John
Edwards (Australian Financial Review March 2015) said "Elected on a
platform of opposition to the Campbell recommendations and of budget
expansionism, the Hawke Government abruptly moved in the reverse
direction".
And
there is no shortage of people working for big corporations or their political
or media cheer squads who are happy to regard the 1980s and 1990s as a halcyon
era of political and economic reform which served Australia well. The argument
goes that floating the dollar, pulling down tariff barriers, deregulating the
financial markets, and implementing National Competition Policy, laid the foundation
for economic growth and rising living standards in the years that followed. It
is said that Australia's income per head rose during this period as a result of
these changes.
But
less simplistic and more detailed analysis suggests that the deregulation and
destruction of industry support, and the ripping up of the Australian
Settlement which occurred in these years and subsequently, has not been the
claimed road to paradise. Much of Australia's increased income has been a
consequence of exports to China. China's increased prosperity has led to demand
for Australian commodities, particularly minerals. The mining boom could not go
on forever, and it has not. It has come at the cost of narrowing our economy,
when we need a broader, more resilient, one.
Secondly
Bob Birrell and Ernest Healy have pointed out that the achievements of the
1990s were not just attributable to the protection offered by the low
Australian dollar and therefore vulnerable to the currency rise that came with
the mining boom, much of the elaborately transformed manufacture (ETM) exports
of the 1990s can be attributed to foundations which had been established during
the protectionist period, which the market liberal policies of the 1980s and
1990s dismantled.
Peter
Sheehan and colleagues showed that ETM exports from the mid-1980s to the early
1990s were predominantly those which had benefited from "industry specific
policies directed at increased outward orientation and export levels". (P.
J. Sheehan, Nick Pappas and Enjiang Cheng, 1994, The Rebirth of Australian
Industry, Centre for Strategic Economic Studies, Victoria University, p. 30).
The industries included telecommunication equipment, cars, computers and
pharmaceuticals.
Motor
vehicles were a standout, with an average annual rate of export growth of 16
per cent over the decade to 2000-01. Pharmaceutical exports grew by 21.4 per
cent per annum during the same period, to $2.4 billion. (Jonathon Coppel and
Ben McLean, 2002, 'Trends in Australia's
Exports, Reserve Bank of Australia Bulletin, April 2002, p.3).
New
enterprises were not significant contributors. Bob Birrell and Ernest Healy
present the heretical hypothesis that the tariff protection and industry policy
support of the pre-reform era laid the foundation for Australia's ETM export
successes in the 1990s, and that once this support was removed in the 1990s and
2000s that the success was short-lived.
Dennis
Glover, Lecturer Graduate School of Humanities and Social Sciences at the
University of Melbourne, draws a parallel between what happened to English
workers in the first three decades of the 1800s and what happened in Australia
from the Mid-eighties and the 2015. ("The unmaking of the Australian
working class - and their right to resist", The Conversation, 3 August 2015).
Dr.
Glover says that at the end of the eighteenth century the English working class
of hand loom weavers, agricultural labourers, iron workers, miners and so on
lived a largely rural existence, employed at home or in small workshops, with
strong connections to village or parish life. But by the 1830s many had been
agglomerated into large factories. Towns like Manchester, Liverpool and Leeds
had been transformed into the "dark satanic mills" of Blake's poem.
Crammed into dangerous slums, many died young and poor. The old world had been
physically transformed: bricked over, blackened, cheapened, uglified.
Dr.
Glover says something just as dramatic happened in Australia during the past
three decades. He says the transformation from the industrial to the post-industrial
era has been so total as to constitute the sociological equivalent of an
extinction event. (Ibid). "The queues of workers' cars lining up each
morning to get through the factory gate - gone. The publicly owned banks and
utilities - gone, or about to go...... Secure, full-time employment, with its
guarantee of holidays, sick pay and promotion - in many industries long gone.
The working class dream of home ownership and upward mobility via cheap land,
equal educational opportunities and cheap land - all are on the way
out"(Ibid).
Dennis
Glover describes this as the un-making of the Australian working class.
"Just as 18th century England's green and pleasant fields were paved over
with brick, its vocations replaced by the steam-powered machine, its pastoral
life rent asunder by the regimentation of the Industrial Age, in just 30 years
the world of the Australian working class, with its factories and unions and
quality public services and the communities they supported, has been made all
but extinct, wiped out, like the dinosaurs, by the fiery asteroid of creative
destruction". (Ibid).
He
describes this as the revolution the little people lost, and makes the astute
observation that the little people, the losers, refuse to go away. They vote
against more "economic reform" - they won't support a higher GST and
they won't support more privatisations. One might add that they voted out the
party of Workchoices and they don't support deregulated university fees or
Medicare co-payments either.
Dr
Glover asks why they don't thank Paul Keating for liberating them from their
dull, monotonous, supposedly unskilled and unimportant jobs making cars? He
answers by saying that Australia's working class won't easily give up without a
fight, won't voluntarily accept poverty, and won't surrender its culture and
traditions without a struggle. "Australia's wilful working class deserves
to be rescued from the condescension of the economic reformers. Just like the
members of the English working class who went through the Industrial
Revolution, the people who have experienced the destruction of their industries
and communities in places like Dandenong and Doveton in Melbourne's South-East,
Norlane in Geelong, Broadmeadows in Melbourne's north, and Elizabeth outside
Adelaide, where the car factories and canneries are still being closed and
unemployment is still well above 20per cent after 25 years of economic growth,
have something important to say to us" (Ibid).
He
concludes with the observation that we should try to make economic change work
for everyone.
Right
wing commentators and economists regularly say the world is changing, and
changing rapidly, and nations must change in order to survive. This is a
classic case of seeking to profit from their own wrongdoing. Much of the change
that is happening is being driven by policies advocated and implemented by
right wing commentators. Much of the change is not inevitable. The fact that it
is making it tougher to survive should be cause to question our policy
directions, not head even faster towards the cliff.
One of
the defining features of modern political life is a pervasive loss of faith in
government's ability to solve problems, or indeed do anything much at all.
Sally Young, Associate Professor of Political Science at the University of
Melbourne, says we are living through a lost era of policy making. She says
that politicians of today are suffering a crisis of confidence about whether
their policy making can make a big difference. (The Age, 1 April 2015, p.20 ).
She
notes that the Prime Ministers of the seventies built things. Gough Whitlam
left behind Medibank, women's health centres, the Family Court, single-parent
pensions, public transport projects, sewerage systems, the Arts Council, the
National Gallery, Triple J and Legal Aid. He gave us free tertiary education,
the Trade Practices Act, no fault divorce, needs based schools funding, the
abolition of conscription, the Heritage Commission, aboriginal land rights,
voting at age 18 and fair electoral boundaries.
But the
situation since the 1970s has deteriorated dramatically. Erik S. Reinert from
The Other Canon Foundation set this deterioration out in detail in 2012 in his
paper "Neo-classical economics: A trail of economic destruction since the
1970s". He says that three decades of applying neoclassical economics and
neo-liberal policies have destroyed, rather than created, real wages and
wealth.
Reinert
starts by observing that after the Second World War Two institutions were
established which provided the conditions for an unprecedented increase in
human welfare. The 1947 Marshall Plan paved the way for the re
industrialisation of Europe and other nations all the way to Japan. The 1948
Havana Charter established rules of international trade that made this
industrialisation possible. It allowed for "infant industry
protection" where unemployment was present in a country. There was a
tripartite political setting, with a balance of power between business, labor
and government.
Countries
with a diversified economy prospered. For example South Korea diversified away
from agriculture and raw materials and into manufacturing industry. It did not
continue to rely on its 'comparative advantage' in agriculture, instead using
heavy-handed industry policy to break into manufacturing. On the other hand
Somalia was richer than Korea until the mid 60s, but in Reinert's words
"continued to specialise according to its comparative advantage in being
poor".
Reinert
says that the theory of "comparative advantage" advanced through
David Ricardo's free trade theories was in practice only applied in the
colonies. He says that the US Washington Consensus free trade theories were for
a long time mainly intended for export, not for use at home. He says that
"Unfortunately, in the end the West also started believing in the
propaganda version of its own economic theory".
The
world development record, expressed as a growth rate of GDP per capita, is
described by Reinert as excellent from 1950 to 1973 but dismal from 1973 to 2001.
He says that during this period Latin America experienced a string of 'lost
decades'. Real wages in Peru were more than halved when the free trade shock
and subsequent deindustrialisation hit Peru starting in the mid-1970s. Africa's
beginning industrialisation was reversed, and the communist economies became
poorer than they had been under a notoriously inefficient communist planned
economy. Reinert concludes from this period that a nation with an inefficient
manufacturing sector is much better off than a nation without any manufacturing
sector at all.
Reinert
says that even the United States finds that too much free trade has undermined
its manufacturing base. The West has embarked on an attack on wage levels and
purchasing power in the name of austerity. The results are likely to be just as
harmful to real wages and purchasing power as they have been wherever they have
been applied. A wave of neo-classical wealth destruction hit Latin America in
the mid-seventies. It also hit the little industry Africa had managed to build.
Another wave of destruction hit the centrally planned economies after the fall
of the Berlin Wall. The fall of the Wall heralded a period of Western
triumphalism, an in particular a failure of mainstream economics to distinguish
between the financial sector and real wealth creation. This has now caught up
with country after country in Europe and beyond.
Three
economies which have done well during these lost decades have been Brazil,
India and China. Reinert notes that they escaped the free market fundamentalism
and free trade shock that accompanied the fall of the Berlin Wall. In these
countries neoliberalism was met with resistance from a critical mass of
economists.
Reinert says that
what is needed is to recapture the middle ground. He supports the principles of
the Havana Charter, unanimously approved by the members of the United Nations
in 1948, as a blueprint for a world economic order that creates, rather than
destroys, mass welfare. He says that of the three political systems which
brought financial capital under control during the 1930s, - communism, fascism,
and the New Deal - there is little doubt what most people today would choose.
But that needs to be kept as a live option, and neoclassical economics is
failing to do this. It fails to distinguish between the real economy and the
financial sector, with the risk that financial sector stops adding value to the
real economy, but starts to parasitically destroy value. (This paper is online
at http://mpra.ub.uni-muenchen.de/47910/).
