Prime Minister Kevin Rudd's proposed tax on mining industry super-profits has, to the surprise of no one, attracted a great deal of whining from the mining sector.
Andrew Forrest of Fortescue Metals accused those who supported the tax of engaging in “class warfare” and threatened to sell his mining interests overseas if the tax goes ahead, reported the May 19 Herald Sun. On May 20, he said that he had shelved $17.5 billion in new mining projects as a result of the tax.
Threats of “capital flight” are standard when a capitalist enterprise sees its profit margin threatened with even a slight decrease and governments routinely bend over backwards in response. The perceived risk of capital flight is used to justify handouts to big business, such as the $10 billion a year subsidy to Australian fossil fuel industries revealed by a University of Technology Sydney (UTS) report released on April 30.
The whining from the mining sector would seem more justified if the proposed tax wasn’t (in addition to increasing superannuation payments) funding a cut in the overall corporate tax rate to 28%.
It’s a pity that we get another serve of “fiscal responsibility”, with no serious investment in improving social welfare or helping develop an ecologically sustainable economy.
The Rudd government is not seeking to tax the mining industries profits in the interests of ordinary people or the environment, but in order that the benefits of the mining boom can be shared more equally among the capitalist class as a whole.
The big mining companies, not surprisingly, are less than thrilled by this approach — hence the crude attempt at economic blackmail.
However, while the Rudd government will use the threat of capital flight to justify a likely “compromise” deal with the mining industry that weakens the tax, the threats are largely hollow.
With or without the tax, the mining industry in Australia is extremely profitable. Given the ongoing global economic crisis, it is hard to imagine big mining companies turning their backs on the Australian industry.
What is more, the threat of capital flight only works if a government refuses to consider nationalisation.
The use of capital flight to blackmail governments into not adopting policies unfavourable to big business depends on the belief that only big business can, or should, run such industries.
This is the position of the Rudd government, which is slavishly loyal to Australian corporate interests.
However, a reasonable response from a government to the threats from companies like BHP and Rio Tinto to go offshore would be to tell these companies that, if this occurs, the government will take over their mines and related infrastructure.
State ownership would give government all the profits — not just 40% above a certain level.
More importantly, state ownership would allow a government committed to tackling the climate crisis to use mining revenue to fund development of renewable energy, while seeking to phase-out destructive mining (especially of coal) and re-train mining workers for new, green industries.
Seen from this perspective, a tax of mining industry super-profits is a step in the right direction — but not the ultimate solution. It should be seen as the start of a process that seeks to shift major industry towards the needs of people and the planet.
If private owners of big companies resist or sabotage this change, governments should be willing to step in and take over.
Nnimmo Bassey, chairperson of Friends of the Earth International, told the World People’s Conference on Climate Change and the Rights of Mother Earth in Cochabamba, Bolivia in April that to avoid devastating climate change, “oil should be left in the soil, coal should be left in the hole, and tar sands should be kept underground”.
Bassey is from Nigeria. Both Bolivia, whose radical government hosted the conference, and Nigeria are poor countries that have suffered from the curse of having carbon resources extracted by Western multinationals at the cost of terrible environmental destruction and social dislocation.
At Cochabamba, Bolivia’s President Evo Morales, said the profit-driven extraction of resources had to end if the world was to avoid catastrophic climate change. For that to happen, the private ownership of resources had to end — and capitalism with it.
This is a hard path for carbon-resource-dependent Third World countries like Bolivia and Nigeria, but is far easier for a rich, developed country like Australia. And the best way to manage the transition away from environmentally destructive mining is for the industry to be in public hands.
But the Rudd government has other priorities. The $10 billion state subsidy given to the fossil fuel industries is 25 times higher than that which goes to renewable energy., the UTS report revealed.
The vested interests of the fossil fuel companies rig the game, making it impossible for a transition to renewable energy. The government allows this to continue.
This must change. We need a new set of rules, free from the variations of the market. A set of rules where choices are made not on what is profitable, but what is needed for our survival.