Elections are about deciding who runs the country, they say. But most of the power in our society is not held in parliament, and even the choices of elected governments are heavily restricted.
This is because a tiny super-rich minority, the ruling class, control most of society’s wealth.
The Liberals announced on budget night that government spending made up 25.8 per cent of the economy—and a raft of mainstream economists and commentators complained that this was still too high. But that means that three-quarters of the country’s economy remains in private hands. Wealth, accumulated over many years, is even more concentrated.
In 2014, Australia’s richest seven people controlled around $56 billion dollars between them, equivalent to the wealth of the bottom 1.73 million households, or 20 per cent of the population.
At the top of society there is a very small group of people who run the major corporations through their positions as CEOs and directors of the large firms.
There is considerable overlap between companies. One study from 2006 found that half the directors of Australia’s 50 largest companies held seats on four or more corporate boards. Altogether, these 50 companies were effectively controlled by around 160 people.
The result is that we live in a world where the rich write the rules, and the economy and political system are run for their benefit.
The Panama Papers revealed the immense amounts of money they have stashed away, and the devices like shell companies used in an effort to avoid or minimise tax.
An estimate from 2010 said between $21 and $32 trillion dollars are stashed away in tax havens around the world.
The staggering thing is that so little is ever done about it. In fact the largest tax havens are run by the world’s richest countries themselves—jurisdictions in the US like Delaware, or British territories like the Virgin Islands.
They could close them down whenever they choose, yet they are allowed to continue operating because it suits the interests of the rich and powerful.
It’s a rich man’s world
There is increasing anger about inequality. In Australia the top 10 per cent of the population control 45 per cent of the country’s wealth, and the top 20 per cent of income earners make five times as much as the bottom 20 per cent of the population.
The situation in Australia in not yet as stark as in some countries, such as the US. There the top 0.1 per cent (made up of just 160,000 families) hold 22 per cent of the country’s wealth.
But inequality here is growing. Last year ACOSS produced a report on inequality in Australia. It found that over the previous 20 years, income for the top 5 per cent grew at the fast rate, while growth for the bottom 20 per cent was the slowest. The growth in wealth was ever more unequal, with the top 20 per cent increasing their wealth by 28 per cent and the bottom 40 per cent by just 6 per cent.
The super-rich ruthlessly defend their power and privileges, even from minor challenges. The big four banks dominate the Australian stock exchange and doubled their profits between 1984 and 2013. When Labor announced its support for a Royal Commission into the banking industry earlier this year, Banking Industry chief Steve Munchenberg responded by saying the banks had “not ruled out” a mining tax style ad campaign against Labor.
This was a warning shot to Labor not to go too far. A Royal Commission could expose more banking scandals and dubious practices, but Labor was not proposing a significant tax increase on the banks or anything that would do more than tarnish their brands.
When Labor announced its mining tax, and did try to increase profits on mining companies, the miners spent $22 million in advertising and forced Labor to cave in.
Control of wealth isn’t just about being rich. It also means control of major companies and the decisions they make.
Big businesses make decisions in the interests of their profits. In the face of what they view as threats to their business, like taxes and regulations, the wealthy can attempt to move their wealth out of the country, shutting down factories and offices.
This is true across the global capitalist system.
In one famous example, the British Labor government that won office in 1964 faced an attack on the currency by speculators who wanted to force it into raising interest rates and cutting wages and spending.
Prime Minister at the time Harold Wilson, in a private conversation with the Governor of the Bank of England, commented that, “because of the sheer compulsion of the economic dictation of those who exercised economic power”, Britain had “reached the situation where a newly elected government with a mandate from the people was being told…that the policies on which we had fought the election could not be implemented; that the government was to be forced into the adoption of Tory policies to which it was fundamentally opposed. The Governor confirmed that that was, in fact, the case”.
Today, both major parties basically accept that things have to be run in the interests of big business. The Liberals are the most open about this, with Turnbull describing his new budget as designed to drive, “aspiration and enterprise and growth”. When in government Labor does essentially the same thing.
Power and parliament
Real power does not lie in parliament. Any party that wins control of government through parliament is trapped. Since they are hostage to the whims of big business, they find that unless they do their bidding, they face major economic problems as businesses sack thousands of workers and close down companies.
The influence and reach of the ruling class extends into the institutions of the state, so that they are only under the control of government to the extent that it does not seriously challenge capitalism.
The generals, police chiefs, judges and top level bureaucrats in the public service are all part of the ruling class and serve the interests of the rich.
Senior public servants generally come from the same privileged backgrounds and share the same worldview as the rest of the ruling class. Often there is a revolving door between government departments and senior roles in industry.
A Fairfax investigation last year revealed how financial sector regulators like APRA and ASIC were staffed with former senior managers from the big four banks.
Jeff Millard, the manager of supervision of insurance, came straight from Deloitte. Michael Saadat, a senior executive at ASIC, was formerly head of compliance at Citibank. Steven Casey went from a senior role in the Treasury Department working with Finance Ministers to become a director at KPMG.
Whistle-blower James Wheeldon has claimed that, “At ASIC, where I saw that revolving door in play…the culture there was not a culture of doing things by the book, it was a culture of facilitating business. And that affected everything. Giving business what they want, and rolling over for business.”
And at the core of the state are repressive institutions like the army and the police, run by generals and senior officials who are determined to defend capitalism and the priorities of the ruling class—even against democratic governments where necessary.
So one serving army general gave an anonymous interview to The Sunday Times to attack left-wing British Labour leader Jeremy Corbyn, promising “the very real prospect of an event which would effectively be a mutiny” should he become Prime Minister.
The capitulation of the Greek Syriza government has shown the limits of democracy under capitalism. Although they were elected with popular support to tear up the austerity deal signed with the EU, they chose to compromise with the rich and the European institutions.
The rich and the most powerful companies inside Greece wanted to remain inside the European Union. Because Syriza went along with that, it meant agreeing to cuts and austerity worse than those they were elected to end.
No parliamentary road
Seats in parliament can be used as a platform to build struggles outside it, but not as a means to fundamentally change things.
The real power in society lies where the wealth is produced. The capitalist ruling class controls the economy through their ownership of the mines, factories and offices that are the source of their profits.
But they rely on the rest of the population, the working class, to produce those profits. When workers go on strike and take industrial action, it costs the bosses millions of dollars in lost profits.
It is possible to stand up the rich. But the power to do so does not come from electing left-wing MPs, but from workers organising as a class to assert their own control over production.
This means that struggle outside parliament, in the workplaces and on the streets, is the key to social change.
Winning real democracy requires workers to take control of the wealth in society and begin using it in their own interests. This means a revolution where new democratic institutions take power, like the soviets or workers’ councils in the Russian revolution of 1917.
Similar organs of workers’ power have emerged time and again in great social upheavals, from Hungary in 1956 to Chile in 1973 and Iran in 1979.
It is only through such struggles outside parliament that we can get rid of capitalism and the political system run for the rich.
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