This is an abridged version of an article which appeared in Australian Options, Spring 2014.
US President Harry Truman famously pleaded in vain for a one handed economist; an economist that would not end advice with the statement, ‘on the other hand’. One would be forgiven for thinking Truman has finally got his wish. Especially since the policies of Thatcher and Reagan, inspired by Freidman and Hayek, there has been an apparent consensus among economists, usually known as neoliberalism. This presents the efficiency of private markets, the costliness of government intervention and regulation, the case for privatisation and free trade, and the damaging affect of organised labour as received economic wisdom. To question it runs the risk of being labelled an economic ignoramus.
But this apparent neoliberal consensus is misleading. Based on a recognition of how complex the real world is, other fields of economic inquiry have sprung from asking the question: what happens when the conditions needed for market efficiency are not met? From behavioural and public economics to industrial organisation and institutional economics, the economics discipline contains much broader views and insights than the majority of media and policy makers lead us to believe. The views of Nobel Prize winner and former World Bank economist Joseph Stiglitz are a prominent case in point.
Nevertheless, the neo-liberal consensus has gone from strength to strength, even brushing aside the greatest global economic crisis since the 1930’s with remarkable ease. This agenda presents us with an increasingly brutal competitive world, where the winners of the competition can look forward to ever greater rewards while the losers, whether individuals, communities or whole regions, are looked on with pity but also an increasingly detached sense of inevitability and helplessness. Welfare support and universal services like health and education are increasingly seen as luxuries that come with an ever increasing and even unaffordable economic cost.
Rising inequality and other economic realities generate an increasingly common feeling that people are now working for the economy, rather than the other way around. The economy might be larger every year, but there is a large and growing portion of society that isn’t seeing these benefits translate into improved living standards. In the USA, a recent Wall Street Journal poll showed 76 per cent of people expect their children to grow up less prosperous than they are.
An alternative progressive economic agenda is badly needed to address the fundamental problem with neo-liberalism and do so in a credible way.
Perhaps Robert Kennedy articulated this fundamental problem best when he said that GDP “measures everything, in short, except that which makes life worthwhile.” The basic problem is that the neoliberal agenda doesn’t recognise this truth; it equates the social good with the private good. In doing so, it elevates business from producer and employer to the ultimate generator of welfare in society. Anything that increases output or profits is seen as being in the social interest.
As an example, the Abbott government is promoting a paid parental leave scheme, not because it allows mothers the financial security to form a closer bond with their children at the earliest stages of life, contributing to children’s life-long mental and physical health and therefore wellbeing, but because it is claimed the scheme will increase workplace participation and therefore GDP.
By treating education, healthcare or other social goods like any other market-produced good, these services cease to be a right and become a commodity, they are under-provided, their societal benefits are ignored, and the economy and society suffer.
This identification of the social good as being the same as the private economic good couldn’t be better exposed than when Thatcher said, “There is no such thing as society”. But ordinary people know this isn’t true, and so should economists. In reality, social wellbeing is influenced by the supply of public goods, the extent of economic inequality and the externalities that cause either social and environmental problems or intangible benefits.
An alternative economic agenda must change the goal of public policy from maximising GDP to enhancing society’s welfare. That means it needs to recognise and act on the truth that people’s wellbeing is determined by much more than their income, profits and economic growth.
A credible alternative agenda also needs to be informed by a clear eyed view of the real economy. It needs to draw on more sophisticated economics that incorporates the complexities of the real world, rather than economics that assumes these complexities away. It needs to treat the economy as a mechanism to improve people’s lives, rather than the thing to be improved regardless of the impact on people’s lives.
And of course, it needs to be underpinned by values of social justice, equity and fairness. It is these values that make us recognise that excessive inequality isn’t bad just because it is harmful for economic growth; it is bad because it leads to injustice and undermines our social fabric.
The ultimate goal is not to define a policy platform for a new government: it is to articulate and begin a practical reform process that will be implemented by many governments. It needs to be a reform program that will replace the dominance of neo-liberalism and create a new era that sees the goal of growth coupled with, not at the expense of, improved equity, economic security, sustainability, quality of life and broader public welfare.
It is a task so large and ambitious that if we are to have any chance of success, all progressive minded people and organisations need to play a role – from academics, think tanks, unions and NGOs to individuals. We need to all work together to articulate an alternative agenda and to make the case publicly. And ultimately, as the only credible alternative party of government, the Australian Labor Party needs to adopt this agenda as the basis of a long and thorough reform process.
The AMWU has begun on this work by proposing 10 principles that could be used as a foundation of an alternative progressive economic agenda. They are not specific reform proposals, but they do set out an alternative approach to policy. They are:
1. That economic growth is not an end in itself – improving people’s wellbeing is the real measure of progress
2. Economic growth must lead to broad and inclusive economic development
3. Government benefits must be targeted at those in need, adequate to achieve their goals and not used as punishment
4. Good budget management is essential, but this means ensuring solvency, not a blind aim of budget surpluses
5. Fair regulation means that we all get a fair go and is aimed at improving welfare, not just growth
6. Workers have a fundamental right to organise
7. Provision of government services by a fair and unbiased public service is a fundamental human right
8. Companies and high income earners must pay their fair share
9. We need a broad-based economy, not one simply based on agriculture, resource extraction and the services sector
10. Trade is crucial but it must be fair and in the national interest.
These principles are certainly not the last word on an alternative progressive economic agenda, but they are one start.
Image credit: Manufacturing rally, 16 December 2013, Mark Phillips/ACTU