Time to end the profits blow-out
"Companies don't invest in new projects for the public interest or the national good, they do it if they think the project will make a quid", notes Australian industrial correspondent Peter Wilson, in response to calls by the federal government and ACTU for business to reinvest some of its massive profits.
The Financial Review's Neil Chenoweth informed us on March 18 that net profits for listed companies were up 33.5% for the year ending December 1993. Further, he says, "with total dividends announced up by 58 per cent ... [this] suggests that much of the benefit of the corporate tax cuts may have been passed straight to shareholders". Tax concessions to companies amounted to $390 million last year.
The calls to reinvest, accompanied by lame threats of a wages break-out, made by Paul Keating, some of his ministers and ACTU president Martin Ferguson, are an admission that the Prices and Incomes Accord has failed workers.
Thanks to the Accord's Robin Hood-in-reverse strategy, devised and policed by the Labor Party and the ACTU, the share of wages and salaries in national income fell from 74% to 63.3% in the first seven years of the Accord, while profit share rose from 26% to 36.7%, according to the 1989-1990 Treasury budget papers.
The hope was that business would in turn productively reinvest its windfall profits. But the employers took the money and went out to an extended lunch — they have to yet to return. Business investment remains at a 20-year low.
And why should business bother to increase production when both the government and the ACTU are eager to further extend profits through, further tax cuts and/or deeper cuts in living standards? The latest scheme to drive down wages comes in the guise of a "training wage" for the long-term unemployed. This scheme, which has the backing of the ACTU, will result in business laying off workers on award wages and replacing them with workers on government-subsidised training (lower) wages.
Later, Ferguson was forced to back-pedal furiously on statements suggesting that the ACTU might not be able to control a wages break-out (departing from any script is fraught with danger, particularly for the untalented). For as Wilson points out in the March 19-20 Australian: "[T]he Accord has replaced the Industrial Relations Commission as the only institution that has any hope of restraining wages during the economic recovery". In other words, all that stands between working people and wage justice is the Labor government and the ACTU.
There is never a good time for a pay rise according to business and its defenders in the ALP-ACTU: during a recession workers are told their pay rise is at the expense of another person's job; in a recovery period, wages will kill investment prospects; in the brief space between one recession and the next, when the economy is "booming", any increase in pay will drive up inflation and tip the economy into recession. This is a win-win situation for employers.
What we have witnessed in the 11 years of the Accord is a profits blow-out. Wage rises can be won — the money is there — but it will mean breaking free of the ACTU Accord straitjacket to achieve a result.
Even in conventional economic terms, a transfer from profits to wages would be more effective in creating some new productive investment through increased consumer spending.
But ultimately, investment decisions are too important to be left to business shareholders, whose sole motive is profit. Investment needs to be the political business of the community at large. As long as it isn't, our futures will continue to be held to ransom by the greed of a small minority.