Posted by John, June 26th, 2010 - under Julia Gillard, Labor Party, Mining, Resource Super Profits tax, Super profits.



Julia Gillard is Prime Minister today because of the mining magnates’ campaign against a minor tax impost – the Resource Super Profits Tax.

Their campaign tore down Kevin Rudd’s leadership. The panicked right of the trade union movement and Labor Party swung behind Gillard and within a day she was Prime Minister.

The mining barons are a very powerful faction within Australian and global capitalism. They lied that the mining tax would mean job losses.

The men and women who sacked fifteen percent of their workforce during the global financial crisis convinced many workers around Australia that they would defend them against job losses under Labor’s tax. According to Treasury the tax was structured in such a way that it would have increased jobs in the mining industry and the economy more generally.

The way to defend jobs is to strike, not rely on Palmer, Fortescue, and the other super rich mining magnates or their Parliamentary puppets Gillard and Abbott.

Capitalists don’t understand that workers create wealth. In the early days of capitalism its bourgeois economists struggled towards some sort of understanding that this was the case and laid the framework for Marx to develop the labour theory of value into an analysis of the crisis ridden nature of the system.

Bourgeois economists from various schools have been unable to understand where economic rent comes from. Thus for example finite resources like minerals, which often require billions to develop and exploit, can produce profits well above the normal return on costs like capital and labour. In the case of Australian minerals the demand from China gives further levels of so-called super profits to the mining companies.

The Chinese ruling class buys these mineral resources with the surplus Chinese workers create.

In ‘normal’ conditions of competition the super profits in the mining industry would attract new investment and the extra capital and competition would drive down overall returns to the industry. That isn’t happening in mining because the resources are finite, it costs a lot to enter the market, there is an oligopoly of big mining companies and Chinese demand for Australian resources continues unabated.

This means that the profit rates across industries in Australia aren’t being equalised by normal competitive processes. This creates a number of problems, including the two stage economy some economists are warning about.

(As an side the monopolisation of capital globally means that these competitive processes are undermined in a range of industries and intervention to mirror the outcomes of competition is and will be one important option for governments around the world. As the mining companies show, the industries involved will resist any attack on their super profits.)

So the Rudd Labor Government adopted the Resource Super Profits Tax to help equalise the rate of profit across industries and slow down the mining boom. It was the state imposing a tax to produce a result consistent with the ideology of competition within capitalism.

Further Rudd Labor wanted to redistribute this largesse to the less profitable sections of capital through a tax cut, helping address the stagnant after tax profit rate in those industries.

This is all consistent with Labor’s role – to rule for capital. This role means at times attempting to override the interests of sections of capitalism for the system as a whole.

The mining bosses fought back to defend their own interests at the expense of the wider system. The ascension of Gillard to the Prime Ministership and her commitment to negotiate with the mining barons means they have been successful.

The Resource Super Profits Tax compromise Gillard engineers will be something like no 40% subsidy to failed projects, no exploration rebate, a super profit of the long term bond rate plus 5%, not applying the tax to existing projects, market value instead of historical cost, and a rate of about 30%.

The loss in predicted revenue – say $6 or $7 billion of the estimated $12 billion – will be made up by no company tax cuts and no accelerated depreciation for small business, no superannuation top up for low paid workers and attacks on social spending – education, health, public transport and the like. This compromise will be disguised as some sort of victory for both sides.

Having been elected by the mining magnates, Gillard will give them what they want on the mining tax. She may go further and develop proposals for dealing with climate change that favour them even more than Rudd’s postponed scheme and generalise the experience to buy off other sections of capital. The historic role of Labor as the party that rules for capital over sectional business interests is at an end.