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March 2006 | |
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Interview: Organising In Cyberspace Industrial: How Low Is Low Industrial: Cloak and Dagger Unions: Bad Medicine History: Right Turn, Clyde Economics: Long Division International: Union Proud Politics: Howard�s Sick Joke Indigenous: The year of living dangerously Review: Lights, Camera, Strike! Culture: News Front
The Soapbox Parliament The Locker Room
Home Truths
 Howard, My Part In His Downfall
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Economics Long Division
**** How often do we hear from the Liberals in response to some felt community need that there is no point in "throwing more money at it" or rationalising cutbacks in some Hawke/Keating government welfare program by arguing that it wasn't effective because it was "middle-class welfare"? Overwhelmingly, the charge of public largesse and middle-class welfare is false. The main reason Australia has low taxes and low welfare spending compared with most OECD countries is because welfare is rigorously means-tested in Australia. This is why the so-called tax reform debate is so mean-spirited. The middle class resents paying taxes to fund residual public health, education and welfare services they would not use in a fit. By contrast, in industrialised Europe, services are universally provided on the insurance principle. European voters know that politicians promising tax cuts are politicians promising to cut expenditure on their education, health and welfare services. Prime Minister John Howard's aspirationals believe - with some justice - that tax cuts for them mean expenditure cuts on education, health and welfare for the improvident or poor who will not or cannot afford the superior private (heavily subsidised) alternative. There is no mystery about Howard's political success. The times and circumstances suit Howard. Globally, economic growth has been 12 per cent higher over the past 10 years than the previous 20 and most of the additional wealth has been channelled into an asset price bubble via a distorted tax system instead of nation-building infrastructure. The "long boom" will continue for as long as the rest of the world is prepared to accumulate United States (and Australian) dollar debts in return for Chinese (and Japanese, South Korean and Taiwanese) export surpluses. The reason for the slower growth in the period up to 1996 was that previous governments in the US (and Australia) believed external balance was important and were prepared to dampen domestic demand to achieve it. Treasurer Peter Costello's 1996 election foreign debt truck was put away immediately after the election, never to be seen again. There is now more concern about US foreign liabilities than Australia's, even though net foreign liabilities in relation to GDP are about 30 per cent in the US and 60 per cent in Australia. We are in the hands of our creditors. The US has sufficient muscle to cut a deal with China. Australia hasn't. The spectre haunting the Howard Government is the possibility that a financial crisis could wipe out the capital gains of the aspirationals overnight. In the meantime, we have more exciting things to debate - like the size of the tax cut in the May budget - while Howard's beneficiaries maintain a po-faced belief that tax cuts (for them) are the way of sound economic reform. The structural fissures that have been opened up by this Government - the politicised public service, the under-funded public schools, universities, TAFEs, the ABC and CSIRO and public hospitals, plus the privatisation of Telstra, which has shifted its direction from nation-building to profit maximisation - are celebrated as evidence of sound financial management, though the fissures must be repaired if the external financial balance is to be corrected. Everything is grist to the mill of financial capitalism, which has now escaped effective political control through the privatisation of pensions financed by compulsory superannuation. Privatised toll roads have become the most expensive way to undermine liveability in Melbourne and Sydney. Now the electorate is being softened up for the injection of private capital into water conservation. Why? There is no shortage of capital or the ability of government to borrow more cheaply and invest more wisely in the public interest than bankers seeking private profit. The political mindset has changed. Political success used to depend on a perceived ability to manage national development. Now it depends on the ability to read the angst from focus groups in order to divide the community into "us" and "them". The task of nation-building has been handed over to haute finance because the political process has been corrupted. Politicians are terrified that if they put the public interest ahead of private financial interests they will be branded financially and economically irresponsible. The politics of division is a race to the bottom. Now Costello and others are seeking to play the race card, albeit sotto voce, for political advantage. Which politician is prepared to make the obvious point that the best long-term breeding ground for fundamentalism is fundamentalist schools, or military adventures that serve no real national purpose but cause collateral damage to social solidarity by inflaming ethnic tensions? This provides the excuse for government to suppress dissent with anti-democratic anti-terrorism and sedition laws that isolate "them" further and could even promote the terrorism they ostensibly attempt to prevent. It has to be said that Howard is better at this game than any Labor leader in the past decade. But that won't last forever. The so-called Labor renewal under way in Victoria may produce politicians with the requisite ruthlessness combined with the po-faced rectitude necessary to compete with Howard on his own favoured political terrain. This article first appeared in The Age on March 2. Ken Davidson is editor of Dissent magazine www.dissent.com.au
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