GEOFF DAVIES. Hawke and Keating set Australia, and Labor, up for failure

Labor failed, again. It took on the most riven, brutal and monumentally incompetent rabble since Federation and still could not manage to beat them. This is a profound failure that requires a profound explanation. There is one, though it goes against decades of received wisdom.

The problem is the economic ‘reforms’ imposed by the Hawke-Keating governments are a failure. Our anaemic economy and divided society are their continuing legacy.

These claims are of course heresy. They sully the revered memory of Larrikin Bob. They contradict the economic and political mantras of the past thirty five years. Yet the evidence is clear and has been readily available for some time.

A few numbers tell the story. The average GDP growth rate in the 1950s and 60s was over 5%. Average unemployment was 1.3%. Those numbers should have set off raging inflation, according to current dogma, but average inflation was a moderate 3.3%. The numbers are from Ungoverning the Economy by economist Stephen Bell, published in 1997.

The economy has never approached that performance in the whole neoliberal era initiated by Hawke and Keating in 1983. Growth has rarely exceeded 4% and is currently struggling to reach 2%, while unemployment is routinely around 5%.

Yes but haven’t we enjoyed unparalleled prosperity, twenty eight years without a recession? No. We have an increasingly anaemic economy. We avoided a GFC recession in 2008 because the Rudd-Swan Government spent directly into the economy. Australia, uniquely among larger developed economies, avoided the Great Recession by briefly abandoning neoliberalism. The mining boom may have helped, but on its own would not have been quick enough or large enough.

Former Treasurer Wayne Swan has been pilloried ever since for running up government debt, but the debt was modest and not a significant burden. His real sin was breaking with the faith and, worse, being right.

On the other hand Hawke and Keating delivered our worst recession since the Great Depression. Banks make most of their money from ‘loans’ (in fact they don’t loan existing money, they issue newly-created money, but that’s another story). When they were deregulated in the 1980s they competed to throw money at ‘entrepreneurs’, and business sector started running up large debts.

Unfortunately much of that money was not used productively, it was used for unproductive take-overs and mergers by people like Alan Bond and Christopher Skase, who ended up broke and in gaol or exile. Nevertheless all that new money flowed out through the economy, which boomed through the nineteen eighties until it ‘overheated’ and the Reserve Bank jammed on the brakes in 1990.

Interest rates were raised to 17%, unemployment soared to 11% and the economy crashed into the Keating Recession. It was a recession we did not have to have.

The political ramifications of the Keating Recession were profound, and are with us still. Many older men were thrown permanently out of work and their bitterness was given voice by Pauline Hanson. The neoliberal project emphasised selfishness, drove inequality and left behind a resentful under-class that became ‘Howard’s battlers’. The Liberal Party continues to exploit them (in both senses of the term).

The failures of the neoliberal project are becoming so obvious that lately there has been some overt mainstream criticism of it. Few yet recognise that it never has worked and was never going to work. The economic theory behind free-market fundamentalism is such an irrelevant abstraction as to be a sick joke. The enforced dominance of selfishness over community is nothing less than a denial of our humanity.

Neoliberalism has yielded a hollowed out economy and a riven social fabric with deep inequalities of wealth, power and perception.

Labor’s continuing attachment to neoliberalism deprives it of any real vision. The result is the incoherent grab-bag of policies presented by Bill Shorten, which featured alleged action on global warming alongside a huge public subsidy of gas extraction in the Northern Territory.

Labor’s promised gift to the fossil fuel industry simply advertised the deep corruption of both major parties, who accept money from rich vested interests and pay them off with policies opposed by the people. The corruption has been magnified by the wealth concentrations yielded by neoliberalism.

There is little sign that any Labor MPs recognise any of this, so there is little prospect that Labor will undertake the fundamental change of direction it, and the country, needs. The Greens have some good policies but seem to prefer to remain a party of the fringe.

The only serious prospect for change comes from a few Independents. The most promising of these is Helen Haines, who succeeds Independent Cathy McGowan in the seat of Indi, propelled by the non-partisan Voices for Indi.

Our best hope would seem to be a crop of Independents who are unencumbered by the anachronistic traditions and destructive internal conflicts of the old parties, who recognise our current challenges and who are willing to look at whatever proposals might work.

Dr. Geoff Davies is an author, scientist and economics commentator. He is the author of The Rise and Failure of the Radical Right and the forthcoming Economy, Society, Nature (World Economics Association). He blogs at BetterNature Books.

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9 Responses to GEOFF DAVIES. Hawke and Keating set Australia, and Labor, up for failure

  1. It was indeed a sad day when Labor promoted Hawke over Hayden, who had done the hard yards rebuilding the parliamentary party after the Kerr coup. There would still have been a general neoliberal movement under Hayden but I doubt if Labor would have got quite so close to the big end of town. This is an international fight and the main battle ground is the university campus. Frank Stilwell at Sydney University with his back-pack is one of the heroic figures in the struggle for critical thinking.

    I thought I had read just about everything there was to read about neoliberalism and I remain a Polanyi man but the new book by Canadian historian Quinn Slobodian has an important perspective — “Globalists: The End of Empire and the Birth of Neoliberalism.”

  2. Geoff Davies says:

    Regarding the Greens, their platform has good policies and I’d love to see them charge ahead, but I’ve been waiting for that for a long time now. Their strategy seems to be picking up a seat here and there as demographics change, their vote has been static for some time. I think the reason is they don’t go for the main game, which I see as the economy (whether we like it or not – in current political terms). If we shift the economy to support all the good things the Greens want, instead of subverting them, we’ll make far more rapid progress. In the meantime they’re more a party of issues than grand strategy. And then there are the civil wars they’ve decided to fight, a symptom of lack of clear direction in my view.

    My perspective on this comes from all the writing I’ve done on how the economy *could* function and from Bernie Sanders who stood up in the US of A and called himself a democratic socialist. In the US, a socialist may as well be a communist and a communist is the devil incarnate. The mainstream hated him but the (younger) people came running. That potential is there in Australia but I don’t see anyone in our politics who understands it.

    On the Greens: http://betternaturebooks.net.au/2016/08/24/the-greens-paddling-hard-but-missing-the-wave/

    On the economy: The Little Green Economics Book, http://betternaturebooks.net.au/my-books/little-green/

    On Australia’s potential: Desperately Seeking the Fair Go, http://betternaturebooks.net.au/my-books/fair-go/

  3. Rex Graham says:

    Little wonder the death of Bob Hawke right on the eve of the election did no favours for Labor. Probably the same can be said for Keating’s interventions in the election campaign. If anything, these events reminded many older voters with long memories, of bad experiences of neo-liberal free market fundamentalist economic policies.

    Meanwhile, neo-liberalism marches on, virtually on auto-pilot. By now, the massively wealthy monied interests are even better placed to ensure their economic philosophies are widely promoted in the community. Only neo-liberal economists, CEO’s, board directors and the like, get appointed to head roles in the corporate world, including its vast lobbying contingent and private media outlets.

  4. Jean Ely says:

    Thank you for this article
    The Labor party has been canabalistic because Hawke forced the right wing unions back into the party after he had quiet ended the Whitlam sacking
    . Who were his real masters I wonder?
    To understand the failure of the Labor party go back to Gordon Childe’s How Labor Governs of the 1920s.
    Coxsedge’s Cold Tea for Brandy is a good read
    Unfortunately Bill Hartley is gone but he really knew where the bodies were buried
    Jean Ely

  5. Felix MacNeill says:

    Why do you claim that “the Greens…seem to prefer to remain a party of the fringe”?
    How is it that they are of the fringe but your, generally very sound argument isn’t?

  6. Frank Stilwell says:

    Attributing the origin of neolibarealism to the era of Hawke-Keating government is an argument carefully and thoroughly developed in a new book by Elizabeth Humphrys, called How Labour Built Neoliberalism: Australia’s Accord, the Labour Movement and the Neoliberal Project (Brill, 2019). Geoff Davies summarily dismisses the prospect of the ALP changing direction on economic policies post-Shorten. Unsurprisingly, any party tends to honour the people at the helm its historical electoral successes but I think we have to wait and see how it changes its program in the light of current economic and political conditions. Meanwhile, it is odd for the author to say that ‘the Greens have some good policies but seem to prefer to remain a party of the fringe’. They field candidates in elections in the hope of getting elected, don’t they? They sometimes succeed and would surely welcome more people voting for them. Between elections, they are active in trying to get the government of the day to adopt more progressive policies, aiming to create a more egalitarian and sustainable economy and society. So where’s the alleged ‘preference’ not to be in government? The independent candidates that the author ends up preferring cannot, almost by definition, form government. The Greens could do so – if sufficient people voted for what the author describes as their ‘good policies’. So why be so dismissive of this consistently progressive alternative?

  7. Richard Barnes says:

    Oh Geoff (and Jocelyn), we are of course dinosaurs, but I am so with you on this. The wonderful Hugh Stretton indeed wrote a powerful essay, ‘Leaders’ which elucidates eloquently how Labor died when Hawke and Keating rolled Hayden and Willis.
    Of course, faced with the alternative, we all wanted 2019 Labor to win the election, bringing at least some timid proposals for righting the worst excesses of neo-liberalism, and tackling, however inadequately, the looming climate catastrophe.
    Just one quibble – please take the time to listen to a full di Natale speech – eg recent address to the National Press Club – to understand what the Greens really propose. The challenge for them (us – I’m a member) is to get out to the disenfranchised and downtrodden, particularly in the regions, and help people understand the looming catastrophe and the policies which might truly be of help. Not easy, however, when everything is drowned out by the Murdoch behemoth.

  8. John Doyle says:

    It is a pretty accurate description of economic life after Hawke and Keating set up Neoliberalism, although that term was not used then. Restructuring was it?
    The Accord itself was OK but Hawke gave away the previous dogma of full employment and it has never been the sase since that we have had it, instead we have NAIRU and a whole lot of statistical fudging to hide the real figure of 20% or so.

    Labor has become wedded to Neo-liberal policies .No wonder Howard praised Hawke for setting it up for the Liberal party. I suppose it may have come about anyway as it is a world wide scourge, but labor is indelibly tainted by it. Rudd did break the mould briefly, but Swann with his perpetual search for budget surpluses showed he was utterly clueless about the economy. They still are with the statement that they would go for a bigger surplus than Sco-Mo!!!

    Labor really needs to clear out the dead wood infesting it, starting with any person who thinks you can spend or save a budget surplus. Whoever advises them is a snake in the grass, forever contributing to the incompetence we in Australia desperately need to get away from. The LNP will royally stuff it up as no one understands economics there either.

  9. Jocelyn Pixley says:

    This is a good piece: I agree the banks were let loose – Hugh Stretton railed at the time – to create more money to throw at useless ventures. Westpac nearly collapsed. But Hawke’s Accord was the better world-wide ‘solution’ to the rise of Wall St, certainly than Britain’s and USA’s austerity. Wage inflation reductions came with a social wage. Business agreed but didn’t keep its promise to reduce prices. Howard built new/old problems: superannuation is worst managed by the for-profit funds and Medicare is white-anted by private health firms. People have more riven motives – saving super, tax perks on unearned income and the low wage, privatised landscape, let alone climate change, and banks; household debt. Also, the Menzies era was not so great (in Boris Schedvin e.g.).

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