Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Government tactics

By John Passant - posted Monday, 17 March 2008


The assumptions underpinning the sub-prime business model have proved incorrect.

For the first time in 40 years housing prices in the US fell last year. Repossessions increased 75 per cent, with about 2.2 million households possibly impacted. Unemployment in the US is on the increase. Real wages have increased only 5 per cent over the last 15 years. Minimum wages actually fell 6 per cent.

Falling interest rates in the US are being offset by credit rating increases. Standard and Poor’s recently revalued the credit rating of 8,000 US companies - making the cost of borrowing by them more expensive because they carry risk exposure to the sub-prime crisis or are heavily indebted.

Advertisement

Standard and Poor’s estimates are that the amount at risk in the US at the moment through the financial crisis is $285 billion, with possibly more to come.

The US Keynesian Paul Krugman describes what is going on as a Wyle E Coyote moment. The sub prime crisis is the last mountain cliff and now US capitalism is busily scuttling in the air about to fall into the abyss.

Australia’s boom, while it might slow down thanks to the US recession, is still in its expansionary mode. But the warning signs are there. Debt - both business and personal - is at record levels. While debt can extend booms, when the market reaches its credit extended limit, the crash is worse.

The impact of the US slowdown is likely to cut 1 per cent off Chinese growth. The growth rate has been revised down from 11.4 per cent to just under 10 per cent. Inflation there is gathering pace. Chinese unemployment is hidden in official figures but is probably more than 10 per cent in the cities. Sporadic outbreaks of strikes and other struggles are repressed or bought off.

Like China much of Australia’s growth is domestically generated. But there are real dangers to that continuing in the next two years.

Our present housing boom is unsustainable. Housing affordability is at record lows. The RBA will increase interest rates again during the year to fight the inflation ogre, a paper tiger really. Increasing investment and falling profit rates generate inflation.

Advertisement

Unemployment in Australia may rise in 2009 as capital becomes more expensive for companies and personal borrowers in Australia. That is the RBA’s intention.

Labor will try to drive wages down to protect profits. For the first time in my life I agree with Sharan Burrow. Cut profit, not wages, she supposedly said. To do that workers need to organise in the good times to force higher wages out of the bosses, to help tide them over the lean times.

Booms and slumps are a natural consequence of the profit system. Nothing King Kevin Canute does will address this. Only a radical transformation of society can do that. For the HowRuddistas such a suggestion is anathema.

Instead the ALP will attack workers wages and conditions in the hope this will increase profit rates. It is no coincidence that the day after the Apology and the euphoria it created, both Rudd and Gillard began talking about wage restraint.

The tactics of this Government are becoming clearer. They will use (more or less) cost free social changes to distract from their real agenda - shifting the burden of capitalist booms and slumps onto workers to help the bosses make more and more profits.

So I was wrong - Rudd’s 2020 will have some giggles for the participants, but the working class will be the object of its big hits.

  1. Pages:
  2. 1
  3. Page 2
  4. All


Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

6 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

John Passant is a Canberra writer (www.enpassant.com.au) and member of Socialist Alternative.

Other articles by this Author

All articles by John Passant

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of John Passant
Article Tools
Comment 6 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy