Sunday, March 4, 2012

Is Australia's 'fair go' ethos under threat?

In his recent essay about the rising influence of ‘vested interests’ in Australia, Wayne Swan, the treasurer, notes that we Australians ‘always prided ourselves on being a nation that’s more equal than most – a place where if you work hard, you can create a better life for yourself and your family’ (‘The Monthly’ March 2012). He argues that this ‘fair go’ ethic is ‘under threat’ from ‘the rising power of vested interests’. He was not referring to the union movement, which has exercised extraordinary influence under the Gillard government. He was referring to wealthy people who have campaigned in recent years against a new resource rent tax and carbon taxes.

 Swan claims:
‘A handful of vested interests that have pocketed a disproportionate share of the nation’s economic success now feel they have a right to shape Australia’s future to satisfy their own self interest’.

An editorial in the Australian Financial Review (AFR, 3-4 March) contrasted the tone of Wayne Swan’s essay with that of an essay by Bob Carr, former premier of New South Wales, which was published in the AFR on the preceding day. The AFR noted:
‘Mr Carr’s thoughtful musings on the crisis of democratic socialism and the need for Labor to embrace the reform era of the Hawke-Keating era stand in stark contrast to Mr Swan’s belligerent swipe against private enterprise’.

Carr’s comments about the reforms of the Hawke-Keating era are worth quoting:
‘The best bet for Australian Labor might be to embrace and not shy away from the bold economic reform of the Hawke-Keating era. British Labor will sound absolutely inauthentic if it repudiates Blairism. In a similar spirit, Australian Labor cannot walk away from its legacy and is entitled to define itself as the party of economic liberalism, open markets and rising living standards’.

Bob Carr’s article was written before he knew that he was about to become Australia’s foreign minister. Unfortunately, it is not likely that he will be able to continue to write sensibly about Labor politics while in his new position.

The AFR editorial went on to suggest that Swan ‘is wedded to an outdated ideology’ and to claim that ‘Mr Swan is arguably the most left-wing treasurer since Jim Cairns’. (Jim Cairns was federal treasurer for a brief period in the 1970s.)

I rarely read newspaper editorials, let alone quote them, but that one seemed to me to be exceptionally good. There are, however, a couple of points that I would like to add.

My first point is that it is particularly obnoxious for a government representative to criticize people for trying to defend their wealth against confiscatory taxation. There may be a strong case for governments (state rather than federal) to obtain a larger share of resource rents on behalf of citizens, but it was outrageous for the federal government to seek to do this by changing the rules applying to existing mining projects. When an investment has been made on the basis that governments will take a share of rents according to a particular set of rules it is extreme opportunism (if not theft) to announce a sudden change in the rules which enable the government to take a larger slice of rents. In my view the miners are entitled to argue that such behaviour is contrary to Australia’s ‘fair go’ ethos.

My second point is that the tone Wayne Swan has adopted is counter-productive if his aim is to promote serious consideration of the issues associated with changes in income distribution. Swan refers to the recent OECD publication, ‘Divided We Stand: Why Inequality KeepsRising’. This report suggests that income inequality is likely to rise in countries like Australia in the absence of ongoing government involvement in extensive income redistribution.

The evidence on changing income redistribution poses some serious questions to those of us who are inclined to argue that governments can create widespread opportunities by just getting out of the way. It also poses the serious question for advocates of redistribution of how they propose to build widespread community support for removal of disincentives in the tax-welfare system. In that regard, Wayne Swan’s performance could only be described as abysmal.

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