The Australian Labor Party (ALP) has an identity crisis. Historically, the Party represented disadvantaged workers and their trade unions, organisations continually involved in low-level conflict with capitalism – fighting for improved wages and conditions, job security, and defending worker’s rights. Unions soon found that they needed to lock-in their hard won gains by legislation, so the Party’s historic task came to be seen as drafting and implementing worker and union-friendly legislation.
To understand how estranged the party has become from this historic role, we need to see the bigger picture. Around the world, after the Great Depression, a raft of stringent banking regulations was put in place. The aim of these reforms was to ensure that the kind of speculative greed that had caused the global collapse in 1929 couldn’t happen again. The reforms worked well for forty years producing unprecedented economic growth and improvements in living standards around the world. But in the mid-1970s the OPEC cartel, upset by the West’s defence of Israel, unilaterally increased oil prices and sent inflation through the roof. Economic growth faltered and inflation skyrocketed producing the infamous period of stagflation – inflation combined with unemployment, Keynesian theory said it couldn’t happen. For a time, in Britain, in the late 1970s something approximating a post Keynesian solution was tried – the Social Contract, a prices and incomes policy, trying to regulate the key variables by a kind of corporatist consensus. It failed, and in 1979 Margaret Thatcher was elected. The Keynesian paradigm was unceremoniously replaced by the monetarist one.
In the 1980s, under Reagan, Thatcher and, in Australia, Hawke and Keating, a massive shift towards the so-called free market occurred. Fixed exchange rates were abolished, floating currencies introduced, and responsibility for interest rates was devolved to newly independent central banks. The three pillars of modern capitalism – deregulation, privatisation and globalisation - frequently referred to as the Washington Consensus were pursued vigorously. Historically the ‘free market’ might have been on tap, but now it was unquestionably on top.
By 1983, when the Hawke Labor Government was elected, monetarism was dominant in both Britain and the US. The Hawke government tried to square the circle, introducing the Prices and Incomes Accord which, on the face of it, was similar to the British Social Contract, a system of central corporatist economic planning, but with an economic agenda ‘free market’ to its core.
Historically, the ALP had existed uneasily with ‘free markets’ preferring the so-called mixed economy – a balance of public as well as private enterprise. But now Keating vigorously supported the three capitalist pillars on the untested promise that this would produce higher economic growth and better living standards for all. The Labor Government’s planning system put all of its efforts into structural adjustment policies – palliatives such as industry assistance schemes and redundant worker retraining schemes designed to mask union complicity and to ease the pain of transition to the new deregulated, dynamic economy, until such time as the new system could deliver.
Keating was responsible for two major privatisations – The Commonwealth Bank and Qantas – as well as financial deregulation, welcoming foreign investment banks to Australia with disastrous consequences, floating exchange rates, reductions in tariffs and quotas, and the shift from centralised wage bargaining to enterprise agreements. Keating foreshadowed the independence of the Reserve Bank (RBA), but it was left to Costello to formally confirm in a Statement on the Conduct of Monetary Policy issued in 1996. The independence of the RBA was reiterated and strengthened in a subsequent statement issued by Swan in 2010 on behalf of the Labor Government. The RBA is obliged primarily to adopt policies designed to stabilise the currency and secondarily to achieve full employment. Stabilising the currency has invariably been interpreted to mean controlling inflation, and this goal has without exception taken precedence over the employment objective.
Apparently unaware of the global mobility of multinational capital, Keating subscribed strongly to the idea of comparative advantage as a basis for international trade. He saw Australia as the quarry of Asia. In his Brave New World, there was no place for a manufacturing industry which had been the focus of much of Australia’s post-war growth strategy. Ironically, the Asian Tigers – Hong Kong, Taiwan, Singapore and South Korea, not to mention Japan – which were driving Australia’s minerals and energy export growth at the time, had all but collapsed by the early 1990s. Had China not stepped into the breach, Keating’s economic strategy would have been in tatters, as would Australia. Keating also suggested a consumption tax well before the Liberals, one of the rare occasions Keating was voted down by his cabinet colleagues.
Apparently unaware of the global mobility of multinational capital, Keating subscribed strongly to the idea of comparative advantage as a basis for international trade. He saw Australia as the quarry of Asia. In his Brave New World, there was no place for a manufacturing industry which had been the focus of much of Australia’s post-war growth strategy. Ironically, the Asian Tigers – Hong Kong, Taiwan, Singapore and South Korea, not to mention Japan – which were driving Australia’s minerals and energy export growth at the time, had all but collapsed by the early 1990s. Had China not stepped into the breach, Keating’s economic strategy would have been in tatters, as would Australia. Keating also suggested a consumption tax well before the Liberals, one of the rare occasions Keating was voted down by his cabinet colleagues.
The global financial crisis has almost taken us back to the 1930s. The Washington Consensus is dead. Wall Street is again under fierce pressure to reform. Capitalism like the leopard really doesn’t change its spots. There is an almost universal acknowledgement that markets – especially financial ones – must be regulated. Yet ‘regulation’ remains a dirty word in Australian political economy. The changing international mood finds no reflection in the forums of the Labor Party.
So, what does the Labor Party stand for? The promises given by Hawke and Keating in the 1980s have spectacularly failed to materialise, but in the intervening period we have lost control of interest rates and exchange rates, we have structurally weakened our economy – especially manufacturing, we have lost many of our skilled workers, we have casualised our workforce, and our unions are materially weaker, household debt has replaced real wages as the primary source of consumers expenditure, we have privatised whilst also enviting capitalist corporations into partnerships with government, forgetting that governments are accountable to the poeple, capitalist corporations aren't, members are deserting the Labor Party in droves, and Party thinking continually bounces from one weird proposal to the next.
The Whitlam Dimension
One of the weirdest – a system of primaries designed to give ordinary people a say in party affairs – is interesting in light of Labor history. In the 1960s and early 1970s, Gough Whitlam fought and won a protracted battle against the unions and the left for control of the ALP. For years there had been tension between party officers and parliamentarians, especially in Victoria. Party officers and affiliated unions were concerned to ensure that party programs were implemented by the parliamentary wing irrespective of their popularity, the parliamentary wing instead concerned about their standing in the opinion polls.
The media were fond of describing party and union officials as faceless men, bolstering Whitlam’s campaign to break the power of the Party. Whitlam was successful. But the party officials were anything but faceless men, democratically elected by a then vigorously involved branch membership at various party conferences, controlling party resources, recruiting staff, conducting major research programs, organising pre-selections, and controlling renegade MPs who felt constrained by party discipline. After the Whitlam victory this system was completely dismantled. The job of the party officials, henceforth, was fund raising, public opinion polling and focus groups.
The party was set adrift, its anchor chain snapped. No longer would the party membership and executive exercise policy control and discipline over its parliamentarians. Now MPs were free to do whatever the parliamentary caucus and the cabinet decided. Whereas before the change, caucus factions hadn’t mattered very much since all were subject to external party discipline, now they came sharply to the fore. And ministers from the dominant factions were all powerful – almost warlords. Keating was just such a minister and he frequently road roughshod over party policy. It was more than ironic that just prior to the 1983 election, the party renewed its commitment to socialism.
Whitlam might have thought that he was fighting to free the party from rigid control by doctrinaire left wingers not interested in electoral success. In fact he paved the way for Hawke and Keating’s absolute control, and by a fairly linear progression, the woes of the current Gillard government. So now we have a party caught twice in its own trap 1) the major Keating ‘free market’ agenda of the 1980s has failed catastrophically and the parliamentary leadership can’t find a way out because 2) the party has no centre of gravity outside of parliament since the membership and party officials can’t, don’t, and won’t be allowed to do anything except raise funds and hand out how-to-vote cards on election day.
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