Who rules Australia? The politicians, the ultra-wealthy class of capitalists or the high-powered bureaucrats who run the state—the military generals, court justices, heads of government departments and so on? The answer is all three. Together, they make up the Australian ruling class.
The most important section, however, is the capitalist class. While the government and the state bureaucracy wield a great degree of power and influence, their actions cannot be understood without reference to the capitalists, who control most of the economy. Capitalists own the things that are required to make society function: the agricultural land, the offices and factories, the telecommunications infrastructure, the financial wealth and so on. They are the people in charge of the big companies that have decisive weight in and influence over the economic, political and even social life of the country.
The capitalist ruling class is quite small; being a business owner doesn’t necessarily qualify someone as a member. For example, the Bureau of Statistics counted about 2.4 million Australian businesses at the end of the last financial year. But of those, 1.4 million were “non-employing”, 710,000 employed between one and four people, and 220,000 employed between five and nineteen people.
None of these business owners could be said to “rule” the country. They are people who own a small or modest shop or family business. They have significant power over their employees (if they have any), and many make good money. But, individually, they don’t wield much, if any, influence in the broader economy. In the archaic language often used by Marxists, these are the petit bourgeoisie—the small capitalists who make up a section of the middle classes. Often, they are just as screwed by big business as the working class is, albeit in a different way.
There were a further 55,000 companies each employing between twenty and 199 workers. Most of these count as middle class business owners as well. Somewhere along the spectrum, however, the owners of medium-sized businesses begin to blur into the ruling capitalist class as the companies become of a size that gives owners significant social and economic power.
At the top end, there were more than 4,000 firms each employing at least 200 people. A few years ago, the Department of Industry and Science estimated that this group of firms accounted for 44 percent of industry “value added” and 95 percent of exports. And the largest 100 companies listed on the Australian Securities Exchange today have a combined value of almost $2.4 trillion. These big capitalists overwhelmingly influence how resources are used, who will work and where they will work, which things are produced and how they are distributed. Their decisions, which are made on the basis of how much money can be made, are the single greatest determinant of how the rest of us live.
Working out who exactly owns the biggest firms is, however, almost impossible. Take Wesfarmers, one of the country’s biggest employers. Its latest annual report lists 114,000 employees in a host of subsidiary businesses such as Bunnings, Kmart, Target, Officeworks and more. But if Wesfarmers owns all these businesses, who owns Wesfarmers? This is where the question of “who is in the ruling class” gets interesting.
On paper, the company, like most others listed on the stock market, has lots of owners—nearly 500,000 in fact. Yet more than 380,000 of them hold fewer than 1,000 shares in the company. Legally, they may be part owners, but they don’t in any real sense “own” Wesfarmers. If you believe otherwise, just try using your life savings to buy shares in the company, and then see if you can secure a meeting with even a low-level manager of Bunnings to discuss business strategy.
By contrast, there are 155 shareholders each with at least 100,000 shares (around $6 million worth) who collectively own nearly 60 percent of the company. The largest are HSBC Custody Nominees, JP Morgan Nominees, Citicorp Nominees and National Nominees Limited. Combined, these entities own almost 50 percent of the company. Who are they? Good luck finding out. Looking at company reports for Australia’s other major corporations, these same four “nominees” are ubiquitous as major shareholders across the economy. Nominees are set up to manage funds, often for institutional investors. There is little available information about who, where or how many investors there are. As one finance writer noted:
All frequently show up together among the top 5 or top 10 shareholders. They simply represent a very large pile of money, all of which has to be parked somewhere … Unfortunately, it is practically impossible to track down the identities of those underlying shareholders through the various financial structures that hold shares for each other and on behalf of each other.
This all seems a bit shadowy. But for our purposes it’s not particularly important to know who the major owners are, only that it’s the major owners who count and that there are not very many of them. To illustrate, National Centre for Social and Economic Modelling researcher Simon Kelly twenty years ago calculated that the wealthiest 5 percent of Australian families owned 77 percent of shares and other investments, 46 percent of rental properties, 29 percent of private business equity and 30 percent of all wealth.
Any talk about a “shareholder society”—the idea that millions of people have a genuine stake in corporate Australia—is an attempt to blur this reality of highly concentrated wealth and power. The point here is that owning a few thousand shares or more of Australia’s biggest companies through a superannuation fund, or trading a few thousand dollars’ worth of shares on a mobile phone app, doesn’t make someone a capitalist any more than hosting a poker game after work on a Friday night makes you a casino.
The operations of the companies themselves are much more transparent than their ownership structures: they employ people, and buy and sell things, generally to make as much profit as possible to be divided among the owners. That’s not a Marxist conspiracy theory; it is referred to as the “shareholder primacy doctrine” in the corporate world. The people engaged directly in this process are not the owners, but the managers. And as Raewyn Connell and Terry Irving noted in their classic book Class structure in Australian history, in advanced capitalist societies, an increasingly large layer of them is employed to run large companies:
The problems of coordination of enterprises on this scale, of controlling such numbers of workers, managing suppliers, markets, and governments, forced changes in the pattern of control in business … [I]n the largest companies, personal entrepreneurship is no longer a feasible way of doing business; and here the appearance of a bureaucratic leadership has substance, with a division of functions—control of production, personnel, marketing, finance, etc.—among a corps of career managers with relatively clear-cut lines of command.
Like most business owners, most managers are part of the middle classes. But again, the higher one climbs up the management ladder, the less “middle” and the more “capitalist” they become in terms of class. Telstra, for example, has several hundred executive managers overseeing several thousand middle managers in a workforce of 16,000. Above them all sits the company board, comprising the CEO and ten non-executive directors, which hires the CEO, is responsible for oversight of the company and answers to the owners.
Decisive influence lies with directors, the CEOs and the high executives of big companies like Telstra—such as the chief financial officers, the HR managers, the group or divisional executives, legal counsel and so on. The Australian Council of Superannuation Investors 2015 annual survey of corporate board compositions found that just 105 directors held more than one-third of all 669 non-executive (non-management) seats in the largest 100 listed companies. These are referred to as “interlocking directors”: a layer of people overseeing not just several companies, but several areas of the economy (because the companies are so influential in their respective industries). As Georgina Murray from Griffith University wrote a few years ago:
The distinction between ownership, management and board membership is important. Managers make key executive decisions about the running of companies and they are answerable to a (maybe interlocked) board of directors who are in turn answerable to the major shareholders … The central point here is that although a lot of the directors collectively manage, direct corporate strategy and gather corporate intelligence, ultimately their most important task is to protect the interests of their major shareholders.
Murray also noted that “the key role of boards of interlocking directors must, by default, be read as primarily political”. This is also important. The capitalist class re-creates and gives itself coherence in several ways to maintain its power. The most obvious is through industry associations, such as the Business Council of Australia (BCA), which is a forum for the CEOs of more than 130 of the country’s biggest companies.
Through the BCA, the capitalist class mobilises politically to strengthen its position in relation to workers and in relation to capitalist classes in other countries. It works with government to shape policies on industrial relations, corporate taxes, regulation, investment and trade. For example, as Michael Pusey explained in the 2003 book The experience of middle Australia: the dark side of economic reform: “In the 1980s, those with an ear to the ground in Canberra already knew that, with senior Treasury and central agency officials, the secretariat of the BCA was writing national budgets sometimes almost line by line”. Or take the words of former BCA president John Ralph, who credits the association’s work in dismantling centralised wage fixing and instituting firm-based contracts for workers, supposedly tying wages to productivity:
There was a study commission set up by the BCA that worked through a period of about five years [from 1983], from which time it developed the ideas of enterprise bargaining. Enterprise bargaining was, I won’t say our greatest success, but it is a really good example. Enterprise bargaining was an anathema when the stake was put in the ground. Now the words are used commonly sometimes to mean something quite different but at least it’s in most agendas and things have moved.
While the BCA is strictly an association of the major capitalists, there are others that represent big business and small business alike, which at times share similar interests (lowering company tax rates and making it easier to fire workers, for example). The Australian Chamber of Commerce and Industry is the largest business representative body, comprising state chambers of commerce and more than 50 national industry associations. The Australian Industry Group, which has its origin in the metal trades and manufacturing industries, represents more than 60,000 businesses and is particularly active in efforts to undermine working conditions. Its 2012 annual report noted:
Ai Group’s role as the major business advocate in [workplace relations] has been highlighted by the 18 largely successful appeals we have pursued or intervened in under the Fair Work Act … There are a number of areas that need urgent amendment. For example, curtailing the scope of [workers’] bargaining claims.
There are also the seemingly non-economic and non-political clubs and societies that bind capitalists socially, shaping and reinforcing their consciousness and integrating those select few who claw their way up from the lower classes into the world of the rulers. Private schools and university colleges are two of the more important institutions, moulding and connecting the children of the class in their formative years, training them in the ways of privilege. As Jane Kenway noted in a 2016 Red Flag article, “A lattice of self-love: elite private schools and the making of the ruling class”, private schools “do class work on behalf of their usually wealthy, well-connected and often powerful, clients, patrons and advocates”:
‘Class work’ includes conspicuous socialising at glittering high status events (charity, sporting, the arts) where the elite of various class fractions are served by the people they look down on. It includes wheeling and dealing in various circles of power, in which decisions are made about the lives and livelihoods of others. It also involves the more mundane, everyday friendship and kinship groups, parties, sport, clubs, marriage, mothers’ groups and family holidays in select locations. Regular social interaction contributes to class maintenance and integration. This is the class work of living day by day, and elite schools are often the fulcrum balancing such work, for parents, students and ex-students.
Then there are golf, racing, yacht and other social clubs. Sydney’s Australian Club, the Melbourne Club or the Athenaeum Club are a few of the most exclusive. Each has a membership of a couple of thousand at most, and an annual fee of a few thousand dollars. But you can’t simply buy your way in. The Athenaeum’s official history brags:
Potential members are screened. Nominations are examined assiduously and painstakingly discussed. By the time an applicant is approved, the Committee is as sure as it can ever be that he is a man of character, of high repute, of substance and of credibility.
No, they are not talking about social workers, nurses, firefighters etc. But the ruling class is broader still than simply capitalists. As noted earlier, the other major sections of it reside in the state: the heads of government departments, the top ranks of the police, judiciary and armed forces, and, yes, politicians—cabinet ministers and key personnel such as the prime minister’s chief of staff. This broader layer of the ruling class is required for several reasons.
First, large scale capital investments, particularly in urban areas, require coordination. “This has meant a close involvement with government in the planning of investment, a search for guarantees by the state”, Connell and Irving wrote.
This generally has payoffs for development-minded cabinets, and it has been common for large investment decisions to be announced, not by the companies, but by the local premier. With this mutual involvement in investment planning, and the extension of central economic control, added to traditional activities like wage regulation and lobbying, the care and maintenance of diplomatic relations between big firms and governments has become one of the major activities of management—on both sides.
Second, the capitalists have an interest in maintaining social reproduction and a stable environment for business. So the state provides security and carries out functions that facilitate the accumulation of wealth and balance the economic process through redistributive taxation; provides infrastructure; funds research and training for business in general; regulates the distribution of the means of production through competition laws, inheritance laws etc.; and helps provide an efficient and pliant working class through the provision of health care, education and welfare.
Third, while the capitalist class has a common interest against workers and against pro-worker organisations and institutions such as trade unions and left-wing political parties, it is also internally divided. Businesses are locked in competition with each other. Many state functions are about writing and enforcing the rules of business competition—ensuring that certain “unfair” practices are outlawed. Without the courts and certain commissions, the economic competition between firms would easily, and probably quickly, spill over into violence and sabotage as different companies stole ideas and property from each other and even raised their own militias—something that happened in the early years of U.S. capitalism, for example.
Fourth, capitalists generally do not establish direct political rule. On one hand, they are too torn between their own individual interests to govern collectively. For example, the government would not be able to maintain legitimacy if the CEO of Telstra was the minister for communications, if a director of BHP was also the resources minister or if the Wesfarmers chief financial officer was also chair of the Reserve Bank. Other members of the ruling class wouldn’t accept such conflicts of interest. On the other hand, the capitalists are an incredibly small section of the population. If the government were made up entirely of CEOs, its base would be too narrow (in a democracy) to gain legitimacy in the eyes of the majority of the population.
So the capitalist class needs a state bureaucracy and a government that can rule in its narrow interest, yet which has the appearance of ruling in the “general interest” of all citizens. It needs organisations through which it can galvanise a broad cross-class constituency to provide a bigger base of support for a pro-business government: a political party made up of reliable servants—lawyers, apparatchiks dedicated to gaining and serving power, ex-businesspeople who understand the desires of big business or former union leaders who know how best to betray the workers they are supposed to represent.
In Australia, the Liberal and National parties have been the vehicles most trusted by the capitalists for this purpose. They both claim to represent the interests of “hardworking Australians” from all walks of life. But the reality is otherwise. Take the testimony of former Howard government minister Jackie Kelly on the ABC’s The Drum in 2016:
The Liberal Party is full of lobbyists. You look at anyone of influence in the Liberal Party … and they are working for Merck Sharp & Dohme, Johnson & Johnson, major oil companies—big business, big end of town.
The politicians govern, but they understand well who really runs the country. That’s partly why there often seems little difference between the major parties of government—they know the parameters within which their mandate is set and rarely step outside of what the big capitalists want. And while the ALP has had a more contradictory and fraught relationship with the ruling class due to its links with the labour movement, it has at times been the most visionary servant of the capitalists because it has fewer direct sectional links to big business.
The full introduction of neoliberalism in Australia under Labor is a good example. As then-PM Bob Hawke told the parliament in 1991, the party instituted “longer-term structural change to make us a more competitive nation. That was what my government set out, eight years ago, to achieve—through fundamental reform of long-established economic institutions and of deeply entrenched attitudes”.
If politicians act in a way that the rest of the ruling class doesn’t accept, they can receive serious blowback in the corporate press and are subjected to negative campaigns by industry bodies. These might take the form of advertisements in the media or orchestrated street demonstrations but can at times turn into “capital strikes” during which the bosses bring the economy to a standstill to create a social and political crisis.
Importantly, being such a small minority controlling such disproportionate wealth while there is so much poverty and hardship in the rest of society, the capitalist class always requires violence, or the threat of it, to maintain its rule. So the police commissioners, military generals and judges in the court system are also part of the broader ruling class bringing a level of order to the system on the capitalists’ behalf.
Australia’s ruling class, then, is multifaceted: the owners and managers of big business, supported by a layer of bureaucrats and officials within the state. Through ownership and control of the economic resources, industrial associations to promote the interests of capital, social clubs and institutions to network, interact and intermarry, state institutions to order and oversee the economy and to promote pro-business and pro-capitalist ideas among other classes, the Australian ruling class is constituted and maintains its dominance.