IAN McAULEY. Brexit, Trump and the Lucky Country – Introduction

Jan 9, 2017

John Menadue – introduction to Ian McAuley Series.

Many have been surprised and even horrified by the Brexit and Trump results. These events are likely to be followed by similar outcomes in elections in other countries this year.

Serious issues have been raised – a wave of anti-globalisation, an alleged swing to the right, blaming ‘deplorables’, racism and xenophobia. Establishment politics is being challenged. Russia is becoming an insider in Washington!

Some of these reactions to Brexit and Trump are over-simplified, but there is no doubt that we now face complex and challenging times.

Our attention has been focused on the UK and the US, but these issues, although important in Australia, may not take the same acute form here. But one thing we do have in common with Trump and others is the conservative protection of privilege by diverting attention from inequality , unfairness and the power of elites and focus instead on the most vulnerable, Muslims, refugees and welfare ‘bludgers’

Against this background I asked Ian McAuley to focus on these issues. His introduction and eight parts follow. Your comments would be welcome. John Menadue.  

Ian McAuley

Two years ago, in response to John Menadue’s suggestion, I wrote a series of articles under the theme “Is capitalism redeemable?”. They covered stresses on our economic system, emphasising the consequences of widening inequality. In one of them I wrote:

When legitimacy is lost people are inclined to reject the whole capitalist model, turning to superficially attractive but destructive alternatives.

When I wrote that I imagined something happening maybe five or ten years down the track, triggered perhaps by a global recession. We had been through the 2008 financial and economic crisis without a populist uprising, and by 2016 most “developed” countries, including Britain and the USA, were on the road to recovery. Admittedly a slow road, but the main economic indicators – GDP, unemployment – were pointing in the right direction.

That’s why Brexit, Trump’s election, the rise of far-right parties in mainland Europe, and here the electoral success of One Nation and other protectionist movements took us by surprise.

The immediate (and still dominant) interpretation of those events has been to ascribe them to an “anti-globalization” movement. But as John and I wrote a few weeks ago, “globalization” is too simple a term to describe what people are reacting against. No one is objecting to cheap international telecommunications and travel, for example. Even in the absence of tariff reductions, technology would have wiped out many of our manufacturing jobs. And perhaps “globalization” is taking the rap for many objectionable policies that are entirely of domestic making, such as privatization of water and electricity utilities.

Just as Marxists a hundred years ago justified revolutionary communism on the basis that it was futile to protest against its unstoppable tide, so have our politicians presented “globalization” and its supposed accompanying measures – “small government”, privatization, deregulation, contracting out, unbridled competition – as inevitable and unquestionably desirable developments.

A dominant rationalization has been that while these market-friendly measures, collectively known as “neoliberalism”, may increase inequality, they would leave no one behind. The boost to growth would ensure that those who may lose out – such as employees in previously protected industries – could be compensated. We may recall the aphorism “a rising tide lifts all boats”.

The trouble is that even if no one is left behind materially (in itself a doubtful proposition), inequality counts. As former US Labor Secretary Robert Reich points out in his 2015 book Saving Capitalism: for the many, not the few:

If America’s distributional game continues to create a few big winners and many who consider themselves losers by comparison, the losers will try to stop the game – not out of envy but out of a deep-seated sense of unfairness and a fear of unchecked power and privilege.

It’s been hard for economists and policymakers to understand this sense of loss. A former worker in a car plant in Detroit, Michigan or Elizabeth, South Australia may have been fortunate enough to find another job in the service sector, perhaps even a job paying just as well as in the car plant. If so, that would show up in the official statistics as a successful policy outcome.

But those official statistics would not pick up the loss of community, the loss of respect as a member of a skilled workforce and the loss of pride in identification with the product – losses described eloquently by Gideon Haigh in his work on the Australian automobile industry End of the road.

Australia’s policymakers have obviously been shocked by Brexit and Trump’s election, but so far they have been floundering. The Commonwealth Government is panicking.

While their rhetoric continues to be about “jobs and growth” and the need for corporate tax cuts, as if they have learned nothing from the events of last year, their action has been to turn to old fashioned protectionism (subsidies for the submarine industry, local preference provisions in the Australian Building and Construction Commission Act), and a promised billion dollar subsidy to get an otherwise uncompetitive venture (the Galilee Basin coal mine) off the ground. And it’s been convenient to take the muzzle off Immigration Minister Dutton to let him make a few anti-Muslim immigration dog whistles.

Protection and subsidies won’t bring back those manufacturing jobs, and as George Megalogenis reminds us, Australia has prospered only when it has been open to the world.

At a high level of generalisation it’s easy enough to suggest a policy path. Australia needs to stay open to the world, holding on to the best aspects of globalization. We need an economic structure that ensures economic gains are distributed fairly, and that when we have to bear short-term pain to realize future benefits the sacrifices are shared widely. It’s important that people don’t just have “jobs”, but rather that they have opportunities to develop and use their abilities to make meaningful contributions to our collective well-being, and that there is a clear link between people’s contributions and their rewards.

But there is no easy way to translate these ideals into practical public policy. To do so involves difficult adaptive work for policymakers – politicians, public servants, journalists, economists. They have to understand and respect those who, in democratic processes, have supported Brexit, Trump and One Nation, and to re-examine their own assumptions, beliefs and motivations.

John has suggested that as a contribution to this process I once again write a set of articles for his blog.

Apart from a life immersed in public policy I claim no particular expertise (I may be too much of an insider myself), but I have attempted to draw together the various strands of observations and theories into a framework, more for the purpose of pointing out areas for consideration and raising questions rather than making specific policy suggestions. I have therefore written a set of eight short chapters around that framework:

  1. Who’s been left behind?
  2. The response of those left behind
  3. Globalization takes the rap, unfairly
  4. Issues re-framed
  5. How we lost trust in government
  6. Who exploited discontent and how
  7. The “left” went AWOL
  8. Don’t wait for a “leader”: we need leadership

I don’t come to any grand theory. Rather my intention is to put forward various tentative explanations for what has happened, and to dispel any notion that there is one great movement. As in all situations of public policy it’s all more complex – and interesting. And I want to dispel what is called “the trap of fatalism” – the idea that the rejection of liberalism is so strong and overwhelming that it’s futile to go against it.

And if you want loads of holiday reading I have provided plenty of hyperlinks to the works of people who can help us all in the task of understanding what’s going on.

Ian McAuley describes his work as “helping the left to engage with economics”.  He is an adjunct lecturer in public finance at the University of Canberra. Before taking an academic appointment he worked in the Commonwealth Government in trade and industry departments, in Australia and overseas.  And before that he was an engineer in a large manufacturing firm – back when Australia had a thriving manufacturing sector employing engineers.  He has qualifications from Adelaide and Harvard Universities.


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