IAN McAULEY. It’s not about “left-right”: it’s the economy

May 30, 2019

Some see Australia’s election from a traditional “left-right” perspective, but that frame is meaningless. Labor should be guided by principles of good economic policy, in contrast to the Coalition’s policy of thwarting necessary economic adjustment.   

 In the wake of Labor’s election loss there are calls for the party to move “back to the centre”, as if Shorten had been promulgating some radical agenda of Venezuelan proportions.

Albanese would do well, however, to resist pressure for an early policy re-formulation. Labor’s worst move would be to yield ground on the nation’s two most vital economic issues – the need to deal with climate change and the distortions in our tax system that privilege speculation over productive investment. These are not “left-right” issues.

Dealing with climate change does not involve a tradeoff between “the economy” and “the environment” as some naïve commentators state. We are not only missing investment (and employment- creating) opportunities in wind, solar, and geothermal generation and in storage and energy conservation technologies, but we are also risking our long-term trade prospects in a world that won’t want our thermal coal and that may impose countervailing duties on countries that fail to meet their Paris commitments.

Nor is dealing with our tax distortions a question of class war or the politics of envy. A tax system that directs people’s savings to inflate a housing bubble rather than to investment in the real economy, that favours the idle over those who are working, and that has contributed to a bloated and parasitic financial sector, needs reform. By any realistic economic philosophy there should be a strong connection between people’s contributions and their rewards, but in Australia that connection has weakened as a result of the Coalition’s policies to privilege its supporters and to thwart structural reforms that would threaten those supporters’ financial interests.

In fact, if we were to apply a traditional “left-right” frame to the Australian election results, one could argue that Labor should stop courting well-off professionals and pay more attention to its old working-class base. The Party has drifted too far to the right.

“Left-right” – a meaningless frame

But that old “left-right” frame is meaningless: it has been losing relevance for a long time. A half century ago the political philosopher Herbert Marcuse warned America’s “left” that the day was coming when blue-collar workers would march down the streets in support of the Republican Party. The only thing he didn’t foresee was that yellow jackets would replace blue collars. Political commentators are now trying to make sense of the EU elections but they won’t make much progress if they are using a traditional “left-right” frame.

The political issues here, as in Europe, are structural, and have to do with groups of people, not defined along traditional class lines, who feel they have been disregarded and disrespected, who have not shared in the benefits of economic growth, and who fear that they will bear the costs of any structural change, no matter how desirable that change may be from a national perspective.

Those who say that Labor should draw back from climate change policies because they don’t resonate with rural electors seem to be patronisingly assuming that those electors are a bunch of bogans who don’t understand basic science. Of course they understand climate change – they live in the parts of Australia most affected – but quite reasonably they don’t want to bear the full costs of adjustment while urban dwellers are comparatively unaffected.

One trend apparent in Australia, supported by William Bowe’s analysis, is that Labor lost support among workers in particular industries. (Bowe’s analysis, using multivariate techniques, seems to be the most rigorous so far presented.) Construction, manufacturing and retail industries stand out as industries whose employees went to the Coalition, while Labor support has consolidated in industries with more secure employment such as education, health and professional services.

This could be explained by risk aversion among people who feel insecure or threatened by economic developments. People in such situations may be more likely to support the party that promises “jobs and growth” over the party that proposes change, even change that an independent analyst would know to be to their benefit, because as surveys on trust show, people don’t trust any politicians’ promises. They didn’t have to trust the Coalition’s promises because they didn’t make any worth considering.

Also, it is likely that people, particularly those who are not politically engaged, have been reacting against their perception of Labor’s policies, shaped by the Coalition’s lies. Who wants to vote for a party that will welcome people smugglers, will introduce death taxes, will subject all pensioners to a new tax, will close all coal mines (including metallurgical coal mines), will raise power prices even further, will make us all drive pooncey little electric cars, will thwart our aspirations to do better for ourselves, and will generally make a mess of the economy?

In this situation the Coalition’s greatest political asset has been the public perception that it is the party best able to manage the economy, a perception consistently revealed in opinion polling.

The Coalition’s weakness – economic management

In fact the Coalition is weak on economic management. It simply happens to have had the good fortune to be in office when the business cycle has been on upswings. It has benefited from reporting by journalists (including many in the ABC) who lack the economic capacity to challenge the Coalition’s simplistic messages. It has benefited from a weak voice of the traditional “left” who have become absorbed in issues of identity and gender rather than engaging in the economic debate. And Clive Palmer has helped along the way.

The reality is that the Coalition’s economic policy is about protecting existing economic arrangements, while Labor is the party of economic reform. In office Labor has been guided by mainstream economic theories about how a capitalist economy needs to advance while being protected from its own divisive and destructive forces. The Coalition has been the party of economic conservatism – “conservative” in the worst sense of the word – determined to shore up the existing order, no matter how economically unsustainable that order may be.

In what some may see as a reversal of stereotypes, Labor has been the advocate of using markets and price signals, while the Coalition has been the party of heavy-handed government intervention. We might recall the Coalition’s historical opposition to tariff reform, or currently the divergent views on dealing with climate change, Labor being far more inclined to using prices to achieve change, while the Coalition’s models seem to be based on some Soviet Ministry of Production model.

It is not easy, however, for Labor to campaign on a platform of economic reform. As critics of its election tactics point out, there were too many targets, too many vulnerabilities, particularly when the government had the resources of a politicised public service to discredit its proposals and was not bound by any moral constraints or concern for the country’s log-term economic interests.

Going into this election Labor’s principles were sound, but it did itself and the nation a disservice in having too many specific policies. We can wonder if Labor would have won in 1983 if Hawke had gone to the election promising to cut tariffs, float the currency, require workers to suppress wages and put their pay rises into superannuation, and deregulate the finance sector.

Labor’s path to office

The path for Labor has to be to gain enough trust from voters that it can fight the next election (whenever that may be, not necessarily in three years) more on the basis of its values and principles than on specific proposals – with an economic “narrative” as some would say. It should not run an election campaign as if it is a set of referenda – that’s not how representative democracy works.

If Labor has economic credibility it can argue for reforms to capital gains tax, negative gearing and the taxation of superannuation on the basis of sound economics, without letting its opponents frame such reforms as “class war”. It can even use the term “aspiration” in terms of people aspiring to do something meaningful with their lives – to invest in a business or in their own skills – rather than to own four apartments.

To clear the ground Labor, its supporters, and all who want to see Australia advance in prosperity, must expose and demolish the myth about the Coalition’s economic competence.


Ian McAuley is a retired lecturer in public finance at the University of Canberra and a Fellow of the Centre for Policy Development.

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