Dr Jim Stanford on: Workplace Reform, Neoliberalism and the WA State Budget

 Last week, Dr Jim Stanford was in WA to present a series of guest lectures about workplace reform, analysis on neoliberal economic policy and his latest research on the implications of the gig economy.

With the State Budget due in just a few weeks it was timely for us to ask Dr Stanford what he thinks the solution is to WA’s budget woes.

 

What is Neoliberalism and why are we seeing so many discussions right now about its failures?

Neoliberalism is a term that gets thrown around a lot but it’s not always 100 per cent clear what it means.

Neoliberalism is a term used to describe a set of economic policies that have been in operation for around thirty years in most parts of the world. I think of it as a ‘tough love’ version of capitalism – think of it as capitalism with the gloves off.

While in the post-war decades, industry and employers were more willing to share profits and the wealth a little bit with workers via unions. There was wealth spread into social programs but starting around the late 1970s into the 1980s, we began to see that tolerance for the workers and workers interests evaporate. We saw it with Margaret Thatcher in Britain and Ronald Reagan in the US, and then it spread through much of the world.

We saw it be adopted by hard-nosed right wing leaders and spread down to become a more aggressive position adopted by employers. It led to a stance that they would not give anything to the workers unless they absolutely had to.

The results of thirty years of Neoliberal economic policies are obvious all around us today with our growing inequality problem. There’s also now a massive gap that has been created in wealth ownership between the one to two per cent at the top, and the rest of the people in society.

Everyone else is striving to get by.

We’ve seen reductions in social programs, attacks on entitlements and above all, we’ve seen incredible attacks on unions. Neoliberalism wants unions out of the way. Why? Because unions are an organised force that defends workers from attacks.

 

How does Neoliberalism view public services?

We often make the assumption that Neoliberalism wants to remove or shrink the government, or go back to a free market utopia with no government involvement. But that is an incorrect view of the strategy.

Neoliberals generally like a strong central government; they just want that government to do things that are not what the people in democratic society have traditionally expected government to do.

Instead of government providing public services and effectively spreading the wealth through an appropriate tax and transfer system, Neoliberalism would prefer government to focus on supporting the business community and enhancing profit. They will support investment in infrastructure if it helps business operate more effectively and profitably. They’ll support government investment in training and education, if that training is really focused on producing job-ready graduates. This saves the employer on having to take on the costs of training.

Neoliberalism wants government to have a long arm when it comes down to private property protection. Especially in abstract forms, such as patent laws or intellectual property, where the government can work to protect those on private companies’ behalf.

They like government when it polices industrial relations. In Australia, take a look at our industrial relations systems. We have one of the tightest and most heavily policed Industrial Relations systems anywhere in the world. This represents government being used by employers to promote the interests of employers, in this case, by making it very difficult for unions to do what they’re supposed to. They like a strong government, a government with power. But they want government to be focused on the needs of business, rather than being focused on the needs of the whole population.

 

What are some of the economic reasons professional workers have been campaigning against privatisation in the developed world?

Another strategy of Neoliberalism in regards to the government and public services is, if there are parts of the public services that can be hived off to the private sector, they’ll strongly support privatisation.  This creates new profit opportunities for private investors.

There’s no evidence that private ownership and private management will make the service more efficient. The facts suggest this is quite to the contrary, just look at Australia’s electricity market concerns or take a look at our vocational education system. Sectors that have been privatised are quite often in a mess today. The push to sell isn’t actually about efficiency itself – it’s about creating opportunities to allow private sector investment to make a profit.

Public professional workers have got a big stake in opposing privatisation – once something is handed over to the private sector, it is very, very challenging for workers in that sector to protect their incomes, working conditions, their living standards or oppose the outsourcing of their work. It’s quite logical that professional workers in many public service environments, whether it be healthcare, education or utilities have always opposed privatisation. They would argue ‘no, no, noto privatisation.

This is an argument to keep a service in the public fold - it keeps the service more accountable, it means higher quality services to the users and it means the retention of a fighting chance to preserve the quality of the jobs.

 

What are the economic outcomes from a state maintaining a strong contingent of highly educated workers employed within the public service?

It’s really important to think about the economic benefits of public services. Neoliberals often portray public services as a situation whereby we are shovelling money into a giant black hole in the ground -- where money is lost, a waste, a cost.  But that’s not the case at all. There are real economic benefits associated with public services. Of course firstly, the service itself is valuable to the people in the state using it. That contributes to the quality of life of Australians.

There are also economic benefits delivered from having a highly skilled, educated workforce in this service. For instance, let’s look at the income they receive. These incomes reflect the education levels received, their skills and their productivity. They are fair and legitimate payments. What does the workforce do when they receive payment? They do what everyone else does – they go out and spend it. The economic stimulus provided by this investment in the economy is absolutely essential for Australia’s economic growth.

We’ve seen the cases of governments that take a short-sighted view: who prioritise action on a deficit by laying off public servants, cut spending, freeze wages, that’s a very common response. They are shooting themselves in the foot. They are effectively cutting economic growth and aggregate demand. You are taking millions of dollars out of your own economy by an artificial suppression of income. I think it’s extremely important for public sector workers, public service providers and the unions to enhance understanding in the public about how this is not a cost – it’s a benefit. And it’s a benefit in supporting economic growth.

 

You may have seen some of the media coverage around WA’s bleak budget. What are your thoughts on the situation and what insights do you have about the state adopting austerity measures?

It’s really important that we take a breath and avoid a knee jerk reaction to adopt an austerity approach to a downturn in the private sector economy. It is clear that what caused the deficit in Western Australia was the downturn and decline of the mining industry and the recession that followed that.

When the government is faced with a recession, the absolute worst thing you can do is try to cut your way out of it. By cutting public programs, cutting public workers, you’re making it even worse. Now, instead of just having an issue with mining workers and associated industries having lost their jobs, you’re adding thousands of unemployed public servants into the mix as well. This feeds back into further weakness in the state budget situation.

The role of government when the private sector economy goes into recession is not to jump on the bandwagon and make things worse. The role of government is to swim against those tides and stimulate economic activity rather than contracting your own operations.

It’s very important that governments do not jump on the short term austerity bandwagon. We’ve seen in other developed economies such as Greece, for example, when governments with big deficits try to cut their way out, they only make it worse. WA’s deficit is not large. It is manageable and it can be balanced by getting the economy back on its feet – not by slashing and burning public services.  

 

Dr. Jim Stanford is an Economist and Director of the Centre for Future Work, based at the Australia Institute. 

Jim recently relocated to Sydney, Australia from Toronto, where he is one of Canadas best-known economic commentators.  Jim is also an Honorary Professor of Political Economy at the Department of Political Economy at the University of Sydney.

 

 

 

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