This article was first published by The Weekend Australian on 18 October 2014 and was written by Henry Ergas.
Choosing ‘social democracy’ over the Hawke-Keating reforms is sheer folly
WHAT a difference five years make. In 2009, Kevin Rudd called competitive neutrality “essential”; now, according to Labor senator Stephen Conroy, the Keating-era requirement that publicly owned businesses not be artificially advantaged is a “right-wing ideology” that reflects “deeply flawed ratbaggery”.
Conroy’s stance highlights Labor’s growing willingness to dismiss the micro-economic reforms of the Hawke-Keating era as irrelevant at best, misguided at worst. Previously, at least lip-service was paid to the direction those reforms took; now, even that ritualistic reverence has been jettisoned.
Of course, despite his endorse- ment of competitive markets, Rudd promoted the broader revisionism that Conroy now reflects. After all, his Quarterly Essay on the global financial crisis claimed the GFC represented “a turning point between one epoch and another”. The “orthodoxy” of “neoliberalism” had been “overthrown”; a new “comprehensive philosophical framework” based on an “activist state” would take its place.
Only social democracy could “speak with clarity and cogency to the challenges of our time”.
As it turned out, Rudd’s “clarity and cogency” proved less than compelling to his colleagues. But as Labor struggles to redefine itself, the ghost of Rudd’s essay still hovers over the party he once led.
That is not to suggest anything sensible has come from Labor’s recent avalanche of publications. No doubt, concealed in that vast outpouring are subtle differences of emphasis; but as far as ideas are concerned, the tomes are so formulaic as to reverse the old gibe: when you’ve read them all, you’ve read one.
Instead of insight, the “ideological renewal” Rudd called for has degenerated into moral posturing leavened with an outsized dose of anger. According to Wayne Swan, for example, what distinguishes Labor is that it “keeps believing in the dream and reality of Australian equality”. Its adversaries, in contrast, merely represent “a small but growing group” of “oligarchs” desperate to entrench “a disproportionate influence in our economy”.
A titanic struggle between good and evil is also at the heart of Jim Chalmers’s account. Swan’s former chief of staff, now the member for Rankin, claims Labor stands for an Australia where “prosperity is more fairly shared”, as against one “where wealth, influence and opportunity is increasingly concentrated in the hands of the few”.
The choice between these, he claims, is fundamentally a choice between “two very different kinds of Australians”: on the one side, compassionate Labor politicians, such as himself; on the other, right-wing “hyper-partisans” who are not only “mean-spirited, petty and old-fashioned” but “narrow, intolerant (and) retrograde”.
Coming after such a preamble, it is hardly surprising that Chalmers’s description of Tony Abbott brings to mind Gibbon’s account of the deposition, at the Council of Constance, of the antipope John XXIII: “the most scandalous charges were suppressed”, Gibbon says; “the vicar of Christ was only accused of piracy, murder, rape, sodomy and incest”.
What never surfaces in Labor’s sea of mangled prose is any doubt as to why it lost office. With masterly understatement, Chalmers admits that “the implementation of policies such as the home insulation program could have been done better”; but the real sources of Labor’s woes, he hastens to add, lie elsewhere. They lie, of course, in News Corp Australia, the publisher of this paper.
Never in the course of Australian history has the power of the pen been so exalted. Just as Gough Whitlam attributed his electoral defeat to “dark forces”, so Swan, in a judgment echoed by his colleagues, blames News for enveloping the Gillard government in a “poisonous chemical stew”. Apparently, it was a “torrent of negativity and confected crisis” unleashed by The Australian that prevented Labor from “recalibrating” its message and thus fed “a groundswell of opposition to the Gillard government”. With Sydney’s Holt Street, where News is headquartered, figuring as the biblical Hill of Evil Counsel, only Rudd, for whom Swan vows “eternal enmity”, attracts venom comparable to that reserved for these opinion pages.
All that would wear thin if it weren’t so threadbare to begin with. Yet the verbiage of Labor’s politicians is no more vapid than that of its greatest maitres a penser. Robert Manne had hailed Rudd’s rise to the prime ministership in terms normally reserved for the arrival of the Messiah; now he points to News’s “undue influence over daily politics” as “a principal cause of Labor’s prolonged crisis”. The solution to that crisis, he tells us, is to rediscover the Whitlam era, not as a “synonym for fiscal recklessness” but as a “great reforming government”.
Channelling Manning Clark’s description of Whitlam as a “teacher who had a chance to lead us out of darkness into light”, Manne suggests it is Whitlamite policies, rather than the productivity-oriented reform of the Hawke and Keating years, that Labor should aspire to; Manne’s grasp of how readily those policies could be funded is epitomised by his reference to the Rudd-Gillard- Rudd period’s deficits as “relatively modest”.
But if Manne pins the star of redemption on an earlier messiah, Michael Cooney, who heads Labor’s Chifley Research Centre, wants to sweep out the past. Colourfully rejecting talk of earlier eras — “that’s barely even bullshit, it’s just duckspeak” — he urges Labor not to fear “walking away from our legacy”.
Obviously, that raises the question of what it would be walking to. Cooney’s answer is simple: something new. Indeed, he uses the term “new” so often one wishes he was familiar with poet Frank O’Hara’s plea that “new is such an old word: they should invent a new one”. As for the contents of this fresh thinking, O’Hara’s famous ode to novelty — “kangaroos, sequins, chocolate sodas / you really are beautiful” — contains more substance than Cooney manages to muster.
With so little to offer, it is clear why these authors would resent The Australian for providing commentary that rises above their flatness. But it would be unfair to blame them for the intellectual vacuum they inhabit; if their writing induces less heartbreak than heartburn, it is because the central claim of Rudd’s essay proved so false. Far from the GFC heralding a renewed social democratic philosophy that accorded primacy to government, no coherent challenger has emerged to the liberalism Rudd denounced.
Nowhere is this more apparent than in Rudd’s proclamation of the death of the “Washington consensus”: the belief that prosperity is best served by macro-economic prudence, flexible labour, product and capital markets, and international trade and investment.
Of course, in trumpeting the demise of that consensus, Rudd was merely joining a chorus that stretched from economics Nobel laureate Joseph Stiglitz to globetrotting pundit Thomas Friedman. The rise of China, that chorus suggested, would lead to a new “Beijing consensus” that, unlike the “Washington consensus”, legitimated interventionism.
But nothing approaching a “Beijing consensus” has developed. On the contrary, although China is hardly a free-market economy, its leadership’s rhetoric remains focused on what Prime Minister Li Keqiang has described as the need to “further develop the market’s fundamental role in allocating resources”.
At the same time, no matter how far removed they may be from its daily practice, China’s repeated calls for “global free trade and a stable and efficient financial and monetary system” are anything but an alternative to economic orthodoxy.
Nor has global public opinion swung against open markets, as Rudd predicted. Thanks to the Pew Global Attitudes Project it is possible to compare the public mood before and after the GFC. Particularly in the developing world, support for international trade is remarkably high, approaching or exceeding 90 per cent in countries as diverse as Bangladesh, China, South Africa, Tunisia and Vietnam. And while support for the statement that people are better off in a free-market economy has declined in the most severely depressed eurozone economies, it is stable elsewhere and rising in much of the developing world.
Those results are not puzzling. Although the GFC highlighted important gaps in financial regulation, countries with open, competitive markets, fiscally sustainable budgets and stable macro-economic policy settings continue to substantially outperform their rivals. Moreover, thanks to the work of economists such as this year’s Nobel laureate, Jean Tirole, the scope that competition offers to increase efficiency is far better understood and exploited.
That is not to deny the strength of constituencies whose instincts and interests are increasingly at odds with an open economy, particularly in the wealthier countries. From public-sector employees to welfare recipients, environmentalists to militant unionists, the clamour for greater government intervention galvanises a diverse coalition of champions. But simply promising “more” is not a coherent approach to governing; and, as Labor discovered, that coalition’s diversity and the sharp divisions within it mea it cannot underpin durable electoral success.
It is no surprise then that, virtually everywhere, social democracy is struggling to define its goals, role and future. Trapped between climate-change zealots, welfare recipients and its shrinking base of industrial workers, all it has been able to come up with is a renewed emphasis on redistributing, rather than creating, wealth. The result is a sharp move to the left that alienates the aspirational voters social democratic parties once attracted and desperately need to reclaim.
For example, having entered into an alliance with the Greens and the far Left, the Swedish Social Democratic Party has seen its vote shrink from nearly half the electorate to less than a third. As for its Norwegian counterpart, its new leader, Jonas Gahr Store, has caused a rift with its traditional industrial base by endorsing the Greens’ argument that more of the country’s oil and gas reserves should be left in the ground.
Meanwhile, Germany’s Social Democrats, whose electoral position has also reached new lows, are torn between alliances with former communists in the eastern provinces and a staunchly centrist middle class in the west. Finally, Francois Hollande, who came to power promising a renewed social democracy, has veered aimlessly, in the process becoming the least popular French president since opinion polling began.
Those are the waters in which the ALP’s revisionists have plunged. But even compared to its European equivalents, Labor’s position is made more difficult by the unusual tightness of its links to the unions. A simple comparison highlights the point: unions cover about 27 per cent of the British labour force, compared to less than 18 per cent here; but after the most recent general elections, only 24 per cent of the newly elected British Labour MPs thanked unions in their first speech, while 91 per cent of the ALP’s 2013 vintage did, up from 30 per cent in 1984.
Through those links, the ALP gains significant access to resources; but they come at the price of bestowing on the unions one favour after the other. Those favours include the cripplingly expensive promises Labor made to the teachers and health workers unions, as well as to unions in aged and child care: promises Bill Shorten claims Labor, if it is returned to power, will honour in full.
But it is extremely unlikely a future Labor government will have the fiscal room to do so; instead, it will have to rely on providing benefits to its most powerful constituencies by shielding them from competition. That path was well-trodden under the previous government, with examples ranging from the Fair Work Act to the National Broadband Network, along with the restrictions Labor placed on competition in coastal shipping and road haulage. As the next election approaches, the exchange of political support for anti-competitive policies will become ever more prominent.
It is consequently easy to understand why Labor has abandoned whatever commitment it may once have had to structural reform. And it is also easy to understand how Labor, which (borrowing a characterisation of Australian politics from WK Hancock, who borrowed it from William Pember Reeves) always used to vaunt itself as the party of “initiative”, has so clearly become the party of “resistance”.
But Labor should remember that, as Dryden wrote, “those whom God to ruin has design’d,/ He fits for fate, and first destroys their mind”. For one thing is clear: it is not “neoliberalism” that is a thing of the past but the social democratic mirage Rudd pointed to. Until Labor comes to grips with that, the delusions that destroyed its government will continue to haunt it, with no hope of exit from the intellectual wasteland in which it seems so firmly trapped.
The following is a response to the above article, first published by The Australian, on 20 October 2014, and was written by Robert Manne.
Severe Labor critic
HENRY Ergas (“Revisionist ALP re- mains mired in tired old ideas”, 18/10) claims Kevin Rudd once wrote a Quarterly Essay. He did not. He claims that I regard the Whitlam government rather than those of Hawke and Keating as the model for Labor. In my review of Paul Kelly’s Triumph and Demise, I wrote that there have been two great reform governments in recent Australian history — those of Whitlam and of Hawke-Keating.
Ergas claims it is self-evidently ludicrous to argue, as I did, that the deficit left by Rudd and Gillard Labor was relatively modest. This is also the view of scores of Australian professors of economics and of the Nobel prize-winner Joseph Stiglitz, who recently argued: “For an American, Australia’s anxiety about deficit and debt is a little amusing.”
In dismissing my claim that the News Corp papers were a principal cause of the difficulties Labor faced under Rudd and Gillard, Ergas shows that he cannot distinguish between a principal cause and the principal cause. In 2010-13, I was a severe critic of the Labor government and of the systemic anti-Labor bias of the News Corp newspapers which became alto- gether risible during the 2013 election campaign.