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There's always a progressive alternative

Looking back on 2002

Frank Stilwell

The year has been dominated by international security issues - the aftermath of September 11, 2001, the war on the Taliban regime in Afghanistan, the Bali bombings, and the threatened war on Iraq. These international concerns have overshadowed domestic economic and social policy issues.

Outpourings of grief and anxiety are understandable in the circumstances. Racism, xenophobia and militarism have also had a field day. But many people have sought constructive responses. Thousands have joined in anti-war demonstrations in cities and towns all over the country. All eyes are now on the effectiveness of the weapons' inspection process in Iraq.

Significantly, many people are now recognising that some resolution of the Palestine-Israel conflict is a necessary condition for restoration of greater global security. The consistently biased position taken by the USA in relation to that conflict is in the spotlight and can be expected to be more so in 2003.

Meanwhile, the global insecurities have created conditions conducive to the resurgence of US military imperialism, with US Present George W Bush benefiting significantly from the continual backing of British PM, Tony Blair. The insecurities have also created conditions for further restrictions on civil liberties, an opportunity currently being embraced by the Howard government. Mark you, Howard has played a strange game on this, refusing to support the amended bill dealing with extended ASIO powers which was debated by Parliament on its last sitting day on 14 December. Evidently the government would rather leave the issue in limbo than work in tandem with the ALP. So much for the need for unity in protecting 'the national interest'!

The treatment of refugees has also been a running sore on the body politic. One might have thought that conditions of global insecurity would provoke more compassion for the victims of the conflicts. Evidently not so in the Australian case, with Howard and Ruddock sticking by their tough line, emphasising the internment of illegal refugees behind razor wire and in Pacific Island concentration camps. Yet glimpses of more positive attitudes are discernable elsewhere in the community. In the country town of Young, for example, about fifty Afghan refugees, working in the local abattoir, have been warmly accepted by many of the townspeople.

What about the economic conditions? The drought has been a major blow to many parts of rural Australia. More generally, there are growing anxieties about the global and national conditions. The fear of global recession following September 11, 2001 and the downturn in the US economy has not materialized with the severity many expected a year ago. However, there has been a shake-out of some large capitalist corporations, some the consequence of dubious financial practices if not downright fraud. There have been major plunges in the values of shares traded on the stock exchanges, wiping out a considerable proportion of the unearned wealth that had accumulated in the 1990s. This has important implications for savers, including workers who have been drawn into shareownership, either individually or through compulsory superannuation. Workers' expectations of good retirement incomes have taken a major jolt in many cases during 2002.

However, the employment conditions are not yet those of a recession. Rather, we seem to be stumbling along in a perpetually unsatisfactory state. The official unemployment rate continues to hover in the 6-7 per cent range, although political economists commonly note that the true figure, taking account of people who are under-employed or have left the workforce because of poor employment prospects, is probably more than twice that level. And many workers are in part-time, casual and insecure employment circumstances. Will overall employment prospects worsen in 2003? The latest surveys of advertisements of job vacancies and of business expectations are notably pessimistic: job ads and business confidence both dropped significantly in October-November.

If a deep recession does come, we don't have adequate shock-absorbers. Few checks and balances can be expected from the institutions that are responsible for economic policy. The Reserve Bank of Australia has been keeping official interest rates low, so there is little remaining scope for counter-cyclical stimulus from monetary policy. The federal government is determined to maintain a budgetary surplus, so that significantly limits the scope for counter-cyclical fiscal policy too. A positive job-creation role for the public sector is also anathema to this government. The embrace of the World Trade Organisation agenda further erodes the capacity of national governments to manage trade and capital flows. These political choices compound the problem of economic insecurity. The rejection of Keynesian economics carries a high social cost.

The recent flirtation by Treasurer Costello with the possibility of eliminating all government debt shows how far the government has gone in its rejection of the former 'Lib-Lab consensus' over the role which government should play in macroeconomic management. If implemented, Castello's policy to have zero public debt would make Australia the only country in the world, to the best of my knowledge, to have eliminated the government bond market. It would add to the volatility of other financial markets, as a spokesperson for the Australian Financial Markets Association, speaking at an Evatt Foundation seminar, has recently warned. It would herald the abandonment of the government's commitment to the long-term management of national economic development. Such is the ultimate 'logic' of neoliberalism.

Meanwhile, of course, the government does nothing to discourage private debt and, indeed, encourages it in certain respects. Housing debt is a case in point. What has been propping the economy up over the last year has, in large measure, been the housing and construction sector. John Howard recognised the importance of housebuilding in the economy two years ago when he reintroduced the First Home Owners Scheme, in order to head off what then appeared to be an impending recession. The scheme probably helped maintain buoyancy, although a significant number of its recipients took the money in the process of purchasing homes costing a million or more - hardly the young 'battlers' that the policy was ostensibly designed to help.

The buoyant demand for housing has fuelled inflationary processes, particularly in the big cities. This is a bizarre outcome, creating grotesque redistributions of wealth in Australian society. It has also caused many people to get locked in to huge mortgage commitments: rising interest rates or greater job insecurity down the track could cause a very painful shake-out of the over-committed. Australian Bureau of Statistics data suggests that the housing boom may already be over: loans for construction of owner-occupied homes have fallen significantly in recent months.

Meanwhile the government has been embarrassed by revelations that its much-prized budgetary surplus is largely the result of higher tax collections, as 'bracket creep' resulting from inflation pushes ordinary taxpayers into paying higher marginal tax rates. This is particularly embarrassing for a government claiming a fundamental commitment to reducing tax! The ALP opposition has predictably taken the opportunity to gloat. Unfortunately though, it has fallen into the trap of promising, if elected, to outdo the current government by cutting taxes. Politically, this is a dangerous game, raising the prospect of the next eederal election being based on rival campaigns promising bigger 'fistfuls of dollars' through tax cuts. The continued impoverishment of the public sphere, and the undermining of the legitimacy of a strong tax base, are predictable consequences.

It is the instability and inequalities arising from the interaction of housing, labour and capital markets, coupled with the abandonment of a coherent approach to economic policy, that is the focal point of our current economic predicament. Therein lies the source of our longer term political economic problems. The current government has no idea about how to cope with the situation. The Labor opposition is yet to develop a coherent response either and is seemingly unable to resist being drawn into promising tax cuts and making other compromises with neo-liberal policies. No wonder there is widespread disillusionment with the political process, quite apart from the day-to-day embarrassment of individual politicians being caught with their hands in the till. There's been a lot of that this year, ending with the spotlight on Liberal Senator Helen Coonan.

On a more positive note, 2002 has been a great year for the Greens. Capitalising on the manifest inadequacies of the major parties and offering more consistently principled and ethical alternatives makes Bob Brown and his fellow Green politicians look a very attractive alternative for many people. The Cunningham by-election produced the first ever Greens representative in the lower house of the federal parliament. Is this stunning success for the Greens the forerunner of more dramatic changes to come in the complexion of Australian policies? My crystal ball starts to cloud over at this point...

A dreamy image remains. I fantasise about waking up in 2003 to find a totally different scene. The drought has broken. Our political leaders have collectively embraced a progressive economic strategy that recognises the crucial importance of the public sector to our collective well-being, redistributes incomes and wealth more equitably and creates greater economic security. Ecological sustainability has become a primary policy goal, with Australia showing the world the practical steps to it achievement. Our political leaders are also showing the way forward to the humanitarian treatment of refugees and the creation of a peaceful world. It is a nice dream, reminding us that there is always a progressive alternative. But I wouldn't bet on it....


Frank Stilwell is Professor of Political Economy at the University of Sydney and a member of the Evatt Foundation's Executive Committee. This article was first published by Workers Online on 20 December 2002.

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