Superannuation and the Morrison Government's Determination to Make Working People Pay for the Crisis

Lisbeth Latham

A central plank of the Morrison Government’s response to the economic uncertainty and crisis unleashed by the COVID pandemic has been its policy of allowing working people to draw down their superannuation accounts by $10, 000 in each of the 2019/2020 and 2020/2021 financial years. Hundreds of thousands of people have now accessed their accounts for a range of spending, and while the individual decision to draw down super accounts has been criticised by some commentators, the real question is what Australia now does in a context where the problem of retirement poverty is likely to have been exacerbated?

The government’s announcement that people could draw down their superannuation account - particularly by such relatively large amounts, was a tacit admission by the government that its broader economic response to the current crisis was an entirely inadequate response. The most notable example of this being JobKeeper the program, which actively excluded millions of workers and for millions more it was inadequate to enable them to meet their financial obligations. Why else would the government believe that people would need to draw up to $20, 000 from their retirement savings than if they knew that they were not going to meet their financial obligations drawing on the welfare system?

Drawing down superannuation savings wasn’t just an individual tragedy for those workers, there was and continues to be a real danger that the individual decisions to draw down accounts would cause liquidity problems for Australia’s massive superannuation system, and further exacerbate the decline of the financial markets with up to $50 billion drawn down. This situation has led to individual criticisms of workers who chose to draw down their accounts. With some media outlets critical of both people accessing funds without experiencing a personal loss of income and individual spending decisions. Apart from a severe misreading of what this spending represented - the majority of it consisted of either paying down debt, making significant large purchases that would otherwise incur debt, or meeting day to day, or week to week living expenses. Criticising individuals for drawing down their life savings in a context generalised system failure appears to be at best misguided if not totally disingenuous and malicious. People facing a collapse in their disposable income given access to their super were always going to access it - it that is why the government made it available. If anyone should be blamed for the money being accessed and spent it is the government.

The problem with the spending is not what people spent their superannuation money on, but that it was necessary. We know that a significant number of the people drawing down their superannuation accounts will have been women and people in less secure and lower-paid employment. These are groups are all at greater risk of experiencing poverty in retirement in a system that already produces some of the largest proportion of people over the age of 65 living in poverty within the OECD. With 2.5 million people expected to draw down their super, and more than 480, 000 people now having a zero superannuation balance. This problem of retirement poverty in Australia can only be expected to get worse. In addition, the running down of workers superannuation balances could have an immediate impact, as workers with less than $6, 000 in their superannuation accounts are no longer provided with default insurance by their fund.

Country	65+ Living in Poverty
Australia	23.7%
France	3.6%
Germany	10.0%
Korea	43.8%
Japan	19.6%
Britain	15.3%
US	23.1%
OECD	14.2%

Table 1.0 Poverty Rate Amongst the Elderly. Source: OECD. 2020. OECD Income Distribution Database (IDD): Gini, poverty, income, Methods and Concepts. http://www.oecd.org/social/income-distribution-database.htm. Accessed July 18, 2020.

The problem of hundreds of thousands of older Australians retiring into poverty has been an issue in policy development. The main solution that has been put forward has been to lift the compulsory employer superannuation contribution from 9.5% to a higher figure, the most notable one being 12% which had been legislated to increase incrementally by the Rudd government. This increase was subsequently delayed by the Abbott government, with the increase to 10% not scheduled until July of 2021. It is unclear that this will go ahead, and the need to increase to 12% has been the focus of a number unions, most notably the Australian Services Union, Finance Sector Union, and Shop, Distributive, and Allied Employees Union. While there is an undoubted logic that the easiest and best way to address retirement poverty is to boost the amount of money going into workers’ superannuation accounts, this ignores the fundamental problems with the superannuation system:

• It shifts the problem of supporting working people in their retirement from society as a whole to workers during their working life - which has contributed to and justified the inadequate pension system within Australia; 
• It reproduces and exacerbates the income inequality that already exists in the Australian economy, most notably the gender wage gap; 
• Australia’s super system props up financial markets - with the funds being worth $2.7 trillion in March 2020 - and makes workers retirement income and wealth entirely dependent on the stability of these markets (which experience shows is not at all reliable)

Given these serious limitations, limitations that have existed, and were built into, the superannuation system from its inception, what is the solution? It has to be a significant re-envisioning of Australia’s entire pension and welfare system to view that all people deserve a liveable income which guarantees a minimum quality of life irrespective of the ability of an individual to work. Work would then enable people to enhance and improve on that standard of living both now and into retirement. However, this universal welfare system would be funded both by steeply incrementing progressive income tax system combined with a concerted effort to ensure that corporations are levied increased tax levels which they are actually required to pay.

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Capitalism’s Accumulation Crisis Prompts Attacks On Wages And Organised Labour

Lisbeth Latham

The central driver of the capitalist system is the drive for capitalists to constantly increase profits – failure to do so can be a trigger for a crisis within the capitalist system.

Since the end of the long boom in the early 1970s, capitalism, particularly in the advanced capitalist countries, has entered a period of long-run crisis under which individual capitalists have sought to find ways to continue to expand profits during a period of chronic over-accumulation.

This crisis has prompted the search for new avenues for profitable investment and the attempt to maximise returns on the existing capital in circulation. Despite sporadic periods of temporary growth, the past 50 years have been punctuated by regular national, regional, and global crises.

This protracted period of low growth, instability and crisis has seen capital and its representatives in government seek to adopt a range of strategies aimed re-establishing and stabilising growth. This strategy has at times been successful in the short term but ultimately has served to exacerbate capitalism’s crisis tendencies.

Capitalism’s over-accumulation crisis
Capitalism has an unquenchable thirst for the growth of profits. During the early period of industrial capitalism, this was easily achieved through the expansion of production. Its higher levels of productivity meant that capitalists could simply outcompete non-industrial producers, absorbing their markets and expanding profits.

As capitalism expanded, however, markets began to be saturated. While investing in better and more efficient machines made individual workers more productive, this expansion in productive capacity became more expensive to achieve and risked companies producing more goods than could be profitably sold (known as a crisis of overproduction).

This problem could be addressed by finding new goods to be produced and generating corresponding new consumer demand. Over time there becomes a limit on the extent to which such new areas for profitable investment in production can be made, and capitalists begin to have far more money than they can reinvest profitably in the production of goods (known as a crisis of over-accumulation).

Such a crisis becomes generalised, and the capitalist economy can enter a profound period of crisis. Historically these crises have only been overcome either through massive recessions that result in the destruction of sections of capital, or through wars that also consume and destroy vast amounts of production and productive capacity, opening up the possibility for new periods of capitalist growth.

A long-run decline in growth
In the period coming out of the second world war, capitalist economies experienced protracted periods of high growth. This growth was in part a consequence of the rebuilding of Europe and Japan after the destruction of the Great Depression and the war. But it was also a result of the continued high levels of arms spending, particularly by the US, during the Vietnam and Cold Wars.

Entering the 1970s, this extended period of growth came to an end, a development that was exacerbated by the 1973 Oil Crisis. This began a prolonged period of substantially lower growth in the economies of the advanced capitalist countries (see Figure 1). This prolonged period of low growth has been punctuated by short booms and regular economic crises.

Figure 1: Average GDP Growth, World Bank National Accounts Data.

Penetration of capitalist relations into everyday life
An important aspect of the capitalist response to the over-accumulation crisis has been an attempt to find new avenues for investment and the extraction of profits. The focus for this drive started, and has continued, with the push for corporatising, and then privatising, government-owned corporations.

In the past 30 years, this has expanded to efforts to commodify substantial areas of what had previously been the private domestic domain, with the mass expansion of the services industry. This drive has resulted in the opening up of new aspects of social life for profit-making, as well as the intensification of working life – particularly for working women, who bear double and triple shifts as workers while continuing to carry out the central role in social reproduction.

The process of expanding commodification has been further intensified by the development of the gig economy. This has generated new technologies that have enabled capital to regularise social exchanges for profit. At the same time, capital has shifted substantial costs onto the gig workers themselves, in exchange for providing a platform linking workers with consumers – a platform that has intensified the capacity of capital to monitor and exploit labour.

The growth of the gig economy has also intensified crises in other parts of the economy, as previously dominant market players are forced to compete with numerous individual operators linked via platforms.

Financialisation
As the expansion of profits through the real economy became more difficult with the saturation of markets and problems of over-accumulation, capital shifted its focus towards investments in financial markets and the creation of new and novel financial instruments, expanding interest-bearing capital in both intensive and extensive forms.

This has resulted in a massive expansion in the volume of financial transactions and in the relative weight of the finance industry in economies. This process of increasing complexity and weight is called financialisation.

It can create the impression of a decoupling of the ‘real economy’ and ‘financial services’; however, in reality they remain intimately connected with the speculation in the financial markets essentially being a series of bets and counter bets on the real economy.

The immediate catalyst of the 2007-2008 global financial crisis was the failure of US sub-prime mortgages and its ripple effect through the bond market, which rapidly spread through other vulnerable sectors within both the ‘real economy’ and the ‘financial services’ sector.

Decline in wage growth
In 2019, in response to widespread public concern regarding record low wage growth, Australian finance minister Mathias Cormann described (downward) flexibility in the rate of wage growth as “a deliberate design feature of our economic architecture”.

This statement reflects not just the determination of individual capitalists to drive down wages, but the active efforts to transform the industrial relations environment in advanced capitalist countries to undermine the ability of workers and their unions to fight to defend wages and conditions, let alone advance them.

This process of undermining organised labour – central to the neoliberal project – is also based on a race to the bottom between jurisdictions. Employer groups, neoliberal thought leaders and governments point to efforts that have been made in other jurisdictions to erode workplace rights and be internationally “competitive”.

Lapavistas et al. argue that in response to the global financial crisis and sovereign debt crisis in the European Union’s Economic and Monetary Union (EMU) there has been a renewed pressure to increase labour productivity within all economies of the EMU.

This has placed downward pressure on wage growth, with German capital being the most successful in achieving this within the EMU. As a result, Germany has been best placed to sell goods and services to other member states and to markets outside the common market.

The impact of these dynamics can be seen in the ongoing low wage growth across the OECD, which demonstrate that the burden of low economic growth since the end of the global financial crisis has primarily been shifted onto working people (see Figure 2).

Figure 2: Wage Growth, OECD (2020), “Average annual wages”, OECD Employment and Labour Market Statistics (database).

This combined pressure to increase labour productivity while at the same time limiting wage growth has resulted in a decoupling of labour productivity and wages, which had historically been correlated (see Figure 3).

Figure 3: Decoupling of wages and productivity. Source: OECD (2018), OECD Economic Outlook, Volume 2018 Issue 2, OECD Publishing, Paris.

This decoupling has meant that while capital continues to experience growth – albeit at a rate insufficient to quell its insatiable hunger for growing profits – working people are failing to see any real benefit for their increased productivity.

As a result, in order to maintain spending power, working people became increasingly reliant on borrowing, whether in the form of credit cards or payday loans, to meet day-to-day spending costs (see Figure 4).

Figure 4: Household Debt as Percentage of Household Income, OECD (2020), Household debt (indicator).

Rising household debt ultimately exacerbates the problems of the declining purchasing power of the working class. This decline in purchasing power also negatively impacts on the capacity of economies to grow, deepening the crisis tendencies.

The long-run capitalist economic crisis that started with the end of the long boom, and which is now intensifying with the current COVID-19 pandemic, is prompting a more aggressive orientation by both state actors and individual capitalists.

This aggressive posture means that collective bargaining more readily lays bare the class struggle. For working people and their unions to be able to effectively respond to this environment will necessitate being prepared for direct challenges to capitalist power.

Failure to do so effectively and adequately will see a deepening of the shift of more and more of the product of workers’ labour into profits, leading to the further inequality not only within societies but within the working class itself.

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Originally published by the Irish Broad Left. 

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