GEOFF DAVIES. Hawke and Keating set Australia, and Labor, up for failure

May 31, 2019

Labor failed, again. It took on the most riven, brutal and monumentally incompetent rabble since Federation and still could not manage to beat them. This is a profound failure that requires a profound explanation. There is one, though it goes against decades of received wisdom.

The problem is the economic ‘reforms’ imposed by the Hawke-Keating governments are a failure. Our anaemic economy and divided society are their continuing legacy.

These claims are of course heresy. They sully the revered memory of Larrikin Bob. They contradict the economic and political mantras of the past thirty five years. Yet the evidence is clear and has been readily available for some time.

A few numbers tell the story. The average GDP growth rate in the 1950s and 60s was over 5%. Average unemployment was 1.3%. Those numbers should have set off raging inflation, according to current dogma, but average inflation was a moderate 3.3%. The numbers are from Ungoverning the Economy by economist Stephen Bell, published in 1997.

The economy has never approached that performance in the whole neoliberal era initiated by Hawke and Keating in 1983. Growth has rarely exceeded 4% and is currently struggling to reach 2%, while unemployment is routinely around 5%.

Yes but haven’t we enjoyed unparalleled prosperity, twenty eight years without a recession? No. We have an increasingly anaemic economy. We avoided a GFC recession in 2008 because the Rudd-Swan Government spent directly into the economy. Australia, uniquely among larger developed economies, avoided the Great Recession by briefly abandoning neoliberalism. The mining boom may have helped, but on its own would not have been quick enough or large enough.

Former Treasurer Wayne Swan has been pilloried ever since for running up government debt, but the debt was modest and not a significant burden. His real sin was breaking with the faith and, worse, being right.

On the other hand Hawke and Keating delivered our worst recession since the Great Depression. Banks make most of their money from ‘loans’ (in fact they don’t loan existing money, they issue newly-created money, but that’s another story). When they were deregulated in the 1980s they competed to throw money at ‘entrepreneurs’, and business sector started running up large debts.

Unfortunately much of that money was not used productively, it was used for unproductive take-overs and mergers by people like Alan Bond and Christopher Skase, who ended up broke and in gaol or exile. Nevertheless all that new money flowed out through the economy, which boomed through the nineteen eighties until it ‘overheated’ and the Reserve Bank jammed on the brakes in 1990.

Interest rates were raised to 17%, unemployment soared to 11% and the economy crashed into the Keating Recession. It was a recession we did not have to have.

The political ramifications of the Keating Recession were profound, and are with us still. Many older men were thrown permanently out of work and their bitterness was given voice by Pauline Hanson. The neoliberal project emphasised selfishness, drove inequality and left behind a resentful under-class that became ‘Howard’s battlers’. The Liberal Party continues to exploit them (in both senses of the term).

The failures of the neoliberal project are becoming so obvious that lately there has been some overt mainstream criticism of it. Few yet recognise that it never has worked and was never going to work. The economic theory behind free-market fundamentalism is such an irrelevant abstraction as to be a sick joke. The enforced dominance of selfishness over community is nothing less than a denial of our humanity.

Neoliberalism has yielded a hollowed out economy and a riven social fabric with deep inequalities of wealth, power and perception.

Labor’s continuing attachment to neoliberalism deprives it of any real vision. The result is the incoherent grab-bag of policies presented by Bill Shorten, which featured alleged action on global warming alongside a huge public subsidy of gas extraction in the Northern Territory.

Labor’s promised gift to the fossil fuel industry simply advertised the deep corruption of both major parties, who accept money from rich vested interests and pay them off with policies opposed by the people. The corruption has been magnified by the wealth concentrations yielded by neoliberalism.

There is little sign that any Labor MPs recognise any of this, so there is little prospect that Labor will undertake the fundamental change of direction it, and the country, needs. The Greens have some good policies but seem to prefer to remain a party of the fringe.

The only serious prospect for change comes from a few Independents. The most promising of these is Helen Haines, who succeeds Independent Cathy McGowan in the seat of Indi, propelled by the non-partisan Voices for Indi.

Our best hope would seem to be a crop of Independents who are unencumbered by the anachronistic traditions and destructive internal conflicts of the old parties, who recognise our current challenges and who are willing to look at whatever proposals might work.

Dr. Geoff Davies is an author, scientist and economics commentator. He is the author of The Rise and Failure of the Radical Right and the forthcoming Economy, Society, Nature (World Economics Association). He blogs at BetterNature Books.

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