Laura Tingle had an interesting piece on political memory. in Quarterly Essay recently, and my response (over the fold) was published in the latest issue (paywalled)>. Tingle is the most insightful observer of Australian politics writing in the mass media, but she has always taken the inevitability and desirability of market liberal reform for a granted. I detect a bit of a shift in the latest piece, but that may be wishful thinking on my part.
Quarterly Essay response
Laura Tingle is right to suggest that memory is a problem in Australian politics. But, for most of the Australian political class, the problem is not amnesia. Rather, like the Bourbons, they have learned nothing and forgotten nothing.
The key word here is ‘reform’. As Tingle observes, “reform” remains a fetish word, at least for the political class. Its continuing magical power can be seen in the recent ‘National Reform Summit’, jointly sponsored by our rival national dailies, The Australian and the Australian Financial Review, along with the inevitable participation of consulting firm KPMG (which helpfully notes its affiliation with KPMG International ‘a Swiss entity’).
The content of ‘reform’ is generally taken to be self-explanatory. Obviously, for example, anyone who suggested a tax reform that would require higher income earners to pay more income tax, or a productivity reform that involved more leisure, would not have been welcome.
As Tingle observes, the term ‘reform’ has become ‘a hollowed-out word which you attach to anything voters won’t like in the hope that it will make you appear a strong and decisive government’. The problem lies in her implicit contrast with an earlier era in which there was a consensus around a reform agenda based on ‘an obligation to explain and advocate’.
The memory of this golden era of reform is what gives the word ‘reform’ its continuing magical power, at least in the political class. But it is largely mythical. Reform has been a top-down process, imposed without any serious attempt at persuasion, from the very beginning. The floating of the dollar, generally seen as the starting point of the microeconomic reform era, was announced following late-night meetings between Treasurer Keating and senior Treasury officials, the content of which is still disputed.
By the early 1990s, the phrase ‘economic rationalism’ had entered the public lexicon, thanks to Michael Pusey’s book Economic Rationalism in Canberra. The era of explanation and advocacy was well and truly over, replaced with a sharp divide between the political class and the public. As Tingle observes (with implicit reference to the political class), to argue against economic rationalism was to invite ‘ridicule or contempt’. By contrast, among the public at large ‘economic rationalist’ became, and remains, a term of abuse.
The results were seen in National Competition Policy (NCP), a deliberate and successful attempt to institutionalise economic reform with an end run around the political process. A carefully selected committee, appointed to analyse an obscure area of commercial law, produced recommendations which turned into an intergovernmental agreement, backed with huge and financial incentives and penalties. By the time NCP came to the attention of the ordinary voter (through, for example, the contracting out of local government services) it was a fait accompli, impossible to challenge through any democratic process. ?The upsurge of support for Pauline Hanson was not only due to John Howard’s dog-whistle attacks on ‘political correctness’. It owed at least as much to the (correct) perception that ordinary people no longer had any say in the crucial issues of economic policy. Tingle recognises this, but, like the rest of the political class, treats this as an unalterable fact about the world rather than the result of specific (and misguided) policy choices.
As Tingle observes, citing her previous essay Great Expectations ‘Our politicians still speak in the language and play to a set of expectations formed at a time when our economy was heavily regulated. Politicians once had the power to set interest rates and to protect industries from overseas competition. There were mechanisms in pace to set wage rates for the whole country. That all changed with the deregulation of the economy (emphasis added)’. The use of the passive voice here is striking. It’s as if the deregulation of the economy were some kind of natural disaster (or, perhaps, a piece of good fortune) rather than being the result of policy decisions made by the very politicians who are unwilling to live with its consequences.
Seen in this light, the core of the essay is a demonstration of the contradiction at the heart of the reform agenda. The central idea of reform is that governments should get out of the business of regulating economic and social outcomes, and should instead provide the legal and institutional framework within which market forces can do the job. On this basis, it makes sense, for example, that the Department of Finance should outsource most of its work to private contractors, confining itself to high-level policy.
Unfortunately, as we have seen, this seemingly neat separation does not work well in practice. Generic managerialism and incentives are not an adequate substitute for knowledge of specific policy domains and an ethos of public service.
The loss of memory, then, is not a remediable problem in our current political systems. It is inherent in the whole direction of public policy since the 1980s. It is scarcely to be expected that an ideology based on attacking the competence of government to do anything will produce anything other then incompetence in government.
Our real problem is not amnesia regarding the past. It is the golden glow of memory with which our political class still surrounds what they remember as the glory days of the 1980s and 1990s.
John Quiggin 
Bourbonism, that is a big study, so I’ll make a comment on reform. My sister was with Customs for several decades and my brother had been with management review for Defence. Some where in amongst those “reforms” of the nineties there were changes to the government superannuation schemes which were presented to government workers as a choice, and a choice that was made to look attractive.
My sister asked my brother for his advice, which was simply put “if it is to do with money and they are urging your to make a choice, what is being offered is to their advantage, not yours. Stick with your old plan.”
The comment that reforms are top down is an important maxim to which I would add the slightly less obvious, reforms go from Big to Small, and as we see in our today’s politics the benefits of reform flow from small to big.
Perhaps their needs to be a new term elevated to match reform,…”Fightback”. And in this mornings news there is a good addition to that idea, interestingly coming from a profession with an ethical requirement to serve the interests of the individual (the medical profession), with the AMA releasing a detailed study on the effectiveness of health plans (a health card for health plans). This coming on the eve of new health insurance rate increases. I know I am going to read it.
I’ve just decided to open up a new folder into which links for the huge number of subjects I have had to read in order to keep up with this Blog. I have several folders already which are subject specific but it is now clear that these should be in a class of their own so I have labelled it “The Quiggin Files” ,…or maybe that should be just “Quigginphile”.
A number of key sentences in the piece above attracted my attention. These are in order;
“As Tingle observes (with implicit reference to the political class), to argue against economic rationalism was to invite ‘ridicule or contempt’. By contrast, among the public at large ‘economic rationalist’ became, and remains, a term of abuse.
“the (correct) perception that ordinary people no longer had any say in the crucial issues of economic policy.”
“Tingle recognises this, but, like the rest of the political class, treats this as an unalterable fact about the world rather than the result of specific (and misguided) policy choices.”
“It is scarcely to be expected that an ideology based on attacking the competence of government to do anything will produce anything other then incompetence in government.”
I agree with all these statement but the analysis is not explicitly carried to its logical conclusion. J.Q., you talk about the “political class” and “the people” but another class is prominent by its omission, as it were. You also talk about “an ideology” which attacks the competence of government but you never clarify what this ideology is. I am a little unsure what to make of these omissions.
“The people” can be taken as the large majority of the population with broadly similar political and economic interests. They will be working class and middle class people on wages and salaries. We can include with them dependents, pensioners, students and the unemployed. The “political class” is clearly a functionary class meant to act in the interests of the people but, by your own analysis, not acting in the interests of the people. A functionary class can act in its own interests of course but almost by definition it must also function in the service of “masters” from whom they get their (extra) rewards. If their masters are not the people, who then are their masters?
As I said, you also mention an ideology which attacks the competence of government: undermines its legitimacy and capacity to govern. If it attacks democratic government (even representative democracy) it is essentially attacking democracy itself; again in terms of reducing legitimacy and capacity.
I wonder why you won’t mention capitalists as the class and capitalism as the ideology. Otherwise, your analysis is very clearly bereft of motive force. You can see things happening, you can describe them accurately but you cannot explain why they are happening. I will admit you could try for other explanations for motive force (as interests and capacity to see those interests furthered) but you don’t attempt this analysis either. You leave the whole question in abeyance. I wonder why you only analyse half the issue. If something is being moved in a certain undesired direction by forces unknown and if one never uncovers the forces and deals with them as root causes how can one ever hope to achieve anything?
I have long regarded the term “economic rationalism” as a misnomer, referring as it does to a doctrine that is neither rationale nor genuinely economic, and would more appropriately be labelled “chrematistic cretinism”.
@Paul Norton
It is rational for those who benefit from it. It is irrational to those exploited by it and/or to those who have values other money and “wealth”. Globally, I agree, it is irrational. It damages most people and most of nature. One need scarcely explain why that is both immoral and irrational.
You have introduced to me a new and interesting word. According to Wikiepedia, “Aristotle established the fundamental difference between economics and chrematistics. The accumulation of money itself is an unnatural activity that dehumanizes those who practice it. Like Plato, he condemns the accumulation of wealth. Trade exchanges money for goods and usury creates money from money. The merchant does not produce anything: both are reprehensible from the standpoint of their philosophical ethics.”
It is clear that Aristotle would have deplored capitalism. Wise man.
Ikonoklast, I already requested that you take this topic to the sandpits. You can get a hint of my views by searching the site for “capitalism”. If I get some free time, I’ll spell my ideas out more completely. In the meantime, sandpits please.
@Paul Norton
“chrematistic cretinism”
Good one, particularly considering there is no ‘natural’ limit to real numbers.
@John Quiggin
I await with interest your spelling out of your ideas more completely. I (re)read your Piketty article “The Australian exception”.
In it you use the term “capitalism” once. This is perfectly fine in my view as it indicates you think the term has a meaning. You also write;
“In an economy dominated by capital, and in the absence of estate taxation, there is little to stop the current drift towards a more unequal society from continuing and even accelerating.”
I infer from the above that since you regard our economy as “dominated by capital”, it might follow that you also regard it as “dominated by capitalism”. But you might have a variant or mixed proposition to offer on that score. As I said, I await with interest your addressing of this issue if you can find the time.
@Ernestine Gross
It’s an interesting point. A while ago, I spent a little time pondering Piketty’s formula;
r GT g or Return on capital greater than growth. Of course, he is saying IF that happens then certain results follow (increasing inequality). Further, he says that this r GT g might a “norm’ which we have returned (based on the empirical data).
I developed a simple thought line that;
(1) Physics equates physical quantities e.g. Kinetic Energy equals half M times V squared.
(2) Pure maths (and accounting) equate nominal and/or imaginary quantities.
(3) Economics, in part at least, seems to equate nominal/imaginary quantities to real quantities.
We could argue that r is a nominal quantity (being measured in nominal units) and that real economic growth is a real quantity (more of physically quantifiable goods and services). We could then question the validity of equating nominal quantities to real quantities. Does this create a maths or a calculation which has validity? However, in turn it can be argued that we convert the real quantities to a value in a nominal base (money) and thus the equation does equate nominal to nominal.
Taking a pragmatic view (which I believe fits nicely with empirical views ), we can say that if this method of equating has practical value in producing useful or usable insights or outcomes then it is a valid and worthwhile procedure. To me this arena of the equation of the notional or subjective to the real is an interesting part of economics (of any type) and illustrates a problem area within it. There are practical uses to the procedure but it also contains real dangers both intellectually and practically.
@Ikonoclast
Please your post to the sandpit and I’ll try to reply.
Regulation is neither bad nor good, and economics is value laden, eg welfare economics, which has been replaced with narrow CBA units in curriculum
To repeat myself, Ikonoklast, from now on any comment from you that includes the words “capital” or “capitalism” should be directed to the sandpits. If not, it will be deleted.
Well, there is one clause that is definitely passive voice (our economy was heavily regulated) and one which is implied (expectations WHICH WERE formed) – I;m not sure if that is ‘striking’. Sure, Tingle is doing various things here to obscure agency, but use of passive voice is not the main strategy (I would say).
Staying the political boubonism meme, it seems to be a common characteristic to hang on to an ideal or vision, possibly constructed during childhood, and call such a vision reality then mourn the loss of deprivation of that reality.
In that context for evidence I call the Christian conservatives of Australia, who seem to cling to an ideal that would be impossible to sustain and more to the point never existed. Ever.
We seriously need a ghost buster.
@rog
I’m not sure that the Christian conservatives are motivated by an “ideal” so much as a series of prejudices, but I agree with you about that childhood vision thing. I sometimes wonder if that’s what motivates the more one-eyed nuclear energy advocates, who seem to adamantly insist that it’s the energy of the future (as it presumably was during their youth) no matter how much evidence to the contrary appears.
A very insightful commentary on Laura Tingle’s essay John.
There is no question that the econocrats were very powerful in the 80s and 90s. But their views were not uniform. Just look as the heterogeneity in the Treasury Secretaries listed below.
And the econocrats acted in concert with their Treasurers, Finance Ministers and Prime Ministers, and it is hard to know who had the most influence with regard to particular decisions of the 80s and 90s. I would love to know what the econocrats think now of the policy changes they were involved in in that period.
Do some of them have regrets about matters like National Competition Policy? What is their view now about all the privatisations?
I suppose someone like Megalogenis has interviewed most of them for his books, but I don’t know whether he asked them about policy changes they now regret.
I hope someone is doing further research in this area, as it really was a fascinating time in Australian economic and public policy making, and it would be good to have a better understanding of what we did right and what we can now see we did wrong, and the reasons for the mistaken decisions.
10 John Stone 8 January 1979 14 September 1984
11 Bernie Fraser 19 September 1984 18 September 1989
12 Chris Higgins 19 September 1989 6 December 1990
13 Tony Cole 14 February 1991 23 March 1993
14 Ted Evans 24 May 1993 26 April 2001
15 Ken Henry 27 April 2001 4 March 2011
16 Martin Parkinson 7 March 2011 12 December 2014
17 John Fraser 15 January 2015 present
The test of a mistake is if you can, you undo it.
If deregulation was a mistake, campaign for a reintroducing of the two-airline policy, the bank regulation that suppressed competition, high tariffs on cars, electrical goods and clothes, and media regulation that outlawed cable TV. Campaign for a repeal of the GST and for 66% tax rates again on the middle class!
The Left must campaign for a buy back of the Commonwealth Bank, Qantas and Telecom. They will be a good buy. Public ownership is said by them to be as least as efficient as private ownership, and the cost of capital cost for state owned enterprises is allegedly less.
Go for it. It will ensure another 60 years is the wilderness for the Left. The only Left-wing government that held office in Australia since 1949 was the Whitlam Government from 1972 to 1975.
Well actually Jim, the Government did do a buyback of the copper wire and hybrid coaxial cable networks from Telstra in order to establish the NBN. The central network part of Telstra should never have been sold, though the rest should have been. The problem with the privatisation ideology is that it assumes that privatisation is always good, whereas the reality is that sometimes it is a net bad and sometimes a net good. I’ts got to be case-by-case.
Is it the case that by the start of the 80’s things really were too regulated, and there really were too many sweetheart deals, and tariffs really were too high?
Was there an actual need to shake things up?
I would say that yes, there was a need to shake things up. But it seems we unleashed a monster. And the secret of success of this monster is that it eats up little bits of us at a time. So the majority revel in the cheap prices at Bunnings, ignoring the minority who have lost stable, well paid employment. Indeed, the cheer leaders of the monster demonise the losers. But we don’t care, because its not us who are suffering.
Its clearly time to have a bit of stability. To have a rest from the endless “reform”.
In a way, I look at high marginal tax rates for high income earners as a valid substitute for reform. Take medical specialists. Through a well run closed shop they secure themselves obscene incomes. Obviously we should tackle the closed shop and allow the supply of specialists to increase to meet the demand. But this is a really difficult thing for a government to do. So instead, have a high marginal income tax rate for incomes over (say) $300,000. Effectively, you just take their ill gotten gains, and redistribute it to the people they extorted it from.
@John Goss
I do not think the NBN, planned by Rudd during a plane trip from sydney to canberra is a good example.
@Jim Rose
Is that Chris Kenny?
The neoliberal “economic rationalist” assault on the public service continues;
http://www.abc.net.au/news/2016-03-21/public-servants-on-strike-across-australia/7262410
The neoliberals freeze pay, remove conditions, cut jobs, delay deals indefinitely and just generally refuse to negotiate in good faith. Government needs its administrative arms. Apparently the neoliberals don’t realise that if you chop off your arms you can’t do anything. They also don’t realise that if all wage earners are on a low pay trajectory then they are on low spend trajectory. The economy will slump. Meanwhile, people run up debt to spend. It’s unsustainable. A reckoning is coming.
@Ikonoclast
Sad, gloomy, and probably true. And you tackle these things a bit at a time. Today you say you only want the penalty rates of hospitality workers. Tomorrow you go after nurses.