Thursday, 03 July 2014

The slow death of the Australian Middle Class

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The Abbott Government is systematically reshaping Australian society. Their agenda isn’t just about rewarding the rich at the expense of the poor. Nor is it simply an anti-science agenda that ignores expertise, particularly in the area of environmental concerns, so that the great extractors can continue on their merry way. Nor is just old white men longing for a time when they were the daddies and women knew their place. The Abbott Government is all those things, but it is important to understand that it is also operating in a global system that fundamentally alters social relations. Under such circumstance, getting rid of the Abbott Government isn’t enough.

The picture of Treasurer Joe Hockey and Finance Minister Mathias Corman outside Treasury smoking cigars the day before the Abbott Government brought down its now-infamous austerity Budget resonated like an omen.

Nothing quite says “the ugly face of capitalism” like the image of self-satisfied white males sucking on fat cigars, and the Budget that followed once the cigars were stubbed out exceeded many people’s worst expectations.

The community experienced the measures outlined in it, not as the attack on “entitlement” that the Abbott Government insisted it was, but as an attack on something fundamental about Australian society.

It has been encouraging to see just how much opposition the Budget has produced. Yes, the polls have registered our concerns, but more importantly, there has been - and continues to be - a wave of street protests that have the potential to not only help people maintain their rage, but to generate the sort of grassroots opposition that leads to lasting change.

We’ll see.

As arresting as the image of the cigar-puffing duo might’ve been, though, there is an argument that that image of “ugly capitalism” is outdated and that we have to get our heads around a different idea of what capitalism means in these first decades of the new century.

In what follows, I want to flag some recent analysis that attempts to understand just what is happening.

The main point I think we should take away from the discussion - and by “we”, I don’t just mean the progressive left, but the electorate more generally - is that getting rid of the Abbott Government is not enough. Real change is only going to come when certain underlying structures are dismantled.

So, you know, deep breath.

In her latest book, Expulsions, sociologist Saskia Sassen, argues that global capitalism has morphed into something new. The book is an attempt to document the rise in global inequality and to tease out the continuities and breaks from what has gone before. So although it shares many features with the creature of earlier times, contemporary capitalism, she argues, is fundamentally different.

Rich individuals and global firms by themselves could not have achieved such extreme concentration of the world’s wealth. They need what we might think of as systemic help: a complex interaction of these actors with systems regeared toward enabling extreme concentration.

Such systemic capacities are a variable mix of technical, market, and financial innovations plus government enablement.

They constitute a partly global condition, though one that often functions through the specifics of countries, their political economies, their laws, and their governments. They include enormous capacities for intermediation that function as a kind of haze, impairing our ability to see what is happening — but unlike a century ago, we would not find cigar-smoking moguls in this haze.

Today, the structures through which concentration happens are complex assemblages of multiple elements, rather than the fiefdoms of a few robber barons.

As she goes on to note, the earlier iteration of capitalism “was far from perfect: there were inequality, concentration of wealth, poverty, racism, and more. But it was a system with a capacity to generate a growing middle sector that kept expanding for several generations, with children mostly doing better than their parents.”

This is what I think someone like Joseph Stiglitz misses in the sort of analysis he offers in this New York Times piece. Stiglitz is one of the few mainstream economists who at least tries to argue against the sort of austerity measures that governments are inflicting on their citizens, and for that he deserves great credit. But he wants to voice his opposition from within the economic orthodoxy and so, in pieces like this, he seeks to rescue that orthodoxy from a more fundamental criticism. Speaking of the debilitating inequality that now undermines American society, he therefore argues that, “it is not the inexorable laws of economics that have led to America’s great divide [but] our policies and our politics.”

Well, yes, policy and politics are obviously part of it. But what he argues for in that piece is basically to restore the regulations of a previous era which, while it has a superficial appeal, is utterly pointless if the underlying structures of capitalism have changed in the way Sussen (and those below) suggest.

It is the way in which the economic system no longer needs to generate a broad middle class that is the arresting aspect of her analysis and which is absent from Stiglitz’s. That is to say, when the key elements of an economic system are finance, extractive industries like mining and logging, and knowledge and technology-based activities rather than manufacturing, the middle tier of workers tends to disappear thus creating the sort of social and economic polarisation we are seeing:

As the leading sector in market-based economies for much of the twentieth century, mass manufacturing created the economic conditions for the expansion of the middle class because it facilitated worker organizing, with unionization the most familiar format; it was based in good part on household consumption, and hence wage levels mattered in that they created an effective demand in economies that were for the most part fairly closed; and the relatively high wage levels and social benefits typical of the leading manufacturing sectors became a model for broader sectors of the economy, even those not unionized nor in manufacturing.

Once this middle disappears - structurally disappears - the social justification for redistribution of national income in the form of welfare disappears with it and the winners in this system - the one percent, if you like - are increasingly begrudging in their willingness to pay taxes to support social services. As Ken Davidson wrote in The Age this week:

The (Abbott) government and its ideological supporters say that with an ageing population and a shrinking workforce, the country cannot afford to fund a welfare system which allows the aged, the sick, the unemployed and the dysfunctional to participate in the affluent society. What they really mean is that they are not prepared to pay the necessary taxes to ensure this participation.

The structural disappearance of the middle class in even advanced free-market democracies is also at the heart of this recent piece by Nils Gilman. He argues that the modern state is being hollowed out and that what we are left with is a “criminal insurgency” below, and a “plutocratic insurgency above”.

“During the social modernist era (1945–71),” he says, “virtually all states—whether capitalist or communist, industrialized or developmental, great power or post-colonial—aimed to legitimate themselves by serving the interests of middle classes whose size they sought to expand.

“Both capitalist and communist accumulation strategies were based on the nurturing of industrial laborers, who were expected to work for a living and who in turn were told that the state not only would steadily improve their standard of living but also cushion them from misfortunes through various forms of social security.”

But this model has passed, or is passing. Drawing on Thomas Piketty’s work Gilman notes:

The accumulation regime that predominated during the heyday of social modernism depended on a new class of workers who could afford the goods they were producing. The great fortunes of the late 19th and early 20th centuries were built on the backs of worker-consumers in primarily inward-looking national contexts. By contrast, today’s plutocrats thrive by selling their goods and services globally; their success is dramatically less connected to the fortunes of their fellow national citizens than was that of previous generations.

Moreover, the two signature types of massive wealth accumulation in the early 21st century have been high technology and financial services. Neither of these industries relies on masses of laborers, so their productivity is detached from the health of any particular national middle class. The result has been a dramatic rise in inequality within countries, even as wealth inequality transnationally has narrowed.

And Sassen makes the key point (contra Stiglitz):

These trends are not anomalous, nor are they the result of a crisis; they are part of the current systemic deepening of capitalist relations.

In other words, the gutting of the middle class is not a glitch, it is a feature of the system.

The final piece I want to consider is a book by Philip Mirowski called Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown. In it, Mirowski teases out a point that others have often hinted at, namely, that the logic of neoliberalism has so invaded our understanding of even non-economic activity, that it has more or less normalised itself as our way of understanding the world.

The key to this “everyday neoliberalism” is the shift from collective concerns to a focus on individual identity, and Mirowski lists some of the ways in which we become attuned to that shift, not necessarily because of some sort of false consciousness (that is, ignorance of what is happening to us), but because of the ubiquity of neoliberal structures:

Not many people can be bothered to actually read Hayek or Buchanan or Milton Friedman or (even) Ayn Rand; but a whole lot more people drink fair trade coffee from time to time, watch Big Brother or Jerry Springer; have a Facebook page they desultorily update; contemplate whether to buy insurance; find themselves short until payday; are worried enough to check their FICO score; spring for a lottery ticket at the checkout; feel conflicted at the sight of a scruffy panhandler; worry about the foreclosure sale down the street; commiserate with friends over what to think about the British summer of riots in 2011; take medication to lose weight; or anguish over whether to visit a fertility clinic.

In these thousand and one little encounters spread over a lifetime, the average person begins to absorb a set of images, causal scenarios, and precepts that begin to add up to something approaching a worldview.

I might mention in passing that street artist Bansky articulates a similar concern in his comments about the appropriation of public spaces by corporations:

The people who run our cities don’t understand graffiti because they think nothing has the right to exist unless it makes a profit…. The people who truly deface our neighborhoods are the companies that scrawl giant slogans across buildings and buses trying to make us feel inadequate unless we buy their stuff…. Any advertisement in public space that gives you no choice whether you see it or not is yours, it belongs to you. It’s yours to take, rearrange and reuse. Asking for permission is like asking to keep a rock someone just threw at your head….

Both Mirowski and Sassen also point out that, despite the neoliberal rhetoric of being anti-government, government is actually a key player in the neoliberal project. Mirowski notes the penchant of the likes of Hayek and Milton Friedman for authoritarian governments in South America, but in Australia we only have to look at the Abbott government to see that what they try and pass off as “deregulation” and “freedom” is often accompanied by draconian countermeasures designed to discipline and punish, everything from the treatment of asylum seekers to making unemployment benefits conditional on the use of a debit card that can only be used in government-approved places:

“We would say, you can have a debit card that precludes certain expenditure. It could, for example, preclude expenditure on alcohol. You get a card, go to the bottle shop and they say ‘sorry, transaction declined’,” [Minister Kevin Andrews] said on Network Ten’s Bolt Report on Sunday morning.

Claims of deregulation are a particular furphy. As Mirowski says, “deregulation always cashes out as reregulation”, something we saw under the Howard Government with WorkChoices. The supposed “deregulation” of the workplace laws was actually an eight-hundred-page policy document that simply re-regulated the workplace in favour of business at the expense of workers.

What I’m groping for with all of this is some overarching understanding of how an unpopular government led by an despised prime minister can, in a democracy, still do tremendous damage to our social fabric and bring about changes that few people want.

The short answer, as per the above discussion, is that they can do it because they and we are embedded in a social and economic structure that is global in nature and that, therefore, makes diffuse, and difficult to combat, the underlying power structures that generate it.

It is enabled by governments who have entered into a devil’s bargain with the private purveyors of that system on the promise of economic growth, even as the growth that is generated is not of the sort that allows for a strong middle class to be sustained. Sassen notes that the definition of “growth” is simply adjusted to exclude troublesome factors:

There is a de facto redefinition of “the economy” when sharp contractions are gradually lost to standard measures. The unemployed who lose everything — jobs, homes, medical insurance — easily fall off the edge of what is defined as “the economy” and counted as such. So do small shop and factory owners who lose everything and commit suicide.

And so do the growing numbers of well-educated students and professionals who emigrate and leave Europe all together. These trends redefine the space of the economy. They make it smaller and expel a good share of the unemployed and the poor from standard measures.

Such a redefinition makes “the economy” presentable, so to speak, allowing it to show a slight growth in its measure of GDP per capita.

What is left out of these measures showing a return to some growth is that a significant portion of households, enterprises, and places have been expelled from that economic space that is being measured. The expelled become invisible to formal measurements, and thereby their negative drag on growth rates is neutralized.

What’s more, the whole nature of control over this system is depoliticised, that is, taken out of the sphere of a public contest of ideas, and is normalised as something over which we have no control and to which there is no alternative.

It ultimately fractures social relations, stressing individual reinvention and blame at the expense of collective action, and thus robs us of the key weapon any society has to organise itself in the way it sees fit.

Australia is not at the extreme edge of these transformations in the way that, say, Greece or Spain is. As is often noted - as we try to reassure ourselves as things fall apart - we avoided the worst of the financial crisis. This mantra rings through our public rhetoric like an incantation uttered to ward off the fiscal demons we know are waiting to run over us.

But the logic of what has happened at the extremes is every bit as embedded in our economy as it is in those, like Greece and Ireland and Spain, who have more or less collapsed under the force of it.

In other words, we are not immune, and incantations ain’t going to save us.

What has saved us thus far is not just large scale government intervention into the sacred operations of the market-based economy, but an underlying belief that such interventions can work, and more importantly, a belief that government actually has a role in acting on behalf of all us to protect us from what the likes of the financial crisis has wrought.

It is exactly that belief that is being attacked by the Abbott Government.

They don’t say it clearly, but the entire logic of their “end of entitlements” and “bring the budget back into balance” rhetoric is to reject political action of the sort that saved us. It is a total dismissal of the idea that politics has any role in shaping economic outcomes in an equitable way, while at the same time providing the regulatory environment which is ultimately to the benefit of the few at the expense of the many. Theirs is deeply ideological and interventionist government even as it is presented as a benign, hands-off slasher of “red tape”.

The net effect of all this is exactly what we are seeing in Australia at the moment. A growing brutalisation of the poor, a rhetoric of work as the only measure of worth and personal fulfilment, a mistrust of any activity that can’t be valued in a market, and an intellectual winner-takes-all mentality where counter arguments are not only rejected but struck out of contention by the government defunding any organisation that doesn’t sing from their hymn book (on this latter point, see my recent article, here).

And, of course, growing inequality.

This trend does not begin with the Abbott Government nor is it likely to end with it. Paul Keating’s neoliberal reforms set us on a path that ultimately outpaced any of the Labor-values amelioration he put in place, while Julia Gillard, as much as any public leader we’ve had, was a champion of work as our true measure. “We believe life is given direction and purpose by work,” she declared in front of the US Congress. “Without work there is corrosive aimlessness. With the loss of work comes the loss of dignity. This is why, in each of our countries, the great goal of all we do in the economy is the same to ensure that everyone who can work does work.”

And who knows where a Shorten government would finally settle on the spectrum of “acceptable” economic policy.

In noting that, I’m not saying that the Coalition and Labor are the same thing. Clearly Labor is more willing to enact policy that aims at redistribution and some sort of pushback against the inequalities that, as we’ve seen, are inherent in the economic system to which most of our elites and political class subscribe.

What I am saying is that it is as well to be aware of the true nature of that economic system, how it is a different beast to what might be conjured by the image of a cigar-smoking Treasurer, and realise that simply changing governments does not necessarily alter the underlying conditions.

Tim Dunlop

Tim Dunlop writes regularly for The Kings Tribune, The Drum and other publications. His new book, The New Front Page: New Media and the Rise of the Audience, was released on August 26.

Follow him on Twitter @timdunlop