December 2015 - January 2016

Arts & Letters

Ideas disguised as history

By Andrew Charlton

Treasurer Paul Keating and Prime Minister Bob Hawke on the set of The Midday Show in Sydney, 21 August 1989. © Ross Duncan/Newspix

Chris Bowen’s ‘The Money Men’ and the ideal treasurer

Young politicians write books about ideas; old politicians write histories. In the twilight of their careers, when their passion for politics is no longer absorbed by active service, many former ministers channel their energy into musty biographies or nostalgic memoirs. But Labor’s Chris Bowen is a young man, which raises the question: why has the shadow treasurer written a history book?

The answer is that The Money Men (Melbourne University Press; $34.99) is a book of ideas disguised as a book of history. Bowen purports to review the successes and failures of Australia’s most notable treasurers. But it’s clear from the first page that his walk through the halls of the past has a purpose. Bowen, who was treasurer during the second Rudd government, is searching for markers to help him chart a course for the future.

“I’ve learnt things writing this book that will make me a better treasurer should I receive the honour of serving in the post again,” Bowen writes in his introduction. This statement reveals a receptive, autodidactic and quietly ambitious politician. Bowen is seeking office to do something rather than to be someone.

The Money Men is structured as a meta-biography covering the lives and careers of 12 notable Australian treasurers in as many chapters. Bowen weaves together a twinkling bower of political vignettes and biographical sketches, and each chapter adds a new layer of detail to his stylised portrait of what a successful Australian treasurer should be.

In his chapter on William Watt, treasurer from March 1918 to July 1920, Bowen shares a series of increasingly vexed telegram exchanges between Watt and Prime Minister Billy Hughes. During much of Watt and Hughes’ two-year partnership, Hughes was in Europe as a gadfly at the postwar peace conference; he left Watt with responsibility for domestic affairs, but was constantly meddling and undermining the treasurer’s authority. On the points of substance in their disputes, Bowen clearly sides with the capable and principled Watt over his notoriously obstinate boss. But for Bowen, the merits of their positions are beside the point. His lesson is that a successful partnership with the prime minister is essential to the success of the treasurer. Whatever his circumstances, Watt could not work with Hughes and so failed as treasurer. The weakness of that crucial relationship, in Bowen’s view, is also the reason why John Howard was not a successful treasurer in the Fraser government.

Bowen’s second lesson is that knowledge is more important than qualifications. It is striking how many of Australia’s best treasurers came from modest beginnings. Many were self-taught, including two of the most talented, Paul Keating and Depression-era treasurer Ted Theodore, who left school at 15 and 12 respectively. Ben Chifley and Arthur Fadden diligently attended night classes while making their way in the workforce. As a young backbencher studying for an economics degree, Bill Hayden eschewed socialising with colleagues to burn the midnight oil in the parliamentary library.

Bowen also emphasises the relationship with the treasury department, arguing that successful treasurers should be neither dismissive of their bureaucrats nor captive to them. Bowen shows that a breakdown of trust with the Treasury was a factor in the chaos of the Whitlam government, until Bill Hayden replaced Jim Cairns and restored the relationship.

Bowen explicitly focuses on these points of process and style. But the most interesting parts of the book are where Bowen’s narrative reveals his sympathies on policy substance. This is surely Bowen’s biggest challenge. In the previous generation, the political landscape moved decisively to the right on economic issues. The sunlit plains of socialism fell into a long shadow of doubt. Bowen has ascended to be Labor’s chief economic thinker at a time when centre-left leaders around the world are struggling to articulate a compelling new economic narrative.

This centre-left is now also under pressure from a recent resurgence of the hard-left in many countries. British Labour has been seized by the grizzled socialist veteran Jeremy Corbyn. Bernie Sanders is mounting a surprisingly successful challenge to Hillary Clinton’s presumed nomination as the Democratic presidential candidate. Syriza has recorded two decisive election victories in Greece.

Bowen’s book is a reminder that the wrestle for the soul of social-democratic parties is now more vigorous than ever. The Money Men isn’t a policy manifesto, but its themes give us a deep insight into how Australian Labor might respond to what political website Vox has called the rise of the “resurgent, unapologetic left”.

Throughout the book, Bowen subtly shows his colours by praising the treasurers who have sought to reform and modernise the economy rather above those who tried to shelter and socialise it.

Bowen favourably reviews Keating’s legacy of reform, anointing him our greatest treasurer. According to Bowen, Keating “refocused Labor’s attention on outcomes as opposed to methods, arguing that economic growth, buttressed by strong social safety nets, was a more effective way of achieving Labor’s objectives than the old-style focus on government controls and ownership”.

Bowen also expresses admiration for Ted Theodore: his efforts to reject the economic nationalism of NSW premier Jack Lang (who had attempted to repudiate the state’s debt), his plan to establish a central bank (at the time the government-owned Commonwealth Bank acted as both a trading bank and a reserve bank) and especially his prescience in pushing for proto-Keynesian policies to alleviate the Depression. Despite Bowen’s excoriation of Jim Cairns’ period as treasurer, he gives Cairns credit for working with Gough Whitlam on the 25% tariff cut, “the biggest blow to inefficient protectionism in Australia’s history”, as well as for forging trade links with China.

While Bowen appreciates the successful reforms of the past, he is careful not to be nostalgic. Australian centre-left economic leaders need to break out of the spell of the Keating era and think beyond his liberalising reform agenda. As the American economist Hyman Minsky said, those who long for the lost reform era must recognise that “economies evolve, and so, too, must economic policy”.

In recent years, the Australian reform agenda has become tired. It is a merry-go-round with only three horses: industrial relations, superannuation and the GST. As former Reserve Bank economist Jamie Hall wrote recently for the Monthly, “every year we spend futzing around with tax rates and IR changes is another year stuck in the mud”.

Australia is in need of new economic thinking. That is not to say older ideas should be discarded. New thinking should stand on the shoulders of the best ideas of the past, extending and developing them to address new challenges and harness new opportunities.

Bowen and Bill Shorten have made it plain that the next Labor government will champion entrepreneurialism and innovation to drive economic growth. This was a great differentiator against Tony Abbott. But now Prime Minister Malcolm Turnbull is also talking big on similar themes. With this agenda, Turnbull’s tanks are on Labor’s lawn.

It is yet to be seen how either party will act on this rhetoric. The work of Italian-American economist Mariana Mazzucato has shown that governments have played a crucial role in spurring innovation and revolutionary technological change. The clustering of engineering talent and venture capital in favourable policy environments has been a vital ingredient in the heady growth of American tech giants like Google, Facebook and Uber.

But interventionist industrial policy – whether cloaked in the language of innovation or not – has always been challenging to put into practice. The fat finger of the state can do more harm than good when poked into the delicate ecosystem of entrepreneurship. Policies designed to support successful innovation and research can often end up subsidising the status quo. There is also the risk that entrepreneurial economies may exacerbate inequality.

A successful entrepreneurial agenda must ensure that innovation benefits more than just a few. It must implement policies that do not naively fund a series of failed moonshots or succumb to incumbent rent-seekers. Whichever party can shape its rhetoric on innovation into a credible long-term growth platform is likely to dominate the economic debate ahead.

Bowen mentions that five treasurers have held the job more than once. Whether he can now provide the new ideas Australia needs will largely decide if he becomes the sixth. This intelligent and insightful book is a positive sign in that regard.

Andrew Charlton

Andrew Charlton is the author of Ozonomics and Fair Trade for All (with Joseph Stiglitz) and two Quarterly Essays, ‘Man-Made World’ and ‘Dragon’s Tail’. From 2008 to 2010 he was senior economic adviser to Prime Minister Kevin Rudd. He is co-founder of the strategic advisory business AlphaBeta.

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