||Issue No. 126||01 March 2002|
I Don’t Like Sprouts
Interview: Clean Hands
Corporate: Out of Asia
Unions: Tears, Real And Crocodile, At The Ansett Wake
Economics: Labour’s Capital: Individual Or Collective?
History: Mardi Gras: The Biggest Labour Festival?
International: Driving A Hard Bargain
Review: In Bed With a Sub-Machine Gun
Satire: Whitlam Forgives Kerr: "At Least He Didn't Dismiss A Rape Victim"
Poetry: Dear Mother
The Locker Room
Week in Review
Well Done, Splitter
Labour’s Capital: Individual Or Collective?
Are we becoming a nation of shareholders? In broad terms, the proportion of Australian households owning shares has increased from about one in five two decades ago to about one in two today. This is a prodigious rate of growth. The lion's share of shareownership remains concentrated in relatively few hands, including the major institutional investors, but more and more 'mum and dad' shareholders have been drawn into having a direct stake in Australian industries.
Buying shares in partially privatised enterprises like Telstra, QANTAS and the Commonwealth Bank has been a principal means through which this broadening of shareownership has occurred. Many middle-income earners have perceived shares to offer a better rate of return on their personal savings than, say, fixed term deposits in banks: indeed, during the boom years of the 1990's, this was typically the case. Meanwhile, demutualisations, such as those of the NRMA and the AMP, have spread the net wider still, some people who had voted 'no' on principle having since become reluctant shareholders.
Is this broadening of share ownership socially desirable? Some advocates of the 'third way' see it as a welcome development. Maverick ALP backbencher Mark Latham, for example, argues that it is part of the process whereby more Australians become direct stakeholders in the economy.1 'People's capitalism', traditionally supported by the political right as a means of inculcating working people with conservative values, is now getting broader support, it seems.
It is possible to make the case on equity grounds. Thus, one might argue that, if more and more people have income from both capital and labour, the class division in capitalist society is apparently eroded. However, the overall distribution of income is not necessarily made more equitable as a result. A contrary tendency may well prevail, as the gulf widens between those with regular income from both capital and labour and those with regular income from neither. One of the features of the increased income inequalities over the last decade is the 'great divide' between households with two or more working adults and those with none. As the former also become shareholders this division becomes further accentuated.
There are other grounds for concern. One relates directly to the economic risks involved in private share ownership. For small investors, who cannot afford a large share portfolio in which the risks are spread, this is particularly problematic. Capital appreciation and regular dividends may have looked easy to achieve in the 'nineties, but this is a more difficult decade, with major corporate collapses, like those of HIH and OneTel, and growing fears of a major economic recession emanating from the US economy. Workers and retirees stand to lose their lifetime savings.
The social consequences of shareholding are also problematic. As a shareholder one may have an interest in corporate profitability even when it comes at the expense of other people's jobs or of environmental decay. Awkward personal dilemmas arise where corporate rationalisations, or higher rates of exploitation of labour or nature, add to shareholder value. As a shareholder one may have a stake in corporate activities that, as a citizen, one may deplore. The growth of 'ethical investment' funds is one response to this conundrum, but the tension between individual self-interest and collective concerns remains deeply embedded in the nature of capitalism.
The tension has broader ideological and political implications. The comparison between share ownership and home ownership springs to mind in this context. Mark Latham sees this in a positive light, comparing the case for promoting broader share ownership to the successful promotion of individual home ownership by Prime Minister Bob Menzies during the 1950's and 1960's. Indeed, the latter was a remarkably successful policy. It raised home ownership rates over the two decades from around 50 per cent of households to around 70 per cent. Politically, it also had the effect of creating a more conservative populace. Part of Menzies' intention was to use the home ownership policy as a means of building 'bulwarks against bolshevism' giving Australian families a perceived stake in the status quo and thereby rendering them less likely to embrace politically dissident perspectives.2 In the case of share ownership the inculcation of capitalist value is yet more explicit. Mark Latham's advocacy of a 'first share-owners' scheme, comparable to 'first home-owners' schemes needs to be considered in this context. Whatever his personal intentions, the effect is likely to run counter to the longer term political interests of Labor.
The dangers of extending share ownership - economic risk, social division, and political atomisation - are not necessarily arguments for simply leaving capital to the capitalists. The extension of workers' ownership and control over capital has always been a central aim of politics on the left. The key issue is whether the ownership and control should be individual or collective. Traditionally, the aspirations for collective ownership and control have focussed on the extension of public enterprise to more industry sectors, beyond the 'basics' such as electricity, gas, water and other infrastructure provision. Successive privatisations of those public enterprises have been a major setback to these aspirations over the last two decades. The development of cooperatives has been a supplementary concern for the left, but this too is a process forced into reverse by the neo-liberal ascendancy.
Meanwhile, a different form of collective involvement in the ownership of capital has been proceeding apace. This is the massive extension of occupational superannuation schemes. At first sight it sits uneasily with the more traditional left agenda. It is essentially a form of individual share ownership, albeit usually with a good spread of investments which minimise personal risk. The various fund managers typically allocate their members' savings according to primarily capitalist criteria. Shares feature prominently alongside a mixture of securities and property investments in the holdings of the superannuation funds. On average about a fifth of the money is invested overseas. The dominant concern of the superannuation fund managers is with getting the maximum rate of return, consistent with maintaining a sufficiently diversified portfolio.
The focus of these investments tends to be more short-term than is socially warranted because, where workers face a choice of superannuation funds (which is a declared aim of government policy), the funds compete according to the annual returns on capital they advertise themselves as having achieved on a year-by-year basis.
Herein lie substantial inequities too. Not all Australians are in superannuation schemes. Those who are enjoy tax advantages not available to those with their savings in other forms. In effect, the inequalities during people's working lives become perpetuated and magnified in their retirement years. Thus, the extension of occupational superannuation schemes constitutes a 'privatisation of pensions'. As such, it sits uncomfortably with the egalitarian principles of concern to the political left.
Two changes could help to reduce, if not eradicate, these tensions. One involves the elimination of the tax advantages and the use of the extra revenues thereby generated to improve state-provided retirement incomes. Getting the employers' contributions is surely sufficient incentive for an individual to have superannuation, without the need for extra tax breaks. Most employees have no option but to be in some scheme or other anyway.
The other change would inject a more collectivist element into the investment process. The most obvious means of doing this would be through the coordination of the numerous existing superannuation funds into a national scheme, with a substantial proportion of the pooled savings being directed into a National Investment Program to finance the development of Australian industries.
The latter policy would link the spread of ownership of capital with more collective control over its disposition. Workers' capital could then be invested with a view to longer term goals, acting as an instrument for the development of a more actively interventionist industry policy. Priority could be given to investment in restructuring for ecologically sustainability, for example, boosting industries like solar power production where there is a major potential to take a leading role, particularly now that the Kyoto agreement is starting to pressure countries to adopt more sustainable energy policies.
A carefully constructed industry policy, embracing broader social and environmental goals alongside economic goals, could become a real possibility if it were linked to a National Investment Program. The steering of the workers' savings into this channel need involve no sacrifice in terms of retirement income levels. On the contrary, to the extent that industry policies promote more balanced and sustainable development, the economic yield, as well as the social and environmental benefits, could be positive in the long term. Retirees would share in its fruits. They would also bequeath to their children an improved array of economic opportunities and hopefully, a less degraded environment.
The procedures for control and accountability over any such National Investment Program would need careful consideration, of course. There is a case for having representatives of consumer and environmental groups, as well as workers and retirees, involved in the superannuation/investment management process. Supporting economic expertise would be essential but, given the vast amount of human resources currently involved in portfolio management in the various superannuation funds, this would not seem to be a significant constraint. Indeed, combining that expertise into a collective process would seem to be more sensible than continuing to dissipate it in a competitive process that has the characteristics of a zero-sum game.
These considerations of superannuation and industry policy may seem rather distant from the more immediate concern with individual share ownership. However, they are interconnected issues. The essential point in this argument is that the ownership of capital by a broader array of households is not in itself the problem. Rather, the problem is the prevailing emphasis on individual rather than collective ownership of capital. A restructuring of superannuation, linked to investment and industry policies, provides an alternative response.
In an ideal world one might prefer to emphasise public ownership or the development of cooperatives. Pragmatically, judgements have to be made about effective political options in the more immediate future. The prodigious volume of savings going into the superannuation funds makes this a growth area. Bringing it under more effective social control is a necessary reform. It is not inconsistent with the defence and promotion of other forms of public ownership.
The long term challenge is to engineer means of establishing more collective control of capital. There is growing interest in this issue among some trade unions: it remains to be seen if a future Labor government is prepared to take the issue on. It would be politically courageous to do so, but would signal a sharp break with the neo-liberal principles and practices that have dominated economic and social policies in recent years. Otherwise, the interests of private shareholders, big and small, can be expected to further prioritise the interests of capital over labour.
This article was originally published in Arena
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