Class Warfare Trumps Economic Literacy at the ACTU

It’s a bit of a shame that Melbourne University Publishing is no longer in the business of publishing non-academic filler-material. There is a public-service benefit in exposing to the wider community the thoughts, such as they are, of the militant Left, and nothing has been more clarifying than On Fairness by Sally McManus, the Secretary of the ACTU. The ACTU has fallen a long way from the days of Bob Hawke, Bill Kelty and the Accord. They have been replaced by the politics of “Good Old Collingwood Forever”, in which any and every means used to bring about a desired outcome is fair play, and anything that stands in the way is axiomatically unjust. The only criterion seems to be whether unions succeed in getting what they want, and whatever that might be is, by definition, right. Any efforts made in opposition are wrong.

I will divide my comments into two halves. First, I will look at the philosophical and political issues McManus raises, and, second, I will examine the economic side. Since there is nothing in the economic side, there won’t be much to add other than to explain what was left out. It is a great shame that the union movement is run by such intellectual lightweights.

The core of McManus’s argument is in defence of a series of statements she made on the ABC on the day she was elected Secretary of the ACTU. This is the key statement: “I believe in the rule of law where the law is fair, when the law is right. But when the law is unjust, I don’t think there’s a problem breaking it.”

She apparently took quite a bit of flak for saying this. But, being the unreflective type, she was never going to back down irrespective of the views of others who might have a deeper sense of what is actually required to make a political system stable and fair to all. But what ought to be a doubly remarkable discovery is just how deep the rot has gone. Any hopes that she might have had some misgivings about what she said were finished off at a presentation she later gave to the Teachers Federation. This is how she described the reaction of a hall filled with Australian teachers:

I walked into the Teachers Federation meeting … and found I was the subject of a standing ovation. From everyone. There were teachers union members in that room who would have been among the teachers striking in the Sydney Domain, back when I had my “eureka” moment at the age of sixteen. Their reaction was the complete opposite of what I was getting from the Australian, the Prime Minister and the business lobby. The people in that room kept repeating: “Thank god someone has finally said something like that.”

And from one end of the country to the other, from workplace to workplace, in all kinds of professions, union members still say that to me—over, and over, and over again.

So let us go back to that “Eureka moment” when she was sixteen, the moment that explains how she came to be the person she is. It occurred during a teachers’ strike when she was “a student at Carlingford High School in the late 1980s”.

My teachers took strike action against unjust education cuts by the New South Wales Liberal government. With my friends, I caught the train into the city to show support, joining a mass gathering in Sydney’s Domain.

We were protesting bigger class sizes, losing teachers in the middle of our HSC year, at the end of a decade when lots of communities across the English-speaking West had been experiencing cuts to public sector jobs. It was part of a new right-wing economic agenda that insisted things like education, or the supply of water, or transport, health and electricity generation, could be done more efficiently by the private sector, with more outsourcing, and fewer permanent jobs.

Not someone then, or probably even now, who would have been versed in the intricacies of either education or economic policies, but she did feel some potential vague personal loss should the number of teachers be cut while she was preparing for her HSC exams. She continues:

It was, of course, the era of Margaret Thatcher in the UK, and Ronald Reagan in the United States. I had grown up listening to the protest songs of punk bands from overseas, but now this ideology—and the protests that accompanied them—had hit my city and my school.

Those protest songs by punk bands somehow informed her understanding about the problem that would be created for “my city and my school”. And while you would think that those right-wing zealots might have taken on the softest targets first, that was not at all what they did:

The consistent tactic of the organised right was to take on the industries with the strongest unions, banking on early victories to demonstrate to the broader union movement, just as Nick Greiner’s newly elected Liberal government picked a fight with the Teachers Federation.

But the Teachers Federation fought back. Teachers, parents, students and communities are rarely united, but the federation mobilised them all to defend public schools from the ideology of funding cuts and mass layoffs; there were some of the largest union protests Sydney had ever seen.

And now that “Eureka moment”:

And I was there—in the city heart that kids from my suburb visited rarely, standing with tens of thousands of people.

The spectacle of that gathering, the might of its unified purpose, the feeling of solidarity and strength, resonated with me in a way that has shaped my beliefs and my actions ever since.

There she was, experiencing for herself the madness of crowds and the power of the mob. It is this she brings to the union movement. Not reason, not cool analysis, but a juvenile sense of injustice, and the personal pleasure it gives her to believe she is standing up for right against wrong.

She clearly sees herself as some kind of dissident living in some totalitarian regime, as if she were part of some clandestine resistance movement. The terms “fairness” and “justice” are found virtually on every page and many times on some pages. But other than knowing who is on which side, there is no indication of what makes an action just or unjust ethically. She is still that sixteen-year-old, supporting her team come what may.

The reality is that we live in a country governed through a parliamentary system where the entire adult community votes to determine who makes the rules and what those rules are. Our free, democratic order sets out the rules under which we live, and in so doing, also determines where our own individual rights come to an end because the exercise of certain of those rights might infringe the rights of others.

The communal rules of union behaviour are set down by law and exercised through the Fair Work Commission and the state industrial tribunals. This is how we determine what is right or wrong in a workplace setting, and these rules apply not just to unions and workers, but to employers as well. There is no doubting that industrial action causes harm to many who are uninvolved in the process. That is the aim: to cause harm to others so that the union will prevail. If the actions taken by a union are outside the law, they are no more just and fair than any such actions that might be taken by anyone else who breaks the law to suit themselves.

Why should a group of pilots, to take just one example, be allowed to disrupt airline travel for an entire country? There is nothing intrinsically obvious that the rights of any group of individual employees should be allowed to create disruption to pursue their own individual interests at the vast expense of others.

In the view of Sally McManus, if some union wants to do so, then they have the right to pursue their aims regardless of the rights of others. They are free to cause as much damage as possible because, like a two-year-old in a tantrum, they want it and that is the end of it.

Yet we have seen how the law has dealt in the past with this very claim. The Prime Minister at the time of the pilots’ strike was Bob Hawke, who before he was elected Prime Minister had been the President of the ACTU. And what he did was sack them all. He tried reason and negotiation, but when that failed, they were all dismissed and new pilots were brought in and trained.

But let us get right down to it. Is this even remotely true: “There are few Australians who wouldn’t define the culture’s adherence to ‘the fair go’ as our most important national belief” (italics added)? Who in any society at any time in history would dispute that fairness is intrinsic to their social values? But even if we let that pass, the incoherence of her definition of “a fair go” is absurd: “An even-handed, reasonable chance or equitable opportunity to attempt something.”

McManus puts the statement in quotation marks, but I imagine she made it up herself. That anyone anywhere is opposed to “a fair go” in the abstract is nonsense. That we might individually judge the fairness of different actions and outcomes differently is a certainty, but everyone is certain to believe that justice is on their own side. Her entire discussion of the concept (on pages 27 to 35 of her book) is so muddled that by the end of it only one thing is clear: for McManus her own personal beliefs set the standard of fairness. Anyone else’s views count for nought if they do not coincide with hers.

Among all the absurdities and historical inaccuracies she presents, this must rank as the head of the school:

In the years leading up to World War II, Australian unions refused to load ships with pig-iron bound for Japan, knowing that the cargo was destined for the manufacture of armaments used in the Japanese militarisation and expansionism that caused the war in the Pacific. [emphasis added]

Foreign policy of the 1930s was not based on an expectation that a world war would break out, first in Europe and then in the Pacific, and it is not in any case the role of unions to make any such decisions then or now. But what makes this passage so remarkable is that whatever one might think about failing to load cargo destined for Japan in the 1930s, there is no question about the treasonable and disgusting refusal of these self-same unionists to load the ships that were intended to supply Australian soldiers serving overseas after the actual war had begun, as detailed by Hal Colebatch in his book Australia’s Secret War. Miranda Divine wrote:

What the wharfies did to Australian troops—and their nation’s war effort—between 1939 and 1945 is nothing short of an abomination … wharfies vandalised, harassed and robbed Australian troop ships, and probably cost lives.

With this as part of their history, these words from McManus demonstrate how lacking in perspective she is: “Something I’m most proud of as an Australian unionist are those times that working people fought for justice far beyond their own workplace or industry.”

No one should be a judge in their own case. Seldom has this been better shown than by the infantile carte blanche approval of union activities demanded by McManus. 

As lacking in sense as are her philosophical and political maunderings, equally lacking in substance are her views on economic issues. What really is astonishing is her lack of understanding of what has allowed workers in 2019 to have living standards higher than did workers in 1919 or 1969 and even 1999.

McManus just takes for granted the existence somewhere out there in the economy of people who produce the food we eat and the homes in which we live. The role of entrepreneurs and the businesses they run is completely ignored.

There is no apparent appreciation that the goods and services which actually constitute the real wages of employees must be produced by businesses that must cover their production costs, of which wages are only one component. And beyond that, her recognition of the need for the economy to raise productivity if wages are to rise seems vague to the point of non-existence.

Let us start with the basics: productivity. Here is a simple fact of life: you can only take out of the fruit bowl what someone has first put in. There is only so much to distribute and it is dependent absolutely on how much the economy has been able to produce.

Workers contribute to the process by undertaking tasks that have been assigned to them by their employers. In return, employees receive wages in the form of a number of dollars. How many dollars the employer can pay is determined by how well the business is performing. What those dollars are able to purchase is determined by how much output is available to buy.

Before workers can get around to buying what they want, their employers have had payroll tax, other taxes, workers’ compensation, leave payments, sick leave, and a host of other payments to meet, all of which reduce the amounts available for workers to buy. The government, meanwhile, has paid out enormous sums in welfare benefits, the NDIS and public infrastructure, which has also depleted the resources available to produce consumer goods that workers are able to buy with the wages they earn.

There are also the effects of the stimulus programs that poured enormous amounts into projects that seemed so positive to the unions at the time, since this spending supposedly increased the number of jobs. Outlays on pink batts and school halls, for example, which used up resources at prodigious rates, but which added not a single solitary consumer good to the total amounts available to buy. Add in the NBN, plus the streetcar down George Street in Sydney plus the new railway lines being constructed in Melbourne, and we find yet more of our resources diverted away from the production of consumer goods, or the production of capital that could be used to provide consumer goods.

She then has the gall to ask, “Why do power prices keep going up across Australia?” The devotion to green energy has seen the construction of far more costly forms of energy through public subsidies with the actual closing of less costly forms of power production due to concerns about the environment. These things are not free. There is a cost to the community for every such indulgence. 

It merely betrays her inability to understand even the economic basics when she writes, “Wage growth for the average worker has flatlined”, as if this is such a great mystery, which perhaps to her it is.

Higher wages can only be afforded if we raise the productivity of the workplace. Yet, to McManus, rising productivity has a negative effect on employees:

If you’re a private company, you’ve got one overriding obligation, and it’s not to your workers, to your country or to your community—it’s to make a profit, in order to return it in dividends to your shareholders. That’s it. And the means to increase that rate of return to its greatest possible margin is cutting the cost of your operations. You do this by increasing your productivity, expanding your market, raising prices on your offered commodities, and by reducing the wages and conditions of the people who work for you.

In fact a large proportion of employees in Australia do not work for companies that pay dividends to shareholders. There is also no employer who does not recognise an obligation to their employees, and the need to maintain a good relationship with them.

But what is seriously inane is the implied criticism of businesses trying to raise productivity, as if this were contrary to the interests of employees. Real wages per hour worked will only rise if real output per hour is rising. This would be obvious were she not always looking through the prism of exploitation and the class war.

Employers are trying to turn a profit in the face of the dead hand of union demands seeking more money for less work, while governments are continually prevailed upon by these same unions to provide additional benefits, such as employer-funded superannuation. We may as a community think these are benefits worth endorsing, but every such benefit needs to be paid for by someone, and part of how these are paid for is with a lower rate of growth in real earnings.

It is a problem for us all that the ACTU is led by someone who appears unable to understand even the basics. The real wage is an outcome from the interaction between business, the workforce and the government. You cannot raise real wages by printing more dollars. You cannot make workers better off by undermining their employers.

Moreover, we have processes for creating workplace benefits. We have parliaments, both federal and state. We have industrial tribunals, both federal and state. We have a communal sense of justice and injustice, which can be superficially described as seeking “a fair go”. We have an economic system that promotes economic growth and innovation. We have competitive labour markets where workers can seek out who will pay them the highest salary.

We have seen wages rise since Federation almost continuously. Workers today receive higher real earnings that at any time in our history, with some possible slippage over the past few years that have a variety of causes, with the main one being the wasted resources that have been misdirected by governments since the Global Financial Crisis.

To return to some crude class-war rhetoric, to see some kind of injustice in a comparison of the payments made to workers at the top of a business compared with the real wage growth of some estimated average, is the kind of inanity that leads nowhere but to attempting to go outside the market to force wages higher even though the economy cannot afford to pay more than it already does.

Sally McManus seems to understand all too little about the cause and effect of an economy, where higher wages are the result of higher productivity. We can afterwards try to think through how that higher productivity might be distributed—in higher wages, better working conditions or an increased level of communal welfare. But unless we begin with the recognition that what must happen first is higher productivity, then everything she has said is a waste of breath and paper.

Steven Kates is Adjunct Associate Professor of Economics at RMIT University in Melbourne.