ALLAN PATIENCE. Towards a social democratic future for Australia.

Jan 3, 2018

The neoliberal war on western economies is finally collapsing under its own contradictions. In Australia its attacks on public wellbeing have been devastating. Politicians in thrall to the neoliberal ideology have vandalized manufacturing industries. Productivity and wage levels remain static. Inequality has ballooned while CEOs have plundered profits to enrich themselves while depressing workers’ wages and returns to shareholders. Neoliberalism was the midwife of the Global Financial Crisis and is the ugly sister of alt-right extremism, populism and racism in all the advanced economies – witness Trump in the USA and Brexit in the UK. The good news is that its end is nigh. What, then, is the way forward?

Australia has not escaped the public policy vandalism that has been operating in the name of neoliberalism in all the advanced economies. As Hugh Stretton and Lionel Orchard warned in their 1994 book, Public Goods, Public Enterprise, Public Choice, neoliberalism was bound to fail. But in failing it has left a public policy wasteland in its wake. Its most damning consequence has been the ruthless reshaping of the kind of capitalism that has been dominating many economies for the past thirty years or so.

In the nineteenth century the newly industrialised economies produced a simple class division: workers versus bosses (proletariat versus the bourgeoisie). The bosses were the owners of the textile factories, the coalmines, the steel smelters, the banks, railroads, shipping lines, and associated industries. They preyed on each other’s businesses while repressing the wages and living conditions of the workers. Their businesses fouled the atmospheres of industrial cities characterised by slums that housed the working poor. This was the era of predatory capitalism.


Following its grotesque excesses in the nineteenth century, attempts were made in the twentieth century to “civilize” capitalism. This was to be achieved through regulatory and redistributive policies coordinated under the broad umbrella of the welfare state. Tax reforms, pension schemes, unemployment benefits, wages tribunals, and welfare safety nets were put in place, along with national health schemes, public housing and free education, to ensure that the gross inequalities of the nineteenth century would be ameliorated. A great deal of the economic growth in the twentieth century occurred precisely because of these reforms. A healthier, more secure, educated workforce improved both production levels and standards of production.

However a public service culture soon evolved that undermined the legitimacy of redistributive policies and state welfare. Bureaucrats invented red tape strategies for protecting their careers and their own preferment rather than serving the public good. The services they provided were often delivered in authoritarian or judgmental or pettifogging ways, to deter those in need from accessing the benefits they had been legitimately awarded. They administered welfare payments as a form of punishment rather than a right, more often humiliating recipients than giving them the leg up they so badly needed.

We can call this development the treason of the bureaucrats. At the same time, ownership of private capital became fragmented as companies sold shares to a dispersed and disparate capital investing public, opening the way for the next development in capitalist history. This development saw the old adage of divide and rule applied to capital ownership – the fragmentation of the capital investing class paved the way for the rise of the managerial class.

Seizing on the treason of the bureaucrats, over the past three or four decades neoliberals have been assiduously – ruthlessly – demolishing the redistributive and regulative measures of the state welfare system, ushering in the most destructive phase of capitalism in history. We can call it parasitic capitalism.

Parasitic capitalism has two especially pronounced features. First, it has given birth to a detached managerial class that has seized financial control of the capitalist system. As a class its primary aim is to reward its members with obscene salaries and benefits by cannibalising the very services their companies should be providing. Secondly, parasitic capitalism has spawned a host of provider agencies, all competing to entice customers. In the process they have driven up the costs of essential services and added unwarranted confusion for customers across the board.  Consider, for example, the madness of the myriad electricity service providers, all offering almost identical “deals” in all sorts of different and very complicated guises.

Can parasitic capitalism be civilized? Its benefactors will put up a huge fight to protect their ill-gotten gains. But we could use one of their most favoured mantras – that competition in the market will drive down prices while improving service provision. Clearly this has not happened throughout the neoliberal era of parasitic capitalism. A largely unregulated market and weak and under-resourced regulatory authorities have seen anarchy in the market with prices going up and service provision in precipitous decline.

However, introducing real competition into the market is a good idea. But it has to be publicly driven competition. The state must come back into the market by establishing a range of competing agencies – for example, a publicly owned bank, to compete with the big four banks; a public medical service at specialist level, to compete with medical specialists who are ripping off their patients; a public real estate agency, to compete with private real estate companies that are one of the major causes of high house prices across the country. There are plenty of other areas where public competition needs to be introduced to the economy, but the three mentioned could be a useful beginning.

Meanwhile, progressive intellectuals and political thinkers need to get together to attack parasitic capitalism via a whole new approach to a genuinely social democratic Australia. The Labor Party was once a possible contender to lead this development, but its total surrender to neoliberal policy making probably rules it out. Could the Greens step up to the plate?

Allan Patience is a political scientist in the University of Melbourne.




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