Stutch just loves ‘dem bosses

Editor-in-chief of the AFR, Michael Stutchbury, has his say on the election today:

Let’s bury this idea that Australian capitalism is broken and needs to be fixed to make sure workers get a fair go. Amid dire warnings about precarious gig economy jobs, 290,000 extra full-time jobs were created last year, helping push down the unemployment rate to 5 per cent. Nine of every ten jobs created over the past year were full-time.

…During this [mining] boom, the rest of the world gave Australia a pay rise, which flowed to both company profits and workers. Consumer wages surged ahead of productivity.

But, from 2012 or so, iron ore and coal export prices corrected, squeezing national income, profits (which fell) and real wages (which flatlined). It is “part of the adjustment process to the unwinding of the mining boom,’’ notes Gianni La Cava in a paper in the Reserve Bank’s March Bulletin...That has brought wages growth back to the longer-run advance of productivity.

Well, first, let’s note that net jobs growth over the past year came from government. The private sector was flat. That is a problem for Australian capitalism.

As for the broader argument about income, there was plenty of truth in Stutch’s view from 2011-15. But since then the terms of trade have again lifted to very high levels yet workers have seen none of the boost to national income, even while their productivity gains continued. Need I remind Stutch that Governor Phil Lowe himself has been out begging bosses to give more pay rises.

What Stutch misses is that the structure of the Australian economy is broken. Throughout the period of limited income gains it was, and remains, a fact that capital (not labour) productivity has lagged horribly:

This has happened owing to:

• marginal mining investments;
• terrible energy investments;
• massive capital misallocation into land and property;
• mass immigration crush loading, and
• the over-consolidation of every business sector.

If income is going to grow again for both profits and labour, capital productivity must lift. This requires tough national interest productivity reforms. But that will create very large corporate losers:

• property taxes concessions must be cut;
• public electricity investment incentives altered and the gas cartel broken;
• immigration must be halved, and
• competition and innovation policy become much more aggressive.

Yet Stutch’s “businomics” approach to the political economy by definition prevents support for such policies as the losing industry titans complain loudest in his paper, usually supported by its editorials and journos.

Indeed, all “businomics” creates is a profitless zero-sum economy in which labour and capital war over their ever shrinking slice.

In short, while Stutch is making a claim to the high economic ground, he is in fact only choosing a side within a false class binary.