Australia's super system is three trillion dollars of unused worker power

Australia's compulsory superannuation system, established during the Hawke/Keating era of Labor government, has since blossomed into an enormous pool of cash, around $2.9 trillion AUD, belonging to Australian employees.

Meanwhile, organized labour in Australia is in trouble. Membership is in long term decline, amidst a hostile political and legal environment. Correspondingly, pay and conditions are bad, particularly at the lower end of the employment market: Australian workers and unions lack bargaining power and political leverage.

Pondered together, these two realities are hard to reconcile. Australian workers collectively possess a vast pool of cash - but little political power to show for it. Money and power usually go hand in hand, but here, apparently not.

Super's trillions could be wielded for incredible political power by Australian workers, but aren't. Fixing this is perhaps the greatest hope for the future renewal of organized labour and the working class in Australia.

To do this we must understand the strengths and weaknesses of the existing system, and how with some changes they could be wielded by workers to defend, and take control of, their own interests.

The scale

$2.9 trillion is a number so large it is hard to perceive. Divided equally, it roughly $115 000 for every single Australian.

It's perhaps most meaningfully compared to other large economic measures - Australia's annual GDP is roughly $1.9 trillion.

It could buy the entirety of every single company on the ASX, and leave a trillion left over. Considered globally, it's worth roughly ~4% of all the world's publicly traded companies.

The fees

The management fees charged every year on super accounts are also staggering: At around 1% of the total pool per annum, this equates to $30 billion dollars, which is twice what australia spends on electricity per year, and nearly as much as Australia's military budget.

Industry funds (see below) have made much of the fact that their fees are lower than the commercial variety - this is true, but they are still far too high.

The cause is mostly duplication of effort from handling many different funds - Norway's publicly owned retirement fund actively manages cash of similar scale for annual fees of roughly 0.05%, or about twenty times less proportionately.

This pointless waste, handed over to the financial class every year for no good reason, could be better spent improving the lives of Australia's most vulnerable. For instance, the cost to raise the brutally low Newstart benefit by $75 per week would cost a small fraction of this: $3.3 million a year.

Other countries

Norway's fund is an instructive comparison in other ways too.

It it the largest single retirement fund in the world, valued at over $1.1 trillion USD - similar in scale to Australia's overall cash pool, but very different in structure and nature.

Australian superannuation is a system of individual defined-contribution accounts. Norway's fund is entirely collectively owned, a pool of cash for the future not allocated individually.

Norway's fund is owned and operated by the government, funded initially resource taxes but now self-sustaining. Australia's super funds are operated by commercial funds, or by industry funds, which are run by a board comprising (by law) half employer representatives and half employee (typically union) representatives.

Norway's actively manages its fund, and engages in a fairly high level of shareholder activism. It maintains a blacklist of companies it will not invest in for ethical reasons, and also works towards management reforms of companies it invests in, for instance, routinely opposing the appointments of the same person as both CEO and Chair of the companies it invests in. Industry funds in Australia also do some level of engagement in their capacity as shareholders, but it seems much milder: The chair of the largest industry fund claims they are "not activists".

Political power left on the table

What could be achieved if this $3 trillion of financial power, were used for activism directly on behalf of workers?

David Webber, in his book "Rise of the Working Class shareholder: Labor's last best weapon", describes the incredible successes worker-owned pension funds have had in taking on the capitalist class, and winning better conditions for workers. He highlights the battle by california pension fund CalPERS against the board of Safeway. Where traditional strikes failed, and exacted a terrible toll on striking workers, the pension funds won a decisive victory against the board, and reversed the planned pay cuts.

The toll on affected workers was much lower - their pay continued as normal and no striking was required.

And this victory was achieved while the fund owned nowhere near a majority stake of the company.

If victories for workers can be achieved with only this small fraction of ownership, think of the gains that could be made with larger, majority stakes - even full worker ownership isn't out of reach. Remember Australian workers already own enough money via their super balances to purchase the entire Australian stockmarket.

As socialists, we want to seize the means of production - but first we need to figure out how to actually use the means of production we already own.

Instead of limiting our imagination to organizing strikes against corporate giants like Qantas, we ought to think bigger: Workers could and should own Qantas and run it for themselves. Via their super investments, workers already own companies that together would dwarf the scale of an individual enterprise like Qantas - but hand that power over to commercial interests to operate instead of using it directly.

Reckoning with super's current problems

This incredible political potential is neutered by a number of structural problems - fixing these problems ought to be a priority project for anybody interested in socialist ownership of Australia's capital.

Foremost is the individualized nature of super balances. Besides inhibiting any collective aspirations, the inequality in these balances parallels the income and wealth inequality in the wider economy - while those with stable professional careers, continuous employment, and few domestic obligations enjoy enormous balances, median balances are shockingly low. The median woman reaches retirement age with a measly $36 000 balance ($110 000 for men), and many retire with zero balances.

In its ostensible purpose as retirement security for ordinary Australians, the super system has been a collossal failure, and has done little to prevent poverty in retirement for the country's most vulnerable.

Any battles over the future of super must realize that any retirement system tied to lifetime income will inherently fail the poor, and poor women in particular. To fix elderly poverty there is no substitute for a generous, universal pension.

Super also fails low income people as they pay into the system - reducing their disposable income by forcing them to pay for a retirement they may not live to see. It's often proposed to reduce the super percentage to solve this but this is usually proposed by those with bad motivations more interested in reducing obligations for employers. A better way would be to allow withdrawals from super accounts for those on low incomes (hopefully by the time those people retire we'll have a system that fixes the problem of their lower balances).

Fighting the wrong battles

Due to their current and historical ties with super, the Australian union movement are staunch defenders of super against attacks from the Liberals, and with good reason - proposed Liberal reforms of super are badly motivated, would weaken worker influence over the funds.

However, these defensive maneouvres are often built on dubious rationales, and defend the weaknesses of the super system rather than buildings its strengths.

The typical line is that the super system builds worker wealth, and allows workers to have comfortable and secure retirements.

But as we've discussed, super does does a terrible job of this, failing low income workers, particularly women, leaving them vulnerable in retirement.

Super's real strength is this potential for workers to acquire capital that is collectively and democratically owned, and operated by workers themselves - it is on this basis that super is best defended.

From individual balances to collective power

That potential cannot be realized without substantial, fundamental changes to the super system.

Foremost is the need to move away from individualized balances towards a pool of collective ownership - vested interest resistance from doing this all at once would be fierce but there are numerous strategies for shifting the ownership model over time towards an entirely collective one:

Beyond the core accounting, governance must be changed to reduce the size and role of the for-profit funds, and eliminate the influence of the corporate class over industry funds: it's critical that ownership of the fund assets be moved entirely into worker and public hands. A broader public stake is important so that non-workers too have a say in the economic management, and in recognition that industry ought to serve the wider public and not just itself.

Complimentary efforts must be made in defending, increasing and universalizing the existing government pension, allowing the super system to move beyond its status quo role as retirement system and more fully embrace its role as vanguard of collective economic management.

Beyond the grand bargain

Super has rather dubious origins in the Price and Incomes Accord - a neoliberal "grand bargain" between capital and labour. Super was widely considered by its architects as a substitute for direct pay rises. Paul Keating himself summarized this mentality in a recent column in the context of a possible raise to the contribution rate:

"...working people will either get the 2.5% extra super or they get nothing"

It's essential that we transcend this false choice, and realize super's potential both a source of collective ownership and a weapon for greater labour power.

It's important too to move beyond the ideological limits of the Hawke/Keating era, and build a new, more radical vision of worker-owned wealth - excessive nostalgia is the refuge of the defeated.

The battle ahead

These are difficult fights to have and to win. But they represent Australia's best path to worker liberation, and the importance of these struggles must be understood, articulated, and emphasised by anybody in favour of this broader cause.

They'll face fierce resistance by the capital class - but we ought to remember that much of this battle has been won already through the raw scale of the ownership already achieved.

There is also a cultural barrier - part of the reason these frontiers remain unexplored is a hesitatation to actually wield economic power. Capitalism has rendered workers defeated for so long that in some ways we have forgotten how.

But to fail to take this power, and fully manage our own workplaces and capital ourselves, is to reduce ourselves to begging for crumbs from the capitalist's table.

We can't fix climate change or poverty by begging or politely asking, or otherwise delegating to the capitalist, managerial class - the only way is to take what we already own, and properly run it ourselves.