Monday, 5 August 2013
Political leaders have to manage economic circumstances that we’re confronted by. We don’t manage the global economy.
Penny Wong on Insiders 4 August
So many decks, so much clearing.
The start of the election campaign has at least confirmed it will be what it always was going to be on, the economy. Even the Daily Telegraph couldn’t keep up the pretence that asylum seekers would be an issue with its “representative” sample of Western Sydney voters, whose concerns over cost of living, health and education seemed no different from what the nation as a whole has been telling pollsters. Maybe Western Sydney tells us about nothing more special than the current state of Labor/Liberal insecurities.
But having decided it will be on the economy, we now have to find out what that means. It is not exactly clear.
The government enters this election with what appears a confused economic message. On the one hand it seems to be saying that it was its stewardship that meant Australia avoided a recession through the GFC. On the other hand it is warning that a Chinese slowdown will mean unemployment will rise whatever it does.
This seems contradictory if the economic debate is still seen in the old way. However, the common theme running through the message is a new way economic policy is being viewed, namely that government is not responsible for the state of the economy, rather just for protecting the electorate from the worst of it.
This is a marked change from how government economic policy has been discussed in the past. For much of the last century, the state of the economy was supposed to be a consequence of government policies. This was despite world economies running largely in tandem across much of the developed world irrespective of whether centre-left or centre-right parties were in power. This was a legacy from when the economy was seen as a battleground for competing political interests representing business and organised labour. The erosion of that representation has eroded the content of this economic debate and the pretence of control over the economy.
There was understandably some reluctance by political circles to recognise the increasing difficulty of governments maintaining this pretence. It became fashionable for the last twenty years, for example, to see such loss of control still as a result of a deliberate policy of liberalisation, and a result of a philosophy, as described by the left, who tend to overstate ideology, as “neoliberalism”.
In Europe and the US, any sense of political control over the economy under the guise of liberalisation has been fatally undermined by the GFC. Far from opening up to the capital markets, governments have tried desperately to control them. This is especially clear in the EU where political control over the capital markets, currency and the banking system has seen both a proxy nationalisation of the financial system and increasing fusion between the political class and financial markets towards what looks increasingly like a financial bureaucracy such as found in China. Nevertheless, despite the undermining of liberalism, this erosion on the political system is seen through the prism of the financial crisis.
In Australia, as usual, things are clearer. Hawke/Keating’s opening up to global financial markets is still seen as “neoliberalism” rather than the fag end of Labor’s historical project as it was. However, the further undermining of the pretence of political control to be replaced by a more technocrat approach has been more clearly occurring within the political system itself under Rudd.
Several commentators have made the point that Bowen’s downbeat Economic Statement and the limited capacity for hand-outs is an unprecedented way to enter a campaign. It isn’t really. In 2007, Rudd surprised commentators by refusing to match Howard’s spending promise through his declaration that “this reckless spending must stop”. The fact that a few months later Rudd had no problem pumping the country’s largest ever stimulus into the economy showed that this wasn’t understood by voters as some political or economic philosophy, but simply a way to make Howard’s promises look like narrow political opportunism.
The widespread acknowledgement that government has limited control over the economy was something that the Gillard government never got (among other things). It continually felt responsible for the state of the economy and defensively talking it up. This especially came out in its commitment to a surplus, which was widely disbelieved, and rightly so, as it had little control over it. One of the fixes of Rudd’s return has been to quietly step away from responsibility for the surplus, saying it depends on what happens internationally. Indeed one of the unnoticed features of Bowen’s Economic Statement has been that in line with a surplus “over the cycle” and the gloomy near term forecasts, Labor has allowed for a passive in-built stimulus that has pushed the surplus timing out.
Gillard and Swan’s adherence to a surplus was widely seen as a political mistake. Yet curiously few seemed to have commented on the other group that still commits to a surplus, the Coalition. It is here where they are vulnerable. A surplus commitment irrespective of the state of the economy is in reality an ideological response from the Coalition rather than a practical one. It is a sign of the internal branding pressure from Australia’s last political party that put Abbott where he is and would have probably kept him there, no matter how good Turnbull’s polling numbers.
Labor is vulnerable too of course. Its transition to a technocrat model over the last six years has hardly been smooth, nor appropriate for what is supposed to be about managerial competence. Surprisingly Abbott made rather little of the “Labor chaos” theme in his campaign opening comments. Nevertheless the Coalition is vulnerable to an anti-politics attack of threatening uncertain times even more so because of ideological agendas. Rudd has spent the last weeks on issues such as asylum seeker policy that has more to do with his own side than the other (or the electorate). There is rather little time, but his re-election would rely on him bringing the real meaning of his period as Labor leader out into the open.
Posted by The Piping Shrike on Monday, 5 August 2013.Filed under Tactics