How are we to explain Australian Labor’s woes? Some hints in an examination of British New Labour’s economic record by Duncan Weldon. He highlights how Labour’s model was unsustainable:
Remember the campaign posters in 2005? How the issue of the economy was dealt with? A near endless repetition of macroeconomic statistics – the longest period of unbroken economic growth in 200 years, the lowest interest rates and inflation since the 1960s, low unemployment. Much of this though was underpinned by an enormous credit bubble. Between 1997 and 2007 banks advanced £1.3 trillion of loans to UK residents – 46% of this went to financial companies, 12% to commercial real estate and another 23% on residential mortgages. Mortgage equity withdrawal in 2004 was around 8% of household post-tax income. 2006 was the last year that the old New Labour model of political economy worked – credit continued to flow propping up both asset prices and consumption and boosting the Treasury’s coffers to the extent that financial services firms alone contributed around a quarter of corporation tax receipts in 2006/07 (and 14% of total revenues).
When Australian Labor came to power in 1983 the economy was in a severe recession. The recovery of the economy during the early Hawke-Keating years enabled Labor to establish itself as the preferred party of ‘economic management’. This together with Hawke’s personal appeal underpinned Labor’s electoral success. John Howard came to power in 1996. At that time the economy was growing strongly but the overhead of dent and weak corporate balance sheets meant that the recovery was not apparent in employment. Keating’s boasts of an economic recovery alienated voters. However after 1996 the economic recovery finally began to work down unemployment. The export boom and the productivity surge contributed to rising living standards. This was despite the continuation of the redistribution of income towards profits that had occurred during the Hawke years. However the signs of this improvement were only faintly apparent in Howard’s first two years, One Nation surged winning support from conservative voters discontented with the economy. One Nation was neither a spontaneous racist outburst nor a populist reaction against globalisation. Howard’s success at the 1998 election despite his pledge to introduce a GST is often cited by supporters of the carbon tax. However by 1998 (unlike 1993) the GST was on balance a vote-winner (unlike the carbon tax). The Coalition shed low income voters in 1998 but they compensated (just) for this loss by winning over higher-income Keating loyalists from 1996. This is the germ of truth in the popular theory that Labor suffered by not aggressively defending the economic reforms of the Hawke-Keating years. However even by 2000 voters remained deeply unsure about the economy although they welcomed the signs of recovery. In this context the introduction of the GST briefly generated a panic among voters that the good times were ending. Thus the Labor surge of early 2001. However as the economy rallied voters began to return to Howard. More fundamentally it was around this time that voters began to expect the good times to last. Here we can draw a parallel with the 1950s. John Murphy suggests that from the later 1950s voters began to expect prosperity to continue and the spectre of another depression receded from voters’ thoughts. 1950s Labor was devastated by the Split but it striking that from the 1960s first-time voters became much more likely to support the Coalition. Even during the 1920s and 1930s this had not been the case. In the end Howard overreached and rising living standards made voters more sympathetic to increased social services expenditure and hence more likely to support Labor. However Labor’s victory in 2007 did not challenge voters’ perception that the Howard years had been an economic boon. Labor too had persuaded itself that the good times would last forever. It consoled itself with the thought that the economic reforms of Hawke-Keating were to credit. The problem for Labor was that any economic downturn would be blamed on them rather than the Coalition. Despite the exceptional performance of the Australian economy under Rudd voters did not credit Labor. Rudd cast his response to the GFC in radical terms as recognition of the crisis of capitalism. In fact it was not, Rudd simply sought a tool to return the economy to its presumed natural growth path. However the economy has not done so, as consumer demand continues to remain stagnant. The model of economic management perfected in the Hawke-Keating years is no longer sustainable. In this context the carbon tax has appeared as a spectre rather like the GST in early 2001. However with a weaker economy and with Labor’s economic credibility much lower than was Howard’s in 2001 Labor’s political position is much weaker. Voters seek scapegoats and the carbon tax is a convenient one. Any rise in energy prices is likely to be blamed on the carbon tax. Thus Rudd’s apotheosis in 2008-09 was actually the last apotheosis of the Hawke-Keating years. In the US the Clinton model slowly unravelled from the busting of the tech boom but voters blamed the Republicans for its demise without considering the extent to which is fundamentally unsustainable. Barack Obama thought he could go back to Clinton 1993. This is not surprising every government takes up where its partisan predecessor left off. Hawke started with a policy of late Whitlamism c. 1975 plus an incomes policy. Rudd started where Keating left off. In some views on the left the experience of Hawke-Keating and of Blair’s New Labour is where it all went wrong. But to adopt a materialist approach there were good reasons for the rise of the ‘new revisionism’ as Donald Sassoon calls it, and of which British and Australian Labo(u)r were leading exponents. 1983 and 1997 are long ago now. But now the Australian left needs a strategy to deal with the latest phase of capitalism.