NACTs Zero Sum Budget

Auckland Mayday March against welfare cuts May 1, 2012

NACTs 2012 budget keeps the country heading down the Rip, Shit and Bust road to destruction. The capitalists who rule Aotearoa want to rip out all our resources, shit on the lives of working people, and drive the country bust. Who has the best program to counter the NACTs bosses’ zero sum crisis budge? Labour and Green reformists, Mana radicals or Marxist revolutionaries? Let’s see the bosses’ budget for what it really is, an exercise in spin to cover up making workers pay for the capitalist crisis. Labour and the Greens have got no answers except Keynesian pipedreams and austerity ‘lite’. Mana is staking out a left Social Democratic position with income transfers to the poor. But the cause of the crisis is capitalist exploitation and there can be no effective rolling back of capitalist austerity except as a by-product of the building of a mass workers movement for socialist revolution.

NACT’s zero-sum budget

NACTs spin budget is zero-sum. It presents its austerity measures as ‘fiscal responsibility’ in balancing the budget by 2014 in the middle of a global crisis. Having run up a deficit of NZ$11 billion by bailing out the private sector it has transferred the cost of paying this deficit onto the taxpayer. In reality it is the working class that pays all taxes because the working class produces the wealth. So the real purpose of the zero-sum budget is to cut wages to boost profits. It boosts profits by forcing austerity on workers. Austerity is the bosses’ solution to their crisis as it cuts wages and social spending as a drain on bosses’ profits. It tries to make workers pay for the crisis by cutting capital’s costs at all costs. It restores profits by cutting taxes to rich, while increasing taxes to low paid workers like paper boys and girls; cutting social spending such as education from ECE to tertiary, ACC, welfare benefits, health and housing. This budget adds a new list of cuts in the NACTs austerity regime. A new round of austerity will hit when assets are privatised and power charges, education fees, health, ACC etc rise, and attacks on union rights and beneficiaries weakens unions and drives down wages.

Labour’s ‘Budget’

Of course capitalists argue that they are entitled to their profits, and to influence policy to restore them. They justify this as necessary for growth in the economy and the creation of rising incomes and living standards. Labour (social democratic) reformists agree with the capitalists that profits are earned rather than expropriated by capitalists. Capitalism is not inherently exploitative but there are some bad bosses (today the villains are usually Bankers) who ruthlessly exploit workers. They think that the cause of the crisis in not any inherent flaw in the economic system, but the wrong policies that create inequality and falling incomes for the poor. Labour accuses the NACTs as deliberately pushing austerity policies to enrich the already rich and worsening the gap between rich and poor.

The typical response of Social Democracy around the world is to replace austerity with ‘growth’. Keynesian solutions to the crisis are pushed. Keynes was a bourgeois economist who recognised that when profits fall the capitalists stop investing causing a slump. Keynes’ solution was to take over from the capitalists and use the state to borrow and spend on creating jobs and boosting incomes so that rising demand would trigger capitalists reinvesting in production. Roosevelt’s administration in the US and Labour Governments in NZ both applied Keynesian economics overcoming the worst effects of the Great Depression of the 1930s. In NZ the reformist left is pushing these solutions. Problem is inequality which can be fixed by state intervention.

The budget then, rather than cutting back on expenditure, should borrow to boost working class incomes to stimulate demand and hence capital investment in supply to meet the rising demand. This should be part of a wider policy of state regulation, ownership and economic planning to eliminate the profiteering of the capitalists. . See the big debates over austerity vs. growth on Michael Roberts Blog.

Green's ‘Budget’

The Green leader Russel Norman says that the Greens would “share austerity more fairly”.
They would tax the rich and capital gains, and redirect expenditure away from unproductive motorways, subsides to polluters etc and into a R&D and education for a smart green economy. This is a form of Green Keynesianism spending to boost clean, green, consumption.

The Greens are also against selling state assets having shown that they contribute more in ongoing dividends than in a one off sale. But like the Labour Party they will not commit to buying these assets back. While some think that the Greens are now the real opposition without Labour swinging right under David Shearer, and would keep a future Labour government honest, there are those who think that the Greens could work with Labour under David Cunliffe’s leadership because he stands for ‘Real Labour’.

But however they may rant on that we need throw out the NACTs and replace it with a smart, green Keynesian politics, the reality is that capitalist crisis cannot be solved by ‘growth’. Crisis requires austerity which means depression. This means destroying the value of surplus capital and of workers’ wages until the capitalists are assured that the capital invested in production can once more return good profits.

Mana’s ‘class war’ Budget

Mana is the only radical party in Aotearoa because it is driven by Tinorangatiratanga, or Maori self-determination, and by the socialist left. Radicals know that the state cannot oversee a fair distribution of income, since it is controlled by the capitalist elite that exploits labour by underpaying the true value of the wage. This is usually referred to as unequal exchange as labour is not paid its equal value in the market.

Thus the parliamentary budget is only fiddling with wealth already stolen from the producers. So further fiscal fiddling by the left cannot equalise the burden of austerity. The solution is for the majority working class to realise its potential power and get the true market value of labour. Some radicals want to take over the existing capitalist state to enforce this balance of power by similar means as the reformists. Others think the working class can take power in society and render the state superfluous. On balance Mana is a left reformist party willing to work inside parliament. Matt McCarten’s column in the NZ Herald, “Derisory Budget wages war on the poor”, sums up the Mana left Social Democratic politics.

Mana wants to get elected to represent Maori, and all other workers, and as its leader Hone Harawira said in his budget speech, “Tax the rich and free the poor”!

Workers’ revolutionary ‘Budget’

Marxists take a very different approach to the budget.  The capitalist economy is based on the production of value by the working class and the extraction of surplus value by the capitalist class. The state serves the capitalist class by defending the right of capitalists to the exploitation of labour as private property. That is, the state oversees the exploitation of the working class on behalf of capitalists’ profits. The income and expenditure of the state is therefore the consequence of the production of value and its distribution via incomes and via state incomes policy among the different ‘revenue’ classes to reproduce those classes.

The Marxist explanation of capitalist crisis is that is it caused by falling profits due to the inability of the capitalists to extract enough surplus value. This is the Tendency for the Rate of Profit to Fall. Bosses whose profits are falling stop investment, growth stagnates, and to restore the rate of profit the mass of capital has to be devalued as well as the value of wages until such time as the amount of surplus extracted represents a profit over total capital invested. The devaluation of the wages to restore profits is the essence of ‘austerity’.

The state plays a key role in creating the conditions for the return to profitability. It introduce social and economic policies to increase the rate of exploitation (increasing the share of profits) by making workers work harder for less pay. Here we see a whole box of NACT austerity policies to attack living standards, workers rights, union rights, and attacks on beneficiaries and the sick and injured to drive them to work – workfare – and so on to make workers produce more value and cut the share of value going to wages.

But that increased share of value does not go towards restoring profits if it is taxed to pay for state expenditure that does not produce bigger profits i.e. is a net drain on profits. So to restore profits the NACTs on behalf of the capitalist class want cut back on state spending by massive cuts in jobs and the social wage (the part of the wage made up state transfers – benefits, pensions, Kiwisaver, health, education WFF etc)

The budget ‘deficit’ therefore is an excess of state spending over state income that is a net drain on profits. The ‘balancing’ of the budget means reducing the state functions to only those that cannot be done more cheaply by the market. So we see the wholesale privatisation of state production, distribution and exchange (energy, airlines, banks etc) and services (health, housing, education, prisons etc). The capitalists kill two birds with one stone. First, state spending reduces the net drain on profits, and second, privatised state activities become directly profitable as the accumulation of capital (stocks, shares, interest etc).

Our conclusion is that ‘austerity’ is not merely a policy option like ‘growth’. The NACTs austerity policies are necessary for the capitalists’ survival, and they will not give up power or wealth without a fight. Thus liberal reforms are useless. Power has to be taken. It cannot be taken by peaceful means on the streets or other institutions. Radical reforms will come up against insuperable state power unless they take the form of a working class insurrection. Power has to be seized and the capitalist state power replaced by workers state power. For working class and the planet to survive the capitalist system must die. 


From Class Struggle No 100 May-June 2012