LIONEL ORCHARD. COVID-19 and the Role of Government

Apr 23, 2020

The COVID-19 crisis has exposed the fragilities and inequalities in our economy and society. It has driven dramatic public policy responses careful not to disrupt the underlying economic balances. Will we be more willing to be bolder particularly about the role of government?

There are all sorts of ways the COVID-19 crisis has and will continue to disrupt social, economic and political life and the conventions and assumptions which currently shape it. The crisis has driven dramatic responses challenging received views about how our political and economic thinking works or should work.

The ideas and frameworks that have shaped western democratic politics and public policy over the past 40 years or so – private markets where possible, libertarian freedom or negative liberty as paramount, lower taxation and smaller government, and mutual obligation in a meaner welfare state – all seem up for reconsideration.

The need for quick, dramatic action to deal with both the health crisis itself and the impacts on private economic and social life has produced a refreshing capacity by our political leaders to think and respond through pragmatic public action and agency. The fact that this pragmatism has come from populist conservative governments normally hostile to or at least not amenable to such public action adds to the disturbance of conventions.

The crisis also highlights and exposes things that have been generally ignored or avoided for a considerable time. The general lack of preparedness to respond to crises has become more visible even if the nature of any crisis is always going to be unique and therefore not easy to plan for. Given the health care imperatives of the crisis and the closing down of private economic activity and the unemployment it has created, there has been a clearer understanding of the need for major economic and social policy responses.

There also seems to be a better understanding of what is essential to the proper order and functioning of society particularly those public and non-profit institutions and fields of work necessary to keep things afloat – medical and nursing care, welfare support, and human services across many areas. Many have acknowledged that these essentials are undervalued and insufficiently recompensed. Economic inequalities have become more visible through this process.

While unsettled, it is therefore an interesting and important time in which there might be a better chance to shift how we respond to economic and social problems beyond current orthodoxies. One of the most significant issues here concerns the role of government and the related question of the shape of Australia’s mixed economy. Are current roles and balances right and appropriate?

Pretty clearly, the Morrison Government’s responses to the COVID-19 crisis to date expresses a readiness to intervene at a level that Treasurer Josh Frydenberg claims is the most dramatic in our history. But it is the nature of that intervention where debate resides, and questions are raised.

The Morrison response took some time to emerge but alongside Reserve Bank monetary interventions, it has entailed short term fiscal policies doubling unemployment benefits, massive expenditure on ‘job keeper’ support, free childcare and public expenditure directed to private hospitals to ready them for COVID-19 treatment. The thinking has been to intervene to deal with immediate demands but in ways that won’t disrupt Australia’s economic structure long term. Be creative in dealing with the dramatic immediate impact of the crisis and plan to ‘snap back’ to how things were before the crisis. Don’t plan for any deeper reflections about existing economic and social arrangements. ‘Socialising the loses’ or Guy Rundle’s idea of ‘subsidised neoliberalism’ provides the underlying rationale.

The usual suspects in the mainstream media highlight the wisdom of this approach and have been quick to muzzle criticism and talk of alternatives as inevitably utopian and impractical. On the other hand, those on the centre left suggest that more permanent public investment, services and capacities will be needed to address the legacies of the crisis particularly in health, industry policy and general economic stimulus.

One has to be a little pessimistic about the chances of a more fundamental reset for a number of reasons. The path dependence that has been established through nearly 40 years of neoliberal reform defended by both sides of Australian politics has left a legacy of norms, interests and institutions with an inertia that will be very hard to shift. This is manifest in many ways.

The values of individualism, competition and growth continue to crowd out those of public spirit, community, cooperation and conservation. The privatisation of more and more arenas of life over this time has pushed government imperatives to focus on regulation and partnership models rather than more direct public effort, investment and enterprise responding to economic and social problems. Privatised economic and social life has become self-fulfilling. Success is measured in financial and shareholder value terms. Along the way, public capacities have been reduced and modified to suit. Mantras of public sector reform – managerialism, agility, innovation, and whole of government collaboration – have displaced more substantial public purposes and institution building.

Nevertheless, the COVID-19 crisis has exposed the fragility of the neoliberal model and outlook. What replaces it will entail a rebuild from the ground up – theoretical ideas and practical knowledge – appropriate to the important tasks facing democratic societies which go well beyond the immediate crisis to include climate change, inequality and social breakdown.

Twenty-five years ago, Hugh Stretton with my help as his assistant worked on a critique of a significant school of neoliberal thought – public choice theory – challenging the barrenness of its assumptions about self-interested motivation applied to questions of the role of government and public institutions. Along the way, we thought it necessary to outline other ideas to better guide the government role in a democracy. Stretton’s principled pragmatism, historical knowledge and social democratic values shaped our response. In reflections on ‘how to mix a mixed economy’, we suggested there are areas best left in public enterprise and ownership, those best left to private markets but there are many areas where either is possible.

In restating the history and case for a better mix, we noted that public enterprise, ‘can be financed to take longer views and do riskier research and development than any but the biggest private firms can usually afford, and they can operate with multiple purposes as well as or instead of profit – for example to build up under-used, unprofitable capacity for use in wars or emergencies, to give workers more secure jobs in homes than private employers might do, or to work with expensive standards of conservation and environmental care. Besides those particulars they can also work to improve the means of national economic management and to reduce inequalities.’

One hopes that this kind of flexibility and openness to options might find new resonance in our current setting.

Lionel Orchard holds academic status as Associate Professor in the College of Medicine and Public Health at Flinders University. The critique of public choice theory and defence of a social democratic mixed economy is contained in Hugh Stretton & Lionel Orchard,Public Goods, Public Enterprise, Public Choice: Theoretical Foundations of the Contemporary Attack on Government, Macmillan (1994)

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