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social democracy brings about banana republic « Previous | |Next »
November 13, 2006

Here's an interesting argument from Keith Windshuttle in The Australian. His position is that social democracy eventually gives you the banana republic. His argument to support this position is that the causes of family breakdown originated mostly on the left of the political spectrum. By this he means:

The '60s sexual revolution, which promoted promiscuity as the key to happiness; The radical feminist movement, which told women to throw out their husbands because all men were beasts; the revolution in the divorce laws made by leftist divorcee Lionel Murphy and administered by the Family Court of feminist divorcee Elizabeth Evatt; the Whitlam government's introduction of welfare for single mothers, which made the state a substitute for the father as family provider; and the rapid rise of unemployment in the late '70s and early '80s, which devastated many Australian families and for which the much-maligned neo-liberalism has proven itself the only cure.

It's a strange argument, given that Paul Keating had stated in the 1980s that the banana republic was due to a protectionist Australia, rather than the rejection of conservative values around the family, gender and sexuality.

Windshuttle is argung against the view 'that family relations and community institutions are being laid waste by the unforgiving forces of neo-liberalism, materialism and consumerism', which is what is argued by Kevin Rudd in the latest edition of The Monthly magazine. Rudd says:

Howard's culture war ...masks a deeper unsettling reality: that the socially conservative values at the core of Howard's cultural attack on the Left are in fact under siege from the forces of economic neo-liberalism that he himself has unleashed from the Right. Whether it is "family values", the notion of "community service" or the emphasis on "tradition" in the history wars, "traditional conservative values" are being demolished by an restrained market capitalism that sweeps all before it.

Windshuttle is contesting the argument that there is a contradiction within the political Right ----between its market liberal and socially conservative strands. As Rudd states it, this contradication is one of 'the ruthless logic of the market rubbing up against a tradition which holds that those with economic power have a moral obligation to protect those without it.'

The flaw with Windshuttle's argument is that negative consequences of an unfettered market capitalism and its ethos of economic self-interest cannot be effectively quarantined from its effect on the nuclear family and the reciprocal relations within communities and the associations of civil society. Though Windshuttle states the economic growth provided by the shift to a free market has resulted in women's employment increasing (more in part-time than full-time work) he overlooks that more time working means less time for family life.

What has been pushed into the background by Windshuttle is the view that the key aim of social democratic parties is to civilise capitalism by addressing the inequities it creates in power and income, and by trying to control the impact of free markets in society in the name of social justice. Windshuttle's talk about family values rather than social justice implies that are two orders (free market and traditional families) and that the ethical norms (social obligation, solidarity and altruism) belong to the family.

| Posted by Gary Sauer-Thompson at 7:03 AM | | Comments (8)


The idea that neoliberalism could be the only cure for what? The cure for depression in people who realise the emptiness of total reliance on consumerism to find meaning in life? Keith makes absolutely zero sense here.

The values espoused by a social democracy are generally what prevent Australia from becoming a banana republic surely!

Windshuttle states that economic prosperity fosters happier families and better communities. Hence neo-liberalism is the cure for a social democratic society, which he defines as:

corporate capitalism with low economic and population growth, high unemployment and a highly regulated, environmentally virtuous, unadventurous society.

That's old Europe. But it stands for social democratic Australia. Windshuttle neatly sidesteps the way that the welfare state protects those from the inequalities caused by a deregulated market.

I agree with your commentary, there are a lot of contradictions in Windshuttle’s arguments.

I think it’s beneficial to explain exactly why Australia adopted neo-liberal policies in the first place. From its inception, Australian industry had lived a very sheltered and favourable existence under the British Empire, which was a closed market, protected from outside competition. Two costly wars with Germany broke the back of the British Empire. The empire crumbled and our export industries were exposed to competition, and we lost some of our traditional markets. When the Whitlam govt came to power it was handed a poison challis – the economy was in struggling against external competition.

The economic situation at the time was unprecedented and the Labour govt was too inexperienced to deal with it. The economic management delivered by the Liberal party between the years 1960 – 1972 can be characterised by ineptitude, complacency and neglect. The fact that Japanese auto manufacturers were able to export cars into the country even with high tariff barriers, and still turn a tidy profit, showed how far ahead they were in terms of management proficiency, labour productivity and manufacturing technology. The economies of Western Europe and Asia had bounced back strongly after the war while those of Britain and Australia had failed to modernise and keep pace. Even with the economic problems and the Vietnam war, Labour only managed to secure a miserly 9 seat majority in the lower house in 1972. Australian conservatism was a tough nut to crack. The economy soldiered on from 1972 to 1983 with half-hearted attempts at modernisation and restructuring with no real improvement. 20 years of neglect could not be overcome overnight – there were no quick solutions.

My point here is that Australia’s economic problems were not due social democratic policies but due to economic mismanagement and ineptitude in the years preceding the crisis, after all, the economies of Japan and Germany also adhered to social democratic policies at that time and still do today. After coming to power in 1983, Hawke and Keating adopted the neoliberal policies espoused by Thatcher and Reagan to solve the malaise in their own economies and the rest is history.

In the last 20 years the left have argued that neo-liberal policies have created social inequality and has created an underclass not seen since the great depression. This has prompted govts such as British New Labour to devise a third way. Professor Hugh Emy from Monash University discusses third way economic neoliberal policy in the paper entitled
Dancing with Wolves: The untenable tenets of the Third Way

The debate on this subject is often viewed, as the neoliberal states of the US, Britain and Australia v’s the social democratic states of Japan, Germany, France and Italy. Sometimes it’s viewed as the economic ideologies of Hayek/Friedman v’s Keynes/Galbraith. I think it’s important to state that competion between the capitalistic countries is cutthroat, and should a country fall behind, it takes sustained effort to crawl back.

Australian neo-liberals argue against govt intervention in the economy when there are clear cases in the past where intervention has benefited the economy. In the 1950s/60s Australia received millions of migrants, most who came with little money of their own. Labour state govts of day injected considerable funds into public housing. This kept supply and demand in equilibrium preventing inflation and made housing affordable for all Australians. Compare this to the free market policies of the 1980s/90s where massive inflation of house prices made housing unaffordable for millions of Australians on low incomes and increased the burden of mortgage debt on many middle-income families. Most conservatives would agree that the huge injection of public funds into tertiary and technical eduction by the Whitlam govt greatly benefited the Australian economy in the 1980’s.

Neoliberals point to the higher growth rates and lower unemployment of countries such the US and Australia as a case for neo-liberalism. This can be misleading because these states also have high rates of labour causalisation and under-employment. Debate has been raging over the past five years over the high rate of private debt that these states been accumulating over the past 20 years. The question being, has this debt been used to purchase economic growth in the form of consumer spending and housing construction or is it purely investment?

Windshuttle criticises the social democracies as low GNP growth, low population growth and high unemployment. He fails to realise that these economies are very mature and have already gone through a period of sustained economic growth, which has lead to a reasonably high standard of living. Consumer spending in these countries is fairly static. In Japan where personal savings are very high, people are clearly choosing to save their earnings over greater consumption. These economies attain their growth primarily from higher productivity and increased exports, this why selling into the emerging markets of eastern Europe, China and India is very important to the economies of Japan and the EU. Western Europe and Japan are densely populated regions; many want to maintain present population levels. It’s easy for large countries like the US and Australia to achieve higher growth rates through increased immigration and population growth, which leads to greater housing construction etc, however there is also a downside in terms of pressures on the environment caused by urban sprawl. Many people in Australia question whether we should push our population beyond 20 million. Unemployment is indeed a problem in some social democratic states, however to be fair Windshuttle should have also stated that in Germany the unemployment is long-term and centered in Eastern Germany. In France it is also long-term and centered amongst the socially disadvantaged Nth African and Middle Eastern migrant communities.

It’s hard to tell what the Howard Govt’s economic policy is, there doesn’t appear to be any economic planning whatsoever. One minute Howard is proclaiming that our economic future lies with shipping as much coal and other natural resources to growing countries such China. Then after the global warming debate heats up, he changes tact and states that nuclear energy is the way to go and we need to export uranium – it's so reactionary. The only resource countries such as Japan and Italy have are human resources, they have nothing to fall back on. These countries literally live off their whits.

yes I agree with your economic account of the how Australia avoided the Banana Republic scenario under Hawke and Keating.You say that:

My point here is that Australia’s economic problems were not due social democratic policies but due to economic mismanagement and ineptitude in the years preceding the crisis

Right on. Windshuttle is shooting up the 1968ers by attacking social liberalism and its emphasis on individual freedom. The economics are ignored.

Hugh Emy is interesting. He says that the Third Way:

does contain some useful ideas which can be used to re-invigorate the social democratic tradition. But the Third Way must be seen as a transitional response to the complete dominance of neo-liberal ideas and policies. It is, perhaps, a way of resurrecting, of keeping alive, a belief in non-market, social values which hard or dogmatic economic liberalism threatens to extinguish. But, ultimately, the Third Way is based on the illusion that is possible to strike a sustainable balance between free market and non-market approaches to social organisation. Third Way thinking may - and ideally, should - lead back to social democracy but cannot provide a satisfactory substitute for it.

Kevin Rudd would be an advocate of the Third Way?

On the banana republic - Hawke and Keating concluded that the country had to do away with economic nationalism and completely open itself up to foreign investment as a way of re-invigorating the economy. They also continued Whitlam's policy of pumping money into public education and training as a way of making the country's labour force more attractive to foreign capital. No doubt, the big multi-national mining companies who have invested here have reaped big returns from their investments, much of it tax free.

If all social democracy has to offer is 'old Europe' then there's not much to hope for, is there?

The 1960's revolutions, like most revolutions, had costs, as well as benefits. The benefits outweigh the costs, which is why only reactionaries like Windbag want to go back. But it is more useful to accept that there were indeed costs as well, and we're paying for them now.

it is Windshuttle who equates social democracy in Australia with Old Europe. Social democracy in Australia has been a different kettle of fish for all the talk of the Sweden model. It embraced the Third Way under Hawke and Keating and then Latham.

agreed. But Hawke and Keating underestimated the way that the expansion of a de-regulated (i.e. laissez-faire) global capitalism embodies, increasingly, destructive social forces that become more politically significant than the creative, expansionist features of the initial stages of globalisation that bought all the economic growth and wealth creation.

Hence the current poltical conflict free market capitalism and social cohesion that is deflected by the dog whistling about Muslims and Islam being a threat to the political order.

It seems as if Windshuttle has not read his Adam Smith. He acepts the neo-liberal distorted interpretation of the 'Wealth of Nations' and the ignoring the philosophical framework of 'Theory of Moral Sentiments 'in which the market is supported by a complex set of social relationships based on reciprocity, trust and civic commitment.