but growth is forecast to slow.
Australian GDP growth in 2022 has been revised lower by around ¾ of a percentage point, to 3 per cent.
GDP growth in September Quarter was .6%.
Demand seems to hinge on consumer spending not capital investment, which is slowing.
Slowing growth in China, especially in real estate, may have negative knock on effects to Australia’s export market.
The strong US dollar, as well as rising interest rates, is making credit for corporations more expensive.
Growth shows some resilience despite Omicron and floods - this is maintained by government and household spending:
Household savings are declining.
Increases in resources and tourism.
Capital expenditure has grown but is lower than pre-pandemic levels.
Tightened financial conditions and a rising cash rate.
Australian Government bond yields have declined:
This would signal capital moving to a ‘safe-bet’ rather than a risky investment.
Employment: (Information taken from November 2022 and February 2023 RBA Statements on Monetary Policy)
The demand for labour is strong with participation and employment (relative to population) rates both rising:
Participation of the young and women is around record highs.
Thus capital struggles to find workers, with vacancies and advertisements high (though peaking in 2022).
Housing: (Information taken from November 2022 and February 2023 RBA Statements on Monetary Policy)
Dwelling investment is increasing - but supply constraints are impacting construction.
Housing prices and demand have declined - but there is a rising pipeline of incomplete construction.
Rental availability continues to decline - rental prices grew in 2022 at an average of 10% in both capital cities and regions.
Agriculture: (Information taken from ABARES Snapshot of Australian Agriculture 2022 and RURAL INDUSTRY FUTURES: Megatrends impacting Australian agriculture over the coming twenty years)
Australia is food sufficient: Non-exported production still satisfies 93% of food needs. However, 72% of output is exported.
Climate change poses severe problems for profitability: Optimistic estimates of reduction in profits (assuming rapid climate action) range from 2 to 31.9% by 2050. Worst predictions (assuming limited action) are 10.7- 49.9%. Drops in livestock profitability could be even higher.
Concentration: Fewer farms, concentration over time in large ones: ““While accounting for only 15% of the farm population in 2019‒20, large farms contributed to 72% of total farm income and accounted for 60% of the total value of output.”
Growth: 7% gross value increase due to a) Crops: Falling prices offset by volume growth through increased productivity (technologies and “management practices” – “better and more flexible labour management”, b) Livestock: Higher prices from increased demand (need for protein in emerging economies) as well as factors like drought and disease in importing countries.
Inheritance of farms is falling, as capital becomes concentrated.
Carbon storage and biofuel production are viewed as competitors in the market for land-use: This is framed as a threat to existing agricultural production .
Productivity is a concern and technological solutions are not apparent.
Prospects for heavily reducing environmentally destructive farming of animals for food products are improving.
Australia is currently reliant on some key imports required by existing methods of agricultural production: Fertiliser, chemical products, oil.
Productivity: (Information from Productivity Commission PRODUCTIVITY INSIGHTS FEBRUARY 2020 and June 2021, Treasury Round Up Overview: Understanding productivity in Australia and the global slowdown Andrews D, Hambur J, Hansell D and Wheeler A (2022) ‘Reaching for the Stars: Australian Firms and the Global Productivity Frontier’, Treasury Working Paper)
Both labour productivity and MFP in market sector fell 2018-2019; the first time since the peak of the mining boom. But this is a continuation of slowing growth since 2012-2013 (peak mining boom investment).
There are structural difficulties in automating various service sectors to improve productivity (Baumol’s ‘cost disease’). It is also harder to apply other traditional measures.
3 reasons why wages growth against consumer prices have been weak since 2012-2013:
Labour productivity growth slowed.
Consumer price inflation outpaced producer price inflation.
Labour share of income has been in a continued pattern of decline since 2000.
An overall level of weak growth, but growth nonetheless. And when broken down, it is much more varied.
Growth is linked to labour market participation, increases in hours worked, while investment remains low.
Investment is weak by historical standards.
Outside of mining, there has been little growth in investment in machinery, equipment, buildings etc. In intellectual property there has been an increase of about 5%.
The shift to a service economy may require more investment in intangible capital.
Low labour productivity in key sectors contributes to the overall slowdown: manufacturing and agriculture have had a notable slowdown and make up shrinking component of the economy. Similar, though less drastic, is the slowdown in electricity, gas, water and waste services.
Strong terms of trade (price of Australian exports over imports) has also underpinned persistent growth in spite of slowing productivity.
Productivity Gains from IT happened in the 1990s and 2000.
New tech gains may be ‘slower’
There has been a measurable decline in competition:
This is speculated as the reason for a lessening drive towards increasing productivity.
Superannuation: (RBA Financial Stability Review, April, 2021)
The Australian Prudential Regulation Authority oversees $2 trillion in assets, which is around 100 per cent of annual GDP. As of September 2022, total superannuation assets are closer to $3.4 trillion, or 157% of GDP.
Super funds “own one quarter of Australian banks short-term debt and equities and account for almost 10 per cent of banks’ deposits.”
Super funds use currency derivatives to hedge against changes in exchange rate and the risk posed to investments denominated in foreign currencies.
Approximately 35% of members’ funds are invested offshore. Around 40% of these offshore investments are hedged in this way.
When the Australian dollar loses value, the value of the derivatives declines. The upshot is that super funds have to make payments to their counterparties to meet settlement obligations with counterparties.
March 2020 saw AUD fall by 15%.
Super funds had to pay over $17 billion in margin call payments to counterparties. Around half of these payments went to the 4 big banks. Most of the rest was paid to foreign investment banks.
The RBA claim they have confidence that Australian super funds managed the need to come up with cash for margin call payments well. Because of this, they expressed confidence in the hedging strategies used.
Notably, equivalent institutions in the UK had similar confidence in the stability of pension funds prior to the recent crisis.