Sunday, 8 February 2009

The Second Ideological Bind: The Rudd Government & Social Democracy.

Ever since Rudd announced his stimulus package this past week, I’ve been in an ideological bind. As a proud member of the Australian Labor Party it is not very often I disagree with the policies that my parliamentary colleagues choose to pursue. Sure, I might disagree on political choices, such as promotions to Cabinet, or on issues that require a conscience vote (such as my party’s refusal to recognise gay marriage as part of the Federal Party’s platform) but the stimulus package is the first time I’ve wholeheartedly disagreed with a major policy.

I have always identified my self as a social democrat, so the ALP represented the natural choice for me to cling on to when identifying my ideological persuasions. Critics say that being a social democrat is like having a bit each way; never fully committing to the cause of socialism nor are they a disciple of the free market. I see myself as more a believer of the former rather than the latter, I have always believed (and still do) that the free market is not the answer, despite every successful politician of the last three decades subscribing to the opposite theory.

I have been well aware that my own internal ideological battle mirrors the one experienced by my party. The advent of free market fundamentalism can be traced to the oil crisis of 1974, which precipitated the end of Keynesian style economics. Keynesian economics was perfectly suited to social democrats because it advocated government intervention at every turn, but with the lack of oil in the Middle East during the mid '70s the price of oil went up as its supply decreased. The government couldn’t do anything to stop it, and thus the theory of government intervention was discredited. This presented a problem for the ALP, that was in the midst of the reformist Whitlam government that relied on the excesses of Keynesian economics too heavily, as a consequence overspent, and by doing so created a constitutional crisis which subsequently led to the government’s dismissal.

As Clive Hamilton succinctly explains in his essay What's Left? The Death of Social Democracy, The ALP remained in a collective ideological bind:

‘Whitlam’s prediction on the steps of Parliament House on 11 November 1975 that nothing would save the Governor-General proved incorrect: the Dismissal was not just the end of a government that had dreams grander than “responsible economic management”, it also marked the beginning of the end of the era of social democracy. The ghost of the Whitlam government has stalked the Labor Party ever since, turning visionary social reformers into cautious economic managers desperate to prove that they can be trusted to put their hands on the economic levers.’ Pg 9

In the process the term ‘social democratic’ redefined itself. No longer did it represent a middle ground, it represented a diluted version of free market fundamentalism, which not only declared that the free market could help solve economic problems, but social ones as well. From my own perspective I acknowledge begrudgingly the free market philosophy is now a political reality, merely because so many have chosen to adopt it, but it doesn’t mean I have to like it. The ALP now has seemed to adopt a conservative economic position, only they are 35 years behind their opponents.

This leads to my objection of Rudd’s stimulus package. It is targeted towards a conservative electorate that wants to spend its own money, and achieves this by giving out cash bonuses, tax incentives and generating schemes that reward entrepreneurs. A stimulus package should target those less fortunate in society; those who don’t have the opportunities rather than handing out the rewards of a faltering economy. Ponder that phrase for a second; ‘rewards of a faltering economy’. We should not be rewarding; we should be investing. Investing in service provision, the provision of health care, the provision of infrastructure, and maintaining the integrity of our environment. Yet none of these things are being addressed in the stimulus package. So who are the true social democrats?

Today I read Rudd’s article in The Monthly, published before he released the stimulus package. In the article he attempts to frame his policy of preventing the escalation of the Global Financial Crisis in social democratic terms:

‘The challenge for social democrats today is to recast the role of the state and its associated political economy of social democracy as a comprehensive philosophical framework for the future – tempered in both times of crisis and for times of prosperity….

‘Long before the term ‘The Third Way’ was popularised in the policy literature of the 1990s, social democrats viewed themselves as presenting a political economy of the middle way, rejecting both state socialism and free market fundamentalism; indeed social democrats maintain robust support for the market economy but posit that markets can only work in a mixed economy, with a role of the state as a regulator, and as a funder, and a provider of public goods. Transparency and competitive neutrality are ensured by a regime of competition and consumer-protection law are essential….

‘Social democratic governments face the continuing challenge of harnessing the power of the market to increase innovation, investment and productivity growth - while combining this with an effective regulatory framework which manages risk, corrects market failures, funds and provides public goods and pursues social equity. Examples of such a government are the Australian Labor governments of Bob Hawke and Paul Keating during the 1980s and early ‘90s. Hawke and Keating pursued an ambitious and unapologetic program of economic modernisation. Their reforms internationalised the Australian economy, removed protectionist barriers and opened it up to greater competition. They were also able dramatically to improve the productivity of the Australian private economy whilst simultaneously expanding the role of the state in the provision of equity-enhancing public services in health and education….’ (Pg 25.)

The above quotes demonstrate the inherent problems that I have with this package. Whilst decrying free market fundamentalism Rudd uses its terminology to describe his new brand of social democracy. Passages such as ‘…harnessing the power of the market to increase innovation, investment and productivity growth - while combining this with an effective regulatory framework’ are used to describe the legacy of Labor Governments. This legacy is characterised with language that is laced with free market fundamentalism. In essence, social democrats have ceded valuable ground in the ideological argument without even noticing.

So it goes with the stimulus package. The Government has latched on to the latest conservative economic argument, which suggests that governments must spend its way out of the Global Financial Crisis. In doing so, the Rudd Government is being attacked on two diametrically opposite counts from its opponents. On one hand the government is betraying the legacy of social democracy, and on the other it is being labelled as economically irresponsible for sending the economy into deficit. Thus, the current period represents a second bind for social democrats in Australia.

My ideological bind represents the collective bind that the ALP itself faces. The first bind came in opposition, but this time the bind is while the party is in government. The question now is whether the ALP can maintain its social democratic legacy, whilst stabilising the economy. If it cannot do both, the long term fortunes of the party as an entity will be in jeopardy.

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