The Federal Budget, Changes to Welfare and The Labour-Crisis

On 10th May the Federal Treasury Wayne Swan presented the government’s budget for 2011-12. Simply put the budget is how the Federal Government plans to spend its revenue over the next financial year. It does this through a reading of the general economic situation and attempts to create policy which it believes will help that economic situation. As such the presentation of the budget is normally a main event in the circus of Australian politics and is the target of a whole flurry of commentary, speculation and critique. Most often the discussion focuses on what kind of underlying ideology the budget is based on (does it confirm to neo-classical or post-Keynesian economic thought etc.?)[1], how much money is going to who and the voracity of the economic modelling that it is uses. Since the budget details where the government is spending its money it has a direct relevance to many peoples’ lives: how much funding goes where, if the state is in surplus or deficit. This translates into levels of funding for health, education and infrastructure; grants to NGOs etc.; pay and conditions for public servants; money for public private partnerships. Now this all comes down to daily bread and butter issues for many people, as well as the broader issue about how the government is attempting to steer the ship of state.

However these debates, even the Left ones, are largely debates within capitalism. They are debates about what kind of capitalist society we should have seen through the prism of the roles we have under capitalism. As someone working in a university the amount of funding education gets is important, important as it affects my ability to function as a worker within a certain division of labour. But the struggle against capitalism emerges out of and against the conditions we are reduced to under capitalism – the revolt of the workers is the revolt against being reduced to workers. When I care about university funding what I care about, at some level, are the conditions of my exploitation. Now this all matters but the struggle for emancipation is a struggle that hopes to transform the basic coordinates of society not just rearrange them. Thus we should not just read the budget to argue over who gets what, but rather more critically, to understand what the budget says about the current conditions of Australian capitalism, and how the state understands the challenges and antagonisms in society.

To do this we have to think about the state and its relation to capitalism on a whole.  We have to discard the notion that the ‘state’ and the ‘market’ are somehow mutual exclusive social phenomena. The history of capitalism has seen that the rise of exchange relations (the development of a capitalist mode of production where human creativity are sold as commodities and creativity takes the form of wage-labour) has been facilitated and intertwined with the rise of the state. But it is also wrong to think that the state is simply and obviously dominated by capitalists, by individual owners of businesses or their representatives. Undoubtedly individual capitalists and formations of capitalist exert large amounts of power and influence, but the state is not their play thing.

Rather the state is a product and reproducer of capitalist social relations more broadly. Just as our creativity is broken from its product in a world based on commodities and wage-labour, the task of administering society become broken from society generally – and this is the origin point of the state.[2] The state takes on a special role. In capitalism human activity is mediated through commodities. Whilst bourgeois ideology present a society built on exchange relations as one of free choice we experience a world of commodity fetishism. To quote old Charlie “definite social relations between men( sorry for the sexist language) themselves  which assume here, for them, fantastic form of a relation between things.”(Marx 1990:165) This affects the capitalist as much as anyone else. In a society where human creativity is fetishized in the commodity form it is the circulation of these commodities which ‘organises’ society – everyone is simultaneously atomised yet enmeshed in a web of activity which they both produce yet rules over them. For the individual capitalist this is a problem – they can only relate to other capitalist on the whole through the exchange of commodities, through the competition, yet the profitability of each capitalist firm is dependent on the health of society on a whole. An individual capitalist business will be primarily focused on producing as many commodities at a given standard at the lowest cost in both machinery and labour – yet for this business to be profitable it has to rely on the society on the whole.  It needs there to be roads to transport the commodities, money in the pockets of consumers, laws to prosecute shop lifters, but also schools to train workers, hospitals to look after the sick and so on and so on. Also in an advanced capitalist economy capital will move from industries that are less profitable to those that are more profitable – thus there is a tendency to the establishment of an average rate of profit and that x amount of money invested in one industry will produce the same amount of profit if it was invested in another industry ( this is of course just a tendency, equilibrium in never actually achieved). Thus each individual capitalist’s profit is reliant on the health of total social capital and here question of the reproduction of society become crucial.

It is through the state that a faction of capital (not that politicians are often actually capitalists) takes on responsibility for managing the reproduction of capitalist on a whole. By critically examining the budget we can get a better insight into how the state views the antagonisms that capital faces and its efforts to grabble with these. This is useful to critically understanding our condition

Things go Boom twice,

The budget is framed within the exceptional conditions of the Australian economy. Unlike the vast majority of developed nations Australia is undergoing continual strong growth. This is driven mainly by the “Mining Boom Mark II”.  “Australia is facing the largest mining investment boom in its history driven by ongoing strong demand for Australia’s non-rural commodities from emerging Asia”(Ministerial and Communications Division Treasury 2011a:5). This will lead to forecasted GDP growth of a “strong 4 per cent in 2011-12 and 3 3/4 per cent in 2012-13”(Swan 2011).  What does this mean? Whilst much of the world is recovering at a slow rate from the recent economic crisis (and the crisis as the street fighting in Greece shows is neither closed nor over) there are still considerable rates of growth in China and India as capital flows into these countries. “The continuing economic re-emergence of Asia has lifted global economic growth and is leading to a shift in the world’s economic activity from west to east. Together, China and India accounted for less than a tenth of world gross domestic product (GDP) in 1990 and almost a fifth in 2010. In 2020 they are projected to account for more than a quarter of the world GDP – which will be equivalent to the combined share of US, Japan and ASEAN-5” (2011d:4). This growth is reflected in that a constantly increasing share of Australia’s exports is destined for India and China. What is being exported?

“Sustained high prices for Australia’s key non-rural commodity exports are driving record investment intentions in the mining sector and strong forecast growth in commodity exports. New engineering construction is expected to grow 56 per cent over the next two years, underpinned by large liquefied natural gas (LNG) projects, driving new business investment to 50-year highs as a percentage of GDP. The surge in investment will expand the economy’s capacity over time, with previous investment in mine and transport infrastructure underpinning a forecast increase in the volume of non-rural commodity exports of over 20 per cent over the next two years”(2011c:4).

What does this mean? There is a profound shift going on in the shape of global capitalism. Increasingly capital is moving towards India and Asia from Europe and the US. This is creating vast expansions in the economies of India and China, especially large urban development. This requires large amounts of mineral and energy resources. This demand for resources means that the price of these commodities, which are relatively rare, is increasing and thus capital in Australia is flowing into mining from other sectors of the economy in a chance to reap these profits. There is a limited time frame to this. Just as capital is flowing to mining in Australia the same is happening globally and new mines are being opened (throughout Africa for example). “The medium-term outlook is for Australia’s terms of trade to decline as the global supply of iron ore and coal increases”(2011c:5). As more mines are open the value of mineral resources may fall.

Thus there is a small window of opportunity for Australian capitalism to benefit off the high value of these resources. This is based on the belief that there will not be, in the short term, another serious economic crisis that will slow or derail the growth in India and china. And this is changing the shape of capitalism in Australia and poses two challenges which the Australian state is attempting to address: the Dutch Disease and the Labour shortage.

The Dutch Disease.

The Dutch Disease (based unsurprising on the experience of The Netherlands) is the concern that in an economy that is doing well off resource extraction other sectors, particularly manufacturing will suffer. Simply put the concern is that in period where economies are exporting high value resources the rising value of their currency will negatively affect other export orientated industries – the higher say the dollar rises the more expensive products made in Australia will be overseas. (This is the very reason that the Chinese government under-values their currency and the US is trying to cheapen their through “Quantitative Easing”[printing more money] – make products they export cheaper in comparison on the world market.)

The added concern is that after such a boom the other sectors of the economy don’t recover and thus the boom will “negatively affect long-term growth”(Ministerial and Communications Division Treasury 2011d:21). The Treasury wants to stress that they don’t believe this will happen arguing that: “Resource sectors in advanced economies tend to be highly skilled and generate their own spillovers – stimulating other industries as well as driving opportunities for long term economic growth”(Ministerial and Communications Division Treasury 2011d). Yet the Treasurer in his Budget Speech was forced to concede that: “our patchwork economy grows unevenly across the nation.” Whilst part of this is due to natural disasters but also that “The high dollar hurts our tourism and many manufacturing industries, especially small businesses”(2011:2). A high dollar which is, in part, being driven up by the mining industry. Thus what the state is hoping to do with this budget is to maximise the accumulation possible from this boom and then position the economy in a way that it can smoothly transition towards “a knowledge-based, diversified and service-orientated economy” that can benefit from a predicted rise in consumption for an “increasingly wealthy and upwardly mobile middle class” based in China and India.

There you have it, the core outlook of this factional of capital for accumulation in Australia: maximum the benefit of this boom, and then smoothly move to something that sounds fancy based on the idea that the global economy continues to recover and this contradicts of growth in India and China don’t explode. Apart from the optimism of this outlook which fits uncomfortable with the status of the global capital and a range of challenges it faces there is one major obstacle in capital’s way: the labour-crisis and this is the centre of the budget aim.

The Labour Crisis.

If you read the Budget carefully you can find a persistent worry about one problem – the labour-crisis. The mining boom has contributed to a continual drop in unemployment. As the Treasure says “Over 300,000 jobs have been created in the past year and the unemployment rate is forecast to fall further, to 4 1/2/ per cent by  mid 2013, creating another half a million jobs”(Swan 2011:3). Obviously the Treasurer is saying this as a good thing, as the unemployment rate carries particular political cache. Cynics may also want to question what is defined by a job. But the Budget also identifies a problem with the drop in unemployment for accumulation in Australia and this is the very real tension in capitalism in Australia.

“Labour market constraints are likely to increase as the mining boom ramps up, with businesses not linked to the boom likely to find it relatively more difficult to attract and retain workers. Price and wage pressures are also likely to emerge in some sectors as the labour market tightens.”(Ministerial and Communications Division Treasury 2011a:6)

What does this all mean? It is important to remember the nature of capitalist economy. Capitalism is focused not on the accumulation of wealth but the accumulation of value. If we consider wealth to be anything that has a use or utility to it ( a cake, a song, a house, shoes, etc. etc.) then its origin is the metabolism between human creativity and nature( for lack of a better term.) In capitalism this wealth takes a particular form – the commodity. Creativity rather than being organised directly by society is broken up into private interests who then sell their products on the market – these commodities have an exchange-value, their price. This exchange value is an expression of their value, how much the effort that produced them is seen to be worth in relation to the efforts of society on a whole, their “socially necessary labour time”(Marx 1990:129). This is a fetishized relationship where this value is not calculated by the processes of exchange a “social process that goes on behind the backs of the producers.”(Marx 1990:135). Value is expressed in the form of money.

Thus production happens in capitalism not to accumulate more wealth but to accumulate more value. The capitalists starts with money (value) goes out into the market place buys machinery and resources and labour-power. They then produce a commodity and sell it for a value greater than they paid. Where does this extra value, this surplus-value, come from? If we assume that the different buyers and sellers are not cheating each other and everything is bought and sold at its value how can money make more money? The capitalist buys a special commodity: our labour-power. They pay for it the value that it is worth (that is the socially necessary labour time that it costs to produce the bundle of goodies to maintain us at our life at a given standard – a standard that is in part of product of class struggle.) But in the process of production we produce commodities with a value that is greater than the value that was paid for our labour-power and the means of production. Thus the capitalist hopes that when these commodities are taken to market they will be sold and thus will realise the value in them, make a profit and then they will reinvest again on and on. This is why Marx called capitalism “self-valorising value” (Marx 1990:255). Of course lots of things can and often do going wrong in this process – hence the dynamism and insanity of capital.

What happens when labour is in a short supply? A number of serious problems. The most noticeable is that there is a possibility for wages to increase. The value of labour-power can go up because capitalists are attempting to compete with each other for workers and thus (potentially) offer higher wages and better conditions. If readers care to pay attention to the business press on any given day you will see these worries write large. Rising wages will have the potential to eat into profits as the size of the surplus value produced will drop. Thus capitalists perhaps will attempt to maintain their profits by increasing prices – thus leading to inflation which is another worry of the Treasury and the business press.

But more than this a shortage of labour-power limits what we might call the “total social working day” that is the aggregate of labour in a society that it is possible to employ – and thus this puts a cap on the expansion of capital. How can one open a mine if there are no workers to employ – they have be shifted from some other part of the economy, thus increasingly the unevenness of its “patchwork” nature(Marx 1992:501). Capital runs up against a barrier to its ability to flow and move when there is not the labour it needs to put to work.

Importantly a labour crisis is not simply about numbers – it is not just a head count. It is about the volume of work that a population can do and is willing to do. Thus it is about skills and training and subjectivity, forms of behaviour. And it is about the intensity of work as well, how much is produced by those already at work – hence the added worry in the capitalist press that productivity has stalled.

The crisis for Australian capitalism is how in this historic window of opportunity can it make people worker enough, and hard enough, and long enough, to accumulate as much value as possible.

The obvious solution is more immigration, which the business press is also calling for, is political unviable for Labor or The Coalition as both play heavily to a racialised populist-nationalism that is an ugly current amongst the population. We should never forget that large sections of Australia Trade Unions were supporters of the White Australia Policy(cf.Curthoys and Markus 1978).

The answer that the budget makes is that despite the low unemployment there is also a large lack of participation in labour market– that is people that the government thinks are not effectively looking for work. So the answer for the state is to work out a way to squeeze these people into the work force. Arguably the most important part of the budget is Building Australia’s Future Workforce “a plan to help industries get the skilled workers they need, to modernise apprenticeships, and to ensure more Australians enjoy the economic and social dividends of work”(Swan 2011:3).

Building Australia’s Future Workforce.

This package contains two elements to deal with the labour crisis: an expansion of training for skill that are required for the economy and a vast intensification of the disciplinary nature of welfare.

The first arm of this is the expansion of industry focused training. “Our plan begins with a new approach to training. Putting industry at the heart of a $558 million National Workforce Development Fund that will deliver 130,000 new training places over four years. Better meeting the needs of industries and regions with a $101 million national mentoring program to help 40,000 apprentices finish training. Accelerating apprenticeships, letting them progress as they acquire the right skills, by investing $100 million in more flexible training models. Plus up to $1.75 billion, in addition to our existing $7 billion investment, to leverage ambitious reforms of the vocational education and training system. And funding 30,000 more places in the Language, Literacy and Numeracy Program to provide the basic skills essential for a job”(Swan 2011:3-4).

Whilst this all sounds relatively benign (and scant on detail) it does reveal a continual and overt use of education to tailor the population towards the demands of industry. This may make sense within the confines of capital, which is for those of us, who today are compelled to sell our labour-power for wages, need access to training to do so. But if education is meant to be for human enrichment and social need then we need to assert different priorities.

The budget also has targeted sections of the population as the potential sources of more labour-power and plans to use welfare to compel them to work. These are “320,000 young people who are not in education employment or training”, single parents with school age children, people under the age of 35 on the Disability Support Pension “whom have some capacity to contribute” and the “230,000 people who have been on income support and registered with employment services for two years or more”(Ministerial and Communications Division Treasury 2011e:7).

The budget details a carrot and stick approach. The most obvious carrot is the introduction of a Low Income Tax Offset (LITO) which will mean those returning to work will be taxed less.(Ministerial and Communications Division Treasury 2011b:17).

In 2010 the Federal Government based legislation which allows the extension of Welfare Quarantining, which was part of the Northern Territory Intervention, to be extended throughout Australia.  Elements of this legislation will be part of the broad restructuring of welfare. This is the stick the state will use.  “To encourage all young people into jobs, education or training, the Government will extend ‘Earn or Learn’ requirements to those aged 21.” “The age of eligibility is being increased so that the Newstart Allowance will not be available until age 22 (up from 21).” This means a larger amount of young people will either not be able to access welfare (Youth Allowance views most young people as being dependent on their parents and therefore not eligible for payment) and those on it will face restriction of their payment if they are not working or in education(Ministerial and Communications Division Treasury 2011b:19).

Single Parents will get “A reformed income test will increase the rewards from part-time work for single parents. The Government will reduce the taper rate for single parents on Newstart Allowance to 40 cents …This will allow single parents to keep up to $3,900 extra of their income from part-time work every year.” But those with children 12 and over will face tougher eligibility rules(Ministerial and Communications Division Treasury 2011b:19).

Those on the Disability Support Pension will face increased requirement to work. This include

“the introduction of appropriate participation requirements for DSP recipients under

35 years of age with an assessed work capacity of more than eight hours”, “ relaxing the number of hours recipients can work before their payment is suspended” and additional wage subsides for those employers would employ those on the DSP (Ministerial and Communications Division Treasury 2011b:19)

Employers who employ the “very long-termed unemployed” that is those who have been on benefits for two years or more will also be eligible for wage subsides. (Ministerial and Communications Division Treasury 2011b:20)

Special measure will be rolled out nationally to target different groups of parents The budget details the measures as “$47.3 million to introduce compulsory interviews and participation plans for teenage parents; $71.1 million to introduce participation requirements for jobless families in ten locations with preschool age children to improve school and employment readiness.”(Ministerial and Communications Division Treasury 2011b:20)

$117.5 million will be over five years to extend income management arrangements to five targeted locations. (Ministerial and Communications Division Treasury 2011b:20) These are  Bankstown, New South Wales, Logan, Queensland, Rockhampton, Queensland,  Playford, South Australia and Shepparton, Victoria. Within these areas those  have been referred by the State/Territory Child Protection Authority, have been referred by a Centrelink Social Worker, or volunteer for income management will find 70% of their payments quarantined on a Basics Card and thus restrictions placed on where and on what they can spend their payments.

This is happening in a context where other changes to Welfare will increase the power and severity of breaches to payments.


The real limit of Australian capitalism is how much we are prepared to work and for what. My suggestion is that the changes in welfare have little to do with those on welfare and everything to do with the working class as a whole. This needs to be seen as an attempt to use the unemployed to increase competition for jobs, to squeeze those who are parents or on disabilities into the position that are left vacant as other workers turn towards opportunities in mining and related industries. The flip side to this is that it reveals the state is having to address a power that we have, which right now we are only using latently. What would happen if we used this power consciously? And could resistance to these changes be the spark to light the fire?

Clark, S. (1991). The State Debate. The State Debate. S. Clark. New York St Martin’s Press  Vol 1-69.

Curthoys, A. and A. Markus, Eds. (1978). Who Are Our Enemies: Racism and the Working Class in Australia. Neutral Bay, Hale & Iremonger.

Holloway, J. and S. Picciotto, Eds. (1978). State and Capital: A Marxist Debate. London, Edward Arnold.

Holloway, J. and S. Picciotto (1991). Capital, Crisis and the State. The State Debate. S. Clarke. New York, St Martin’s Press  Vol 109-141.

Marx, K. (1990). Capital: A Critique of Political Economy. London, Penguin Classics. Vol.1

Marx, K. (1992). Capital: A Critique of Political Economy. London, Penguin Classics. Vol.2

Ministerial and Communications Division Treasury (2011a). Budget Overview. 5th July 2011

Ministerial and Communications Division Treasury (2011b). Budget Paper No. 1: Budget Strategy and Outlook 2011-12 Statement 1: Budget Overview.

Ministerial and Communications Division Treasury (2011c). Budget Paper No. 1: Budget Strategy and Outlook 2011-12 Statement 2: Economic Outlook.

Ministerial and Communications Division Treasury (2011d). Budget Paper No. 1: Budget Strategy and Outlook 2011-12 Statement 4: Opportunities and Challenges of an Economy in Transition.

Ministerial and Communications Division Treasury (2011e). Building Australia’s Future Workforce: trained up and ready to work.

Swan, W. (2011). Budget Speech 2011-12. 5th July 2011

[1] Neo-classicals are those that believe that as much as possible economic activity should be handled by ‘the market’ and that the state should retreat to the role of being a night-watchman. This is the thinking that underscores what is often called ‘economic rationalism’ or ‘neo-liberalism’. Post-Keynesians argue that some forms of state intervention are necessary to smooth out the instabilities in the economy, Paul Krugman is probably the best example of such a perspective, whether he would use the term to describe himself or not.

[2] If this presentation seems too vague see Holloway, J. and S. Picciotto, Eds. (1978). State and Capital: A Marxist Debate. London, Edward Arnold, Clark, S. (1991). The State Debate. The State Debate. S. Clark. New York St Martin’s Press  Vol 1-69, Holloway, J. and S. Picciotto (1991). Capital, Crisis and the State. The State Debate. S. Clarke. New York, St Martin’s Press  Vol 109-141.

This entry was posted in Analysis. Bookmark the permalink.

2 Responses to The Federal Budget, Changes to Welfare and The Labour-Crisis

  1. Pingback: A New Start? Welfare Changes And the Labour-Power Shortage | With Sober Senses

  2. Reblogged this on With Sober Senses and commented:
    And old blog post – relevant to how we think about the Budget and the role income management plays

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s