The Chifley Research Centre were kind enough to organise a programme of meetings for me in Sydney, Canberra and Melbourne to coincide with the publication of my paper Building a Fair and Sustainable Economy in the Post-Crisis Era. My visit was fascinating, not least because of the turmoil affecting the Coalition. More important though, was the clear willingness amongst Labor’s parliamentarians to consider some of the tough economic questions. I was most struck by the recognition that, while Australia had emerged relatively unscathed from the GFC, there were genuine reasons to be worried about the future. The end of the mining boom and the impact on government revenues will obviously have profound implications for fiscal policy, although Liberal claims that the country is heading the same way as Greece unless an absurd level of budgetary restraint is applied seem, to an overseas observer, to belong in the realms of fantasy.
It was especially encouraging that leading members of the ALP were embracing the notion of inclusive prosperity – that the economy does well if working people do well. Income inequality has clearly been identified as a deep-rooted problem even if, as with politicians the world over, there remains some uncertainty about the best policy response. My own work has emphasised the importance of labour market institutions, notably trade unions and other vehicles for worker participation as essential in ensuring that the distribution of income is as fair as possible before the state intervenes through taxes and cash transfers. The difficulty of course is how do we get to inclusive prosperity from here?
Some people I met argued that technology and globalisation impose real constraints on policymakers, so it would be unwise to make rash promises about the reduction of inequality. But as the British scholar Tony Atkinson argues in his excellent new book Inequality: What can be done?, the process of technological change is not some fact of nature like the weather – it is partially determined and certainly mediated by public policy. This critical insight explains why the extent of income inequality remains so highly differentiated across the developed world and why some countries (notably the Nordics and the Netherlands) remain relatively egalitarian societies. What this also means of course is that parties of the centre-left can once again assert the primacy of politics. Legislators still have the power to influence the course of events. Countries are not at the mercy of global forces beyond their control.
The potential for action is clear even if the precise policy prescription is not. My paper highlighted the relative decline of the power of labour against capital over the 30 years before the crisis and argued that there needed to be some rebalancing if inclusive prosperity were to be achieved. It may be unwise to expect a rapid revival of conventional trade unionism either in the UK or Australia, but governments can legislate to give individual workers the right to be consulted collectively. At the same time corporate governance rules can be changed to open up boardrooms to a wider range of voices – recognising that shareholders are not the only stakeholders with an interest in the success of a business. That the Australian centre-left is beginning to tackle these difficult issues offers real hope for the future. The Chifley Research Centre has a pivotal role to play in the developing conversation and I am very grateful for the support I was offered during my short sojourn downunder.