ALLAN PATIENCE. It’s time for Labor to think big about policy – a people’s bank!

Tony Abbott is not the only one anticipating a change of government at the next election. Voters across the board are increasingly fed up with the Coalition and there are even signs that some of its most devoted cheer leaders in the media are beginning to give up on it. Dear old Alan Jones has certainly given up on it. So what does Bill Shorten have in store for us if the ALP wins the next election?  

Out in voter land the Coalition government is on the nose. As Michelle Grattan has observed: “What is so striking is the wide sweep of the discontent and pessimism. That negativity is the prism through which voters will look at whatever the government does on housing and other things.”

As Labor heads towards a possible (though still not yet set in concrete) victory at the next election, does it have any policies up its sleeve that will turn a bemused, angry and alienated electorate into an enthusiastic and expectant clear majority of voters? The danger is that it will simply drift into power by allowing the government to pull itself down.

That would be a no-win for everyone – an example of the laziest kind of politics. And both the major parties have practised a lot of lazy politics for far too long. It is the kind of politics that would certainly deny the ALP the unambiguous mandate the party badly needs if it is to be a government enacting major reforms. And let there be no mistake: major reforms are urgently needed to drag this country out of the paranoid narcissism and neanderthal policy making in which it is has been floundering for more than a decade.

It’s time (to borrow a phrase) for Labor to dramatically distance itself from the stale old policies of the Coalition parties. It could do this by taking four initial big imaginative policy steps.

First it must abandon neoliberalism as its guiding economic philosophy. Neoliberalism (or economic rationalism if you must) has patently failed on any criterion against which it can be measured. It’s over. Labor must bring the state back in to curb the neoliberal vandalising of the economy by a grossly de-regulated private sector. It needs to define and explain – patiently, clearly and passionately – examples of the destructiveness that many free market failures have unleashed on the public. For example, the electricity retail industry that everyone (including Blind Freddy’s dog) knows has become a disgustingly messy dog’s breakfast.

Second, Labor needs to come out swinging on a number of signal social policies, promising that it will enact reforms very early in its first term. Marriage equality should be right up there in lights for immediate action. Ending negative gearing and putting in place a sound housing affordability policy should be way up on the agenda. A government-run, working family-friendly childcare system needs to be designed and ready for the next election. There must be a recommitment to the National Disability Insurance Scheme (NDIS) and to something like a Gonski #2.

Of course all these measures will mean raising taxes – but if this is explained carefully, clearly, and rationally (that is, against the backdrop of a truly progressive tax system that makes the rich pay significantly more than the poor, and which funds essential and effective user-friendly public services), voters will come on board in droves. (Consider, for example, the public’s hostile response to the Coalition’s tax cuts for big business.)

Third, Labor must commit itself to real action (not just blathering on about “good ideas”) on some major infrastructure projects. The Very Fast Train linking Brisbane, Sydney, Canberra and Melbourne should be brought forward immediately. Policies to radically upgrade urban infrastructure – roads, public transport, schools, health services, aged care facilities – need to be advocated with authority and clarity. And it must bring forward a clear, unambiguous policy to counteract climate change.

Fourth, Labor needs a standout signal policy that nails its post-neoliberal colours proudly to the mast, to show that it is unequivocally on the side of “ordinary mums and dads” (to use a Shortenism). This policy must be one that will find huge voter support right across the country. And a sure-fire nominee for this has to be a publicly owned bank – the Australian People’s Bank.

A publicly owned bank is desperately needed to curb the gross excesses of the big four banks by competing with them at every level. It is needed, too, to offer to the general public a bank that has their interests at heart, not the interests of the private banks’ over-paid CEOs and big shareholders (not a few of whom are off-shore). And most of all it is needed as a model of client friendliness able to respond to the needs of middle and working class Australians whose interests are presently being ridden over rough shod by the existing banks.

Moreover the Australian People’s Bank must have an insurance arm providing general insurance and medical (including dental) insurance. And it must be able to offer to the general public the most impeccably, transparently honest financial advisory service in the country. Its profits (and they will be considerable as the public recognizes the many advantages of a publicly owned bank over the private banks) can go into general revenue, to lessen the tax increases that will be necessary for the broader program Labor must bring to the next election.

If Labor can’t develop a strong and inspiring program like this, another party or parties (for example, the Greens, or a new Social Democracy Party) will rise to the challenge. Then we will see voters deserting the ALP, signalling its demise as a major party.

It’s time!

Dr Allan Patience is a principal fellow in the School of Social and Political Sciences in the University of Melbourne.

See also an article by Nicholas Gruen in The Saturday Paper ‘Making the Reserve Bank a people’s bank’.  https://www.thesaturdaypaper.com.au/opinion/topic/2017/04/15/making-the-reserve-bank-peoples-bank/14921784004504?utm_source=share_button&utm_type=social_email

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11 Responses to ALLAN PATIENCE. It’s time for Labor to think big about policy – a people’s bank!

  1. David says:

    Hear hear, Allan!

    Can you imagine the hysteria – in media, among the banks, big corporates and lobbyists – if such a program was proposed, never mind implemented.

    Bring it on.

  2. Jaquix says:

    Agree generally and I’m sure Labor will be ready for it. So much to be done! On people’s bank I’m not so sure, banks should I be compelled to be ethical. Royal Commission might recommend it. Big one that people want is an anti corruption watchdog.I like the story of Gough Whitman and 2 other sitting down with a big pile of projects, before the cabinet was announced, and they worked through a while pile of things in a few days. I’d like to see Labor be bold and do this too.

  3. Jaquix says:

    Gough Whitlam. not Whitman. Silly keyboard.

  4. Peter Graves says:

    Good one, especially about finding extra revenue with increased taxes. Instead of the mining companies, why not try taxing the banks ?

    One way is a (Tobin) tax of about 0.01 per cent on high-frequency foreign exchange transactions. The Reserve Bank calculated FOREX trades in April 2013 averaged $US182 billion each day. By contrast, the Department of Foreign Affairs and Trade reported Australia’s two-way trade in 2012 was $623.8 billion, or about four days’ FOREX trading.

    This suggests over 90 per cent of these trades are speculative. Taxing financial speculators means extra revenue for child care, health care, aged care and Australia’s overseas aid.

    In May 2015, The Australia Institute estimated a Tobin Tax could produce an extra $1 billion each year, by taxing high-speed share transactions. This is the same principle, just a different base for the tax: (http://www.tai.org.au/content/australia%E2%80%99s-tobin-tax-arguments-and-evidence):
    TO QUOTE:
    A tax on financial transactions, known as a “Tobin” tax, could protect superannuation, investors, and improve the operation of Australia’s capital markets and provide a source of tax revenue of over $1 billion per year.
    Tobin taxes or some form of financial transaction tax are in effect in over a dozen jurisdictions internationally, including UK, France, Italy, Hong Kong and South Africa.
    High Frequency Trading (HFT) creates instability which primarily hits retail – or ‘mum and dad’ investors, and super funds. Australia’s super funds and retail investors are losing up to $2 billion per year due to practices such as high-frequency trading.

  5. Colin Cook says:

    Great and visionary; Labor really must step up to get these ideas out into the community – in spite of the terrible bias of MSM.
    See also http://evonomics.com/central-banks-for-everyone-nicholas-gruen/
    and http://cooksourdough.blogspot.com.au/2016/10/the-great-economic-divide-explained.html

  6. Rob Pilgrim says:

    Well, I don’t know which Labor Party this person is writing about – but it isn’t the ALP (otherwise known as the Alternative Liberal Party). Big ideas? Ooooh, that’s too frightening … it’s all about getting into power and milking the status quo for the benefit of politicians, and screw the poor suffering taxpayer!

    • Allan Patience says:

      You have a point about the ALP Rob. I too have all but lost faith in it. I do think a new party on the left, a Social Democracy Party, is needed.

  7. Mael Colium says:

    I support the ideas put forward but would make one correction to the narrative which reflects the author’s misunderstanding of macroeconomic principles. The initiatives outlined will not be paid for by taxation. While deriding the neoliberal (monetarist) ideology the author has fallen into the trap of the greatest travesty in modern politics that federal fiscal capability is funded by taxation. It should also be understood that bonds do not finance federal government expenditure. The notion that taxation and bond sales gather the funds required for fiscal outlays is an old notion harking back to the gold standard or the Bretton Woods agreement which collapsed when Nixon untied the greenback to gold reserve backing, which made the currency fiat.

    Since that time the advanced economies, including Australia, have all floated their exchange rates and made their currencies non-representative which permits deficits to be funded via the exchange rate rather than the imposition of domestic austerity. The federal government is able to issue currency for whatever purpose it desires provided that all goods are available and purchased at nominal prices. Put simply, when an economy is within productive capacity, the federal government is free to issue currency without regard to the nonsense of balanced budgets, fear of deficits or pursuit of surpluses. This would enable the Reserve Bank to effectively target headline interest rates for the purpose of monetary policy rather than using that purpose as a blunt tool for encouraging investment, which has been demonstrated to be a folly, leading to overblown asset speculation and financial imbalance within the needs of the economy.

    So yes, I strongly support the ideas put forward, but an understanding of the futility of following a balanced budget mantra supported by cheap money rates should be appreciated at the same time to allow those new policies to take root and flourish for the benefit of ALL Australian and not the few elites.

    • Allan Patience says:

      Mael: We seem to agree on most things. I was not at any stage advocating a “balanced budget” economic policy. Far from it.

  8. Michael Lambert says:

    I agree that alternative governments need to articulate a coherent set of policies for the electorate and not simply get elected on the basis of discontent with the government. This is in spite of the glaring counter example of Hewson’s Fightback.

    There are two policy areas in Dr Patience’s article which need far greater consideration. The first is the diatribe against what is termed neo liberalism or economic rationalism ( is this a call for economic irrationalism). Australia and most developed western economies have mixed economies with a combination of functioning markets and a strong role for government in macroeconomic policy, macro prudential policies, the provision and funding of public and merit goods and the use of regulation to maintain effective competition and address externalities. This is not a neoliberal framework though I accept that there are those seeking a return to a mythical past era. Rather than deal in slogans an alternative government needs to articulate clear policy positions. It would be a major mistake and misreading of economic history for the ALP to move away from pro market position which also recognises the strong role of government.

    The second policy area in the article on which I take a contrary view is the proposal for a “people’s bank” which ignores the lessons painfully learnt in the past when governments owned banks and insurance companies that failed, at great expense to the public purse and, in the case of Victoria, to the state economy. There is no rationale for governments owning companies that operate in competitive market places. A government owned bank would sufffer the significant disadvanateges of capital constraints, lack of informed shareholders and absence of a share price giving continuous feedback on performance. The key isssue to adddress is the need for great competition and a more consumer responsive approach in the banking sector. Rather than a knee jerk reaction like a government bank or commisssioning a legallly based process like a Royal Commision , a better appproach would be to commission the ACCC and APRA to advise on how this objective can be best achieved.

    • Allan Patience says:

      Free markets are an illusion. Thomas Picketty and Wolfgang Streech (among others) have shown very clearly that the neoliberal era has been a destructive failure – even on its own terms.

      The Commonwealth Bank (CBA) was once a people’s bank, owned by the Australian people. It was originally set up because the big private banks were ignoring the needs of small clients. It was run very efficiently and competed successfully with the private banks. Then the Hawke-Keating government sold it to the private sector. A publicly owned people’s bank would be a real addition of real competition into what is currently a much too cosy and self-regarding banking system in this country.

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