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July 2004   
F E A T U R E S

Interview: Power and the Passion
ALP's star recruit Peter Garrett shares his views on unions, forests and being the Member for Wedding Cake Island

Unions: Tackling the Heavy Hitters
Tony Butterfield became a State of Origin gladiator at the unlikely age of 33. Even that, Jim Marr reports, couldnt prepare him for the knock-down, drag-em-out world of modern IR.

Industrial: Seeing the Forest For The Wood
Proposals to flog off NSWs forests have raised eyebrows and temperatures amongst some of the key players reports Phil Doyle.

Housing: Home Truths
CFMEU national secretary John Sutton argues for a radical solution to the housing affordability crisis.

International: Boycott Busters
International unions have issued a new list of corporations breaching ILO sanctions to do business in Burma.

Economics: Ideology and Free Trade
The absurdities of neoclassical economic assumptions has never stood in the way of their being trotted out to justify profiteering and attacks on the rights of citizens. The AUSFTA is the latest rort we are supposed to swallow, writes Neale Towart.

History: Long Shadow of a Forgotten Man
Interest in JC Watson's short time as Labor's first Prime Minister should not detract from his more substantial role as Party leader, writes Mark Hearn

Review: Chewing the Fat
As debate rages in Australia about Fast Food advertising, Julianne Taverner takes a look at a side of the industry that Ronald McDonald wont tell you about in Supersize Me.

Poetry: Dear John
Workers Online reader Rob Mullen shares some personal correspondence with our glorious leader.

C O L U M N S

Politics
The Westie Wing
As the NSW Labor Government sells its first budget deficit in nine years, the real concern for the union movement is the devil in the detail, especially when it comes to procurement agreements, writes Ian West.

The Soapbox
Rubber Bullets
Labor's IR spokesman Craig Emerson launches a few characteristic salvos across the Parliamentary chamber

The Locker Room
Tears After Bedtime
Phil Doyle says that it's all fun and games until someone loses an eye

Postcard
Postcard from Vietnam
APHEDA's Hoang Thi Le Hang reports from the north of Vietnam on a project being fund by Australian unionists.,

E D I T O R I A L

A Place To Call Home
These days the Great Australian Dream is closer to a fantasy, where the chances of owning to your own home depend on either inheriting property or winning lottery.

N E W S

 NRMA Reverses Over Turnbull

 Privatisation Kills

 Crikey: Irwin Feeds Staff AWAs

 Nurses Telegraph Fight Back

 "Sexiest Man" Plays it Safe

 Eureka: Bug Swats Hadgkiss

 Macdonald Ponders Asbestos Blue

 Latham Gets Late Mail

 Murdoch Faces Discrimination Rap

 Boss Goes Postal

 Oberon Survives Bomb Threat

 Howard Out On CD

 Telstra Hangs Up On Staff

 Activists Whats On!

L E T T E R S
 Letter From America
WHAT YOU CAN DO
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Economics

Ideology and Free Trade


The absurdities of neoclassical economic assumptions has never stood in the way of their being trotted out to justify profiteering and attacks on the rights of citizens. The AUSFTA is the latest rort we are supposed to swallow, writes Neale Towart.

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The federal government claims that the AUSFTA has been developed on a sound economic basis. A study produced by the Centre for International Economics has been used to argue that the agreement is in the national interest and has assessed the risk of it not being in the national interest as "minimal."

The AMWU, in its submission (produced by the National Institute for Economic and Industry Research - NIEIR) to the Senate Select Committee of the ramifications of the AUSFTA sets out the dubious basis of this claim from CIE. Ideology rules when big dollars for the few are on the line. The CIE study claimed that their would be over $52 billion of benefit to the Australian economy from the agreement over the period 2005 to 2025. The NIEIR finds a completely opposite outcome - an expected loss of $46.9 billion in net present value terms.

The conclusion that can safely be reached by the person in the street, in the US and Australia, is that the benefits will flow to profits and shareholders, not to workers, communities, social services or community facilities. The histories of globalisation from 1492 to now are the solid evidence for this. Immiseration of the poor and slaughter of people is the main historical fact of the expansion of imperialism. Ask native Americans, Canadians, Africans, Chinese, South Americans and Australians.

Certainly the economists and statisticians will point to rising GDP to poo poo this idea. However, any improvements in health statistics and life expectancies have not come from the "unimpeded workings of the global market but rather from the direct action of those who are at the sharp end the rush to increase production and expand and speed the circulation of commodities. Trade unions exist because profiteers want to maximise returns art the expense of those who actually produce goods and services. They claw back returns to themselves, their families and communities. At present the ruling classes have been dominant and have reversed the post war trend of expansions of rights for workers and peasants in al corners of the globe. Anti-colonial and anti-imperial movements have had successes eaten up and spat back in their face by the financial and economic power of the imperial powers, in particular the powers of the US based corporations firmly supported by US governments.

These companies are the powers that drive the US administration and drive the calls for free trade. Freedom to exploit unimpeded by notions of human, environmental, social or any other rights.

Political sovereignty is what is at stake. Nationalism and patriotism are dangerous concepts, as we can see by the appeals to both that John Howard reels out over Iraq (what that has to do with Australia escapes me) but at the same time he and his cheer squad are happy to sell out the whole nation for the benefit of the few. Workers need to realise that the national interest equates to corporate interest for the Liberals. For the Australian people the national interest is in decent water, decent wages, decent houses, national parks, public transport, fairness and equity and liberty. The security state whittles these away in the name of national security, and the AUSFTA further undermines rights we have under our laws.

The NIEIR addresses the sovereignty issue. "[It] will severely constrain what future Australian governments can do to influence domestic economic activity and employment. Also they will have less ability to stop the stripping out and transfer overseas of Australian economic assets in terms of intellectual property and technology. Many of these assets were built up with large amounts of taxpayers' funds. One would logically expect there must be at least some risk of Australia being negatively affected by AUSFTA, even if the expected net benefit was positive. The Centre for Economic Economics produces no risk of economic loss. Why?

Part of the reason as to why is the nature of the modelling system used by the CIE. The modelling system is of the so-called Computerised General Equilibrium (CGE) type. Such models are not econometric models in the sense that all relationships in the model are estimated from historical data sets. Rather, they are theoretical models, where many of the key dynamics are determined from the theoretical assumptions built into the model structure. The models typically take their theoretical underpinnings from neoclassical macroeconomic theory, in the process imposing the outcome of neoclassical theory on all model results. Model results are inevitably that market forces left alone will produce optimal economic outcomes. Government intervention by interfering with market forces produces sub-optimal outcomes by assumption." (ie garbage in, garbage out!)

"This is reflected in model mechanisms which impose a return to full employment no matter what the economic shock. These mechanisms, which have no validity other than as assumptions, imply that public policy has no major employment effects. This lack of effect apparently also produced, in the CIE modelling, the unfortunate conclusion that the AUSFTA does not matter much for economic activity, a conclusion which led to the need for a tertiary-sector productivity "fudge factor" to leverage up the economy-wide results.

The corollary of these assumptions is the loss of political sovereignty, because it limits the ability of governments to intervene in the economy, would be an improvement [according to the models used by CIE]. Therefore, the AUSFTA, by limiting the role of government and increasing the degree of competition in the economy, leads to improved welfare. The CIE report simply assumes away all potential costs from loss of political sovereignty."

The Knowledge Based Economy is where we are constantly told we are heading. What are the impacts of the AUSFTA on this?

The application of research, science and technology, all generated in publicly funded universities and research institutions. A review of the development of successful and unsuccessful societies since 1945 show that this government (ie citizen) funded development is the reason for economic development, growth and improved living standards. The absurdity of the CIE position that says the removal of government from these roles is shown by the record of countries moving from medium technology economies to advanced knowledge-intensive economies (not excluding the USA), capable of sustaining innovation and hosting expanding high-technology industries. These economies were able to make this transition because of the leading role governments have taken. That the US is included is largely because of the technological spending it does for the military. The Military Keynesianism has been a major driver in the US, but innovation elsewhere has not been so militarily based. Finnish and Swedish companies did not become leaders in digital and mobile phone technologies by accident.

The NIEIR lists these key features common to successful economies:

Adopting policies ensuring the transfer of technology and intellectual property to the countries;

Ensuring that domestic capital was mobilised to exploit and create leading edge technology, often with enterprises under direct government control;

Adopting efficient planning methods to ensure the finance, resource requirements and export support were available when needed; and

Protecting indigenous intellectual property so it was retained for the benefit of the domestic economy.

Countries such as China (now), Ireland in the 1990s, Japan and Taiwan from the 1950s to the 1970s are examples. These countries have all used policy instruments to drive their economies which Australian governments, under AUSFTA, will not be able to do.

The loss of political sovereignty clearly imposes large costs on the Australian economy. The governments pet modelling agency, CIE, simply wish this away.

This what we are asked to sign up for. The ALP is under pressure from Howard and a craven, ignorant media to sign our scope for independent action away. We will race to the bottom of the heap as US multinationals rip and tear the heart out. Not just the rocks we have been exporting but our minds and souls.

For lots of details and actions you can take to oppose the AUSFTA go to http://www.aftinet.org.au/ the Australian Fair Trade and Investment Network.

The AMWU has its paper, fact sheets and workplace education sheets on its website

http://www.amwu.asn.au/default.asp?Action=Category&id=68


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