Upturn: all too familiar ideas but an advance on Coalition’s limited offerings

Feb 5, 2021

An eclectic set of essays, the book Upturn: A better normal after Covid-19 tries to put forward a serious reform agenda. While there is a wealth of enthusiastic ideas, Upturn is unfortunately stronger on identifying problems than solutions. This post concentrates on the chapters discussing economic and social welfare. Reviews of other chapters will be posted in coming days.

Upturn: A Better Normal After Covid-19 sets out what policies we should demand from our government after we have defeated the Covid-19 pandemic. The series of essays are by “some of Australia’s most interesting thinkers” who are “ready to imagine a better Australia, and to fight for it”.

The starting point is that Australia has handled the Covid-19 pandemic relatively well, and ‘in some cases we have done better than we could have expected’. Another plus is that experts now have a better standing with the government, which probably translates into greater trust in expertise by the public.

In this context, as Heather Ridout suggests: ‘It’s very tempting to pick up the adage “don’t waste a good crisis” and enthusiastically put forward big and sweeping ideas to reboot the Australian economy, fix up a whole lot of problems, and push through comprehensive reforms under the guise of needing to act in the crisis.”

But Ridout goes on to say: ‘This presumes a lot. Firstly, that after a decade of drift in which real reform seemed to belong to a past era, Australians are open to the challenge and will embrace radical change. And secondly, that the old songs are the right ones. That the solutions of the past are the right ones for the future’. Furthermore, as Ridout observes, ‘Scare campaigns are easy to wage.’

Certainly, judging by his speech on 1 February, setting out his government’s program, the Prime Minister, Scott Morrison, seems to have concluded that his chances of re-election are best served if he doesn’t adopt an ambitious reform agenda. So, despite Morrison telling us six months ago that post-Covid we could not go back to the previous economic model, now only modest changes to the industrial relations system and tax cuts favouring the rich remain on his economic reform list.

But as the Introduction to Upturn points out, the economy was not in great shape before the pandemic. ‘We had almost 2 million Australians who didn’t have a job or enough hours of work, economic growth was weak, businesses weren’t investing and consumers weren’t spending. Wages growth was at record lows and our national debt had more than doubled.’

We need to do better than ‘snap back’ to moribund growth and increasing inequality.
The proposals in this book are not the solutions from the past, or at least not those that have been proposed in favour of smaller government, less regulation and tax cuts for the rich.

On the other hand, there has been little attempt in Upturn to draw out a coherent and comprehensive reform agenda. Rather this book comprises an eclectic set of essays with only limited coordination.

Whether this matters is a moot point. As Wayne Swan says in his chapter, putting forward a comprehensive progressive agenda was not enough in 2019. Labor lost because it lacked a narrative.

Accordingly, this book review will try to distil a narrative from the various essays. Its basis could be Shadow Treasurer Jim Chalmers’ conclusion that ‘The highest priority needs to be stronger and more inclusive growth; more fairly distributed opportunities, and most of all, secure and well-paid work for more Australians.’

Chalmers goes on to say that: ‘

Growth needs to be broader, more inclusive and more sustainable. It will need to come from cleaner and cheaper renewable energy; life-long learning to keep up with technological change; and converting research and development more effectively – turning Australian ideas into Australian jobs.”

Furthermore, according to Wayne Swan, this narrative must embrace the proposition that government should have a much greater role in job creation and support. ‘Social democrats have to convince people that the power of government to transform their lives is real and in their hands.’

In particular, a progressive economic strategy faces three key challenges:
• Ensuring greater equality of incomes and opportunities
• Responding to climate change
• Providing an adequate safety net.

In each case it will be necessary to explode the false allegations by conservatives that there is a negative trade-off between action on these three fronts and economic growth. Indeed, the reverse is the true reality.

First, as Chalmers notes, the world’s best economists, including the IMF and the OECD, have found that ‘growth is stronger when it is fair’. Inequality and low wage growth depresses demand and explains the secular stagnation we have been experiencing. As the ACTU’s Sally McManus puts it, ‘Workers with money in their pockets to spend are the engine room of economic growth.’

Second, as Ross Garnaut summarises in his chapter, because of its relative reliance on renewables, the cost of electricity in South Australia has already fallen below that in NSW and Victoria. As Garnaut shows, switching to renewables makes economic sense. The opponents of acting now and setting ambitious targets to limit emissions never recognise the costs to our economy and way of life from further delay.

In fact, Australia has a major comparative advantage in producing green energy. As Garnaut points out ‘in the new zero-emissions era there is larger economic gain using electricity at home rather than transporting it overseas’. Thus, we could develop industries that are energy intensive. Accordingly, Jenny Macklin in her chapter, proposes that ‘We should build an Employment and Emissions Accord’ to encourage the use of cheaper, cleaner energy to create new industries and thousands of jobs.

In this context it is also interesting to note how industry opinion is changing. For example, Gabrielle Chan, writing about The Price of Food, acknowledges that ‘We can’t ignore global warming’. ‘The political moment is here to fuse agriculture and the environment.’ The President of the National Farmers Federation, Fiona Simson, writes ‘we are nothing if our environment is not managed sustainably.’

Third, an adequate safety net is not only humane and necessary for social reasons, without it the adjustment to inevitable economic and technological change becomes much more difficult. But if those changes are resisted, then economic growth, jobs and living standards will suffer. As Macklin puts it, ‘Without the peace of mind that unemployment insurance can bring, no government can expect working families to get behind the transformations necessary to reboot the economy and save Australia from the worst of climate change.’

Not surprisingly, many of the authors call for a permanent increase in the JobSeeker allowance. But both Macklin and Linda Burney also emphasise the importance of improving access to employment and training services.

Sally McManus calls for ‘a training plan for reconstruction that invests in providing the skills and training for the generation who will bear the heaviest burden of this pandemic – young workers.’ And Stephen Koukoulas considers it ‘a disgrace and an indictment of the education and training system that even before the Covid-19 crisis hit, with nearly two million Australians unemployed or underemployed, many firms were concerned about a skills shortage’.

Looking beyond the Covid-19 crisis, Andrew Charlton argues that we need to develop a reform agenda to support long-term growth. The starting point would be to tackle the loss of dynamism across the economy, which Charlton considers one of the root causes of Australia’s slowing growth. Apart from clean energy, central to Charlton’s agenda would be investment in education and skills, infrastructure, research, aged care and digital technologies.

Tanya Plibersek provides the main discussion of education and training. Some key conclusions are that ‘unfortunately, Australia now has one of the biggest gaps between the least and most advantaged students in the developed world and Covid-19 has made it worse’. Plibersek therefore argues that we need ‘a plan to provide a world class education for all our children’, starting from universal pre-school at age three. She also thinks we need system changes so that the best and brightest graduates become teachers and paid accordingly.

Turning to workforce needs, Plibersek notes that even before Covid ‘Unskilled entry-level jobs hardly existed. Nine in every 10 new jobs needed a TAFE or uni qualification’. However, Plibersek further notes that funding has been cut since the Liberals came to office, and none of the measures announced by the Government since the Covid -19 pandemic adequately reverses the trend.

The other two important chapters discussing longer-term growth requirements are Saved by Science, by the former Chief Scientist Ian Chubb, and The future is here – and it’s digital, by Danial Petre.

Chubb notes that the response to Covid-19 ‘is clear demonstration of the value of expertise’. But he also notes that as climate change has demonstrated, science is not always heeded nor funded. Chubb thinks we need to do much better looking after our science, our skills and our capacity for innovation.

Most importantly, basic research is a critical foundation for innovation. Chubb thinks we cannot rely on the market to identify where we should focus our effort and that we must identify areas of comparative advantage.

Petre outlines the importance of the digital economy, especially since the pandemic, and concludes that ‘all of these trends are enabled by technology’. Like Chubb, Petre argues for more support for R&D, but he is also concerned about the market power of overseas oligopolies. He appeals to government to ‘stop damaging the growing start-up sector’.
Some other conclusions in Petre’s chapter are that everybody must have digital skills, and that our scientists and engineers should receive the same acclaim as celebrities.

Most readers of Pearls and Irritations will find much in Upturn that they already agree with. Whether they will be much more enlightened is less clear.

While there is a wealth of enthusiastic ideas, in many cases, Upturn is stronger on identifying problems than specific solutions. By comparison, a plan for government would require priorities to be identified and choices to be made.

There are some gaps that would need to be covered if Upturn were to provide a base for economic and social reform.

Most importantly, the adoption of the reforms proposed in Upturn would involve a significant increase in government spending, including on education and training, research and development, income support, and infrastructure investment. With the exception of the last item, all of this additional expenditure is justified, however there is no chapter on taxation reform and how these ideas could be paid for.

It is quite likely that a major reason Labor lost the last election was because its policies for raising revenue were rejected. If Labor is fair dinkum about reform, it needs to make the case for raising extra revenue, and therefore must again tackle tax reform.

Equally there is no discussion of possible savings that could help fund the new spending. Many of the authors pay ritual homage to extra infrastructure investment on the assumption that it is always a good thing.

But as readers of Pearls and Irritations will know, most of the big infrastructure projects favoured by governments in the past few years have never been supported by business cases, and almost certainly represent a waste of money. Furthermore, these projects provide few employment opportunities per dollar spent, especially not for young people and women who have been most affected by the Covid-19 lockdowns.

Similarly, the defence acquisition program is running at billions of dollars and, in the case of submarines, for example, Australia is planning to pay two or three times the going price rates.

Greg Combet details the contribution that superannuation savings make to the economy and argues for a stable set of rules governing the accumulation of superannuation funds. Unfortunately, like so many others, Combet ignores the main present problem, which is the need to improve the drawdown and efficiency of the use of those funds to support people in their retirement. This is, of course, the fundamental rationale for superannuation.

In sum, many familiar ideas are trotted out in Upturn, but there remains quite a lot of work to prepare a serious reform agenda. On the other hand, the ideas of the authors represent a considerable advance on what the Coalition has offered.

And I hope Wayne Swan is right when he says that ‘For Labor to win the next election, this is a time to be optimistic and idealistic.’

Upturn,a Better Normal is published by NewSouth Publishing

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