What a crisis looks like

Monday, 9 March 2009 

To get an idea of the current Australian political scene, it is necessary to start where Australian political commentary almost never does – the world. For the last thirty years, since the first serious global downturn marked the redundancy of arrangements set up by the US immediately after the war, we have had a steady breakdown of the old labourist institutions that largely originated in the aftermath of the Great Depression. On the domestic front the unions’ influence over government was broken, nationalised industries privatised. On the international front the former communist bloc was opened up to market forces and national barriers to global financial markets removed.

Since the left identified with most of these institutions it is no surprise that their roll-back brought on triumphalism from the right. But there was something phoney about it, as to call such a process ‘liberalisation’ is mis-leading. Certainly market liberalisation was introduced, but the roll-back of government was not straightforward. In fact what we have seen is a new intimate relationship between government and the market that has meant government plays even a larger, albeit indirect, role in the economy than ever before. Industries may have been privatised but have become more reliant on government subsidy, financial markets may be expanded, but government plays an increasing role in supporting their stability. Therese Rein’s business may have benefited from the privatisation of the job placement industry, but so too does it’s profitability rely on the government subsidy given to the industry as a whole.

In Australia, the phoniness of calling this process a ‘right-wing agenda’ was neatly summed up by the fact that it was the centre-left that carried it out. That it took the ALP under Hawke and Keating to do what Fraser and Howard could not, is an uncomfortable truth that all the right-wing warriors which have sprung up like Topsy over the last decade can never get their heads around. This has not stopped them claiming credit for it, however, and now that those arrangements have collapsed, the right have nothing to say.

This is the main weakness of Turnbull’s response to Rudd’s attacks on neo-liberalism. It is not that it attacks the business practices of Rudd’s wife, something that neither the coalition nor the media were too worried about two years ago (nor perhaps Rudd’s own side if reports are true that it was a Labor MP who, without bothering to tell Rudd, passed on the dirt to the Howard government in the first place). Nor is it that in highlighting the glaring inconsistencies of someone who 18 months ago was claiming the only difference to Howard on budgetary spending was to be less inclined to do so, Turnbull also highlights the Liberals’ own inconsistencies.

The main problem with Turnbull’s response is that while it is largely correct on the past, it has nothing to say about what needs to be done now. The inconsistencies of Rudd’s attack are being ignored by most because his attack on neo-liberalism fits in with what everyone agrees on now – the government must do something. Just what that something is has until now been largely seen as a domestic issue, national stimulus packages rolled out, national interest rates cut.

But ultimately this is an international crisis needing an international solution. Keating is right, a new international settlement is needed on which to build a new economic order. From this it could be argued that the stimulus packages around the world have made this harder. Not only will the damage done to the global capital markets need to be repaired, they will soon have to deal with trillions of dollars of new debt, especially from the world’s largest debtor nation, the US, precisely at a time when the global economy is least capable of financing it. Everyone has worried about a return of the beggar-thy-neighbour protectionism of trade of the Great Depression but what we have seen is a fiscal beggar-thy-neighbour policy instead. To not only forge a new international settlement, but also deal with the additional pressures it will soon be under, will require strong political leadership.

But here’s the rub. The restructuring of the last thirty years has hollowed out the very political process that brought it about. On the domestic level the undermining of the old institutions with which the left identified has not only undermined them but the right that defined itself in opposition to it. Hawke and Keating called on the union movement to carry out the restructuring, but in doing so fatally wounded it.

On the international level, the introduction of market forces in the former Soviet Union and China allowed the US to claim victory, but undermined the Cold War rationale it had used to assert leadership over the rest of the West. The neo con experiment over the last eight years to restore that leadership has failed dismally, but not because the US was acting unilaterally, but because when it did, this time no-one followed.

This is the blind spot in Keating’s call for a new realignment. Not for the first time (probably because he played such a role in it) he fails to see that the political will to mobilise and undertake a restructuring is not there. On the international level, the US may recognise the neo-con cul-de-sac, but has not found a way to recover global leadership. This is summed up by the new role for the G20, an implicit recognition that the old G7 club is redundant, but too broad and amorphous to yet count as anything new.

On the domestic level, the phoney right-wing agenda of the last decade has been replaced by an equally phoney Keynesian revival. Both rested more on the failure of the alternative than the ability to mobilise to a new direction. This probably explains Labor’s timidity at the moment. It is worth noting that the coalition is extremely vulnerable. They have nothing to propose right now summed up by a leader who they don’t want but are struggling to replace. Yet Labor is barely able to go in for the kill. We saw this at the federal level and are now seeing at the state level. There is no state coalition party more vulnerable than the one in Queensland where the collapse of the state Liberal party was managed as a ‘conservative revival’. It gives the Queensland LNP least room to move of any to finesse the opposition to the stimulus package. Yet somehow Labor is still struggling to drive the point home and is allowing Springborg to get away with not only opposing public spending but still go around matching Labor’s spending promises dollar for dollar.

It is this problem, which is now becoming more pressing, that is leading to a change in the tone of the Rudd government. Until now this blog has focussed on Rudd’s technocrat side, because it was the anti-political angle to it that played such an important role in despatching Howard and dealing with the Liberals still. But giving the government a sense of ‘mission’ is becoming a growing imperative. It is why the government continues to pursue the climate change agenda despite concerns that clearly exist at the cabinet level. And from Rudd himself there is emerging more and more a moral agenda. It was seen with his Howard’s ‘Brutopia’ essay shortly after gaining the leadership but has generally run in a distant parallel to a technocratic agenda. In the last few months, however, there has been a more concerted attempt to attach a moral agenda to the workings of government.

The attacks on executive pay shows the problem with doing this. Describing pay levels as ‘obscene’ is easier than directly forcing companies to do something about it. It is partly the reason why the government wants to pursue it at the level of the G20 Summit than in the domestic arena. But it is also where political activity generally is likely to shift. Keating was right to call time on the spending stimulus packages. The period of domestic initiatives is now over and the global dimension to this crisis is now becoming unavoidable. This suggests the next phase in the crisis will be very international and at least this government has been prepared for that.

Posted by The Piping Shrike on Monday, 9 March 2009.

Filed under Key posts, State of the parties

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4 responses to “What a crisis looks like”

  1. David Jackmanson on 9th March 2009 8:10 am

    The first and second paragraphs here remind me of Gabriel Kolko’s “The Triumph of Conservatism”, the thesis of which is that the so-called Progressive Era in US politics was not, as is generally accepted, an insurgent movement of the people against “the trusts”, but rather the establishment of what Kolko calls “political capitalism”, meaning that the Government was harnessed as never before to the service of particular corporations. Kolko demonstrates that most of the initiatives of the Progressive Era happened with the insistence and blessing of the largest corporations in the US at the time.

    I’d say that the poltical decisions Hawke and Keating Governments *were* a “right-wing” agenda, – that those Governments, while nominally of the centre-left, were in fact right-wing pro-corporate Governments.

    The current attack on corporate salaries is definitely a “moral” agenda and nothing else. Even if it were easy to do something about executive salaries, it would do nothing in itself to make more money available for government-provided services or higher wages – the amount of money involved is irrelevant in terms of Government spending programs or company-wide wage bills. It’s as fake as attacking “elite private schools” for the subsidies they get, when the bulk of private school subsidies goes to small private schools that no Government will dare to de-fund.

  2. Ricc on 9th March 2009 12:21 pm

    I think what TPS is saying is it’s all a mess, and while tempting to find conspiracies behind it, no one really knows what’s going on to be well organised enough to do anything about it.

    Keating was Moses, charged with taking the people to the promised land, unable to go into it himself. Too much the ALP politician, to the end.

    Who would the corporate interests be? GM, Ford? Nope, no luck there. Citigroup, AIG? Nope.

    Even the Chinese Communist Party might see some joy in their relative advancement (and advancement for their relatives) and position on the world stage, but even they won’t enjoy taking a whack to their investments in the meantime. The CCP have, at best, kept the wolf from the door by keeping the wolf busy feasting on the USA.

    I’m more fascinated by all these countries without a reason for existence. Iceland, for example. May end up mere suburbs of Europe.

    People who’ve spent their lives fighting the EU are going to wake up with a nasty shock – they will go out not with a bang, but a whimper, whimpering as slow death from indebtedness drives them into multilateral institutions.

    Babylon 5 fans will know the line “Not much to be independent about” – you’d wonder why anyone would want economic or political independence if it is merely a recipe for starvation.

  3. Just Me on 9th March 2009 9:22 pm

    “It is worth noting that the coalition is extremely vulnerable. They have nothing to propose right now summed up by a leader who they don’t want but are struggling to replace. Yet Labor is barely able to go in for the kill.”

    Not sure I agree with that final sentence. Why waste much time and effort and political capital on attacking an already very weak leader and opposition? String them out as long as you can, let the internal rot of your opposition fester away and do the hard yards for you. Save your ammo for when you need it. While the opposition remain in largely self-inflicted political irrelevance, the government does not have to do anything much except point out the fact occasionally, have a good chuckle at their expense (preferably in Hansard for all history to see), and then simply ignore them for the rest of the time.

    Mr T will probably fall this year, and then in real desperation they will try Hockey or Costello or The Mad Monk or one or other J. Doe, and the self-defeating internal political fun will start all over again for the still inexperienced and traumatised opposition.

    An internally riven political opposition, a gift that just keeps on giving. Ask JW Howard, or the NSW Labor government.

  4. The Piping Shrike on 10th March 2009 7:56 pm

    JM, I think that tactic would work for Labor if they were happier to deal with Turnbull than an alternative. But I don’t think that is the case. I think Labor (especially Gillard) has gone out of their way to add to the instability around Tunrbull’s leadership. But from their point of view, they need to destroy the Liberals’ economic credibility while there is still support for deficit spending and before its impact starts to wane.

    In Queensland if they do not work out how to do this quick, they will lose government when they should not have.

    DJ, I agree that there are elements of Hawke/Keating’s agenda that could be termed ‘right-wing’ but I do think the fact that this was carried out by Labor, rather than the Liberals, is not irrelevant. I think it raises questions about what has constituted right-wing politics over the last three decades (and what has constituted the left as well).

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