The GFC and The New Capitalism

The GFC and The New Capitalism An Ethical Response

Is there an alternative? • “Political and economic conventional wisdom: As immoral as it is unintelligent”. • ‘The temptation is to drift towards the default setting of modern liberal capitalism once more. The point of this book is to insist that this would be monumentally irresponsible: as immoral as it is unintelligent”. RohanWilliams

Faith has its own integrity • ‘As long as a Christian does not know what true Christian faith is he or she cannot relate in a collective way to political questions…This is of course over looked today when out of an inner uncertainty in faith one plunges into political engagement in order to find a more certain standpoint’ J Moltmann , The Crucified God

Keynesian Liberalism • Following the global economic depression in the 1930’s there was widespread consensus as between the political and economic elites in Europe, North America and Australia that governments needed to support expansionary economic and industry policies designed to create sustainable employment. There was also support in these countries for stronger social policies focused around health education and social services and including a stronger income security safety net especially for those unemployed or not of workforce age

After Keynes • Following the international oil crisis in the mid seventies and the abandonment of Breton Woods these policies were abandoned as governments gave increased attention to inflationary pressures, which were seen to be being exacerbated, by steady increases in public spending. (Phillips curve).

Neo Liberalism • During the 1980s (Thatcher Reagan) governments in Britain and North America sought to decrease public expenditure and to tighten the money supply in an effort to slow economic growth and also redirect public expenditure away from welfare towards increased spending in defence. Also in this period governments sought to limit and reduce spending on public sector enterprises ( privatization) placing greater emphasis on private enterprise and markets in key sectors such as transport, energy policy and government administration.

Corporatism • In Australia some of these elements were present in reductions in public expenditure and wage restraint but the focus on ‘the accord’ emphasised the importance of maintaining the real incomes of wage earners through the social wage. There was also for a period, comparative to other developed countries, high rates of employment growth although the composition of employment was changing. The Australian government under ‘the accord’ negotiated trade offs as between reductions in wages and tax transfers or improvements in the social wage (increased spending in education and reintroduction of universal health insurance along with increased social protection for families with children ).

Irrational Exuberance • What seems to be absent from the thinking of many economists and economic commentators is an understanding that contagion of ideas is consistently a factor in human affairs... The changing zeitgeist drives common opinion among members of society at any point in time and place and this zeitgeist changes as new ideas gain prominence and recede in importance within collective thinking. Speculative markets are merely exceptionally good places in which to observe the ebb and flow of zeitgeist’ Shiller43

The Scandal of Inequality • ‘Part of the increase in upper brackets of the earning distribution took the form of the massive growth of CEO pay relative to the pay of normal workers. Estimates by Business Week and the Institute of Policy Studies show a ratio of CEO pay to worker pay of 42 to 1 in 1980, 0f 107 to one in 1990 and 325 to one in 2010’ • Optimal Inequality for Economic Growth, Stability and Shared Prosperity : the economics behind the Wall St Occupiers Protest, Richard Freeman Harvard University , March 13 , 2012 MiegunyaLecture p7

The One Percent • ‘ Technology (skill based technological change) may be central to certain aspects of our current inequality problem, especially in the polarization of the labour market. But even if that is the case, we don’t have to sit idly by and accept the consequences’ …We can and should regulate banks and forbid predatory lending, make them accountable for their fraudulent practices and punish them for abuses of monopoly power. So too stronger unions and better education might mitigate the consequences of skilled based technological change’ p80 Stiglitz, The Price of Inequality

Australia and the new economy I want to mainly draw attention to important shift encouraged by the Labor government in the 1980s especially the inter-nationalisation of the Australian economy with a stronger export orientation replacing the import replacement strategy based on high tariffs that had previously supported Australian industry. • In pursuing this, for Australia, new direction Australia joined many other countries similarly seeking to build knowledge or information economies. It certainly was a break with post war reconstruction that had emphasized manufacturing industry and it foreshadowed a very different economy with a much stronger emphasis on services.

New Employment Profile • ‘ Since the 1960’s there has been a significant shift in industry employment away from productive industries towards service industries. In the mid sixties employment was almost evenly split between production and services, however this changed significantly in the four decades that followed. By 2011 around four in every five jobs were in the service sector, with only one in every five available in production’ (Keating, Riemens and Smith, 2012)

Changing Values • Daniel Bell who had earlier forecast ‘The Coming of Post Industrial Society’ ( 1973) also wrote The Cultural Contradictions of Capitalism (1976). In this work he saw the new forms of capitalism as ‘heralding the end of Puritanism, and mounting a final attack on bourgeois values’ It is the breakup of this ethic and temper, owing as much to changes in social structure as in the culture, that has undercut the beliefs and legitimations that sanctioned work and reward in American society.

Wants V Needs • One observation that social scientists make is the shift from deferred to immediate gratification. Keynes assumed that as incomes increased people could meet their finite needs and work less but average hours of work are increasing as what people want as opposed to need often proves insatiable. Raises the issue of sustainable development as a moral imperative, intergenerational equity. Skidelsky 2012

Information Capitalism • ‘At the core of this technological change that unleashed the power of networks was the transformation of information and communication technologies based on the micro electronics revolution that took shape in the 1950’s and 1960’s. It formed the foundation of a new technological paradigm , consolidated in the 1970;s, first in the US and rapidly diffused around the world ushering in what I have called the information age’ M Castells, Communication Power, 23

Multidimensional Change • We are most conscious in Australia of the increasing emphasis on a knowledge or service economy and the shift of much of our manufacturing to Asia. Castells also emphasises the growing importance of finance capital, increasing reorganization of firms reshaping management structures, forming powerful international partnerships designed to increase the power of capital vis a vis labour, the declining power of trade unions, the incorporation of women into the paid workforce, states increasingly deregulating markets, trimming the welfare state and increasing the emphasis on global competition.

The New Divide • New divide in the work force as between ‘‘self programmable labour’ and what Castells describes as a ‘generic labour force’. Increasingly people feel that the workforce is being divided as between the core and the marginal. One impact of change is the increasing diversity of work contracts or standard and non standard contracts.

Insecure Work Enquiry • Conducted by Biddington,Charlesworth Munro and Howe and reported to the ACTU Congress in May 2012. ( Lives on Hold) • ‘We defined insecure work as poor quality work that provides workers with little economic security and little control over their working lives’ ( Howe 2012)

Casual and under employed • Almost a quarter of all employees in Australia (23.9% or 2.2 million workers), and one fifth of the total workforce, are engaged in casual employment’ (Howe, 12) • ‘ There is a strong relationship between casual employment and age and gender. Casual employment is most common among younger workers, with 20% of all casual workers aged between 15-19 years and just fewer than 60% of casual workers less than 35 years of age. Women are much more likely to be in casual employment than men with 25.5% of all female employees are casual compared to 19.7% of male employees. Most workers who work part time (54%) work in casual employment. Just over 30% of casual employees work full time hours’ ((Howe, 15)

Flexibility The mantra of employers is very much about using labour on their terms. Formally, the workforce today is divided as between standard and non standard work. Effectively employers are moving away from standard work contracts and dictating working conditions that shift responsibility from them to the individual encouraged to think of themselves as self employed.

Creates a New Culture of Work • In the modern workforce there is much greater emphasis on mobility, or multiple transitions across the working life as more people are employed on a casual or fixed term basis. For ‘self programmable labour’ mobility may not be a problem but for millions of workers insecure work is not compatible with personal or family stability. There may be good or bad transitions which often lead to social exclusion.

A Role For Theology Hans Kung remarks that ‘the gospel is the norm’ The role of the theologian is on the one hand that of emphasizing the values that are integral to the gospel while on the other hand looking with ‘the greatest care at what is being assumed about human motivation about character and integrity’.

Faith based orgs are employers • Faith based orgs exist in society not outside . In Australia where they are present as major employers in fields such as health education and welfare there will the challenge to bring together faith and practice. Faith based orgs may also be major investors in companies and various corporate funds, presenting the challenge to be ethical investors.

Ethical Socialism • Canvassed in Crisis and Recovery as a possible option. Social liberalism strongly supported in Australia ( Strong and Anderson) and recently revived as an option by Andrew Leigh MP for Canberra. The ALP could renew he said recently ’ by becoming a party of egalitarianism and social liberalism. Liberalism means standing up for minority rights, recognizing that open markets are fundamental to boosting prosperity.’

ICCR • The interfaith Centre for Corporate Responsibility ( US). Started as a non denominational faith based organisation, it works to have issues (ethical, social , moral, religious, environmental) raised at Company shareholders meetings. Local activist Howard Pender here in Canberra is seeking to establish a similar organisation in Australia

Dialogue Faith based organizations often struggle to find ways of engaging with influential policy makers, especially around economic issues where their technical expertise may be questioned but where they may affirm important values and priorities. Christians for an Ethical Society might initiate a discussion on ethics and values with say the Productivity Commission or the Business Council.

Conclusion • The transformation of the Australian economy, that has been underway now for at least three decades, has a darker side evident in the ongoing reconfiguration of the Australian workforce. Behind these changes is the awesome power of international finance capital. Faith based organizations with their strong global links are uniquely placed to understand and respond to the deeper implications . Avoiding the ’default option’ requires fresh ideas also new sources of power.

The GFC and The New Capitalism