This Discussion Starter on economic rationalism and globalisation is part of a broad, inclusive, nation-wide discussion about a better way for Australia than today's market-driven degrading of citizens' rights and the public good.
This discussion process will culminate in a major national conference in Sydney on July 14-15, 2001.
This and other Discussion Starters aim to develop ideas for and interest in the conference, to ensure the most informed and productive level of discussion possible within our resources.

USING THE DISCUSSION STARTER
The project sponsors encourage you to use the Discussion Starter in a group discussion in your locality, community organisation or trade union. If that's not possible, work through the points and questions yourself.
In either case, your feedback on this topic into the discussion process is vital to develop the agenda for the July 2001 conference.

GUIDELINES FOR GROUP DISCUSSION
1. Select a facilitator and a note-taker for the discussion
2. All participants should introduce themselves and say what they expect to achieve from the group discussion
3. Either a guest resource person, or someone in the group, should briefly introduce the first point in the Discussion Starter (5 mins).
4. In turn, each participant should comment on the discussion point.
5. At the end of discussion on each point, the facilitator should try to briefly summarise the views expressed, and if agreed, the not-taker should record the summary.
6. This process should be repeated for each point.
7. After all points are discussed, participants should be invited to briefly say if their expectations were met.
8. The summary of the discussion should be returned to Now We The People's Sydney office, by email if possible info@nowwethepeople.org Fax: 02 9211 1407. Post: PO Box K941, Haymarket NSW 1240.
9. The discussion should be no longer than 90 minutes, and there should be a refreshment break during or at the end of the discussion.

DECIDING OUR ECONOMIC FUTURES …
Economic considerations are central to our futures, individually and collectively.
Powerful capitalist economic interests and the prevailing 'economic rationalist' policies by the Federal government are wreaking havoc on Australian society, creating even more economic insecurity and social inequality.
Can we develop an alternative approach which is more democratic, egalitarian and ecologically sustainable? To do so requires confronting some tough issues, such as the ones raised on the following pages of this discussion kit:
· GLOBALISATION
· JOBS
· INDUSTRIES
· ECONOMIC INEQUALITY
· TAXES

FUNDAMENTAL CHALLENGES
There are fundamental challenges facing all Australians as we reflect on what economic structures will serve our society best in this new century. We have come through an 'economic rationalist' era in which social needs have been subordinated to economic interests. Much social damage has been done. Even the economic results, narrowly defined, have been disappointing - a continual balance-of-payments deficit, a large foreign debt, a falling value of the national currency, and persistent unemployment. It is an appropriate time to be considering a new political economic strategy.
These notes have been produced by Frank Stilwell, Associate Professor of Political Economy at the University of Sydney. They are written to stimulate widespread community discussion of key political economic issues. For further elaboration of these concerns see Frank's new book, Changing Track: A New Political Economic Direction for Australia, published by Pluto Press, Sydney in August 2000.

SOME TERMS USED IN THIS PAPER

Keynesian:
John Maynard Keynes advocated the systematic intervention by governments to stabilise the economy. For example, public spending can be changed to maintain high economic growth, low unemployment and fairer income distribution.

Incomes Policy:
Policies to offset the growing inequalities in market incomes, for example, redistributive income tax, guaranteed minimum income, income tax credits.

Carbon Tax:
A tax designed to reduce use of fossil fuels. Higher costs, in the form of taxes, act as a disincentive to the use of 'unfriendly' energy sources.

Tobin Tax:
A globally co-ordinated tax devised by Canadian Economics Professor James Tobin, aimed towards speculative activities taking place on the foreign exchange market. This tax would be applied at a rate of 10-25 cents per $100 value of the currency transacted, with the intended effect of steering resources away from speculation and towards productive areas.

GLOBALISATION
Globalisation is a multi-faced process. Technological changes have facilitated increasingly more effective and cheaper communications worldwide. National governments embracing neo-liberalism have concurrently reduced the barriers to international finance, trade and investment, and movement of labour.
The dimensions of globalisation need careful analysis. Different economic aspects - globalisation of production, trade, finance and labour - can be distinguished.
International trade, for example, has doubled in the last decade.
International direct investment by corporations has tripled in the last decade.
The volume of funds raised in international markets has more than quadrupled over the decade.
Global trading in financial derivatives rose sixfold in only six years.
These changes concentrate power in the hands of transnational corporations, many of whom have more assets than whole national economies. Some see the result as undermining national sovereignty, indigenous peoples' sovereignty, the interests of workers, and our ability to limit environmental damage.
The protests at the World Trade Organisation meeting in Seattle, at the World Economic Forum in Melbourne and at the IMF/WTO meetings in Washington and Prague brought these concerns into sharp focus.
But, alongside the globalisation of capital and culture, there are potentially progressive opportunities, for the greater globalisation of human solidarity on environmental sustainability, labour, women's, indigenous and broad human rights.

Questions:
· How can we best respond to the globalisation of capital?
· Can a regime of free trade be replaced by policies to promote 'fair trade'?
· Should a tax on international currency transactions (the 'Tobin tax') be supported as a means of controlling international speculation?
· How can trade unions and progressive social movements most effectively take advantage of the opportunities opened up by new global technologies?

JOBS
The world of work is rapidly changing. Casualisation and the more extensive use of contract-labour is leading to greater economic insecurity.
Corporate managerialism - in both private and public sectors - is commonly resulting in more authoritarian practices in the workplace. Managerial prerogatives are being aggressively asserted. Wages and working conditions are being increasingly determined in a 'take it or leave it manner'.
Meanwhile, the problem of continuing unemployment symbolises the ultimate irrationality of 'economic rationalism'.
The official rate of unemployment hasn't been below 5% for two and a half decades. The true figure, taking account of those withdrawn from seeking work in their area, is much higher.
Having a substantial proportion of the potential workforce out of work imposes massive personal and social costs. It also imposes an enormous 'opportunity cost' of the production foregone, ie. the better roads, schools, hospitals or other goods and services that could have been produced.
The cost to government alone, in terms of social security payments and tax revenues foregone, has been estimated at over $20 billion annually.
An economy which served social needs would have to put more attention on creating and rewarding socially useful work and on redistributing the work more fairly.
How best to achieve these goals is one of the most pressing concerns of the era.
Some argue that a leading role for public sector job-creation must be the first priority. This requires a revival of the Keynesian approach to employment policy.
Others contend that we need to embrace labour flexibility but ensure that it serves workers' interests rather than only the employers - a better balance between work and leisure should be the goal. On that scenario, the key issue is reducing working hours for the 'overemployed' in order to produce a fairer outcome for the under-employed.

Questions:
· Is full employment possible?
· What are the best policies for job-creation and for the more equitable distribution of work?
· How can trade unions get out of defensive positions into more pro-active roles in shaping the future of work?

INDUSTRIES
Australia's economic base has significant weaknesses. The heavy reliance on primary industries - agriculture, mining and forestry - has hitherto been a source of economic strength, albeit often at significant environmental cost.
However, some of those industries - and the areas of regional Australia that depend on them - are facing significant stresses.
Manufacturing industries are, in the aggregate, relatively weak: they accounted for only 14% of GDP in 1997, compared to 19% of GDP in 1980. This is 7% lower than the average of other OECD nations.
Exports are growing, but those markets are subject to increased competition from industries in other nations where wage costs are lower and/or technology is more advanced.
There has been growing concern - which some see as contributing to the plunge in the value of the Australian dollar in 2000 - about the failure to develop an effective 'new economy'. The application of computers and other advanced technologies is extensive, but local production is poorly developed, so most of the equipment must be imported into Australia.
How to redress this problem is a key issue for industry policy, alongside other concerns about promoting higher productivity and restructuring industries into more ecologically sustainable forms.
The prevailing 'economic rationalism' does not tolerate serious considerations of interventionist industry policies.
A progressive alternative must go beyond the free-market approach which has left us with this legacy of entrenched industry development problems.

Questions:
· What industries should be promoted as the basis for Australia's economic development? Those which have been our traditional strengths, high technology industries, and/or 'environmentally-friendly' industries capable of generating 'green jobs'?
· Could a new national investment scheme, drawing on workers' savings in superannuation funds, be an effective mechanism for boosting investment in these industries?
· What role should trade unions, environmentalists, consumers and other community groups play in the formulation and implementation of industry plans?

ECONOMIC INEQUALITY
Economic inequalities are increasing. This reflects the growing power of capital over labour and the waning commitment by governments to engage in progressive redistribution of income.
Between 1993 and 1998 the share of the nation's wealth held by the richest 10% of the population increased from 43% to 48%.
Over the same period the richest 1% of Australians increased their share of national wealth from 12% to 15%.
The wealth held by the richest 10 individuals rose by 55% in the preceding two years, three times the rise in total private wealth. Even John Howard has had to concede that the phenomenal growth in executive salaries is 'over the top', although he is doing nothing to stop it.
At the other extreme there is a growing social residual of people in poverty.
There is a polarisation between households with two or more incomes from work and other households where all are unemployed. The latter households are increasingly concentrated in particular localities. The result is a breakdown in social cohesion.
This mirrors the US situation where the wealthy are taking refuge in security patrolled estates in elite suburbs, far removed from a growing social underclass. It is a sort of economic apartheid.
It is a prospect which sits increasingly uncomfortably with the residual egalitarian sentiment of Australian society.
These developments raise difficult questions about what can be done to reverse, or even to redress, the trend to growing economic and social inequality.

Questions
· How can we reverse the processes by which income is redistributed from labour to capital? Is a new incomes policy necessary?
· What can be done - through urban planning, housing policy or local labour market policies, for example - to redress the increasing geographical polarisation of Australian society?
· How should wages policy and welfare policies to interrelated in order to produce more equitable results?

TAXES
Tax 'reform' has recently been dominated by the introduction of the GST. Discussion of its pros and cons can be expected to dominate public debate for some time to come. However, more wide-ranging questions about appropriate tax reforms need to be raised, paving the way towards a more progressive restructuring of the system.
That more progressive restructuring could broaden the definition of income and reducing the number of allowances against tax in order to reduce the scope for tax avoidance. The rich - most notoriously Kerry Packer - are in the best position to engage in these practices of tax minimisation, the effect of which is to throw the tax burden on low and middle-income earners. Progressive tax reform could also eliminate the dividend imputation system, which provides major benefits to the owners of capital. There could be new taxes on accumulated wealth, including the extension of taxes on land and property. Progressive tax reform could also see the (re)introduction of inheritance taxes as a means of reducing the inter-generational transfers of wealth inequality.
The criteria by which such tax reforms can be judged are:
(i) simplicity: the legitimacy of the system depends on it being easily understood;
(ii) equity: tax rates should reflect ability to pay;
(iii) efficiency: the system should not discourage productive activities nor encourage unproductive pursuits, and
(iv) potency: it must finance a good quality public sector.
The current tax system clearly fails these tests. The GST potentially adds to revenue-raising capacity, but at the cost of social equity: it has been hitched up to income tax cuts from which the rich are the main beneficiaries. Business tax rates are also falling. In the long term it is hard to see the tax system being sufficiently robust to eradicate tax avoidance and evasion, and to ensure sufficient funding for the infrastructure and social services necessary for a good society. The decline in public infrastructure spending is particularly problematic.
These are circumstances in which the tax system must be fundamentally reconsidered. Linking tax reform to the assault on economic inequality and to the promotion of ecologically sustainable development are particular challenges.

Questions:
· What forms of tax on wealth and inheritance would be appropriate?
· How can the tax system be made more consistent with environmental concerns? Could a 'carbon tax' be the solution?
· How can tax avoidance and evasion be most effectively reduced?
· What is the political process by which a more progressive reconsideration of tax reform could be generated?