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One more election postmortem

October 18th, 2004

Looking at the discussion following their election, there are few points I think still need to be made or restated.

First, although the outcome came as a surprise, it’s about what would have been expected on the basis of historical experience in the absence of any knowledge about the parties, their leaders and so on. Particularly at the Federal level, Australians don’t tend to change government in the absence of a recession or other policy failure[1]. The realists like Ken Parish who predicted Labor’s defeat on this basis were right. I noted the general pattern, but thought that the government’s weaknesses were enough to give Labor a good chance. As it turned out, Howard’s decision to match Labor on health and education, combined with the messup over forest policy, wiped out any gains Labor might have made.

Second, over and above the benefits to an incumbent government from economic growth, I think the Liberals have benefited from the real estate boom. Even allowing for a fair bit of ideological crossover, it’s clear enough that the Liberals are more likely to act in ways that help property investors and encourage rising property prices for homeowners. More generally, in all the English-speaking countries, there has been a big expansion in debt-financed consumption, reflected in large trade deficits and supported by high and rising property values. The question of whether this is a sustainable model is a critical one. I’m on the record as saying it is not, but there are plenty of highly qualified people who take the opposite view, most notably Alan Greenspan. Among Australian bloggers, Stephen Kirchner has been most supportive of this view and critical of reference to the property price boom as an unsustainable bubble.

Third, it follows from this that I don’t think the election represents some sort of terminal crisis for Labor. Although several of the Labor state governments have hit rough patches at present (and this hurt Labor federally), Labor still looks like the natural party of government in most states. And, as I’ve already noted, Howard had to move a long way to the left to win, promising to preserve Medicare, assist state schools, expand the TAFE sector and so on.

It will be hard for Labor to win Federally in the absence of a recession or slowdown. But that’s a fact about Australian politics, not a fact about Labor.

fn1. Labor’s defeat in 1996 is sometimes presented as a counterexample. But it’s clear that the 1989-90 recession and the interest rate policy that caused it had not been forgotten then – as Howard showed, it hasn’t been forgotten even now. Labor should have lost in 1990 and 1993, but the Liberals mucked things up both times. 1996 was a referendum on Keating’s whole career, not the period after 1993.

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  1. matt byrne
    October 18th, 2004 at 12:59 | #1

    http://www.smh.com.au/articles/2004/10/17/1097951559065.html

    Interest rates tipped to rise within three years, with a recession to follow.

    Here could be Labor’s election victory.

  2. Spiros
    October 18th, 2004 at 13:07 | #2

    The Labor Party is not off to a promising start in its quest for renewal. The Queensland AWU sub faction has removed Craig Emerson from the front bench and replaced him with Senator Joseph Ludwig, whose only claim to fame is that his father, Bill Ludwig, is the boss of the Queensland AWU sub faction. If Joseph Ludwig has made a single contribution to any policy or political debate, they have escaped my attention, and a lot of other people’s too. Emerson is an Ph.d economist with substantial things to say about policy matters. Emerson has been in Bill Ludwig’s gunsights since he defied him and supported Latham against Beazley last December.

    The Labor Party are the Bourbons of our time. They have learned nothing and forgotten nothing. They are going to be in opposition for a long, long time, and deservedly so.

  3. Homer Paxton
    October 18th, 2004 at 13:37 | #3

    Agree with spiros as any person of Greek descent should.

    given costello’s technical difficulties in economics Craig Emerson would be the ideal Shadow Treasurer.

    I take issue with 1996.
    I believe the voters were suffering from inflation illusion. The ALP could not understand why people didn’t appreciate the then longest economic recovery since the war. This could not be explained by real GDP however if you merely analysed NOMINAL GDP then it was easily explained. It then became easier to understand why focus groups kept on insisting Asutrlai was still in Recession.

    since it is some 4 years since the last recession probability would tell you there must be a recession coming up soon. given the highly geared nature of people in Housing, whether owner-occupied or investment, rates do not have to go up much to beckon this on.

  4. Ric Simes
    October 18th, 2004 at 13:58 | #4

    Howard also shifted “to the left” on Medicare and other policy agendas in 1996, only to bring about some fundamental changes in Govt. (eg in the case of Medicare, thru combination of benign neglect on most issues and supporting the supporting the private insurance companies’ agendas on others.) It will be interesting to see how he approaches such agendas in Govt this time with a compliant Senate.

  5. observa
    October 18th, 2004 at 14:13 | #5

    We have a recent report that Australians have seen their nett wealth double from 1987. It is presumed much of this is due to rising real estate values. The question is whether or not this is a sustainable trend. There may be some reasoning to assume it could be. Now it is possible that those earning surpluses are more than comfortable to hold their increasing wealth in the form of developed world RE. The most likely earners of surpluses are the Chinese and ME residents. Now one thing that is universlly known about RE investment is it’s about position, position, position. From that point of view any international investor would choose prime RE in developed countries with stable politico judicial histories. Essentially Bali bomb blasts are bad for all Indonesian RE investment and you could forget downtown Baghdad. You also have a secondary market in RE via the investment trust industry. Frank Lowy’s Westfield Trust is a classic example of a rapidly expanding international investor in MDC shopping centres. You can buy the shares rather than directly invest yourself. Westfield’s demand for existing shopping centres will naturally raise their price.

    Generally we should note that we can hold our wealth in any form we choose, from shells on a string, precious metals or land and buildings. It may be that the world has had a quantum and irreversible leap(short of an impending asteroidal collision)in the demand for MDC RE. In the absence of any sudden leap of faith in LDC RE, this trend may continue apace, particularly if investors are happy with capital gains, rather than income returns.

  6. Mark Bahnisch
    October 18th, 2004 at 14:13 | #6

    Not surprising move by Ludwig. Fortunately, though, he’s not the whole of the ALP and increasingly marginalised within the Queensland ALP. However, they still do have enough Federal MPs to influence one slot in the Qld representation.

    I think Emerson’s been a bit of a disappointment given his credentials, though. The IR policy wasn’t well sold, and while I supported it, could have used a bit more creative thinking.

  7. Spiros
    October 18th, 2004 at 14:53 | #7

    Mark, I’m not saying that Emerson is the world’s best politican. But he’s got to be better than Ludwig. The problem is, the Labor Party, as an institution, just doesn’t care who is good and who is not. At the state by level, they have enough coherence, though only just, to present themselves to the electorate as fit to govern. At the federal level, they are a collection of fiefdoms, headed by warlords like Ludwig, who carve up amongst themselves the ever diminishing spoils of defeat. Bill Ludwig places his son on the front bench; the Victorian Left, or some subset of it, decides that Jenny Macklin rather than Julia Gillard should be the Deputy Leader; Joan Kirner puts in her two cents worth on how there needs to be more women on the front bench, as if that is the most pressing issue facing the Labor Party – and on and on it goes.

    Policy development and its presentation is an afterthought, if it’s thought of at all. It all gets cobbled together in the six weeks before the election – a bit of Medicare Gold here, a bit of Tasmanian forestry there – and, surprise, surprise, when the electorate is asked whether they think the Labor Party is fit to form a government, they say no.

    The Labor Party loses the election and the cycle begins anew. Another bunch of worthless hacks, whose life experiences consist of running errands for some obscure state government minister, or stacking branches, will get preselected for federal seats. Labor will win state elections (mostly because the Liberals have given up on state poltiics) and once again delude themselves that she’ll be right, mate. The activists, who spend their entire lives in the company of like-minded people, will once again kid themselves that the electorate hates John Howard, and will wake up on the Sunday after the election angry and bewildered that the electorate could have go it so wrong.

    It is truly pathetic.

  8. October 18th, 2004 at 16:35 | #8

    I quite agree, and predicted, that Howards’s fiscal Leftism, and financial inflationism, were decisive factors in winning the LN/P a majority of the HoR.
    To be more specific, it was mainstream mortgageville interest rate-rise fear of the LABs, rather than property value-rise grace for the LIBs, that worked to win it for the government in the HoR.
    And sure state issues, Lathams personality, the privileges of incumbency, a lucky run with the business cycle, have all contributed to the L/NP ascendancy. But Pr Q forgets that the electoral pendulumn also has a tendency to swing of its own accord, esp after three elections on the trot. An increased majority in the fourth election requires a more fundamental explanation.
    It is true that the nation has shifted Left on Economics. But it is like pulling teeth to get Pr Q to admit that the nation has also shifted to the Right on culture. This conservative cultural shift has electoral implications.
    THe most glaring omission in Pr Q’s, summary is an account of the ALP’s failed strategy of capturing Cultural Progressive second preferences – as typified by the forestry policy debacle – esp in the SEN. The ALP cannot seem to lift its primary vote above 40%. It was relying on (Cult.Prog.) GREEN & DEM second preferences to make up for the decline in its primary vote caused by its crumbling working class base, some significant section of which has been attracted by the LN/P blend of Financial Aspirationalism, Cultural Conservatism and Political Nationalism.
    What is surprising is that most analysts expected a pick-up in the Cult. Prog. vote, mainly to the GREENs who were preemptively bragging about getting over a million votes. Many also expected a significant SEN electoral revulsion to the LIBs security and identity crimes and misdemeanours.
    The Cult.Prog. watchdog failed to show up in the SEN, let alone bark. Hence the minor parties of the Left failed to deliver their second preferences to the ALP.
    This election is another data point in the 30% decline of the Wets minor party vote, from 14% in 1996 to 9.5% in 2004. And, to show it is no accident of partisan re-composition, there has been a similar dimunition of Cult. Progs. in the Major Party leadership, from Hewson and Keating in 1993 to Howard and Latham in 2004.
    There is a significant gap between the cultural agenda of the Broad Left and the cultural agenda of the majority of Australian voters. Mr Howard is now minding that gap.
    This has momentous political consequences. The SEN, for the first time since the Fraser years, is now in conservative hands.
    YOu would think that someone on the Left would at least bother to notice this, instead of sweeping it under the carpet.
    Can anyone explain this remarkable decline of the Wets in the SEN? Or am I, and a spread of bi-partisan op-ed writers conducting post-mortems in the major metros, now in the grip of a mass hallucination over this phenomenon?

  9. Fyodor
    October 18th, 2004 at 16:51 | #9

    Fourth time lucky, Jack?

    Apologies to Homer Paxton for nicking his post, but his response @ Catallaxy nails the issue very nicely:

    “the vote in the Senate is pretty easy to understand.

    Before Mystic Meg thought she was a brilliant politician people voted for the Democrats because they put a brake on either government without being too stupid. This was best exemplified by Janine haines and Cheryl Kernot. both then took madness pills.

    Mystic Meg led by her Raspurin Anfrew Murray was encouraged to enter the GST debate so the Democrats could become a mainstream party.

    Their vote never recovered. The Princess only put back the day of reckoning.

    given their demise one has two choices to vote in the Senate. either go completely barking and vote Green or vote for the Libs. People took the latter position.”

    ’nuff said.

  10. October 18th, 2004 at 18:42 | #10

    Excuses, excuses. Lets get real.
    The GREENs have now defined themeselves as the standard bearers of Cult Prog. in AUS politics. We saw that this gave Howard etal a perfect opportunity, that was too juicy to resist, to jump right down their bright pink throats at the beginning of the campaign.
    The result was that the GREENS failed to pick up anywhere near the number of votes that they were expecting to get. They were predicting a doubling of their vote, to a one million votes. Instead they got three-quarters of a million, about one-third short of their target.
    I hope, for the sake of the environment, that they had get the anti-Progressive message loud and clear. Bob Brown has been spouting an anti-US, anti-capitalist and anti-conservative rhetoric pretty heavily over the past few years which I do not think does him any great credit. And he has fanned the flames of Howard-hatred. As Latham found, to his cost, this just turns the majority right off.
    If he keeps the ultra-Progressive ideology, and Howard demonology, on high-flame over the next few years he will wind up pleasing his dogmatic Base. But that will put the GREENs in great risk of alienating pragmatic mainstream swing voters.
    Should that occur, the body of the GREENs will be interred, with the decaying remains of other third force minor parties, in the grave-yard of well-intentioned Australian political dreams.
    Any takers?

  11. Mike Pepperday
    October 18th, 2004 at 18:59 | #11

    Hugh Mackay reckoned we only elect opposition leaders who are household names. It seems to fit. Bit simplistic?

  12. derrida derider
    October 18th, 2004 at 19:38 | #12

    Jack’s right that the country has slowly moved to the right on cultural issues and to the left on economic issues (don’t agree with much of the rest of his analysis, though). I think population aging is a sufficient explanation for both trends (the left are often economic conservatives in the sense they’re uncomfortable with change – too many of them seem to join the Tories in nostalgia for the policies and institutions of the 50s and 60s).

    I reckon the move has some way to run yet; ‘left libertarians’ like me find this thought disquieting.

  13. James Farrell
    October 18th, 2004 at 23:22 | #13

    John, you’re missing the point when you say that Labor doesn’t face a terminal crisis. As a party it doesn’t: the ALP is bound to go on reinventing itself as long as it provides a career path for ambitious political animals. But it will be Labor without labour, like the Blair’s New Labour, or the US Democrats.

    It’s the labour movement that’s staring into the abyss, especially now Howard controls the Senate. Once we’re all on individual contracts, class consciousness will be fast eroded, along with any appreciation of collective action, its ethical underpinning and its power to achieve common goals. As the population embrace dog-eat-dog methods of survival, both parties will pander to the new selfishness and demonise the undeserving.

  14. Mike Pepperday
    October 19th, 2004 at 10:03 | #14

    A clear, concise message James. And bleak.

    It seems to have begun in the 60s when, as Beazley senior put it, the dregs of the middle class took over the Labor Party from the cream of the working class. Socialism always was a dead horse in Australia but the fall of the wall scattered its bones and people finally ceased flogging it. Now everyone agrees: capitalism is the way.

    Apparently our society is doomed to ever increasing delusions of individualistic self-reliance and competetive independence. A nasty world and probably not viable for, in the end, as with other social animals, the human female cannot raise her young alone.

  15. October 19th, 2004 at 14:37 | #15

    The ALP needs to re-invent itself as the Party of the disorganised working class.

  16. Gaby
    October 19th, 2004 at 17:19 | #16

    Well said James. Sort of what of what I was groping for in a previous comment about “workers” not seemingly naturally aligning with the ALP.

    You succintly make three important points. First, the melding of the policy stances of the two parties and their constituent political classes. Secondly, the international nature of this trend.

    Finally, and most importantly,the precarious position of the labour class.

    At this stage, I’m not convinced about Howard’s “softly, softly” pragmatism. I think it more likely that Howard the ideologue will come to the fore to try and shape an economic/social legacy for history. It is his last (partial) term after all.

    If James is right, then ironical for the labour class given Howard’s self-avowed “safe and comfortable” vision for us.

    Mike Pepperday, love the “cream” reference.

  17. Katz
    October 19th, 2004 at 17:47 | #17

    The shackling of the union movement to a Labor Party made sense only so long as it was possible to defend and even extend the powers of the Arbitration system. This is what the ALP did for the union movement for the first century of the operation of the Australian Constitution. (The Founding Fathers made provision for centralised arbitration, which powers became more and more intrusive until the late 1970s).

    It now seems highly likely that Howard will finish off what remains of this quasi-judicial system.

    The labour movement can either wallow in nostalgia for the good old days or grind its teeth in bitter recrimination.

    Or it can do something creative like forego their attachment to centralised arbitration and seek to make themselves useful to their members by using contract law to protect the interests of their members.

    Sure, it’s not working class solidarity, but at least labour unions might be doing something useful for their members, rather than allowing individuals to be picked off one-by-one by signing Australian Award Agreements.

    The Labor Party, meanwhile, might usefully be employed testing the strength of Australians’ commitment to the relative merits of rights to property and the rights of labour.

  18. John Quiggin
    October 19th, 2004 at 18:47 | #18

    I promise a post on labour issues RSN.

  19. October 22nd, 2004 at 00:13 | #19

    People writing on this topic seem to have a big problem with acronymitis, right, JQ?

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