Saturday, 14 February 2009

Time for Dot Points: Edition 2

  • Valentine’s day is meh. Its neither good, nor bad, just a rather fruitless attempt at consumerism. I’m not in love, so I couldn’t care less about it, if I were I wouldn’t care less about it. However, I’m sick of people in various stages of puppy love emphasising its importance.
  • I currently have an obsession with Taylor Swift’s new album after seeing her performance at the Grammy’s last week. I normally hate country pop but she is great.
  • I used today as an opportunity to clean out lots of irrelevant shit from the last 5 years. I have now taken the opportunity to let all the bullshit go, without feeling the least bit guilty.
  • Saw Rachel Getting Married today. Terrific movie that you should see.
  • Meg and Dia’s new song Black Wedding kicks proverbial arse. Can’t wait for the album to come out next month.
  • Two weeks into my PhD and I’m already sick of reading. I’m insane
  • Happy Birthday to the most important person in my world. It is the only reason that this day is special

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.

Tuesday, 3 February 2009

Stimulating or Over Excited?

Ladies and Gentlemen it is official: the Howard era of Australian politics is over. The Rudd Government, just fourteen months old has overturned the economic legacy of the Howard Government by announcing its second economic stimulus package in just over five months. The headlines are thus:

  • The total package will cost $41.5 billion
  • It will send the economy into a deficit of $22.5 billion this financial year and over $35 billion the year after (A record)
  • Low and middle income earners who earn below $100,000, single income families, and families with school aged children will get tax cuts worth $11 billion, which will be handed out by the end of next month (This all but replicates the aim of the first stimulus package announced last September).
  • A jobs package with $25 billion over the next two years designed to curb the rising unemployment rate.
  • An infrastructure package targeted towards modernising schools worth $14 billion
  • $6 billion to build new homes

That’s only just the start. Beyond the raw numbers is a theoretical shift that has underlined Australian economic policy for nearly three decades. During the 2007 election campaign both the Howard Government and the Rudd led Opposition tried to play the game of who can generate the highest surplus. In the last Budget, handed down in May the Rudd Government announced a $22 billion surplus. In November, that surplus was revised to $5.4 billion, and now we have a $22 billion deficit. In short, we have lost $44 billion dollars in nine months. The latest economic theory suggests that in order to limit the severity of the ‘Global Economic Crisis’ the world must spend its way out of the hole to generate more money in order to keep the economy in a productive state. I believe there is something wrong here.

In my entire political life, economic stability has been based upon generating huge savings by maintaining a large surplus. Australia had 16 years of continued economic growth largely based upon the country’s economic restructuring of the early 1980s and the resources boom of the early 21st century. Parents tell their kids to save their money for a rainy day, however respective governments throughout the world of both philosophical persuasions chose to spend the money in the form of tax cuts. Governments made hay while the sun shone in order to get re-elected on the back of handing out economic bribes to voters, and now all we’re paying for it.

Former Prime Minister Paul Keating said on Landline last night that this is the worst economic crisis in 60 years. Consequently he’s calling for an economic overhaul that is not within the existing model of spending to end deficits. As the deficit gets bigger, the spending will increase, only increasing the size of the debt never to be repaid. Keating suggests that it will take six or seven years, or two electoral cycles to recover, while the entire financial system, as we know is restructured. Clearly, this is a problem that cannot be solved domestically, but must be solved internationally.

The question is this: When will leaders recognise that economics is always a long term exercise? One must always plan for the future. The transformation in politics towards continual campaigning and generating short term political capital has come at the expense of overarching economic policy. While Hawke, Keating, Howard and Rudd learn this lesson in Australia, our citizens will suffer. No stimulus package will fix that.