The Australian Labor Party made a fundamental change yesterday. With the statement of the Prime Minister, Paul Keating, the Labor Party invested its hopes of change in society, and its hopes for re-election, in small and medium companies.
The change was accompanied by both rhetoric and practical policy.
For the first time in Labor Party history, the principal vehicle of modern industrial capitalism _ the limited liability company _ has been promoted by the Labor Party as the leading positive force of social and economic change that will benefit soceity and Labor’s principal constituents in particular.
In the past, Labor had seen companies as a force of exploitation of its constituents, to be met by counter-acting organisations, namely unions. More recently they have been seen as a merely neutral force or a necessary evil. In the past, companies were capital’s collective and unions were labour’s collective. It was different yesterday.
Mr Keating said of small and medium companies yesterday, “”These companies are exemplars of the change in business and industrial culture of Australia. They are marked by the dynamism of their leadership; by their flexibility; their export orientation and their success in capturing niche markets, particularly in Asia. These are the Australian companies of the future, the companies which will provide work _ rewarding interesting work for our children.”
At the same time, the public sector _ the traditional vehicle for Labor Governments to redistribute wealth to its constituents _ took a back seat.
Mr Keating said his One Nation statement last year had provided infrastructure spending, “”but One Nation never pretended that the large and continuing increments to production and employment that Australia needs could be delivered by or in the public sector”.
This was a recognition that wealth and employment generation was done best through the machinery of a company _ a very different form of collective than the entities traditionally supported by Labor. Companies are collectives of capital that come together for the pursuit of profit. In the past that has been seen by Labor as an intrinsically defective or destructive mechanism. Yesterday it was seen as the nation’s salvation, its provider of jobs and wealth.
Moreover, it was more than rhetoric. It was matched with action by a cut in the company tax rate from 39 cents to 33 cents. This especially helps medium and small business.
Big business _ the friend of Labor in the 1980s because it co-operated with unions and the Accord _ took a back seat. Few, if any large businesses, pay anywhere near 33 cents, let alone 39 cents anyway. They use numerous tax deductions and scheme to reduce their effective rate to well below the official rate. Yesterday was small business’s day.
Mr Keating lauded small and medium business. He said a recent McKinsey report found 700 companies play a large role in Australia export growth.
(Once you get below the top 100, you are talking medium business.)
Mr Keating praised their ingenuity and entrepreneurship. He also gave a fillip to the new class of people who they are employing: part-time women, by giving cash rebates for child care.
He said recovery would be hastened and jobs created “”by the rapid expansion of vigorous and innovative small- and medium-sized businesses _ in the main companies”. The principal aim of his statement yesterday, he said, was to increase the number of these companies.
Production and employment “”must come from the private economy, from private investment, from private businesses.
“”The measures I am announcing will make the Australian company a more effective device, playing a more effective role as an instrument of national achievement and enterprise,” he said. “”The Australian company _ large and small _ will be the basic device that powers our innovation, marshals our capital and our productive power.”
Mr Keating then went on to detail the benefits his Government would pass to small and medium companies.
What brought the change about? Perhaps it is partly explained by a recognition that the limited liability company is a very effective mechanism for uniting capital and labour into useful production. But it is also explained by a continuing surrender of sovereignty by smaller nations worldwide as we are forced to compete with other economies in the world.
Mr Keating’s speech, and more so his answers to questions, yesterday were laced with references to international competition. His accompanying detailed statement had several graphs showing Australia’s present and proposed new company tax rates compared with those of other nations.
“”Competitive rates do exist in our region, and we’ll have to compete with them,” Mr Keating said. “” The thing that matters most is, are we competitive?”
Even in calling for banks to change their lending practice from reliance on collateral to reliance of cash flow and management, he referred to a similar change made by banks in Japan and Germany.
Capitalism’s underlying force _ competition _ beat its historical competitor _ collectivism _ decisively yesterday.