Home > Economics - General, Oz Politics > Keating on the end of market liberalism

Keating on the end of market liberalism

May 11th, 2017

Among the 29 people to hold the office of Prime Minister in Australia, Paul Keating is probably the one with the sharpest intellect[1]. So, his abandonment of market liberalism is worth noting.

Unlike those with a more or less fixed view of the world, Keating is committed, as a matter of principle, to going with the intellectual flow. He started out, a little behind the times as a protege of Jack Lang in the 1960s, but soon adopted the then-dominant developmentalist nationalism represented by Rex Connor, and before that by the nation-building probjes Curtin and Chifley.

He was probably the first significant figure in the Labor party to jump on the market liberal bandwagon and abandon what he memorably called the “welfare bag of policies.” He justified this shift by the argument that, just as the traditional Labor heroes were right for their times, market liberalism was right for the 1980s and beyond. The fact that he stayed with Labor rather than changing sides reflected long-standing tribal loyalties and, even more, tribal hatreds, for the bankers who had brought down Lang and Chifley and for the born-to-rule “Tories” in general. But as Craig McGregor observed in 1990,

Anger without ideology breeds reaction.

Keating wasn’t quite as quick to recognise the failure, or exhaustion, of market liberalism, whch he now dates back to the GFC 2008. I’d argued (and did) that this failure was evident in 2001. Still, having recognised that market liberalism is dead, he pulls no punches in pointing out the fact, as in this recent interview with Troy Bramston, who has apparently just released a new biography.

Of course, that doesn’t make him any more charitable towards those who opposed him in the 1980s and 1990s, among whom I must be numbered.

“Of course some on the left might see my remarks as falling into line with their prejudices in the 1980s and 90s,” Keating says. “But the problem with these people is that they were dumb then and they remain dumb — they are resolutely determined to learn nothing.”

Responding, I’ll try to be a bit more charitable. Keating rightly recognised that the postwar social democratic agenda had run into a dead end by the 1970s and that market liberalism was the only game in town (At the time, I got the first part right, but thought that the time had come for a sharp shift to the left). And he’s right, if belatedly so about the fact that the 1980s market liberal agenda is exhausted.

But anyone who changes his views as radically and suddenly as Keating has done, ought to be a bit more humble about the way they push their newly adopted ideas. However deft you are in such transitions, they imply a substantial period in which you held to the old ideas when they were clearly wrong. And while some of the ideas you abandon may be merely outdated, others invariably turn out to have been just plain wrong. I don’t think I lack self-confidence. But having seen so many certainties overturned in my lifetime, I try to avoid them most of the time.

fn1. Gough Whitlam could give him a run for his money. The much-overrated current incumbent certainly couldn’t.

Categories: Economics - General, Oz Politics Tags:
  1. Smith
    May 11th, 2017 at 17:46 | #1

    “anyone who changes his views as radically and suddenly as Keating has done, ought to be a bit more humble about the way they push their newly adopted ideas.”

    If Keating was humble, he wouldn’t be Keating. Dogmatism is hard-wired into his DNA. Plus, lacking much of a formal education, he wasn’t exposed to the reasoning along the lines of: “here is the argument in favour of proposition X, here is the argument against, the evidence on balance points to the conclusion that ..” (Of course there are many dogmatists who have been so exposed, and they are still dogmatists. Our parliaments are full of people with degrees who can be accurately described as non-educated.)

    This allowed Keating to be on opposite sides of the same argument (such as the GST) in short periods of time without it ever occurring to him, much less caring, that this was intellectually inconsistent. Whatever he believed at the time was right because he believed it. No one should take much comfort from his present denunciation of market liberalism because he is saying it. Keating was a politician who had the skills to get done what he wanted to get done, which is a lot more than you can say for a lot of politicians. But he is no enduring figure of authority.

  2. Newtownian
    May 11th, 2017 at 18:28 | #2

    Does this also mean that in 10 years when the summer Arctic Ice cap has melted, the Antarctic Icecap is collapsing increasingly rapidly, methane is pouring out of the Tundra – which together are sending average temperatures 4 C above present sooner than excepted, submerging Pacific Islands Bangladesh and Egypt and precipitating catastrophic fires across eastern Australian every summer ? …………………………………………..

    Paul Keating will suddenly turn into a tree hugger and reject his comfy lifestyle supported by pig farms whose carbon footprint is not exactly friendly….?

    (I know this is all hyperbolic but that is the fun of hypotheticals).

  3. Geoff Edwards
    May 11th, 2017 at 20:46 | #3

    Tertiary education is not an essential prerequisite for a politician, but in Keating’s case, it meant that he entered the Hawke government without a robust personal intellectual framework. He was a reluctant Treasurer but when Hawke insisted, he immersed himself within Treasury for six months and emerged well indoctrinated in Treasury’s neoliberal worldview. Being as streetsmart as he was, he then became a very effective advocate for Treasury’s worldview. If only he had had a more balanced, better informed worldview…

    I don’t think I would rank him above Whitlam in terms of sharpest intellect. Certainly he had stronger political and tactical skills than Whitlam, but Whitlam had was far better read and a far better understanding of history and society.

    I agree with you Prof John that there were other worldviews around in the 1970s, notably the green and limits to growth movements, although they did not have the momentum of the neoliberals and they had few political champions other than perhaps Jim Cairns and Moss Cass. Keating had no time for those worldviews because he was a product of the New South Wales Right and those worldviews were most strongly promulgated by the Victorian Left, which was cause enough in itself for him to ignore them.

  4. Jimmy
    May 11th, 2017 at 22:17 | #4

    Interesting article, John. I like your characterisation of Paul Keating as something of an intellectual journeyman, flitting from one idea to the next. I won’t deny he has a formidable intellect, but his lack of formal education may have been his failure (I think Gough once made a witty remark about Keating’s lack of formal education). I think you have nicely summed up what I loved about Keating (hatred of the Tories, writering turn of phrase) and what I disliked (rigid commitment to neoliberal policies).

    I have read a lot of Keating-related books (afterwords, the interviews with Kerry O’Brien, recollections of a bleeding heart) and he always struck me as an unrepentant market liberal. There’s a telling interview in which O’Brien pushes him on the human cost of his policies and Keating refuses to acknowledge that his policies may have left many voters, most of whom lived in the Labor heartland, worse off. I would like him to acknowledge that people didn’t make a seem less transition from the textiles factory to the trading desk at Macquarie Bank.

  5. jojo
    May 12th, 2017 at 01:17 | #5

    he seemed to back away from those comments in a recent interview with Joh Faine

  6. jojo
  7. Ikonoclast
    May 12th, 2017 at 06:57 | #7

    If Keating had had a sharp intellect and a little reading of history and political economy he would never have adopted market liberalism in the first place. He was a dedicated follower of fashion in politics and other matters, nothing more.

  8. John Quiggin
    May 12th, 2017 at 07:26 | #8

    ” No one should take much comfort from his present denunciation of market liberalism because he is saying it.”

    You’ve missed the point of the post, I think. First sentence, second para.

  9. Smith
    May 12th, 2017 at 09:56 | #9

    @John Quiggin

    I know you aren’t taking any comfort, but I’ve read plenty of commentary elsewhere from others who are.

    Speaking of recanting Treasurers, Wayne Swan now says “We simply have to get rid of neoliberal economics” (story and podcast in the Guardian). It’s funny how he didn’t say this when he was Treasurer (2007-2013), which was during and just after the financial crisis, an event which might have caused a thoughtful Treasurer to question the dominant paradigm.

    As you say in the OP:

    “Keating rightly recognised that the postwar social democratic agenda had run into a dead end by the 1970s and [concluded] that market liberalism was the only game in town”.

    That is, Keating thought about the situation Australia faced, came to a conclusion that things needed to be fundamentally changed, and changed them.

    Swan didn’t recognise anything, came to no conclusions, and didn’t try to change anything, even as the world was experiencing the worst downturn since the Depression. Or if he did, he was too timid to say anything. Unlike Keating, Swan was feeble willed and politically feeble. He was so scared by the inevitable budget deficits of the time – scared that he would be labelled as financially unsound by the opposition and the media – that he produced ludicrous forecasts that said, don’t worry, the budget will soon be in surplus. This was never going to happen, and so he got labelled the debt and deficit Treasurer anyway, against which he had no defence. It’s only now, a decade after the GFC began, that this rhetoric has been shaken loose from the political discourse, by Scott Morrison, of all people.

  10. derrida derider
    May 12th, 2017 at 11:45 | #10

    Oh, Smith, I think Wayne is just not that bright, even by the standards of Australian politicians.

    Intellect’s a strange concept – PJK and EGW were/are both very, very smart in some facets and quite foolish in others. And in differing facets between the two.

    But people here are right to point out PJK’s lack of training (brainwashing?) in a consistent intellectual framework makes him prone to be utterly and genuinely convinced of positions that are in fact a matter of mere political convenience. He’s the sort of person who HAS to believe his opponents-du-jour are genuinely dumb and evil rather than mistaken. All while failing to notice that his current opponents were once his friends.

    Still, we all enjoy that wonderfully creative use of Australian idioms – so long as we are not the target of them, of course.

  11. John Quiggin
    May 12th, 2017 at 12:10 | #11

    Looking at Swan’s obsessive pursuit of a return to surplus, I conclude that the successful stimulus that saved us from the GFC was the work of Ken Henry and Kevin Rudd. As soon as Swan got the reins back, he ran for the safety of fiscal orthodoxy.

  12. peter
    May 13th, 2017 at 06:05 | #12

    Of the 30 people to have held the post of Treasurer, Keating is probably the one with the second-sharpest intellect, after Ted Theodore.

  13. peter
    May 13th, 2017 at 06:06 | #13

    * 39

  14. Ikonoclast
    May 13th, 2017 at 08:35 | #14

    A sharp tongue and a facility for bon mots does not equal a sharp intellect. I am not at all convinced that Keating was a great intellect. But then politicians are scarcely ever great intellects. They are selected for facility at telling lies and for a complete lack of scruples and conscience, not for great or consistent thinking. Our system unfortunately selects the best and most unscrupulous liars and those capable of the greatest self-interest and callousness to others. All this is disguised but not even cleverly. Most people easily recognise the venality of politicians. What people don’t understand yet is how to develop a system which does not promote the venal.

  15. May 13th, 2017 at 12:39 | #15

    Go away for a while, come back, and ikon is still at it!
    “Politicians … are selected for facility at telling lies and for a complete lack of scruples and conscience”

    I know that it is fashionable in some quarters, seemingly on the far left and far right particularly, to put all our problems down to the moral failings of politicians. But can I point out to you that that way lies Trump and ‘Drain the swamp’.

    Politicians are just human beings like you and me. Let’s look at the systemic problems rather than fall into the trap of suggesting – even if this isn’t your intention – that it’s all about individual politicians.

  16. May 13th, 2017 at 12:48 | #16

    Also JQ I don’t accept your view that we had to have “market liberalism”. It’s all counter-factual argument, so hard to know, but what about the Scandinavian countries? Maybe they went down that road a bit, but not as far as the Anglosphere, and they’ve done better on many counts, haven’t they?

    (Of course left wing public health people have a swag of examples about the failures of ‘market liberalism’ but I won’t go through those again – not yet anyway. But what is the measurement you’re using? Hugh Stretton, my one time lecturer (sadly departed) suggested that comparing the post war welfare state era to the market liberalism era, the first one comes off better on conventional economic as well as social indicators.

  17. Smith
    May 13th, 2017 at 17:22 | #17

    Keating is now saying that the highest income tax rate should be 39%. He might be the only person in the world who simultaneously argues against market liberalism and that high income earners should pay less tax, but doubtless in his own mind it is all perfectly consistent.

  18. Ikonoclast
    May 13th, 2017 at 20:16 | #18

    @Val

    I said: “Our system unfortunately selects the best and most unscrupulous liars and those capable of the greatest self-interest and callousness to others.”

    This falls into the category of “Let’s look at the systemic problems….”

  19. Nicholas
    May 13th, 2017 at 20:54 | #19

    Market liberalism was not the only or the correct response to the stagflation of the 1970s. There could have been a social democratic path of using floating exchange rates to give currency-issuers maximum fiscal policy space. Appropriately targeted use of fiscal policy could have been used to curb inflation and target full employment. Conservatives were able to exploit stagflation as a pretext to implement ideas that they had been developing in academia, think tanks, and the media for many years. The mainstream left’s capitulation to that agenda was a major mistake.

  20. Ikonoclast
    May 14th, 2017 at 10:10 | #20

    V.I. Lenin figured out the Australian Labor Party long ago.

    “Labour Government in Australia

    The parliamentary elections took place in Australia recently. The Labour Party, which had the majority in the Lower House, having forty-four seats out of seventy-five, suffered defeat. Now it only has thirty-six seats out of seventy-five. The majority has passed to the Liberals, but this majority is very unstable, because in the Upper House, thirty out of the thirty-six seats are occupied by Labour.

    What a peculiar capitalist country is this in which Labour predominates in the Upper House and recently predominated in the Lower House and yet the capitalist system does not suffer any danger! An English correspondent of a German Labour newspaper recently explained this circumstance, which is very often misrepresented by bourgeois writers.

    The Australian Labour Party does not even claim to be a Socialist Party. As a matter of fact it is a liberal-bourgeois party, and the so-called Liberals in Australia are really Conservatives.

    This strange and incorrect use of terms in naming parties is not unique. In America, for example, the slave-owners of yesterday are called Democrats, and in France, the petty bourgeois anti-socialists are called “Radical Socialists.” In order to understand the real significance of parties one must examine, not their labels, but their class character and the historical conditions of each separate country.

    Capitalism in Australia is still quite young. The country is only just beginning to take shape as an independent state. The workers, for the most part, are emigrants from England. They left England at the time when Liberal-Labour politics held almost unchallenged sway there and when the masses of the English workers were Liberals. Even up till now the majority of the skilled factory workers in England are Liberals and semi-Liberals. This is the result of the exceptionally favourable, monopolist position England occupied in the second half of the last century. Only now are the masses of the workers in England beginning (slowly) to turn toward socialism.

    And while in England the so-called “Labour Party” represents an alliance between the socialist trade unions and the extreme opportunist Independent Labour Party, in Australia, the Labour Party represents purely the non-socialist trade unionist workers.

    The leaders of the Australian Labour Party are trade union officials, an element which everywhere represents a most moderate and “capital serving” element, and in Australia it is altogether peaceful, and purely liberal.

    The ties between the separate states of Australia in united Australia, are still very weak. The Labour Party has to concern itself with developing and strengthening the country and with creating a central government.

    In Australia the Labour Party has done what in other countries was done by the Liberals, namely, introduced a uniform customs tariff for the whole country, a uniform Education Act, a uniform Land Tax and uniform Factory Acts.

    Naturally, when Australia is finally developed and consolidated as an independent capitalist state the conditions of the workers will change, as also will the liberal Labour Party which will make way for a socialist Labour Party. Australia serves to illustrate the conditions under which exceptions to the rule are possible. The rule is: a socialist Labour Party in a capitalist country. The exception is: a liberal Labour Party which arises only for a short time as a result of conditions that are abnormal for capitalism.

    Those liberals in Europe and in Russia who try to “preach” to the people that class war is unnecessary by pointing to the example of Australia, only deceive themselves and others. It is ridiculous to think of applying Australian conditions (an undeveloped, young country, populated by Liberal English workers) to countries in which a state and developed capitalism have long been established. – June 1913 (“In Australia”) – Lenin.

    This appears very far-sighted now. Class war IS still happening. The unemployed and the working poor are being oppressed and exploited more and more now as late stage capitalism runs true to form. Workers in the West did okay for a while as there were many third world countries and peasants to be exploited. Workers in the West became the “aristocracy of labor”. This is how we (including me) were bought off by capitalism. But late stage capitalism now begins to show its fangs even in the West. The “aristocracy of labor” is being dismantled except for those brain workers especially useful to capitalism:- the “quants”, the production scientists, (not impact or environmental scientists), the engineers, software engineers, medical specialists and security experts, along with war weapon and war theory experts: these are the only workers of interest to capitalism now.

    For the record, I am not a Marxist_Leninist. If one wants to attach labels I am a Maxian Autonomist in political-economy and ideology.

  21. totaram
    May 14th, 2017 at 13:33 | #21

    John Quiggin :
    Looking at Swan’s obsessive pursuit of a return to surplus, I conclude that the successful stimulus that saved us from the GFC was the work of Ken Henry and Kevin Rudd. As soon as Swan got the reins back, he ran for the safety of fiscal orthodoxy.

    Good to see my ideas independently corroborated by a noted economist. Duly copied for pasting elsewhere.

  22. totaram
    May 14th, 2017 at 13:52 | #22

    @Ikonoclast
    Wow! Over a century ago! Wow, again!

  23. John Turner
    May 15th, 2017 at 13:18 | #23

    I think that most people, including his opponents, would agree with JQ that Keating has a ‘sharp intellect’. Unfortunately, having a sharp intellect and a high IQ does not necessarily and some would say rarely, translates into wisdom. This mistake of conflating intelligence with wisdom is something that in my experience many ‘intellectuals’ make.

    I like Paul’s Keating ascerbic wit and enjoy his commentary but he was woefully wrong about the economic and social effects of market liberalism. If he has stepped back from his previous views and recognised that Market Liberalism has run its course it is to be applauded.

    An aside :
    At the time of the first Keating-Howard election face off I worked in the automotive industry as a finance/business analyst. I wrote a letter the Age which argued that there was little to choose between their positions in terms of economic policy. I was rewarded with a Leunig cartoon that captured my comments perfectly, it consisted of both Keating and Howard saddled on the same horse (a rather Quixotic looking horse) back to back facing in opposite directions. – Howard was looking backwards of course.

  24. John Bentley
    May 16th, 2017 at 09:38 | #24

    If indeed the Turnbull Government has shed the cloak market liberalism, will the emperor go nude and divorce himself of neoliberalism entirely?? This would be a gargantuan leap of faith for the COALition who, seemingly, can get little right. Will Labour turn green and Greens see red? Will corporate Australia allow it? What will become of our bloated bureaucracies at all levels of government based on market liberalism?

    I can see this creating a huge vacuum; ideologically, mentally and physically. Are we prepared for the mass suicide events that must surely arise from such change? You can’t just flick the switch and say the party’s over. This be the hangover to end all hangovers. Post traumatic market liberalism – PTML. Still it may open up some new markets………

  25. May 20th, 2017 at 18:20 | #25

    peter :
    Of the 30 people to have held the post of Treasurer, Keating is probably the one with the second-sharpest intellect, after Ted Theodore.

    Hear Hear!

    And only one of those two understood (macro)economics

Comments are closed.