The failures of neoliberalism are becoming widely recognised, yet more than one response to my recent urging to reclaim the fair go was yes, but what can we do? What would a better approach look like?
Some argue for a return to social democratic approaches, and they would certainly be better than neoliberalism. The alleged failure of social democracy is a neoliberal misrepresentation.
Yet we need to go beyond post-war policies. The banking system needs major reform and we must urgently begin to reduce our heavy footprint on an over-stressed land and planet. The high cost of high immigration rates needs to be recognised.
Here is a list of policies that illustrate a better approach. They will not be enough on their own, but they would be a good start. They might seem radical to young, modern eyes, but we used to do many of them, and the others do not involve great disruption.
Even so, this is not about politics as usual. It is about things we desperately need and the sorts of things many people already want, as evidenced by the popularity of Bernie Sanders in the US and Jeremy Corbyn in the UK, and by the work of social researchers like Richard Eckersley.
First, some general principles.
• Govern explicitly for the well being of everyone, not for endless growth of any and all activities involving money, however useless or harmful (the implicit goal of a growing GDP).
• The federal budget is fundamentally different from a household budget. The federal government cannot go broke, because it controls the issue of money.
• Markets need to be managed – free-market theory is irrelevant, abstract nonsense.
• Government has an essential role, to manage society according to the wishes of the people. It needs to be valued and its functioning improved.
The following policy suggestions are in no particular order, because everything is related and anyway it’s hard to know where to begin, there is so much needing attention. The context and rationale of these ideas is provided by my recent book, Desperately Seeking the Fair Go.
Reframe the “budget deficit” mantra. (1) All money is debt; government spending underpins the supply of money to the economy, so it is not just debt, it provides the medium of exchange. (2) Government spending also underpins private saving. There’s a theorem: the net surpluses of the private sector, the public sector and the foreign sector sum to zero. Private saving requires a deficit in one or both of the other sectors. (3) Austerity slows the economy.
Separate capital expenditure from recurrent. Ok so it’s not simple and can still be manipulated, but the merging of the two allowed Paul Keating to sell off the silverware and claim he was balancing the budget, and it allows the radical right to claim any sensible investment in infrastructure will leave a black hole of debt. Bob Menzies did not agree.
Get purchasing power back into the hands of people, so they will spend it usefully (rather than on unproductive speculation) and so they will be less terrified of “great big new taxes on everything”. Raise the minimum wage, raise taxes on the wealthy and on unproductive and harmful activities. Work to remove the many rorts that have been built into the system to pump wealth to the wealthy.
Explain the deal clearly to people, e.g. we’ll see Jo Average gets a better wage and we’ll feed carbon fees back to those who struggle the most to pay their bills, so their house can be insulated and they’ll be no worse off financially; most other people won’t notice a huge difference; you can avoid the carbon charges if you make your house energy-efficient (that’s the point). Helping the poor to insulate is an excellent investment. Gross mismanagement of our balkanised energy system is already costing us far more than the poor old carbon price.
Explain to the Business Council of Australia that if all the bosses lower wages then the economy will slow. Each boss’s narrow interest is actually to pay his employees less and to have other bosses pay their employees more, so the latter can afford his products. The Henry Ford logic. It’s a classic market failure, where an unregulated market generates a race to the bottom that hurts everyone.
Stop the multi-billion dollar subsidies of fossil fuels, immediately. We’re paying extra to trash our land and planet. Ban all fracking, it is permanently damaging aquifers and much good land.
Emulate the highly successful German model to promote clean, decentralised energy generation.
Buy back the electrical grid and set about modernising it for the new reality – distributed generation and storage (small to medium scale, off-river pumped hydro looking very promising). Stop pointlessly going on about “base load” – demand fluctuates, so fluctuating supply is not a great drama, especially with flexible storage.
Set up a national bank to undercut profiteering and manipulation by the private banks. You could call it Commonwealth Bank. Oh. Yeah.
Buy back Qantas. It is not central to the economy, but it would be a powerful symbol. People don’t like seeing a national icon trashed, and they want it back.
Buy back Telstra (longer term?). If we still owned it we might have a proper NBN by now.
Stop invading countries we have no business with. That, not the Lord High Herr Dutton, will do the most to stop terrorism. Dismantle the surveillance state.
Stop committing crimes against humanity – in Manus, Nauru and perhaps in remote indigenous communities.
Impose small transaction fees on financial and currency trading, with the primary purpose of slowing and stabilising the financial sector (which trades 50 times faster than is needed to serve the productive economy). Make the fees just large enough to take most of the profit out of parasitic speculation and arbitrage. The point is not to maximise revenue, though significant revenue would be raised. The point is to stabilise the economy, to better direct flows of wealth to those who earn it, and to reduce finance to a small sector serving the productive economy.
Tax “bads” (pollution etc) not “goods” (needed products, services, labour etc).
Withdraw from so-called “free trade” deals. They destroy our sovereignty in favour amoral corporations intent only on maximising profit at our expense. The data don’t support claims for their economic benefit, even in the narrow, misguided terms of GDP. (‘Sovereignty’ means simply the ability to manage our own affairs, it does not imply raging jingoism.)
Allow that markets need to be managed. Manage them using incentives, disincentives and, where necessary, regulation. Markets will go where the profit is. It’s profitable at present to exploit people and trash the planet. Just weeding out perverse incentives (intentional and otherwise) would already make a large difference. The management tools are already there, the difference would be in having a coherent strategy. We can be far more sophisticated in our market “interventions”.
Move to triple-bottom-line balance sheets instead of GDP. GDP is not accounting, and it hides major distortions of our priorities. Never mind the imperfections in the balance sheet approach, at least proper balance sheets would be moving us in roughly the right direction (subtracting the “bads”, whereas GDP adds them). GDP is not just imperfect, it is indefensible as a measure of wellbeing.
Address unemployment through counter-cyclical spending, adjusted working hours (as in Germany) and such, instead of blindly ‘growing the GDP’.
Reconstitute the ABC with an arms-length, non-ideological board and proper funding. I believe the Greens have a proposal ready to go. Require the board to remove ideologues from management. We don’t owe the commercial media their fortunes or their power, and their performance is abysmal anyway. The ABC is immensely valuable to our society and culture.
Support (with subsidies?) the formation of media outlets owned by their audiences –neither big government nor big business. Communication technologies are our modern society’s way of conducting our essential conversations, of organising our affairs. It is high folly to allow them to be controlled by a self-interested few.
Break the cycle of bigger loans – higher property prices – even bigger loans. Commercial banks make their profit by getting us to take on debt, and we are now burdened by huge private debt that could collapse at any time. Perhaps require loans to be scaled better to household incomes instead of market prices; perhaps move to a land tax, even to community land trusts, there are sensible ideas out there. Land is not just another commodity, as someone pointed out a long time ago, and it can be leased not owned. And yes get rid of negative gearing and other tax favours to land speculators.
End the windfall capture by land speculators of unearned appreciation of land value due to developments around the land. That wealth properly belongs to the community the land is part of. Land leasing, taxes and/or land trusts can do the job.
Promote collective ownership of enterprises by employees, communities, even suppliers and customers. This cuts through two centuries’ ideological conflict between bosses and workers. It keeps wealth more local. It reduces ignorant or cynical exploitation by remote owners. Such ownership forms already exist and many are successful, though still a small minority.
Reduce the rate of immigration. Every new arrival (immigrant or local-born) costs our society around $500,000 for extra durable assets (infrastructure, housing, shops, schools etc.), according to straightforward estimates by Jane O’Sullivan. (O’Sullivan, J.N., Economic Affairs, 2012. 32: p. 31-37.) We can easily release around $70 billion per year. A high immigration rate mainly serves the construction and related industries, along with lazy CEOs. We don’t owe them a living, our cities are choking, our lifestyle is degrading and our land is being run down.