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The myth of the bad century

This article was first published in Quarterly Essay (number 55) in September 2014. It is a response essay to Quarterly Essay (number 54) “Dragon’s Tail: The Lucky Country after the China Boom” by Andrew Charlton. 

QE54-cover-(online)

When Andrew Charlton “came back” to Australia – do they do that anywhere else? – he had a Rhodes scholarship, an Oxford doctorate, a co-author credit with a Nobel laureate, and he’d worked at the UN, the OECD and the LSE. He was two years older than Germaine Greer was when she left Australia.

And in that year of miracles, 2007, the only greater wonder than this CV was that he had a book under his arm that was helpful to the Australian Labor Party. The contrast with the books written by former and future Labor frontbenchers in the preceding decade was morally impressive. Mature leaders such as Latham and Tanner had mixed creative and constructive new ideas with a pervasive “What do we stand for?” angst. Widely admired figures such as Button and Jones, who’d made their lives and livings in the movement, had spent their retirements throwing stones at us. Here was a kid of my generation who was prepared to throw stones at the other side.

The big thing about Charlton’s Ozonomics was its explicit attack on Australian conservative economic management. In fact the book was subtitled Inside the Myth of Australia’s Economic Superheroes and the cover showed a comic pairing of Prime Minister Howard and Treasurer Costello as “Mr Fantastic” and “Mr Boombastic”. And Charlton was right.

What made this genuinely fresh wasn’t just that it was an attack on the right’s failures of economic management. It was also a last, late flowering of a Labor account of the much-chronicled “reform era” of Australian politics, before the seeming final triumph of the bipartisan myth. Bagging the Tories of the mid-2000s was one thing. Bagging the Tories of the mid-1980s was quite another. And by no means did Charlton do this when it was fashionable or easy. The book was written in what Kim Beazley used to call the “dog days of opposition.” All you could say was bravo, and can we host a book event for you? Even more remarkable, Andrew then went to work for the Labor Party, and for Australia, and did some pretty amazing things.

So when a bloke who wrote almost the only helpful book in eleven years of opposition and who’s been a G20 sherpa says he has a warning for you, you stop and listen. And in Dragon’s Tail, Andrew Charlton has a warning for us:

If we are happy to leave our prosperity to luck, we can continue to bob up and down on the tide of global circumstance; but if we want to be a successful country, we need to learn to surf the waves.

It’s hard to disagree, in that it’s hard to argue for an approach that relies more on luck. But do we really not know how to “surf the waves” now? Let me put the objection another way. Charlton asks if we want to “be” a successful country, but shouldn’t this be: if we want to stay a successful country?

I hope this isn’t only wounded pride from someone who never left. I hope my real problem with a warning against second-rate leadership and popular com­placency isn’t that it’s obviously false, but rather that it’s obviously true. I don’t disagree with Andrew, I just want him to be less general; I want more explanatory power. When he writes:

We haven’t helped ourselves … In the boom years, Australians embraced the windfall of China’s growth without preparing for the aftermath. We allowed the non-mining economy to wither and failed to save resources profits. As a nation, we have to be smarter than this.

I think of my father’s ancient joke about the Lone Ranger and Tonto, surrounded by hostile “Indians”.

Lone Ranger: Tonto, I think we’re in trouble

Tonto: What’s this “we” shit, white man?

Because if Australians, and our leaders, are going to act on Andrew’s warning, we need an explanation of problems of national leadership which doesn’t occlude politics. We need to know the detail of the problems. Because actually, we didn’t spend the boom windfall on a lower top tax rate for our mates, superannuation tax breaks for our wives, school rifle ranges for our kids and a Middle East war for some poor bastard in Darwin or Townsville – they did. The problem isn’t the quality of Australian political leadership; the problem is the quality of Australian conservative leadership. Even where progressives have “failed,” it’s been a failure precisely to overcome conservative resistance to our ideas. Failing to beat the bad guys is a kind of culpability, especially when it’s your job to beat them, but it’s a very different kind from actually being the bad guys.

Charlton gets this, of course – in fact, he’s lived it as much as anyone. He’s got as many scars as Coriolanus. So yes, much of his discussion implicitly accounts for the big differences between how Australia was governed before 1996 and how it was governed between 1996 and 2007 and then how it was governed between 2007 and 2013. It’s not an error not to whack a party bumper sticker on this part of his discussion – but the decision not to do so demands something of the reader.

“He who has ears to hear, let him hear.” You have to see through the nonpartisan economic presentation to the political facts. Don’t be fooled by the respectability of this account. Read between the lines.

Looking for the real politics in the story of national leadership becomes even more important when Andrew’s wider argument about Australian economic history comes into play, because here I think he is importantly wrong. While his account of post-1983 economics is close to silent on politics but consistent with a sound political analysis, his account of the “long history” really does miss the mark. He writes:

The long history of our economy can be summed up in a single sentence: Australia had a very good nineteenth century, a poor twentieth century and a stellar start to the twenty-first century.

No, we didn’t. In fact, Andrew’s own data and chart prove him wrong.

On page 12, the chart “Australia’s global rank” shows “Australia’s position in the world’s richest countries measured by GDP per capita” from 1825 to 2012. On this chart Australia’s global rank sits at ninth in 1895. We tick up a couple of places, and then down a couple of places, for the next sixty-five years. On Andrew’s data, Australia is eleventh in the world in 1960. That’s a lifetime of holding our own.

We then crash to twenty-first in the world in 1988. The bars on Andrew’s chart show this perfectly clearly.

This is the key point. Australia held its place from ninth to eleventh for sixty-five years through a depression and two world wars – and then we fell from eleventh to twenty-first in less than twenty-five.

But Andrew bangs across the top of this chart a giant arrow that points down for a hundred years. This makes the catastrophe of the 1890s financial collapses and subsequent depression (when we pretty much went from first to ninth in one mad Collins Street afternoon) look like a steady decline running for the next six decades. So what should be a long flat line from Federation onwards is an arrow going down at thirty degrees. This is even more confusing because the horizontal axis gives the same amount of space to the period 1905 to 1960 as it does the period 1960 to 1988. So the visual representation of the decline after 1960 should point downwards twice as steeply as it does. What should be an arrow pointing at sixty degrees looks only half as steep.

So across this chart, we see a long decline from 1885 to 1988. What we should see instead is something like two hands of a clock, with the long minute hand pointing to nine and the short hour hand pointing to five, centred on the year 1961.

If we did, then we would see that Australia didn’t have a “bad century” which started with the Harvester judgment. Australia had a “lost generation” which started with the credit squeeze.

I don’t think for a moment Andrew is trying to trick us – for a start, I’m sure that the single biggest explanation for the apparent distortion here is how wide the page is and how many data points were available. But I do think this chart is incredibly revealing. It’s not a great illustration of what happened in Australia, but it’s a perfect picture of what many people think happened in Australia in the twentieth century, and a striking proof that even the most striking economic data can’t counter this fixed view.

The real lesson is that so many of us, including Andrew, are trapped in a myth about what went on in the politics of Australia before 1983 and what the real economic problem was before Hawke and Keating. Because that arrow has an author – that idea of a bad twentieth century has a parent – and it’s not Andrew Charlton, and it’s not Paul Keating either, it’s Paul Kelly.

And Paul Kelly is wrong.

And that matters.

It matters because if you accept the big myth of the “bad century” (the long decline from Harvester onwards), the trifecta favoured by Andrew here, and by so many in Ross Garnaut’s “independent centre” – of micro-flexibility, revenue stability and productivity growth – isn’t enough. You end up deciding that we have to chuck out the whole progressive Australian model of a stable economy and moderate social protections, and you end up convinced that we have to start with industrial relations.

But we don’t want to, we don’t need to, and in fact to do so would make us all worse off. On the other hand, if you recognise the reality of the “lost generation” (the steep decline from 1961), you see something quite different. The longstand­ing centrist economic approach, combined with a serious progressive political effort to ensure the benefits flow to all, can get us where we want to go. We just need not to slip back into the way Menzies and his successors did business for a relatively brief period from 1961 to 1983.

What does that mean in practice? Well, start with this fact. The years 1960 to 1985 weren’t decades of Keynesianism and egalitarianism gone rogue. They were a golden age of rent-seeking at the top end of town.

What does that period tell you about the politics of today? About who to trust on corporate tax adequacy? Or about who to listen to in the financial sector? Or about what is good support to regional communities and what is blunt sub­sidy in agribusiness? Or about who can manage the US alliance as an asset in Asia? It’s not a story that Maurice Newman or Tony Shepherd probably want to hear. But it is a story that a lot of smart people – in business, in universities, in government, in community leadership – can apply to the real challenges for Australia today.

Not only of Asia, but also of ageing, clean energy, new jobs, future growth.

Instead, today, we’re led by crass conservatives such as Abbott and Hockey, feeble liberals such as Hunt and Turnbull, and ludicrous populists such as Joyce. They’ve made Peter Costello’s adjournment debate clichés in his News Ltd tabloid columns look economically sophisticated; they’ve made John Howard’s family tax policies look practical and fair. Australia is in far greater danger of being governed as we were in the 1960s than as we were in the 1900s or the 1940s. The threat to our ability to adapt successfully to a changing China and a changing world isn’t a return to type by the Australian left, it’s a return to type by the Australian right.

If the argument goes astray with that graph on page 12, it finds its line and length again with the postcard view of “Pudong transformed” that Andrew shares with us on page 18.

Dragon’s Tail is really a story about the Australia we could have if we’re governed well – one which is prosperous and inclusive, and yes, one which is smart, sceptical and unsentimental about China. It’s really an essay about whether our leaders settle for fragile prosperity based on a boom and growing inequality, or whether they aim for us to remain a rich, fair, stable country – and to become more like that over time.

In this respect, it’s an essay about how much of Australia’s future is explained by that view in Shanghai. Yes, it is one of the most important and impressive sights in the world – and yes, it symbolises change in Australia as well as in China. I’ve been lucky enough to see it a few times in the past ten years and the wow won’t wear off before I see it next.

The last time I was there, Prime Minister Gillard was announcing one of the biggest deals for the Australian finance sector so far in the young Asian Century – licensing Westpac and ANZ to trade the Australian dollar and the Chinese yuan directly in mainland China. This is one of the big openings to service exports that Andrew rightly points to as the future for us in China and Asia.

That was on a very short visit in April 2013. We arrived late evening from Hainan, stayed in a hotel on the Bund and left next morning for Beijing. So there was only going to be a brief opportunity to feast on the view from high in the hotel. But we’d got in after 10 p.m. and it was too late. There were power cuts across the river and the lights were out – even on the Oriental Pearl. We had a drink in the dark.

About Michael Cooney

Michael Cooney

Michael is the Executive Director of the Chifley Research Centre. He was previously Speechwriter to Prime Minister the Hon Julia Gillard MP, Senior Adviser at the HR Coombs Policy Forum, Crawford School of Public Policy at the Australian National University, and was Principal Policy Advisor to Federal Labor Leaders Kim Beazley and Mark Latham.

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