The Labor way: balancing wealth creation and wealth distribution

by

posted | in Feature Article

The Hawke-Keating Labor Government was one of the most successful governments of the western world. It was also Australian Labor’s most successful federal government in the post-war period by a country mile. Whilst Thatcherism and Reaganism are often held up by conservatives as exemplary administrations, the same could be said of Hawke-Keating, not just in Australia but around the world.

In fact, the Hawke-Keating economic performance was superior to anything that high deficit ‘trickle down’ economics from Reagan or that Margaret Thatcher could conjure up in her long years of UK Conservative rule.

For instance, if we compare Hawke versus Thatcher, the record speaks for itself.

In terms of GDP, Australia outperforms Britain in 12 out of the 18 years compared since Mrs Thatcher begins her term. In terms of inflation, Australia had a lower inflation rate than Britain for 9 out of the 18 years. In terms of the labour market, the UK unemployment rate was 6.5 percentage points higher than Australia, with a higher proportion of long term unemployed people in the UK than Australia for every year of comparison.

Australian Labor’s success at a time of prevailing Conservative tide in the Anglo-American world did not go unnoticed. In fact future British Labor Prime Ministers Tony Blair and Gordon Brown whilst in Opposition were so impressed with Australia that they regularly visited our wide brown land to rejuvenate the intellectual capital and future policy agenda of ‘New Labour’ in the UK before winning office in 1997 and enjoying a long period of successful government initially under Tony Blair’s ‘Third Way’ banner.

As Paul Keating said in an interview with me: “I said to Tony Blair, our way was not the third way, but the only way”.

Tony Blair’s ‘Third way’ program for modernisation, was provided with a successful model in the Hawke-Keating government – one of the few successful social democratic governments that survived a political and intellectual era dominated by the right in most industrialised democracies.

In short, it wasn’t the third way that Tony Blair followed it was the Australian way.

One of the great lessons of this historically successful Labor government of 1983-96 was the balance struck between the growth creators and growth distributors. To govern successfully and continually, Labor needs both. Prime Ministers Hawke and Keating knew this, the business leaders knew this and the Australia Council of Trade Unions (ACTU), so ably led by Bill Kelty knew this through the forging of the successful Prices and Incomes Accords throughout that period of Labor Government.

“I said to Tony Blair, our way was not the third way, but the only way”

Bob Hawke knew the importance of encouraging businesses to invest through stable macroeconomic conditions, wage restraint and employment creation.

Hawke could build consensus with business whilst ensuring workers received improvements through the social wage with Medicare, Education and Skills development and tax cuts.

Paul Keating, the son of a boiler maker – turned entrepreneur, knew that financial markets needed to be conducive to growth and regional expansion. His own Bankstown based father had been knocked back for a loan from an established bank when wanting to expand to Malaysia, so as Treasurer and Prime Minister Keating democratised finance so all Australians could embrace the opportunities of the Asian Century.

Bill Kelty, not only forged the Accords with both Hawke and Keating, but also created the Australian superannuation policy framework that is the envy of the world. In a stroke of genius, as union membership fell in the 1980s, the workers became owners of capital in the 1990s and beyond through the industry super funds. The workers took control of the commanding heights of capitalism – that are now jointly managed by employer representatives – and providing pools of savings for sustainable investment. It has taken the conservatives a long time to realise what has happened – hence their issues with low cost highly competitive industry funds in today’s financial system.

In today’s Australia, there is a polarising of our political economy. Some on the far right with large mining and media interests want to create wealth but don’t want to redistribute it. Sometime it seems they would prefer an oligarch friendly government protecting their rents and vested interests.

Labor is electing a future Prime Minister. Someone who understands the Australian way and the need to balance growth creators with growth distributors.

On the other hand, some on the far left want to redistribute wealth but have no interest in how it is created. They sometimes want to ban mining and any other extractive industry but at the same time claim they have the tax revenue from the resources industries to spend.

But it should not be a battle between wealth creators and wealth distributors. As the Hawke-Keating-Kelty reform period of the 1980s and 1990s showed, you need both to function effectively as an economy and a society.

In essence, a growing economy allows you to pay for a national disability scheme, superannuation, Medicare, better Occupational health and safety, and enables you to take better care for the environment.

A growing economy with high employment, high wages and rising living standards helps improve productivity and competitiveness.

Growth and employment creation is not about mean industrial relations laws like Workchoices.

It is not about destroying the environment.

It is not about locking generations out of quality education and employment.

It is not about attacking the contribution of our newest Australians nor the culture of our oldest Australians.

Bob Hawke, Paul Keating and Bill Kelty knew the value of Labor supporting both the growth creators and growth distributors. And so does Bill Shorten.

Labor combines the best of the right to ‘have a go’ by our entrepreneurs and the right to a ‘fair go’ for workers, middle income and low income families.

In this historic ballot for one of the oldest political parties in the democratic world, Labor is not electing just an Opposition leader in this ballot, nor someone who is solely popular in inner city branches and amongst rusted on activists.

Labor is electing a future Prime Minister. Someone who understands the Australian way and the need to balance growth creators with growth distributors.

Bob Hawke Paul Keating and Bill Kelty knew this in their successful run of Labor Government. And so does Bill Shorten.

I recommend a vote for Bill Shorten in this ballot to continue the great Hawke-Keating-Kelty legacy.

It’s the Labor way. It’s the Australian way. It’s the only way to return Labor to Government.

Tim Harcourt is the J.W. Neville Fellow in economics at the University of New South Wales. He previously worked as Chief Economist at Austrade and has been an economic advisor to several Labor Ministers.