No economic crisis for WA's rich
The fortunes of Western Australia’s billionaires have surged, unabated by the global economic crisis. Gina Rinehart is the first woman to top Forbes Asia’s list of the wealthiest Australians, with an estimated fortune of $9 billion. Her wealth grew by $7 billion in one year. Andrew “Twiggy” Forrest came in at No 2 as his wealth surged 68%, thanks to soaring iron ore prices. It is estimated his wealth is at least $7 billion. According to Forbes Asia, the net worth of Australia’s 40 richest people rose 40 per cent last year to $68.4bn, the number of billionaires rising from 13 to 20.
Corporate Australia has record amounts of cash, profit growth in 2010 averaging 15%. BHP Billiton, Australia’s largest company (in terms of capital) has a cash pile of at least $12.5 billion. According to CommSec, Australian firms held a record $271 billion in cash and deposits in the September quarter of 2010, and the proportion of total financial assets held in cash is the highest in 11 years.
The high proportion of cash reflects general fears about where the economy is heading and a consequent reluctance to invest. But the price of iron ore is set to double this year, and coking coal is expected to rise by 60%. Resource firms are planning $133 billion of new projects; most of these will be coal-seam gas, iron ore production expansions and liquefied natural gas.
These resource projects are relatively secure. The profits they return to shareholders are certainly under no threat from the political establishment. Big mining capital has direct ties to both Labor and Liberal that are never questioned by the mainstream media. Both political parties are enthusiastically in bed with the mining industry.
Even a cursory glance at the Labor Party shows how overt and intertwined the interests of mining capital are with the parliamentary system. Gary Gray, holding a safe Western Australian seat in federal parliament and formerly national secretary of the ALP, is a case in point. He is not by any means a prominent leader of the party, yet was influential in the dumping of Kevin Rudd as leader. Gray has in effect been a mining lobbyist inside the Labor Party. After leaving Labor head office in a show of tears “for family reasons”, from 2000 Gray became a special consultant to Woodside Petroleum, Australia’s largest national gas producer. He eventually became the company’s corporate affairs director, during which time Woodside secured a natural gas agreement with China’s state-owned PetroChina, a deal projected to produce revenues of $35-45 billion over a 15-year period.
Another example is BHP Billiton’s director of public affairs, Geoff Walsh, also a former ALP national secretary as well as being a former adviser to prime ministers Bob Hawke and Paul Keating. The corporation’s senior media relations executive, Amanda Buckley, was an adviser to Kim Beazley. The head of government relations at Rio Tinto, Mark O’Neill, is another former adviser to Keating. Tim Gartrell, who succeeded Walsh as ALP national secretary, now works for “Twiggy” Forrest.
It is little wonder that Rudd’s resource super profits tax never got off the ground. The media campaign against the tax was organised by the head of Rudd’s own 2007 election campaign, Neil Lawrence, who had already been recruited by the mining giants to kill the emissions trading scheme.
In its current form, the minerals resource rent tax proposed as a replacement of the resource super profits tax provides all sorts of loopholes that not only enable mining companies to evade the tax, but loot the public purse as well as the resources. The tax will apply only to the value of the resource, rather than its processed form. Mining companies will also be eligible for a 25% “extraction allowance”. The starting base of the tax will now be on the market or book value of assets, which is easily fudged, as opposed to the accounting book value, which is the actual cost of the assets less depreciation.
Add to this the lowering of the company tax rate to 29%, and it’s a boon for Australian capital.
The vast majority of working people are not experiencing any benefits from the mining boom. The rising cost of living and a lack of affordable housing are causing financial stress for low-income families. Two million Australians are living in poverty. In the 1970s, only 2% of Australians were considered to be living in poverty; now it is five times that.
The term “working poor” was once considered a contradiction in terms in Australia, useful only in describing poverty in the US or the underdeveloped world. Today being employed is no guarantee against poverty. Accessing social services has become more difficult as a result of the “mutual obligations” imposed by Centrelink, causing individuals and households to sink further into poverty.
Housing stress is chronic throughout Australia. On any one night, 100,000 people are homeless. In WA, half of the homeless are under the age of 25. A disproportionate share are Aboriginal. According to the Australian Bureau of Statistics, Indigenous people are 9% of the homeless despite being only 2.5% of the population.
It’s not hard to figure out why there is an increase in housing stress. Statistics from the ABS show that between June 2000 and June 2005, the price index of established homes, averaged for eight capital cities, increased by 171%.
Gap between prices and wages
Barely any sector of the workforce has been spared casualisation, making employment precarious, especially for those already marginalised. But even those who have been in full-time employment for years are struggling. The dismantling and “modernisation” of the award system have meant that the minimum wage is no longer enough to provide even a basic level of subsistence and have put downward pressure on wages. Compounding this problem are exorbitant price rises for essential goods and services such as public transport, petrol, utilities, housing and staple foods.
In WA, growing inequality is particularly acute. The Australian reported last June that average power bills would rise between 16% and 25% over the next three years in WA. Gas prices have risen 30% in two years, and the number of people not able to make payments has risen 40%. Complaints to the utilities ombudsman have doubled.
Growing inequality is legitimised in capitalist society. Status is reflected in the ability to consume and reproduced through cultural ideology. Nowhere in mainstream culture are the lives of workers given real value. The stars are people who have “made it”. Their success is judged by how much wealth they can display.
The capitalists’ robbing of the working class and plundering of the earth are considered achievements; the more capable they are of exploiting labour, the higher the reward. These people are able to gratify themselves with no limits to their consumption of whatever takes their fancy. There is no moral outrage expressed in the mainstream media at the fortunes amassed by Gina Rinehart or Andrew Forrest, nor at the power they wield.
While it is generally true that “the rich keep getting richer and the poor keep getting poorer”, it doesn’t have to be this way. In pre-historical societies, people lived a communal existence and contributed collectively to the tribe. What was produced was distributed according to needs rather than hoarded as individual profit.
We know that a return to greater equality on the basis of modern productivity is possible today despite the global power of capitalism. In socialist Vietnam and Cuba, a large part of what is produced and distributed is based on social planning. The ongoing socialist revolution in Venezuela is moving in the direction of such an economy. These societies show a positive glimpse of the future of humanity, where those who produce society’s wealth are in control, enabling society to meet the needs of all people and live without poverty or homelessness.