MARCH 1981 - VOLUME 2 - NUMBER 3
Why the Rush to Sell?
by Phillip Frazer
Australia's immense store of natural resources, its well-educated population, and its significant industrial base would suggest a nearly boundless potential for economic development. In terms of per capita income, Australia ranks ninth among developed countries. And yet, in terms of foreign control of investment, Australia ranks with many Third World nations as almost a client state of multinational corporations.
Why are Australia's federal and state politicians seemingly falling over each other to dispossess Aboriginals, flood Australia's river valleys, and gouge its mountains-all in order to sell off the nation's natural resources and lure energy-intensive industries with below-cost electricity?
One Australian writer, Jim Kemeny of the Department of Politics at the University of Adelaide, provides this historical perspective:
"The industrialization of Australia was built upon the highly profitable industries which exploited natural resources, particularly minerals ... British capital played a central role in exploiting and then reaping the profits from their enterprise ... the dependence of the indigenous ruling class upon foreign capital for initial industrialization meant that it became increasingly excluded from the next and more profitable stages in the development of Australia's industrial economy. "Kemeny then argues that, over the nation's brief history as an industrial society, this dynamic has been maintained-that is, foreign control has bred even-greater foreign control, while the local power elite has remained fragmented. The end result is a country that has "the natural resources of a major Third World society, far in excess of anything possessed by other minor capitalist societies ... the domestic market of a middle-ranking industrial society ... (and a power elite that is) neither well-integrated nationally nor possesses significant surplus capital of its own with which to determine development." In short, a prime candidate for foreign-controlled investments.
The lack of national integration goes back to colonial days, which ended with federation in 1901. The two largest states, Western Australia and Queensland, have small populations and economies, that were, until recently, dominated by agriculture. The local elites in those states have traditionally harbored powerful suspicions of the big-city states of New South Wales and Victoria, which have industrial bases. Today this rural-industrial rivalry has intensified since the big states have the bulk of the new-found mineral wealth. State governments in Western Australia and Queensland have pursued foreign investment with little regard for the priorities of the nation or the other states.
The country, then, remains divided, unable to assemble the huge capital sums required to develop its vast minerals and energy resources-at least, not at the pace of development preferred by multinational corporations.
But this is not to say that the capital isn't available, or couldn't be generated. Out of a total foreign investment inflow into Australia of $A2,586 million in the financial year 1979/80, $A900 million, or 35 percent, came from foreign-controlled corporations' undistributed income. That is, 35 percent of the "foreign" capital came from profits made in Australia by the Australian subsidiaries of multinationals. In the period from mid-1975 through mid-1978, the figure was 53 percent. In the mining sector, the trend is toward a greater percentage of earnings being taken out of the country-in 1968-69, only 1/ 2 percent of "primary production" income payable overseas was in fact repatriated. In 1978-79, the figure was 90 percent.
Furthermore, those figures apply only to what is described as "foreign investment inflow"-but almost 30 percent of direct investment in Australia by foreign investors is not "inflow" but money borrowed on the Australian capital market.
In other words, well over half the funds being invested in Australia by multinationals and other foreign sources are funds either borrowed from Australians or profits made in Australia.
It was this cycle that R.F.X. Connor, Minister for Minerals and Energy from 1972-75 under Labor Party prime minister Gough Whitlam, tried to break by attempting to develop Australia's resources on the national level with funds borrowed from Saudi Arabia.
Connor's brusque style did not help him persuade foreign investors, or even Australian ones, to treat his plans with sympathy. Once, when asked by a reporter what his policy was on uranium, Connor replied, "Leave it in the ground." The response by foreign investors was dramatic.
Between 1966 and 1972, foreign companies had provided about 35 percent of the total private investment in the Australian economy. After the Labor Party came to power, this share dropped to 11.3 percent in 1972-73, and 7.4 percent in 1973-74. It remained relatively low until a conservative coalition government came to power in 1976. By 1979-80 the level had increased to 18.9 percent-a sign of renewed "confidence" from abroad, tempered by the increased availability of Australian capital to foreign investors.
Labor politicians spent most of their term in office (1972-76) fighting complex parliamentary , battles to implement their reform-minded increases in social spending, and they took to describing the "pullback" by foreign corporate investors as a "strike by capital."
As that financial confrontation continued into its fourth year, in 1975, another element of controversy surfaced. Prime Minister Whitlam discovered that the deputy Leader of the conservative opposition was renting a house to a high-level undercover CIA official named Richard Stallings. In a heated moment, Whitlam accused his opponents of taking money from the CIA.
Whitlam's throw-away line led the CIA to threaten to cut Australia off from all of the commercial and military intelligence which the agency had been providing its Australian counterparts for decades. This threat was transmitted through the Australian Security and Intelligence Organization (ASIO) liaison officer in Washington to his Director General who informed-not his Prime Minister (Whitlam)-but a top-level Defense Department official who showed the cable to the Governor-General John Kerr, himself a former intelligence operative. The next day, November 11, 1975, Kerr invoked a dubious interpretation of his constitutional powers and dismissed the Whitlam government in what Australia's leading constitutional scholar, Professor Colin Howard, describes as a "constitutional coup."
So ended the Labor Party's attempt to make the federal government the force behind economic self-determination for Australia.