Labor needs to go back to roots

March 18, 2014

By Dennis Glover

18 March 2014

The weekend state elections brings to an end a period in which Labor has had to come to terms calmly with the reality of opposition. While there is still some shaking out to do, the intellectual and strategic rebuilding now needs to begin. Where to start? At the beginning: the principles of social democracy.

What does social democracy mean today?

Obviously not its original 19th century meaning of expanding public ownership – that doesn’t work. Today social democracy must operate within a predominantly market economy, but this doesn’t mean that its task is simply to get out of the market’s way and turn citizens into consumers, as some party “elders” and former leaders are now arguing.

As the title suggests, a social democrat believes that citizens” democratic rights are social and economic as well as legal, and that the state has a legitimate role in promoting a degree of economic equality. It also implies that the state has a duty to ensure the economy is structured to promote greater equality, or at the very least not to act as a giant vacuum cleaner sucking up wealth and power to the top.

One could justify this preference for greater economic equality in economic terms if one wished, and there are plenty of economists who will provide evidence that a more equal economy is usually a more prosperous and productive one. “Look to Scandinavia,” they say.

But ultimately, this preference for equality over inequality is a moral choice that must be justified philosophically not economically.

The British Labour philosopher R.H. Tawney put it succinctly. When the state stays its hand on economic matters, he wrote, the result for those at the bottom can be a form of effective economic tyranny. In other words, businesses have the negative right to be free to make profit, but the rest of society has the positive right to a decent standard of living. Deciding where the balance should lie is primarily a moral choice.


If parties like Labor can’t see this, they’ve lost their founding sense of purpose.

What might taking a moral stand in favour of economic equality mean in policy terms? Let’s take one of the biggest policy challenges around today: superannuation.

When Bob Hawke, Paul Keating, Simon Crean, Bill Kelty and others created compulsory superannuation in the 1980s, they did so for primarily social-democratic reasons. Their aim wasn’t to create a limitless pool of investment capital or tax breaks for high income earners, but to give working Australians a secure, comfortable, enjoyable retirement. In other words, compulsory super was about breaking the historical nexus between old age and poverty. A policy idea does’t get more moral or social democratic than that. Some on the Labor side went even further, seeing in the existence of industry-controlled super funds the socialist idea of worker ownership of capital.

But superannuation has now become a vehicle for highly regressive economic redistribution.

Today just under three-fifths of all tax concessions for superannuation go to the highest-earning fifth of all Australians. The system is turning fund managers into a new economic super elite whose lobbying power is capable of channelling the economy down ultimately unproductive and destabilising paths. The recent decision to relax controls on the financial advice industry is an ominous example. There are fears also for what control of massive industry funds is doing to unions.

Our superannuation system, founded to create a fairer society, is leading to the exact opposite. Clearly, Paul Keating’s dream is losing its moral force.

Revisiting superannuation policy from a social-democratic standpoint is a good place for Labor to start. First, because cutting regressive super subsidies would create funds to pursue Labor’s other cherished social democratic objectives. Second, it would set an example for the social democratic revisiting of other sectors like housing, education and health. Are current policies making housing more affordable, education more egalitarian, poor people healthier?

Getting back to the social democratic principle of equality and retraining itself to think in moral terms once again is the best way for Labor to honour its past, including its recent leaders like Bob Hawke and Paul Keating. It is also the best way to rediscover its fast disappearing sense of purpose, rebuild its base and win elections.