The Poverty Of Class War Rhetoric


If there is a single phrase that reveals the poverty of our national conversation in 2013, “class war” must be it. It was once a genuinely-held view of ALP firebrands, such as the Melbourne thunderer Frank Anstey or the New South Wales populist Jack Lang – neither of whom, by the way, would have suffered the description of socialist. In the 1940s, Ben Chifley really did try to nationalise the banks, in a bitter constitutional and political battle that eventually cost his party government.

But in the wake of the Whitlam government, big-L Labor has made its peace with capital. The 1980s government of Bob Hawke and Paul Keating was so neo-liberal that a new phrase, “economic rationalism”, entered the vernacular to describe its deregulatory impulses.

Nor have the governments of Kevin Rudd and Julia Gillard been noticeably anti-business, except by the yardstick of business itself, which has consistently opposed key ALP policies even when they have been of benefit to the broader economy. Such is the dastardly state of political discussion in this country that the Coalition, which seeks to impose a greenhouse gas emissions target by means of regulation and government spending, is somehow preferred by many business groups to Labor, which seeks to impose the same target by means of a market mechanism in the form of a freely-traded carbon permit scheme.

I suppose that's par for the course in a country where we've seen much of the media leap upon statements about “class war” by departing Rudd-camp ministers Martin Ferguson and Simon Crean.

So will Labor establish a dictatorship of the proletariat, nationalise all the property and distribute the Commonwealth's resources according to need? Will it take over the mining industry, or the banks, and run them for the public good? Perhaps the farms will be collectivised and the kulaks liquidated? After all, did not Lenin write that “wars waged by the oppressed class against the oppressing class” were “legitimate, progressive and necessary”?

No, Labor wants to make superannuation fairer. We think.

It's hard to believe it, given the delight with which the media has recycled the meme, but the Government currently has not yet given any indication of preemptory social redistribution. In fact, no changes to superannuation have so far been announced.

We assume, because Simon Crean has told us, that Wayne Swan is thinking about levying some extra taxes on wealthy superannuation recipients. But in fact, there is nothing yet on the table. What changes the Government will eventually recommend are almost certainly likely to be relatively minor, in keeping with the compulsive habit of governments of all persuasions to tinker with superannuation tax breaks — tax breaks that cost the federal purse tens of billions. 

As Ian McAuley writes today, if superannuation policy really is a class battleground, it's a battle the rich are winning. The majority of the huge tax concessions given out to superannuation every year go to the rich, while our nation's poorest, with the smallest super balances, get no tax concession at all.

The reason is that super is taxed at a relatively flat rate. Before Labor introduced a special break for low-income earners in last year's budget, all super was taxed at 15 per cent. This gave huge incentives to high-income earners in top tax brackets to stock as much of their income into super as they could. Income paid at the top marginal tax rate will cost high-income earners 45 cents in the dollar, while income paid into super attracts only 15. From an accounting point of view, for many top executives and high net worth individuals, self-managed super is really just a government-sanctioned tax haven. Even better, it is completely legal and has none of the risks of offshore jurisdictions like Vanuatu or Cyprus. All this makes super regressive.

It's small wonder the government is looking to claw back some of this advantage. After all, the federal budget is in structural deficit after a decade of income tax cuts delivered by Peter Costello and Wayne Swan. Under Costello, most of these tax cuts helped middle-income earners, while under Swan they have been skewed more to helping those at the lower end. But the combined result of all of them across many years is that Australia's tax take is no longer enough to pay for the government's expenditure, even after Labor's aggressive cost-cutting and efficiency measures since 2009.

It's worth dwelling on this point for a minute when we weigh up the common argument that this government can't balance its books. As we can see across the last 10 years or so, expenditures associated with the 2009 stimulus package were essentially a temporary blip. Since the big spend-up, the feds under Labor have quickly tightened their belts, returning spending to levels similar to those at the end of John Howard's reign.

The real damage to the bottom line has been on the revenue side, where the boom and bust cycle of the commodities boom has meant huge fluctuations in company taxes, even while both Liberal and Labor have been incrementally reducing personal income tax rates. Worse still, inflation and wage rises have both been very low in recent times, robbing the government of tax dollars through bracket creep. In short, as we've pointed out here at New Matilda before, the government doesn't raise enough tax.

But the current rhetoric about “class war” shows how hard it is to introduce or increase taxes to deliver public services more sustainably difficulties. When mild efforts to get mining companies and high income earners to pay more for their non-renewable resources and retirement tax concessions are branded as “class war”, one wonders how a genuinely redistributive policy would be greeted.

But that's the problem with being a Labor government in 2013. Julia Gillard and Wayne Swan win no plaudits for their economic orthodoxy when it comes to pursuing a highly conventional strategy of cost-cutting in the wake of a downturn. Indeed, they are constantly attacked as profligate. But when Labor tries to bring in more revenue to improve the budget bottom line, suddenly it's a bunch of greedy socialists stealing money from the deserving rich. It's depressingly reminiscent of another quote of Lenin's: “Democracy for an insignificant minority, democracy for the rich — that is the democracy of capitalist society.”

Ben Eltham is New Matilda's National Affairs Correspondent.