One of the most difficult problems Kevin Rudd faced in writing his Monthly essay was the extensive, and indeed dominant, role of the Hawke and Keating Labor governments in implementing ‘neoliberal’ policies.
When he says that the political home of neoliberalism in Australia is the Liberal Party he is giving the Howard government more credit (from a reformist perspective) than is warranted by the historical evidence. While the Coalition moved further ahead on labour market deregulation, waterfront reform and the privatisation of Telstra than was likely under Labor, most of the major reforms had already taken place by the time Howard took office in 1996, and what the Coalition did was incrementally advancing or fine-tuning reform processes initiated by the previous government.
Apparently when the Coalition introduces a market reform it is ‘economic fundamentalism’, but when Labor implements a market reform it is ‘economic modernisation’.
The differences between social democratic market reformers and ‘neoliberal’ reformers are larger in their underlying philosophical perspectives than in their substantive policies. In The Australian this morning, Dennis Glover put it this way:
Rudd does not believe the free market is an end in itself; it exists to serve society. For Rudd greater social equality is a moral good.
I think this is right. Social democrats have a largely utilitarian view of markets; the wealth produced by markets is of value in itself and provides the tax base for big-spending social democratic programs. The fiscal problems caused by the 1970s combination of a stagnant economy and ever-expanding government spending necessitated measures to increase economic growth. In this perspective, ‘society’ is conflated with the state, and the market economy exists to serve the state.
While there is a strong utilitarian streak in liberalism as well, liberals also believe that there is intrinsic value in voluntary exchange and cooperation, whether or not this helps or is approved of by the state. On this view, people should be able to sign labour contracts or buy a higher education if they think this will make them better off, without being second-guessed by the state.
In the liberal perspective, society is equated principally with civil society and individuals rather than the state, and so voluntary exchanges are by definition serving ‘society’. It is just that society collectively, as represented by the state, does not have veto power on transactions.
On many issues, these philosophical differences won’t matter much. This is why I have long argued that ‘economic rationalism’ was a useful term in describing an issue movement of the 1980s and 1990s dedicated to economic reform, which included social democrats, classical liberals, neo-classical economists, and business interest groups. Issue movements are characterised by shared or overlapping policy goals rather than ideological consensus.
In the end, business and social democrats achieved more from the 1980s and 1990s reforms than did classical liberals. Business profits increased, and partly out of taxes paid by business discipline on government spending could again be relaxed. Far from opposing this, the Coalition were enthusiastic spenders. Classical liberals picked up much of the intellectual glory because the key ideas came out of their intellectual tradition. But ultimately ‘neoliberal’ policy served social democratic ends by sustaining a high-expenditure state.