Financialization & Zombie Neoliberalism
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Paul Keating tells us that Australia is on its way to becoming the unofficial 51st state of America. The former PM is not being complimentary in his assessment of our current defence policies when saying this. No, Keating is issuing a warning about our docile behaviour in this space. The truth is that Australia does follow the United States in many ways when it comes to economic and political trends. Especially, those on the conservative side of politics are constantly looking to take our country down well-trodden American roads. Financialization and zombie neoliberalism is where the US finds itself with private equity investment firms gobbling up all areas of life and business in America.
Housing A Major Investment Commodity
We have a housing affordability crisis in Australia, as they do in America and in most Western nations around the globe. Shelter has become a major investment commodity globally, which has left large chunks of the population out in the cold. In Australia, our banks have grown incredibly wealthy on the back of the home loan business over the years.
“Household net wealth sat at a record $16.2 trillion in the March 2024 quarter, boosted by a record level of property assets of $11.0 trillion as at 31 March 2024. As a proportion of net household wealth, residential property accounted for around 67.9%, up from 61.7% in December 2020.”
High levels of immigration into the country has exacerbated a housing shortage in combination with a proliferation of short term holiday rental properties draining the available stock further. Long term rents have sky rocketed in response to these market forces. Our timid governments still in thrall to zombie neoliberalism refuse to consider caps on things like rent increases despite the inflationary effect of these 20% and 30% increases.
Private Equity Investment In Residential Property In America
In America, Wall St hedge fund investors and private equity firms have been buying up residential property in cities around the nation. In a number of cities they have become the major landlords in town. They now own around 10% of properties nationally. This could be seen as a good thing economically if not for their behaviour. You would think cashed up corporations would be good landlords. No, in the extreme world of American financialization these landlords have not only pushed up rents more aggressively than ever, by around 30%, but they also skimp on fixing the property and maintenance for their tenants. Only in America! It is all about return on investment and screwing every dollar possible at the lowest cost. Rising rents are a major factor in sticky high inflation in economies everywhere. President Joe Biden, prior to stepping out of the race, promised to cap rent increases by corporate landlords to 5% annually. Even, the avaristic Americans are looking to cap rental increases but sleepy Australian governments leave the market to sort itself out. Zombie neoliberalism still stalks the halls of power in Oz. Most Aussie MPs are landlords by the way, including PM Anthony Albanese. More Australians get rich via property investment above and over everything else.
“The latest data from the Australian Taxation Office (ATO) reveals that 2,245,539 Australians or around 20% of Australia’s 11.4 million taxpayers owned an investment property in 2020-21 – this is the latest data available at the time of writing and was released in June 2023.”
Financialization Poses Further Wealth Inequality Opportunities
Financialization is really a cannibalising of existing societal infrastructure. It feeds on the necessary stuff we have put in place to make our lifestyles possible. Shelter, a roof over our heads, is now commodified as the major investment opportunity for a section of our population. If Australia goes the way of America, with private equity financialization running rampant through everything we will see an increase in the already growing divide between the wealthy and the working poor. We don’t tax wealth in this country but income, mainly from workers. This means with the aid of tax minimisation arrangements, like family trusts and shifting profits to tax shelters, the wealthy avoid paying their fair share of tax in Australia. We learned this from our former British colonial masters. Conservative British billionaires contribute even less to annual tax revenues in the UK than their American counterparts. Capital gains tax contributes less than 2% to annual tax revenues in the UK, this is despite the enormous wealth within the financial sector operating in Britain. Many of the tax havens are British island territories and are a part of the web of tax minimisation established by the financial realm in the UK at the height of the Thatcher years. Stripping the state of assets and access to the wealth of private citizens are all aspects of the neoliberal playbook. Meanwhile, for everyone else at the bottom of the food chain neoliberals want the ‘user pays’ economic model to cover everything in life. You will notice already the plethora of fees, charges, subscriptions and rents being levied on everything you do in life in the 21C. In Australia, this means our hospitals and health system ultimately becoming privatised. This is already happening with private equity buying up hospitals in Australia. They promise greater efficiencies if the hegemony of capital markets reign, but ‘for profit’ ownership of health facilities invariably see cost cutting measures which do not put patient care first and foremost. Education under the LNP will see further neglect of the state school system and the prioritisation of looking after private schools. This occurred for the decade they were last in power and saw more parents leaving public education for the private sector with their kids. The best schools in the world are consistently those in the Scandinavian nations and they are public schools, where they fund them well to ensure top quality educational outcomes for their children. The split between public and private in Australia is a perennial canker displaying the century long tussle between models and ideological philosophies in our nation.
Choose An Independent Australian Future
We do not want to become the unacknowledged 51st state of America because the US is a deeply divided and extreme nation. The China scare tactics of conservatives and US economic and defence policies must not box us in to the tacit support of everything America proposes in this space. Yes, we do not agree with the totalitarian regime underpinning China, but we should also be clear about the extremely unfair state of economic life in the US. The minimum federal wage in America is $7.24, whereas in Australia it is $24.10. The neoliberal economic policies which have proliferated in America since Ronald Reagan have produced a massively inequitable state of wealth among Americans. A land of billionaires boasting obscene levels of wealth and tens of millions of Americans living in abject poverty. Two speed economies have become the norm in neoliberal economies around the globe. The ‘trickledown effect’ never materialised and the economic theories of Hayek and Friedman made some very wealthy at the expense of the rest of us.
It is time to redress this situation and rebalance the wealth distribution around the globe. Financialization and zombie neoliberalism must be rooted out from our governments and business sectors.
Biden Invested In American Manufacturing
President Joe Biden has overseen the injection of trillions of dollars into American homegrown manufacturing. This contrasts the previous decades of financialization in the US and the growth of private equity. America had been putting all its eggs into the money market to the detriment of its millions of skilled workers, as manufacturing jobs flooded offshore. The rise of Trump as the king of grievance politics was borne on the back of this. Of course, Trump is a liar and conman and has never done anything for American workers but make them empty promises. President Biden has led the greatest investment in America by an administration ever.
“$563.6 Billion in public infrastructure, semiconductor and clean energy investments in the United States under the Biden Administration, including: $303.4Bannounced for transportation investments in roads, bridges, public transit, ports and airports, as well as electric school and transit buses, EV charging, and more.”
This is just some of the massive investment in American manufacturing for a clean energy and high tech future for American workers. Trump did next to nothing during his chaotic time in office, accept lower the tax rate for the wealthy and corporations.
Investing In Australian Manufacturing?
I remember the talk in Australia during the pandemic, as we realised our economic dependence upon China was a problem. However, since then I have heard little about investing in Australian manufacturing, apart from the solar panels plan. This plan copped criticism from economists who have grown up in an Australia committed to globalism. If we do not seriously invest in our manufacturing future we will continue to be vulnerable to headwinds of whatever nature be they economic or from warfare. Australia should be investing in its independent resilience. It is an opportunity to lay the economic groundwork for an economy capable of withstanding shipping blockades and being cut off from the global digital network if marine cables are damaged by acts of war. It is time to start doing things, building things, making things, instead of merely buying cheaper stuff from China.
Tough Times Downunder
Our construction sector is bleeding companies going into liquidation because their business models were designed around accessing cheap building materials from China. This all changed post pandemic with everything going up in price, including labour in response to high inflation reducing the buying power of workers’ wages. Australians have been forced to become entrepreneurs and small business owners because the well paid manufacturing jobs have disappeared over the last couple of decades.
This results in a plethora of undercapitalised businesses who are the first to go bust when the economic cycle turns and interest rates are whacked up by the central bank to curb demand and high inflation. This is what we are seeing right now in the Oz economy.
Neoliberalism is a global economic order. It’s philosophy is based on market fundamentalism. It operates by shifting power from the state to private equity. Public assets are sold off and utilities are privatised and corporatised. National banks are privatised. National airline carriers are privatised. Telecoms are turned into Telstra’s. Power utilities become corporate power companies. Promises of cheaper prices never eventuate. Jobs disappear and wages are trimmed and tightly controlled. Shareholders and investors are kings. Consumers get shafted as competition in the sector is removed via takeovers and mergers all approved by the ACCC. You get Coles and Woolies. The big 4 banks. The big 4 consultancy firms replacing public service jobs. The disappearance of accountability and transparency. Duopolies everywhere you seek to do business. Welcome to modern Australia.
Zombie Neoliberalism & Our Politicians
“A politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn’t happen.”
- Winston Churchill
We are living in a time of financialization and zombie neoliberalism. The GFC and subsequent crises have discredited neoliberalism but it lives on zombie-like in the actions and policies of governments. Generations of politicians have grown up never having to actually do anything but talk on the TV. Never being truly responsible for any economic activity but commentating on it instead. Much of their role nowadays involves being talking head puppets making sage predictions with few consequences. Spending billions on endless reviews by PwC and Ey and legions of consultant lawyers and accountants. ‘Leave it to the market’ has been indelibly inked upon their foreheads – even those pollies on the left march to this same zombie neoliberalism beat. Housing crisis? The market will fix it! Cost of living crisis? Market forces will readjust eventually. Politicians learn to smile for the camera and to nod their heads whilst appearing wise. Photo opportunities are more important than getting one’s hands dirty in the 21C.
Is it any wonder that the electorate quickly tires of the sound bites and fake smiles? That we end up despising our pollies for their failure to really engage with the business at hand?
Robert Sudha Hamilton is the author of America Matters: Pre-apocalyptic Posts & Essays in the Shadow of Trump.
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