Is there life after neoliberalism?

You might have recently read my mum’s guest post about Hugh Stretton’s book – Australia Fair. That post received some great feedback. Here is the follow up post:

Is there life after neoliberalism? Yes there can be, says Hugh Stretton in his unfairly neglected book, Australia Fair (UNSW Press, 2005). I recently wrote about the general argument of this book in Australia Fair by Hugh Stretton. Here, I’m going to look at the specifics. But just to recap, Stretton argues that the neoliberal economic reforms of the past thirty years – floating the dollar, reducing tariffs, privatisation of public assets, lower taxation and spending cuts – have not brought the economic gains claimed for them. And he says they make for greater inequality. There have been a few improvements since he wrote in 2005, but not many. Mostly, things have got worse. He argues that a rich country like Australia should be able to assure a comfortable living for all citizens, and outlines a program involving both the public and the private sector to achieve this. Interested?

It’s not possible in a short review to do justice to all that Stretton is suggesting, or to include all the for and against arguments, reservations and complexities he mentions. For this, you must read the book. Furthermore, the policies that make up his program are inter-related, though I am mostly discussing them separately. His writes in a somewhat idiosyncratic style, and though he tries to keep his economic discussion simple, he loses me sometimes. Please forgive my oversimplification.

Stretton begins with ‘work’, because in his argument, full or fairly shared employment should be the main purpose of economic policy. He says that ‘every consideration of economy and humanity should drive us to see that there is paid work for everyone who wants it.’ But having given up most of their power to control the economy in favour of free market prescriptions, the only way governments can control inflation is by sustaining a significant level of unemployment. This is not only disastrous for those experiencing it; it results in less production, less demand and less investment. It also means a higher welfare bill – and/or the demonization of the unemployed, even though there are no jobs for them. Furthermore it often results in an increase in working hours for the employed, not always paid, which in turn affects their quality of life. Achieving full employment depends on other parts of his program, so what he is advocating is quite complicated. It seems to be a combination of stimulating demand, including increasing some benefits, increasing some public employment and stimulating some private employment, particularly in the housing industry.

Stretton has had a long involvement with housing policy. He considers housing a right in a rich society like Australia, alongside the right to education and health provision. (This is the sort of ‘stuff’ Mitt Romney and Bill O’Reilly think Americans who voted for Obama are so remiss as to expect.) Here Stretton addresses the situation where as part of the neoliberal agenda, the Commonwealth has cut funding to the States for new housing investment, and States have sold off most of their existing stock of public housing. This has been replaced by a first home buyer grant and rent allowances to poor tenants who have to compete in the private rental market. The result of simultaneously cutting the supply and subsidising the demand was to raise prices, as first home buyers bid against each other for a limited stock of moderately priced housing. Waiting lists for public housing are years long, and homelessness continues to grow. His solution, which rather elegantly pays for itself over time, is to give Commonwealth money to the States who contract private builders to build good quality but relatively modest housing, half of which is for sale or rent to working families who pay full cost or rent, and half as welfare housing. If full employment reduces the numbers on welfare and increases the number able to pay market rent, then this proportion can change. An increase in public housing acts as a dampener on the private market, and everyone gains except those who are hoping for a large capital gain when they sell mum and dad’s house at an inflated price.

The next issue is what Stretton calls ‘children’, but is actually parenting. He asks how we can best bring up children and respect parents’ right to choose either paid employment or staying home to care for their young children. As things stand, women usually end up doing the unpaid housework in addition to paid work, and children end up in less than satisfactory child care. He agrees that family friendly work places may help, but argues that in addition, there should be a parenting wage equivalent to the basic wage available on a means tested basis to one parent so they can stay at home if they wish. He knows the arguments about rorting the system, but considers that the social good of the proposal outweighs the possible abuses.

In both health and education, Stretton argues that the Howard government favoured private over public provision, and allowed the latter to decline. The Rudd/Gillard government has made a start on these issues. There are some moves to fix the buck-passing between Federal and State governments, and the private health insurance rebate has been cut for some rich families. Stretton would have abolished it altogether, and spent the money on the public health system. He would also likely approve the Gonksi proposals to fund the public education system properly.

More surprising to me, he is also highly critical of current superannuation provision; he quotes another historian’s conclusion that ‘the privatisers of superannuation have presided over the creation of a league of parasites on a scale not seen since the close of the eighteenth century.’ Transparency, which is the best we are offered in relation to fees and charges, is not enough; he argues there should be a public superannuation scheme alongside the private ones to add some genuine competition. I find this chapter technical and difficult, but his general drift is clear.

On the environment, he says: ‘The neoliberal change of direction to greater business freedom, less public production, less government and steeper inequality could have been designed specifically to disable our environmental management.’ He outlines a ‘green program’ which is perhaps now somewhat out-dated, but more important is his warning of the further damage to equality that climate change and greedy consumption of resources could bring.

I also find Stretton’s chapter on managing money difficult, and guess that he might well revise the details post the Global Financial Crisis – which can only have confirmed his general critique; ‘the real fruit,’ he says, ‘of 25 years of well-intended blundering should be to discredit the economic theories on which the mistaken expectations were based.’

He has had a stab at costing his program, and suggests ways of finding the money. And here, you have to decide on whether he is unreasonably optimistic, or whether, as he argues, Australians really might support a program that offered better services and a more equal society, even if it meant higher taxes and forgoing some luxury consumption. It would take ‘guts and ingenuity’ to try, and of course leadership – which has so far been leading us pretty much in the wrong direction.

I do not know of any other book that not only offers a reasoned critique of the impact of neoliberal economic policies in Australia in the last thirty years, but also offers an alternative set that could just work. If only there was someone who would try them.

Kay Rollison

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