The Australian settlement
Don Arthur, a great but infrequent blogger, has joined the crew at Troppo Armadillo, which will be a great location for him, I think. His first post is a response to my argument that the era of neoliberalism/economic rationalism is over. Don makes a lot of points, and I’m going to start with a relatively easy one. Don says “it’s hard to see a return to the high tariffs of the old Australian settlement”. I agree, but I think the whole notion of the Australian settlement isn’t very useful in relation to the rise and fall of neoliberalism.
What matters is the Keynesian-social democratic settlement adopted after World War II. Australia was one of the leaders in this with the 1945 White Paper Full Employment in Australia, claimed here as
the first time any government apart from totalitarian regimes had unequivocally committed itself to providing work for any person who was willing and able to work
Nevertheless, there was little that was specifically Australian about this settlement.
While Kelly’s name has been widely used, the things he is talking about are more accurately described by Gerard Henderson’s earlier term ‘Federation Trifecta’, consisting of Protection, Arbitration and White Australia. These policies added up to a uniquely Australian policy package in the period before World War II, but their subsequent histories have been very different.
After World War II, and the encouragement of mass migration from poor European countries, the White Australia policy ceased to have any link to economic policy. The end of the policy came in 1966 when both the Liberal–Country Party government and the Labor opposition committed themselves to a non-discriminatory policy. By the early 1970s, when economic interventionism reached its peak, the last vestiges of the White Australia policy were swept away. Since then we’ve seen periodic attempts at revival, but there has been no correlation with attitudes towards protection. Howard’s flirtation with racial quotas in the 1980s came at a time when his advocacy of free-market reform was at is strongest. And Pauline Hanson managed to straddle both camps, starting out as an endorsed Liberal candidate, and ending up advocating a complete reversal of reform.
The second element of the trifecta, tariff protection, was the first target of the free-market reformers and the abolition of tariffs has been their most complete victory. The basic problem was that the employment protection function of the tariff had ceased to be relevant. From 1945 onwards, the maintenance of full employment was seen as a task for macroeconomic policy, not trade policy. Even when macro policy ceased to work well, after 1975, few saw tariffs as more than a delaying tactic.
Tariff protection was obsolete in another sense. In the Brigden Commission’s 1928 report tariffs were seen as taxing the profitable rural sector to assist the employment-intensive manufacturing sector. But by the 1970s, the employment-intensive sectors of the economy were in services, not tariff-protected industry.
Finally, there’s Arbitration. The reformers have had big successes in reducing the power of unions and arbitration tribunals, and the proportion of workers covered by unions. Unlike with White Australia and tariff protection this success is fair from complete, Still it’s hard to see this process being rewound to produce a resurrection of the old system of comprehensive awards. On the other hand, workers in general aren’t too happy with the wonderful world of individual contracts, and I expect to see a significant shift back towards more pro-worker intervention in the labour market (the notion of ‘deregulation’ is a myth – we’ve seen repeated government intervention on the side of employers both through legislation and through direct action as in the case of the waterfront).
To summarise, most of the Federation trifecta is gone for good. But White Australia and tariff protection were scrapped or rendered marginal by the rise of social democracy, and the gap left by the decline of the Arbitration system will be filled one way or another.
fn1. Kelly adds “state paternalism” which is too vague to be useful and “Imperial Benevolence” which, apart from a change of imperial masters during World War II, has never been seriously challenged.