Budgeting for profits again…

The Sunday Star Times (April 25) ran a feature about a Waihi ‘middle-class’ family that couldn’t live on $55.000 who wrote an open letter to Helen Clark. It was an indictment of the Social Democratic kiwi dream of a ‘milk and honey’ classless paradise that has turned sour. Than along came Labour’s budget that gave $2 billion in income top-ups to working families earning up to $55,000 over the next 3 years. Predictably, this was condemned as buying votes by the right. But in fact Labour was doing what it always does in its budgets, budgeting for profits. We explain how.

The celebrated Waihi family may be described as ‘middle class’ but in reality they are workers. Father teaches while mother minds the four kids. They both provide profits for the bosses out of their labour. Dad educates kids who then (he hopes) go on to be good workers. Mum does the same at home without pay, subsidising the cost of producing these kids to be exploited by the bosses. Topping up their wages in the budget package for working families is another subsidy to bosses because without it, bosses would have to pay for the complete training of their workers out of their profits.

Tax cuts are code for wage cuts

But to explain how this works we first have to get rid of the bullshit about tax cuts.

National and ACT made a huge fuss about Labour taxing people and then giving some of it back to buy votes in the next election. Admittedly, Labour had cynically phased in the benefits so that to get them it had to be re-elected. But all this talk about tax cuts is just a smokescreen to hide the real motive of wage cuts.

We pay taxes out of our gross income. This assumes there is a distribution of income between wages and profits (and rents for those who own property) that is like a ‘law of nature’. Workers get wages, bosses get profits, and landowners get rents. We are not supposed to disturb this ‘law of nature’ or else something like the global meltdown in the ‘Day after Tomorrow’ will destroy the world market.

All of the debate over the budget accepts this ‘law of nature’. We don’t question the plot. Taxes are a sort of theft of an individuals income, unless there is a national interest in taxing people to pay for ‘public goods’ like state funded health, education and welfare. The debate then comes down to whether or not people should pay for these things. Plots become conspiracies about who is out to screw whom?

But what if this concern about taxes is really a smokescreen that hides the reality of how the economy works? Karl Marx once referred to this ‘law of nature’ as the ‘holy trinity’ - a sort of blind faith in each class –worker, boss and landlord – getting their ‘fair share’ of the national wealth. But as Marx proved neither the boss nor the landlord create any wealth at all. Their ‘share’ is deducted from the wealth created by workers. He took delight in showed that this was a fact in the settlement of Australia and New Zealand, where landlords and bosses who had money and land, but couldn’t get any workers, made no profits and had to work themselves or starve!

So what is all the fuss about the Budget?

Of course the Nats and ACTs worship the ‘holy trinity’ that entitles them to profits as the reward for their innovation and sacrifice. They argue that taxing these profits to pay workers raises wages and cuts ‘their’ profits. In the past they were happy to allow some of ‘their’ profits to be taxed to boost wages if it was cheaper then pay higher wages themselves. The whole postwar period saw state-provided health, education and welfare contributing to profits until those profits started to fall dramatically. Not because workers wages squeezed profits, but because bosses could not screw enough wealth out of the workers.

But now that the economy has been opened up to international competition, the bosses have to cut their wage costs. They want to pick and choose skilled workers, pay them a market wage and refuse to pay for the education and health of the pool of unemployed and service workers. They also want benefits to be cut to force people to work for lower wages. In the twenty years since the onset of Rogernomics in 1984, the income gap between bosses and the poorest workers has grown much larger.

But if we reject this blind faith in the ‘holy trinity’ we see that the NATACTS attack on welfare is another way of extracting more wealth from workers to increase their profits. Instead of workers clawing back some of the wealth they create in the form of benefits, the bosses want to keep it all, blaming those they exploit, or make jobless, for demanding that the state taxes ‘their’ profits! They have the cheek to try to get workers onside by calling them ‘taxpayers’ too and not exploited workers!!

If this is what the rightwing bosses say does this mean that Labour’s tiny token redistribution of income back to the poorest families on a drip feed system over the next 3-4 years means a cut in profits?

Labour’s smartass subsidies to bosses

The NATACTs opposition to taxing profits to boost workers incomes is typical of bosses who own banks or run hotels and who want wage cuts in order to maximise profits. Their blanket attack on welfare is that it reflects the narrow interests industry where high tech productivity gains are not at stake. Yet the major growth points in the NZ economy today are in high-tech, high productivity, value-added areas such as pastoral production, biotech, forestry etc. The only way that NZ bosses can compete internationally is if they can out-smart their competitors.

This is what is behind Labour’s promotion of the ‘knowledge society’. It is the recognition that high-tech growth in the economy is necessary before any ‘social dividend’ to the most needy can be made. The idea of a ‘knowledge society’ is a society in which the blind faith in the ‘holy trinity’ has become politically correct. It takes the form of the ‘social partnership’ between the godfather (the bosses), the son (workers) and the holy ghost (government –as landlord).

Labour’s ‘Blairites’ (after Tony Blair’s ‘third way’ politics that takes a middle course between neo-liberalism and socialism) want to ‘balance’ the raw market with social policies that ensures that people are ‘included’ in the benefits of market. This is the smart state that backs winners in the knowledge economy, tailors state subsidies to education to match skills to jobs, and tries not to leave anybody ‘deserving’ person out. Labour’s shift of industrial law, the foreshore legislation, and the budget, are designed to ensure social harmony rather than social conflict or exclusion.

The problem is that this Blairite strategy requires rapid growth in productivity to create new jobs and rising incomes to offset the pool of unemployed and the downward squeeze on wages. But in the global economy high-tech itself cannot save the global capitalist economy as it cannot generate enough wealth to make sufficient profits. Therefore there is no surplus profit to be taxed to spend on boosting the incomes of the poor. The ‘social partnership’ is doomed to economic and political bankruptcy.

Capitalism is not sustainable

The anti-globalisers like the Alliance or the Greens say this is because of the greed of the multinationals operating globally to suck profits out of the high performance sector inside nation states where they own the resources or control the market. According to ARENA, foreign investment in NZ owns half of productive wealth, and in some sectors like the Banks all of it. The effect is a squeeze on wages and social spending inside Aotearoa/NZ to suck the profits out. The anti-globalists answer is to cut the pipeline and keep the profits inside Aotearoa/NZ. But this is a pipedream.

As Marx would say: capitalism is global. The corporates are driven not by greed but by the survival of the fittest. The enrichment of global corporates at the expense of the mass of impoverished does not respect national borders. The Blairite Budget in NZ 2004 is a futile attempt to keep the faith in the ‘holy trinity’. But this ‘partnership’ is doomed. God the father must betray the son, and the holy ghost hasn’t got a shits show in hell of doing anything about it.

This means that to break out of the bosses globalisation we need a workers globalisation. Workers need to take control of their own welfare; socialise the ownership of the means of production so that the wealth they produce is retained for collective use; renationalise and expropriate the property of the corporates and put them under workers control; take control of the state and expel the ‘holy trinity’ into the dustbin of history; build unions of socialist republics in the Pacific, in the Middle East, in Asia, in Latin America, in Europe, in North America, in Africa. 

From Class Struggle 56 June-July 2004

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