Monday, May 28, 2007

Does the country change when the government changes?

Tim Dunlop has asked me to be part of a blogging ‘conversation’ experiment he is co-ordinating from his Blogocracy blog. Each person in a group of commentators, posts a question in turn. Each member of the group then responds to the question on their own blog and links to the responses of the others. So I will respond today and get a chance to post a question for the others at some time in the future.

Tim’s initial question is:

My first question is picking up on something said by both John Howard and Paul Keating, namely, that when the government changes, so does the country. Both made the comment at a time when it looked to them like they might be about to lose power and so there was, of course, a sense of warning in their observation. So that’s my question: Does the country really change when the government changes?

My response.

This question seems to in part pose the tweedledum-tweedledee issue. Despite the different way they portray themselves, are the two major political groupings in Australia so similar that they can be expected to provide essentially the same policies?

If so then a change in government will not provide much of a change in the country.

The question is a very general one and clearly does not admit a simple ‘yes’ or ‘no’ answer. To answer it precisely one would need to relate the history of the major political groups in Australia to the history of Australia. There would be a significant random element in effecting this linkage reflecting the role of general global changes, the role of other levels of government, the unions, Reserve Bank, public sector and the Treasury. Perhaps, too, social attitudes drive history and to some extent politicians just play catch-up.

Thanks Tim it’s a tough question.

Let me give a narrow economic perspective of the question based on some specific cases that I know something about:

1. In the very long-term some major policies seem to be determined by events rather than the party-political identity of politicians.

One of my academic interests is the very long-term history of labour and capital migrations to Australia. My judgment is that most of these outcomes reflected events in the international economy, and the ups and downs of the Australian economy, rather than party political policy decisions in Australia.

Up until the 1920s, capital and labour moved freely and in great quantities into the Australian economy. The main determinant of intakes had nothing to do with Australian policy at all – they were primarily determined by the size of US capital and labour inflows which left countries like Canada and Australia sharing the residual. After the 1920s a period of restrictions emerged that lasted up until the Second World War. This was then followed by an increasingly Liberal phase. Hiccups occurred during the banking collapses and droughts towards the end of the nineteenth century but these, again, had nothing to do with political identity.

It is difficult to tie these broad immigration phases to particular political developments in Australia since the other countries of high immigration (Canada and the US) followed exactly the same chronology. You would have to be naïve to see this as mere coincidence.

Even particular events such as the abolition of racially discriminatory immigration policies in 1973 were accompanied by similarly-timed changes in other countries. Big reforms based on changing morals or a common response to the same international factors? I’ll bet the latter.

These days I remain surprised, more generally, by the extent to which economic progress in Australia is driven by the international economy alone. The driver now is China and Japan rather than Europe and the United States. The main task for policy-makers is to not stand in the way of inevitable changes.

2. Over the past 40 years the outstanding events in Australia’s economic history were the 1975 tariff cut by Gough Whitlam and the move by the Hawke-Keating Government in December 1983 to float the exchange rate and liberalize foreign exchange controls. These moves cemented Australia’s modern role in the world economy. They were moves that one might have expected a conservative government to implement.

Most conservative supporters saw the years of Mr. Fraser’s Prime Ministership as years of inaction and wasted opportunity in relation to liberalizing the Australian economy - although the conservatives in opposition did support the subsequent liberalizing moves by Labor they were bound by interest-group politics and their conservatism not to bring these changes on themselves.

Moreover, the international community, as a whole moved, towards greater flexibility in exchange rates and to less reliance on foreign exchange controls so it is not clear how much specific Labor input there was in the decision. I don’t think that much though Labor drove the specific timing.

I think Labor can be identified with changes that altered significantly the way Australia related to the world but I am unsure how much of the change was endogenously determined by events. I don’t worry too much about the attribution of such changes - they were unambiguously welcome.

The Howard conservative Government has presided over what is perhaps the longest boom in Australian history for the past 100 years. The key remaining item on the reform agenda is to rid the economy of destructive workplace practices which reduce our freedoms and our prosperity. I think Howard has taken a small step in this direction but his basic virtue has been to not stuff things up. A Labor Government might well introduce urgently-needed, simple labour market reforms eventually. It would not surprise me.

3. The present. Would a Rudd victory change Australia?

In the short-term a Rudd victory will restore the failing fortunes of Australia’s trade unions but this is unlikely to have much medium term impact. The decline in the role of the unions reflects changes in the way work is carried out in Australia and is only marginally a function of anti-union activities by the conservatives. That Mr. Rudd’s wife chooses common law individual contracts for her firm rather than relying on collective agreements is telling as Terry McCrann points out.

The current IR stance of the ALP will fade in the face of economic realities and its Therese Rein-style contradictions. The unions and collective bargaining will die over the next few years to become a perceptible force only in the public sector.

Mr. Rudd’s indicated withdrawal of troops from Iraq will weaken the Australian-American Alliance but not in a major way. The war is as unpopular in the US as it is in Australia. In addition, the latent anti-Americanism in the ranks of Labor’s left will be squashed by policy realists who understand the overwhelming importance of the Alliance. The most significant impact of the proposed Australian withdrawal will be to signal (in a minor way) to the terrorists that the propaganda tricks and manipulations they have played on the West have won.

The West will live with the consequences of this victory for decades – it is my major current political concern.

The other distinctive parts of Mr. Rudd’s agenda such as reinstituting an ‘industry policy’ which favors manufacturing will likewise, in my view, fade. Much damage can be done here but it will only be temporary. The factors that limit growth in, for example, the Australian automotive assembly industry have much less to do with whether we have 5, 10 or 15% tariff protection than the existence of China which will be the largest automobile market on earth by 2020. We will still sell and service vehicles in Australia then but we probably won’t produce many. Avoiding this would require protection of 60% and that is not on.

In my view Rudd is a right-wing bureaucrat who will seek to operate Australia much as it operates now. He is a fairly able guy (not in the order of JWH) but has really poor quality people to draw on as ministers and a hopeless backbench. If Rudd secures power there is a high chance of monumental policy stuff-ups but there is little chance of long-term damage.

Conclusion: The notes above probably doesn’t answer Tim’s question adequately but I think I have shown why it is a demanding question anyway.

Political parties provide us with ways of adapting to the inevitable and are only partial creators of our social evolution. The world changes and we will too.

My response to the other commentators.

Joshua seems to see the rise of more liberal economic policies in the 1980s in Australia as leadership-driven. I would ask why this liberalization was then and after such a global phenomenon in Western countries. With respect to immigration policy at the time countries such as Canada had much higher intakes than we did. Joshua’s comments on immigration policy under Howard seem off the mark – Howard increased intakes considerably over those in the Hawke-Keating years – easier now of course since we have much lower unemployment.

Tim and I seem to have similar views on the issue even though we would draw different political conclusions; I agree with him that politicians have incentives to exaggerate their role. I liked his discussion of the role of ‘inevitability’ arguments.

I also thought Ken and I had similar thinking – WorkChoices continues reforms begun under Hawke/Keating – I agree.

Tigtog and I are apart in terms of politics and I think that her emphasis on the relation between parties and views in the electorate is only part of the story. We are also impacted on by the world as I argue in my post.

Kim’s arguments I find really difficult. Her claim is that leaders should lead and when they don’t lead the ‘people perish’. I think this is a boring old lefty illusion – we don’t need a ‘prophet’ (to Kim Keating was a prophet!!!!!) to go forward and if we don’t we will not necessarily stagnate. Indeed she regards JWH as anything but a prophet but he has delivered good outcomes. Basically I don’t want any political visionary ‘leading me’. It is ‘clear that prophecy and prophets are what give sustenance to the people’. What you are saying here Kim is close to being fascist and an unhappy conclusion in what should be a free society. Moreover it is inaccurate – as a number of us have argued many of the political changes at this time were replicated elsewhere with local politicians understating the extent to which they just reacted to events.

Robert M is one of the interesting bloggers on the left and on this question is sensible enough to see that things won’t change drastically if a Rudd government is elected. As I have stated (and I think Ken agrees) the current IR reforms continue a set of historical developments that ultimately will not be reversed. Ken might regret that but I don’t. I think Robert is astute in recognizing the lack of leadership the coalition has displayed on climate change. It’s a justifiable gripe but the facts of climate change will drive Coalition policy even if they do so with a lag.

Andrew, as a politician, is in the thick of it and despite his qualifications I think he (almost naturally) overestimates the autonomy of politicians. Like Tigtog he emphasizes constraints imposed by the electorate. I think these are important but that constraints imposed by the world (Greenhouse, China, India, US policy) are as important. I liked Andrews’s comment about Al Gore. Particularly on the climate change issue the world would have been better-off had Gore been elected instead of Bush. This exception establishes (if you really needed to prove such an obvious point) that one cannot ignore totally the issue of political identity.

A good discussion which I enjoyed. I welcome comments on this draft and will add changes in perspective as updates.

Other commentators are: Joshua Gans, Tim Dunlop, Ken Parish, Kim, Robert Merkel, Andrew Bartlett and Tigtog.

My response: I enjoyed this discussion and my responses to the various participants are at the bottom of the page over the leaf.


Francis Xavier Holden said...

The most significant impact of the proposed Australian withdrawal will be to signal (in a minor way) to the terrorists that the propaganda tricks and manipulations they have played on the West have won.

aah Harry but it's just the opposite.

In my view:

The most significant impact of the proposed Australian withdrawal will be to signal (in a minor way) to the terrorists that the propaganda tricks and manipulations they have played on the West have NOT been successful in Australia.

hc said...

fxh, Disagree but I hope, in any event, that my views on the Iraq conflict won't dominate discussion of this post.

Francis Xavier Holden said...

It was you who mentioned the war.

If you give me a couple of bottles of the 1991 St Huberts Cabernet I promise to stop commenting for at least a week.

rabee said...


Do you think that the Pacific solution, the German African solution, the UK Regional 'Protection' Proposal, and Gitmo are a global phenomenon in Western countries.

I can think of many instances in which a change in government changed the country in a negative way:

* the election of Bush and his fantastical friends
* the 1932 Reichstag elections
* the election of Hamas and the change of government in Iraq (how far are we willing to go in this discussion?)

I can hardly think of a single situation where a new government dramatically and quickly changed a country for the better. But the 1994 elections in South Africa comes to mind.

davidp said...

Hi Harry,
In the economic history of Australia, it is at least arguable that the Trade Practices Act might have been comparable to the Whitlam tariff cut - the ending of open cartels and other restrictive practices documented by Brunt (I think) and others.

The Industrial Relations Reform Act with its first moves away from centralized bargaining might also get a guernsey. (if one of the distinctive features of the Australian economy was its centralized labor markets, surely its undoing is also a major change)

Both of these weren't by new governments (though the Whitlam government never really settled down to be an established govt.)

I agree with financial deregulation though (though would include domestic as well as international).

Anonymous said...

I have to agree with harry's assessment of labors bench. That bunch would better suited to letter sorting at the local post office centre.

I couldn't name one of these people that impresses me in any way.

Julia Chavez should be thrown out of parliament for the things she has done recently.

The real question once these jokers get in is whether Rudd can hold the idiot gallery back.

I don't think so becasue it will be like trying to plug the Hoover dam.

So I expect a mini Whitlam moment in our history.

Not a good thing but great to watch as it will be hillaroius seeing this gaggle of fools doing everything they can to ruin living standards.

But in the end we are far to wealthy and flexible to take long term damage.

I'm getting the popcorn ready, removing the shoes and tuning in. It will be great to watch.