April 22, 2020

Federal politics


By Russell Marks

© Stefan Postles / AAP Images

COVID-19 is shaking conservatives’ commitment to the neoliberal creed

It seems to have been understudied by virologists, but one of COVID-19’s major effects appears to be the way it attacks rigid economic ideologies in human political leaders. Take the Australian case, for instance.

Australia’s economic indicators have been trending generally south since about 2012. Annual GDP growth has never been as high as 3.5 per cent under this conservative government (it had climbed to more than 4.5 per cent under Labor, and reached almost 5.5 per cent under John Howard’s government), and little wonder: first Tony Abbott and Joe Hockey, then Malcolm Turnbull and Scott Morrison, and finally Morrison and Josh Frydenberg had steadfastly refused to borrow money and spend it (while the cost of borrowing was at record lows) for the nonsensical reason that it would mean sending the budget into deficit.

Day after day, week after week, year after monotonous year, Australians were fed a standard line: government budget deficits were bad, because they contributed to government debt and locked future generations into making interest repayments that would mean future hospitals and schools couldn’t be built. The key fact that government debt (which spread risk across a population of 25 million people) was infinitely preferable to private debt (which saddled individuals and households with risky debt instruments that really do need servicing) didn’t enter the equation.

Nor did the fact that private debt has skyrocketed to more than 200 per cent of Australia’s entire GDP – an increase of 85 per cent since the election of the Howard government. This while government debt in Australia has never reached even half of GDP, which compares very favourably with Greece (174 per cent of GDP), the United States (106 per cent), the European Union (84), Britain (86), India (69), China (55) and indeed most other countries. By contrast, Australia’s ratio of private debt to GDP is now among the 20 highest such ratios in the world.

These aren’t just numbers and graphs. As a result of being mortgaged to well above our eyeballs, we’re ominously vulnerable to any downturn in the housing market. By not borrowing, and not spending, Australian governments were retaining artificial and arbitrary caps on all kinds of necessary public spending – on housing, on social security and on infrastructure. Managers of public authorities were judged on their abilities to rein in expenditures (at least on frontline service delivery, if not middle- and executive-level management). Dentistry was kept out of Medicare; homeless numbers swelled as public housing stocks were sold off; public assets were flogged to deliver one-off sugar-hits to bottom lines; and too many Aboriginal people, violently liberated from their economic base – their land – generations ago, were forced to stay in crowded, sub-functional department “houses”.

The emblematic statistic of the whole neoliberal experiment, though, was the Newstart allowance (known as “JobSeeker” since March 2020). Tied to inflation by Howard and Costello in 1997, Newstart had not increased in real terms since 1994. By March this year, virtually the only people who had not accepted that $279.50 a week was impossible to live on (assuming a person needed to pay rent and eat) were on the government benches in parliament. Comparisons showed it was the second-lowest social security payment in the OECD. Even the Business Council of Australia was saying the Newstart payment was so low that recipients were priced out of even making themselves available for work. Yet to receive that pittance, applicants had to jump through an ever-expanding number of bureaucratic hoops, many of which had themselves been privatised to “job network” companies that were allowed to make fortunes with very little accountability.

Then came COVID-19. The full extent to which the virus has been lethal to the conservative cabinet’s commitment to its neoliberal ideology remains to be seen, but nobody can deny it has made inroads. Scott Morrison was never as wedded to the ideology as, say, Peter Costello, a champion of the New Right’s Hayekian cause through the H.R. Nicholls Society, of which he was a founding member and shining light. By the time the prime ministerial hot potato fell into Morrison’s hands in August 2018, his loyalty to the neoliberal creed was probably more a matter of habit and mantra than the kind of active commitment he makes, say, to the Horizon Church. But it was a habit that would take some breaking. Liberals and News Corp Australia had found the ideology too deliciously potent in smashing Labor’s electoral prospects for far too long for a new PM to ever seriously consider throwing it away.

As supermarket shoppers began wrestling each other for toilet rolls, as office workers began demanding to work from home, and as major events began cancelling themselves, on March 13 Morrison convened what he called a national cabinet, made up of himself and the six premiers and two chief ministers. It’s been compared to the war cabinet that met between 1939 and 1946, but it’s really just a more-often COAG that takes advice from health authorities. Over the past seven weeks, the national cabinet has steadily tightened advice on travel, meetings and movement. As the virus began to spread within Australia, state governments converted that advice into enforceable laws. The restrictions appear to be working to limit the spread and manage the sick. Hospitals, which have already pressed “go” on emergency plans to be ready for influxes of coronavirus patients, are still waiting for the influx. Of the 81 countries with more than 1000 confirmed cases of COVID-19 at the time of writing, Australia’s mortality rate of 1.02 per cent (of 6547 cases) is better than 65 of them. It’s certainly a lot healthier than that of the United States (5.5 per cent mortality), or of the UK or Italy (both around 13 per cent).

If the wartime analogy is apt, it’s in the totalising – socialised? – nature of the problem and what the government is doing about it. The Reserve Bank of Australia became the first central bank to respond to COVID-19 by cutting the cash rate; two weeks later it went again, to a new record low of 0.25 per cent. (Tony Abbott’s old promise that interest rates will “always be lower” under a Coalition government has certainly held true.)

But it was the massive stimulus packages – the first worth $17.6 billion, the second $66 billion, and the third $130 billion – that Morrison announced during March that confirmed the wartime analogy like nothing else. While the planks of Australia’s “settlement” were laid around the time of Federation, it was the totalising nature of the 1939–45 war that saw the Commonwealth assume a leadership role over the national economy. The enormous amounts spent by John Curtin’s Labor government to boost production for the war effort had the happy effect of ending unemployment. The spending continued after the war under the policy of “reconstruction” and gave us most of the welfare state we rely on.

It’s the “middle-class welfare” and that directed at the “undeserving” poor that successive governments under the thrall of neoliberal ideology have chipped away at since the 1980s. We’ve now accepted neoliberal theory’s need for an omnipresent pool of unemployed (to keep wages down and inflation low) for so long that unemployment has become a permanent state for generations of the same families and communities. But neoliberal proselytisers have never been able to explain just how rendering whole communities effectively unemployable helps anyone, let alone the national economy.

Is Morrison’s Coalition government restoring the welfare state? So far, most of the measures have a temporary feel, designed to tide businesses over (to prevent them from collapsing, and from sacking their staff). The initial $17.6 billion package included a stimulatory one-off payment to welfare recipients of $750, which recalls the cash windfalls we all got from Kevin Rudd’s government during the global financial crisis.

But it’s the doubling of the JobSeeker payment that is prompting all kinds of hopeful questions. On the one hand, it’s temporary compensation for middle-class workers whose jobs have succumbed to COVID-related shutdowns: in other words, people who “deserve” a helping hand and who couldn’t possibly be asked to live on $279.50 a week. (An effect of doubling the JobSeeker payment is that it’s now worth more than the Disability Support Pension, which hasn’t increased, most likely because middle-class workers don’t suddenly need to access it.) On the other hand, it will be politically difficult for Morrison to drop JobSeeker back to $279.50 in six months, or 12 months, or whenever this is all over. The economy will still need stimulating, and the cost of borrowing will still be very low.

It’s tempting to fantasise about the society that might emerge after COVID-19. Now that we’ve discovered that it’s possible to house the homeless and to allow people enough money to live on, will we choose to make those things priorities? Will we bring dentistry into Medicare to cope with the backlog caused by dental clinic shutdowns? Will we accept the logic of a basic income for everyone, by virtue of their humanity and regardless of their visa status or their capacity to meet increasingly absurd bureaucratic requirements? Or should we expect to return to business as usual, based on a theory that enhances class division and works only for the wealthy?

The virus hasn’t overwhelmed the faith of every adherent to neoliberal ideology, judging by the title of an op-ed by Tom Switzer that ran in Nine’s newspapers recently: “Our liberty and prosperity are in peril if COVID-19 triggers an arms race of compassion”. One might equally take the view that the liberty and prosperity of the great bulk of us are in peril if we persist in placing our faith in an ideology unable to respond to economic threats without being bailed out by an approach that belongs to the theory it replaced. The irony is that Keynesian theory was itself declared terminal when it struggled to respond to the oil shocks of the mid 1970s.

COVID-19’s effects on rigid economic ideologies in human political leaders will continue to be observed over coming months. The results should be fascinating indeed.

Russell Marks

Russell Marks is a lawyer and an adjunct research fellow at La Trobe University. He is the author of Crime and Punishment: Offenders and Victims in a Broken Justice System (Black Inc., 2015). 

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