Were the 1980s the ‘last great period of reform’?

It’s common enough in right-of-centre circles to laud the economic reforms of the 1980s. A new publication from the Institute of Public Affairs, Australia Since the 1980s, is in this tradition. Its opening paragraph tells us that it is

worthwhile revisiting the last great period of reform – the 1980s.

Certainly, there were some worthwhile reforms in the 1980s: the floating of the dollar, the opening up of the financial system, and the start of phased tariff cuts among them. Yet as with some other recent IPA excursions into history (here and here), this claim doesn’t quite stack up.

The 1990s, and especially their first half, have a better claim on being the last great period of reform: the end of the two airline policy, the end of the one phone company policy, improved competition policy (admittedly, a point of dispute among liberals), more phased tariff cuts, all the major privatisations, the most significant industrial relations changes, and many other less high-profile reforms. This Industry Commission publication gives a useful timeline from the 1970s to 1997.

So why do people keep talking about the 1980s as the period of reform? There are several possible explanations. It was certainly the start of a major period of reform, the unravelling of the ‘Australian Settlement’ that had governed economic policy since the first decade of the 20th century. And arguably it is a little artificial to distinguish between the two decades; the ‘1980s’ can be used figuratively to refer to later, related periods too (just as some of the important trends of the ‘1960s’ peaked in the first half of the 1970s).

But I think there could be other reasons relating to the culture of the right. The 1980s was the time when the right was on the intellectual offensive, and the left shell-shocked. In Australia, they simply weren’t used to the right having a specific programme of reform. In 1987, an edited collection from various Labor and left figures, The New Right’s Australian Fantasy, said on the back cover that its contributors ‘feel strongly about the need to safeguard what is best about this place.’ The left being reduced to a conservative argument like this was something few people would have predicted 15 years earlier, when the left’s time seem to have come. This first phase of economic reform, superbly recorded in Paul Kelly’s The End of Certainty, was as exciting for the right as it was depressing for the left.

Though the reform programme continued even more quickly in the 1990s, the political dynamic changed. The dreadful early 1990s recession gave the opponents of economic reform a plausible (if wrong) argument that the economic reform programme was a failure, and vocal opposition arose from conservatives as well as leftists. The Paul Keating Prime Ministership also divided the right. Many pro-economic reform cultural conservatives hated his non-economic agenda so much that they could barely give him credit for the good things he was doing. And then he defeated Liberal leader John Hewson and his radical reform agenda Fightback! in the 1993 election. The reform movement didn’t die with Fightback!, but it marked the end of manifesto politics. So while the 1990s were important years for economic reform, they didn’t feel as good as the 1980s had.

Surveys suggest that people tend to look back fondly on their years of early adulthood, and I think the same might be true of political movements as well. The future remains an exciting possibility, free of the messy realities of trying to make things work. This is why the free-market right views the ‘1980s’ with nostalgia. But we should not pretend that these memories are accurate history.

12 thoughts on “Were the 1980s the ‘last great period of reform’?

  1. To me the 90s just seemed a continuation of the 80s – the cultural shift happened in the 80s. We had the huge changes of the Whitlam era, then the seeming stagnation of the Fraser years, then something new again with the Hawke government. There was a change of vocabulary and values: the “greed is good” thing seemed to sweep the UK, USA and Australia, with government policies to match – privatisation, etc.

    What about the effect of state governments? The Cain, Wran and Burke governments were also economic reformers – maybe that’s also affecting people’s recollections ?

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  2. But those state governments weren’t economic liberalisers, though financial market deregulation indirectly brought Cain and Burke down.

    Another odd thing about the IPA publication is that it plays to the left stereotypes of the 1980s – ‘greed is good’ (not the rationale of markets, of course – which are an ingenious device for using the energies of self-interest for the interests of others), and the out-of-context Margaret Thatcher remark about there being no such thing as society.

    But odder than either of these things is quoting the Ronald Reagan line of about bombing Russia and a joke about superheroes.

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  3. People’s recollections will often depend upon their attitude towards the person being remembered. Conservatives still attack Keating. He is accused everything bar the Gatton murders. Yet when you look at the reforms which have really changed the economic face of Australia, there are two which stand out. Keating’s move to force people into superannuation and the change to the taxation laws which allowed for the franking of dividends. While there are other major reforms in my opinion the “L.A.W.” tax break which Keating later moved into superannuation was the bravest.

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  4. I agree with you that people have an innacurate memory of history, and indeed I think that major iconic reforms are remembered far better (and are easier to talk about) than potentially large amounts of smaller reforms that have a bigger overall impact. For instance, we have had a slow increase in the tax take by the government in the last 10 years — but most people don’t even know, even though it has impact in numerous areas.

    Perhaps the same issue might be investigated better by asking people in a more indirect way about changes in general, rather than reforms. In addition, it might be worth probing people on issues like family benefits etc. which otherwise might fall under the radar even though they impact some people’s lives considerably. I doubt, for instance, most people would even think about the difference in these things, but if you asked them what was important, then they would give you highly related issues like family finances etc.

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  5. I would have thought it was quite silly to talk about the 80s as a time of major reform, from my memory next to nothing happened until very near the end of the decade. I will read the timeline after I post this to find out what actually happened.

    My dominant memory of the 80s is the hysterical assault on economic rationalism from all directions. Although of course I like to think that the intellectual battle was won in 1985 with the publication of my paper on the Austrians, and also John Stone’s paper “Deregulate or perish” (now on line in the Rathouse).

    http://www.the-rathouse.com/hayaustriankey.html

    http://www.the-rathouse.com/John_Stone.html

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  6. Yes it is apparent from the chart that action in some key areas like mining, the Labour Market and Regulation came immediately after my 1985 paper, no doubt reflecting the influence of the readership of the Age Monthly Review where the paper was published. John Stone’s paper would have had next to no impact by comparison because he was just preaching to the converted in some obscure industry group.

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  7. The 1990s, and especially their first half, have a better claim on being the last great period of reform: the end of the two airline policy, the end of the one phone company policy, improved competition policy (admittedly, a point of dispute among liberals), more phased tariff cuts, all the major privatisations, the most significant industrial relations changes, and many other less high-profile reforms.

    let us examine Andrew’s assertions.
    End of two airline policy. if getting rid of Ansett is said to be reform well I guess it is.

    phased tariff cuts. well he was following ALP policy but even here he gave in to the motor , clothing and footwear industries and lengthened the time period.

    ‘reform’ of telecommunications had already happened. what we have now is a policy for producer sovereignty not consumer so this ain’t reform.

    Competition policy. Paul Keating started this and thought it so important he brought it on despite the political pain.
    Howard campaigned against it in 96 and has never had his heart in it ever since because the Nats and country libs don’t like it.

    his labour market ‘reforms’ have re-regulated the market not deregulated so there is no reform here.

    Privatisations are only reforms if they produce consumer sovereignty and that word is not understood by the present Government.

    In essence your history is sadly lacking

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  8. ‘End of two airline policy. if getting rid of Ansett is said to be reform well I guess it is.’

    Ansett collapsed in 2001. I thought the two-airlines policy was having Qantas and Australian Airlines as separate entities.

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  9. Homer – I was barely talking about Howard, who has been a laggard though generally not a backslider.

    Airline deregulation was more than just letting new airlines into the market; it was removing a whole lot of other restrictions on how the industry operated. It is now much more competitive; a far cry from the old days of flying at the same time charging the same fares. An inefficient airline like Ansett being put out of business is a normal and desirable market process.

    Reform of telecommunications did not really start until the early 1990s, with Optus starting up. Big improvement in service standards followed.

    Most tariff reductions occurred in 1990 or later. Been a key to rising living standards through cheap imported goods.

    Privatisations haven’t all been in the consumer interest (eg monopolies like airports) but all that I am aware of improved asset management and unleashed more entrepreneurial activity.

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  10. No Sinkers the two airline policy was TAA (and then quantas) with Ansett.

    Andrew you are supporting me.

    IF Howard was a supporter he would have de-regulated the labour market ,

    changed the taxation regime,

    ensured competition policy was robust not weakened.

    By the way Howard supported tariiff reductions in parliament as Oppo leader then campaigned against them in various seats

    What a shame he turned out to be a pale imitation of Hawke and Keating

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  11. Andrew, I agree with the points made in your post. Another factor it seems to me is that much of the commentariat, including newspaper journalists, were/are much better informed and much more interested in macroeconomics (and hence macro reform) than microeconomics. Most were probably raised on Keynesian macro and thus things like the floating of the dollar, tax reform (from 1985) and the move away from full wage indexation (in the later versions of the Accord) were/are considered a much bigger deal than industry reform, deregulation and privatisation. For example, I noticed that Alan Wood’s article in the Oz on 4 October said that there is “no national market in electricity”. He is one of the best newspaper economics writers in the country yet seemed not to know about the NEM, which has been around since 1998. Macro is also probably easier to communicate to generalist journos and financial market economists than micro, which requires an understanding of more esoteric concepts.

    Incidentally, Victoria’s year 12 economics syllabus *still* treats micro reform as an afterthought, with ‘fiscal policy’ given much greater attention.

    At the same time, it’s probably true that the earlier macro reforms (if one includes the tariff cuts) probably have had a greater impact on the productive capacity of the economy than industry reform.

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