- by Anna Pha
- The Guardian
- Issue #2067
As families struggle to put food on the table and keep up with rental and mortgage payments, profits are soaring. Inflation was running at six per cent for the year ending 30th June with housing (at 8.1 per cent) and food and non-alcoholic drinks (7.5 per cent) – the two largest drivers of the cost-of-living crisis.
While the shortage in housing is contributing to rising costs, the banks are also making a major contribution. Mortgage payments on relatively recent home loans of $600,000 have risen by $1,000-$1,200 or more. Every time the Reserve Bank of Australia increases the official rate, the Big Four banks pass on the increase in full to borrowers but fail to pass it on in interest to those with savings.
As a result, the Big Four (CBA, NAB, ANZ, Westpac) are raking in record profits. For the first half of 2023, they reported profits of $17.1 billion, up 19 per cent compared with the first six months of 2021.
A recent survey of more than 1000 households found the cost of an average weekly grocery shop had risen by 25 per cent over the past year from $145 to $185.
As struggling households look for ways to save on soaring grocery bills, the major supermarkets are also wallowing in profits. Woolworths made a $907 million in profits for the first half of 2023 – up 14 per cent on the year before. Its profit margin increased to 30.7 per cent. That is its revenue from sales exceeded its costs by 30.7 per cent!
Coles increased its net profit by 17.1 per cent to $643 million with a profit margin of 26.5 per cent.
These are margins that every capitalist dreams of!
The term profit-driven inflation is no exaggeration!
But how do the banks, supermarkets, and other sectors of the economy get away with it? After all we have ‘free markets’ where competition is supposed to drive down prices.
The banking and supermarket sectors in Australia are among the most profitable in the world.
Woolworths, Coles, and the Big Four banks are what is known as monopolies. Because of their size they control markets. Monopolies exert considerable power to not only determine what they charge consumers but also the terms of trade with their suppliers. The large scale of their purchases enables them to demand lower prices from producers and manufacturers than would-be competitors pay (see item in Dingo page 4).
They are not the only monopolies in Australia. Over 80 per cent of the market for newspapers, domestic airlines, health insurance, department stores, internet service providers, baby food, and beer is controlled by the biggest four companies in these industries.
And when it comes to petrol, cinemas, liquor retailers, telecommunications, bottled water, and fruit juice, the biggest four providers control around two-thirds of the market. (Andrew Leigh and Adam Triggs, “Product market power and its implications for the Australian economy”)
Monopolies also exist in mobile telecommunications, internet service provision, energy retailing, insurance, and pathology.
And then there are the Big Four consultancy/accounting firms (PwC, EY, KPMG & Deloitte), internet search (Google) and social media (Facebook and Twitter), Amazon, Apple, and Facebook that are monopolies.
RISE OF MONOPOLIES
Lenin, in Imperialism, the Highest Stage of Capitalism, pointed to qualitative changes within capitalism since the time of Marx. He said “… the rise of monopolies, as the result of the concentration of production, is a general fundamental law of the present stage of development of capitalism.”
Lenin raises one of the defining economic characteristics of imperialism: “the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life.”
He also refers to “the formation of international monopolist capitalist associations which share the world among themselves.” The Big Four consultancy/accountancy firms are one such examples of global monopolies. Other examples are Google, Facebook, Amazon, Ebay, Alibaba, Visa. They now exist across most industries. (see Guardian 2066 for examples of food monopolies).
Lenin pays special attention to the concentration of production and capital in the development of monopolies. This occurs through takeovers, mergers and smaller companies going bust as they are unable to compete.
While countries have anti-trust laws to prevent monopolies taking over markets, these are largely ineffective. Likewise with legislation that purports to prevent the formation of cartels (monopolies colluding on pricing) and monopoly price fixing.
In Australia, the Competition and Consumer Act is supposed to protect “free markets” and the interests of consumers from the creation of large monopolies and monoplu price fixing. It has proved largely ineffective.
The monopolisation process accelerated in the 1980s and 1990s when neo-liberal governments deregulated markets and privatised banks, insurance companies, energy retailers, and telecommunications, in the name of increasing competition and efficiency and lowering prices for consumers.
In the ’80s, major banks in Australia accounted for 50 per cent of lending, with credit unions, building societies and other home-loan originators making up the other half. By 2010, banks controlled 91 per cent of the lending market. This has since declined but it is still over 70 per cent.
Lenin stated that increased concentration of production would result in new and more intense contradictions. He was right.
Today we are witnessing a widening of the wealth gap midst record wealth creation; mass starvation midst a plenty of food production; climate change a direct result of the pursuit of profit regardless of consequences; scientific advance but its application not put to the benefit of humanity; wastage on military and wars; medical developments capable of saving lives but access denied because of patenting systems and the lack of ability to pay.
These contradictions are also seen in financial and economic crises, water crisis, amongst others. Capitalism is in deep crisis and resorts to war for domination of markets as the way out.
One of the most profound changes that we are seeing is a change in the role of the state. The state is withdrawing from many of its responsibilities for society and undoing many of the progressive social gains of the post-WW2 period.
Privatisation and deregulation are giving more power to the monopolies including finance capital through its loans and partnerships with corporations.
We are witnessing in Australia the Albanese government surrendering sovereignty and undermining democracy in service to the naked power of monopoly capital, in particular the US military industrial complex.