6 min read

Out of Luck

Out of Luck

After glancing through Saturday's Age, it seems that its time for a bit of ineffectual and self-indulgent prognostication.

Two articles provided grist. One on the state of the restaurant industry in Melbourne and the other is by Ross Gittin's on the fundamentals of the Australian economy.

Neither directly addresses the other but they are linked.

The one on restaurants describes the explosion of eating out - 15,000 eateries at the start of the century to more than 50,000 now. Much of the profit realised derived from low base salaries for workers in the industry, with obvious opportunity for avoiding penalty rates and underpayment. Big money bankrolled the development of branded celebrity chains, fuelled by reality TV. But unfortunately many players thought that growth would be endless and that business efficiencies could address the flood on the supply end. Consumers, strangely, didn't want prices to go up, and, with many choices, would dump those who were unwilling to keep prices low. Profits declined with subsequent pressure on wages. And then, along comes the call out culture of the internet, supported in the background by innovative labour organising. Poor celebrity restaurateurs. The Age, ever a champion of Melbourne culture, is concerned: "But beneath the public opprobrium and bitter industrial politics of the wage scandal which engulfed Calombaris and the company he part-owned, an industry essential to Melbourne's cultural identity and the national economy is in deep trouble .... There is no question however, that if not for the wage scandal, the restaurants would be open today.  ... The ombudsman accepted the underpayments were unintentional ... A former Made host describes a hard-bitten management culture, which, at the time, was typical for the hospitality industry ... George was nothing but lovely to me ... We were blatantly told to clock off at certain times even though we were still expected to work."

All in all, nothing fundamentally wrong, but still, its very sad that these nice big money people have lost a shit load. Happily, the assets are being snapped up by others, but get ready for increased prices at the table.

I suppose it would be asking too much for questions to be asked about what the Melbourne cultural identity position on the easy exploitation of workers is? And how it was allowed to get this way? Unsaid, but lurking in the shadows, is nascent criticism of workers spoiling the party.

Gittins, on the other hand, provides two very different perspectives on the fundamentals of the Australian economy. "Is the Lucky Country struggling?" According to the RBA's Lowe, the fundamentals are "sound" meaning that "people have jobs and employment and security". Alternatively, ALPer Andrew Leigh, provided a list of problems: declines in labour productivity, snail like wages growth, declining domestic spending, record household debt, record government debt, retail down, construction down - not a rosy picture at all. Questioned, Lowe conceded that "it's linked to very low levels of investment relative to gross domestic product. ...The simple demand-side answer is that they (businesses) haven't been seeing much growth in the demand for their products. ... I fear that our economy is becoming less dynamic .. We're seeing lower rates of investment, lower rates of business formation, lower rates of people switching jobs, and in some areas lower rates of research and development expenditure. ... there's something deeper going on, and its not just in Australia: its everywhere. At the meetings I go to with other central bank governers, this is the kind of thing we talk about. Something's going on in our economies that means the same dynamism that used to be there isn't there. ... It's the sense of uncertainty and competition that people have, and this is kind of global. Most businesses are worried about competition from globalisation and from technology, and many workers feel the same pressure. There are many white-collar jobs in Sydney and Melbourne and Canberra that can be done somewhere else in the world at a lower rate of pay, and many people understand that. So the bargaining dynamics .. for workers is less than it used to be."

Both articles glide over a brittle surface of social expectations, without being prepared to break the glass of incipient class antagonism created by the development of financialised capitalism through the past four decades. The successful implementation of policies designed to lower taxes on the wealthy, decrease regulation and reduce state spending are having an effect. Australia's high wage economy is facing significant labour relations turmoil in the next decade, as domestic capital retreats from local investment, reacting to the imbalance of income distribution created by regressive taxation, which in turn effects a decline in real demand. Low interest rates contribute to the same dynamic as housing costs accelerate past average inflation rates.

In the past, wage growth has been driven by company profits, as workers sought a better share for their labour. This link was broken following the Hawke government's accord with the Trade Union movement. The insecurity of employment created through the gig economy and labour globalisation looms in the background as international capital industriously extracts the mineral wealth of Australia, and transmits it overseas, gone in an instant, whilst a phony detente prevails between capital and labour as the sophists of labour relations meet for coffee together before the next round of enterprise bargaining. Government in Australia is a cartel of well paid bureacrats, whose main role is facilitating the extraction of profit by capital and presiding over the market rate of Australian labour. Its a tough gig but someone has to do it.

But as various articles like to describe it, the headwinds are stengthening. Australia is struggling to address the changing circumstances of capital and labour in an international economy that has seen the incomes of large populations in the BRICS nations (Brazil, Russia, India, China, South Africa) increase dramatically relative to the old world. Manufacturing industries have departed for these new worlds and the artificial creation of profit through the manipulation of financial instruments is sufficiently rewarding for the wealthy to no longer bother with capital investment in productive infrastructure. Their wealth buys the influence required to ensure that government policy skews the "rules" to allow it to continue. In capitalist terms its simple - the relative value of the Australian worker is in decline and his/her/their price is too steep.

Of course such an assessment does not sit easily with those struggling to make ends meet. The sharp end of the economy impacts those least able to bear it, hence the continuing development of social control and authoritarian welfare measures such as the cashless welfare card, which is but one part of a whole package that punishes the poor for being unemployed and reliant on state support. Such policies further divide any opposition as insecurity and survival instincts engage a grim distinction between "us" and "them". Populist tribalism is fostered through the industrial scale use of social media, funded by a variety of wealthy donors. Superannuants are lined up against millenials. Workers in stranded carbon extraction industries are lined up against the dilettantes of the inner suburbs as though their interests are worlds apart, that their demands can never be reconciled. And its not just the Libs - in the same edition of the Age, a Labor right activist, a Mr. Sidhu was quoted as saying at a private meeting - "they have all arrived by boats and as soon as they arrive they are given pensions, Centrelink and also rewarded with houses and medical services immediately."

Health and aged care face significant pressures as the private insurance scam edges closer to collapse. The demand for services is increasing, as is demand for better wages. Something has to give.

And as night follows day, politics follows the money. The old political contract is no longer sufficient. New trends emerge to take opportunity as they find it. The rise of blue collar conservatives, the likes of Trump and Bozo Johnson, will soon find their way here. Scomo is having his shot and Matt Canavan's new website is a good example of what we can expect. Labor's Otis group has stolen a march on the Libs and may well be chosen by Murdoch and international capital as the preferred vehicle in Australia to achieve a reduction in wages. We'll see.

But more needs to be done simply to stand still.

The low demand that accompanies high debt and wage stagnation has become the new normal. Labor is captive to capital and so it is unlikely that any serious attempt to alter the imbalance of income distribution will be enacted through any significant changes in taxation policy. My prediction is that we've probably reached the end of low unemployment (as currently measured) and can expect that it will rise over the next five years as a dynamic to achieve lower wages. Of course, devaluation of the Australian dollar could assist in achieving the same end, but might simply trigger other nations to follow suit.

Trump's policies emphasise US first. Britain has bailed on the common market. China is happy to buy our iron ore and coal, but will be ruthless in its pursuit of self interest. Its everyone for themselves.

The lucky country is running out of luck.