The battles of economic reform.(The Experience of Middle Australia: The Dark Side of Economic Reform)(Book Review)

The Experience of Middle Australia: The Dark Side of Economic Reform, by Michael Pusey; Cambridge University Press, 2003, $36.95.

IN 1991 MICHAEL PUSEY published Economic Rationalism in Canberra. He showed, after interviewing a few hundred national decision makers, that in the 1980s Canberra had adopted a rational economic response to the economic problem of "stagflation" (low growth, high inflation, rising unemployment) that had dominated Australian political debates in the period 1975-83.

Since I knew this to be the case, and had supported the Hawke government's economic reform agenda, which dealt with the problems the Fraser government had clearly been unable to resolve, I gave Pusey credit for his research. Indeed, I acknowledged his efforts in my Globalising Australian Capitalism, despite his wrapping his findings in the most irksome Left-sociological, ideological jargon. I looked forward to this book for similar reasons. Pusey is usually a fellow who, despite his own large preconceptions, will give you some meaty data to consider.

This book follows from his Middle Australia Project, funded by the Australian Research Council, a body whose Social Science section was long since seized by a far Left that only consolidated its hold during the Howard government. Pusey interviewed hundreds of suburban "middle Australians" in 1996 and 1999 in the hope of finding they didn't like economic liberalisation. Generally, they didn't disappoint him.

Let me say immediately that I am not at all surprised. The dominant view among the political elites who drove deregulation of the Australian economy in the 1980s and 1990s was that, while it was unpopular, it was the only means of regenerating economic growth in Australia and resolving the difficulties of stagflation. Very few people thought it could become popular until the fruits of the social dislocation it would occasion had become evident in the form of strong economic growth coupled with price stability.

These circumstances have now been evident for about a decade and support for a liberalised economy is increasingly evident among Australians. But it was only possible to drive through the reform agenda because a consensus for its necessity was forged across the leadership of the Labor, Liberal and National parties, and beyond them into the peak bodies of labour (the ACTU via the Accord) and capital (the Business Council of Australia and even the rural lobbies). The only real standout was the Democrats.

This liberalisation has undoubtedly increased income inequality in Australia and greatly reduced the status and power of labour unions and other rent-seeking political organisations. The reform program was designed to do precisely this, and to relate incomes more closely to productivity and less to political bargaining power. To offset this impact, the previously universal welfare system was targeted at the poorest 20 per cent or so--with considerable success, as Pusey acknowledges.