Capitalism with Australian characteristics

Dear ,

Treasurer Jim Chalmer’s essay in The Monthly is an urgent, although not particularly eloquent, proof of the need for organisations like the AIP.

In a mixture of solutioneering, electioneering and propaganda, Chalmers argues that 2023 is the year that we must remake capitalism and create a values-based economy in partnership with business, unions and community groups, more in line with Australian values.

You might call it Capitalism with Australian characteristics, or more realistically crony capitalism or even fascism.

Whatever you call it, this is a program that must be fought. It will undermine the strength and resilience of the Australian economy (already compromised by the last government’s response to COVID) and smother the spirit of individual genius that is the secret not just to growth, but to a proper civil society.

When Australians voted for Anthony Albanese they thought they were voting for some species of Bob Hawke, Paul Keating, even Kevin Rudd or Julia Gillard. But in the history of Labor these leaders, even the worst of them, were fortunate aberrations.

The “true believers” have always looked back to Gough Whitlam, or to Chifley and Curtin, and this is a government of true believers. They will govern by the “light on the hill”.

Chalmer’s screed fulfills multiple purposes. It positions him as a future leader, and as the spokesperson for the rank and file. It also seeks to position the opposition as cruel, heartless, valueless, and out of tune with the Australian community.

To do this he must enunciate and defend preconceived ideas irrespective of the reality on the ground. This makes him the reverse of Keating, one of the best treasurers this country has seen, who spouted ideology in opposition, but once in government adapted to reality and jettisoned the platitudes.

“Solutioneering” is the practice of adopting a solution before you have defined the problem. It’s post hoc rationalisation done prospectively so as to make the adoption of bad policies seem inevitable. This essay is a study in it.

Chalmers identifies the last 10 or so years as being ones of drift and drag. They may have been, as successive coalition governments sought to deal with the excesses of the Rudd/Gillard/Rudd governments after the successes of the Howard ones.

But the “drift and drag” has not been caused by “neo-Liberal” policies as he claims, rather the reverse. The type of policies he identifies as “neo-liberal” are those last implemented by John Howard and Peter Costello.

Since then, the size of government has increased dramatically, spending rising from 35.6% of GDP in 2007 to 44.16% in 2019 and then 46.28% in 2020.  Taxes have remained high. The rigidities baked back into the wages system by the Gillard government have never been reversed and starting at the end of Howard’s reign central government diktats tampered with the energy markets, which have resulted in the high prices we “enjoy” today.

Chalmers points to the GFC as showing the weakness in our system, but in fact it showed up the weakness in central planning. As the late Tony Makin pointed out at the time, all the government interventions meant to save us – pink batts, school halls and all the “go hard go households”  paraphernalia – arrived after the GFC had passed.

Australia survived the GFC as well as it did because it had a resilient, adaptive and open economy. The dollar devalued, as it should have, the RBA cut interest rates, and our exporters went and found new export markets – hello China. The government had no debt, and we sailed through, despite the government interventions, not because of them.

To be successful in his solutioneering, the Treasurer needs to obscure the truth of the last few years. He has help with that. The unions have been complaining about “insecure work” in the gig economy, even though there has been no rise in casualisation, and most of those who work casually think of it as “flexible”, rather than “insecure”.

They, along with meme and faction factories like the Australia Institute, the Mickel Institute, and to a lesser degree Grattan, manufacture other crises. Inequality is allegedly increasing, despite the fact that the Gini coefficient for Australia (a measure of inequality) has actually declined slightly over the last 10 years.

Wages are said to have stagnated (not true) and are at a record low share of the economy versus capital income. Whether it is a record low share or not is a matter for debate, but it is true that capital income is a greater proportion of the economy than labour.

But the question is “Why?”, or rather, “Why shouldn’t it be?”. The compulsory superannuation system set up by Hawke and Keating was supposed to achieve just such a thing. In 1983 the capital share of the economy was seen as too low, as a high savings rate generally means higher productivity, which should result in higher wages. A higher capital share also goes to support Australians in retirement.

To ensure the erasure of history, the Treasurer intends to “renew and restructure” various organisations. Labor has already restructured, or should I say “razed”, the Australian Building and Construction Commission, and under the cover of Christmas did the same thing to the Administrative Appeals Tribunal.

Apparently the Treasurer now intends to renovate the Productivity Commission, one of the drivers of rational economic decision making, and the Reserve Bank. He’s vague on what this might mean, but it appears that they will be remodelled to align with the government’s values – new personnel and new ideas.

And what is the treasurer’s preferred economic model? It is for the government to set the overall direction and for business, superannuation funds, unions, and community groups to work out how to implement it. No more “What would Milton Friedman do?”. It is “what would James Chalmers want?”.

But not on their own. The government will be involved in something called “impact investing” and “co-investment”. It will redesign energy, finance, labour and social service markets. And this will be built on the clean-energy transition and an investment in skills and training.

Let me predict what this really means.

On top of trying to run their businesses, owners and managers will now need to conform to vague and capricious values set by the government, and their agents, the bureaucrats.

There will be best practice codes that can be enforced by authorities, but hard to interpret with any certainty. Prices will be capped, and business told who they can and can’t sell to. (This is happening now not just with gas and coal companies, but also the streaming organisations who sell us movie product).

Union membership will become almost mandatory, and businesses will be required to involve their “stakeholders” (self-identifying busybodies) in management and governance. The financial markets will become the enforcers of conformity to government objectives like climate change and diversity, equity and inclusion.

Equality will be achieved by taxing investors more heavily. Franking credits will probably be abolished, as will negative gearing (while tax benefits will be bestowed on superannuation firms who build welfare housing). The capital gains discount will also go.

And all this will be rained down on a populace encouraged by post-Howard governments to think that if there is a problem the government should be relied upon to fix it, and if someone has more than me, then they must have stolen it.

If you think this sort of top-down approach will work, then you weren’t paying attention as the  COVID-induced command economy misallocated resources so that welfare was wasted, the economy inflated, and supply chains disrupted. Imagine that in perpetuity.

It will be hard on us who live here, and discouraging to any sources of foreign capital who might think about investing here.

And all this proposed by a treasurer who has never run a business in his life, progressing straight from uni to a role as a political advisor.

In reality, it doesn’t really bother the current ALP whether it works or not. Politics has ceased to be the idea of governing for all. Labor is owned by the unions, the unions see economies as zero-sum games, and this is naked self-interest designed to redistribute power and prestige away from other Australians to them.

There are no genuine values in a “value” economy, growth is out, and redistribution is in. And we, the AIP, are rolling our sleeves up.

Regards,

GRAHAM YOUNG
EXECUTIVE DIRECTOR