Economic system

Gerry Harvey is an icon of Australia’s corrupt economic system

Gerry Harvey, the Australian retail magnate, is not shy of controversy. In a now infamous interview on the Australian current affairs show 60 minutes, the billionaire described COVID-19 as a great business opportunity. Following a backlash, Harvey complained that “everyone thinks I’m this callous old bastard who profits off other people’s misery”. For once, Harvey was absolutely right.

As lockdowns forced many people to stay home, sales of furniture, housewares and appliances soared. As a result, Australian retail chain Harvey Norman more than doubled its profits to $462 million last year. Gerry Harvey, who owns more than 30% of the company, harvest more than $70 million in dividends, increasing his personal wealth by 24%.

Financial prosperity did not mean that Harvey Norman was above government subsidies, however. The company raised an additional $22 million in JobKeeper wage subsidies intended to prevent struggling companies from making layoffs. Not content with benefiting from a massive upward redistribution, the company called on volunteers in November 2020 to help with the “busy back-to-school period.” In exchange for their services, these volunteers received shopping vouchers and store credits.

Social media users lambasted the company while unions staged protests at Harvey Norman stores demanding a minimum wage hike. Harvey Norman’s social media operators responded to this criticism by taking to Twitter blocking frenzy and censor comments and posts on its Facebook page. When that didn’t work, the company went on a charm offensive, responding to complaints with weird and tactless emojis. Finally, Harvey Norman deleted his official Twitter account.

Tact and decency were never virtues associated with Harvey. He is on file saying that donating to charities for the homeless is like “helping a whole bunch of hopeless people survive for no good reason”. And, in 2016, he suggested that Australia’s political impasse could only be resolved by install a dictator.

The social crisis caused by the pandemic has clearly not led Harvey to reveal a friendlier side of his personality. True to form, in March of last year he wondered “Why are we so afraid of contracting this virus? … There is practically nothing to worry about. Citing his company’s recent record air purifier sales as an example, Harvey urged people to view the pandemic as “an opportunity”.

It’s easy to get bogged down in horror at the personality of a man like Harvey. Many of his public remarks are so heinous that any decent person can’t help but be disgusted. As socialists, however, we should aim to see through this quagmire and understand the ideology behind Harvey’s statements.

The keys to understanding this ideology are found in Master CEOs: Secrets of Australia’s Leading CEOs, a series of modestly titled interviews with members of the Australian bourgeoisie. There, Harvey paints himself as a Randian titan of industry, a benevolent Atlas sustaining the world:

I’ve helped a lot of people make a lot more money and helped them get into jobs they never would have had [sic] if they hadn’t met me. They make maybe $600,000 a year now and I think 90% of those cases they wouldn’t make anything like that if they hadn’t come to my territory.

Throughout his interview, Harvey praises the competitive culture his company fosters, which rewards sales with ever-increasing benefits. This culture may be good for Harvey’s bottom line, but its social consequences have been devastating.

Several years ago, the company’s Alice Springs store was caught in the act of falsifying information in order to register people to store credit cards. Clients without a stable income, often with poor English proficiency, found themselves burdened with unaffordable debt. In some cases, these debts were then deducted from their social benefits. An investigation by the Australian Securities and Investments Commission forced the company’s finance division to repay approximately $1.5 million in fraudulently generated debt.

Paid to businesses and introduced last March, the JobKeeper wage subsidy was meant to prevent layoffs due to the pandemic. to be eligible, companies only had to declare, or credibly forecast a one-time drop in income. Once qualified, they continued to receive payment, even though employees returned to work.

Although eligibility rules were tightened in September, profitable companies like Harvey Norman had already received six months of JobKeeper money. It was not uncommon. According to a report According to governance consultancy Ownership Matters, 20% of large companies that received JobKeeper payments last year increased their profits. Alan Kohler, economist and former editor of the Australian Financial Review, valued that if all companies are taken into account, the total value of wasteful payments can approach $30 billion.

Even this figure may be underestimated. Unlike similar wage subsidy programs in the UK, New Zealand and the US, Australia has kept no public records of JobKeeper grants paid to private companies. Despite public outrage, there is no legal mechanism to compel companies that have wreaked havoc during the pandemic to return JobKeeper payments.

JobKeeper’s business-friendly orientation is more than an unfortunate consequence of the policy that has been hastily created in response to a crisis. Rather, it is the result of the Liberal Party’s broader pro-business agenda, as Lauren Kelly argued in Jacobin Last year.

Shifting responsibility for distributing wage subsidies to corporations is a way to privatize welfare and build corporate support for the Liberal Party. As Director of Ownership Matters Dean Paatsch observed:

The winners of the JobKeeper game – employers, small businesses, private companies, private schools – are clearly qualified…but this represents a simple transfer of wealth from the public treasury into private coffers.

Harvey complaints that he will repay that money by paying $42 million in higher taxes. It is, however, easy to see how fallacious this assertion is if one remembers that any tax levied against Harvey Norman would only take a portion of that sum.

Since Harvey Norman Holdings pays the standard Australian corporate tax rate, only 30% of the JobKeeper payments it has received will be clawed back. The remaining 70% will remain pure profit. The only way to recoup the full amount through tax would be to levy 100% profit tax.

Alison Pennington, senior economist at the Center for Future Work, identified a pattern in the behavior of JobKeeper job seekers. While she didn’t go so far as to allege that the policy was designed to funnel money into corporate pockets, she noted that:

It is no coincidence that real wages are stagnating, labor’s share of national income is falling, and corporations are racking up record profits. That’s the whole plan. This is why Gerry Harvey publicly brags about his record profits and the expansion of his stores, while claiming that higher wages for his workforce are unaffordable.

Instead of requiring profitable businesses to repay the subsidy, the government has simply appealed it is up to them to do it voluntarily. When asked if these companies should return the money, the Prime Minister noted: “It was up to them.”

The National Retail Association (NRA) represents major retailers like Harvey Norman. In one recent submission at the Fair Work Commission, which sets the federal minimum wage, the NRA argued that the minimum wage should not be raised higher than inflation. In some industries, they proposed, even that should be postponed until November.

In the past, Gerry Harvey also argued that, as Australia’s minimum wage is the highest in the OECD, wage increases should be limited to make the country more competitive. Alison Pennington, however, pointed out that identical comparisons of Australian salaries with those of other countries distract from the inequalities within the country. According to Pennington, a better measure of the Australian minimum wage is relative to the median wage.

Compared to other OECD countries, Australia shows a downward trend in terms of the gap between the minimum wage and the median wage. According to Pennington: “The Australian minimum wage is now 54% of the median wage. In 1992, it was 65%. Compared to other OECD countries, Australia is not, contrary to Harvey’s assertion, a world leader but in fact ranks twelfth out of twenty-nine.

Despite Australia’s intermediate status when its minimum wage is compared fairly to those of other OECD countries, the federal government believes that wage increases should be limited. In their submission at the Fair Work Commission, the government argued that a higher minimum wage would place a “major constraint on the recovery of small businesses and could dampen employment in the sector”.

Unsurprisingly, the NRA agrees. This argument is, according to Penningtonoften used to justify wage freezes.

The biggest beneficiaries of a minimum wage freeze are powerful market dominators like Harvey Norman, Woolworths and Coles. They have by far the largest minimum wage workforce – hundreds of thousands of people. Higher wages would give Harvey Norman workers back some of the windfall profits they created…. Almost two-thirds of Australians think the minimum wage should be higher. Gerry is playing an unpopular card that is ripe to be denounced by the unions.

The unreasonable greed of companies like Harvey Norman cannot be justified by citing the need to remain competitive in a global market. The outpouring of anger against Gerry Harvey shows that there is a large audience out there to challenge our corrupt elite. It’s time to demand that billionaires pay back more than their ill-gotten JobKeeper superprofits.