Questioning Failed Capitalism

A common mistake people make when talking about wealth disparity and income inequality in Australia is that they often attempt to conflate what is happening elsewhere in the world than what is happening here. This cross-cultural relevance attempt is often made mistakenly to make the problem sound far worse than it is, or can be made because those making a point are unaware of the gargantuan differences in economic and governmental systems involved.

When people talk about the top 1% of income earners in Australia they automatically think about billionaires like Clive Palmer and the world’s richest woman and Australia’s richest person Gina Rhinehart. But in Australia the top 1% of income earners incomes start at a mere $197,000. When compared to the Australia wide average wage of $72,800 it shows that those at the top are not all too far removed from those in the middle. The same isn’t true in the US of A where the average wage $50,502 and the top 1% of tax-payers starts at $343,927. If we factor in relative growth since those numbers were published and how they’re arrived at, it shows whilst the top 1% in the US of A are earning near double what their Australian counter-parts do the average wage still lags behind Australia’s, which can only be due to a far greater number of Americans being at the lower end of the earnings scale than exists in Australia.

The above makes economic comparisons based on economic decisions made by government and the relative out-comes very difficult as the underlying economic reality is far from even. But people still try when they really shouldn’t, especially when they start claiming that capitalism has failed when they’re basing that on US Economy and experience there-of.

In reality the US of A still has the largest economy on Earth, its wealth, technology, information and industrial out-put is beyond the comprehension of most people, and makes that nation still top of the economic pile. Even when considering the rise of China the US Economy will still remain the world’s most important because it will still remain the greater source of technology and wealth generating capital.

However, as explained by American thinkers such as Dr Cornel West and Tavis Smiley around half of the entire US Population have not benefited from the enormous wealth their nation generates. That is not so in Australia, half of the country isn’t poor, the recently poor or the near poor as West and Smiley describe the situation they encountered whilst writing their book The Rich and the Rest of Us: A Poverty Manifesto and their subsequent tour with that book in the US of A.

But both countries do face similar issues when it comes to over-involvement by government in their economies, in Australia all three layers of government directly employ far too many people which has ensured marginal income taxes remain much higher than in the US of A, where-as the US Government has an enormous economic subsidy program that for decades has distorted the underlying reality of the US Economy and has stifled attempts at meaningful reforms. On that front Australia has been far more pragmatic and as a result has avoided many of the global economic down-turns the American economy has been centre of.

The process of subsidies in the US of A begins with farm subsidies, the 2013-14 Farm Bill passed by the US Congress dedicated $955,000,000,000 for farm subsidies over 5 years. Then there are the US Government backed mortgage lenders Freddie Mac and Fanny Mae which were largely the genesis of the Sub-Prime Mortgage Crisis that precipitated the Global Financial Crisis. So it is evident form the out-set that the US Economy isn’t an open capitalist system based on the free and fair trade of capital, only parts of it are.

And when looking at the US Congress passing a direct subsidies package of $955B you must also consider that it pales into near insignificance when compared to the amount of corporate welfare that exists within their military industrial complex.

Australia avoids much of this and does allow for a much more open market to exist, farmers in Australia do have access to government assistance, however, that usually consists of low-no interest loans which the government requires repayment of, income assistance relative to ordinary welfare payments to other Australian families and drought-disaster relief. Again, often in the form of low or no interest loans plus and what can only be described as animal welfare payments to avoid scenes of dying cattle clogging up the evening news.

Successive Australian governments have been moving away from direct interventionist policies and practices, from Paul Keating beginning the government’s privatisation of assets process to John Howard’s national competition policy and industry restructuring programs. Kevin Rudd when dealing with the single-quarter impacts of the Global Financial Crisis may have actually instituted one of the most successful intervention policies in Australian history, and it wasn’t his largely ineffective, wasteful and largely late stimulus package. It was the largely symbolic bank deposit guarantee it knew it would never have to pay out on, even the amount of mortgage backed securities purchased by the Reserve Banks of Australia insignificant compared to what was transpiring in the US of A.

Neither Kevin Rudd or Julia Gillard altered the course of the National Competition Policy even whilst engaging in profligate spending, and Tony Abbott is looking like continuing the Keating/Howard legacy of government taking a step back when it comes to business, but a step forward when it comes to ensuring social benefit from business, with the PPL and the like. And that may be the fundamental underlying difference in approaches by the two governments, the US Government has made little effort to allow upward wealth mobility and it shows in their average wages where-as in Australia that has definitely been a focus of many governments over a long period of time.

So the problem with capitalism isn’t capitalism it is a question of good government versus bad government and how they approach the problems that capitalism brings. No system is perfect but you do have to look at the system without it being through an artificial construct, and saying the US of A is a capitalist country can only be said in isolation of the fact its government is far too interventionist for that to ever be the case, so to say capitalism has failed as people in certain quarters do can only be done so without first understanding what capitalism is and how it has been manipulated.

NLGM

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