This is one of several articles going around from mainstream economists about whether a recession is happening or in the offing in Australia.
The ruling elites, including the Reserve Bank, can entrench and hasten recession to make the working class pay for a clean-out of the stodgy phase in capitalism's cycle. That's what the RBA Governor is up to now, with the new Labor government working out how to handle that and the big corporations working out how to take advantage of it.
In the northern hemisphere, the answer is pretty settled - it's really happening or it's, about to. Greg Jericho is a better-than-average mainstream economics journalist and as usual, there is useful information in his account. At least he is not blaming wages for inflation or the prospect of a “wage-price spiral” if there ever has been such a thing.
My emphasis is on the word “some”.
That’s because profits are not part of his explanation … as if they have nothing at all to do with capitalism’s scrambly economic cycle.
Yet our society, being a capitalism, is a profit society. There is not a single commodity that is a part of daily life, for rich and poor alike, and everyone in between, that has not been produced and sold for the prime purpose of making a profit. So, the profit story must have something to do with when, how and why recessions occur, right?
Therefore, why are they deliberately or just ignorantly left out of the discussion that is presented to the public?
The short answer is that mainstream media is propaganda and its general effect, if not its purpose as is the case with Jericho, is to ensure that big numbers of the population must be denied a complete understanding of how the society they live in works. They must be taught that economics is something that is done TO them. There is no need for them to take command of economics from their own solidarity-driven point of view. And, there is little need for our union movement to build critical economics in the daily practice of its members that is based on their daily experience.
Further, any serious grasp of profit-taking shows it at the centre of the problems of poverty, inequality, the destruction of nature, and alienation, especially the despair that leads to the “I give up on life” mentality and the associated withdrawal from caring.
Recently, I produced a short article on the current story of profits in Australia. You can read it here. Apart from putting profit-taking at the front and centre of our major problems, it throws in two “understandings” that are useful to get why recent and current circumstances are taking us towards a recession.
First, I put the relationship between profits and wages on a better footing than the mainstream (including laborist champions) who focus on their relative shares of GDP. I suggest that profits relative to wages show the rate of exploitation and, that the rate of exploitation is the daily experience of every single worker in the country. That's why an anti-worker Fair Work Act is so important for employers.
Second, I emphasise the relationship between profits and capital stock to show a “rate of profit” that is, actually, a good measure of the health of the capitalist society we live in. I don’t say that it is a desirable measure, just the most telling. (To be even more accurate one must include “wages” in calculating the rate of profit to get an even better take on what is happening. However, the way in which the ABS presents its economic data makes that somewhat difficult to do and I have not quite mastered the method, yet. Although not far away.)
This is what the most recent data shows:
Regrettably, this data is only up to 2019, that is just prior to the pandemic. It does show an overall downwards trend over the past twenty years, but somewhat of recovery until just before the pandemic arrived. My hunch is that 2020-2022 will show a slight but fragile recovery. In other words, no sign of a robust economy, rather one that the capitalist class would demand should be fixed in their favour and at the cost of the working class.
Every single employer is obsessed with making a profit relative to their total investment (including that part that is either inherited or borrowed from a bank). And, of course, relative to their competitors because they must be better than their competitors to survive. That is still the case.
Beware of any economist who leaves out profits in any story about the economy, and take charge of your own efforts to deeply understand why it is the key to working out strategy and tactics in the union movement and the intellectual starting point to justify instinctive defiance against a rotten system. Should the working class pay for recovering the rate of profit?