Monday, April 28, 2008

Do we now have a new Australian settlement?

In his book, “The end of certainty”, published in 1994, Paul Kelly argued that the 1980s saw the collapse of an Australian political tradition that had been embraced nearly a century before. This tradition, which he termed the 'Australian settlement', was based on the white Australia policy, trade protectionism, the arbitration system (national wage regulation), government paternalism (extensive government intervention aimed to promote individual well-being) and the belief that Australian prosperity was underwritten by the British Empire.

Kelly suggests that the Australian settlement (also sometimes known as Fortress Australia) was bipartisan – an alliance between the conservative establishment and working class power (p 13).

It seems to me that the Australian settlement had begun to crumble by the late 1960s. By that time many people felt that racial discrimination in immigration was an embarrassment. By then the case for some reductions in protection was being seriously considered within government, even though few people were brave enough to advocate free trade. Faith in Empire had crumbled during the Second World War and had largely been replaced by the American alliance – which (as today) was coming under criticism as a result of poor leadership in Washington.

I think Kelly is correct, however, in pin-pointing the 1980s as the decade in which the greatest part of the Australian settlement collapsed, even though centralised wage fixation was still strong during that decade. Arguably, government paternalism is as strong as ever, even now.

Kelly ended his book by suggesting that the challenge for Australian leadership was “to create a synthesis between the free market rationalism needed for a stronger economy and the social democracy which inspired the original Australian Settlement ideals of justice and egalitarianism”(p 686).

More recently Paul Kelly has announced the arrival of a “new Australian settlement engineered by political leaders during the past generation and a half”. He suggests that “Australia's post-1983 progress is a direct function of national leadership. Hawke, Keating and Howard, despite their differences, are best understood in an historical continuum finding similar solutions to the same problems”. He notes that the policies of the major parties have converged. For example, economic policy has become more pro-market, foreign policy has converged on a strategic outlook of simultaneously deepening ties with East Asia and the US, and immigration policies have converged on acceptance of increased immigration accompanied by a deeper commitment to Australian citizenship (see here).

In a Financial Review article entitled ‘Merging into nothing’, a few weeks later (9 November) Mark Latham, former leader of the Australian Labor Party, took this argument about policy convergence somewhat further. He suggested that the policies that the major parties had put forward in the election campaign then being conducted were virtually indistinguishable. It seems to me that he was not suggesting that the situation could be otherwise – it was the result of an “economic revolution” that had “transformed the nature of politics”.

Latham argues that “the market-based reforms of the Hawke / Keating / Howard governments transformed Australia into an intensely materialistic society. For the first time, working class people were given easy access to finance and capital. They used these economic opportunities to climb the social ladder, leaving behind their working-class suburbs and values”.

I disagree with Latham on the question of whether society has become more materialistic. It seems to me that despite all the talk about the “fair go” ethos the Australian Settlement embodied a mean-spirited form of tribal materialism. The prevailing ethos was that in this country we look after our mates. The “fair go” ethos did not even extend as far the nation’s first inhabitants.

Latham does seem to be right, however, in suggesting that more people have adopted middle-class values over the last couple of decades. He states: “The chief middle-class demand on the political system is ... for more money. It wants governments to get out of the way: cutting taxes, cutting outlays to undeserving welfare recipients and freeing up more resources for the growth of private sector lifestyles”.

It seems to me that the policy convergence on middle class concerns, as identified by Mark Latham, provides the foundation for the new Australian settlement. Whereas the old Australian settlement left room for political battle over income distribution, this has now just about evaporated.

One of the few areas in which major policy divergence could open up within the framework of the new Australian settlement lies in the contradiction, noted by Latham, between middle class demands for lower taxes and for middle class welfare to be retained or increased. Hopefully, before too long, one of the major parties will begin to offer the electorate the choice of reducing middle class welfare in exchange for lower taxes.

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