December 2016 – January 2017


Andrew Charlton and Lachlan Harris

A pox on both your houses

Pauline Hanson. © Greg Wood / AFP / Getty Images

How can the major parties address the rise of populism in Australia?

Anyone who thinks the Donald Trump phenomenon could never happen in Australia should spend some time in Townsville. During the resources boom, the hard-bitten capital of northern Queensland thrived as the epicentre of the fly-in fly-out economy. Commuters in hi-vis flooded the airport, and flash utes choked the Bruce Highway in and out of town.

But over the past few years, Townsville has been caught in a downdraft of falling commodity prices and a deflating property bubble. Hundreds of local businesses closed. Thousands of people left town as unemployment jumped into double digits. The city begged state and federal governments for a financial rescue package. “We need to see action, not words,” pleaded Mayor Jenny Hill a few months before the 2016 federal election. “There’s been sweet bugger all for the north, especially Townsville.”

That election, predictably in the circumstances, was an earthquake for the Liberal National Party (LNP) in Townsville. The popular local member for Herbert, Ewen Jones, was turfed out with a whopping 7.8% swing against him, losing almost 7000 voters in three years.* But here’s the remarkable thing: fewer than 1000 of those voters switched to Labor. In fact, Labor only achieved a measly 1% primary swing and relied on a wave of preferences to win the seat.

Where did all the Townsville LNP votes go, if not to Labor? Family First more than doubled its vote to 3.6%, the Greens vote jumped to 6.3%, Katter’s Australian Party won 6.9% and Pauline Hanson’s One Nation candidate seized a staggering 13.5% of first preferences. Overall, the minor party vote in the electorate skyrocketed by more than 25%.

The repudiation of major parties extended well beyond Townsville. In the neighbouring electorate, longstanding independent Bob Katter won a massive 10.5% swing. At the other end of the country (and the political spectrum), the Greens secured a 9.6% swing in the northern suburbs of Melbourne and came within an inch of snatching the formerly rock-solid Labor seat of Batman. In the leafy suburbs of the Adelaide Hills, 35% of voters gave their first preference to the Nick Xenophon Team candidate, wrenching the previously safe seat of Mayo from the hands of the Liberal Party for the first time in its history. Across the nation as a whole, the Liberal and National parties lost a total of 475,000 first-preference votes. Labor won 182,000 of these votes, but the undeclared winner of the 2016 election was the minor parties, which gained 293,000 votes and won a record 23.3% of the primary vote in the House of Representatives.*

Minor parties had even more success in the Senate, where they snared a record 20 seats: nine for the Greens, four for Hanson’s One Nation, three for Nick Xenophon Team and four for singleton senators Derryn Hinch, Jacqui Lambie, David Leyonhjelm and Bob Day. In the past ten elections, the Senate vote for minor parties has grown from just 7% to 35%. The upwards trend is consistent whether you include the centrist Australian Democrats or not.

The dramatic growth of minor parties represents a seismic structural shift in Australian politics. And one that the major parties have so far failed to fully appreciate. Malcolm Turnbull blamed the swelling ranks of minor-party senators on the backroom machinations of so-called “preference whisperers” and sought to kill them off by changing the Senate voting rules before the recent election. His plan failed because he, and others, overlooked the most important reason for the rise of the minor parties: people are voting for them.

In almost every part of the world, populists are overturning establishment politics with fiery rhetoric and incendiary manifestos. President-elect Donald Trump and Bernie Sanders in the US, Nigel Farage and Jeremy Corbyn in the UK, Marine Le Pen’s Front National in France, Spain’s Podemos, Italy’s Five Star Movement, Alternative for Germany, the Danish People’s Party and other populist parties have secured staggering growth in their support bases, and many have snatched political victories that would have been unthinkable just a few years ago.

Australia is not immune from this global populist uprising. In fact, it is already upon us, albeit in a uniquely Australian form. Instead of embodying a political Godzilla like Donald Trump, Australian populism is manifesting itself through the rejection of establishment politics and the embrace of a raft of minor parties that are connected – in both style and substance – to the rebellion against centrist parties occurring across the globe.

Australian minor parties adhere to many of the same inchoate themes that have animated populists everywhere: inequality, environmentalism, nationalism, immigration and fear of the effects of trade. Pauline Hanson’s playbook of heavy nationalism and light xenophobia bears more than a passing resemblance to those of Marine Le Pen and the UK Independence Party’s Nigel Farage. Clive Palmer at his peak shared more than a little of Donald Trump’s billionaire bluster. David Leyonhjelm’s evangelism for small government, low taxation and libertarian values is something of a poor man’s Tea Party.

But these are ultimately superficial similarities. The factor that really unites populists around the world, including in Australia, isn’t an idea. It’s a sentiment. And that sentiment is disempowerment.

Everyone has an image in their mind of what a Trump supporter looks like: white, middle-aged, uneducated, lower income. Trump is the NASCAR candidate. Except that he’s not. RAND’s 2016 Presidential Election Panel Survey looked at all the factors that unite Trump supporters. The survey showed that Trump’s base is remarkably diverse, spanning both very high- and low-income voters to capture an election-winning coalition. But one survey response was overwhelmingly common. Republican voters who agreed with the statement “people like me don’t have a say about what the government does” were 86.5% more likely to favour Trump than his rivals in the primaries. Trump spoke directly to these voters on election night, promising that “the forgotten men and women of our country will be forgotten no longer”.

Australian populists tap into this same vein of disempowerment and share the same hostility towards establishment insiders. Bob Katter’s advertisement during the 2016 campaign depicted him blowing the smoke off a smouldering gun barrel after shooting two members of the LNP and the Labor Party dead. Both sides of politics called for Katter to resign over the tasteless ad. Instead he stayed and significantly increased his primary vote. Pauline Hanson rails against the political correctness of “the establishment”. Nick Xenophon vividly accuses the major parties of being like “the Coles and Woolworths duopoly”. The front page of Jacqui Lambie’s website welcomes visitors with a simple message: “I’m an average Australian just like you.”

What is causing millions of people to feel so disempowered that they are willing to kick sand in the faces of mainstream leaders and instead make tribunes of Trump, Sanders, Farage, Le Pen and, here at home, Hanson and Xenophon?

The way you answer that question depends on where you get your news. If you’re the kind of person who reads the Guardian, follows Paul Krugman on Twitter and watches CNN, you’ll probably blame populism on growing inequality. The popular left-wing view is that we are witnessing a rebellion by “globalisation’s losers”, who haven’t shared in the prosperity of the past 25 years. Populism is said to be a response to the failure of corporate institutions – especially the culture of Wall Street in the US and, to a lesser extent, the big banks in Australia – that have managed the capitalist system to benefit themselves at the expense of ordinary people.

You might have a different view if you listen to talkback radio, read the Murdoch press, watch Fox News and have a penchant for conservative blogs. The right believe populism is a reaction to the century-long erosion of society’s pillars: families, communities, schools and churches. The encroaching arm of government has led to lost jobs, lost wars, broken neighbourhoods and diminished freedoms. Trump and Brexit are a frustrated reaction to the loss of identity, culture, safety and morality by citizens who value their flags, their Bibles and their guns.

The rise of populism is the ultimate political Rorschach test. Every commentator sees a pattern that serves their world view.

Do we need to choose between these explanations? Probably not. Populism has no requirement for policy or ideological coherence. It is powerful because it can attract adherents aggravated by a kaleidoscope of gripes, from inequality and immigration to political correctness.

But none of these issues is particularly new. So what is causing them to fuel an extraordinary outbreak of populism now?

One explanation is that Trump and his ilk are an aberration – a fleeting political fever that will eventually pass as sense prevails and normal politics resumes. But this would be to underestimate populism. The point that most politicians are missing is that populism represents something deeper, a phenomenon that cannot be dismissed lightly and isn’t beaten easily.

Populist movements are a blinking warning light for democracy. They are a bright symbol that something fundamental is wrong, or that a prevailing world view is breaking down. Historically, periods of populism haven’t occurred at random. Populism flares up predictably during interregnums, those tumultuous gaps after an old regime has collapsed and before the new order is born. The interwar turmoil of the Depression spawned the nationalism, racism and extremism of the European populists, including Germany’s National Socialists, Belgium’s Rexists, Spain’s Falange and the Swiss National Front.

These interregnums are often precipitated by economic crises that undermine confidence in the existing political and economic order. The University of Munich’s Christoph Trebesch studied the political fallout from economic crises over the past 140 years across more than 800 general elections in 20 countries. He found that populism surges after systemic financial crises. Extreme right-wing parties exhibit the strongest gains, increasing their vote share by 30% on average. For example, the Scandinavian financial crises in the 1990s led to significant electoral gains for populist parties including the Progress Party in Denmark and Norway and New Democracy in Sweden.

Trump, Sanders, Corbyn, Farage, Le Pen and others have all capitalised on the pain of the global financial crisis and the slow economic recovery that followed it. Their brand of populism has fed on the breakdown of trust in the existing economic and political systems.

Specifically, the crisis eroded the faith that many Americans had in the power of globalisation and free markets to deliver economic security. This disillusionment gives oxygen to alternative views, however crazy they might be. Donald Trump’s economic plan for a system of discretionary punitive tariffs against countries that “are taking our money” and companies that “ship jobs offshore” is probably a recipe for disaster, with the single saving grace that it would be almost impossible to implement. Many of Trump’s supporters might be suspicious; some of them might even know his proposals are, to borrow the straight-talking folksiness of Joe Biden, “a bunch of malarkey”. Ditto Trump’s plans to build a wall along the border with Mexico, deport 11 million immigrants and crush ISIS with a secret plan.

Yet American voters brought him to power despite his sketchy plans and policy inconsistencies. They have a strong sense that, however far-fetched Trump’s alternative might be, what they have now just isn’t working, so they may as well take a chance.

In the 44th Parliament, the Coalition government made clear its disdain for Jacqui Lambie, Glenn Lazarus, Bob Day, Dio Wang and the other Senate crossbenchers. They were a nuisance. Behind closed doors, ministers derisively referred to the eccentric group as the “Star Wars bar”.

But understood as a part of a global tide of populism, the dramatic shift in voter support from major to minor parties in Australia is not merely an irritant for the incumbent government. It is a major threat – perhaps the major threat – to our system of government.

Since Federation, majority government has been sandbagged in Australia by our system of single-member electorates, which has limited the presence of minor parties in the lower house. For example, in the 2016 election minor parties and independents won 23% of the vote but just 3% of the seats in the House of Representatives.

Despite winning only five lower house seats, the minor parties and independents came incredibly close to breaching the electoral levees around the major parties. The threat of a hung parliament was the subject of intense media speculation as the votes were being counted. What few people realise is just how close we came to having not only a hung parliament but also the largest lower house crossbench in more than 70 years. A close examination of results in the electorates of Grey, Barker, Wills and Batman shows that if fewer than 12,000 votes had switched to the requisite minor party in these four seats, the election would have delivered a hung parliament in both houses, with a crossbench of nine in the House of Representatives and 20 in the Senate. In electoral terms this is a minuscule swing that would have had an enormous impact. Beyond these four knife-edge lower house seats, there is another rung of vulnerable seats, like Sturt in South Australia and Melbourne Ports in Victoria, and a clutch of seats in Queensland that could fall to the minor parties if the minor major swing is on.

If the trend of rising support for minority parties grows, and given the durability of the long-term trend there are good reasons to expect it will, Australian politics could change fundamentally over the next two or three elections. One potential outcome is that the major parties could be forced into governing coalitions with smaller, more extreme parties – Labor with the Greens and the Coalition with One Nation – for the purpose of securing an elusive majority (the German model). Alternatively, Labor or the Coalition could go rogue, and transform into populists themselves (the Trump and Corbyn model). Another possibility is that one or both major parties could simply cease to exist as governing parties, overcome by the political power of populism (the Greek model). Or, the major parties could govern together in a tacit power-sharing arrangement forced on them by the sheer size, and lunacy, of the populist crossbench (the Irish model).

If the populist trend persists, all of these outcomes are real possibilities. It is impossible to predict which path Australia may take, but it seems increasingly likely that the future of Australian politics may be vastly different to the past.

So what can the political establishment do to fight back against the rise of populism around the world? And what must the Liberal and Labor parties do in Australia?

For a start, both sides must recognise the reality of their new circumstances: they are now in a two-front war. The traditional left–right battle rages on, but both sides are also fighting a guerrilla army of populists on their flanks.

To ensure they can fight effectively on two fronts, major parties will need to transform themselves in three ways: by rebuilding their structures, refocusing their policy agendas, and radicalising their political strategies.

First, major political parties will need to adapt their structures in ways that build respect, trust, authenticity, conviction and participation. Specifically, the elements of machine politics that have contributed to their thinning membership, narrow policy development and weakening community links have left them vulnerable to insurgent populists. The era of hyper-centralised policy-making, controlled preselections, leadership instability, divvying out of political favours, and dubious donations must come to an end, because these features of major-party politics are the source of public disempowerment that is fuelling the populists.

Machine politics didn’t need to worry about its disconnection from the public when massive barriers to entry prevented the emergence of new political forces. But those barriers have collapsed. Around the world, the era of political loyalty defined by institutional fidelity to church, club and party is falling away, and being replaced by an era defined by Facebook, where connections are fickle, fashions are fleeting and allegiances are fluid. Donald Trump launched a national movement from a platform of reality television, the Tea Party built an empire within the US Republican Party through conservative blogs, and little-known Jeremy Corbyn became the unlikely leader of Britain’s Labour Party through a remarkable social media campaign.

According to one Labour MP, the party’s collapse into the abyss of Corbyn populism can be directly attributed to its organisational decay. “Labour lost that emotional power of our political project,” Jon Cruddas said in 2015. “So we became transactional, instrumentalist, remote, managerial, technocratic, blah, blah, blah.” Without an empowering structure, membership dwindled, there were fewer new ideas, and the centre ground became stale. “The Corbyn phenomenon did not represent a resurgence of interest in the Labour party,” warned British journalist Janet Daley, “it represented a collapse of interest in it.” The vacuum in the centre was filled by a well-organised minority on the far left. Cruddas says the Blairites “woke up to find a party that has totally disappeared in front of them. They don’t know what to do.”

Politicians love telling businesses they need to innovate and to embrace change in order to keep up with the times, but unfortunately major parties are failing to take their own advice. Their machine structures have disenfranchised too many members and disillusioned too many voters. As a result, the parties have left themselves wide open to disruption by nimbler, more agile and more connected political insurgents.

Second, in addition to renovating their structures, major political parties must fight populism by refocusing their policy agendas. Populists across the globe are using immigration and free trade as simple, understandable scapegoats for legitimate grievances. To counter the appeal of these deeply misleading, but also deeply effective, scare campaigns, established political parties must focus their manifestos on the underlying causes of economic dissatisfaction: stagnant incomes, rising inequality, falling economic mobility, and flagrant tax avoidance by the richest individuals and corporations.

Developing a coherent economic framework will be hardest for major parties in the centre-left, which have struggled to articulate a convincing economic narrative since the triumph of the market economy in the 1980s. There has hardly been a centre-left leader anywhere in the world in more than 30 years who could look down the barrel of a TV camera and deliver a simple, compelling explanation of what a progressive economic policy means in the 21st century. Those who try usually either reheat some pale socialist rhetoric or appropriate a moderate form of neoliberalism, or create an awkward mixture of the two.

On the campaign trail in October, Hillary Clinton recognised the economic challenge facing social democrats. “We have been fighting out elections in general on a lot of noneconomic issues over the past thirty years,” she said in a magazine interview, citing the perennial progressive social issues, plus welfare, crime and the Iraq war. “Sometimes we win, sometimes we lose, but we haven’t had a coherent, compelling economic case that needs to be made in order to lay down a foundation on which to both conduct politics and do policy.”

What we do know is that any major-party economic policy that has a hope against populism must respect the distinction between economic growth and fairly distributed income growth. Promoting economic growth, the mainstay of political campaigning in most advanced economies for the past 50 years, is no longer enough. Any mainstream policy agenda that is not specifically focused on delivering fairly distributed income growth is likely to be overwhelmed by the empathetic appeal of political populism.

The UK Brexit referendum provides a stark example of what can go wrong when this distinction is misunderstood. Sir Craig Oliver, David Cameron’s communications director and a chief architect of the Remain campaign, recently explained the surprise loss this way: “We put all our chips on economic risk trumping all other arguments and actually what happened was that immigration became much stronger as an issue.” Dig into this statement and you can see the central failure of the Remain campaign. The political establishment believed voters could still be swayed by the promise of economic dividends from global integration. But voters in northern England, ravaged by decades of economic decline and low wage growth, saw a distinction between economic growth and their own income growth. They may, or may not, accept that globalisation brings economic growth, but they have long since given up on the expectation that it will trickle down to them. As a result, the Remain campaign’s “economic risk” argument had little resonance.

Major parties must develop a policy agenda that promotes both economic growth and broad-based income growth. They must aim to create an inclusive economy where there is work for all, where tax is paid by all, where incomes rise, where unnecessary instability is avoided and mobility is facilitated. A policy agenda focused on these objectives would go a long way to addressing the root cause of populism. Bill Clinton’s motto was “It’s the economy, stupid,” but future leaders will need to adopt a new mantra: “It’s the economic distribution, stupid.”

The third agenda item for major parties fighting populism is the need to adapt their political strategy. Around the world, most established parties are taking one of two strategies against populism – and both are failing.

Some are trying to copy the populists. This is the Corbyn, Sanders and Trump strategy – all of whom tried to convert major political parties into populist movements. François Hollande drew from this strategy to win a thumping victory in the 2012 French presidential election, via a radical left-wing manifesto that included massive new taxes for the rich, a levy on bank profits, caps on executive bonuses and a tax on financial transactions.

But the problem for major parties adopting the populist strategy is that their policies are policies of protest, not policies for government. They simply don’t work. Two years later, with a floundering economy, Hollande dumped most of his left-wing agenda and shifted dramatically to the right, embracing supply-side reforms, offering huge company tax breaks and introducing labour-law reforms that made it easier to sack workers. In October, Hollande’s personal approval rating plunged to just 4% – the lowest ever recorded. By embracing left-wing populist ideas and carrying them into government, he has decimated the credibility of the French left.

The same goes for Greece’s proto-communist Syriza party, which swept to power in early 2015 with the most radical left-wing manifesto ever seen in Western Europe. The party led a historic rejection of the prevailing economic orthodoxy of austerity through the OXI campaign, only to make a U-turn immediately thereafter. In government Syriza has implemented many of the austerity policies it railed against and has quietly morphed into a tame partner of international financial institutions.

The other political option for major parties – and the most familiar in Australia – is the small-target strategy. Australian politics lends itself to incrementalism because compulsory voting means that elections are won by capturing precious inches of the political centre ground. Australia’s two-party system has reinforced the moderate, low-risk political strategies of our leaders.

But traditional moderate politicians have struggled to compete when they find themselves fighting a two-front battle involving populists who flood the news cycle with white noise. Jeb Bush’s centrist message was completely drowned out by Donald Trump’s media dominance. Similarly the Remain campaign’s arguments were barely audible over the barnstorming rhetoric of Nigel Farage and Boris Johnson.

In order to withstand the surge of populism, the major parties in Australia must embrace more radical political strategies. This radicalisation does not mean that major parties should take on the extremist ideas of the populists themselves. They must remain committed to the standards of policy rigour and credibility that have guided both of them for most of their respective histories. Jettisoning these standards now, and embracing the wacky world of populism in the pursuit of short-term political survival, will be not only deeply counterproductive for the major parties but also deeply unfortunate for the country. Major parties will need to focus on delivering significant structural reforms that may be opposed by powerful vested interests. If they are not willing, or not able, to take political risks and pick political fights, they simply won’t be heard.

In this regard, there are some positive signs from both sides of Australian politics. In the 2016 election, Labor put forward a policy to wind back the tax concessions for negative gearing, and the Liberals proposed changes to improve the fairness of the superannuation system. These policies meet two of the criteria set out above: they are both radical (at least by the tame standards of Australian politics) and both focused on delivering fairly distributed income growth. In the current political climate this is a rare combination, and we shouldn’t miss the significance of the relative political success of these two policies in the context of the rapid rise of political populism. They are examples of policies that could be broadened, and repurposed, into a politically effective economic policy agenda – an agenda bold enough to cut through to disillusioned voters tempted by populists and credible enough to substantively address the economic conditions that promote the appeal of populism in the first place.

Bohlevale State School is a small, 800-pupil public primary school just off the Bruce Highway 20 minutes north of Townsville. It serves the home-and-land-package young families of tradies, drivers and miners that flocked to Townsville’s northern suburbs during the mining boom. The school looks directly across to the railway line that once carried the long chains of rusty commodity hopper cars to Clive Palmer’s Queensland Nickel refinery, where many of the local residents worked until it shut down a year ago.

In the suburbs around Bohlevale State School, people are three times less likely to have parents born overseas than in the rest of the country and 50% less likely to have tertiary qualifications. Incomes are falling and unemployment is rising. Based purely on demographics, if Bohlevale were in the US, it would be Trump country.

On Election Day 2016, the school hosted a polling booth where 2435 voters cast a ballot. Only 1359 of these voters gave their first preference to the Labor Party or the LNP. The rest, just under 45% of voters, chose a minor party (mostly Hanson, Katter, Lazarus, Greens) or voted informally. In Bohlevale, political dissatisfaction turned into a full-blown populist political landslide.

Most Australians watched with horror this year as millions of Americans were suddenly drawn to a blustering strongman who upended conventions, traded in racism and misogyny, and thrived on fraudulent promises. The lone consolation in this rampage was the relief that, as bad as Australian politics can become, we haven’t yet seen his ilk on our political shores.

That thinking is probably wrong or at least dangerously complacent. We are already witnessing vast swathes of the Australian public reject long-established institutions and power structures. If this populist groundswell is allowed to run unchecked in Australia, it could gather enough momentum to shift our place in the world, as Brexit did for Britain, or rupture the tensile meniscus around our multicultural society, as Le Pen has done in France, or upend our support for the principle of open markets, as Sanders and Trump did in the US.

The good news is that the populist wave is arriving later in Australia than it has in the rest of the world, and is arriving more slowly, giving both major parties a real chance to reform their structures, reshape their policy agendas, and refocus their political strategies to more effectively buttress against the storm.

* Votes are adjusted for change in the voting population between 2013 and 2016.

Andrew Charlton and Lachlan Harris

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 a co-founder of the strategic advisory business AlphaBeta.

Lachlan Harris is a co-founder and the CEO of One Big Switch, and he was senior press secretary to Prime Minister Kevin Rudd.

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