The New Australian Socialist Experiment
The Socialists' Capture of Capitalism
A sweeping new Australian socialist experiment is now well underway. The signs are everywhere. But it’s unique. This is socialism with Australian characteristics. And it’s being plainly stated.
For those of us in business for ourselves, that is we are our own boss, understanding this seismic shift is important. Comprehension of trends and events enables us to make better business decisions.
At the time of writing (January–February 2023) there’s one initial big observation to be made.
The socialists’ capture of capitalism
This article focuses on the capture of Australian capitalism by the socialists. If fact it’s probably truer to say that the socialists have become the capitalists.
Does this sound counter-intuitive? In theory, yes. Karl Marx’s thesis contends that socialism would defeat capitalism and usher in the rise of communism.
But socialists learned a big lesson from the 1989 collapse of the Berlin Wall and with it the collapse of the Soviet Empire. The lesson was that Socialism doesn’t need to ‘defeat’ capitalism, but it does need to ‘capture’ capitalism for it (socialism) to survive and win.
The Chinese Communist Party (CCP) learnt this from both the Soviet demise and the CCP’s global pariah status after it massacred its own nation’s people in the 1989 Tiananmen Square protests. A decade after the massacre, the CCP invited in the financial titans of Wall Street who fell over themselves to oblige. The ‘capitalist’ behemoth Goldman Sachs led the Wall Street charge. On offer from China was a system where capitalists could flourish through political patronage. It proved hugely successful for the CCP which, having once learnt the operational lessons, absorbed capitalism into its own form of communism.
And that effectively is what has been happening in Australia. The socialists have become the capitalists.
This has principally been delivered through the brilliance of the Australian compulsory superannuation system. The scheme was conceived by then Australian Treasurer Paul Keating and union supremo Bill Kelty in 1991 and then implemented over the last three decades. The compulsory Australian superannuation system has delivered to Australian socialists control of the proletariat’s savings and, through that, major control of Australian capitalism. This may not have been the intention of Keating and Kelty, but it’s what has eventuated.
The Keating/Kelty plan envisaged super funds being drivers of economic growth. Both men deride what they refer to as the ‘loony tune Left’. But then comes the political twist.
The Left are in the political ascendancy in Australia. It’s not that ‘the loonies’ are in control. Rather the sensible and looney Left have, through election outcomes, been pushed into political accommodation. (Think, The Greens and the Left factions of the Australian Labor Party now dominating Australian federal parliamentary numbers and their power in several states.)
What’s also clear is that the Australian Left across the board doesn’t subscribe to the Keating/Kelty vision of how economic growth is achieved. Keating/Kelty subscribe to the Schumpeterian ‘creative destruction’ theory. That is, that an open, competitive market drives economic growth. The Keating/Kelty vision of compulsory superannuation was that it existed to secure the financial retirement needs of Australians. But this was to occur within the structure of a free, open, competitive market economy. And this also required a minimally regulated labour market—at least according to the Keating/Kelty vision.
But this free-market language and associated views have little traction with the Left. To them, it’s Martian language without earthly resonance. Free market concepts and language are no longer central to the Australian political orthodoxy. In this sense, Keating/Kelty are yesterday’s heroes—old men reminiscing about the good old days.
In fact, today’s Treasurer, Chalmers, when reflecting on the Keating/Kelty heritage is dismissive, saying ‘…we can’t just retrofit old agendas or retrace the steps of our heroes…’
The Chalmers vision holds that ‘… government has a leadership role to play …to guide how we design markets, facilitate flows of capital into priority areas and ultimately make progress on our collective problems and purpose.’ Chalmers tags this as a ‘rebirth of Australian capitalism.’
Here’s the ‘switch’ that’s been (and is) in the process of unfolding and upsetting the Keating/Kelty vision.
Under Marxist theory, socialists subscribe to the ultimate victory of the dictatorship of the proletariat. ‘Dictatorship’ is the operative word. In practice, this means that socialists are monopolists—and for the most part, that means monopoly through government.
But capitalists are also monopolists. The aim of any capitalist has always been to achieve monopoly of some sort. Think of the great robber baron capitalists—Carnegie, Rockefeller, JP Morgan and Vanderbilt—who made their massive fortunes by creating monopolies in the unregulated industrial boom era of 19th Century USA. They would not have achieved such dominance in the competitively regulated market economies of the 20th and 21st Centuries.
The aim of free market regulation is to allow parties to aspire to achieve monopoly but to always frustrate the achievement of such monopoly. Free market regulation is about the tension created by competition as both a driver of economic growth and as a player in wealth distribution. That’s the idea anyway.
But there is one thing that binds socialists and capitalists together. It is their common love of, and desire for, monopoly. Socialists seek the monopoly of the state over the individual. Capitalists seek monopoly through the elimination of competitors. What both socialists and capitalists despise is the frustration of the achievement of their monopolistic urges. The practical implementation of their (different) quests for monopoly is the essence of this new Australian socialist experiment.
Here is where the Australian superannuation system is critical to this socialist experiment.
With $3.3 trillion in assets, and growing fast, the super funds are dominating the financial system. Even though the big four banks’ combined assets are $4.1 trillion, superannuation is effectively the biggest single financial game in town.
But it’s not just raw financial size and grunt that matters. It’s also about control. The super funds have strategically large share ownership of major corporations, including the banks. This delivers huge influence over corporate boards, policies and actions. It could be said that the super funds even control the banks—or at least are moving in that direction.
The control narrative goes deeper: to the very structure of who controls the superannuation funds. The Industry Funds are the largest fund sector with $872 billion in assets. These funds are effectively controlled as a conglomerate by a partnership of unions and employer groups. Contributing members have no say or influence over the controllers, even though it’s the members’ money. The accountability and disclosure obligations of Industry Funds are scandalously minimal, even opaque when compared with listed corporations for example.
This is the cornerstone of the socialists’ control of Australian capitalism. The socialists ‘own’ the money of the proletariat which the proletariat cannot claim back until they retire. In the meantime, the proletariat’s money is the socialists’ plaything, used of course for the very best of socialist intentions. That is, Australian socialists have become the dominant capitalists.
Really none of this is new. It’s been evolving for 30 years. What is new is that the economic rationalists, the Keating/Kelty, Schumpeterian ‘creative destruction’ theory, free marketeers, have lost their political potency. The socialists are in the political ascendancy. They have captured capitalism. They have become capitalists. They are now in the process of implementing their version of a socialist/capitalist utopia or, more accurately, a monopolist’s utopia.
Articles in this series.