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Catalan referendum scores massive vote for independence

By Joe Montero

The fallout of the independence referendum in Catalonia is that many more people voted than expected, given the circumstances of an outright assault on the ballot by the paramilitaries that had been ordered by the government in Madrid. At least 844 were injured.

Over 90 percent of those voters cast a ballot. This is around 42 percent of the population or a little over 2.2 million people. More than 90 percent said yes to independence.

While the vote may have been skewed towards those supporting independence, there is enough evidence to suggest that most Catalans are in favour. Any survey taking a sample this size, even considering the margin for error, would conclude the same.

Suggestions that the vote is not representative do not hold water. The will of so many people cannot be denied.

Armed with its success, the Catalan regional government is saying that it will now press on to make independence a reality.

“We will respect the mandate which the citizens have given us,” regional Vice President Oriol Junqueras said.

Catalan unions are holding a general strike today, to protest state violence. Many union leaders and members support the independence cause.

Madrid has only itself to blame. Its actions worked to convince more Catalans that they were better off breaking away.

The result has sent a seismic shock through Spain. Claims about legality and the constitution do change the fact that brutal action was taken to deny a people their voice and this not isolated the Catalan independence movement but the Mariano Rajoy government and the Popular Party.

The bottom line is that millions of Spaniards are disgusted with what has been done in their name. Even many of those who were not sympathetic to Catalonia breaking away are now saying that the people there have a right to be heard.

The result has also caused am for headache for the European Union,  which has so far sat on the fence and its reputation as an upholder of “democratic values,” is starting to suddenly wear a lot thinner. It wasn’t particularly strong in the first place. But now it the leaders of most of its nations are really looking like hypocrites.

There is growing nervousness about this and its potential to fuel further political instability in the region. It is possible that the European Union might now be pushed by the need of political expediency, to exert pressure on Madrid to enter dialogue with the Catalans.

The Catalan government is pressing for this and working to gain support for the European Union to mediate in talks.

For Spain, it is already clear that the independence movements, such as that of the Basques, the Galicians and natives of the Canary Islands have taken stock and been armed with a stronger case for breaking away.

Condemnation of Madrid’s methods has been worldwide, even if some of it is rather mild. The point is that the use of violence and rubber bullets on peaceful voters has been a shock and a reaction is building.

Mariano Rajoy might go on about winning, his defending Spain and that there was no referendum. Behind the pronouncements he is a dead duck. He has called an emergency meeting of the government to extricate himself from a sticky situation. What remains to be seen is whether there will enough politicians there with the backbone to make a stand and right a wrong.

Unfortunately, the leader of the Socialist Party, Pedro Sanchez, announced that he would not recognise the result of the referendum either and this might throw a lifeline to Rajoy, even if it is only temporary. Exactly how this translates in the days ahead, only time will tell.

The impact of events that have unfolded does not just concern the Catalans, Spain and Europe. It raises a question about the limit and therefore inadequacy of the western parliamentary system, usually represented by two traditional parties.

Is there a need for change in the direction of giving citizens a much more authentic voice?

This is a matter for Australia as well.

Maybe this is a good reason why our politicians have remained silent about the events in Catalonia. This doesn’t mean that the rest of us should not be involved in the discussion.

Mariano Rajoy a worried Prime Minister of Spain goes on TV to declare he has won

It is not wages but other factors are driving up business costs

 By Joe Montero
Wages are not a major cause of rising business costs. This is a bold statement in the face of all the rhetoric claiming the opposite to be true. This does not make it less true.

One qualification must be made. Wages do figure highly in small business. But this diminishes as the size of the operation increases. What follows concerns big business. The focus is important because big business is the most decisive part of the Australian economy.

Note that this is not an exhaustive examination, but a brief sketch of what goes on.

Looking back over history shows that real wages tend around what it costs to raise an average family. This constant, was recognised by the landmark Harvester case in 1907, and regardless of whether it admitted or not, the truth of it shown  the need of the average household to use all of its income to maintain its accustomed position.  If real labour costs remain relatively constant, they are not likely to be the cause of rising real costs over the economy as a whole.

From time to time there is some departure from this rule, depending on the relative strength of the unions and employers and the short-term labour demand and supply factors. But over time, the norm asserts itself.

From the view-point of a business, operations are based on the overall costs of production. This does involve labour costs. It also contains the costs of providing the premises and equipment and materials needed to operate the business, plus taxes and other impositions placed by society. Only the first two are going to be considered here, because they are the most important.

Labour differs from the others in that the bigger the volume, in terms of units over a specified time period, the less the labour cost in each.  Put another way. If one wage produces 1 unit in an hour is made and if this is changed to produce 10 in the same hour, the cost of labour has dropped to one tenth of what it was. It is the reason why the cost of labour is called variable capital.

Conversely, the cost of the premises and the equipment (other less important inputs are left out for ease of explanation) used, cannot be spread out over a larger volume in the same way. The cost remains the same for each unit, regardless of the quantity. This is why economists call this fixed or constant capital, depending on the school of thought. Increasing the volume of business increases the cost of this capital proportionally.

Fixed or constant capital has another property that differentiates it from variable capital. Investment in variable capital can be changed easily. The other capital cannot. The premises and equipment used come in precise units and at a certain point reach full capacity. Shifting to a new place to do business, redesigning it, or buying a new machine is expensive. Further expansion requires major new investment, which adds considerably to the costs of running the business. Times of rapid technological change add further to this problem.

The pressure to contain costs is the major driver for business expansion. More so, when the market is tight, because it is the smaller players that are most likely to fall off the perch. It is this that pushes forward the imperative for increased productivity. Increased productivity simply means spreading a given quantity of labour used over more units.

In an economy that is in truth shrinking and business opportunities with it, the tendency is to exploit labour to cover the rising cost of fixed or constant capital. Hence the drive to remake the labour market through the creation of flexible casualised work, cut wages growth and attack penalty rates. The real wage is falling  in the present period. The degree to which this falls below the natural rate, marks the extent of a falling standard of living.

While some individual businesses may gain from this, in the aggregate it is another story. Putting wages below their natural real level contracts the economy further. This will translate into fewer business opportunities and a fall in the aggregate rate of profit. How this occurs is another story.

The final word is that rising costs is what is driving the call for assistance through less tax on business.


















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