12 May 2011

A middle-class hero

It is necessary to understand
That a poet may not exist, that his writings
Are the incomplete circle and straight drop
Of a question mark
And yet I know I shall be raised up
On the vertical banners of praise.

- Ern Malley Sybilline

(Spoiler alert: if you haven't read Nineteen Eighty-Four by George Orwell, or if you are in the process of reading it, please skip the fifth-last paragraph in this post.)

In the 1980s small-government Liberals warned that too much welfare would create a sense of entitlement among recipients, which would stifle innovation and would prove politically impossible to reverse.

Even though they have largely been proven right in recent days, they made a few mistakes along the way:

  • They mistakenly assumed that welfare would apply to low-skilled people, which led to unseemly sneering by relatively well-off people at those who weren't, and who made out that social obligations need not be reciprocal:

  • They didn't foresee adequately that their push for deregulation and low tariffs would see a decline in manufacturing and other protected industries - which meant that experienced, capable and willing workers who had developed and applied skills, and who earned taxable income, became (however unwillingly) welfare recipients;

  • They thought that if any party was going to spread welfare around to those in middle-to-upper income brackets, it would be Labor - consolidating its working-class base and grasping for marginal seats, using taxpayer funds to do so.

In the 1980s small-government Liberals had trouble getting people to listen to them, trouble that had plagued them throughout the Liberal Party's history. The Victorian Liberals from Menzies to Peacock were the party of the Australian Settlement, protection for industry and workers and to hell with this small-government nonsense.

John Howard had been Treasurer under Malcolm Fraser and had delivered five Budgets which perpetuated the whole protection-all-round, to-hell-with-small-government ethos. After Labor won office in 1983 he distanced himself from Fraser - he needed to, or his career would have died with Fraser's like that of some ancient lackey to a Pharoah who had to be embalmed with the great man to continue service into the afterlife. Howard began tipping nods and winks to the small-government guys, commissioned the Campbell Report and spoke of how his heart had become unchained now that he was to finally pursue a small-government agenda. Small government thinktanks popped up, such as the Centre for Independent Studies and the Institute of Public Affairs.

The small-government guys became Howard's base. Howard became leader of the Liberals and repaid the faith of the small-government Liberals by opposing Medicare and bagging welfare. Voters repaid their faith in small-government Liberals by not voting for them. They didn't vote National either, even though the Nats were dead against small government and always had been. Small-government Liberals retreated to where the public could not get at them - on the executive of the Liberal Party - and denied preselection to Liberals who opposed small government.

When Howard won office in 1996 it looked like he would actively pursue a small government agenda, with Costello shaping a "horror" budget that depressed housing prices in Canberra and talking about paradigm-shifting reforms such as a GST and selling Telstra. All that changed in the late '90s: Family Tax Benefits were introduced to offset the perception that the GST was A Great Big New Tax, and they weren't means-tested. Neither were later benefits such as the Baby Bonus.

The exponential growth in China's economy in the twentyfirst century had created a boom in tax revenues for the Australian government. Those revenues were channelled back to middle-income earners, directly (in the form of Family Tax Benefits and income tax cuts) and indirectly (porkbarrelling in the sorts of communities where middle-income earners live) in an attempt to bolster the Liberal Party's electoral fortunes.

By this time the small-government Liberals who had helped Howard to office had gone - those who hadn't died were maintaining the kind of dignified silence that hadn't done Malcolm Fraser any good at all.

In 2007 the folly of middle-class welfare as incentive to vote Liberal became apparent. Despite all sorts of economic indicators being positive for the incumbent Coalition government, and despite $billions in aforesaid middle-class transfers, Labor won office again and Howard lost his seat (that's why Costello piked leading the Liberal Party: when the economic policy levers broke off in his hands, he didn't know what else to do). It was a failure of the Economic Man thesis that is central to the small-government faith.

The CIS and the IPA should have spoken out against the Howard government, but they didn't really. Howard was no more a small government man than was Gough Whitlam, and anyone who might've thought otherwise has well and truly been had. That's why you shouldn't pay them any attention, not even to jeer. Any criticism they may have made of the Rudd goverment's stimulus, or any economic policy at all anywhere really, is so invalid as to be absurd.

Labor have wound back middle-class welfare a little bit. Journalists are squarely within that income bracket, and in recent days they have gone on and on and on and on about how they're feeling ripped off. Note that it is the press that is leading the whole middle-class welfare thing, with Abbott and Hockey being sucked along in the backdraft.

Labor should have slashed all middle-class welfare and then come back with a few goodies from the election-eve surplus budget of 2012-13, by which time dopey journalists would have forgotten all about whether or not $150,000 is the sort of annual income that needs income management intervention from Centrelink. Expect Labor to sell out middle-class welfare measures to the Greens during Senate negotiations, and let them wear the bad press.

Wayne Swan couldn't sell cold beer on a hot day and must be replaced. You get respect for making hard decisions, not for putting out a press release warning that you might or might not make a hard decision and subsequently not doing so. Swan is pretty well entrenched in the Labor machine and there may not be anyone tough enough therein to tell him that he has to go. Punting Swan would cause upheval in the Queensland ALP and may hand State government to The Man Who Wasn't There, but so what? This would be the same outfit that gave away nine seats to retirees and adolescents. You'd have to ask Queensland ALP members some tough questions as:

  • Would retaining government in Canberra make up for whatever penalty may accrue from upsetting Bill Ludwig?

  • What do you mean, 'no'?

  • Would you like to phone a friend?

Meanwhile, the Liberals - formerly the party of small government - is happy to cop the benefit of the doubt over the incumbents. They are no more about small government than they are about nationalising the means of production, distribution and exchange.

The dregs of the small government mob (yes, they exist but don't laugh - there are still Maoists who walk among us) are out in the cold or have sold out to the big-taxing, big-spending, nanny-state conservatives who die in a ditch for Howard. Erstwhile libertarians love John Howard in much the same way that, at the end of Nineteen Eighty-Four, Winston Smith loves Big Brother. They've all bought his memoirs, that's why he's the biggest selling political author since, um, Vere Childe or whoever.

However much the Liberals are enjoying Labor's discomfiture, the fact is that they can't promise credibly to restore middle-class welfare. Middle-class welfare couldn't keep the Liberals in government in 2007 and it won't get them back in now. They've lost all their small-government Liberals, so they can't make a moral case for limiting welfare payments even if they wanted to. This is why the Liberals' high poll numbers are bullshit, and every beef-witted pollster who says otherwise can kiss my arse unsustainable in the face of a real election campaign (particularly if nobody from NSW or Queensland runs Labor's campaign).

This explains why Abbott dared not say what, if anything, he stands for. He say that he's remembered the forgotten people, but he won't do much for them/us. Nothing on childcare, nothing on infrastructure or innovation, no bipartisan reach-around on mental health.

You can rely on journalists not to ask Abbott any hard questions about middle-class welfare. Abbott has announced that he's going to talk in general terms, and that's that: nobody can question Coalition media strategy.

Sociology won't help you understand the political situation before us: classes are too loose to sustain grand political and economic narratives. If only economists such as this and this saw this Budget so clearly as a historian can.


  1. Lapuntadelfin12/5/11 8:47 pm

    I cried

  2. Thank you. As a relatively new Australian, I never understood why Howard and Costello were such pork barrelers and why the Australian Government seemed to love to churn tax money and give it back to selected targetted groups.

    The British Labour Party would have loved to be able to dole out this kind of stuff to expand their base.

    Your comments about journos appear to be spot on. Self interest there.

    Overall the governments reining in of middle class welfare is pretty minor.

  3. "After Labor won office in 1983 he distanced himself from Fraser - he needed to, or his career would have died with Fraser's like that of some ancient lackey to a Pharoah who had to be embalmed with the great man to continue service into the afterlife"

    Very funny:)