Dr. David Paul Bennett analyses the how and why of political leaders failing in times of acute crisis when they should and do know better. The areas of analysis are Australia’s disastrous transition to rent-seeking and the impending epic Greek tragedy of the collapse of the Eurozone.

The Slippery Slope to Rent-Seeking Ruin

Whatever the veracity of the civil and criminal allegations against the Federal Speaker, the Honourable Peter Slipper, the timing of their being made against him is not surprising. Since the deposition of Malcolm Turnbull as federal Liberal leader in late 2009, there has been a pattern of political events leading Australia toward having a rent-seeking political economy. Consequently there is a paradoxical mediocre predictability to the May/June 2012 parliamentary sitting being so dramatic.

This parliamentary drama fits into the pattern of political co-ordination between power-brokers in both parties bringing Australia closer to a new rent-seeking regime which can clearly be traced back to the demise of the Howard government in October 2007. The reasons, of how and why the Howard government was sabotaged from within, have been detailed in previous Social Action Australia articles, but will be re-capped for contextual relevance at this potentially dangerous juncture in Australian history.

Even though the Liberals could have easily won the 2007 *federal election, Howard’s political value had expired with regard to facilitating a rent-seeking agenda. Because there was little, if any prospect of either John Howard or Peter Costello as prime minister after the 2007 election introducing a super-profits mining tax and establishing the subsequently needed Sovereign Wealth Funds (SWFs) necessary for a rent-seeking regime, an ALP election victory was engineered in 2007.

(*Due to the 2005 passage of the Work Choices legislation, it was a positive development that the coalition lost the 2007 federal election).

Inter-party manipulation between the rent-seeking elements within the two major parties resulted in the Rudd government establishing an overdependence on mineral extraction as a source of revenue. To help ensure this dependence, the Rudd government was manipulated during the 2008 Global Financial Crisis (GFC) to wastefully spend funds which massively in-debted the nation. The consequence of the resultant massive public debt is that Australia has moved to a two speed economy.

The Rudd government (and now, an unfortunately coerced Gillard government) plunged Australia into a debt spiral of borrowing that, unless stopped, will consolidate a transition to a rent-seeking economy where mineral extraction is the major source of revenue. This state of affairs is even more outrageous because the legacy of the Howard/Costello era of paying off Australia’s massive public foreign debt and the four pillars bank policy essentially insulated Australia from the 2008 GFC such that the debt inducing spending splurges were not needed.

A Balanced Economy: A Barrier to Rent- Seeking

Indeed, the sinister dimension of the deliberate in-debting of Australia has been to remove one of the positive barriers to rent-seeking: having a balanced economy. A balanced economy in the Australian context has traditionally been facilitated by there being a domestic viable goods and services sector and exports for Australia’s valuable produce and minerals. This balance was first established in New South Wales following the Rum Rebellion in the 1800s and socio-economic reform that ensued in Victoria in the 1850s in the aftermath of the Eureka Stockade incident.

The Australian colonies and the nation after federation in 1901 have been able to maintain the invaluable balance between having a viable secondary domestic goods and services sector and a primary produce export market. In contrast to so-called ‘Banana Republics,’ Australia’s high standard of living has weathered fissures in international demand for primary exports due to there being a viable domestic sector. A prime indicator of the health (or otherwise) of the Australian domestic sector has been the generation of high levels of employment.

The massive unemployment levels that afflicted Australia with the collapse of the wool price in the 1890s plunged the soon to be founded nation into its worst ever social and political crisis. Without going into the minutiae of political machinations, elements of the Melbourne and Sydney establishments crucially supported in the 1890s the move to Australian federation so that there could later be a high wage paying arbitration system to vitally support Australia’s domestic sector.

A paradox of Australia’s arbitration system was that its *foundation was supported by employers who actually wanted to pay higher wages to bolster Australia’s domestic economy to safeguard against downturns in demand for primary and minerals exports. The arbitration system that came into being was conducive to unionisation because smaller craft based unions were able to register with the Industrial Relations Commission (the Commission) and thereby utilize arbitral supports to gain higher wages and improved working conditions for employees in their areas of coverage.

(*The establishment of Australia’s arbitration system was crucially facilitated by the passage of the 1904 Conciliation and Arbitration Act and the new Commission issuing the wonderful Harvester Decision of 1907 that ensured payment of minimum award wages).

An important Australian politician who appreciated and supported the arbitration system was *Sir John Mc Ewan who was leader of the Country Party (the contemporary National Party) and Deputy Prime Minister of Australia between 1958 and 1971. Mc Ewan was a dairy and later a sheep farmer in the 1920s and 1930s in Victoria’s Goulburn Valley. As an initially struggling farmer, Mc Ewan realized that government assistance could make the difference between economic success and failure. To Mc Ewan, government assistance to farmers, such as help with irrigation, was not charity or wasteful welfare spending but a means by which they could be economically productive to the nation’s overall benefit.

(*Due to Mc Ewan’s personal integrity, his nickname of ‘Black Jack’ Mc Ewan will not be used in this article).

Mc Ewanism: Employment All Round

Sir John Mc Ewan’s philosophy of state support became known as ‘Mc Ewanism’ and extended from the rural sector to manufacturing. As minister for commerce and agriculture and later minister for trade in the 1950s, Mc Ewan bolstered the policy that became known as ‘protection all round’ by which domestic Australian manufacturing was supported by applying taxes (i.e. tariffs) to imports to make domestically manufactured goods comparatively cheaper.

The veteran Country Party politician measured economic success by the gauge of employment generation. For this reason, Mc Ewan supported migration (which much of his base was weary of) to Australia as a crucial support in generating goods and services in an employment generating economy.

It is still underappreciated in Australia that Mc Ewan was as important, if not more so than the great Australian Labor Party (ALP) Minister for Immigration of the 1940s, Arthur Calwell, for the massive post-war migration that crucially boosted Australia’s population. Mc Ewan supported migration to Australia between the 1950s until his retirement in February 1971 to boost the nation’s economic base because he realized that a sufficient population base was needed to purchase locally manufactured goods and primary produce.

The current economic and political orthodoxy in Australia is such that Mc Ewanism is condemned as economically irresponsible by allegedly making Australia economically uncompetitive. But local manufacturing did not have to be internationally competitive, to be economically viable. The measure of such effectiveness was (and should be) whether the nation’s domestic sector can support high levels of employment growth. Sir John Mc Ewan applied the criteria of employment generation as to whether protection, industry assistance and subsidies for the rural sector should be provided.

It is now futile to indulge in analysis of the overall soundness of ‘protection all round’ but the underlying objective of Mc Ewanism, to bolster and sustain employment levels, was economically sound. Consequently Sir John Mc Ewan achieved the amazing balance in public policy between being generous and economically strengthening the nation. Indeed, these two outcomes were mutually supportive.

Mc Ewan’s positive impact was reflective of Country Party MPs then genuinely reflecting their constituents’ interests. Contemporary National Party state and federal MPs in the main still do an excellent job in representing people who live in their electorates. However, in contrast to Sir John Mc Ewan, contemporary National Party parliamentarians might take opportunities to advance their interests at the expense of those they represent.

Due to the importance of exports to the rural sector - and Australia for that matter-, Country (and later National) Party MPs supported trade initiatives. As such, Mc Ewan was an excellent trade minister. A major problem that now confronts Australia is that due to the nation’s over-reliance on a currently mercantile PRC, Chinese SOEs may gain control of Australian farm land with the connivance of National Party MPs.

Political Mc Ewanism: Constituents First

National Party parliamentarians have very effective communication links with their constituents such that they are aware of any sources of discontent. This does not necessarily mean that senior leaders of the Nationals will not sell out the interests of their supporters. There is still however a plausible scenario in which they (i.e. National Party parliamentarians) could put their self-interests before their constituents in rural and regional Australia.

Nationals’ parliamentarians have warned against Chinese SOEs gaining de facto control over Australia’s food exports via buying prime agricultural land. This credible warning by National Party parliamentarians has been qualified by their making the reasonable point that, while care should be taken with regard to preventing foreign control of Australia’s vital agricultural land, food exports to mainland China should not be jeopardized. In this context, people living in rural and regional Australia have every reason to wish to be assured that ‘their’ party is representing their interests. However the contemporary National Party is not the Country Party of Sir John Mc Ewan!

There are federal and state National Party MPs who cynically regard international trade agreements as means of advancing their economic and political interests at the expense of their supporters and of the nation’s genuine national interest. Therefore, National Party rank and file members and those living in rural and regional Australia should take great care to ensure that any ‘grassroots’ campaigns conducted in their communities are run by them and not by the parliamentary staffers of National and Liberal Party MPs.

It would be a tragedy if concerned citizens in rural and regional Australia fell for the Lasch strategy trick of ceding overall responsibility for campaigns to political operatives who really have an interest in ensuring that the opposite result is actually achieved. There is currently a prominent campaign being spearheaded by radio commentator Alan Jones against big corporate mining companies gaining control of properties to undertake coal seam mining.

Opponents of coal seam mining have correctly warned of the dangers of some of Australia’s best agricultural land being acquired by mining companies in terms of the fatal economic and environmental damage that will happen if this occurs. The Jones led campaign is galvanizing local communities against the power of corporate mining interest by articulating their legitimate concerns and highlighting the courage of individuals and families in fighting to remain on their land.

Jones’ attempts to launch a similar campaign against the carbon tax have not yet had the same success because the ill-effects of this terrible impost have yet to become apparent. Nevertheless, a future critical mass is in the making of Australians who might very well be at the vanguard of supporting a populist right even though the rent-seeking interests within the coalition parties might well have secured their sectional interests at the expense of the broader common good.

Another major threat to Australian regional and rural communities is that of cheap food imports coming into Australia and the crippling debts that afflict too many farmers. It seems illogical that state and federal governments are not supporting regional and rural Australian communities when the fundamental economic importance of Australian agricultural exports is considered.

The reality of the situation is that, from a rent-seeking perspective, it does not matter if Australian farmers are in-debted or consumers buy more expensive imported agricultural and primary produce as a result of the comparatively weaker position of the domestic sector. This is because the main role of the primary sector is to export . From a rent-seeking perspective, the major challenge is to establish trade links that advantage the trading partner but consolidate the power of the economic-political elite.

Under a rent-seeking regime, people are essentially the collateral to gain the financial credit worthiness to do business. If the transition to a rentier state is consolidated then the trading merchant arms of banks will become their major revenue raiser through investment in mining and involvement is SWFs. In this context, having an in-debted rural sector will contribute to elite consolidation.

Indeed, why have family owned farms when there can be foreign owned corporate commercial farming operations that can efficiently service export needs? Although communities in regional Australia are courageously opposing coal seam mining, those who are engaged might actually be surrendering control not only of their own destiny and in doing so undermining the interests of farmers and small businesspeople in regional Australia.

Political Self-Reliance is Another Barrier to Rent-Seeking

So, yes, communities threatened by the coal seam gas mining should move against the ALP if the Gillard government takes control from the states for mining and exploration on Australian land. However, the real danger is that of the predominately anti-state New South Wales government of Barry O’Farrell ceding power for mining rights to Canberra so that a future Abbott or Hockey coalition federal government can later grant mining rights to Chinese SOEs.

In the interim at least, the campaign to protect Australian farms against coal seam gas mining could create the circumstances by which state mining royalties are ceded to the Commonwealth to ostensibly ward off foreign interests. Such a development (as previously analysed in Social Action Australia articles) would be crucial to making Australia a rentier state.

If people in communities threatened by coal seam mining really want to protect their interests, they should exchange email addresses with each other and network among themselves to ensure that they are not manipulated by cynical political hacks. There should be a genuine grass roots campaign against coal seam mining. Such campaigns should seek to ensure that the states deny corporate mining giants instead of allowing state governments to effectively surrender power over mining and exploration rights so that economic power is centralized power based in Canberra.

The ill-effects of centralized power in Canberra undermining Australia’s economic and social interests by undermining a balanced economy were manifested by the Whitlam, Hawke and Keating ALP governments and by a predominant power group within the Howard government.

Because so-called economic rationalism was (or is really) intertwined with corporatist rent-seeking, the real impact and policy intentions of the Hawke government warrant analysis. This is because it was under the Hawke government the dangerous shift to corporatism commenced and was consolidated. Whether the Gillard government can break with the power of corporatism will be the ultimate determinant of its success or its failure.

The Hawke-Keating Era: The Nexus Between Economic Rationalism and Rent-Seeking

The so-called ‘economic rationalist’ ideology of the Hawke government (which was elected in March 1983) dropped the policy objective of achieving high employment. The remarkable aspect of Robert (‘Bob’) Lee Hawke’s political career was that he and his Treasurer Paul Keating managed to get away with undermining full employment during their respective periods of political ascendancy between 1983 and 1996.

As Australia’s once leading trade unionist, it was strange that Hawke, as prime minister (who served as ACTU president between 1969 and 1979) crucially helped facilitate the down grading of the value of labour and employment. When he became prime minister in 1983, Hawke’s main priority was to avoid a massive inflationary wages break out as had occurred under Whitlam. To achieve wages stability, Hawke negotiated a series of agreements between his government and the ACTU for which, in return for social concessions (such as Medicare), the Australian union movement supported wages restraint.

The social concessions and at times generous welfare reform of the Hawke-Keating era (1983 to 1996) was an important reason why the ALP maintained its political ascendancy during this time. There was a certain genius to improving the nation’s social welfare system while economic capacity was simultaneously undermined by tariff cuts and tight monetary policy to service Australia’s growing foreign public debt. But it was by chalking up this massive debt that the governments of the Hawke-Keating era were able to fund substantial welfare benefits and deliver social concessions.

The corporatist approach of negotiating with the Australian union movement soon extended to the business community as represented by industry groups and employer associations. With the backing of some elements of big business and due to the general co-option of the Australian union movement, the Hawke government embarked on a series of neo-liberal economic reforms which took the Australian economy and employment patterns on a roller-coaster ride.

The exercise of corporate power under the Hawke, Keating and Howard governments was opaque. Sir Johannes Bjelke (‘Joh’) Petersen for all his skill in exercising power as the master of Queensland politics as premier between 1968 and 1987 did not understand how power was covertly exercised during Hawke’s tenure as prime minister. Sir Joh considered Hawke’s 1983 National Economic Summit and the 1985 National Tax Summit as exercises in weak leadership.

The Queensland premier did not understand how Hawke as prime minister could withdraw his support for a Goods and Services Tax (GST) because a majority of the participants at the 1985 National Tax Summit opposed this tax proposal. For Sir Joh, who more often than not (but not always) imposed his will on his party and cabinet to accept his ideas, it did not make sense to drop an important policy proposal because there was an insufficient consensus at a policy summit!

Power dynamics for Bob Hawke were different to those of his avowed political enemy to the north. For Hawke, there had to be an elite consensus before important economic reforms were undertaken. Prime Minister Hawke regarded political parties and the media as actors that were ultimately beholden to powerful interests, which in turn had to be placated if power was to be maintained and exercised.

The former ACTU president probably did not consider the government’s post-1988 union amalgamation policy as adverse to unionism despite it precipitating massive de-unionisation because too many employees refused to transfer their allegiance to new amalgamated unions. From Hawke’s perspective, union power was enhanced because industry based unions could be accommodated within an emerging shadowy corporatist elite.

Whatever Hawke’s motivations in supporting union amalgamation, this policy disaster was instigated by the Marxist left of the Australian union movement and pre-predominately supported by the union movement’s right wing (within the polity of Australian unionism) which was bereft of a social democratic sense of direction in relation to union purpose. There was union influence and power under Hawke, and to a lesser extent under Keating. This was probably reflective of the short-term increase in union power under a corporatist model of government where larger organisations almost by definition have power.

A major problem of corporatist government is that important decisions are made without the general public knowing, let alone their interests being taken into account. Eventually feelings of alienation become such that the contradiction cannot be maintained and elitist governments are voted out in landslides. The Liberals could not have won the March 1996 election had Howard as opposition leader not tapped into widespread public disenchantment with the campaign slogan, ‘For All of Us’.

Neo-Liberal Corporatism

The 1996 election slogan was an implicit repudiation of the elitism of the federal ALP’s corporatist approach to governance in which amalgamated industry unions, corporate business and public service ‘mandarins’ seemed to formulate public policy regardless of the negative impact of economic policies on people’s standard of living and future aspirations. As time would tell, the Howard government continued on with an essentially corporatist approach to government.

The important difference with regard to the exercise of corporate power between the Howard era to that of the Hawke/Keating period was that unions were not only excluded from government power structures but their right to meaningfully exist was challenged. For all the power that corporate business gained under Howard, his underlying political position was really weak. The former prime minister did not realize that the business elite that he had supported was prepared to dispense with him as part of the process of transitioning to a rentier state.

The power of this business elite (which is now essentially encapsulated in the Australian Mines and Metals Association, AMMA) was prepared to sacrifice having an anti-union federal government in favour of a novice ALP one which would abolish (or at least prepare the groundwork for the abolition) of states crucial to Australia becoming an in-debted rentier nation that is mainly dependent upon its mineral exports. There were of course inconveniences that such an ALP government would throw up, such as the repeal of Work Choices (sic) with Fair Work Australia (FWA). But these inconveniences were to be endured so long as the essentials for a rentier state were established by the Rudd government.

Prime Minister Kevin Rudd (2007 to 2010) did try and stand up to rent-seeking pressures and for a time did so because the ALP appreciated that the public probably would not have transitioned from the coalition had he not been their leader in the October 2007 federal election campaign. Alas, Kevin Rudd was unable to withstand the changed dynamics that came with Abbott’s ascension to the Liberal leadership in late 2009.

A source of Abbott’s comparative strength was his preparedness to lose the 2010 federal election as part of the process of his establishing a framework for a later political ascendancy. The real test of Julia Gillard’s prime ministership is whether she will be able to withstand the political ascendancy of Abbott opposition leader by stopping Australia’s transition to a rentier state. A major problem with becoming a rentier state (such as Venezuela) is that, once that status is obtained, it is almost impossible to escape from. This is due to incapacity to service a nation’s public foreign debt with a weakened non-mineral sector and the political elite’s determination to maintain its political ascendancy.

As reprehensible as the Howard-Costello’s government’s industrial relations policies and hostility towards state were, for a time at least, Australia avoided becoming a rentier state because the public foreign debt was paid off. This achievement helped reverse the massive suffering that the *‘reforms’ of the Hawke-Keating era, such as floating the Australian dollar, reducing tariffs and implementing micro-economic reform had inflicted on economically vulnerable Australians.

(*The transition to enterprise bargaining that commenced after 1988 was the only industrial/economic reform that had the potential to really boost employment and achieve higher wages by helping engineer productivity gains).

During the Hawke/Keating era farmers became indebted, ‘low’ skill and ‘unskilled’ labour generally transitioned to precarious employment and small businesses and average earning mortgagees were slugged with crippling interest rate repayments which were a result of high levels of foreign debt that the government irresponsibly chalked up. The positive socio-economic dividends of the Accord mitigated the effects of so-called ‘economic rationalist’ policies such that the ALP’s voting base remained intact.

Chronic disunity in the Liberal Party between 1983 and 1995 as a result of leadership rivalry between Andrew Peacock and John Howard helped secure swinging voters to the ALP during the Hawke/Keating era. Mr. Peacock’s failure to win the March 1990 election and the Liberals refusal to return to John Howard seemed to end the Peacock-Howard division. However, the super-economically rationalist John Hewson as Liberal leader frightened too many swinging voters at the March 1993 that they decided to stick with the ‘devil they knew’. Even so, the ALP came with thirteen hundred votes of losing the 1993 federal election which was testament to the extent of hostility toward Labor.

The continuing economic rationalism of the Howard government (1996 to 2007) for many Australians made it seem that they had been conned. The Howard government would have been a one-term wonder had it not been for understandably wary former ALP supporters voting for the extremist far right One Nation (sic) Party of Pauline Hanson at the October 1998 federal election.

By the time of the October 2001 election, One Nation had expired as an electoral force but the fear remained that too many economically vulnerable Australians were still distrustful of the ALP based on its previous record in power. This enabled Howard to ‘dog whistle’ by exploiting the Tampa con to ensure the direction of former Hanson voters to the coalition. At the October 2004 federal election, living standards had improved that the Liberals were in a position to win. This still might not have occurred had the Liberal Party election campaign not cleverly exploited public concern over the suitability of then ALP federal leader Mark Latham to be prime minister.

Super ironically, when the economy was really doing well as reflected by high employment, low inflation and buoyant consumer demand, the Liberals lost the October 2007 election that they should have won.

The federal coalition’s defeat was also paradoxical because the Howard prime ministership had retrospectively bolstered the credibility of the Hawke government due to the coalition government’s stupendous achievement in paying off Australia’s public debt which (for reasons already analysed) boosted employment and economic growth that seemingly vindicated the economic and industrial reforms of the Hawke-Keating era.

2007: The Return to Rent-Seeking?

Whether the Rudd government and now the Gillard government are economically rationalist, is a moot point. The fact is that the ALP since returning to office federally in 2007 has ratcheted up a massive foreign public debt that will ultimately be economically unstainable. Perhaps Kevin Rudd and Julia Gillard are to blame for this fiasco? Maybe. But it should not be forgotten that Rudd was put into office to facilitate the introduction of a rent-seeking state.

Whatever the faults might have been of a continuing post-2007 Howard or Costello government, neither leader would have deliberately increased Australia’s public foreign debt or introduced what will ultimately be a dud super-profits mining tax. That is not to say that there are not elements within the federal Liberals who do not desire these two policies- they just want the ALP to do the dirty work for them. The current state of play is such that the ALP federal government is currently on course to establishing a rentier state that will eventually alienate the public from * ALP for at least a generation.

To Kevin Rudd’s credit, he did initially attempt to resist the dismemberment of Australian states so that state mining royalties could be eliminated thereby clearing the way for a super profits tax mining regime (crucial precursors to Australia becoming a rentier state). However, Tony with Abbott as opposition leader, the political dynamics became such that Prime Minister Rudd unfortunately went along with a so-called ‘Health Funding Agreement’ in June 2010 in which GST revenue was to be clawed back from the states.

The impending disaster of Australian states being dismembered that the ‘Health Funding Agreement’ heralded was apparent with the move by Rudd to introduce a Resources Super Profits Tax (RSPT). An RSPT would have eventually enabled the three big mining companies of BHP-Billiton, Xstrata and Rio Tinto to establish a triopoly because each of the three mining companies had the economies of scale to put in place tax minimization policies to give them an unfair business advantage.

A sinister and disastrous dimension of an RSPT providing the big mining companies with an unfair comparative advantage was that this would be connected to trading arrangements with State Owned Enterprises (SOEs) of the Peoples Republic of China (PRC). Fortunately, the new Gillard government avoided the pitfalls of destroying Australia’s international trading advantages by ditching an RSPT.

But, due to pressure from rent-seeking elements within the ALP led by federal Treasurer Wayne Swan, a Mineral Resources Rent Tax (MRRT) was adopted which supposedly imposes a super-profits tax on the mining of iron and ore, as well as coal. It is only a matter of time before Swan moves to re-introduce an RSPT to compensate for his disastrous mishandling of the Australian economy. But if political power in Australia is to be re-directed by converting the nation into a rentier state via a RSPT, then the domestic economy must be undermined – hence the introduction of the carbon tax.

The carbon tax will be not be a dud tax in terms of its impact in destroying *jobs and causing unemployment. The destruction of small and medium businesses that a carbon tax will wreak on business has been openly foreshadowed by the Greens Senator from Tasmania, Christine Milne. Senator Milne (who recently became the Greens federal leader following the retirement of Senator Bob Brown) implausibly claims that a sufficient quantity of jobs will be facilitated by the creation of new low carbon emitting green industries.

(*Australian employment is already fragile due to Swan’s GFC spending splurges in-debting the nation, thereby precipitating a high interest rate regime which is a crucial determinant of Australia now having a two-speed economy).

The reality will be that impost of the carbon tax will destroy jobs of economically vulnerable Australians by driving up business costs. Billions of dollars in borrowed money will be squandered on so-called Green industries. The only real ramification of such expenditure will be the formation of self-serving Sovereign Wealth Funds (SWFs).

SWFs are essentially investment pools of private and state funds. These funds can be established for different sectors of the economy and will be administered by government appointed boards of industry and government representatives. Management boards of SWFs could also have representatives of industry unions on them and representatives of the hard left on them depending on the political orientation of the government.

It is probable that the ALP will be allowed by the rent-seeking Abbott Liberals to stay on in office until the next federal election to establish the fundamentals for a rentier state, such as a SWF. Whether the rent-seeing elements within the ALP and the Abbott Liberals allow Julia Gillard to remain prime minister is an open question. Prime Minister Gillard is someone who would not wittingly do harm to others, let alone the economically vulnerable.

The prime minister is probably not supportive of the rent-seeking agenda that is being forced on the nation by a destructive carbon tax, a dud super profits mining ‘tax’ and the establishment of SWFs. An indicator of the extent to which the federal government is pursuing a rent-seeking agenda is reflected by the power of the Department of Climate Change (the Department of Rent-Seeking) and the Department of the Regions. The federal minister for Rent-Seeking is Greg Combet, a former ACTU National Secretary. The federal minister of the Regions is Simon Crean, a former ACTU president and Labor federal leader.

The Rent-Seeking Threat to Australian Trade Unionism

Both Combet and Crean represent(ed) the respective worst elements of the right and the left alignments within the ACTU. As president of the ACTU between 1985 and 1990, Crean (who was a former Industrial Officer with the Storemen and Packers Union, which is now the National Union of Workers, NUW) established the groundwork for the union amalgamation de-unionising process in the 1990s. The ramifications of this de-unionisation process were a weakening of the bargaining power of Australian wage earners with a quarter of the workforce now being precariously employed.

Combet was the ACTU National Secretary between 2000 and 2007 but it was as a Senior National Industrial Officer with ACTU that he gained national recognition during the 1998 waterfront dispute between the Maritime Union of Australia (MUA) and the Patricks corporation stevedoring company. The stakes were high in the 1998 waterfront dispute because the then Employment Relations Minister Peter Reith had an agenda of destroying nationwide employee entitlements by attacking the unproductive work practices that the MUA had secured for their members at Australian ports.

The Reith agenda of destroying employee entitlements was actually thwarted because Patricks chief Chris Corrigan accepted federal government support to take on the MUA to negotiate a more productive enterprise bargaining agreement. That is not to say that the MUA should not have initially opposed the federal government’s anti-employee entitlements agenda. However, it would be delusional to believe that the MUA triumphed over the Patricks Corporation which ultimately achieved its preferred enterprise bargaining outcome.

The contemporary relevance of the 1998 waterfront dispute is that Greg Combet as Minister for Rent-Seeking may actually be repeating history by clearing the way for corporate business to ultimately dominate a rentier state. There may be elements in the hard left of the ALP and the Greens that really believe that SWFs will become the new drivers of economic and political power after small and medium (and possibly some big businesses) are destroyed by the cost impact of the carbon tax.

The hard left of the ALP’s Socialist Left (SL) and the Greens may have a power gain by gaining access to billions of dollars via connections to SWFs. But the disastrous economic impact of the carbon tax will be such that the ALP will be electorally pulverized. The ALP might be able to take refuge in new regional bailiwicks after its national vote deservedly plummets. This decline in public support will be due to the ill-effects of the carbon tax and the high interest rate regime being inflicted on Australia to service a massive public foreign debt.

But, if the ALP is to politically adapt in regionalized rent-seeking Australia, then there will have to be a viable Australian union movement. This might not be the case as the political theatre of Peter Reith’s ‘defeat’ at the Liberal Party’s 2011 Federal Council for the national presidency of the Liberal Party sent out a powerful signal to anti-union elements within the coalition to reactivate. The collapse of the ALP vote during the course of the next federal term will be symptomatic of public hostility (to say the least) of the labour movement, including the trade unions.

The job destroying impact of the carbon tax will be such as to cumulatively undermine employee bargaining power so that Australian union effectiveness will be threatened. I hope that pro-labour Australians will believe my assurance that there are some very smart and dedicated anti-union operatives within the Liberals who are preparing to utilize positions of power within a future Abbott government to destroy Australian unionism and destroy the restored arbitration system of Fair Work Australia (FWA).

Will the Greens Support the Environment or Rent-Seeking?

Due to the comparatively low ALP voting primary base of 30%, there is the plausible prospect that the Greens (with Liberal Party preferences) will win the balance of power in the House of Representatives. The elevation of Senator Milne increases the prospect of the Greens winning federal lower house seats. The senator is verbally articulate (if shrill) with an apparent encyclopaedic knowledge of the science of climate change. She also has a supposed understanding of how a carbon tax and an ETS will transition Australia to having low carbon emitting economy with high employment levels.

At the next federal election Senator Milne, will undoubtedly run on a platform advocating that billions of dollars be allocated to establish new low carbon emitting industries. The senator will probably emphasize her passion for a new Green economy (which the carbon tax will help make way for by destroying established industries and services regardless of their level of carbon emission) during the next federal election campaign by claiming that millions of new jobs will compensate for the massive losses in traditional manufacturing and service sectors of the economy.

Indeed, with Liberal preferences and a plummeting ALP primary vote, the Greens stand a plausible prospect of winning a substantial number of lower house seats at the next federal election. If the Greens win House of Representative seats at the next federal election, then there is a good chance that their new deputy leader Adam Bandt will be well positioned to become a federal minister and de facto (if not formal) leader of the Greens should they win the balance of power.

Bandt is the currently the only Green member of the House of Representatives. Consequently, he cannot presently advance politically unless his party progresses from being a Senate based political operation to one with lower house federal seats. It would be ironic if Senator Milne’s leadership of the Greens helps them win lower house federal seats which result in her eventually being supplanted by Bandt.

The member for Melbourne probably has sufficient skill to establish and then utilize a network that would crucially contribute to the establishment of a rentier state. But the nature of a rentier state by definition is one in which the generation and distribution of wealth is restricted to a minority at the expence of the general good. Such a political economy would so fundamentally violate the Australian ethos of a ‘fair go all round’ that the ALP and the Greens will be justifiably later consigned to electoral oblivion.

The above scenario is possible if Lasch type political parties, such as the purported Democratic Labor Party (DLP), garner votes from disaffected former ALP voters (and Liberal Party supporters who live in safe Labor seats) due to the socio-economic dislocation caused by rent-seeking. The net result will be that, to put it mildly, the ALP’s future prospects for continued viability will be questionable.

For all the manifold faults of the ALP (which have been particularly evident since 1955) this party has still fulfilled a vital role in sustaining a two-party system based upon a broad political dichotomy between labour and capital which has served as an invaluable barrier to rent-seeking in Australia. The ALP also has a proud tradition of supporting industrial arbitration which was commendably manifested in 2009 with the passage of FWA. This legislation (which in my view does have some faults) was also an advance because there is a focus on enterprise bargaining which can precipitate real wage growth through productivity gains.

The Liberal Party similarly between 1944 and 1983 (or perhaps even until 1990 after Ian Mc Phee’s exit from federal parliamentary politics) had a stellar tradition on a federal level of supporting arbitration to ensure Australia having a balanced economy.

There are cynics who contend that it does not matter which party is in power or who its powerful leaders are, power ultimately really resides with Canberra public servants. This is now the case because powerful Commonwealth bureaucrats are determined to establish a rentier state.

A Return to the Hawke-Keating Era: The Dangers of a Power- Over Canberra Bureaucracy

The ascendancy of this inexplicable senior public service perspective was manifested by the Rudd government’s unnecessary post-2008 GFC spending splurges. This dangerous approach is being continued due to Treasurer Wayne’s maniacal determination to continuously to borrow to in-debt the nation. This situation is deplorable enough but it is ominous that senior officials from the Treasury Department are now employed in Greg Combet’s Department of Climate Change (i.e. the Department of Rent-Seeking). This situation is indicative of the fact that the imposition of a carbon tax is more concerned with economically reconfiguring Australia to establish a rentier state then to actually engineer lower carbon emissions.

Public service domination of federal governments has been previously attempted and, for the sake of Australia’s genuine national interest, thwarted. Menzies on returning to office as prime minister in December 1949 was placed under pressure from Liberal Party power brokers to purge the pro-ALP statist inclined Canberra civil service.

The returned prime minister adamantly refused to dismiss the civil servants and subtly let be known to them that they should reciprocate by showing him the loyalty expected of non-party professionals. Menzies still avoided the potential trap of becoming captive of those (i.e. Commonwealth public servants) that he had saved by lifting petrol rationing within twenty four hours of becoming prime minister in December 1949. The resultant boost to the Australian economy helped a new post-war middle class emerge which undermined the scope for a public service induced statist ascendancy.

The moral of the Menzies era is that Australian political leaders need, without hubris, to gain a perspective as to what they regard as the public good to have the public service work within that paradigm. The *Whitlam government’s ill-considered 25% Tariff cut of July 1973 and the transformation of the Tariff Board into the Industries Assistance Commission, (the IAC, which is now the Productivity Commission) in early 1974 commenced the process by which a powerful ‘economically rationalist’ public service gained an ascendancy in public policy.

(* An important leader in the Whitlam government and a man of high personal integrity was Dr. Jim Cairns. He was a leading member of the ALP left and had it not been for the 1954-1955 Evatt Purge of the Labor Party probably would not have been elected to parliament in 1955. For all the justifiable criticisms that can be made of Dr. Cairns, he did at least as Trade Minister oppose the terrible 25% tariff cut decision of July 1973.

Dr. Cairns had to resign from the cabinet in July 1975 after it was revealed that he had signed a letter authorizing a commission for the Melbourne businessman George Harris to raise loans for the government. Even some of Dr. Cairns severest critics later said that he had probably honestly made a mistake in telling parliament that he had not signed the authorization. His claim that he answered the question truthfully at the time had credence due to the dis-shelved state of Dr. Cairns’ office.

It was ironic that Dr. Cairns was obliged to resign in July 1975 when he had previously insisted as Treasurer that Prime Minister Gough Whitlam follow due process with regard to the Loans Council authorizing loans in December 1974. The failure to do so on Whitlam’s part led to the debacle of the Loans Affair which was a major justification for the Senate legitimately deferring government supply bills.

The Deputy Labor leader had gained fame (or notoriety) for his association with Junie Morosi who he appointed his office co-ordinator upon becoming Treasurer in December 1974. With the benefit of hindsight the ‘Morosi affair’ was blown out of all proportion. Junie Morosi is now one of the most credible defenders of the Whitlam government probably because she has little reason to have any personal regard for Gough Whitlam.

It was also ironic that the ‘Morosi affair’ obscured Dr. Cairn’s wife, Gwen Robb, who was known respectfully by Canberra politicians as ‘Mrs. Cairns’. It was and is common practice in Canberra for there to be inter-party friendships and socialising as the capital in an artificial planned city where parliamentarians are often away from home. Perhaps understandably, due to the bitterness caused by the Evatt Purge, there was little, if any fraternization, between ALP parliamentarians and DLP senators in the 1960s and 1970s.

Mrs. Cairns was renowned in Canberra circles for being civil to DLP senators and their wives. She was someone who usually left a positive impact on people she met. Perhaps more than Gough Whitlam’s deservedly respected late wife Margaret, Mrs. Cairns might have made an impact on people’s lives had she become First Lady or been better publicly known.

Even though it was undoubtedly best for Australia that Dr. Cairns never became prime minister, he was always courteous, even to those whom he profoundly disagreed with on particular issues, such as Australia’s support for South Vietnam in the 1960s and 1970s. At Monash University’s Clayton campus in Melbourne in the early 1990s, Dr. Cairns often had a book stand where he was prepared to talk anyone who approached him).

The power of ‘economic rationalism’ was evident during the Hawke-Keating era but was mitigated somewhat by the social concessions that the ACTU gained in return for union acquiesce for wage restraint and general acceptance of government economic policy. The power of the public service was similarly evident during the Howard/Costello era. But to the credit of both Howard and Costello, they went against the Treasury orthodoxy that it was alright, if not desirable, that Australia have high levels of private and/or public foreign debt.

Howard and Costello’s determination to pay off Australia’s public foreign debt was a Menzian masterstroke because Australia’s economic position was safeguarded by politicians exercising power over a would-be public-service-elite for the nation’s genuine national interest. The real mystery with regard to power dynamics between the Canberra public service and the elected executive federal government during the Howard era was why senior Treasury bureaucrats opposed paying off Australia’s high public foreign debt?

Further Barriers to Rent-Seeking: Employee Rights and Union Effectiveness

Climate Change Minister Greg Combet may believe that, by working in alliance with rent-seeking Liberals, statist control over the Australian economy will be facilitated to the benefit of the hard left of the SL and the Greens. The historical record of the hard-left (to which Greg Combet belongs) collaborating in facilitating corporatist agendas suggests otherwise. The policy of union amalgamation undertaken in the 1990s substantially contributed to de-unionisation because too many union members from previously smaller unions declined to join new amalgamated unions due to a lack of affinity for them.

The ACTU’s Australia Reconstructed report of 1987 which set out the blue print for Australian union amalgamation envisaged German and Scandinavian industrial relations models where industry based unions fulfilled an integral role in representing employee rights in work councils. Under the German model of work councils, employees under the law can form a work council at their place of employment.

German work councils have the right to make employee representation to employers and have a role in managing, or at least contributing ideas to, the business. These councils were promoted by the occupying Allies and the Adenauer government in West Germany in the 1950s because too many unionists, even if they had since returned to the German Social Democratic Party (SPD), were tainted by previous collaboration with the Nazis.

Even though work councils were supported for de-unionisation purposes, they were an effective form of preventative maintenance because industrial disputation was avoided due to extensive management-employee consultation. This consultation often led to productivity increases because the ideas of employees were taken into account by management. By the early 1970s, work councils had lost their de-unionisation potential because employee representatives on them were often elected with union backing and subsequently received support from the labour movement.

Perhaps the Marxist Australian advocates of union amalgamation envisaged that there would also be union representation on powerful tripartite (i.e. government, business and union) representation industry boards which have a meaningful role in formulating national economic policies in countries such as Germany and Sweden. Transferability of the concept of work councils and industry boards to an Australian environment was (and is) problematic.

Established German and Scandinavian industry unions had (and have) higher membership density rates. In the Australian context, the transition from smaller craft based unions to industry unions in the 1990s alienated too many rank and file union members such that the aggregate position of Australian unionism was consequently weakened. Therefore, even if there were Australian work councils, union representation on them would not necessarily translate into safeguarding and advancing employee rights.

There are the Australian equivalent of industry boards, such as the Road Transport Authority (RTA) in which the Transport Workers’ Union (TWU) effectively represents their members’ interests. However, this union effectiveness is reflective of the TWU being effective as an organising union. There are other industry boards where unions are not as effective due to inadequate capacity at a workplace level.

The overriding reason why the industry (or strategic) unionism model envisaged in Australia Reconstructed failed was because Australian unions come from an arbitral tradition. Bill Kelty, the then Secretary of the ACTU in the 1980s and 1990s, was correct when he criticised the rigidities of centralized arbitration and helped precipitate the shift to workplace union bargaining with an underpinning award safety net. The problem was that, due to rank and file union dissatisfaction with union amalgamation, Australian trade unions fell behind in the 1990s in effectively utilizing enterprise bargaining to adequately represent their members.

Whatever the intermediate de-unionising ramifications of Australian union amalgamation, there was the dividend for new industry unions derived from the establishment compulsory union-run industry superannuation (‘super’) funds that were derived from compulsory employee contributions. These super funds (if well managed) have delivered financial security to many (but alas, not all) economically vulnerable Australians who are members. The virtual monopoly (which the Howard government ended) that unions gained in their respective areas of membership coverage as a result of the superannuation reforms of the Hawke government still did not reverse the de-unionising impact of union amalgamation.

The weakened position of labour was not only reflected by the steep decline in Australian union membership density in the 1990s but the consolidation of the shift to casual and part-time employment that had commenced in the 1980s. Similarly, the imposition of a carbon tax may follow a similar pattern to union amalgamation and the 1998 maritime dispute: corporate business interests allowing the hard-left of the Australian union movement to have qualified victories until their (i.e. corporate business) longer term overriding agenda is ultimately achieved.

This pattern of the position of employees being ultimately weakened by senior leaders of the Australian union movement doing deals with corporate Australia recently occurred at the May/June session of federal parliament. While Prime Minister Gillard was overseas, an announcement was made by the Immigration Minister Chris Bowen in late May that the government had granted an Enterprise Migration Agreement (EMA) for Gina Rinehart’s Hancock Prospecting to undertake iron ore mining at the Roy Hill site in the Pilbara of Western Australia, This announcement understandably caused public disillusionment because the EMA allowed for a substantial number of skilled jobs to be reserved for foreign workers over Australians.

The National Secretary of the Australian Workers’ Union (AWU) Paul Howes and the recently appointed ACTU Secretary Dave Oliver (who comes from the hard-left controlled Australian Manufacturing Workers Union (AMWU) denounced the EMA. But to apply a Shakespearean quote to either Howes or Oliver: ‘Me thinks he dost protest too much’!

A credible scenario that warrants investigation is whether Prime Minister Gillard was set up while she was overseas by rent-seeking elements within the ALP working in collusion with the Abbott Liberals. It is probable that Prime Minister Gillard was unaware of the Roy Hill EMA, or more to the point, that an announcement would be made in parliament reserving jobs for overseas workers. It is doubtful that Julia Gillard would have previously agreed to reserving jobs for overseas workers over Australians with regard to the Roy Hill project.

Having been backed into a corner in Parliament over Roy Hill, the prime minister addressed a Minerals Council of Australia (MCA) on May 31st. At this dinner, Julia Gillard came across as assertive when she said that wealth of the mining boom had to be shared with all Australians. In actual fact, this ‘assertiveness’ reinforces the domination of the mining industry over the Australian economy.

Mining magnates, such as Gina Rinehart, despite their protestations, benefit from the MRRT. This is because this type of super-profits taxation (which will undoubtedly eventually become an RSPT) enables mining corporations to legitimately minimize their taxation. It should be pointed out that, for tax minimization to occur, mining corporations must have the support from a mercantile nation (such as a mercantile PRC).

The Roy Hill EMA: The Rent-Seeking Thin Edge of the Wedge

The Roy Hill project is the thin edge of the wedge with respect to Australia becoming a rentier state. It is now little wonder that, in the June 2010 transition from Kevin Rudd to Julia Gillard, rent-seeking elements within the ALP led by Treasurer Wayne Swan insisted that there be an MRRT so that projects such as Roy Hill could proceed.

The reserving of jobs for foreign workers at Roy Hill is reflective of the PRC gaining an ascendancy over Australia’s mineral sector. This development goes against the tradition in Australian economic history that investment regimes in Australia support trading diversity. Although the uproar against the Roy Hill EMA will continue, the die is being set. The MCA will use its influence with the media to spin the narrative that there is a skills shortage in the mining sector that necessitates further EMAs. The resultant public hostility will then be harnessed by rent-seeking elements in the ALP to move Australia to an RSPT which will consolidate foreign control over Australia’s mining sector.

For Australia to be a rentier nation, there have to be elements within the elite who support such a transition. Senior leaders in hard left unions such as the AMWU or pragmatic unions such as the AWU may think that they will be able to obtain economic and political power via SWFs linked to super profits taxation on the mining industry.

There may well also be the delusion among some senior union officials and ALP power brokers that, with the abolition of Australian states (and with that, of state mining royalties) ‘their’ power will be institutionalized in new regional tier of government linked to SWFs. A word of caution should be sounded to anyone who thinks this way in the ALP or the union movement. Rent-seeking elements in corporate Australia are not going to allow super unions to gain control of millions of dollars via SWFs. This will mean that Abbott will be able to win the next federal election (which the carbon tax will guarantee will be a landslide victory) so that his government can apply a draconian industrial relations policy.

Even if there is ‘regionalization’ (sic) which accommodates a reconfigured ALP, the Australian labour movement will be too weak to resist the ruthless determination of an Abbot government to destroy unionism due to public hostility as a result of the carbon tax. Perhaps the hard left of the ALP will eventually functionally merge with the Greens? Such a new far left-configuration will frighten enough socially conservative economically vulnerable Australians to support a Lasch type party that will become electorally strong, despite being ultimately and covertly aligned to rent-seeking Liberals.

Possible scenarios concerning future Australian political party formation are admittedly speculative but they have evident credence if and when underlying objectives and strategies of those who will selfishly benefit can be ascertained. The black hole of debt that Australia is falling into imperils Australia’s traditionally high standard of living. However, there are (and will be) senior Canberra public servants who have the necessary technical skill to administer SWFs and adequately service debt levels to the extent of accommodating the self-interest of a rent-seeking elite.

Senior Canberra bureaucrats, rent-seeking political operatives in both major parties and some corporate business interests delude themselves that massive volumes of trade with the PRC will economically underpin a future rentier state. Indeed, there is a sinister belief/strategy among senior rent-seeking strategists to ensure that a high public foreign debt eventually locks Australia into a trading dependence on the PRC.

Rent-seeking strategists mis-assume that the Australian minerals sector will feed an insatiable mercantilist mainland China so that there will be a sufficient revenue base to support and therefore ensure that SWFs become the main drivers of economic activity and hence determinants of political power.

Mainland China already has sufficient reserves of iron and ore that Australia could one day be dispensed with as a major trading partner if there were changes in the PRC’s political economy. Alternately, if the PRC continues on its mercantilist path, (which, as the August 2011 debt-ceiling crisis in the United States illustrated, ultimately imperils the viability of the Chinese nations) Peking planners have the capacity to find other trading partners endowed with mineral resources, such as Brazil.

For reasons that have already been overviewed in previous Social Action Australia articles, a transition to a super profit ‘tax’ regime for Australia’s mining sector will eventually create a trade dependency on the PRC that will fatally undermine the nation’s economic capacity. Similarly, the ramifications of the application of a carbon tax will undermine the capacity of the domestic sector of the economy which has usually provided a fall-back in times of lower commodity prices.

The point that needs to be appreciated at this crucial juncture is that primary produce and mineral exporting nations such as Australia ultimately economically survive and prosper by having a diversity of trading partners. Even with such a diversity of trading partners, predominately primary export nations such as Australia are still vulnerable to economic global downturns. Australia currently has a sufficiently strong *services sector to maintain high standards of living during times of decreased demand or prices for Australian primary exports.

(*The nation does not have a sufficiently strong manufacturing sector to withstand downturns in commodity and primary produce demand. This is a legacy of the Hawke-Keating era which the Howard government never attempted to redress. The inflow of manufactured imports did not adversely affect the Australian economy during the coalition’s tenure in office. This was because the GST on cheaper imported goods led to a revenue bonanza that enabled the government to help stimulate economic growth).

The Fork in the Road: Economic Balance or Rent-Seeking?

Australia is therefore reaching a crisis point in its history- the juncture at which the foundations of national prosperity are to be squandered so that a rentier elite can establish economic and political dominance in collusion with a foreign mercantile trading regime that could eventually gain mineral resources from other trading partners! Whether it is an individual or a nation that is being used, a point of dispensability is often reached.

Victims who have been gulled by con artists can sometimes gain a sense of limited satisfaction in later seeing those who have wronged them ‘come a cropper’. This often occurs because self-interested forces themselves are often undone by stronger forces that have used them. It may be little compensation to the Australian people that ‘their’ future rentier elite’s capacity to exploit the nation is undermined by a mercantilist PRC either shifting to other trading partners or succumbing to an internal crisis due to fundamentally inherently flawed unsound socio-economic policies.

The tragedy of the above scenario for the ALP is that the Gillard government could have bequeathed valuable legacies to Australia had it not been for the imposition of a carbon tax. Indeed, Julia Gillard has a number of achievement since becoming prime minister in June 2010 that could have augured well for hers being a very effective prime ministership.

The prime minister has restored administrative coherence to the operation of the federal public service in Canberra. Public servants no longer have to wait for hours to attend meetings with the prime minister that never occur. An effective system of cabinet now operates in which there is consultation, co-ordination and cabinet solidarity. During the February 2012 Rudd leadership challenge, it was notable that cabinet solidarity was maintained despite some members voting in the caucus against the prime minister.

Perhaps the most important change in government process in June 2010 is that public servants, cabinet ministers and government MPs can speak candidly with the prime minister not only without fear of personal retribution but with a reasonable expectation that their suggestions will be at least considered. While the prime minister may have high levels of respect in Canberra, her popularity is not as high outside the capital. This is despite Julia Gillard expressing her esteem for the Australian people.

Prime ministerial praise (regardless of who the prime minister is) can fall into one of the Nordlinger in which public officials (such as elected leaders) attempt to convert previously hostile attitudes toward government policy into support. The fact that the Labor will not achieve a Nordlinger type of conversion in public opinion concerning a carbon tax is derived from the fact that rent-seeking Liberals, since they succeeded in deposing Malcolm Turnbull in late 2009, have been too successful. These Liberals have employed the services of a secretive inner-party dirt squad which is probably the most ruthless operation in the history of Australian politics.

Internal Sabotage: The Decline and Demise (?) of the NSW Labor Right

The defeat of the Howard government in the 2007 federal election was the first major example of the impact of this dirt squad. But this dirt squad is an inter-party operation, encompassing operatives from the moderate Labor Unity faction. It was Unity faction elements within the Labor New South Wales Right (NSW Labor Right) who viciously undermined New South Wales Labor politician John Della Bosca and his wife Belinda Neil.

The NSW ALP Right aided its own destruction due to rent-seeking elements within its ranks. This was most unfortunate because, for all the gusto with which the NSW ALP Right was (or is) caricatured as an Australian version of Tammany Hall, it was a political phenomenon that reflected grass roots membership support. Until the 2000s, the New South Wales ALP had over one hundred branches which provided a powerful bulwark of support for Labor among wage earning Australians. This party rank and file support-base contributed to local trades and labour councils in New South Wales ensuring that union branches reflected their members’ interests.

The calumnies of the NSW Labor Right were not only because of ALP strategic self-sabotage but also due to the cunning of rent-seeking Liberals. To be relatively fair to rent-seeking elements within both parties, they have both achieved a balance in selling short their own side as a trade-off for their political advance. The Liberals threw the 2007 New South Wales state election and the federal election that year and the *Victorian ALP threw the 2010 state election.

(*The margin that the senior leadership of the Victorian engineered to lose by was narrower. This was due to a range of reasons: to help ensure that the new state government of Ted Baillieu has less scope to resist ‘regionalisation’ (sic), to enable the SL to assume the leadership of a post-Brumby state ALP and to bolster the comparative position of the Labor Right vis a vis the pulverized NSW Right. Those in Victorian politics who are complicit in facilitating rent-seeking should be aware that a non-mining state such as Victoria will probably suffer the most in both political and socio-economic terms in a future rentier state).

The New South Wales 2011 electoral landslide against the ALP is testament to the fact that the Labor Party will not be able to adapt to be part of a future rentier state or that it will be considerably more difficult for it to do so. This is particularly the case because New South Wales has been the traditional bastion of the ALP. The ALP became one of Australia’s two major parties because it won a majority of seats in the 1910 New South Wales state election. Indeed, the ALP also won its first majority of seats in the 1910 federal election due to its strong voting base in New South Wales.

The 1955 Evatt Purge of the ALP could have been fatal to Labor had Sydney Catholic Archbishop, Sir Thomas Norman Gilroy not persuaded Catholics to remain within the Labor Party. That New South Wales remained ALP during most the Menzies ascendancy was crucial to the Labor Party being a viable opposition party at a federal level despite the existence of a moderate and sensible DLP siphoning votes away. The Liberals became the ruling party in New South Wales in 1965 (in the year before Menzies retired in January 1966) and the ALP’s first major step to recovering from the Whitlam debacle was to win the New South Wales state election in 1976.

Therefore the national implications of Labor losing the 2011 state election in a mega-landslide cannot be overstated. Perhaps the ALP will be able to rebound after a future landslide federal election defeat due to their having a new tier of government to fall back upon? However, ALP strategists should appreciate that in safe state and federal seats, there is always a staunch Liberal voting base. In a future ‘regionalized’ tiers of government, Liberal Party voting bases could be utilized to preference the Greens to consolidate the ALP’s destruction.

It is understandable that Liberal Party MPs and strategists have reason to support ‘regionalization’ (sic) due to the negative impact (to say the least) that this ‘reform’ will have on the ALP. But the disastrous economic ramifications will be such that a lose-lose socio-economic scenario will ensue for most Australians. Federal coalition MPs would be serving their nation by ignoring any calls from Regions Minister Simon Crean to support ‘regionalization’ (sic) or the disaggregation of mining royalties to particular regions.

With regard to ignoring ministers for the good of the nation, the ALP would do well to ignore any policy proposals from the new Foreign Minister, Senator Bob Carr. Kevin Rudd was conned into making his February 2012 leadership challenge to help clear the way for Bob Carr as foreign minister so that the interests of the NSW ALP Right (or more to the point an inner group that is destroying this one-time bastion of the labour movement) to help establish a rentier state.

Do Bob Carr and Kim Carr Also Have Common Political Objectives?

Bob Carr will attempt to influence New South Wales federal MPs to support rent-seeking policies such as super ‘profits’ mining taxation, the establishment of SWFs and ‘regionalization’ (sic). In this context, Bob Carr will be following a pattern of undermining forces for moderation within the ALP. Had Bob Carr never been premier of New South Wales (1995 to 2005), the ALP might have avoided the 2011 electoral disaster because his time in state office established the groundwork for this massive electoral repudiation.

The former New South Wales premier was clever enough to have exited well before the 2011 state election debacle which helped him become foreign minister in 2012. Having helped effectively destroy the New South Wales ALP Right (which he was a product of), the question is how will Carr help convert Australia into a rentier state? This question is difficult to answer but worth exploring. As previously mentioned the recent challenge (February 2012) of Kevin *Rudd was a con.

(*Kevin Rudd may still later be reinstated as prime minister before the next federal election in 2013 due to the economy going into steep decline as a result of the carbon tax. Even if there is a widespread public sentiment for Kevin Rudd, he will still lose the election due to the by then implacable hostility toward the ALP).

It is doubtful that a hard left SL operative such as Victorian Senator Kim Carr (despite his genuine dislike of Julia Gillard) really wanted at this juncture to reinstate the former prime minister to office. This is probably also the case with the Minister for Transport and Leader of the House, Anthony Albanese, who is one of the leaders of the hard left of the SL in New South Wales, as well as the New South Wales Senator Doug Cameron. For these hard left SL strategists the Rudd departure was useful because it paves the way for the Minister for Industrial Relations Bill Shorten to become prime minister during this parliamentary term.

But, as has been the case with Bob Carr’s involvement with the New South Wales ALP Right in destroying it, a Shorten ascendancy will destroy another vital pillar in moderate ALP politics – the AWU. If there is no New South Wales ALP Right and no AWU, then vital pillars of Australian political moderation will have gone. This is a price that Australia cannot afford to pay!

The role that Bob Carr fulfilled in helping destroy the New South Wales ALP Right could be duplicated with regard to the AWU. Amongst moderate ALP federal parliamentarians from New South Wales, Senator Bob Carr is perceived as an important ally of the prime minister. A New South Wales moderate who is not a supporter of the prime minister is the Immigration Minister Chris Bowen.

Bowen is an avowed supporter of Kevin Rudd’s but, as his recent actions with regard to Roy Hill indicate that the overriding objective of his political actions is to promote rent-seeking. Even though Kevin Rudd gained just on a third (31 votes) to Julia Gillard’s 71 votes in the February 2012 leadership challenge, there is a good chance that most of the votes for the former prime minister were cast on a calculated-as opposed to a sincere-basis.

The February 2012 Rudd leadership challenge was not a dud challenge because a base was established for a transition to Bill Shorten. For those of the hard left of the SL who ostensibly supported Kevin Rudd, the abortive challenge created the inter-factional scope within the SL for avowed Gillard supporters, such as the Rent-Seeking Minister Greg Combet, to later defect to Shorten should the present prime minister prove to be recalcitrant.

Similarly, Chris Bowen as an avowed moderate supporter of Kevin Rudd can help coax other genuine moderates such as the Environment Minister Tony Burke to support Julia Gillard’s deposition in favour of Bill Shorten. Senator Bob Carr as a supposed moderate will help engineer a transfer of parliamentary support from Gillard to Shorten.

The question therefore emerges as to why there is such momentum toward Shorten? From the perspective of moderate (or right-wing) ALP parliamentarians, operatives and union officials, Shorten is a charismatic leader who will assure their political careers. The Labor Right is largely bereft of a social democratic philosophical direction that it lacks a sense of purpose which raises questions as to its long term viability. Shorten is perceived as a leader who can provide the needed sense of direction and security to ensure the long-term viability of the ALP Right.

Why The Hard-Left Want To Shorten the AWU’s Political Life Expectancy

From the perspective of hard left strategists within the SL and rent-seeking Liberals, Shorten is a political pawn who will lead the ALP to defeat at the next election in a landslide as a result of the adverse effects of the carbon tax. This outcome will create a vacuum that will destroy the moderate wing of the ALP and with it the AWU.

That the AWU’s fate is now inextricably linked to Shorten’s is indicative of how that union’s viability is dependent upon there being a moderate wing within the ALP and a viable arbitration-enterprise bargaining system. But the AWU by historical tradition has been linked to arbitration and the ALP. The AWU originally represented the interests of sheep shearers in the late nineteenth century. These workers needed a union to strengthen their bargaining power due to the seasonal nature of their work.

As a union that had to be assertive without been industrially militant due to the precarious employment work patterns of its members, the AWU supported parliamentary candidates in colonial elections. The Shearers Union in Queensland (an important precursor to the AWU) supported Australian Labour Federation (ALF) parliamentary elections with history been made in December 1889 when the first social democratic government in the world was formed in the northern colony.

The AFL minority Queensland government was short-lived but an important precedent was set for trade unions to improve working conditions of their members and advance employee rights by operating within the institutional framework of a democratic state. The AWU subsequently became an opponent of the International Workers of the World (‘the Wobblies’) in Australia which advocated the abolition of craft unionism to promote a working class seizure of power. It goes without saying that the AWU became a vital opponent of the Communist Party of Australia (CPA) following its formation in 1920.

A paradox of the AWU was that its support for industrial arbitration in the 1900s helped support craft based unionism even though it was not strictly speaking a craft union. The AWU’s area of membership coverage (as the title of the union’s name suggests) was broad but it was not an industry union because it did not have a fixed area of industry coverage that had a craft focus. The AWU did however have a focus on supporting the ALP. Queensland AWU organisers more often than not doubled as ALP organisers which helped the party maintain the support of its electoral base.

AWU support for the ALP in Queensland was crucial to the party holding government in Queensland between 1915 and 1929 and from 1932 to 1957. As important as it is that unions as democratic organisations support democracy, it was inconsistent that the AWU supported an electoral gerrymander which gave greater parliamentary representation to areas of rural and regional Queensland. This gerrymander was applied to a swag of north Queensland sugar growing seats where the AWU was powerful because it represented then numerous cane cutters.

Due to the AWU’s close affiliation to the ALP, it was an anathema for it to consider splitting from the party. The first major split in the Labor Party which occurred in November 1916 had strong sectarian undertones because many Protestants split from the ALP due to the party’s opposition to conscription. The ALP might have become a near exclusive Catholic party had Protestant AWU members and leaders not remained within the party. Similarly, the ALP in New South Wales probably would not have survived the Lang Split of the 1930s had it not been for the stalwart support for this at times beleaguered party state branch.

The AWU again crucially supported the ALP during the time of the Evatt Purge of 1954-1955. The Evatt Purge was almost the inverse of 1916 Labor Split in that it was Catholics who departed from Labor following the illegal March 1955 Hobart ALP Conference. Ironically, that there was still a substantial Catholic presence in the post-Evatt purge Labor Party was due to Catholic AWU leaders and members remaining within the ALP. Their presence within the ALP was crucial in counteracting the influx of left-wing members in the 1950s that joined at the behest of the CPA to take advantage of the vacuum caused by the exodus of members.

The effects of the Evatt Purge adversely affected the AWU in Queensland when Premier Vince Gair eventually fell out with the dominant AWU faction in the state branch to form a separate party in 1957, the Queensland Labor Party (QLP). The Gair Split cleared the way for the Country Party to win (with QLP preferences) AWU bastions in the August 1957 state election. Due to mechanisation in the sugar industry, demographics, the Country Party was able to consolidate its hold over formerly safe ALP seats. In a form of poetic justice, the gerrymander that had previously underpinned ALP dominance in Queensland transferred to the Country Party.*

(* A Country Party state MP who was scathing in his criticism of the AWU gerrymander was a Johannes Bjelke-Petersen).

The Queensland Labor Split of 1957 led to an exodus of moderate ALP party members and an influx of left-wingers. The AWU therefore found itself in a position in Queensland that existed throughout the rest of the ALP following the Evatt Purge of being the locus of moderation against a new CPA backed Labor left-wing.

A tragedy of the Labor splits of the 1950s was that moderate trade unions which should have politically co-operated with each other did not. The AWU and the so-called grouper unions which understandably supported the DLP were at best wary of each other and at worst hostile. Had there not being estrangement between the grouper unions and the AWU, the latter might have more effectively fulfilled a role in promoting moderate and sensible government during the Whitlam era.

Missed Opportunities: AWU Estrangement from Union Groupers

The DLP’s unfortunate loss of parliamentary representation in the 1974 federal election and the 1982 Santamaria Purge of the industrial wing of the National Civic Council (NCC) cleared the way for grouper unions to re-affiliate to the ALP in 1984.

The re-affiliation of these unions created the scope for their unfortunately ‘amalgamating’ (disappearing into the AWU). Important craft based unions such as the Federation of Iron Workers Association (FIA) amalgamated into another grouper union in 1991, the Federation of Industrial, Manufacturing and Engineering Employees (FIMEE) which in turn merged into the AWU in 1993.

There were inevitably tensions between the former grouper unions within the AWU which nearly destroyed the expanded union. A power struggle between AWU Queensland stalwart Bill Ludwig and Steve Harrison nearly destroyed the AWU. The latter (Harrison) as FIA national secretary had foolishly supported his union merging into the AWU. Harrison’s departure in 1997 in favour of the highly respected Terry Muscat placated inner union tensions such that AWU unity was maintained.

Mr. Muscat’s tenure as AWU National Secretary between 1997 and 2001 was notable for not only ensuring the survival of the AWU but for clearing the way for Bill Shorten to become the union’s national secretary in 2001. As AWU National Secretary, Shorten brought unity and focus to the AWU that its viability was no longer threatened.

But the price of post-Harrison AWU unity has been that the quality of representation for members previously associated with FIMMEE and the FIA declined to the point of virtual dissolution. The FIA-FIMEE disappearances have almost weakened Australian moderate unionism as much as the loss of the FCU in the 1980s to the SL due to the consequent fall in union membership density. The full socio-economic price of the FIA-FIMEE disappearances may yet be measured in terms of the AWU helping inflict rent-seeking on Australia.

Bill Shorten: National Saviour or Corporatist Cipher?

Bill Shorten is in a position to safeguard Australia against rent-seeking but, going on his past performance as AWU national secretary (2001 to 2007), the precedents are not promising. As AWU Secretary, Shorten neutralized external threats from hard-left industry unions such as the Construction, Forestry, Mining and Energy Union (CFMEU), the Electrical Trades Union (ETU) and the AMWU. This was achieved by arriving at demarcation agreements with these unions to avoid demarcation disputation.

The AWU has left big construction projects such as sky scrappers to the CFMEU. In return the CFMEU has not opposed the AWU seeking to represent house construction workers which the former has no real interest in having coverage. It was ironic that during Shorten’s six year tenure as AWU National Secretary he incurred intense opposition from moderate trade unions such as Greg Sword of the National Union of Workers (NUW, which was previously known as the Storemen and Packers Union).

Although the NUW is industrially stronger than the AWU, Greg Sword probably feared that the AWU, as a focus for moderates within the ALP that the NUW’s position within the Victorian branch of Labor Unity would be undermined. This concern reflected a common problem for Australian trade unions that former union officials once in parliament move to become independent from their previous union.

Shorten’s very election to federal parliament in 2007 therefore consolidated the AWU as the power locus for moderate trade unions and federal and state parliamentarians. The danger of the present Shorten ascendancy is that, should he become prime minister during the current parliamentary term and lose the next federal election, the consequences for political moderation in the ALP could be fatal.

The underlying political position of the AWU is already weak. The mega-landslide against the ALP in the March 2012 Queensland state election effectively wiped out the AWU’s traditional state political powerbase. The virtual disappearance of the New South Wales Labor Right (as reflected by the March 2011 state election result) has similarly undermined the AWU. Victoria is a state where the AWU has maintained its political influence. But for reasons that are best not publicly analysed the actual position of moderates within the Victorian ALP is weaker than what it seems.

Victoria: The Nexus Between Training and Employment Generation

The coalition government of Ted Baillieu is being subjected to an industrial de-stabilization campaign. It is probable that, were an election soon held, Victoria would be the one state in Australia where the ALP would win in a landslide. The Baillieu government is floundering that it is possible that pressure will be placed on the Kennett faction to which the premier is aligned to support ‘regionalization’ (sic). A non-mining state such as Victoria would, to say the least, have nothing to gain from rent-seeking.

The real challenge confronting the Baillieu government is to withstand internal pressure from the Kroger Liberals and their rent-seeking opponents in the ALP who want to impose ‘regionalization’ (sic). But a state government to be effective must do more than politically survive.

A major responsibility that state governments have is for Technical Advanced and Further Education Training (TAFE). Although the Commonwealth is rightfully responsible for TAFE qualification standards, the states still thankfully have funding responsibility. The substantial cut to TAFE spending in the recent Victorian state budget was very unfortunate and unnecessary. Unfortunately there are people within the Victorian branch of the Liberal Party that have an almost ideological aversion to funding ‘unskilled’ TAFE courses in the service sector, such as hospitality.

The Liberal Party should appreciate that, for there to be a balanced economy, there has to be a diversity of employment generating goods and services. The more vocational training there is the greater the opportunity to create goods and services. Many migrants from non-English speaking backgrounds were able to advance from precarious employment to financial security, if not prosperity, by establishing small businesses in retail and catering.

Because a strong retail and service sector is a must for Victoria, the Baillieu government should re-consider its decision to cut TAFE funding. There are too many young Victorians whose families cannot afford to pay for them to go to private colleges when TAFE colleges close. Australian political history has shown that the Liberal Party benefits when there is a strong small business sector.

Perhaps the rent-seeking Kroger Liberals regard small business with disdain. Well, if there is to be an enduring dichotomy between Kroger and Kennett Liberals it should at least have a philosophical dimension to it. Let the Kennett faction (which seems to lack a positive philosophical focus) distinguish itself from the Kroger Liberals and strengthen its position in relation to them by supporting small business by adequately funding the TAFE sector.

As a matter of principle, state governments should staff their ministries that are responsible for training and education with the best recruits. A grievous failure of Baillieu’s ALP predecessor as premier, John Brumby (besides his acquiescing in the attempted federal GST clawback of state revenue) was his government’s failure to adequately protect international university students. Not only was this failure reprehensible on moral grounds but the financial cost to the state economy was immeasurably high. The adverse publicity that Melbourne (the Victorian capital) received in the international media adversely affected the state’s higher education sector.

Victorian governments should, as with TAFE, supports the higher education university sector. The inflow of students to Victoria from overseas and interstate is very important to the state economy and is an area of comparative advantage that the state cannot afford to squander. Perhaps the Gillard government might consider a temporarily make up for the Baillieu government’s cut in TAFE funding. A rare laudable action of the Keating government was to support university student services by counteracting the Kennett government’s so-called Voluntary Student Unionism (VSU) policy in 1994 by providing federal funding.

With regard to Labor Party Victorian factional politics the respective landslides against the ALP in New South Wales and Queensland have strengthened the AWU in Victoria where that union is still politically strong. However, the AWU lacks the industrial capacity to adapt if the on-coming ‘regionalization’ (sic) process dismembering Victoria as a viable state. This outcome will be compounded for the Victorian ALP if Shorten (who comes from Victoria) falls for the trap of assuming the Labor national leadership without first appreciating the reality of the fragility of his actual political position.

Why The Australian Union Movement Now Needs A United Voice

Presently, the power shift toward Shorten in federal parliament is also undermining political moderates within the SL (the most notable example being the prime minister). The strengthening of Shorten’s political position at the expence of the prime minister due to Kevin Rudd’s replacement as foreign minister in February 2012 was reflected by power shifts at the ACTU. It was a real pity that Jeff Lawrence was compelled to stand down as ACTU National Secretary in May 2012.

Jeff Lawrence is from the moderate wing of the SL faction (his base within the union movement is United Voice, which was previously known as the Liquor Hospitality and Miscellaneous Workers’ Union, (the ‘Missos’). The Missos’s membership coverage encompasses those in precarious employment, such as cleaners. This union has been at the forefront in Australian unionism in applying the organising union model (the organising model) where rank and file members assume more responsibility for workplace organising.

The organising model has the potential to foster Australian union renewal as a proactive strategy of unions engaging their members in the industrial relations processes. Under the organising model, union members can be involved in enterprise bargaining (which the Business Council of Australia, BCA, among other reasons in the 1980s advocated as a de-unionising process) to help secure better pay and conditions. Due to a relative lack of industrial bargaining power of the Missos in some areas of its coverage, this union has often effectively utilized arbitral supports to advance their members’ interests.

The Misso’s strategy of combining an organising approach to engaging with members and utilizing existing arbitral supports in some areas of its coverage is one which the Shop Distributive and Allied Employees’ Association (SDA) has similarly applied. Given the relative low union membership density in the Australian workforce and the ACTU’s need to be more relevant to the Australian union movement, it was perhaps a mistake that Jeff Lawrence made way as ACTU National Secretary for Dave Oliver from AMWU.

The AMWU has more secure areas of industrial coverage than the Missos such that Dave Oliver might not appreciate the need for the Australian union movement to promote an *organising approach. The pertinent political point that needs to be made with regard to the ACTU’s leadership transition is that moderate unions (i.e. non-SL) such as the AWU and NUW did not support Lawrence. This shift in ACTU politics is being reflected by the AWU undermining the moderate wing of the SL by supporting that faction’s hard left.

(*Missos’ National Secretary Louise Tarrant would make an excellent future ACTU President or National Secretary due to her understanding of and passion for the organising model. Trade union amalgamation cannot be undone but union democracy – and with it union renewal- can be relaunched via application of the organising model. If the ALP is to avoid future organisational irrelevance, hopefully activated rank and file union members will similarly join and participate in Labor Party branches).

Why The Demise of the Political Centre Facilitates Rent-Seeking

The current indications are that the hard left of the SL and moderate federal ALP parliamentarians supportive of the AWU (or more to the point, Shorten) will undermine, if not depose Julia Gillard, if she does not proceed with implementing rent-seeking measures. If Bill Shorten does replace Julia Gillard as prime minister during the current parliamentary term, the hard left of the SL will not allow him to win the next federal election. From their perspective, an Abbott government will be beneficial because it will implement ‘regionalization’ (sic) by which the power of hard left industry unions (and their associated networks) will be institutionalized in a new local government tier.

An Abbott government will naturally be anti-union but from a far-left perspective, what of it? Even with Work Choices, (sic) hard left unions had the resources and membership reach to survive. So why allow an arbitration/enterprise bargaining system to continue which helps sustain undeserving moderate trade unions that lack industrial muscle? Furthermore, the landslide that will decimate the ALP at the next federal election will end the AWU as a political force and with it the union itself. For what is the AWU unless it is accommodated within the Labor Party or operative within an industrial relations system? The AWU without these inter-related frameworks is nothing.

The question therefore becomes-what is the ALP without the AWU? An ALP without the AWU will be a party essentially controlled by hard left trade unions who will derive their strength from controlling regionalized bailiwicks. Perhaps a future Albanese led ALP will win power back from a draconian Abbott government? Maybe. But the rent-seeking Liberals are ahead of the game. With leaders such as Sophie Mirabella (the federal Liberal member for Indi in North Western Victoria and the coalition spokeswoman on Industry, Innovation and Science) and Victorian Senator Mitch Fifield intending to apply a Lasch strategy to win support of economically vulnerable Australians, there may not be a return to the ALP of once stalwart supporters.

Even though Mirabella is a professed admirer of the libertarian philosopher Ayn Rand she could very well as a future industry minister dispense patronage to try and keep economically vulnerable Australians on side with the Liberals. In contrast to the value adding employment generating industry assistance policies of John Mc Ewan the Mirabella version might be dispensed to keep economically dependent communities aligned to the Liberals. Dependent communities will inevitably and unfortunately exist in a rentier state.

Another important leader to watch out for in a future Abbott government will be the Shadow Treasurer Joe Hockey. His political duplicity in standing for Liberal leader in late 2009 to ‘support’ Malcolm Turnbull, when he in fact split his vote, demonstrates that Hockey has highly developed political skills. Encompassed within Hockey’s skill set is the craft of acting.

The recent release of Gross Domestic Product (GDP) figures for the March 2012 quarter saw Hockey grudgingly concede that the growth figure of 1.3% was good news. Hockey only said this to keep the ALP on track with implementing a carbon tax. He would have known that the growth figures were a distortion due to the mining boom (Western Australia’s annual economic growth rate as a result of the mining boom was nearly 13%) and the rebound that could be expected due to the recovery from last year’s floods in Queensland and northern Victoria.

Another senior Liberal who knows more about economics than he lets on is none other than Tony Abbott. Insights into Abbott’s economic knowledge can be (and will be) ascertained by the predictions that he makes about the negative impact of a carbon tax on the Australian economy. (Interestingly, Abbott initially said that in government he might not be able to repeal a carbon tax but later asserted that as prime minister he would do so).

Abbott first set the scene for a carbon tax by preventing the passage (in conjunction with the Greens) of ETS legislation in early 2010 under which there would have been no carbon tax. He then helped establish the settings for the passage of carbon price legislation in November 2011 by helping ensure that a minority parliament was elected in October 2010. The co-ordination required between ALP and coalition rent-seeking elements to achieve a hung parliament was as impressive as it was difficult to detect.

Topsy Turvy Politics: Is Australia OK?

An important identification of the co-ordination required could be gleaned by observing and analysing the mainstream media. It was interesting to note that Channel Nine’s chief political correspondent Laurie Oakes covered live Prime Minister Gillard’s announcement of the October 2010 federal election at a press conference. *Oakes’ immediate commentary of Julia Gillard’s press conference was scathing but the objectivity of his criticism became suspect when he crossed to none other the Liberal Party power broker Michael Kroger for analysis! Needless to say Kroger’s analysis confirmed Oakes’s.

(*It was therefore interesting that on the ABC’s Q&A programme in 2011 that Laurie Oakes sent in a tweet praising the prime minister’s eloquence in advocating a carbon tax).

Such brazen media bias was reflective of the high degree of co-ordination between rent-seeking elements that Prime Minister Gillard knew that it could be pre-arranged for her to either win or lose the election. The price that she had to pay to stay on as prime minister was to publicly announce just prior to polling day that a government she led after the election would never introduce a carbon tax. Is Julia Gillard to be condemned for breaking this promise she made under duress? Or is it Tony Abbott?

The opposition leader knew that rent-seeking elements within the ALP minority government would force Julia Gillard to keep a coerced promise that would ultimately destroy her and moderate elements of the left and right of the Labor Party in pursuit of establishing a rentier state. If one watches closely the dynamics of Australian politics, a pattern can be discerned where the media (of which Oakes has been an example in regard to the carbon tax) is less critical of the prime minister when she is apparently on track with proceeding with a carbon price and is more effusive in advocating super profits taxation for the mining sector*.

(*Both these policies are prerequisites if a rentier state is to be established).

Due to the concerted and co-ordinated agenda to bring in a rentier state, the last hope are Australian Commonwealth parliamentarians thinking and subsequently acting critically. With regard to ALP parliamentarians, there is little sign of this happening. This is particularly the case with Shorten aligned MPs (who more often than not have AWU connections) vocally denouncing the Roy Hill EMA – while taking no practical steps to ensure that Australians receive priority with regard to employment opportunities- ostensibly denouncing the mining magnates and thereby implicitly supporting a dud super-profits taxation regime for the mining sector.

Unfortunately for these Labor MPs, they do not realize that once they lose their seats they will also lose their union bases of support with the consequent demise of the AWU. The current danger that is confronting the AWU is being obscured by the focus on Bill Shorten as a competent, if not empathetic leader, who is prepared to take over a government that has seemingly lost its direction.

It has been said that even coalition MPs have been impressed by Shorten’s parliamentary performances. But it is substance not style that counts. This comment is not intended to be a reflection on Shorten’s character but rather an analysis of the fact that a wider overview of the federal parliamentary situation is required to ascertain what is really happening in Australian politics.

An important but unrecognized reason why Julia Gillard’s position has been weakened is due to Liberal front bencher Malcolm Turnbull being apparently co-opted into supporting a future rentier state. Mr. Turnbull’s possible co-option was denoted by a speech by the Minister for Rent-Seeking Greg Combet in which he cited Malcolm Turnbull among other front benchers as hypocrites for opposing a carbon tax when they had shares in *mining companies.

(*The introduction of a mining tax will undermine, if not fatally compromise, mining in Australia for domestic purposes. This will help orientate Australian mining toward exports so that the value of mining shares will if anything increase, not decrease. The amount of Australian mineral exports–such as coal- will increase to the PRC but in doing so contribute to probable global warming. The upshot will be that Australia will become more dependent on mineral exports which will cause further environmental degradation. Senator Milne ought to consider this scenario when she advocates a carbon tax.

Hopefully, the legal challenge in the High Court by Fortescue Metals against the MRRT will succeed to help stop the establishment of an uncompetitive mining triopoly. The constitutional issue of the Fortescue Metals challenge to the MRRT could create the scope for the High Court to also consider the issue of section 192 of the Australian constitution guaranteeing free trade between the states. The imposition of a carbon tax will adversely affect commerce between states because each state economy will be affected differently by the impost to render such a levy unconstitutional).

The Rent-Seeking Minister Greg Combet was the real hypocrite because the purpose of his supposed expose of share-owning Liberal MPs was to send a message to federal parliamentarians across party lines that they had been co-opted into supporting rent-seeking. The reference to Mr. Turnbull was the most unsettling aspect of the Combet performance because he is probably the most economically learned MP; with the possible exception of Abbott who is disturbingly foisting rent-seeking on the Australian public which he knows will ultimately be destructive.

Will Malcolm Turnbull Allow Australian Independence to be Squandered to Rent-Seeking?

Malcolm Turnbull would never promote a policy which he knew would be disadvantageous to the nation. He has advocated an Australian republic on the basis that the nation needs a positive identity as an independent nation. Whatever the merits of a future Australian *republic, the fact is that the most important issue for a nation is to maintain its independence. Australia as rentier state will be indebted to an extent that the nation will never recover its financial independence. The Hawke-Keating era demonstrated the dangerous pitfalls and adverse impact on the nation’s standard of living that high levels of public foreign debt cause for Australia.

(*In my opinion there is no merit whatsoever in Australia becoming a republic because our system of constitutional monarchy has given the nation the best system of government in the world).

Australia’s foreign public debt is now already nearing $210 billion (it was zero in 2007) and Abbott knows the point may be reached where the government’s borrowing limit may have to be increased above $250 billion. In contrast to the United States, the Australian dollar is not a reserve currency which means that acute economic suffering will occur once the mining boom ends. The application of the carbon tax will diminish, if not extinguish, Australia’s capacity to service the foreign debt by undermining the domestic sector of the economy.

There are ruling elites in third world nations (such as in the Philippines) which utilize talented technocrats to arrange sufficient foreign debt repayment to keep credit lines open while ensuring that the overall debt burden is maintained so that their economic-political ascendancy is perpetuated. Australia is now facing a similar scenario with regard to the carbon tax and a dud super profits taxation regime helping facilitate a future rent-seeking oligarchy whose dominance will be underpinned by adverse trading arrangements with the PRC and by the technical skill of Canberra bureaucrats.

Canberra is a wonderful city (although there are some surprisingly small pockets of poverty) in terms of its standard of living and quality of life. As a planned city, there is a potential trap that public servants, politicians and advisers can lose touch with the concerns and living conditions of people outside the capital. In this context, MPs might not become aware of the negative impact on people’s everyday lives that the transition to a rentier state will entail. Currently, Canberra politicians are refusing to face the consequences of what they are allowing to happen*.

(*This is reflected by ALP MPs associated with the AWU correctly denouncing the Roy Hill EMA while taking no practical action to ensure that priority is given to Australian citizens with regard to employment opportunities at that mining site. This talk/no action approach is actually having the practical effect though of setting the scene for the consolidation of a dud super profits taxation regime for the mining sector).

Coalition MPs are similarly taking no action to protect Australia from becoming a rentier state. Perhaps they have an excuse because their senior leadership is at the forefront of promoting rent-seeking. However, Liberal Party federal MPs should be aware that the nature of rent-seeking is such that significant economic wealth must by definitional design be restricted to a narrow set within society.

The Australian people, who have enjoyed one of the highest standards of living and one of the best social security systems in the world, will not take kindly to being ‘knocked off their perch’. The ALP will deservedly incur the electoral wrath of the Australian people for establishing the basis for a rentier state but it will not be easy for the Liberals to govern a discontented nation.

The coalition back bench and members of the front bench are talented. This was partly reflected by the high quality of the maiden speeches of many new Liberal MPs in which reference was made to the importance of Australian states. This was statesmanlike because it is rare in a political system for legislators to defend another tier of government. However, no matter how intelligent or well intentioned coalition MPs are, it does not mean that they cannot fall victim to psychological manipulation.

Are the Federal Liberals Political Sheep?

The German psychologist Kurt *Lewin (1890-1947) studied how it was possible for people in authority (usually management) to change individual behaviour by manipulating group dynamics. It is interesting to observe, that when parliamentary question time ends and the prime minister departs the chamber along with most ALP members, coalition MPs remain behind to listen to their front bench members regale them by attacking Labor mis-rule. There is often a Labor minister (such as Anthony Albanese) who stays behind to either heckle or engage in debate.

(*Dr. Lewin as a Jew fled the Nazis to the United States where he became an American citizen).

There is nothing inherently wrong with this now ritual practice but there is a distinct prospect that it is having the effect of dulling the critical capacity of Liberal members of parliament. Major socio-economic and political shifts are now under way in Australia which ironically are being substantially (but not exclusively) driven by the leadership of the parliamentary opposition. The numbers in the parliament by design of inter-party rent-seeking strategists are very close. This has created the dangerous prospect of rent-seeking being foisted on the nation.

Alternately and inversely, there is scope for critical thinking on the part of both coalition and Labor MPs to save the nation from becoming a rentier state. The immediate circuit breaker action that needs to be taken to save the nation is to pass - by a private members bill-legislation for an ETS that negates the need for a carbon tax. Careful consideration (particularly in the context of the GFC) will need to be given to ensure that an *ETS does not undermine the nation having a balanced economy, which is an important objective of applying a carbon tax.

(*An ETS is by definition a trading scheme aimed at promoting lower carbon emitting practices. Tax credits could be traded –i.e. purchased and sold- to encourage small, medium and big businesses to reduce carbon emissions. The hypocrisy of the Greens with regard to being sincere about achieving lower carbon emissions will be apparent, when they vote against ETS as they did in early 2010).

There are many coalition MPs who are understandably climate change sceptics for whom it would be an anathema to vote for an ETS. However, the political dynamics in Australia are such that only the adoption of an ETS that negates a carbon tax can stop this rent-seeking facilitation measure. At any rate, precautions can be taken to ensure that ETS is a genuine non-coercive trading system as opposed to a prohibitive and destructive tax. The overriding consideration that must now as a matter of urgency be taken into account is the appreciation that without a carbon tax there can be no Australian rentier state foisted on the Australian people.

A manifestation of critical thinking is leadership. The Combet overview of front benchers with mining shares was an attempt to co-opt Malcolm Turnbull into supporting rent-seeking. The defining difference between co-option and destruction of someone is that in the case of the former, consent is required. Paradoxically, it is often more challenging to resist co-option than it is to survive an attempt to destroy you.

The accelerated transition to rent-seeking gained considerable momentum with Malcolm Turnbull’s deposition in late 2009. This transition is now increasing in pace due to the *Speaker Peter Slipper’s leave of absence. Consequently it is now time critical that Malcolm Turnbull returns to the Liberal Party leadership to help stop the carbon tax tacking Australia to rent-seeking.

(*The acting Speaker Anna Burke is incontestably the worst chair in the history of the Commonwealth Parliament).

Because so much of the drive for rent-seeking is ironically coming from the leadership of the federal opposition, Malcolm Turnbull still has a substantial, if not a seminal capacity, to stop both a *carbon tax and ‘regionalization’ (sic). With regard to the latter, there are many New South Wales state MPs and cabinet ministers who look to Malcolm Turnbull for support to resist attempts by Premier Barry O’Farrell to betray his state by dismembering it via ‘regionalization’ (sic).

(*It should also be remembered that Liberal Party members - as opposed to their ALP parliamentary counterparts-cannot be expelled if they vote according to their conscience).

Why Peter Costello can still be the Best Prime Minister Australia Never Had Since Sir Robert Menzies

If Malcolm Turnbull does not defy his rent-seeking enemies within the Liberal Party, coalition state governments (or even Labor governments in South Australia and Tasmania) should look to Peter Costello for advice when it comes to economic management. Mr. Costello was probably the best Treasurer in Australian history and it could in the future be said that he was the best prime minister Australia never had since Sir Robert Menzies. This latter accolade could be accorded to Mr. Costello, not on the basis of his previous time as Treasurer but as an economic advisor/consultant to current state governments.

State governments are soon going to be confronted with a political onslaught that will challenge their very existence. A combination of threats and inducements will be made that will test the resolve and character of state politicians. When people are under attack, it is often insufficient to have personal resolve because capacity and external support is often required.

Peter Costello could be an outstanding resource to state governments as an economic adviser. The Liberal National Party (LNP) government of Campbell Newman has inherited a heavy debt from the preceding blighted *Bligh government. Not only did the former federal Treasurer pay off Australia’s foreign debt but in the process, and as a result of this accomplishment, he generated near full employment, although too many of the jobs were part time and casual.

(*If the ALP is ever to gain a reputation for financial responsibility, then an aversion to debt must be encouraged. The disaster that was to become the premiership of John Cain in Victoria between 1982 and 1990 was foreshadowed by illogical ALP commercials that were run in 1981 which accused the then Liberal state government of mismanagement for not spending reserves of money that had been carefully saved to be spent when appropriate.

Andrew Fraser, (a talented moderate) the former Treasurer in the Bligh government, might have held his seat in the March 2012 Queensland election or even helped his party win that election had he not allowed a massive state debt to accumulate. High debt levels usually catch up with the ALP by contributing to electoral punishment. The contemporary context of high levels of foreign debt accumulation is different in that it is being deliberately designed to reconfigure Australian political structures in which some elements of the ALP will be accommodated and others left by the wayside).

There can be no rentier nation state if there are viable states with fiscally responsible governments. *Peter Costello or economists associated with him can advise state governments on how to eliminate or avoid debt, generate employment and attract investment. As a former Treasurer with an intricate understanding of federal-state funding arrangements, Peter Costello could help the Barnett government in Western Australia resist rent-seeking attempts from Canberra to unfairly appropriate the state’s mineral wealth. Similarly, for good measure, Peter Costello could advise the state government to ensure that mining companies do not evade paying their fair share in mining royalties.

(* Advice however from Peter Costello concerning industrial relations should neither be solicited nor heeded if given).

Even though Premier Baillieu of Victoria and Peter Costello are not party factionally aligned, the latter as a Victorian who knows his state well would be an excellent economic advisor to the state government. Victoria’s economy is going to be hard hit when the mining booms ends due to the drying up of financial credit. The expansion of services that occurred due to the successes of the former Kennett state government and Mr. Costello’s impact as federal treasurer has still not sufficiently addressed the decline in manufacturing in Victoria that occurred during the Hawke-Keating era.

The relative weakness of Victoria’s manufacturing base will become apparent after the mining boom ends and the impacts of the GFC hit. The only possible insulation for Victoria is to have a strong financial sector with a lending capacity to support an employment-generating small and medium business sector.

Peter Costello’s economic astuteness would be of particular use to Queensland. During the Bjelke-Petersen era (1968-1987), high growth rates and a doubling of the working population was achieved due to a balance being struck between the primary and service sectors. Indeed, Premier Bjelke-Petersen consciously created an investment environment for mining while also ensuring that Queensland reaped the extensive financial benefits through state mining royalties. The premier converted the state’s potential for tourism into a reality which gave Queensland a strong base for employment growth which contributed to an influx of inter-state job seekers.

If Queensland’s Liberal National Party’s (LNP) state government of Campbell Newman wants to be a success- the assumption being that it is opposed to ‘regionalization’ (sic)-then the balance between the primary and service sectors of the state economy will have to be restored. Peter Costello’s previous outstanding success in achieving similar balance when he was federal Treasurer make him a worthy candidate for consideration as a key advisor to the Newman government.

Perhaps the state where Peter Costello is most needed as an economic adviser-but whose advice will not be called on-is New South Wales. This state might have been insulated (no pun intended) had the previous Iemma Labor government been allowed to privatize the state’s electricity system to pay off or substantially reduce the state debt. A major problem with state or federal debt levels is that credit downgrades occur which ultimately undermine the flow of capital to local financial lending institutions.

The business retail sector is already flat in New South Wales and will go through the floor when the mining boom ends because the state’s financial sector has insufficient capacity. The main hope for New South Wales is to attract finance capital to fund shortfalls in infrastructure bequeathed by Bob Carr. Infrastructure spending could stimulate sufficient economic growth which the state needs to promote employment and pay off its debt. As an economic adviser to the New South Wales government, Peter Costello has the necessary skills to formulate the policies required to create a financial regime that will save the state, particularly in the context of the GFC.

Can the Federal Independents Save Australia From Rent-Seeking?

Because it is politically impossible that Peter Costello could be an economic adviser to the Gillard government, the question arises as to what the ALP should or can do to stop rent-seeking? The question of ‘can’ is the more pertinent one due to the Gillard government being a minority one. Because it is a virtual impossibility that Adam Bandt or the New South Wales federal independents Tony Windsor and Rob Oakeshott will support ETS legislation that negates the incoming carbon tax, an appeal to reason should be made to Bob Katter and Andrew Wilkie to do so even though they are not committed to supporting the Gillard government.

For years, Bob Katter has railed against ‘economic rationalism’ from a position of political weakness due to the obstinacy of both major parties adhering to this so-called orthodoxy. In the main, Katter has been correct in his criticisms of ‘economic rationalism’. The potential to finally overcome the economic vandalism of the Hawke/Keating era was there when Kevin Rudd led the ALP to victory in 2007 because the Howard-Costello government had paid off the nation’s public foreign debt and skilfully utilized the nation’s mining boom to generate employment growth in the services sector.

Alas, Kevin Rudd turned out not to be the fiscal conservative that he promised he would be as prime minister and the nation is again in a dangerous debt spiral. The nation must begin climb out of the debt trap that it is in. Tony Abbott will not (despite his rhetoric) address the issue of public foreign debt because, as prime minister, he will consolidate and administer a rentier state.

Under a rent-seeking regime, people living in rural and regional Australia will be in a worse state then when they were during the Hawke and Keating era. For what really is (or was) ‘economic rationalism’ but a policy aimed at undermining a balanced Australian economic system to clear the way for rent-seeking? If Bob Katter really wants to stop the consolidation of a dangerous policy approach that has been with Australia since 1983, he should consider supporting initiatives from both sides of politics to stop the carbon tax.

The Tasmanian independent Andrew Wilkie should consider that, if Australia becomes a rentier nation, gambling will become such a major problem that no amount of poker machine reform will not be able to address. The cause and effect aspect of gambling is difficult to ascertain. Does problem gambling in itself lead to poverty or is a side effect of hopelessness that comes from despair. I think that it is the latter and, as such, the ramifications of Australia becoming a rentier state via a carbon tax should be very carefully considered.

Even if Bob Katter and Andrew Wilkie were to support the Gillard government attempting to break with the rent-seeking agenda that is being foisted on it, the votes of Adam Bandt, Tony Windsor and Rob Oakeshott would be sufficient to bring down the Gillard government. But if Bandt were to vote to help bring the Gillard government down and in so doing set the scene for an Abbott government, the Greens’ voting base could well be lost and, even with Liberal Party preferences, Bandt could lose his federal seat of Melbourne at the next federal election. At the very least the Greens will have some explaining to do to justify why they do not support an ETS that negates having a carbon tax that will, at the very least, impoverish economically vulnerable Australians.

Will (or Can) the ALP Save Australia from Rent-Seeking?

Should the Gillard government obtain sufficient cross-bench support to break with rent-seeking, the ALP has to get its own house in order to do so. The major internal problem with the ALP is that there are hardline elements within the SL- and ultra pragmatic individuals within the Labor Right-that are prepared to have an Abbott government on the assumption that it will bring in a new regional tier of government to consolidate their power and access to SWFs. If the Gillard government denies the scope for these outcomes, then would-be traitors will not have the incentive to support a transition to Abbott.

An important political link between hardline left wing and ultra pragmatic right wing rent-seeking elements within the ALP is the foreign minister, Senator Bob Carr. Furthermore, in the context of electoral politics, it makes no sense to have Bob Carr serve as foreign minister due to his unpopularity in his home state of New South Wales.

As foreign minister, Carr is unduly antagonising the PRC and as such strengthening the prospect the Chinese military will support an anti-reform leadership at the Chinese Communist Party’s (CCP) Congress in October this year. Such a leadership will be inclined toward a mercantilist approach to economics that would look favourably upon Australia as a rentier state.

It makes more political sense for Kevin Rudd to return as foreign minister from both a domestic and international perspective. Mr. Rudd is electorally popular in Queensland and, as foreign minister, would have the unique capacity to be an effective PRC/United States go-between. Even though Australia is a small to medium international power, Kevin Rudd would be almost uniquely able to punch above his weight to make an invaluable contribution to the most important issue in global affairs: Sino-American relations.

The other imperative to secure political moderation within the left and right of the ALP is for a modus operandi to be reached between Prime Minister Julia Gillard and Industrial Relations Minister Bill Shorten. A succession plan which would help secure the ALP from destabilization is needed to compel the government to pursue a rent-seeking agenda. Such an arrangement would prevent Bill Shorten from being set up for a fall by taking the prime ministership and losing the next federal election which would ensure the destruction of the AWU.

There is eighteen months until the next federal election in which ,even if Julia Gillard was to go to the people as prime minister without a carbon tax, there is no guarantee that the ALP would win*. Bill Shorten can make his mark between now and the next federal election as industrial relations minister by engaging with business and employers to gain acceptance of the industrial relations system of Fair Work Australia (FWA).

(*Alternately, Abbott leading the coalition in a context of there not being a carbon tax would considerably bolster the ALP’s chances of election victory).

An important reason why Peter Reith’s attempt to destroy employee rights failed via the Workplace Relations Act 1996 (the WRA) was that his attack on the arbitration system was an anathema to much of the business community. This was not surprising because the arbitration system was established in the 1900s at the instigation of much of the business sector to support a balance between the domestic and primary sectors of the Australian economy.

The Australian Democrats wisely utilized their balance of power in the Senate in 1996 was to ensure that an award safety net was retained under the WRA. This concession may have amounted to nothing had the Senior Deputy Presidents and Commissioners of the Australian Industrial Relations Commission (AIRC) not upheld the integrity of the industrial relations system which Reith attacked by processes such as award simplification. Employer nominees to the AIRC bench were notable during the Reith era of attack for upholding the integrity of the industrial relations system.

If there was to be a future anti-industrial relations Liberal Party government, the institutional infrastructure of FWA might not withstand it due to current employer ill-will. For Australia to have an industrial relations system - in which arbitral institutional supports help underpin an enterprise bargaining system that benefits both employers and employees - the FWA needs to gain a greater sense among the former.

Furthermore, for the AWU to maintain its strength in a political context, the union must have industrial viability. An arbitral enterprise bargaining system of industrial relations with substantial employer acceptance would facilitate AWU accommodation within the industrial relations system. This would in turn contribute to the industrial effectiveness of the AWU so that this union could be a bailiwick for moderation within the ALP.

If the Gillard government is re-elected, then Bill Shorten could become Treasurer and begin to address the most important issue that confronts the nation- paying off the nation’s public foreign debt. There is no chance of the current Treasurer Wayne Swan paying off this debt (or delivering a genuine budget surplus*) which he consciously created as part of the ground work for a rentier state.

(*Peter Costello used the proceeds from budget surpluses to pay off the nation’s public foreign debt. If Australia is to avoid economic catastrophe in the context of the GFC, then this practice that should be resumed).

Swan himself comes from a classic AWU Queensland background. His political career is testament that AWU political leaders can either inflict colossal harm-when they are ciphers for other economic and political interests-or agents for positive outcomes. This latter scenario is more inclined to occur when senior ALP politicians from AWU derive their power from bolstering political moderation within the ALP. The category that Bill Shorten chooses will determine whether or not Australia becomes a rentier state and the AWU survives.

Historical Justice: Why Germany Could Save the World by Helping to Rescue Greece

Part of the idiocy of Australia transitioning to a rentier state is that it is being undertaken during the GFC. In this context, the massive decline in Australian living standards may come regardless of Australia’s planned socio-economic transition.

A frustrating aspect of the GFC is that the economic catastrophe-that might be on its way is avoidable. Marxists will undoubtedly blame globalization as a cause of the possible economic disaster. But a key aspect of the globalization phenomenon- the international transfer of money- could save the world from economic meltdown. The issue of concern is not one of capacity but of will-power.

It is very disappointing that Germany’s Chancellor Angela Merkel will not support the European Union (EU) -and Greece in particular- by financially supporting the issuing of Eurobonds. Germany of all the countries in Europe should know of the acute dangers of currencies losing unless they are supported.

The hyper-inflation of the immediate post-World War I Germany nearly precipitated socio-economic collapse. Fearing another revolutionary challenge, the new republican government printed money rather than increase taxation. What the government originally sought to avoid actually almost came to pass due to the onset of hyper inflation in 1919 which brought Germany to the brink of ruin. As the industrial base of Europe, Germany was able to recover its economics bearings by 1921 despite the imposition of war reparations.

The decision of the German government in January 1923 to suspend reparations payments to protest the petty decision of France and Belgium to occupy the industrial Ruhr region helped plunge Germany into financial crisis. The decision of the German government to pay striking workers in the occupied Ruhr precipitated another bout of hyper inflation. Germany might have been torn apart by chaos had an emergency national unity government led by the Gustav Stresemann (a sentimental monarchist) not called off the passive resistance campaign and resumed reparations payment in September 1923.

Out of the near disaster of 1923 came short term economic prosperity for Germany because the American government with the surprising backing of a laissez-faire Republican administration supported the Dawes Plan. Under this plan, hundreds of millions of American dollars in cheap loans poured into Germany to support industry and support the new currency, the Reichmark. The socio-economic stability that Germany enjoyed between 1924 and 1929 showed what might have been had the victorious Allies shown more magnamity after World War I and later with the onset of the Great Depression in 1929.

Germany was particularly hit hard by the Great Depression in October 1929 because the national prosperity between 1924 and 1929 was largely financed by American credit. The profound economic challenge confronting Germany as a result of the withdrawal of American capital was exacerbated by the continuing imposition of reparations by the European Allies.

Why Chancellor Merkel Should Remember Heinrich Bruning

Chancellor Heinrich Bruning*realized that the United States could not continue to help Germany economically as America turned inward both politically and economically with the onset of the Great Depression. The German chancellor realized that Germany’s only hope of economic salvation was through European economic co-operation. The realization of this objective was impeded by continuing hostility toward Germany by France, Italy and Great Britain which was manifested by the continuing imposition of reparations.

(Dr. Bruning was a lawyer and a brilliant economist who had previously worked for a Catholic union confederation. Had he not been betrayed by President Paul von Hindenburg who in effect dismissed him in late May 1932 as chancellor, Bruning might have succeeded in his objective of reinstating the Germany monarchy following the death of the aged president).

To gain needed inter-European co-operation to help get Germany out of the Great Depression, Chancellor Bruning imposed a harsh economic austerity programme which resulted in unemployment rising from two million in 1930 to six million in 1932. For this policy to work, the victorious powers such as France, Britain and even fascist Italy had to be frightened by the rise of the extreme right. It was with this objective in mind that Bruning called early parliamentary elections in September 1930 which saw the German National Socialist Workers Party (NSDAP or Nazi Party) come second with 18% of the vote.

The high Nazi vote was a surprise. It had been previously expected that the nationalist anti-republican German National People’s Party (the DNVP which gained 7% of the vote) would reap the benefit of increased public discontent. Although the Nazis relatively high vote surprised Dr. Bruning it did not unduly upset him because it accorded with his strategy of scaring the European Allies into cancelling reparations and of reconciling with Germany in pursuit of mutual economic support.

Germany and the Tragedy of Avoidable Disasters

Dr. Bruning’s political strategy might have worked had ungrateful President Hindenburg not in effect dismissed in late May 1932 as Chancellor six weeks after the ruling Catholic Zentrum (Centre) Party had secured the president’s re-election against Hitler. The Bruning dismissal was instigated by the president’s military adjutant, General Kurt Von Schleicher. He envisaged that a new coalition government composed of a post-Bruning Zentrum Party, the DNVP and the Nazi Party could be formed in alliance against the Social Democratic Party (SPD).

Schleicher erroneously believed that a party that was as once marginal as the Nazis would be satisfied with cabinet ministries and access to state patronage. From this general’s perspective, the Nazi Party was of political value because its Brown Shirt militia could be used as an organisation through which Germany could secretly re-arm. The overriding priority of the restored Junker elite was not economic reconciliation with former war-time adversaries but German re-armament.

The Junker elite that had fallen in 1918 effectively regained power as a result of the presidential appointment of Franz von Papen as Dr. Bruning’s successor in June 1932. The Papen government (which was widely and derisively known as the ‘Cabinet of the Barons’) was suppose to be a stop-gap before a three party government composed of the Zentrum Party, the DNVP and the Nazis was formed. In pursuit of this objective, new parliamentary elections were held in July 1932 in which the Nazi Party came first.

As terrible as it was that the Nazis came first in the July 1932 elections, it was not unexpected due to Germany’s abysmal social and economic conditions. What was surprising was that the Nazi Party leader Adolf Hitler refused to allow his party to join a new government unless he was made chancellor. Hitler’s obstinacy in demanding the chancellorship was derived from his realization that, if his party entered the cabinet without him being chancellor, he would be supplanted by the Nazi Party’s then number two, Gregory Strasser.

The impasse that resulted from Hitler refusing to allow the Nazis to enter government led to another national parliamentary election in November 1932. Although the Nazis still came first in these November elections, they lost support to both the German Communist Party (KPD) and the DNVP who respectively came third and fifth. It was more than probable that, had another subsequent election been held, a then bankrupt Nazi Party would have returned to deserved marginality with its vote being divided between the KPD and the DNVP.

The potential for the KPD to move above third position had another election been held was vividly demonstrated when Communist and Nazi supporters co-operated with each other in 1932 to fly their respective flags from flat balconies in the infamous Berlin rent strike. The possibility of Nazi personnel and voters defecting to the KPD was an important factor among many which led President Hindenburg to foolishly appoint Hitler as chancellor on January 1933.

It is widely believed by many non-Germans that, due to the Great Depression, voter support for the Nazis shifted from democratic parties. This was not quite the case as the bloc votes of the two-major parties, the SPD and the Zentrum Party remained intact even in the March 1933 national elections which were held two months after Hitler assumed office.

Voter support for the Nazis was gained from the two major liberal-conservative parties of the Weimar Republic the German Democratic Party and the German People’s Party. The Nazis also gained a substantial voting base from the many people who had previously not voted in elections due to their apathy. One of the many tragedies of Hitler’s rise to power was that, had international support for Germany been provided, the Nazis would not have gained sufficient electoral support to be a contender for national power let alone proceed to establish an aggressive totalitarian state.

Ironically, the Bruning strategy-of fostering extremism in Germany to end reparations and establish a European financial framework to get out of the Great Depression-seemed to be on track. An Ambassadors’ Conference in Paris in July 1932 formalized an agreement which effectively ended German reparations and established the beginnings of a framework for inter-European economic co-operation that the recently fallen Dr. Bruning had vigorously advocated for the just over two years that he had been German chancellor.

To those who say “There is no use crying over spilt milk,” the rejoinder is, “Yes there is when history is about to repeat itself”!! If Greek voters are not given some hope to vote for the New Democracy Party (ND) on the fast approaching June 17 general election, then Europe and the world with it could again descend into chaos. It should be emphasised that Greece is not an aggressive militarist power. What is important is that the financial contagion of a collapse of the Eurozone caused by a Greek default will have ramifications similar to those that contributed to the Great Depression of the 1930s.

The area of comparative analysis is that governments around the world should now be giving the Greek people hope so that they will vote for a moderate and sensible party such as ND. Because European nations were found wanting in the early 1930s with regard to supporting Dr. Bruning, a disaster ensued that rebounded on them.

It is too tedious and unscientific to undertake a comparative analysis between the four elections (two presidential and two parliamentary) that were held in Germany in 1932 and the dynamics of contemporary Greek politics. However, there is an underlying commonality of moderate voters shifting to extremes when there is apparently no hope. Consequently there are broad parallels between the Greek debt crisis and the last days of the Weimar Republic.

June 17th 2012: How and Why A New Democracy Party Victory Will Save The World From A Greek Tragedy

The fact that the former mainstay of the Greek left since 1977, the Pan Hellenic Socialist Movement (Pasok) - which garnered 16% of the vote in the May 6th 2012 election- and the Democratic Left (DIMAR, a re-founded Eurocommunist party which gained over 6% of the vote) did not enter a coalition with ND strengthens the prospects of the Syriza Party (the Coalition the Radical Left) displacing the ND to come first in the June 17 poll. If this were to occur, then PASOK remnants, DIMAR (if it were to still win any seats) with the Greek Communist Party (KKE) – which has a strong 10% voting base- will be able to form a coalition government led by Syriza.

The Syriza Party’s history is complicated but interesting. This party is derived from micro-parties and left-wing social movements that had previously entered into a broad left coalition dominated by the KKE and a rival Eurocommunist party which now takes the form of DIMAR. The two parent parties inevitably fell out with each other and in the process broke with the Synapismos (Coalition) which they had originally assembled. However, the minor fellow-travelling constituents of Synapismos continued on to constitute the Syriza Party.

It goes without saying that Syriza could not be in a position to win power if were not for the Eurozone crisis. Too many Greeks have bad memories of the right-wing Colonels dictatorship to want to take the risk of again living under a dictatorship by voting for the KKE or even DIMAR. In this context, the Syriza Party is the ideal archetypal Marxist front party – a radical avowedly non-authoritarian party (although Syriza has Maoist and Trotskyite constituent inner-parties) that enough desperate voters can support.

Due to the umbrella style of organisation of the Syriza Party, the hardline elements of PASOK know that there is the scope for them to enter Greece’s new pre-eminent party of the left. The only real challenge for PASOK is to retain a sufficient voting base to enter into coalition with the Syriza Party as a possible prelude to amalgamation. Should DIMAR fail to win any seats in the June 17th poll, this will not unduly perturb its leader Fotis Kouvelis who has political links the Syriza Party. The KKE would never amalgamate with the Syriza Party but this does not preclude the Communists entering cabinet as a coalition partner.

The leader of the Syriza Party, Alexis Tsipras, has emphasized his commitment to democracy but can he be taken at his word as there are authoritarian constituents within his party? Tsipras has recently expressed his preparedness to stay in the Eurozone should Greece receive adequate external financial help, particularly from Germany. It should not however be forgotten that Tsipras’s comments were made in the context that credible fears of the cataclysm that will ensue should Greece leave the Eurozone were precipitating a shift of voter support to ND. Could Tsipras’s comments have been made to stop a return of ND voters to this stalwart centre-right party in the June poll after they had voted for the Syriza Party in the recent May election.

ND political strategists were sufficiently astute to instigate the formation of the Independent Greeks Party (ANEL) to stop votes going to the far right Popular Orthodox Rally (LAOS). LAOS not only failed to win disillusioned ND votes but also missed out on picking up a new far right vote which went to the fascist New Dawn Party (XA).

The political dynamics are such in Greece that, unless former ND voters that supported the Syriza Party in the May poll return to New Democracy in the June election, then Tsipras will be the next prime minister of Greece. This scenario is all but inevitable due to the PASOK and DIMAR decision not to enter into a coalition with ND.

If Tsipras becomes Greece’s next prime minister, he will have the potential power to bring the international financial system down by withdrawing Greece from the Eurozone which could trigger an international meltdown. As an ideological Marxist, Tsipras may feel little incentive to do ‘capitalism’ any favours. There is also the chance that a mercantilist PRC could enter the fray to offer a beleaguered Greece financial support. With a far-left government in office combined with PRC financial support, the prerequisites will be there to establish a statist dominated economy ruled by a quasi-authoritarian leftist regime.

The above scenario is plausible because Greek politics has had a substantial left-wing base since the Greek Civil War (1946 to 1949) which has a strong sense of aggrievement. PASOK founder and later prime minister, Andreas Papandreou, exploited this base to maximize his political power. The militancy of support for Andreas Papandreou was derived from a base which often did not recognize the legitimacy of alternate views.

How and Why Germany Should Avoid An Epic Greek Tragedy

Considering the high stakes the Leninist dictum/question should be asked: “What is to be done?” Perhaps a more apt (and less-power- over-approach) question is, “What can be done?”

The answer to the above question(s) is that nations such as France, Germany and Great Britain should endorse the European Central Bank (ECB) issuing Eurobonds before the June 17 Greek poll to bolster New Democracy’s vote. A substantially enhanced ND vote (or one where this party at least maintains its first place) will lead either to the formation of a centre-right coalition or alternatively a reconfiguration of the Eurozone could result in centre-left voters staying with PASOK. This outcome combined with an increased ND vote would create the conditions for a pro-European government of national unity.

It may be too late (i.e. before June 17th) to finalize the funding of Eurobonds. However, an announcement of the end of the EU fiscal union would send a powerful signal to Greek voters that it is worth their while to support pro-European moderation. The fiscal union is of itself non-viable because its operation mainly benefits Germany and Benelux countries where the Euro reflects the value of their goods and services. This is particularly the case because economic uncertainty in other Eurozone nations and Britain is helping the trading and investment position of Germany and the Benelux nations.

The EU bureaucrats in Brussels cannot expect electorates in struggling Eurozone nations to endure austerity when there are smarter ways of dealing with the credit crisis arising from the GFC. This is particularly the case when Germany will be able to maintain high employment levels not inspite of the Eurozone crisis but because of the power that Berlin is now deriving from the fiscal union.

For the fiscal union to survive, the consent of France and Italy is required. If there was to be a prompt withdrawal by either of these industrially powerful nations, then a profound financial crisis could afflict Europe and the world. However, unless there is some announcement on reforming the fiscal union, then the Greek election results could precipitate a financial collapse that will eventually engulf Germany by on a scale similar to the Weimar Republic.

Will Angela Merkel Honour The Adenauer Tradition?

The Merkel government may well forsake the Adenauer tradition - which eventually redeemed German honour after the Second World War)-of prosperity and peace being achieved by Germany supporting a European framework based on mutual respect. If the Merkel government is unworthy of the Adenauer tradition, then other EU nations must apply the Adenauer tradition without Germany by helping each other out. But to be of mutual assistance, it is first necessary to ascertain what the problems are.

Even though currency union was probably not needed after a European customs union was achieved in 1992, it is currently too dangerous to imperil the Euro. But at the same time it is currently impossible for so-called PIGS nations to service their public national debts and guarantee the solvency of their banks if they have to do so with Euros that do not currently adequately reflect the value of the goods and services within their country, even if they notionally belong to a single market.

However, the so-called PIGS nations (and other EU nations) would understandably be more prepared to support the Euro as a currency if Eurobonds were issued which cumulatively covered the debts of Eurozone nations. Such an arrangement would vitally help guarantee the financial solvency of banks in nations such as Spain and plausibly lead to bank re-capitalization that spurs economic growth so that Europe can emerge from the GFC by ending its sovereign debt crisis.

The major problem is that the Merkel government will not financially support the issuing of Eurobonds, which in conjunction with other EU nations, will collectively cover the sovereign debts of member nations. This refusal is based on the premise that Germany will have to bear a disproportionate burden for servicing debts that she did not accrue. This could be considered a fair call if broader historical factors and potential outcomes were not taken into account.

Firstly, it would be expected that German governments would have more empathy and subsequent nous to know to provide international financial assistance or relief to crisis struck European nations. This is because Germany was denied such support during the 1920s and the early 1930s by the victorious Allies. Chancellor Bruning did not ask for international aid for Germany during the Great Depression but rather made the reasonable request that gratuitous reparations payments be cancelled. He also sought to establish an international framework for mutual economic co-operation so that European nations could help each other emerge from the Great Depression.

The hoops that Chancellor Bruning was forced to figuratively jump through to gain international support for Germany helped precipitate his own downfall and the subsequent rise of Hitler and the disasters of Nazism and the Second World War. Perhaps it was due to a combination of the allied mistakes of not helping in the 1930s- and fear of a Soviet takeover of Europe in the post-war 1940s-that the Americans provided generous financial support through the Marshall Plan to West Germany without which there could have been no German economic miracle from the early 1950s.

Another important factor (besides generous American aid) that helped underpin the German economic miracle was the authorities of the American and British occupation zones on the advice of the economist Ludwig Erhard establishing the Deutsche Mark as a new currency in June 1948. Even an economic ignoramus such as the Soviet dictator Joseph Stalin understood that an American aligned West Germany could thrive if the new nation (which was established in 1949 as the German Federal Republic and which gained full sovereignty in 1955) had a strong currency.

Stalin’s determination to destroy the Deutsche Mark was co-conterminous with his determination to destroy West Germany so that an American presence in Europe became unviable. The resulting Berlin blockade of 1948-1949 was Stalin’s attempt to thwart and fatally undermine the Deutsche Mark. The resulting American airlift of supplies to the people of West Berlin was the antithesis of international indifference to Germany during the Bruning period of 1930 and 1932 as this helped save the Deutsche Mark, and with it, western Europe.

Under the current context of Europe’s sovereign debt crisis, you would think that Germany’s political establishment would have a greater sense of historical appreciation of the importance of facilitating international support for the sake of the Euro. Furthermore, the fact that there is now a Eurozone goes back to the French decision in March 1983 to support Germany in laying the groundwork for a common currency under the Delors plan by which the Franc was devalued and thereby effectively pegged to the Deutsche Mark.

Naturally there is concern that Germany would have to carry most of the burden if the Eurobonds were issued to cover Europe’s debts. There is also an argument that Germany is really preparing the way to do so by utilizing the framework of the fiscal union to regulate the loaning of money to avoid throwing good money after bad. However, the indications are that the fiscal union is going to thwart prospects of economic growth, thereby thwarting any prospect of the so-called PIGS nations generating sufficient revenue to service their debts.

There is an argument that an incapacity of Eurozone nations to repay their debts is a cynical ploy by which German –backed-Brussels-bureaucrats can effectively control the so-called PIGS nations by being the supplier of credit. If this is the case, this policy will eventually rebound. This is because an absence of economic growth via imposed fiscal austerities will thwart the generation of capital and business activity needed so that governments and financial institutions can cover their debts.

More need not be said on this scenario because the GFC was caused by the incapacity of banks to cover existing loans. The world basically survived the first round of the GFC because of the United State’s economic capacity that is derived from the American dollar essentially being a global reserve currency. It doubtful if the United States now has the economic capacity to cover European debts should there be a financial contagion due to a Greek default.

Win-Win: Two Eurobond Zones-One Currency

The United States by itself may not have the financial capacity to cover European debts and underwrite an international framework to financially underwrite invaluable economic growth but Europe does if Eurozone members collectively guarantee Eurobonds to cover debts. There might be a degree of economic austerity for Germany if this were to occur but it is better that the Germans experience economic pain than again suffer a Weimar Republic type of pain with mass unemployment and hyper inflation that will come if the Euro collapses.

In the context of Germany avoiding the above scenario, it is not an unreasonable proposition that Berlin financially contribute to guaranteeing Eurobonds to cover European debts. This is particularly the case because Germany has the economic capacity to do so. Many Marxists conveyed their underlying hostility to German re-unification in 1990 by predicting that the cost of it could not be borne and that Germany would have to endure suffering due to the resulting burden.

Due to Germany’s industrial capacity, excellent financial system and brilliant industrial relations system, the doom-sayers were proved wrong. Germany has economically recovered and living standards in eastern Germany (unless there is a collapse of the Eurozone) are well on the way to being on a par with western Germany. Indeed, Poland (a nation which has grievously suffered from the ramifications of past German economic and political dysfunction) has economically benefited from German re-unification and from Germany positively supporting European unity.

If Germany will not support Eurobonds underwriting European debt, then France and *Italy should immediately withdraw from the Eurozone and, with British support (even though Britain is not a Eurozone nation) provide capital for Eurobonds that cover Greek and Irish debts. Hopefully, this will compel Germany and Benelux nations to financially support a separate Eurozone bond zone for in-debted nations such as Spain and Portugal to cover their debts.

(*Italy has been categorized as a so-called PIGS nation. However, there is ironically sufficient Italian capital that could invaluably contribute to a needed financial pool even though Italy cannot cover its own debts).

The benefit of the two Eurobond zones option it that is virtually halves the burden for creditor nations while providing the necessary breathing space for debtor countries to service their debts. The two Eurobond zones should be a mix of industrially strong and weak nations to achieve the necessary balancing. Litmus tests gauging the success of two-zone Eurobond spheres would be the covering of debts existing and the provision of capital to facilitate banking solvency and credit formation to induce growth in the small and medium business sectors of service economy nations such as *Ireland.

(*It has to be admitted that Sinn Fein leader Gerry Adams was correct in denouncing the recent treaty that Ireland unfortunately ratified in a recent referendum in which Dublin undertook to accept fiscal dictates from Brussels in return for credit lines. However, it is unfortunate that Sinn Fein attributed a degree of culpability for the current crisis to banks.

The recapitalization of Irish banks is a must if there is to be an Irish economic recovery. The application of external controls is legitimate in the context of the current European debt crisis for the purpose of actively monitoring and regulating the provision of capital to banks to ensure that productive, or more to the point, serviceable loans are made. There is greater scope for economic growth when there are effective prudential banking regulations – which Peter Costello introduced in Australia- than having counter productive power over fiscal controls imposed by external authorities on sovereign nations).

Will France Utilize its Balance of Power Save Europe and the World?

An important nation which will by the linchpin of a two zone Eurobond regime is France. The Merkel government moved to create the fiscal union in November 2011 in case Nicolas Sarkozy failed to win re-election. Without France, there can be no fiscal union and, without France, there can be no two zone Eurobond regime. It was probably for the best that Sarkozy did not win re-election because, in a second term, he probably would not have been motivated to leave the fiscal union and address social problems such as poverty amongst a substantial but sidelined underclass.

But not only must a national leader have the motivation to overcome social problems, he or she should also acquire the capacity to do so. To avoid becoming a French president who fell short of his promises, thereby clearing the way for the National Front (FN) to possibly come to power in the future, Francois Hollande could support a two Eurobond zone solution to help precipitate needed economic and employment growth in Europe, without which France will not be able to address its underlying social problems. France, in the context of the current European debt crisis is more important than Germany because it is France that holds the political and economic balance of power within the Eurozone.

History has shown that balances of power can be altered by the internal dynamics of different nations. Unless EU leaders and/or President Obama of the United States make some meaningful policy announcement before the end of this week to give moderate Greek voters a legitimate reason to vote for the New Democracy Party, then they will be buried by history as Dr. Heinrich Bruning was.

Dr. David Paul Bennett is the Director of Social Action Australia Pty Ltd.