Ian McAuley. Labor’s policies.

Apr 1, 2016

Amid all the political chatter about tensions between Turnbull and Morrison, a possible early election, and the laundering of donations to the Liberal Party, Labor has released a substantial policy document –Growing together: Labor’s agenda for tackling inequality.

With a gathering of Labor luminaries – Jenny Macklin (who has main carriage of the policy), Bill Shorten, Chris Bowen, Andrew Leigh – it was hardly surprising that the media had a strong presence at its launch at ANU late last month.

But it turns out that the journalists were more interested in a photo shoot than in public policy, because the document got little media coverage. Those who believe in an anti-Labor media conspiracy would not be surprised, but my view is that the journalists were looking for “deliverables” in the form of specific proposals (they found a few tidbits), but they weren’t equipped to do justice to a document outlining a major shift in policy emphasis.

The document has two strong policy messages. First is its focus on inequality. Not welfare transfers or redistribution, but inequality. Second is its dismissal of any idea that there is a tradeoff between “economic” and “social” objectives.

To understand how far these messages are out of sync with our present thinking, imagine Christian Porter, Alan Tudge, Scott Morrison and Mathias Cormann on one platform giving unscripted statements on the economic importance of dealing with inequality?

These policy principles should really be no-brainers. Who would not say inequality is a major problem? And who would not believe that good economic policy and good social policy are inseparable?

Unfortunately, they are not obvious.

While most people may understand the moral case against rising inequality, they do not necessarily grasp the fact that inequality has bad economic consequences. High and persistent inequality destroys incentives, creates an “underclass” dependent on social security transfers, deprives people of the opportunity to develop and use their capabilities, and in the long run undermines the political legitimacy of the economic system. It’s no surprise that worldwide we are seeing the emergence of populist politicians with simplistic prescriptions for complex problems.

And to suggest that we must sacrifice social objectives for the sake of “the economy” makes no more sense than the (probably apocryphal) story out of the Vietnam War: “we had to destroy the village in order to save it”.  As the philosopher Karl Polanyi stressed, we live in a society, not in a market: markets are, or should be, subservient to society, and should be subject to society’s norms. There is no superior entity called “the economy” to which we must pay homage. Economic policy that goes against our desire for a fair and just society is just plain bad economics.

Yet that’s not the way the public see it. Poll after poll gives Labor a strong lead over the Coalition in “social policy”, while giving the Coalition a strong lead in “economic policy”.  Such a contradiction could be sustained only if the idea of a tradeoff is ingrained in people’s minds.

So while Labor is on the right track in bringing together economic and social policy, it has a lot of convincing to do. Some of that work has to be directed at the public in general, some at journalists who have difficulty in understanding public policy, and some has to be directed at enthusiasts on the “left” who are too ready to dismiss economics, and who abandon the quest to find ways of overcoming inequality and social exclusion that are based on sound economic principles.

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