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Politics through the looking glass
The inversion of Australian democracy.In the Autumn issue of Meanjin.
Budget panto goes wrong
Monday, 19 May 2014
If there is one thing that sums up the contradiction in the government’s position that is behind what is turning into a political disaster, is that a few weeks before the Budget came out, the Commission of Audit proposed one of the most radical overhauls of the Australian economy in fifty years – to one of the weakest governments capable of implementing it.
This gap between political will and political reality is a culmination of thirty years of hubris on the economy by our political class that is now coming home to roost.
It has become almost ritual over the last few decades that every new government will face press columns by the more serious journalists of the right and left about how this needs to be a “reforming government” of the Hawke/Keating mould. Invariably the two Great Men are trotted out, especially the latter, to tell us all what they did back then and how, for some reason, no one’s come up to scratch since.
In reality there was nothing especially remarkable about those economic reforms in the 1980s, since they were happening elsewhere in the world, some a bit earlier than they happened in Australia. For example, the floating of the dollar was already, as Fraser noted in his memoirs, “sailing with the wind” even before the interim Campbell report came down in 1980. In reality, it was well on the cards before that – in fact since the US cut the dollar’s link to gold, resulting in the collapse of Bretton Woods, and forcing Japan and the EC economies to float their currencies, in the early 1970s.
The collapse of Bretton Woods marked a decade of international turmoil as the economic order that the US had built after the Second World War began to unravel. The economic unravelling coincided with an unravelling of the US political order as well (the cost of the Vietnam quagmire was one of the reasons for Nixon’s decision to get the dollar off gold). International instability inevitably had a knock-on effect on domestic arrangements as well.
Nowhere was this clearer than in the UK, where the first part of the 1970s saw a Conservative government try to manage economic pressures by taking on organised labour, and failed. The following Labour government in the late 1970s had more success, using its links with the unions to bring about the biggest cuts in health and education, before and since, and cuts in real wages that have only been exceeded (in duration) by Cameron forty years later. But inevitably the contradiction was too much and the Social Contract collapsed into the Winter of Discontent in 1978, and so, basically, did the UK’s post war political arrangement.
By the time Thatcher came in at the end of the 1970s much of the damage had already been done. The unions and Labour were demoralised and divided both electorally and in the industrial arena and her triumphalism was hollow. Both left and right have an interest in talking up what Thatcher did, for obvious reasons. But in reality she buried a corpse and opened up to international capital because there was little other option.
What happened in the UK throws a light to what happened in Australia because if there was one real difference was that the Labor’s use of its union links for a counter-crisis strategy actually held under Hawke – and Australian employees suffered the biggest drop in real wages since the war (and since) over several years in the 1980s as a result. The ability to hold this was Labor’s real distinctive “reform” of the time.
But the end result was much the same. The union links eventually unravelled, this time by employees deserting the unions in droves and kicking off a terminal decline in union membership that has continued to this day. By the end of the 1980s, Labor’s relationship with the unions had nothing to deliver and Hawke was out. In a sense Keating did a Thatcher, claiming credit for “pulling the teeth” from the unions, as he boasted in a 2007 interview, when the damage had already been done.
The unravelling of Labor’s Accord with the unions, and what was its historical role, has left a hole in the political narrative that has yet to be filled. As usual in politics, that hole is presented upside down. What was in reality an unravelling of social relations became a triumph of the reforming political will of Messrs Hawke and Keating that, curiously, can no longer matched.
Howard tried a Thatcher in his first year, but spending and the size of the public sector ended up swelling under his government, (so aping Thatcher more than he knew). Nevertheless Howard and Costello tried to pretend they will decide when the Budget will go into surplus and the manner in which it does so. But in reality, Howard presided over improving Budgets much as governments around the world did, whatever their political hue – just as they went south at the same time when the GFC hit.
Rudd didn’t even try really to pretend that he was in control of the economy, despite some talk of productivity improvements, but largely meaningless because he no longer had any real links with the unions to bring it about. There was an attempt to find a new narrative during the GFC about the evils of the market, but that sort of went nowhere. But at least, with no union links, he was the first Labor Prime Minister to preside over an economic downturn that didn’t try to take it out on Labor’s traditional supporter base.
Nevertheless, Labor did try to make it look as though it was the spending that prevented a recession (while government programs did help create a few thousand jobs, the difference to the mass unemployment in Europe and the US might be more due to the absence of a collapse of the financial system). However, it left Labor with the unfortunate perception that the deficit was an act of political will, rather than the collapse in revenues it actually was, over which neither side of politics would have been able to do anything about. It was a perception made even worse as Swan flapped around trying to pretend he knew how to get back to surplus. It is this perception of lack of control that Abbott took advantage of, but which has now led him into an even messier trap.
From the right’s point of view, the Budget is a fraud. The nastiness of some of the measures does not disguise that there is little the government can do to cut spending back to fix the Budget. As Howard found, government spending is too ingrained into propping up the economy to do much about. Even under its own projections, spending as a percentage of GDP is set to rise above the levels under Howard. As Ross Gittins points out, the “savings” are not really savings at all. Around a quarter of savings are actually higher taxes, and the really big savings don’t even come this term of government but are due in 2017-18 – and much of this is shifting the burden onto the states for the purpose of recovering it in higher direct taxes.
In other words, the Budget is nasty without being tough, or effective. This worst of all possible worlds is brought out in the polling. The real problem for the government is not even the overwhelming majority of voters who think they will be worse off, but the unusual majority that think it will all have been for nothing to fix the economy.
This is unsettling for the government as if people don’t think it will be good for the economy, they must think there is only one other reason for the pain, it is “ideological”, which is a political stinker. Unfortunately this government has spent so much time with bogus culture war initiatives in the first few months that it is not a difficult conclusion to draw.
But nor can Labor take too much comfort from this. As polls show, voters think Labor would do worse. However, much Labor, or its leader, may be enjoying good polls, it’s reasonable to bet that that perception that Labor has no control over the economy will return to haunt it at the next election. The trouble for the Coalition in the immediate term is that voters are suspecting that they don’t have control either.
Fortunately, for the government, Labor is more interested in “righting the wrong” (as it sees it) of 2012-3 and cheering itself up, shown by its constant banging on about “broken promises”, than being politically effective
The real threat comes from those who have interests in taking advantage of the weakness of both sides. Clive Palmer has immediately focused on the weak point, the ideological nature of it, and has been the only one refusing to give ground that the deficit is a problem in the first place. If Clive sounds rather left wing, however sincere/insincere, it indicates not only which way he sees the votes are going right now, but also how little difference there is between what passes for left-wing and what big business like Palmer’s actually wants – more spending to prop them up.
The other group that has an interest in taking advantage of the weakness of the parties, at least in the federal sphere, are the states. Arguably one of the most important features hidden (and deferred) in the Budget is the attempt to shift the burden of spending back to the states and presumably facilitated by an increase in the GST. It is quite possible that the states may want this greater control and be happy with where this agenda is heading (a reason why a beneficiary of any distribution like Barnett is more relaxed).
But the manner the government has gone about it is extraordinarily antagonistic given that within a few weeks of a landslide win, it was forced to back down over Gonski. The government’s position is a lot weaker since then. Now, in making a song and dance about cuts, that aren’t really happening this term, Hockey has effectively handed what are generally weak unpopular state governments a free rein to make cuts and blame the federal government for them in the meantime.
Since before this government was elected, this blog has noted that any incoming Abbott government will have the problems of the Gillard government, with which in many ways it is joined at the hip. This has been building up over the last few months, and present in the polls, but largely unappreciated by the media. Now having reached the ultimate ritual of the Budget, and economic management, through which the last thirty years political unravelling has been understood, the depth of the government’s problems are finally becoming apparent to all.
Posted by The Piping Shrike on Monday, 19 May 2014.
Filed under State of the partiesTags: Abbott, Budget, Economy, Keating, Swan
Comments
37 responses to “Budget panto goes wrong”
I don’t thinks it’s bad tactics at all to use Abbott’s own words to attack him (i.e “Broken Promises”)
Why not take the opportunity to shred what is left of his credibility(even the minuscule amount that is left)?
I don’t think it even matters at this stage if the ALP’s message is coherent or consistent. It just has to be a rejection of what looks to be an attack on most Australians. I’m actually shocked! The Liberals actually believe in things….at least enough to commit political suicide. This is no longer the party of Howard.
We shall see how effective the opposition is when the senate deliberate’s on this budget. I think it is very interesting that state premiers are pushing the senate to block supply. Fig leafs are in this season.
Politicians always break promises. It usually doesn’t matter if it’s thought for a good purpose. The polls before the election showed there was expectation that the Libs would cut, but people thought it necessary.
Labor’s trying to draw equivalence with Gillard on the carbon tax. But that wasn’t her real problem.
Yes, but not all politicians make such a virtue over their word, now do they?
You have mentioned these polls that show people expected cuts before. I don’t agree that there is all that much in those figures pre-election. Are these the kind of changes people expected? That is very doubtful. Now we have the reality, and it is very different to what voters expected.
You and I both know the last election was about turfing out a Labor government that had become an embarrassment. Criticisms of spending was just another way to vocalise this anger. Big ticket spending items like the NBN, Pension rises, gonski,infrastructure increases, and the Disability benefits scheme were still overwhelmingly popular. isn’t that strange?
Remember voters have an idea of Coalition cuts…followed by Coalition largesse. Where is the bacon in the budget? The future sweeteners? There ain’t any. And it doesn’t appear to be coming back. Cuts when an economy is ticking up is one thing, but when it is flat-lining/collapsing? That’s quite different. Even now Abbott is on the telly likening this budget to the Howard years, but it is pretty obvious that times are very different now.
As an aside, I think it is hilarious that according some of the questions asked in these polls, the Carbon and Mining taxes have grown in popularity. That this government could rehabilitate these two apparently toxic taxes is truly extraordinary.
[…] Piping Shrike is spot on: […]
Nice analysis, context, thanks for the piece.
In your useful potted history of global stuff I was struck by how ultimately unimportant the political individuals were, and their politics, as they were largely swept along by their underlying circumstances. No small feat to make Thatcher look like a caretaker PM!
Perhaps electoral outcomes operate according to inexorable undercurrents similar to those you describe at a global economic level, in which case there is ultimately little a pollie can say or do to much alter their electoral fortunes. Perhaps Howard’s time was up regardless of work choices, Perhaps the electorate just couldn’t cope with a female PM, etc. etc. It does look to me like the ALP has simply forgotten how to swim, though. Shame, because the Greens are still green in pragmatic political skills, leaving T. Abbott to surf into power unmolested.
Given it was ever thus, I wonder why we (and the meeja) still devote such obsessional emphasis to ‘who-said-what-when’, only to be continually shocked/indignant when policies long telegraphed are implemented along party lines? There is nothing unexpected in this budget, as far as I can see. Did people expect a coalition government to do something different here? Why are (some) people so surprised? It seems parties right and left have been saying one thing at one time, then doing the opposite later, for as long as I can remember, at least when it comes to the economy. When will our expectations change?
As always, we need more constructive policy discussion, and less whining all around (not least from the politicians themselves). Your piece is a helpful pointer to the former, while I suppose this comment of mine ends up as the latter…
I kind of agree with the thrust – that it’s nastiness without the benefits. But it seems to me that there is a dubious tacit premise lurking here – and in other arguments I’ve read recently – namely that nastiness would be sort of ok if it worked.
It’s not. Nastiness is … nasty.
To the extent that they can be controlled, economies serve humanity – not the other way around. This budget is shocking, regardless of it’s impact on the numbers. Remember, numbers are not real. People are real.
Certainly it’s not my premise. As I say, the dirt has in the past been usually handed out by Labor, not the Coalition, and it was a relief under Rudd that that is no longer the case, at least in the way it was done before.
I’m more talking of the politics here, not the dismal science, although I think that there is little than can be done around spending in a real sense given the role it plays in the economy. The Budget will go back into surplus by the same way it went into deficit, revenue, over which governments have limited control.
What can change in a real sense is welfare and the state’s relationship to the society and the individual. This is an aim of this government, as it was the last. There are grounds for this happening, but it’s fraught, as we see.
Flocculant, I’m not saying of course that Thatcher was irrelevant, her winding up of the post war arrangements was something, the 1984-5 miners strike was a thing.
But the right’s claim that she changed Britain forever is just silly, and the left’s focus on her and not the government that preceded her is just annoying. What Thatcher did do most was to provide a political narrative to the unravelling, on which the right and left have been reliant ever since.
In Australia, as usual, things are clearer. It’s pretty clear what really happened in the 1980s, an unravelling with nothing really to replace it. I think the “who said what when” has generally limited resonance beyond media, political circles. It’s these circles that are getting a wake up call now.
Thanks for this post (and the last few which I never got around to commenting on).
I think another possible change of revenue that the government has control of is taxation. As we had Glen Stevens and Martin Parkinson earlier this year saying we have committed to Gonski and the NDIS but we need to increase the GST to pay for it.
The surprising element of this budget to me is the buck passing to the states. Will they increase taxes perhaps argue for the GST or run deficits themselves. Although, I agree there is some pretty pointless nastiness in there it looks like increased taxation either state or federal or GST may be the main tool to adjust the budget bottom line. I didn’t understand Gitten’s point about tax rises though…
Another aside. Something that makes this blog interesting is the long history that gets used to explain what is going on. In particular the lack of Labor’s base. Presumably this is in a pre-Hawke era. It also seems that Whitlam (might be) a non-typical Labor leader. This means to many Australian’s the political period where Labor has lost its base is the only period they have known. We sort of need to read up on the history to follow one of your main lines of argument. I just wanted to ask if you had a pointer to a good source to get a grip on this.
Thanks again
David
Nothing comes to mind. I thought Megalogenis’s Longest Decade was the most useful I read.
Whitlam’s modernisation was the start of this process of detaching Labor from the unions. It had a lurch back after Whitlam because he showed that in 1974-5 Labor had also eroded its counter-crisis strategy, which Hayden/Hawke revived.
I get a bit wary of doing the history as, like you say, it was a long time ago and most have lived with Labor having lost its social base. The trouble is that much of the political commentary still carries on as though it hasn’t. It’s only now the consequences are becoming really apparent.
I agree that governments have limited control over economic outcomes on the revenue side – though that doesn’t mean they don’t have some control. However, if the so-called primacy of the market means anything, then it must also mean that a government’s main responsibility is to the social fabric, and not to that market. A government does have at least major control over how the revenue is spent, and it is how it’s spent that is the most important thing. For that is what effects most peoples’ lives.
It’s therefore disingenuous to lump progressive and conservative governments together on the basis that they are following their respective outmoded political comfort systems. To begin with, that argument is still controversial. The settled argument is surely that the difference betwen them is still monumental if it defines their respective positions re the ever-widening gap between the haves and the vast majority which share the rest of the cake. This budget patently supports the haves, and that is all we really need to know.
Income inequality took off under Hawke Labor, not the Coalition, but carried on under them. So it is not possible to distinguish by that. By pretty well any measure you like, ordinary employees did better under 11 years of Howard than 13 years of Hawke/Keating, so you could distinguish by that, but not the way perhaps some may want.
I have no doubt that if Labor had brought down the current Budget it would not have hit lower income earners as hard as the Coalition did. But I find it hard to believe they wouldn’t have hit them at all. First because it did when they were in government. Secondly they have accepted the Coalition’s need to make cuts to fix the deficit. The fact that you have to go past Labor, past the Greens, but to a Queensland billionaire businessman to find someone who doesn’t think there’s a deficit problem to address says all to my mind the narrow straight-jacket the political parties are in, which makes them hard to distinguish for many people.
I think what you’re going to find is the “lies” have blown the narrative that the budget position is all Labor’s fault.
I’m pretty sure Labor don’t realise this though and just happen to have inadvertently struck gold.
Income, indeed all economic, inequality happens mainly despite governments, and only partly because of them. It’s the economy, stupid.
But if one side of politics consciously sets out to advantage the rich minority at the expense of the majority, which this budget patently does, and if you can’t seriously argue that the other side would do the same thing, then any “equivalence” critique you might present is cynical and shallow.
Pretty sound analysis overall.
As for the mainstream media’s stunned responses, we really hate to be seen to be saying ‘We told you so’.
But we told you so …
http://www.independentaustralia.net/politics/politics-display/we-really-must-talk-about-tony-abbott-and-joe-hockey,5694
Dedalus, I’m not following your argument now as you initially said “difference between them is still monumental if it defines their respective positions re the ever-widening gap between the haves and the vast majority which share the rest of the cake”.
Yet when I pointed out the ever-widening gap we see now started in the Hawke period, you then downplay policy and say it’s “the economy stupid”. During the Hawke period, it was not just the economy, but also a deliberate policy by Labor and the unions to cut real wages as the economy took off.
We’ll see what this government does, but the record so far for a government whose policies have deliberately increased inequality arguably stands more with Labor than the Coalition.
To just see what is happening on inequality through a partisan prism looks to me a bit cynical as well, and fails to understand why so many people stopped looking to Labor (or the unions) to address inequality years ago.
Gordon, I think the lies angle would not have worked if people thought it was good for the economy or fair, as polls suggested voters expected something that the Coalition didn’t let on.
Pipe, I’m not trying to antagonise you, butwith Hawke there was the Accord, which traded excessive nominal wage growth for some social benefits, most importantly superannuation. The key word is “deliberately”. To say that the Hawke government “deliberately increased inequality” is ridiculous.
Even if inequality was a byproduct of his policies, unless deliberate intention is proven, your case folds.
In the present instance, intention is self-evident. You are parsing careless adjectives in my sentences to argue otherwise.
I agree PS. I think people would have tightened their belts if the pain had been shared and if they believed all Hockey’s claims for it.
The idea that the budget is an ideological document has taken deep root and very few want to suffer or have the vulnerable suffer for that.
I am no expert but apart from the obvious unfairness it seems to be all over the place. It seems there is a real question over its potential effectiveness. All pain for little gain is never enticing.
The mixed messages are weird too. Today Barnaby Joyce said we were in such a parlous situation that if the budget measures were not all adopted we would be closing hospitals in five years. Just hours later Scott Morrison was attacking asylum seekers for thinking they could come to a first rate economy like our’s.
It seems to be that our image of ourself as a ‘fair go’ society, no matter how imperfect, cuts deeply. Most of us are wise enough to feel gratitude that we do not live in the US and accordingly place a high value on equalizing mechanisms like our universal health system.
I think Abbott has gone. Strange things happen of course but I can’t see him ever being believed again.
Dedalus, what was “deliberate” (as Keating and Kelty talk about a lot in retrospect) was the shift of national income from labour to capital. When you consider how few capitalists there are compared with workers, this will have an inevitable effect of increasing inequality more than if this conscious shift didn’t happen.
Hard to see how they could’ve missed this logical outcome at the time, given the debates that were being had.
I agree broadly with many points that Pipe and others make with respect to politics at an abstract level. The whole subject is very complex and to discuss it you have to be scrupulous with your terms, less ambiguity lead to endless arguments over small points. Personally, I’m hopeless at being careful, and it gets me into all sorts of trouble. But to return to the issue, which I think is political relevence in the age of political irrelevence, Shorten, Latham etc seem to be awake to it at least to some extent, which is why they are pushing for reform, albeit minor reform.
Dr Tad, your point about a shift from labour to capital is not anything new. It’s being going on, with stops and starts due to major wars and depressions, ever since the industrial revolution – at least. It’s an historical phenomenon, or maybe simply a Darwinian one. Talking about it is coming into vogue again as a central concern of politics because of the expansion of the global village (finally) and particularly the internet over the past several years.
We are, therefore we blog. (And, on a more optimistic note, read newspapers less.)
Picketty’s book (already out of print) apparantly (from excerpts I’ve read) enunciates the overall position at length.
So: the classic divide between the rich and the poor is now being revealed as a divide between the rich and the rest. That dawning on the middle class, in little spasms thanks to atrocities like the recent budget, may be the overarching theme of the coming cycle’s politics.
Put bluntly, it’s a class war, and the progressive side has to sharply define its position, as sharply as the conservatives have just defined theirs. The result in 2016 hangs on that.
Just to clear up the point I’m making on this post:
On Hawke I can’t see how the redistribution cannot be seen as deliberate.
There were several Accords, one initial while still in recession, more after the dollar floated. The initial one promised to keep real wages. The later ones did not, just when the economy was recovering. The fact that this would result in a redistribution away from average employees was acknowledged (and later regretted) by Keating but the rationale at the time was that there was a threat of inflation from deregulation (the gist of Keating’s “Banana Republic” comment) and that labour costs had to be kept down. The social wage did not stop a redistribution, it would have been pointless from Hawke/Keating’s view if it did. It was also the point about the “recession we had to have” as it was going to take further inflexibilities out of the economy, i.e. keep labour costs down to help restore profitability. Certainly employees gave their verdict on whether they were compensated by leaving unions and Labor in droves. It’s striking how much clearer all of this was at the time, even by the early 1990s, “Labor In Power”,for example, was fairly explicit on this.
But here’s the thing. It is this counter-crisis strategy that is the only one that governments in Australia have ever really had. Labor using its relationships with organised labour to bring in austerity, mobilise for war, is why Labor tends to be around during crises. But imposing austerity through organisations that were meant to do the opposite is contradictory which is why Labor split over it in the Great Depression and unravelled more slowly (but terminally) in the 1980s. The right have never really had the ability to what Labor could with its social relationships, Fraser tried with a Price Incomes Accord but it flopped.
Now governments have nothing to really address the economy, lacking any real social base to bring it about. Yet politically this is not recognised, except as a lack of political will. So a lack of social base to manage the economy is turned into a problem of political will. This government thinks it has chocs of that so is trying it on through the Budget. The trouble is that it is now discovering it does not really have the social base to bring it about, leading to the political disaster unfolding.
Maybe it’s the word “deliberate” which is causing some confusion here. Pipe’s argument that the Hawke government “deliberately” caused a weakening in real wages etc is plausible, but only as far as it goes, judged on some of its outcomes. From outcomes one infers intent. I’m not sure that’s fair. There were other outcomes, which infer a different intent. In other words, there were multiple intents. For me, intents outside the economic domains are of equal if not more importance. There are social equity issues. This is why I rate Whitlam so highly. This is why I prefer to distinguish between economic reasons for doing things and ideological ones. The latter are too often the reasons for the former.
So the word “deliberate” has a pejorative connotation – it puts Hawke with the bad guys. Because we can all see the current government’s economic policies as ideologically driven (the rich versus the rest), analysis of left politics of the 80’s in economic reductionist terms lulls us into a mistake of believing that these policies were also similarly motivated. Which partly they may have been, for sure, but which – and this is the point – largely they were not.
Of course, I’m completely misrepresenting Pipe’s arguments; nevertheless words such as “deliberate” leave his arguments unclear.
Dedalus, most boosters of the glorious 1980s reform era (Kelly, Megalogenis, Hawke, Keating, Carmichael, etc) accept the idea that the upwards redistribution of wealth (from labour to capital) was absolutely necessary to resolve the political-economic impasse of the Fraser years, which was seen as a problem of “stagflation” that would require “wage restraint” to correct (your word) “excessive” wage growth that was eating into profits. That’s their position.
To imagine that such an upward redistribution of wealth would not create worse inequality as a result would be to delude oneself (although in my partner Elizabeth Humphrys’ view — and she is doing a PhD on exactly this issue — many in the Left of the unions really did delude themselves that the social wage would make up for this, as if that somehow wouldn’t undercut the whole purpose for the redistribution; the other thing they banked on was “industry plans” leading to a new golden age of manufacturing led abundance, which also didn’t happen).
Whether or not you think Hawke was a “good guy” or a “bad guy” in this is irrelevant. This was seen as the way out of the seemingly intractable economic crisis that ended the long post-WWII boom. It was also a disaster for Australian workers, one that Howard didn’t have the political authority to continue with (hence his generally softer approach after 1998 and why WorkChoices proved to be such a disaster for him politically).
I recall the endless calls for sacrifice being made by union and ALP leaders in the 1980s, and the way that it was universally recognised that upward redistribution is what was happening. It strikes me as odd that some who want to defend the Accord record now want to defend it as something its architects are very clear it wasn’t and was never intended to be.
Dr Tad
Are we making different points here? I’m not arguing on the economics of this, as I’m not qualified. My economic beliefs are pretty naive. My entire point relates to intent. You have to make a case that Hawke et al intentionally set out to create a further imbalance between the rich and the rest in order to advantage the former. Otherwise people like me are going to argue that they might have been doing so from more benign motives.
You laugh! Come now, if I can concede some sense in your theory, you should concede some sense in mine.
All you have really done is to assert that the redistribution upwards was so obvious that the governing parties had to be “deluded” into not realising it. Well, it might be obvious in 2014, but it may not have been so obvious in 1983. It might just be that they were informed by some economic principles that you don’t agree with. It’s even possible that they DID know what you assert to be obvious, but that they were counting on some better outcome which might flow from THAT. Your post-facto insight into their presumed short-termism might be missing their forward projection into some long-term prosperity for all.
The popular media certainly seems to think so, that the times are pretty prosperous, sans the debt. Not that I take much notice of the echo chamber. But you have to admit that economics is a murky subject. I note that many of the most famous economists have taken diametrically opposed positions on the most basic ideas concerning money. What that tells me is that there are many economic theories, though I don’t go so far as to say that one is as good as another. That would be silly. Seventy five percent of the population say things like that. We are not one of those here, right? But I have noticed a certain rear-view-mirror aspect to economics. For whether a real-life outcome of a theory is one thing or another is often determined well after the fact – in this case 30 years after the fact, as you have stated dear Dr Tad… but anyway, I am descending into waffle. I must get back to my core belief on the subject. Which is that there are only 79 rich people in the world, and we should hate them.
[…] Piping Shrike: Budget panto goes wrong […]
Dr Tad, Shrike
You need to look at the difference between income and wealth distribution before the effect of government interventions and afterwards, taking into account the impact of government services. While the Hawke Keating era may have increased the former, the impact was ameliorated by the effect of the latter. This included programmes to address income inequality through the provision of government services and things like HECS and Medicare. This fudge continued under Howard especially under the later “this reckless spending must stop” years. We had our cake and ate it too.
What was the point of the redistribution of returns to capital? There was a shortage of capital for investment at the returns which had been available. Is there a difference now which would justify a different position? Yeah, perhaps most of the developed world hitting the zero lower bound for interest rates and the printing of zillions of dollars of new cash? We now have an excess of capital, facing a shortfall in demand and hence limited investment opportunities. The exact opposite situation to that which would require a further increase in the returns available to capital. Why is there a shortfall in demand – well, probably because the redistribution of income towards capital and away from labour around the world has gone too far?
Who did what 30 years ago should not be the basis of what we do now. We should look to our present circumstances. The idea that Labor should feel constrained by what they did in power 30 years ago, when the Coalition has not been constrained by what they faithfully promised while in opposition 8 months ago, is ridiculous. We are facing completely different challenges now than we were 5 years ago, let alone 30.
Reza Barati and the slashing of all aid to less fortunate countries would have sparked student protests once.. now its the HECS that provokes ire amongst academe … what a poor excuse for a nation we have become..
Guy, not sure what point you’re making about HECS, since university fees that were abolished by Whitlam were reintroduced by Hawke. While Hawke brought back Medibank, the levy that accompanied it was not compensated for under the Accord, and of course Hawke also brought in a copayment for Medicare. So the social wage was always equivocal, which is to be expected as the point was to lower the cost of labour. No point having the Accord if it didn’t.
The more interesting point, which relates to the central point of this post, is why Labor should feel constrained by what happened 30 years ago. There is a sense that politics is just about political will, and intent, and it’s just a case of finding the politicians that have it. But in reality it depends on the social relations those parties have in society, and this was lost thirty years ago. Since then, the major parties have been putting a brave face on it and pretending the show can still go on. But as we have seen for the last five years, this is harder to do as the wheels come off.
The point about HECS was pretty obvious I thought, it was introduced under Hawke in 1989?
Abbott and Hockey have proven political will isn’t dead. where I think you are correct is that it will be a struggle to impose that will on Australia, even with substantial parts of the Australian establishment backing it.
my broader point is that the Thatcher Reagan era policies, enacted here in Australia under Labor because everything is backwards, are no longer appropriate in a capital rich world, and in fact are the opposite of what is required. you are perhaps not interested in this point as your focus is on the process of political decision making not the substance of the decision.
Maybe we’re talking cross purposes, just that I wouldn’t have used HECS as an example of Hawke’s redressing wealth distribution since they were to deal with fees that he introduced in the first place.
Political will is very much alive, indeed the lack of social base means it is probably more of a thing than before, but less viable, hence the political car crash we see on the Budget.
On Thatcher/Reagan compared to Australia, what I am arguing in the post is that actually it is more the wrong way round in how what happened in the US and the UK is portrayed than here. That really it was not a victory of the right, but a hollow triumphalism over the unwinding of the left. Here we had it fully revealed, without the phoney right victory parade coming after. Just Keating claiming credit for pulling out teeth that had already fallen out.
I agree that the real story of the 80s both here and Australia is the political class being forced by circumstance into action, which they then try and pass off as due to their own brilliance. That will be the world story over the next decade as the ECB is bludgeoned into QE or the EU falls apart, the Chinese are forced into allowing consumption to rise and the Americans adopt a greater welfare state. Reality eventually triumphs.
Maybe the Australian political class will recognise the fact that we are a rapidly growing young country which needs to spend cash on building infrastructure and not just roads and mines. They will be forced to eventually, and will then claim the credit. We don’t need austerity, the coming issues with China will lead us to spend, spend, spend. This is not the end of history. It is the beginning of the Asian century, and we will be worryingly close to the eye of the hurricane.
Doesn’t look as though we have an austerity Budget. Gittins has been good on this. The economy’s slowing and looks like the Coalition will do what both sides have done for the last 20 years, throw money at it.
No, more a money for old mates budget. The problem with it is that it seems likely to be contractionary due to the negative impact on the majority of the population and through consumer confidence. Taking money away from consumers to fund a cash splash for big miners and big carbon emitters will not help the economy. Looking a the net impact is less important than the distributional impact.
Yes I think the point of an austerity budget would be to be austere. If spending is actually growing, and taxes failing to be massively raised, it isn’t quacking like the duck so probably isn’t one.
Of course the fairness issue is there and I still can’t tell whether the government’s efforts to sell the budget are pure ham-fistedness, or a mix of pure ham-fistedness and trying to appeal to some incredibly reactionary support base on the Far Right – hence Cory Bernadi’s reaction – hang the consequences for the rest of the party.
They (not just Cory) have drunk plenty of Kool-Aid with their Tea at the Tea Party so may well believe the more hostile the reaction from the Political Centre, the better they must be doing. Certainly the Australian and the Fin have been doing their best to reassure them thus.
Maybe just 2.5 years is a long way from the polls, and they believe in cycles (which I think Shrike was trying to disabuse people of in other posts)
It is certainly possible that Abbott and Hockey have stuffed up, and are toast.
I think what happened is that they thought they had been elected to do something to fix the Budget, saw they couldn’t really do much as the economy was slowing, so added a few harsh measures to give the impression they were.
What has thrown them is that really the government was in by default and didn’t have a mandate for anything. The absence of a honeymoon should have warned them.
The irony is that even those few ‘supposed’ harsh measures have been enough to spook businesses and consumers, giving the impression that this government doesn’t have a handle on the economy( which, as you have pointed out, it never did anyway…)