It is now clear that the federal election will take place in the midst of growing uncertainty about the economy in Australia and around the world. It is now over ten years since the Global Financial Crisis (GFC), but its effects are still quite basic, and unfolding.
The GFC was no mere recession or cyclical dip. It was not identical to the Great Depression: central bankers learnt from that tragic phase of the twentieth century, and pumped the economy with internally created money when faced with internal collapse. This avoided the type of horrific slump that typified the 1930s. Nevertheless, the bankers do not know what they are dealing with.
Enormous amounts of money were pumped aimlessly (non-productively) into the financial system, allowing those who knew the ropes to profiteer. This strategy was called quantitative easing; previously it was called printing money—a response to a growing crisis in financial circles as well as the threat of deflation. All the same, we remain in a phase of deflation in the global economy, meaning that economies are tending towards contraction.
As a consequence of quantitative easing, debt circulation increased (for the United States alone this was $4 trillion, or $4,000,000,000,000), propping up markets globally. Excessive liquidity translated into lower interest rates. As a result, investors couldn’t easily generate income and this left them more disposed to pursue risk. It became another phase of that desperate pursuit of risk that typified the lead-up to the GFC (then concentrated in sub-prime mortgages).
This is one aspect of a capitalism that has been transformed. It is now global as never before. This globalisation is a function of a completely novel partnership with the techno-scientific practices that have facilitated the global and given it much of its drive, shape and content. In this respect capitalism has changed its spots. In large part now it is an unknown, a singularity, a social phenomenon without historical comparison.
To some degree this can be seen in the aftermath of quantitative easing if only because, contrary to all assumptions, there is no resolution: what was given with one hand cannot be taken back with the other. The central banks of the United States, the EU and Japan have always assumed that this ‘easing’ would be a cyclical process: what was injected to keep things afloat would soon be taken back in order to get money, markets and the economy on an even keel. Otherwise, one form of excessive debt would simply be added to by another, now held by central banks.
The US Federal Reserve has tried for two years to reverse the process but recently announced it had to stop. It also had to stop returning interest rates to something like normality for fear of a growing danger of another financial collapse. The United States, Europe, Japan and now China are facing serious downturns. What other commentary is needed to see how serious the GFC was and still is? It demonstrates an ongoing instability—related to growing imbalances in global structures. It is also a commentary on the novelty of the global order that confronts regulators today.
The belief that globalisation is merely a variation on normality persists. But this is far from the truth. This new social formation has only been made possible by the emergence of a new form of social agency—in the practices of intellectuals, especially in the form of the techno-sciences. These practices that have emerged in waves since the Second World War have special qualities. They work through technological extension (print, media, email) and this allows social relations between agents who are absent from each other.
This social abstraction is the unique social quality of the globalisation that emerges from the relation of capital and techno-science. It supports a process of lifting out from national and local settings and creating a global social space. Populated by global corporations, intellectual practitioners and researchers, as well as a supportive bureaucracy and banking institutions, celebrities and individuals inclined to cosmopolitanism, it develops its own efficiencies and priorities.
Today it distorts our societies even more than classical capitalism did. Manufacturing moves offshore in many countries to emerging markets like China. This means that capitalism can no longer support thriving local economies and community. The association of investment with new jobs and decent wages has been scaled back, while corporate power expands. Property and other speculation comes into the foreground of investment income. And leading-edge investments coming out of Silicon Valley, made possible by new information technologies, together with bio-tech strategies that reconstruct our bodies, add to the transformation.
Science, now joined with capitalism, contributes to plundering what previously was called nature. Among many other issues, this bears deeply upon the meanings of climate change. Contrary to the stress scientists put on carbon emissions, it is this larger issue of the capacity of the techno-sciences to shape and transform nature while at the same time expanding endlessly our felt consumption needs that lies at the core of the climate-change crisis. Emissions matter, but growth and expansion are the ultimate culprits, and the sciences are heavily implicated.
Not only is globalisation differentiated from the local, it has the powers made available by the techno-sciences to plunder localities, transforming them for the global economy. Some, like commodity exporters, enter the global market on its terms. This may even make them relatively rich, but the processes involved demand a differentiation from the previous community of workers and producers. This grouping enters a world of constant movement and novelty that respects no limits—even the evolutionary process that was always the ground of Homo sapiens is made available to commercial interests. In the main the global market empties out locality—both culture and economy—and leaves many threatened with misery and a sense of deep loss. Even life expectancy begins to decline.
It is this relationship between the level of global relationships and the non-global that lies behind much of the contemporary social and political turmoil. Do we think that the Brexit vote would have occurred if people in the regions had not felt that London had become a world they detested and could not understand? In Ireland, now, Dublin is playing the same role, with high-flyers—representatives of the EU—arriving in the city and those outside left as residuals. Donald Trump would never have prevailed without the sense that Washington and New York insiders—the ‘Washington swamp’—were sucking the life out of the regions.
In present circumstances certain distinctions are crucial. It is one thing to support Trump, quite another to recognise the social processes that allowed him to emerge. It is certainly counterproductive to consider all his supporters irrational, or worse. Increasingly, everywhere, people are reacting against what globalisation is doing to their lives. And there is little leadership on offer as to how to act in these circumstances—certainly not from Trump or Pauline Hanson. It is the global market, too, that generates a large proportion of the world’s refugees, as local livelihoods are undermined, and communities sometimes taken over by criminals and drug cartels. The problem does not lie with the refugees but rather with globalisation and those who promote it.
In Australia the signs are not all one way, but nevertheless they are bleak. We, too, have taken the road of the new capitalism, chasing risk in order to counter declining prospects for investment. Everyone knows that our property market, the source of wealth effects for decades, is now in an escalating crisis, bringing contraction to both construction and retail sales. This is a crisis especially for those who invested in multiple properties, often to secure their retirement, while prices were rising. They now face falling values and huge debts, and heartless markets. Many relatively innocent people will be badly hurt. Our banks have played a strong part in allowing property to enter bubble territory—making available easy mortgage finance, including interest-only loans—demonstrating the power of money, however short term, to pump up property prices unsustainably.
And then there is China. China and property is part of a larger question about dependence on China, especially since the GFC. Demand for commodities from Australia has kept us afloat (as opposed to prosperous) when other economies suffered. In the 1990s Japan played a similar, though not as substantial, role when it enjoyed a wild bubble investment economy, an early illustration of the new norm for globalisation. While that money bubble dissipated eventually, Japan’s economy never recovered. We tend to think that this will not happen to China because of tight government controls, but China has set free the genie of unconstrained investment markets and it exhibits many of the phenomena of the same uncontrollable process. Apartments built but not occupied—a classic bubble phenomenon—and stop-start massive government stimulus packages to re-ignite its flagging economy are clear signs of an unsustainable situation slowly unwinding.
Australia has ‘benefited’ from these investment surges within China, but they have brought their own distortions into our economic and social life. Our hoped-for budget return to surplus, if it materialises, will in large part be a consequence of surging commodity prices related to such investment surges. They are unsustainable and are coming to an end. Australia’s dependence is likely to turn into a nightmare.
There is no doubt that we are now in a global crisis much larger than us. Australia needs to face the realities of how global capital now works and seek major strategies that have the prospect of offsetting its effects. Voters should not be seduced by tax cuts from either party, cuts that substantially announce that we continue to live in fantasy land.
Many responses are possible. Renegotiating our place in the world with other mid-range countries able to stand aside from big power pressures is one. Another is to plan large-scale support for manufacturing industry, not constrained by the criteria of global market efficiency. Electric cars would be one example, signalling a response to climate change while asserting the significance of combining mental and manual labour in productive process. The techno-sciences could be asked to help such a project, while consciously avoiding massive robotisation. Support for strategies around the recreation of diverse regional economies, not tied to export industries, to help strengthen social cooperation and rich social relations, would be another significant contribution.
But social responses to this crisis through particular institutional policies and strategies easily miss the point. They can be gradually reshaped over time to fit the expectations of capitalism in its present form. Rather, particular strategies need to be set within a general perspective consistently highlighting the systematic character of global capital that is so destructive, including the social distortions of ‘solutions’ that target global exports.