The ACTU and ‘wage restraint’: a reply to Matt Cowgill

In a recent article for the Guardian, Matt Cowgill, an Australian Council of Trade Unions researcher, took Peter Reith and his business backers to task for their unfounded arguments about the ALP’s economic management.

Like Matt, I agree that the hysterical screams of business for greater power in the labour market are disconnected from economic reality, simply a device to garner higher profits at the expense of wages.

Combatting the arguments from Reith and his fellow neoliberal zealots is an essential part of enabling workers and unions to fight for the advancement of working people. So I opened the article hopefully, expecting a damning critique from a prominent labour intellectual using the other side’s inconsistency, shifting arguments and dishonesty as part of a larger effort to outline a worker-centred approach to economic development.

While agreeing with the main thrust of Matt’s arguments against Reith and co, I was appalled to encounter what could only be described as an ideological justification of the single biggest strategic disaster in the Australian labour movement’s history: the Accord.

In mounting his case for Labor’s economic management, Matt argues:

there was reason to think that at least some of the rise in unemployment may have been caused by too-rapid wage increases. Union leaders recognised this, and entered into the Accord with Bob Hawke’s Labor government to secure an increased ‘social wage’ (like Medicare) in return for wage restraint.

In other words, he thinks that the economically correct strategy for the union movement to take in 1983 was one in which its membership’s material position went backwards.

The Accord gutted the union movement. The social peace and real wages decline so craved by the business community in the 1980s was achieved by demobilising the movement, removing any control at the workplace level over union decision-making, disciplining those who took exception to the strategy of real wage cuts embodied in the Accord, and demolishing the political basis for fighting unions.

The story that followed is a big part of what we contend with today: after entering the Accord with above 50 percent of the workforce in unions, we have lost more than half that, and now sit at approximately 18 percent. In 2011, Paul Keating praised the big contribution from the unions … of reducing real wages and letting the profit share rise.’ This decline in real wages has been elaborated further by other commentators. Controls on prices never happened. The ‘social wage’ which was supposed to compensate either never eventuated (industrial democracy), or was watered down (Medicare). Superannuation contributions remain too low to compensate for the public pensions that it was designed to displace, not to mention that the ‘funds have lost a greater share of their members’ funds since the global financial crisis than any other pension system in the advanced world, with the exception of Iceland.’ All of this has to be placed alongside cuts in the social wage, including the abolition of free education, and the regressive consequences of the other structural reforms of the Accord period.

On any objective accounting, a strategy that delivered a much weaker union movement, worse material outcomes for workers than under Fraser, as well as legalistic union institutions that have been ill equipped to cope with the post-Accord era, must be reckoned a disaster. The Accord is an object lesson in what not to do.

Yet Matt praises it. This is dangerous territory. If we are to accept his logic, unions would become the parasites the right wing claims they are. Instead of advancing the interests of their members, they would be a kind of ‘rational’ substitute for the irrational economic management offered by business and its allied politicians – yet one still focused on increasing profits at the expense of workers.

Economics is necessarily partisan, since it speaks to economic policy and to the question of the division of social output: to the profit/wage share first and foremost. The Reiths of this world can be relied upon to stack the deck in favour of business and the profit share. Yet by playing at ‘objective’ economic analysis, Matt has ended up simply replaying the basic economic approach he is notionally confronting, albeit with a slight social democratic colouration.

But what is most dangerous in Matt’s position is that if we accept the logic behind his praise of unions embrace of ‘wage restraint’, we would not learn from history but repeat it.

Unions need hard-headed economic analysis. What we do not need is more pro-business economics in the leading councils of our movement. We need the arguments, facts and ideas that will help workers understand that what Reith and his friends are peddling is a weapon against them, nothing more and nothing less. We need ideas that help us assert the interests of the great majority of Australians who work, against the tiny minority who benefit from Reith’s free marketeering.

The union movement needs to recognise the corrosive influence ideas like ‘wage restraint’ and the Accord still represent for our movement. So for me, and I believe an increasing number of other unionists, Matt’s article is unsatisfactory. I am left asking the question of our friends in the senior ranks of the union movement: why are we entertaining this self-destructive rubbish again?

Marc Newman

Marc Newman works at the Fire Brigade Employees' Union in Sydney, and contributes to the blog Left Flank. Opinions and political errors are all his own. He tweets as @marc_newman.

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  1. Marc, interesting article. I wonder what happens when you look at the union movements in other industrialised nations that didn’t have the Accord, and compare the relative health of their union movements compared to Australia’s. I’d take Australia’s union movement over almost any other in the world.

    I think your sentence “albeit with a slight social democratic colouration” is key. The ACTU and the union movement are social democratic institutions.

  2. Hi Alex, I’d settle in this case for a bit stronger social-democratic colouration within the unions. Baby steps – I find it remarkable that in an era when more left wing forms of social democracy are making a comeback (take for example Ed Miliband in the UK, SYRIZA in Greece, or Die Linke in Germany, to take just a few) we still sit here prepared to settle for so little in terms of politics and policy from our own union movement and its traditional political representatives in Labor.

    Depending on what criteria you elected to use I suspect you could prove or disprove the “best movement in the world” claim. But that’s not really the relevant question, is it. The question is whether alternative strategic approaches in the late ’70s and ’80s might have left us better placed organisationally and politically than we find ourselves now, and what lessons might be learned from the strategic mistakes of that period. I think there is enough evidence of significant weaknesses in the Australian movement that question must at least be debated, instead of maintaining the fiction we’re doing everything right and someone or something else is to blame for still declining membership.


    1. “I find it remarkable that in an era when more left wing forms of social democracy are making a comeback (take for example Ed Miliband in the UK, SYRIZA in Greece, or Die Linke in Germany, to take just a few)”

      It is said that while Ralph Milliband proved only in theory how the the Labour party will always betray the working class, his sons Edward and David have set out to prove it in practice.

      What the former Stasi bureaucracy which coagulated in Die Linke, and has been enforcing social cuts against the working class in coalition with SPD in state and municipal governments, has to do with the left is a complete mystery.

  3. A scorpion and a frog meet on the bank of a stream and the scorpion asks the frog to carry him across on its back. The frog asks, “How do I know you won’t sting me?” The scorpion says, “Because if I do, I will die too.”

    The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?”

    Replies the scorpion: “Its my nature…”

  4. Hi Marc,

    The point of my reference to the Accord in that Guardian piece and in my recent paper on factor shares was the following: I outlined the economic circumstances and logic that (in part) led to the creation of the first Accord. I did this in order to show that those circumstances are not present today, and thus even if you accept the logic that led to the Accord then wage restraint along similar lines is not necessary today. This is effectively a defensive argument: I am rebutting claims that there is or has recently been a ‘wages breakout’, by comparing our present circumstances with those of the late-70s and early 80s.

    To make this argument does not require acceptance or endorsement of the Accord per se or particular arguments in favour of the Accord. It is a thought exercise – I am asking “if we accept the logic of the Accord, does that mean that a similar arrangement is justified today?” and answering ‘no’.

    At no stage did I say or imply “that the economically correct strategy for the union movement to take in 1983 was one in which its membership’s material position went backwards.”

    I have not stated my view on the Accord because I don’t think it’s really relevant to the question at hand. My point was to use the Accord (and the period before the first Accord) as an illustration of circumstances in which wage restraint was at least arguably justified (I know you would dispute that, but the position is, as I say, at least arguable).

    As to what my views on the Accord actually are (I repeat that I have not given them in the Guardian piece, nor in my paper), I agree with Ged Kearney:

  5. Marc,

    It seems to met that you’ve just done what you’re accusing the conservatives of, but in reverse.

    Do higher wages _ever_ increase or maintain high unemployment? That is the contestable but relevant “hard-headed” economic fact that Matt cited in his piece (without praising the Accord). That is the argument from the conservatives that you need to address.

    Instead, your second last paragraph seems to simultaneously argue for a hard-headed confrontation with the truth, while presuming that said truth points entirely in the direction of unionized workers’ interests (cf. the unemployed). I think it would be better to argue forcefully, but acknowledge whatever trade-offs may exist.

    (Also, as an aside, spending billions on free university education for people who were largely middle class, and thus helping them to remain middle class, was and would be extremely regressive.)

  6. Thanks to Matt for linking to Ged Kearney’s speech.

    It makes for interesting reading. But I’m not sure it helps us to better understand the real political economy of The Accord. It is, in parts, a rather glossy and sentimental recounting of the policy.

    Some examples:

    Speech: ‘The Accord was a process characterised by deep trust between key players of the two wings of the labour movement.’

    Comment: Not true (or only partly true). A key player in The Accord was Laurie Carmichael of the Metal Workers. Without his support, and that of his union, it is very unlikely The Accord would have been agreed in the form it took. In 1986 Carmichael publically criticised Hawke for using The Accord primarily as a tool for wage restraint. He had good reason for feeling angry and betrayed. The left embraced The Accord in 1983 in large part because they were promised an activist industrial policy (akin to the Scandinavian model). However, the work of the policy committee that was established to develop such a policy was simply ignored by Hawke and Keating. A key reason (perhaps THE key reason) for the left’s support of The Accord was simply not acted on.

    As a result Carmichael and other left-wing activists attempted to form a new political party in direct opposition to the ALP (the New Left Party). This initiative was a complete failure. But that it happened at all hardly speaks to the ‘deep trust’ allegedly felt by important parts of the union movement toward the Labor government.

    Speech: The Accord ‘delivered a stable foundation for economic growth and prosperity from which current generations have benefited.’

    Comment: Many countries experienced generalised boom conditions after 1982. Attributing growth primarily to The Accord is a brave assertion.

    What The Accord didn’t do was prevent the recession of the early 1990s, increasing income inequality, or further deindustrialisation. Let’s not forget, the primary appeal of The Accord to unions in the early 1980s did not revolve around the question of the social wage. It was to rebuild and modernise Australian manufacturing industry. The idea was that wage restraint would provide industrial employers with the additional resources needed to re-equip manufacturing industry with new skills and new technologies. That did not happen.

    Speech: The Accord enabled unions to act ‘as a ballast against the extreme ideology of the free marketeers’.

    One source of such ballast would have been to increase the numerical and ideological strength of unions. But the unions emerged from The Accord process numerically and ideologically weaker. At least one union (the CFMEU) stated that years of top-down wage restraint did enormous damage to the strength of its workplace organisation. The key reason why many workers join and commit to a union is that it will (or will at least try to) defend their members’ standard of living. The Accord radically weakened the willingness and ability of unions to do that.

    More generally, the Hawke government privatised a number of enterprises that were profitable while they were publically owned (such as Telstra). Thatcher justified privatisation on the grounds that certain state-owned enterprises were a drain on public finances. Hawke and Keating pushed ahead with some sell-offs because they thought that privatisation was an inherently ‘good thing’. Surely this made life easier, not harder, for the extreme free marketeers?

    Speech: ‘The Accord was always about much, much more than just wage restraint’.

    Comment: True. It was also about an interventionist industrial policy. But from the point of view of Hawke, Keating and Treasury – it was primarily about wage restraint. Without wage restraint there would have been no Accord. Hawke and Keating simply would not have thought the agreement worthwhile.

    Speech: ‘Wage restraint from 1983 to 1990 meant unions held back from doing their core work of bargaining with employers for better wages and conditions, and some forgot how to organise and are still paying the price.’

    Comment: ‘Forgot’? Having been instructed not to bargain for nearly a decade (an instruction from the top, not one that originated from the shopfloor), many unions lost the capacity to bargain effectively. This capacity was further eroded by enterprise bargaining, a measure that employer groups had been agitating for since the 1970s because they understood that in most cases it would benefit them.

    Enterprise bargaining is only desireable from a union perspective if you are confident that you have very strong and resilient levels of workplace organisation. That was not the case for most unions in the early 1990s. The notion that introducing enterprise bargaining after a prolonged period of inactivity would serve to revitalise union activism was wishful thinking. But it was wishful thinking that happened to coincide with Treasury thinking about how to render the labour market more flexible and less inflationary.

    So when the speech states that ‘the movement fought for and won direct collective bargaining’, I suspect the movement was pushing at an open-door.

    We badly need to debate and discuss The Accord period in all its complexity. There were no easy solutions to the problems faced by unions in the early 1980s. But that does not mean the only way forward was the one largely dictated by Hawke, Keating and The Treasury.

    1. Very strong contribution. Not surprising nobody from the ACTU jumped in to counter it.
      Who could forget the picture in the introduction to the ACTU’s report of it’s delegation to Sweden? It included (from memory)Carmichael, Greg Sword, Joe De Bruyn and Martin Ferguson. Actually, when you think back on who was involved its no wonder it turned out like it did.

  7. Article from Counterpunch on “Counterfeit Unionism in the Empire”:

    A War Agenda
    Counterfeit Unionism in the Empire
    With respect to nearly anyone who is trying to fight back in our current context, I differ from what most people think about the current state of US unionism.

    Of course, none of that can be split away from an analysis of our current circumstances which I believe is an international hot war, and economic war, of the rich on the poor and the rapid emergence of fascism as a popular movement.

    It does not have to be that way.

    Let us hope that another scenario is possible if we take on the hard tasks of the immediate future and connect them to a vision of what can be. One of those tasks is to determine the role of the unions and the relationship of radicals to them.

    Labor bosses at all levels are the nearest and most vulnerable of workers’ enemies. Rather than “move unions to the left,” better, “demolish the labor quislings, take their treasuries, seize their buildings, as we build a mass class conscious movement to transcend the system of capital.”

    Why does that make better sense?

    Since the Industrial Workers of the World (a grand vision but fatally flawed practice) were nearly demolished in the Palmer Raids of 1919, American unionism has been a false flag operation: not what most people think of as unionism.

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