December 2011 – January 2012


Left behind: why the right keeps winning

By Peter Hartcher
Aussie battlers demand a fair go at the Occupy Melbourne protest, 15 October 2011. © Mal Fairclough / Fairfax Syndication
Aussie battlers demand a fair go at the Occupy Melbourne protest, 15 October 2011. © Mal Fairclough / Fairfax Syndication

Financial capitalism suffered a dreadful collapse in 2008 and the economies of the United States and Europe were devastated. Powerful voices called for the rich to pay more taxes to help rebuild. The odd thing was that the most resonant voices were those of the rich themselves. In the US it was the voice of the multibillionaire investor Warren Buffett; in Australia it was the voice of the wealthy investment banker Mark Carnegie.

It was Carnegie, son of the arch-establishment businessman Sir Rod Carnegie, who emerged as the media star of the Gillard government’s tax forum in October with his call for the wealthiest 15% of income earners to pay 15% more in income tax. “What I am saying is that the economic rents of capitalism are disproportionately cascading towards a smaller and smaller section of the community – of which I happen to be one,” he said on Lateline.

Australia’s budget position is a world away from that of America or Europe, so the need for extra revenue is nowhere near as serious, but Carnegie proposed a longer-run purpose for the money: “Over the next 30 years we are going to find the amount of pressure on the government as a result of the ageing population going up and up, and what I am saying is that now is the time for action in terms of starting a sovereign wealth fund.” This doesn’t make him terribly popular with his social set, as he acknowledged: “It’s like asking turkeys to vote for Christmas.” But he campaigned for it anyway.

Newspapers across Australia carried 49 reports of Carnegie’s proposal, television stations 212, and radio stations another 294, for a national total of 555 reports. What does this tell us about the ability of the political Left to mount an argument, to wage a campaign? Why does it fall to the rich to call for more taxes on themselves? Is redistributive politics utterly dead? Or have the voices of the Left just fallen into a quiescent silence?

“Apart from the Greens, they’ve been muted,” says Bob Brown. So what about the Greens? They have a policy to raise the top marginal tax rate from 45% to 50% on incomes over $1 million per year: it was a policy they took to the last election, and this year they have issued four press releases on the subject.

But nobody heard about it. Media Monitors’ Patrick Baume
says: “I haven’t been able to find a single instance in all of 2011 where they have publicly promoted their policy of increasing the top tax rate.” In the clamour of federal politics and the scrums and rucks of policy and parliament, it’s not enough for a party merely to issue a press release among the hundreds of others that hit the press gallery daily. It’s a diffident way to conduct politics, a bit like the Qantas pilots taking industrial action by doing nothing more than wearing red ties.

Lest anyone hatch conspiracy theories that it’s because of a sinister media plot to censor the Greens, Baume adds: “They have received coverage for calling for increases in the Mineral Resources Rent Tax, a ‘fat tax’ and calling for reduced taxes on small business.”

Does Carnegie get attention because he’s a novelty, perhaps even a political freak, a class traitor or perhaps a masochist? Of course he does. It’s a man-bites-dog story, always more newsworthy than the converse. He’s the son of a knighted capitalist who supports an inheritance tax, a financier who endorses a Tobin tax on wholesale financial transactions. But is this enough to explain the vast discrepancy in media coverage? Why does a man who is no part of any parliament get 555 reports while a party that is a coalition partner in the national government win zero coverage for essentially the same idea?

There is something more going on here. Look at the US. Barack Obama has long proposed taxing high-income earners more heavily. But his push for it was turbocharged by Warren Buffett’s op-ed piece in the New York Times on 14 August.

“Last year my federal tax bill,” wrote the man whose net worth is estimated at $US39 billion, “was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4% of my taxable income – and that’s actually a lower percentage than was paid by any of the other 20 people in our office.” And that included his secretary. “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. [L]egislators in Washington […] feel compelled to protect us, much as if we were spotted owls or some other endangered species.”

A little over a month later, Obama seized on this to propose what his administration dubbed the Buffett rule: that a billionaire shouldn’t pay proportionally less tax than his secretary. Obama proposed that it be enforced by an unspecified higher top marginal income tax rate on the rich. It’s striking that the US president chose not to name the rule after himself but after a billionaire investor. And when the Republicans criticised the proposal as “class warfare”, Obama responded by quoting Ronald Reagan. The Republican party’s greatest hero once said that it was “crazy” that a millionaire could get away with paying no tax at all while a bus driver had to pay 10% of his wage to consolidated revenue.

“This is one of the signs that everything is upside down at the moment,” remarks Dr Robin Archer, an Australian political sociologist at the London School of Economics and author of Why Is There No Labor Party in the United States? “The people who, prima facie, are in the best position to make hay out of the situation politically lack the confidence to pull it off. In the last 30 years, the ideological confidence of the Left has been seriously eroded.”

And in both countries, Australia and the US, national legislatures are impervious to the idea of increasing tax on the wealthy. Without the support of the Australian Labor Party, the Greens cannot hope to win support for their proposal and are not seriously trying.

In the US, the Republicans are using their majority in the lower house to frustrate Obama’s efforts. The Republicans dismiss the idea as ‘socialism’, even though progressive tax scales have always been at the centre of the income tax system in America and in almost every country on Earth.

Surely legislatures resist the idea of increasing the tax burden on the rich because the public is unsympathetic to the idea? On the contrary. In Australia, an ANU poll published in October asked whether tax on high-income earners was too high, about right, or too low. Twenty per cent of respondents said it was too high, 34% about right, and a plurality of 46% said it was too low. In the US, support is stronger. Sixty-seven per cent of voters support the idea of raising the tax rate on those earning over $250,000 a year, according to a poll by the non-partisan Pew Research Center.

Around the world, ordinary people are paying a tremendous price for the failure of financial capitalism in the US, UK and Europe: lost jobs, lost houses, lost pension entitlements, lost government services, lost retirement portfolios, in the greatest economic convulsion since the Great Depression.

But even with broad public sympathy for their causes, left-of-centre political parties, notably in the English-speaking countries, struggle to take advantage of the situation.

The left-leaning parties are uniformly on the defensive, whether they were clearly responsible for the collapse, as British Labour was; whether they were far from the scene of the crime, as New Zealand Labour and the Canadian Liberals were; or whether they came to power only in time to manage the crisis, as the US Democrats and Australian Labor did.

In Australia, the Greens are a party of the Left that has been on the offensive, but four of every five new votes it picked up in the 2010 election were at the expense of Labor. This is a civil war among the Left, not some rampant leftist assault on the conservatives.

Australian Labor is trying desperately to hold the pol­itical centre, and failing. Robin Archer draws a distinction between “centre-seeking” leaders and “preference-shaping” leaders: “Margaret Thatcher was a preference-shaping leader; Tony Blair was a centre-seeking leader. In Australia recently, Labor has been more centre-seeking than normal. At a certain point, this becomes self-defeating because other things can shift the centre voter.”

“If your political opponent is shifting the centre to the right, you consistently have to move to the right to compete. There’s a bit of that going on now with asylum seekers. Tony Abbott is out of power, but he’s the one shaping preferences,” says Archer.

Surely Labor’s situation is unique? Of course, its standing in the polls has been at an all-time low, bumping along at 27–30% of the primary vote for months. The Gillard coup against Rudd, for example, has no precedent as a first-term unseating of a prime minister.

But consider New Zealand Labour: “Ironically, in NZ, Labour is at about the same primary vote as the ALP despite no leadership contest since 1993, no expressed concern about the use of focus groups and no musing on the party’s ‘lost soul’,” observes Stephen Mills, a NZ-based pollster with Labour’s favourite research firm, UMR. And heading into elections the conservative National Party was firmly in power, led by John Key, a former Merrill Lynch investment banker.

The hardest sell must be Britain’s Labour Party, which was in power in the years before and during the global crisis and is squarely responsible. Its leader, Ed Miliband, is trying out a new line to try to shuffle away from the party’s Blairite legacy. In fact, in his address to the Labour annual conference in September he won unanticipated applause when he announced: “I am not Tony Blair.”

Miliband declared that there was a defining difference between two types of capitalism – “predator” or “fast buck” capitalism on one hand, and “productive” capitalism on the other. He acknowledged Labour’s complicity in values-free “fast-buck” capitalism. He promised a new emphasis. The conservatives immediately branded it a lurch to the Left; the Guardian described it as “the most radical analysis of Britain’s plight offered by any Labour leader since 1945”.

The other factor is that the Coalition government led by the Conservatives’ David Cameron is imposing harsh austerity measures. With each passing day, the Coalition is more responsible for the current state of the economy and Labor less. “With pay squeezed, unemployment soaring and inflation resurgent, hard times are well and truly upon us,” the Guardian editorialised in October. “That should open promising territory for Ed Miliband […] the Labour leader’s distinction between predatory and productive capitalism ought to resonate. It is still not doing so, however. Labour’s modest overall lead melts away on the economy.”

And in the US, where the Democrats hold the White House and the Senate, they are nonetheless on the defensive. The Republicans took the House of Representatives in the 2010 midterm elections and Obama is struggling.

Alan Greenspan, the high priest of a laissez-faire financial system in his two decades as chairman of the US Federal Reserve, has confessed that the collapse of the financial system in 2008 left him in “a state of shocked disbelief”. He had “found a flaw” in his ideology, he told a Congressional committee. Yet there is scant evidence of any wider ideological tempering in the Republican Party.

In the race for the Republican nomination for the presidency, the concept of ‘fairness’ is receiving the last rites. The contest is to see who can most convincingly flatten tax scales.

Texas Governor Rick Perry proposes a 20% flat tax rate regardless of income. The former banker and Godfather’s Pizza boss Herman Cain has proposed his signature 9–9–9 formula – a tax rate of 9% on income, retail sales and business transactions. This idea was ridiculed by another Republican contender, former Utah Governor John Huntsman: “When I heard about it I thought it was the price of a pizza.” Yet it catapulted Cain to the top of the approval charts and made him the instant frontrunner. Until the revelation of old sexual harassment accusations, at least.

The effect of Cain’s 9–9–9 plan on Americans? A middle-income earner with an annual $US64,000 to $US110,000 in pay would lose $US4300 per year. But a taxpayer in the top 0.1% of income earners, which means an income of $2.7 million or more, would win a tax cut of $US1.7 million per year. The ordinary wage earner’s effective average tax rate would be 23.7%; the richest would pay only 17.9%.

Herman Cain’s 9–9–9 adds up to a dramatic redistribution of wealth from the poor and middle earners of the US to the rich. Yet so far this is the single most popular and acclaimed idea to emerge from the Republican competition.

And in the first three years after the collapse of the financial system, house prices and jobs market, the only popular grassroots political movement to spring up was the angry right-wing Tea Party movement. Says the president of the Democrat-affiliated Progressive Policy Institute, Will Marshall, who helped craft Bill Clinton’s centrist platform: “There’s a lot of anger in America, anger at Wall Street, anger at speculators who got away with murder, who never paid a price […] There’s bewilderment among liberals that it was the Republicans and not the Democrats who managed to claim the anger of Americans. Democrats look at the Tea Party and scratch their heads – the capitalists screw up and the people turn on government – what is this?”

Marshall has a two-part explanation. One: “It’s a fixed rule of US politics – when times are bad, the incumbents get the blame.” And two: “Obama and the Democrats need a credible plan for recovery. The president has a modest tactical jobs plan but it isn’t a plan for restoring the productive economy. That’s the missing ingredient.”

So the Occupy Wall Street movement is seen as a godsend to the Democrats. Obama has gingerly empathised with its motivations but not its methods or aims. The protests were born of a “broad-based frustration about how our financial system works,” Obama said. Marshall explains why he went no further: “There’s a theory among liberals that we need a counterweight to the Tea Party to stop this lurch to the Right that’s been evident since the 2010 election. But while you do want to tap their energy and anger, you don’t want to endorse alienating creeds.” The president cannot allow himself to be painted as anti-capitalist.

Will the Occupy protest movement prove to be the vanguard of a resurgent Left? “It’s very early to assess the Occupy Wall Street movement – it doesn’t have a great deal of visibility in the US at the moment though people are more positive about their goals and aims than their tactics,” observes Carroll Doherty, a pollster with the Pew Research Center. “It is something to watch.”

And surveying the crowds in the hundreds and the low thousands, Will Marshall is not yet persuaded that it can become a real force in American politics: “I will be impressed when we see 400,000 people on the mall like the marches I used to participate in,” says the veteran of the anti–Vietnam War and counterculture protests of the 1960s and ’70s.

The long arc of economic growth and social stability in the West was supposed to deliver a slow but inexorable demographic bounty to the Left through the rise of ‘post-materialism’. This is the attachment to self-expression and quality of life over the more urgent survival needs of income and physical security. Post-materialists put greater priority on rights in the workplace, beautiful cities and the environment. This is the group that fuels left-of-centre movements such as GetUp! and the Greens.

Professor Ron Inglehart of Michigan University pioneered the measurement of this phenomenon. He explains the latest change: “The logic of post-materialism is that growing up under high levels of economic and physical security is conducive to an intergenerational shift toward post-materialist values.” But, he explains: “The relative economic stagnation and high unemployment that western Europe has experienced during the past two decades has slowed the intergenerational shift in those countries almost to a halt […] In the rest of the world, however, an intergenerational shift toward post-materialist values is starting to take off – particularly in the ex-communist countries and also in China. Australia looks like a west European country in this respect.”

If it’s too soon to tell what the Occupy movement might amount to, it’s far too soon to comprehend the larger meaning of the latest four-year sliver of human experience. Robin Archer sketches two equally plausible alternatives: “In periods of huge exogenous crises – economic crises or wars – everything is thrown up in the air and social protests and political realignments can take place as they did in the 1890s and the 1930s,” both times of severe economic hardship.

Look at the divergent experiences of the US and Europe: “In the US unskilled workers became hugely organised. The Republicans had been dominant until Franklin Delano Roosevelt came in with his New Deal,” creating a whole new structure of rights for working people. “In Europe, national and ethnic and racial identities [after World War I] became more powerful and people read their insecurities that way.” The rise of fascism was the result. In both cases, there was a delay of years before the new forces took shape.

“This is another moment of potential realignment as new forces emerge,” says Archer. “The question is: what are they?” It is too early to know, but the meekness, aimlessness and ideological irresolution of the parties of the Left suggest that they have no idea.           


Watch an interview with Peter Hartcher on SlowTV.

Peter Hartcher
Peter Hartcher is a Gold Walkley Award–winning journalist and a Visiting Fellow at the Lowy Institute. His books include To the Bitter End, Bubble Man and The Sweet Spot.

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