When the Occupy movement spread to Australia, many mainstream commentators were incredulous. Has Australia not been doing exceptionally well, having enjoyed a long summer of economic growth since the 1990s and escaping the worst of the global financial crisis? In a long piece celebrating Australia as ‘the most successful and unique economic and policy arrangement of the late twentieth and early twenty-first century’, Crikey writer Scott Steel (‘Possum Comitatus’) took a swipe at the local Occupiers.
The problems we have left in Australia are difficult and sophisticated, requiring a level of thoughtful engagement far beyond the scope of occupying Fuck Knows Where in tents. If the US government responded to the Occupy Wall Street movement by implementing a large policy program that Australia already has – Occupy Wall Street would declare victory and go to the pub!1
Yet the central complaint of Occupy Wall Street – the gap between rich and poor – translates here all too clearly. True, incomes are not quite as unequal as in the United States, but inequality has been rising faster in Australia since at least the late 1990s. Australia is a typical advanced capitalist country, slightly more unequal than the average among its peers in the OECD.2 According to 2008 tax data, the top 1 per cent of Australians receive 10 per cent of all household income, up from 5 per cent in 1980. The top 10 per cent take 32 per cent of the total, up from 25 per cent in 1980.3 Wealth is much more unevenly distributed than income. The Australian Bureau of Statistics estimates that the richest 20 per cent of households own 62 per cent of household wealth – including 90 per cent of equities – while the poorest hold just 1 per cent.4
For Steel, inequality is no serious problem because everyone has been getting richer. The real incomes of those in the bottom decile have been rising rapidly – not as rapidly as those at the top, but more so than the average residents, even the richest residents, of most other OECD countries.5 Australians enjoy the highest real minimum wages in the OECD, and three-quarters of the population are in the top 10 per cent of the global wealth distribution. Australians should celebrate, and stop taking economic reform for granted: ‘The broad Left in Australia deny it, because to admit our economic and social reality is to admit that we’ve actually solved most of the big problems that other nations are still grappling with, and they had little to do with it.’6
Even some on the Left have learned to stop worrying about inequality, though not to love it. Nobody could confuse the views of Clive Hamilton, the author of Growth Fetish and Affluenza, with Steel’s cheerful optimism about Australian affluence. But for Hamilton, the material abundance of advanced capitalism is sufficiently spread across the population to make qualms about its distribution quaint, and abundance itself the real problem: ‘the defining problem of modern industrial society is not injustice but alienation, and … the central task of progressive politics today is to achieve not equality, but liberation.’7 He acknowledges that inequality remains a feature of capitalism, just no longer a defining one.
[T]he concerns that motivated social democracy – poverty, inequality and exploitation – are, as a result of affluence, now confined to a small proportion of the population, no more than 20 per cent. While the moral imperative to improve the circumstances of the group remains – indeed, in the face of widespread affluence, it has even greater force – the circumstances of 20 per cent of the population cannot provide the basis for a politics of social transformation in the twenty-first century.8
By many measures, Australia is one of the most affluent countries in the world, and yet its political culture retains more than a residue of labourism and egalitarianism. Commentators of the technocratic centre, like Steel, have become scornful of the idea of ‘working families’, so much richer than previous generations, ‘doing it tough’, grasping at ‘middle class welfare’. Real economic problems are a thing of the past; danger lies only in the middle class not realising how good they have it and how much that depends on a sensible policy reform process. The likes of Hamilton on the Left agree that problems of want have essentially been solved, leaving traditional socialist concerns anachronistic. Climate change and resource constraints set a hard limit to further material growth; anti-consumerism must replace egalitarianism at the heart of the Left’s vision.
Both these views share a misunderstanding of the nature of ‘abundance’ in contemporary Australia and in the rich world more generally. When they speak of affluence, they are usually thinking in terms of manufactured goods, particularly consumer durables, from flat screen TVs to cars. Such things have indeed become much cheaper over the years relative to the average Australian’s pay. Just since mid-1997, average hourly pay has risen by 64 per cent in nominal terms, while the consumer price index has risen 50 per cent, for a real increase of 10 per cent in purchasing power over the whole consumer basket. The average hour’s pay now buys 59 per cent more clothing and footwear, 71 per cent more household appliances, and an incredible 1066 per cent more audio, visual and computing power than in 1997.9
But such goods make up only around a fifth of the average household’s expenditure.10 Much of the rest of the consumer basket has actually become less affordable. Compared with 1997, the average hour’s wage exchanges for 2 per cent less food, 8 per cent less housing, 26 per cent less water, electricity and gas, 18 per cent less petrol, 5 per cent less healthcare and 21 per cent less education.11 Over the last few decades, household incomes have risen substantially in terms of the overall consumer price index (38.1 per cent for the median household), but food and other essential costs (including housing, energy, transport, health, education and childcare) take up the same proportion of the average household budget as they did in 1985, almost three-fifths.12
This does not mean that the average worker is materially worse off, even in terms of the things whose cost has risen relative to the wage. There is an income effect: people can transfer what they save on cheapened manufactures to cover the increased cost of, say, housing. Taken as a whole, today’s average Australian wage can buy everything it did in 1997 and then some. (The same cannot be said for the average American wage.) But it is therefore hardly surprising if the average ‘working family’ does not feel it is wallowing in unmitigated luxury. Rather than the smooth adaptation of textbook consumer choice theory, people feel it as a mixed basket – shopping sprees at the mall bring back a bigger haul, TVs have bigger surfaces and less bulk, we have more and better computers and cellphones, and upgrade them more often, but we have to work harder to pay the mortgage (or rent) and the power bills, to drive to work, to take the kids to the dentist, to make repayments on student debt. This, rather than a mania for consumer goods, is why ‘downshifting’ seems unrealistic to most people. They have had to work harder to stay in place with respect to housing, education, health and food. Meanwhile, new things have become necessities for participating in normal everyday life, such as cellphone and internet connections. Many have responded by working longer hours and for larger portions of their lives, while others have found less work than they would like. The labour force participation rate has risen from 58 per cent in the early 1960s, through 61 per cent in the mid-1980s, to almost 66 per cent today.13 Thus real household incomes have risen faster than real pay rates.
Those who merely quote household income figures miss the fact that much of the increase has been purchased with more work, not by reaping a bounty of technological progress and microeconomic reform. Thanks to the latter, we are generally less secure in our employment, while those with mortgages now find their disposable incomes a critical moving part in the transmission mechanism of macroeconomic policy.
Income is not a yield of undifferentiated stuff, spewed out by a black box called the economy, ever faster thanks to a technological progress tuned up by microeconomic reform. Income is a claim on the produce of our collective labour – at least, that part of it which is exchanged on the market – and on the natural resources we appropriate. The market organises the division of labour to produce things in proportion to people’s capacity to pay: those with more income, in effect, direct more of their fellows’ labour and command more of the fruits of the earth.
Abundance’s uneven arrival is rooted partly in Australia’s position in the world division of labour. The great boom in commodity prices has driven up the dollar and cheapened imports. Many goods are cheap to us, in part because the people that produce them earn a much lower wage. In a more equal world, these things would be more expensive and we would consume fewer of them. But over the longer run, and in the future, the main story is the uneven development of labour productivity in different processes. Agricultural and industrial processes, and even many services, have been revolutionised many times over, so as to require ever less human labour. In other processes, productivity increases much more slowly. Many services are highly labour intensive, and it is difficult to see them becoming less so any time soon without sacrificing quality: think, for example, of teachers, doctors, nurses, social workers, police, public servants, waiters, hairdressers and so on.
Together, these services make up a large and growing proportion of the labour force. In the absence of productivity improvements, they only become cheaper relative to the average wage if the relative wages of those performing the services fall. If workers in these sectors maintain or improve their relative wages, their services become relatively more expensive.
Housing is another story. The supply of residential land within reasonable commuting time of a central business district is more or less fixed. Residents, landlords and those who want to be either are bidding against one another for real estate. When inequality widens, the increased capacity of those on the rise can come directly at the expense of those left behind. A Reserve Bank analyst has noted an irony of Australian house prices in recent years: the generation aged 25–39 increased their working hours by an average of almost a day a week per household in order to climb into homeownership, but their increased capacity to pay pushed prices still higher, to the benefit of existing homeowners.14
In these sectors, there is no technological cavalry coming to relieve distributional pressures.15 One’s gain is another’s loss. Class conflict is destined to be with us for a while yet. Once you start looking, it is hard not to see it lurking in the middle of all kinds of live political issues, from state budget deficits to climate change, and a good many dormant ones. By tracing the lines of contact between all these problems to their source, a movement of the Left could wake a sleeping giant. There is no opposition, as Clive Hamilton would have it, between the pursuits of equality and liberation. The dividends of productivity growth in some areas could be shared out in the form of reduced working hours rather than more stuff. Because other areas are less susceptible to productivity growth, many people will be liberated only to the extent that they enjoy a greater proportion of the fruits of their labour.
Even if its effects rumble across the political landscape every day, inequality has faded as an issue in itself because it is not subject to policy fix within today’s political parameters. To paraphrase an old bit of folk wisdom: policymakers inevitably set themselves only such tasks as they are able to solve. Other problems are just human nature, the way things are, always with us, et cetera. Behind all the sound and fury, modern politics revolves around the set of tasks judged reasonable by sensible experts – pollsters and party strategists on the one hand, economists and administrators on the other. When Occupy-inspired Harvard students walked out of an economics lecture last year, their professor tellingly responded that he empathised with their concerns, but that ‘widening economic inequality is a real and troubling phenomenon, albeit one without an obvious explanation or easy solution.’16 In a capitalist society, inequality is not a policy setting but the outcome of market processes. In the first instance, people’s rewards are based on their market positions as owners of skills or assets, and a progressive taxation and transfer system can redistribute only so far. The drift towards greater inequality within and between most countries has been generated by blind market processes increasing the returns to property ownership and certain skills, though abetted, to be sure, by policy changes which have weakened the power of labour in the name of efficiency. A movement that would raise the banner of egalitarianism again cuts against the technocratic grain – but in doing so might reignite a genuine Left.
1 Scott Steel (‘Possum Comitatus’), ‘Australian exceptionalism’, Crikey, 8 December 2011, <http://blogs.crikey.com.au/pollytics/2011/12/08/australian-exceptionalism/>, accessed 6 January 2012.
2 As measured by the Gini coefficient on household incomes. OECD, Divided We Stand: Why Inequality Keeps Rising, OECD Publishing, 2011, <http://dx.doi.org/10.1787/9789264119536-en>, p. 45, accessed 6 January 2012.
3 Andrew Leigh and Tony Atkinson, ‘Top incomes in Australia, updated’, Core Economics, 7 April 2010, <http://economics.com.au/?p=5387>, accessed 6 January 2012.
4 Australian Bureau of Statistics, Household Income and Income Distribution, Australia, 2009–10, Cat. no. 6523.0.
5 Steel overstates his case somewhat, because in the OECD dataset he draws upon, Australian data goes back only to 1995, while that for most of the comparison countries goes back to the mid-1980s, which means that the Australian figures are not tempered by a period of recession.
6 Steel, ‘Australian exceptionalism’.
7 Clive Hamilton, ‘What’s Left?: The death of social democracy’, Quarterly Essay, no. 21, 2006, p. 32.
8 Hamilton, p. 21.
9 Figures for average hourly pay come from the Australian Bureau of Statistics, Cat. no. 6345.0, Table 1. They exclude bonuses but include overtime. I have used September 1997 as the reference quarter because the ABS reports data for this series only back to that period. Price index figures come from the ABS consumer price index, Cat. no. 6401.0.
10 I include here the following categories and subcategories from the ABS Household Expenditure Survey: clothing and footwear (3.6% of total household goods and services expenditure), household furnishings and equipment (4.7%), motor vehicle purchase (3.8%), other vehicle purchase (0.2%), motor vehicle parts and accessories (0.8%), recreational and educational equipment (4.4%), toiletries and cosmetics (1.1%) and miscellaneous goods (1.9%).
11 ABS labour and consumer price indices, as above. The enormous figures for audio, visual and computing equipment reflect the ABS’s adjustment of computer prices with a ‘hedonic index’ to deal with changes in computer quality.
12 See Michael Rafferty and Serena Yu, Shifting Risk: Work and Working Life in Australia, Workplace Research Centre report, University of Sydney, September 2010, available at <http://www.actu.org.au/Images/Dynamic/attachments/7105/Shifting%20Risk%20report.pdf>, pp. 56–7. Their figures, showing a rise in fixed costs as a proportion of total household expenditure, are based on the 2003–04 ABS Household Expenditure Survey, Cat. no. 6530. Since the publication of their report, the results of the 2009–10 survey have been released, showing a decline in the proportion of expenditure for housing, due largely to lower interest rates – which is, of course, subject to reversal when monetary policy is tightened again.
13 That is, the proportion of the adult population in work or looking for work. ABS labour force figures, Cat. no. 6202.0, and Reserve Bank of Australia, Australian Economic Statistics, 1949–50 to 1996–97, Occasional Paper no. 8, Table 4.3.
14 Tony Richards, ‘Housing market developments’, talk to CEDA Housing Forum, Sydney, 29 September 2009, <http://www.rba.gov.au/speeches/2009/sp-so-290909.html>, accessed 6 January 2012.
15 Not, at least, without some serious advances in robotics and artificial intelligence – and then our cyborg public servants might develop some needs of their own.
16 N Gregory Mankiw, ‘Know what you’re protesting about’, New York Times, 3 December 2011, <http://www.nytimes.com/2011/12/04/business/know-what-youre-protesting-economic-view.html>, accessed 6 January 2012.