By Greg Ogle
The election of the Howard government and the re-election of the Kennett government suggest that it will be full steam ahead for privatisation. While the Democrats and Liberals may still debate whether or not there is a mandate to sell a third of Telstra, the important point is the election of the Howard government itself. Unlike the GST in 1993, the horror of selling Telstra did not dent the Liberal campaign.
At one level, this is easily understandable. It was not just hypocritical, it was laughable that Labor should run an anti-privatisation campaign after having sold Qantas and the Commonwealth Bank. But beyond Labor's credibility gap is a serious long-term problem which needs to be addressed by the left: the seeming end of any ideal of public ownership.
Yet the arguments for such social ownership are stronger than ever. That logic is based on the two factors which dominate current political economy: globalisation and the end of the Cold War.
Globalisation
Globalisation is a buzz word which has many meanings, but basically it is about the increasing integration of the global economy over the past 20 plus years. Tariff barriers have been dismantled and technological changes have made for cheaper and faster trade while money is exchanged around the world at unbelievable rates.
The role of national governments in this new global economy has changed. The old policies of national economic management are no longer viable because the driving force of the economy is no longer located within the nation. To see why, it is useful to go back to first principles.
In a capitalist economy, production takes place only when it will make a profit for the capitalist investor. More than that, substantial capital will be invested only if the return on that capital is at least equal to the possible return if the capital was invested somewhere else.
For transnational companies, that somewhere else could be anywhere in the world. Transnationals can bring capital and technology from overseas and produce in any country to service a global market. Even the local entrepreneur who has no international ambitions is bound to a global dynamic by competition from potential imports and reliance on banks and finance institutions which operate on a global scale.
The return on investment (i.e. profit) depends on the difference between the cost of production and the sale price. In a global market, the price is relatively fixed (taking into account transport prices) because of the large number of suppliers. Thus profit will depend on the relative cost of the goods and services which make up the cost of production. This includes the cost of capital, cost of raw materials and productive services (advertising, communications, transport), taxes and the cost of labour.
Large companies bring to the production process their own capital and technology and also, to some extent, their own raw materials. These will be the same regardless of the location of production. So nations compete for investment by having low labour costs, low tax regimes or low cost productive services.
The key here is the productivity of labour. It is not simply the case that Australian workers are competing against the proverbial dollar a day super-exploited labourer in the Third World. Australian labour is much more productive due to the greater capital used in production and the capital invested in labour through education and training. Productive goods and services are also more efficient due to superior public infrastructure.
Thus the competitive advantage of any country lies in the balance of production costs. For instance, if wages in Australia are $100 per unit of production, other production costs are $100 per unit and tax is $50 per unit, the total cost of production is $250 per unit. By contrast, a company looking to invest in another country may face wages at only $10 per unit of production, but relatively inefficient productive services mean that other costs are $200 per unit. If the tax rates are the same, the corporation will invest in Australia because it is $10 cheaper per unit.
This obviously creates pressure to reduce one or more production costs. A government trying to get investment may try to outbid other countries by offering tax concessions or subsidies, or by building infrastructure to reduce the cost of productive services. But all of this costs money which the government must raise, ultimately by taxation, and higher taxes on companies are a disincentive to investment.
Wages
Ultimately then, the pressure of globalisation comes to rest on wages. There is pressure to cut the social wage (i.e. welfare spending) to get an "internationally competitive" tax regime and to cut wages to "internationally competitive" levels.
This is the bottom line for governments and explains much of the policy agenda over the last two decades in Australia and elsewhere: industry policy and micro-economic reform to decrease the cost of productive services; smaller government and welfare cuts to decrease taxes; and wage restraint. Given this, it is no use blaming particular governments or hankering after old tariffs, economic regulations or Keynesian-style government spending. Economic regulation, taxes or higher wages will simply mean that capital will be invested elsewhere.
This is just as true of "Australian" capital as of "foreign" capital. Profits made by Australian companies in Australia can and have been invested overseas. In 1990 BHP, CSR, Boral and Pioneer all had between 40% and 60% of their assets outside of Australia, while BTR Nylex, Elders and Pacific Dunlop had over 60% of their assets overseas.
There is obviously some slack in this gloomy model because capital is not perfectly mobile, and there are some political constraints on government, not least because people are not the narrow economic beings of neo-liberal theory. They expect some level of social service and social justice.
However, the dynamic described above is the logic of the global system and of operating within that system. There are few options for governments. Once you accept the ground rules of a market system, the logic of competition takes over and quickly overwhelms progressive economic interventions and social policies.
But it is precisely because governments have so few options under global capitalism that we need to put public ownership back on the agenda. Public ownership means both cooperative/worker ownership and state ownership. Despite its chequered history, state ownership of at least strategic parts of the economy is an essential response to the globalisation of capital.
Public ownership is not a panacea, nor will it turn the clock back to any "good old days". But it does have some important advantages. In an era of global capital, the only really Australian capital is publicly owned capital. The profit from state industry remains within the country and can be used to support social welfare as well as for investment in productive infrastructure and enterprise. This would be an important change even if nothing else about the particular enterprise changed.
However, it is also important to note the obvious point that governments are accountable to the workers and citizens of a nation, or at least more accountable than transnational corporations whose allegiance is to an international shareholding. Thus enlarging government ownership of the economy simultaneously increases the bargaining power of labour and the extent of public/national control of the economy. Governments would have regulatory control, plus the power of ownership of significant economic resources.
Thus, simply for reasons of economic management, there is now a greater need than ever for public ownership, at least of vital sectors of the economy. However, for those who believe that capitalism is inherently unjust, irrational, warlike or ecologically irresponsible, that is, for those on the left, there is an extra reason for calling for a return to public enterprise. This reason is the need to create an alternative system in wake of the end of the cold war and the "triumph of capitalism".
Post-Cold War logic
While Soviet-style communism was not what many of us meant by socialism, its shortcomings and ultimate collapse have done enormous (and some would argue fatal) damage to the image and project of socialism. Its final demise has been trumpeted by the capitalist media, and even some sections of the left, as the death knell not just of socialism, but of any attempt at public ownership or planning of the economy.
Attempts at left renewal have not (yet) been able to develop a unifying vision of what a non-capitalist society might look like, or what socialism is about. In most people's minds, capitalism has become not just the dominant system, but the only system.
The full impact of this can be seen when we consider that within capitalist states, the "depth" of capitalist property relations is also increasing as more and more processes are brought within the capitalist system.
The most obvious example of this within Australia is the growth of service industries. Much of this growth may be in commercial fields in providing financial, marketing and consultancy services to corporate bodies, but there has also been growth in personal and retail services. Many of these now commercial services were previously provided through non-market production — often by women in the home.
Consider, for example, the production of meals. A greater proportion of meals are now produced and consumed in restaurants or as value-added "ready to eat" meals rather than in the home economy. While national accounts make it appear that total production has increased, in reality total production and consumption of meals remains the same. But production within the capitalist economy has increased. Capitalist production relations have colonised another aspect of life.
Similarly, the "downsizing of the state" through contracting out or privatisation of government services represents an extension of capitalist production relations. This is not to pretend that these services were somehow socialist, nor that the provision of these services was not functional to capital. After all, they were provided by a capitalist state. But it is to say that they are now being produced under capitalist production relations. Thus the retreat of Keynesian economics and the welfare state which globalisation has forced also facilitates capitalism's deepening hold on society.
This trend of increasing the depth of capitalist relations is evident right around the world. In the Third World it is obvious in continuing urbanisation and the transformation of subsistence agriculture to market production. The extension of western models of patent, copyright and intellectual property around the world through the 1994 GATT agreements is about the commodification of knowledge: the extension of capitalist relations enabling that knowledge to become private property capable of being "produced" and traded in a market. In some senses such a process is analogous to the commodification of land — a once commonly owned asset which was turned into property.
This colonisation of formerly non-capitalist areas of society is important because it not only strengthens capitalism as production and profits expand, but also deprives us of the space to envision and organise a non-capitalist society.
Part of any socialist strategy needs to be the building of non-capitalist space. We need to build new areas of society, including areas of production, which are not organised under capitalist production relations and not subject to the dictate of the market. This is the socialist logic for putting the issue of public ownership of production back on the agenda.
Increased public ownership would claw back some non-capitalist social space, both in the physical sense and in the sense of a vision that capitalist property relations are not the only possibility. Of course, short of revolution, the state would remain a capitalist state, and we should not underestimate the problems that this creates in achieving such a policy or in implementing it for the social good. But there are historic opportunities for us now.
Opportunities
The fact that globalisation has deprived social democrats and liberal social reformers of some of their traditional regulatory tools and exposed a more ruthless capitalism gives those non-socialist groups a reason to support public ownership. Moreover, it gives socialists a positive program upon which to form alliances with those groups.
It has been a perennial problem for socialists that alliances tend to form around minimum demands which can be implemented within the system. Socialism then gets reduced to, and identified with, a few Keynesian interventions, and socialists become just another lobby group within liberal/social democracy.
Putting public ownership back on the agenda may not be the revolution, but it is a better policy for both socialists and progressive non-socialists than the failed and failing "management of capitalism" economic and industry policies currently being pursued.
We should also recognise that the global restructuring of capitalism and its colonisation of formerly non-capitalist areas within capitalism are being facilitated by the state, and to a lesser extent by the unions. Given this, we could well demand a quid pro quo. Joint government/private capital ventures for new investment projects (where the government has the same limited liability as private capital) are one possibility.
Such projects are familiar to (though often corrupted in) the "development states" of many newly industrialising economies in the Third World. Governments negotiating equity for subsidies might be another possibility, and of course government business enterprises in new fields or in competition with private capital in established industries are another. Most obviously, the ongoing privatisations must be halted.
Finally, public ownership is not limited to government enterprises. We should learn from history that such enterprises are often a bureaucratised travesty of "public" and socialist enterprises. We need simultaneously to develop community enterprises which will be closer to our vision of a non-capitalist society and which do not require the massive capital which for now is unattainable by such enterprises.
There are numerous examples of such community enterprise which socialists can look to emulate. The Mondragon cooperatives in Spain are perhaps the most prominent, but in the Philippines and other Third World countries an identifiably economic/productive community sector is developing comprising cooperatives, NGOs and sometimes trade unions. And of course cooperatives have long been a part of the British socialist tradition.
This type of public ownership can and should be pursued by socialists right now. Marx's labelling of such plans as "utopian" should alert us to their limitations within a generalised capitalist system. However, it should not blind us to an important role they can play in building and empowering communities, countering capitalism's focus on the individual and creating non-capitalist space from which to envision and demonstrate a different society.
It is time to put public ownership back on the agenda, both as a sensible economic response to globalisation and as part of the process of socialist renewal. This is necessary and possible. The arguments over privatisation/public ownership which were lost at the last election were the wrong arguments.
These arguments, and most of the debate about privatisation over the last decade, have been constructed in terms of the prices and services to customers. Sections of the left accepted this construction and argued about the social equity considerations which arose from those prices and services. It was a hard argument to sustain where Qantas or the Commonwealth Bank appeared to customers to be much the same as their private competitors.
We now need to put socialist arguments which go beyond the logic of the market and of global capital. Ultimately, public ownership is about wealth and wealth creation. Public ownership gives people the ability to collectively meet their needs and control their future — at least more than they can under the hand of global capital. It is this public ownership which must be put back on the political agenda. [Greg Ogle is from the Centre for Labour Studies, University of Adelaide.]