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Beazley on economic reform « Previous | |Next »
April 3, 2005

Yesterday afternoon I read Kim Beazley's speech to the Australian and Melbourne Institute's Sustaining Prosperity Conference. Beazley has been developing the much needed economic narrative that would map out the ALP's pathway to economic credibility through the pathway of reform.

This is an important speech in the campaign to establish the ALP's economic credibility at a time when the Australian economy is on the slide. If it is to help re-establish the ALP's economic credibility as enlightened reformers, then the campaign needs to go beyond the 'bash the Howard Government' style of tactics of the parliamentary tacticians to developing good policy.

Beazley's economic narrative comes in two parts. The first celebrates the Hawke-Keating ALP Government as the party of economic reform. Beazley says that this tradition of economic reform is an enlightened one:

"...a story of how in government in the 80s and 90s, Labor rose to the historic challenges it confronted, abandoning its own prejudices to pursue an aggressive program of economic reform... There was urgent work to be done. And though it was often tough, we set aside our own ideological prejudices. In the face of rigid opposition--from our supporters, as well as our opponents--we achieved structural changes that over two decades, turned our economy around. It was what the times required."

Okay we can give him that. It was the social consequences of the economic reform that were badly handled.

The second part of the Beazley narrative highlights the lack of economic reform undertaken by the Howard Government since 1996. John Howard, says Beazley:

"...has failed to abandon his own prejudices to make the changes that could have moved Australia forward to its next stage of growth. Instead of embracing a clear-eyed approach to reform, he has spent the balance of his prime ministership distracted by his own personal obsession, a culture war in which he has sought to recreate the imagined Australia of his childhood. And while he has enjoyed the dividends of Labor's past reforms, he has neglected and sometimes even weakened Australia's longer term economic prospects."

It is the ALP that stands free of prejudice and bias to do what is best for Australia's national interest. That claim ignores Howard's introduction of the GST, and the ALP's opposition, even though Keating had argued for the GST on rational economic grounds.

This kind of economic enlightenment narrative places the onus squarely on the ALP to identify what the times require, to put its bias and prejudices to one side, and then devise good policy that address the problems. The ALP now has to show that it understands the reform agenda and that it has the courage and will to further the reform agenda with good policy.

It's a big promise. Does Beazley deliver on this over and above identifying the warning signals that signify economic decline? Yes and no.

He does take some steps. Taking his guidance from the economic enlightenment signpost of the Hawke and Keating Governments---a clear-eyed, far-sighted approach---Beazley says that it is necessary to get Australia's reform priorities right:

"Today's economic challenges are different to those we faced in the 80s and 90s. Our greatest economic need is to restore strong productivity growth. Because it's only by restoring strong productivity growth that we can simultaneously achieve higher growth rates, low inflation, rising real incomes and improved international competitiveness."

He then asks: "how do we generate the next wave of productivity reforms"? He answers by returning to a familar argument:
"The scope for productivity gains from the old reform agenda of deregulation, privatisation and industrial relations reform is largely exhausted. There's still some unfinished business - in particular, in electricity and water - but with the large-scale structural changes mostly behind us, we won't repeat the windfall productivity gains of the 90s. Labor believes in labour market policies that help people to work smarter. That means investing in the know-how of Australian workers, not returning to a 19th century world of dog-eat-dog industrial conflict."

That is a quick dismissal of the need to ensure that the Australian economy is an ecologically sustainable one; too quick given all the warning signs of an ecological stress in Australia. We can infer that Beazley's embrace of the economic enlightenment presupposes a 1980's understanding of the economy, and it does not include an ecological enlightenment. It is at this point that we encounter the bias and prejudices of the neo-liberalism entrenched in the ALP. It is a limit-horizon of the ALP beholden to a conservative understanding of the economy disconnected from ecology.

What Beazley does say is that to improve productivity of capital, we need long term investment in the nation's infrastructure; and to improve productivity of labour we need long term investment in skills and training. And there it more or less ends.

It ends at the current point of the public debate. So Beazley is basically only restating what we already know. He is not breaking new ground about how the much needed reforms are going to be tackled. What we do not know is how the ALP's understanding of reform differs from the Business Council, ther Australian Financial Review, the OECD, etc? Does it have its own voice?

| Posted by Gary Sauer-Thompson at 9:30 AM | | Comments (6)


Perhaps he's foreshadowing a return to the knowledge industry model/knowledge nation?


I reckon you are right. Today's economic enlightened ALP is basically a more socially conservative 1980s outfit with a new driver.

If so, then how does that translate into specific policies--job training for single mums, those with disability and industrial working class men with bad backs?

Beazley has along way to go: some suggestions:

The above speech does not indicate how he is going to deal with infrastructure other than through government intervention.

It does not indicate how infrastructure renewal involves making Australia a high speed broadband nation.

Moreover, Beazley's remarks that:

"There's still some unfinished business - in particular, in electricity and water - but with the large-scale structural changes mostly behind us...."

overlooks the large scale structural changes that need to take place about how we use water and how to make the energy market an ecologically sustainable one. How we use water involves a change in the way we live in the cities, how we organize agriculture and how we look after the land.

I reckon Beazley will play it safe.

Any reform to a knowledge economy will require the deregulation of the education industry. There is a lot of vocational knowledge that is not being formalised due to time and cost. Opening up education to enable that to happen quickly and cheaply would increase the fluidity of labor. That would have benefits for both industry and individuals (salary/wage growth).

That is more important than electricity or water IMNSHO.

After the manner in which Knowledge Nation was ripped apart by the media, let's hope Beazley is mindful of the oldest rule in the book when selling the ALP's economic message in the coming months.

Keep it simple, stupid!

will not Brendan Nelson push for the deregulation of the education industry over the next 6 years? Is this not the party of free enterprise, competitive markets and entrepreneurial innovation?

I don't know what you mean by this phrase:

"There is a lot of vocational knowledge that is not being formalised due to time and cost."

What do you have in mind? Can you give an example?

It is my understanding that the cost of vocational education at TAFE is already too expensive for many. Do you propose a HEACS system to deal with this?

On the ecology stuff my judgement is that ecological decline is a gradual, cumulative affair that accelerates only toward the end of a crisis when some hard-to-fix tipping point is passed. This crisis arises from the continual misuse of the natural resources upon which the society; onece the tipping point is reached then collective life collapses into a self-consuming Hobbesean state of nature.

It is also my judgement that though Australia currently appears to be dynamic and flourishing soceity, the first premonitory signs of ecological overreach, waste, decline, and ruin are beginning to appear--especially in the Murray-Darling Basin.

Australia currently suffers from overgrazing, "land mining," man-made desertification and over-exploitation of water. It strikes me that this trajectory is one where the country faces a declining standard of living in a steadily deteriorating environment.


I reckon it is going to be harder than keeping the message simple and avoiding the "noodle nation" style of criticism.

Nelson is now making the running on education. It is the ALP that is on the back foot defending the past. They have their work cut out to establish something in higher education.