Nostalgia for the Hawke-Keating years is holding Labor back

June 8, 2014

By Tom Bentley

In August, 2010, during the depths of the federal election campaign, I received a phone call from an unknown number: Tom Bentley? Paul Keating.

Decorum prevents me from quoting the former prime minister’s words directly, but the guts of his message was this: “Abbott is economically illiterate. He’s getting away with murder. What he’s proposing would cost Australia jobs and growth. Stop pussy footing around. Kick him where it hurts.”

In fact, the principals of the 2010 campaign, led by then-prime minister Julia Gillard, were already working to make Abbott’s economic credentials central to the fight. Keating’s advice stiffened the spines of the campaign team.

Labor’s attack on his negativity strengthened doubts that already existed in voters’ minds. The uncertainty about Abbott was endorsed by former treasurer Peter Costello. It was confirmed when the heads of the treasury and finance departments revealed that the Coalition’s 2010 fiscal proposals were riddled with inaccuracies, a fact the Australian media had failed to uncover during 35 days of campaigning.

So why would anybody believe Abbott’s economic claims now? Obviously, he won an election since then, even if he did so by concealing his intentions from voters. The deeper reason is that the Coalition claimed the mantle of superior economic management during the Howard-Costello years, though the facts do not support this case.

The nonpartisan, conservative-leaning Grattan Institute recently endorsed Paul Kelly’s conclusion that over the last 40 years, there have only been 10 big economic reforms in Australia. All but one of them were introduced by Labor Governments.

This reference gives a clue as to how the Coalition has got away with it for so long. Australia is dependent on a way of doing politics – and economics – that had its heyday in the early 1990s. The changes made by Hawke and Keating set up the last 25 years of economic success. But they also introduced three big problems into Australian public life.

First, mythologising and endlessly recycling the economic achievements of the 1980s and early 1990s keeps us addicted to micro-economic reform techniques that have lost their potency. The constant assumption of policy and media discussion is that, somehow, the next “wave of productivity” will come from re-hashing a mix of trade liberalisation, domestic competition, and cutting back regulation. The cardinal sin of economic policy is still supposed to be picking winners but even in national economies, lightning rarely strikes twice in the same place.

Second, constantly searching for “great leaders” who can match the swagger and brilliance of Labor’s 1980s pomp misidentifies the nature of the leadership task today. In 2010 a senior journalist described the two party leaders as “pygmies”. The Labor party, internally, still discusses where to find the individuals who can do what Hawke and Keating once did.

But what they did is part of the problem. The ongoing assumption that constant brawling between male egos is necessary for political success is the third problem. For example, the public spat that broke out between the two superannuated heroes in July 2010, as Labor geared up for a high stakes election campaign, sent an unfortunate cultural signal. The occasional public glimpse of humility from either of these two great men would not go amiss.

Reports of Paul Keating’s role in Bill Shorten’s stirring 2014 budget reply confirm the problem. Equally, Bob Hawke’s easygoing advice that the two main parties should use “compacts” to create consensus without the involvement of those pesky citizens is perplexing. Has he looked at Greece recently? On which issue are the two main parties going to find common ground that is in the long term public interest? Climate change? Using public debt to finance infrastructure? Roads versus public transport? Industrial relations? The myth of leadership from the top is part of the problem.

Hawke and Keating are not personally responsible for these problems, any more than John Howard’s political exploitation of negative gearing makes him personally responsible for the Global Financial Crisis. But the sense that the two Labor greats are still engaged in an unresolved conflict, and that we could solve today’s problems using their methods, has distracted us from greater threats to their whole legacy.

Now that Labor is back in opposition, it is vital that they learn the right lessons. Last time they lost office, in 1996, they spent the better part of the following decade – leaking, spinning and plotting – which brought them undone when they returned to office in 2007. One reason for this is a deep uncertainty over whether to privilege political dominance in the short term, or be willing to expend political capital to achieve long-term change.

The lesson of the post-Keating years is that if you exalt politics over purpose, you lose the opportunity to retain both dominance and legacy. Only if your politics has a living moral core, grounded in the interests of citizens, will the public accept the inevitable compromises and missteps of government. As it turns out, Bob Carrâ’s longevity as New South Wales Premier was an extended lesson in how not to do it, for which others are now paying the price.

The genius of the Hawke-Keating leadership was that it acted simultaneously to enrich the economy and to meet social need, so that prosperity was a shared achievement and social risk was shared by the great majority, not offloaded onto the weak. They had a blind spot: failing to recognise that economic liberation would eventually undermine the shared ethical bonds which in the past restrained market power and government power.

This weakness is compounded by the narrow terms in which we discuss the central issues of economic policy. Australian politics has allowed the projected size of the budget deficit to become a proxy for the health and performance of the whole of a $1.5 trillion economy. This is ridiculous. Treasury has had to revise its assumptions about this projected number every year since 2008. But the Coalition’s exploitation of uncertainty and change has made people disproportionately scared of “debt and deficit”.

It matters now because the play that Abbott and Hockey are attempting in the 2014 budget is to attack the fiscal roots of public institutions – Medicare, universities, public schooling, the aged pension, public broadcasting – so fast and hard that by the time of the next election they will be materially weakened, and private sector provision will be one step closer to being established as the dominant norm in Australian life.

This is an extreme version of the Howard-Costello formula from the 2000s, which first led the Commonwealth budget into trouble, masked as it was by the huge windfall of the mining boom. The same pattern can be seen in the long list of proposed privatisations. Selling off capabilities built up over decades through public investment will not strengthen our economy. Learning how to build new capabilities in today’s economic conditions will do that.

To make this play now is dishonest, short-sighted and immoral. Abbott and Hockey have deliberately manipulated the parameters of the budget and its revenue assumptions to maximise the chances that the economic outlook will appear to have improved by the time of the next election. But in fact their strategy will accelerate the dangerous narrowing of our economic base, making Australians dependent on revenue from mining, financial services and overseas students to fund public services and infrastructure.

The tax cuts that they hope to offer in 2016 will be dwarfed by what Australian citizens will have lost through medical and education fees, higher indirect taxes, lost family and pension payments, not to mention the long term social costs. But they will still cost the Treasury billions of dollars.

If they are implemented, Hockey and Abbott hope it will become impossible for Labor to promise restored investment in health, education and pensions while also maintaining fiscal credibility. If they win a second term, Australians’ jobs will also become less secure.

As in 2010, Abbott will be beaten by showing that he is wrong on the economy. But in order for this to happen, the rest of the community has to broaden its view of what is possible. The Australian economy is richer, with more jobs and better connections, than it was in 2008 when global crisis paralysed the world’s financial system. It is a supreme irony that the Labor Government’s success in preventing recession has allowed so many people to ignore the fact that the crisis occurred at all.

The answer to the current dilemma is to develop a broader, more resilient economy, in which market value is tempered and enhanced by the quality of public and social institutions. But the methods through which this can be done are not the same as those of a generation ago. And just as the Coalition are trying to monopolise the voice of the private sector, Labor must avoid responding with a reactive defence of the public sector.

Instead, the place to plant the flag is the values of the Australian community. Truth, fairness and decency are far more potent than bureaucracy, collective bargaining and treasury economics.