December 6, 2013
The recent Keating interviews on the ABC indicates that it was the economic reforms of the Hawke and Keating Government that opened up Australia to the flows of the global capitalist economy. As Tony Shephard remarks:
We had a fixed exchange rate, tariffs [on imports] were still high, we were frightened of Japanese investment … our financial system was tightly regulated, our industrial relations system was centralised, complex and unproductive, and just about every service was provided by the public sector. State ownership extended to banks, insurance, telecommunications, airlines, ports, shipping, dockyards, electricity, gas etc.
Australia was an ''moribund, inward-looking industrial graveyard''. It was in economic decline. Quality reform was required, not just the empty political rhetoric favoured by the Abbott Coalition Government.
Hawke and Keating floated the dollar, undertook financial deregulation, privatised government enterprises, reduced tariffs and introduced labour market deregulation. They also reduced real wages, providing a social welfare net instead (Medicare, superannuation, tertiary education). This pattern continued under the Howard Coalition government during the China-fuelled Australian resources boom.
Looking back on that period of history from the perspective of the Keating interview we can see that economic globalisation is the game changer. Keating understood that, with global capitalism, the state had to make room for more powerful markets and the flows of international capital.
The state had to undertake an orderly, strategic retreat as an economic unit and shift to accommodating and harnessing the transformative capacity of global capital, rather than trying to fight it. The core policy issue then becomes one of how you globalize not whether you globalize.
It was the China-fuelled Australian resources boom that enabled Australia to enjoy the good times. This veiled the extent to which it is now the power of global markets that are more powerful than the state, which has political authority over society and the economy.
Although Big Mining said the boom would be eternal, Australia is now in the post boom adjustment period. Chinese growth is plateauing and that h means more straightened times of lower terms of trade, lower economic growth, declining revenues and lower living standards for Australia. Such an economic period post-GFC requires innovative ideas and new future industries. So where are the new growth corridors?
So what is the Abbott Government doing to prepare for the period that has emerged in the form of the iron cage of the Dutch disease? So far, it appears that they are pretending that it’s not happening. Are they hoping that something will come along with respect to innovation and entrepreneurship? Or does this denial signify a return to the period of the Great Complacency?:--namely, Big Mining (ie, the resources industry) will see us right once again.
The key concern here is that since world market economy has outgrown the authority of the state, national governments evidently lack both the power and the will to make good the deficiencies of inequality and instability that have always gone with growth and change in market economies. How is the Abbott Government going to address that now that it cannot afford to plough money into the endless trough of middle-class welfare?