This article was first published by The Australian on 7 October 2014 and was written by Nick Cater.
IN 1992 Robert Manne edited a book called Shutdown that floated the idea that the government should build a video recorder factory to compete with the Japanese.
Shutdown attacked the policies of Bob Hawke and Paul Keating, the “radical free-market economics” Manne believed was driving Australia to permanent recession.
Manne later admitted that he didn’t know what he was talking about, telling the ABC’s Terry Lane in 2005: “I have never studied economics formally and found pretty quickly when I began to argue about economic rationalism or neoliberalism, I found myself out of my depth.”
Socially aware public intellectuals have always been inclined to imagine the discipline of economics is beneath them. For great architects of a just and fair society it’s the shape of the building that matters, not the efficiency of the plumbing. At best, they consider economic arguments a mere accoutrement to the public policy debate. At worst they think of economics as a pernicious ideology.
Disturbingly, a fresh outbreak of economic irrationalism is afflicting the upper echelons of Labor. The Hawke-Keating reforms are being treated with disdain. Today’s federal Labor leaders have nothing to learn, apparently, from the party’s longest and most successful spell in office.
“If we really believe we are just Bob and Paul’s dumb-arse step-kids, we should pack up and go home,” Michael Cooney told a gathering in London recently.
Cooney, a former speech writer who heads Labor’s Chifley Research Centre think tank, believes that Hawke and Keating’s work is done. Micro-economics is old hat, if indeed it were ever needed at all. “We have to reject any attempt to ‘do reform again’,” claimed Cooney, “and instead we must approach the conditions of our day as if they are new — because they are new. The politics of progressive change isn’t like using shampoo — you don’t close your eyes, rinse and repeat — no, you open your eyes and confront genuinely new challenges.”
Yet Cooney’s genuinely new challenges — “the clean energy revolution … an Asian century … two retired generations … an end to Australia’s mining boom” — hardly require novel solutions. The structural economic reforms that Cooney appears to despise, such as deregulation, labour market efficiency, competition policy and disciplined government spending, would be a good way to tackle all four of them.
Yet Labor’s conceit that it is the party of fairness means it has little patience for that kind of talk. The micro-economic reforms of the 1980s and 90s have lost their potency, former Rudd and Gillard adviser Tom Bentley says.
“The constant assumption of policy and media discussion is that, somehow, the next ‘wave of productivity’ will come from rehashing a mix of trade liberalisation, domestic competition, and cutting back regulation,” he wrote recently in The Guardian. “Lightning rarely strikes twice in the same place.”
The idea that structural reform has had its day is a point of view, but not one likely to be endorsed by the editorial writers of this newspaper. Call them old-fashioned if you like, but they remain stubbornly attached to the idea that a nation can redistribute the only wealth it earns.
Cooney urges Labor’s neo-Whitlamists to ignore The Australian’s advice. “First, we put that bloody newspaper down and think for ourselves,” he told the London audience.
“If that front page is screaming at us that we are saying the wrong thing — and even more so if that op-ed page is screaming at us — I genuinely believe we must conclude we are making progress, not making a mistake.”
Cooney’s point is that fiscal discipline and micro-economic reform are Liberal ideas that Labor should reject. As for that ideologue Paul Kelly, Cooney says in another article, “Paul Kelly is wrong. And that matters.”
The Kelly-bashing continues in the latest edition of The Monthly, where Manne takes umbrage at Kelly’s Triumph and Demise and its less-than-complimentary assessment of Labor’s two most recent prime ministers.
“In Kelly’s world,” writes Manne, “the very concept of reform has been so narrowed that it includes nothing other than measures to improve economic growth and productivity.”
Kelly, says Manne, “is blithely unconcerned about inequality” and, what’s more, is showing dangerous sceptical tendencies.
“On dozens of occasions Kelly spices his narrative with irrational pronouncements from the songbook of climate-change denialism. He thinks that the warnings of the scientists are ‘alarmist’; that the problem of climate change is self-evidently not ‘a moral issue’; that climate change has become a Labor ‘faith’; that imagined catastrophes in the future provide ‘a poor basis for policy action now’; that only a political ‘mug’ would call upon people to make a ‘sacrifice’ for future generations; and, flatly, that ‘climate change was the priority for neither Australia nor the world at this point’.”
Manne may not know much about economics, but he reckons he knows his climate science. Kelly’s analysis, he writes, is “arrogant and foolish” and reveals “a profound ignorance of the work of climate scientists and its implications”. Readers familiar with Manne’s voodoo logic will know by now where the professor is heading: to the grassy knoll and the book depository, where shadowy figures lurk with loaded guns.
“The most obvious flaw in Triumph and Demise,” says Manne, “is Kelly’s justification of News Corp’s war on both Rudd and Gillard, and his astonishingly dishonest pretence that it was not a principal cause of Labor’s prolonged crisis.” Scarily, we find ourselves back in 1975, with Labor’s true believers imagining that it was not administrative chaos and economic incompetence that brought down a government but a fiendish Murdoch plot.
This time, however, there is no Bill Hayden to pick up the pieces and pull Labor back from the brink. There is no former Queensland policeman to restore economic law and order and lay the ground for the election of a reforming, centrist government less than eight years later.
Instead there’s Bill Shorten and his Treasury spokesman Chris Bowen, who understand the structural challenges well enough. Whether they have the authority to prevail over the forces of irrationality is a different matter.
Nick Cater is executive director of the Menzies Research Centre.