The coming conflicts

President's perspective

2004 was not a good year for the Australian labour movement or for our United States colleagues. Everyone will have a view on what they thought went wrong and what should have been done. At the Evatt Foundation Annual General Meeting in December, we had an open discussion on the priority issues that should be considered by the executive committee, when we consider the papers, seminars, and our website program this year. My view is that there are common issues in the United States and Australian elections.

Both incumbent leaders were favoured by the twelve-year economic cycle. Bush and Howard were able to use terrorism, the fear of the unknown, indeed, in Howard's case, the fear of increased interest rates, to gain re-election. Both countries have had record trade deficits, bubbling housing markets, record low national savings rates, but, above all, they have large corporations increasing their power politically and economically. We must face the reality that the Bush administration is qualitatively a more big business dominated administration than any previous US government. At the same time, the Howard government is under increasing pressure to adopt a program for the second half of this year that is in lock step with the political, economic and cultural agenda of corporate America.

You do not have to rely on left wing thinkers: in the United States, the vast majority of intellectuals are opposed to President Bush. John W Dean, former counsel to the Republican President Richard Nixon, is typical of the conservatives. In his book, Worse than Watergate - the secret presidency of George Bush, he detailed the links with big business, most particularly through vice president, Dick Cheney.

Dean gives detail of the secrecy and duplicity of the Bush-Cheney team. He nails 'Cheney as the co-president incognito, who works behind closed doors and who does not answer to the Congress or the public. His partner, the president, is not sufficiently knowledgeable about their policies to answer questions about them adequately, if and when he does occasionally make himself available. It is not that he is stupid, only ignorant and apparently by design'.

Dean sums up what others have said, that the real power relationship is with Cheney doing what he does best, operating out of sight, but running the Bush White House. Bush is the nation's Chairman of the Board: Cheney is the Chief Executive. Cynics say that if anything happened to Cheney, Bush would become president.

Dean gives detail of Cheney's links to Halliburton and other big companies that Cheney has famously called 'The Base.'

New York Times columnist Maureen Dowd said of Cheney, 'he is creating a sort of 'democracy' he likes. One party controls all power in the country, one network serves as state television (read our Rupert Murdoch), one nation dominates the world as a hyper power and one firm controls contracts to Iraq.'

January saw the US election consummated, with the inauguration of George Bush and the climax of his unilateral foreign policy with the Iraq election at the end of the month.

The conservative former editor of the National Interest, Owen Harries, says: 'In terms of this objective, the creation of a democratic Iraq, the war in that country is doomed to fail. The conditions for such democracy simply do not exist and cannot be created any time soon.' He concludes, 'The outcome of the Iraq war will be a defeat whose good consequences will outweigh its bad ones because it will destroy illusions of omnipotence and restore a sense of limits, restraint and balance to American foreign policy, and that is essential for world order.'

In this issue of the Evatt Journal, we publise the initial appraisal of the election by Juan Cole, Professor of History at the University of Michigan and a prolofic writer about modern Islamic movements in Egypt, the Persian Gulf, and South Asia. We recommend Professor Cole's weblog as a regular source of quality critical commentary on Iraq.

At the same time, this year we will be having a worldwide debate on strengthening the United Nations. On the Evatt website, John Langmore, a former Labor MP and a person who has worked at a senior level in the United Nations structure, describes the proposed reforms. The Evatt Foundation will organise a seminar this year on these issues.

It's the economy, stupid

The Americans are racking up debt at the fastest rate since the late eighties, when the Republicans were last in charge. The Dean of Yale School of Business Management, Jeffrey E. Garten, in Foreign Affairs magazine, estimates that 'President Bush came into office facing a prospective five trillion dollar budget surplus over the next decade. Today, the ten-year projection is for more than a two trillion dollar deficit and that is before spending on any of the new initiatives planned for the second term is taken into account. Bush has said he will make his tax cuts permanent, adding another two trillion dollars US to the deficit over the next decade. He also wants to privatise part of social security in a way that would add another one trillion dollars to the two trillions in transition costs.'

The US problem is that its imports are 50 per cent bigger than its exports. So if imports and exports grow at the same pace, the trade deficit automatically widens. The Economist magazine has said in a leader: 'if America keeps on spending and borrowing at its present pace, the dollar will eventually lose its mighty status in international finance.'

The US current account deficit is currently almost twice as big as its peak in the late eighties. The OECD's latest Economic Outlook predicts that the deficit will rise to US$825 billion by 2006, 6.4 per cent of America's GDP, assuming unchanged exchange rates.Significantly, in the 1980s America was still a net foreign creditor. Now its net liabilities are expected to be 28 per cent of GDP by the end of 2004. In the OECD economies, only John Howard presides over a country with a bigger foreign debt relative to its size.

The US Federal Reserve has indicated that it will continue with its incremental interest rate increases, with their fingers crossed. They face the dilemma of increasing interest rates or a much lower US dollar exchange rate.

As President Bush prepares his budget this year, he faces tough decisions which he has avoided making until now. Commentators claim that he will have to look at policies that reduce excess consumption, which can mean a severe economic contraction, America restructuring its debt or, at worst, defaulting or devaluing its dollar, or a combination of these measures.

As the president claimed that there will be no overall increase in tax, there is a possibility that he could attempt to introduce a form of consumption tax and so shift the tax burden from the higher income earners to consumers generally.

Australia's four hundred billion dollar deficit is twice the amount of 1996. This raises the question of why the Howard debt truck of 1996 was not brought out of its retirement by Labor and driven through the Coalition's economic credibility façade, as part of the election campaign.

In analysing the Australian election campaign in the current Dissent magazine, Kenneth Davison has explained how we are vulnerable to any interest rate movements. He says 'the most puzzling aspect of the campaign was why Latham didn't respond to the trust issue by asking the obvious question, why are interest rates in Australia already the highest in the OECD region? He could have pointed out the fact that Australian short-term rates are 2.7 times the US dollar rate, 2.1 times the Euro area rate and 146 times the yen. The reason is that Australia is running a current account deficit on the balance of payment equals a 5.8 per cent of the GDP, which is also a record for the OECD. Australia is not paying its way in the world.'

The external deficit means that Australia must borrow or sell off assets each year to the value of fifty billion in order to pay for the current level of imports of goods and services, and to pay interest on a growing level of foreign debt.

In Australia we have a parallel campaign to the US. The Business Council of Australia, representing the top one hundred companies and the Australian Industry Group, have served a log of claims on the Howard government. The labour movement well understands the industrial relations program of the employer groups and John Howard, which is part of the package. A full-blown conflict is assurred when the government takes its majority in the senate this year.

In this Issue's special feature, we begin our focus on this coming conflict. We publish ACTU President Sharan Burrow's warning about the government's proposals to isolate workers from their unions, AMWU Secretary Doug Cameron's assessment of the task the labour movment is facing, and an overview of the last 100 years of Australia's virtually unique experience of compulsory arbitration by Professor Stuart Macintyre. Stuart reminds us that "the present-day zealots for freedom of contract are mistaken if they think that absence of such institutions removes the causes of industrial conflict. On the contrary, industrial relations before the advent of trade unions was characterised by explosive, often violent forms of protest."

The tax arguments of Heather Ridout of Australian Industry Group has the familiar ring of the US corporate agenda. She says: 'Domestic income is taxed under the personal tax system and the best way to improve incentives for individuals to invest in Australian business is to reduce rates of personal income tax.'

Twenty-five government backbenchers have been mobilised and the Murdoch press is promoting the campaign. One of the leaders is former Costello staffer, Senator Fifield, who said that "lowering of the top marginal rate of 47 per cent to a rate closer to the company rate of 30 per cent was desirable'.

Sophie Panopolous, a Liberal MP, declared 'the fourth Howard Liberal government will be rightly judged on how it uses its once in a lifetime opportunity to reform structural defects in Australian tax, welfare and labour market systems.' The labour movement must react to this corporate agenda.

A useful start in that process comes from Tom Bramble, Senior Lecturer in Industrial Relations at the School of Business at the University of Queensland, in the December issue of Australian Political Economy. In an article on the contradictions in Australia's so-called miracle economy, he concludes: 'the current economic miracle cannot last forever. When the storm hits Australia, as eventually it must, employers will once more be driven into an offensive against wages and jobs.'

In looking at how we got into the mess, Kenneth Davison reminds us in Dissent that Labor invested in the structure of the economy, to move it away from dependence on the narrow third world export base by investing in programs to promote new industries and broaden the skills base of the workforce. He illustrated the Howard government's performance with figures from the National Institute of Economic & Industry Research that show cuts in government support has been a major factor in reduced growth in exports of elaborately transformed manufacturers (ETM's) from 18 per cent a year in a decade up to 1996, to 1.7 per cent a year since 1997.

I think this is a perfect epitaph to Howard's short-termism. In addition to a failed industry policy, the abuse of their dominant power by corporations in banking, pharmaceuticals and the oil/energy area should be a priority this year.

Taking on the drug barons

The Australia-US Free Trade Agreement (AUSFTA) highlighted the dominance of the Bush administration over John Howard and John Anderson.

Widespread media reports revealed that Australian negotiators recommended against the agreement, after the sensitive sugar industry was excluded. Vaile and Howard overruled the negotiators.

The AUSTFTA election debate centred on the threat to our pharmaceutical costs through the Pharmaceutical Benefits Scheme. In a new book, How to kill a country: Australia's devastating trade deal with the United States, by Linda Weiss, Elizabeth Thurbon, and John Mathews, a chapter on the PBS shows how the AUSTFTA is part of a wider agenda by the Bush administration, acting on behalf of the drug companies to protect their massive profits arising out of patent rights to protect their dubious medicines.

Congress in the US is investigating the pharmaceutical companies; because the US Food and Drug Administration (FDA) had become an agent of the Drug companies and it has failed to protect the public, as it was originally meant to do. They are under attack for high prices, which they want to foist on Australia, while Canadians pay 40 per cent less.

The Institute of Health and Welfare report shows that spending on pharmaceuticals has been growing by 12 per cent a year in the last five years in Australia.

The Washington-based independent research organisation, the Centre for Public Integrity in its book, The buying of the president, 2004 noted: 'The most profitable US industry has become increasingly aligned with the Republican party. The top five pharmaceutical contributors to the political parties in 2000 and 2002 election cycles, The Pharmaceutical Research and Manufacturers of America - acronym PHRMA, known as Big PHARMA, (Bristol Myers, Squibb, Pfizer and Eli Lilly) - gave 87 per cent of their donations to the Republican National Committees.' Eli Lilly has extensive connections to the Bush family.

The Centre says that, according to the Washington Post, over the past decade, PHRMA and its member companies have spent over a billion dollars in a successful attempt to influence the public policy process in Washington, easily more than anyone else, hiring in that time more then 600 lobbyists, including former congressmen and lawmakers.

We must take more notice of the debate taking place in the United States over drugs. Any analysis starts with the fact that 'Big PHARMA', as it is known, is embedded in the Bush leadership as much as the military industrial complex or the oil energy interests.

Professor Peter Drahos of the ANU, with John Braithwaite, described how the drug companies, bought out publicly funded research from the Universities and took over the patenting system, in their book, Who owns the knowledge. Last year, with a number of Australian experts, Professor Drahos made a submission to the Senate Committee that was looking at the effects of the agreement that summarised the dangers of the AUSTFTA (the submission can be read on the Evatt site).

There are major scandals around the US FDA, which has become a partner of big Pharma and declares that its role is the licensing of drugs, not protecting the public. Bush wants to pass legislation to make it impossible for a citizen to sue for damage done by drug side effects.

Sixteen drugs have been withdrawn since 1992, but not before they killed and injured thousands of people. It has been established the FDA and the drug companies knew that they could cause harm and death when they applied to have them licensed, yet clinical trial information remained hidden from doctors and patients. The drugs are advertised directly to the public in the United States as 'miraculous' and patients demand them from their doctors. A rare side effect is one that happens in fewer than 1 in 100. If a million people get the drug, a rare side effect can cause a big number of problems, even deaths.

Twenty per cent of FDA scientists complained that they had been put under pressure to approve drugs whose safety was in doubt. Prominent doctors are paid fortunes to endorse drugs they have never participated in testing. Doctors get banquets, overseas trips, sponsorship for their research and drug companies subsidise their professional associations like the American Medical Association and the American Psychiatric Association to the tune of 50 per cent of their income. They control and fund advertising in medical journals, which educate the medical profession with the information that they want doctors to have. By funding conferences, they can ensure that anyone who challenges them is not allowed to speak, lest the subsidy to the conference is withdrawn.

The FDA and drug companies have conspired to hide dangerous, even lethal, side effects of drugs. In l994, 2.2 million people were hospitalised and 106,000 died from the effects of lawfully prescribed drugs, and a further 80 per cent from adverse interactions of legal drugs. This makes legal medication prescribed by doctors, the third highest cause of death. Yet this had been kept secret from doctors and the public.

Seventeen drugs licensed by the fast track drug licensing method have had to be withdrawn because they were killing people, and the FDA knew they did that before it released them. These are antidepressant, antipsychotic, hormones, blood pressure medicines, arthritis treatments, some of which appear in the Australian press. Vera Hassner Sharav's website, Alliance for Human Research Protection (AHRP) provides daily updates on Congressional hearings into the FDA and international news on pharamceutical comapany scandals.

The Howard government has appointed a drug company representative to the board of the Therapeutic Goods Association (TGA) for the first time. Even when warnings, public health advisories, are given to the American public by the FDA, the TGA does not issue the same warnings in Australia. Every month of delay is worth big money to the drug companies, while Australian doctors and patients are left at risk.

Rescuing the future: Kyoto

In l990, I chaired the Senate Standing Committee on Industry, Science and Technology inquiry into reducing the impact of the Greenhouse effect, entitled 'Rescue the Future'. We were influenced by the Toronto Conference in l988 where a target was set of a 20 per cent reduction in carbon dioxide emissions by 2005. The international scientific community has confirmed all the expert evidence we heard from the CSIRO and others over the fifteen years.

As we prepare for the Kyoto Protocol to come into force on 16th February 2005, only President Bush and his Australian comprador, John Howard, of all the developed countries, prevent their governments from ratifying the Protocol. This is at a time when Hal Turton in an Australian Institute study Greenhouse gas emissions in industrialised countries: where does Australia stand? shows that Australians still emit the highest per capita greenhouse gases in the world.

The words 'outrageous' and 'hypocrisy' seem apt to describe the actions of the Howard government. Howard expended a lot of diplomatic capital driving the bargain that gave Australia an 8 per cent increase when most other developed countries agreed to reduce emissions below the l990 levels.

In response, it should be possible to form a representative coalition in support of Kyoto, to inform our community of the facts. We can anticipate after 16th February that the business interests that are going to be damaged by our inability to engage in the system of tradeable emissions, to be more vocal. This is a real issue that will affect the lives of all Australians.

The Guardian Weekly reported in October that an unprecedented and unexplained rise in carbon dioxide in the atmosphere two years running had raised fears that the world may be on the brink of runaway global warming, with potentially disastrous consequences for the Northern hemisphere if the Gulf Stream is affected.

In recent decades CO2 increased on average by 1.5 parts per million (ppm) a year because of the amount of oil, coal and gas burnt, but has now jumped to more than 2 ppm in 2002 and 2003.

Tony Blair has listed climate change as a top priority during his term this year as president of both the G8 group and the EU. He endorsed the 'International Climate Change Task Force Report' which included NSW Premier Bob Carr and which repeats the warning of 'abrupt accelerated or runaway climate change'.

Summer bush fires send out a warning of the dangers of a drying continent and the increasing threat they will be in the next decade, not least for their challenge to our water catchment areas.

The Evatt Foundation will have a breakfast seminar on the 15th February, the day before the Kyoto Protocol comes into force. Dr. John Merson will address "Climate change and Australia's paradoxical position on the Kyoto Protocol". Dr. Merson is the Executive Director of the Blue Mountains World Heritage Institute and the co-ordinator of the research program in Environmental Policy and Management at the University of NSW. This is a breakfast not to be missed.

Other

As the debate over the economy heats up, public discussion of the policies has been hemmed in by a theory that may illuminate a few facets of its domain rather well, but wants to suppress other theories that would illuminate some of the many facets left in the dark. This theory is neoclassical economics. Because it has been so successful at sidelining other approaches to economics, it also is called "mainstream economics".

This month we publish the introduction to A guide to what's wrong with economics, a new book edited by Edward Fullbrook of the University of the West of England, with contributions from a distinguished collection of economists, including Australia's Hugh Stretton and Steve Keen. In his introduction, Edward discusses the tragedy that has beset his discipline, where one branch of formalized theory is making it progressively irrelevant to understanding economic reality.

A closely related new release is The economist's tale: a consultant encounters hunger and the World Bank, by Peter Griffiths. Peter introduces his story in this issue. This is an acclaimed insider's view of one aid-made crisis. Peter was at the interface between government and the World Bank. He saw the decisions being made, and why. He saw the pressures put on civil servants, politicians, aid workers, consultants and World Bank officials to do nothing, and instead let the crisis develop into a full-blown famine.

Other new articles this month include a warning on Medicare by Maurie Mifsud, a report by Michela Noonan on the West Papua Project, an initiative of the Centre for Peace and Conflict Studies (CPACS), and the text of the address by Paul Fitzgerald at the succesful launch of The state of the states 2004 in October last year. The extra effort the foundation put into The state of the states last year was rewarded with national coverage on the ABC, Channel 9 and the Australian Financial Review, along with our usual local coverage. Paul was co-author with Graham Larcombe of the report's substantive chapter on the state of health, and he was joined in launching the book by Professors Tony Vinson and Mark Findlay. Limited copies of The state of the states 2004 are still available for purchase from the Foundation. Finally, this month we also publish an original contribution to history, an account of the split and the role of Doc Evatt by my friend and colleague, Arthur Gietzelt.

In closing, even if President Bush's policy was right for the most powerful country in the world, Australia's size, geography and economy require our own strategic plan. The Iraq War, short-term economic goals, growing inequality, the coming attack on trade unions, our declining healthcare system and an environment policy not based on the needs of our continent, must all be challenged.

Bruce Childs
President
Evatt Foundation
11 February 2005

Useful resources

Dissent magazine is available at newsagents and a yearly subscription is $22 to Dissent, PO Box 26, Deakon West ACT, 2600.

The Journal of Australian Political Economy is published twice yearly; individual subscription is $24 (four issues) to JAPE Box 76 Wentworth Building, University of Sydney, NSW 2006.

Australia Institute web site www.tai.org.au. How to Kill a Country: Australia's Devastating Trade Deal with the United States, Linda Weiss, Elizabeth Thurbon, John Mathews, Allen and Unwin, 2004.