How different would labor be?(Australian Labour Party)

ACCORDING TO KEVIN RUDD in his "Howard's Brutopia" article in the November 2006 issue of the Monthly, Labor will replace the Howard government's emphasis upon "unrestrained market capitalism" (neoliberalism) with social democratic policies that borrow the positive elements of liberalism such as security, liberty and property, but add "values of equity, solidarity and sustainability" in order to assist "human, social and environmental capital necessary to make a market economy function effectively".

With Labor indicating that it will provide greater attention to health, education, the environment, and infrastructure, it may well be that Labor's lead in various opinion polls in early 2007 can result in a victory at the 2007 federal election.

But this article questions the extent to which Labor can reverse recent policy trends, and whether the Howard government has been as mean-spirited as Rudd suggests. This is because Labor must also take account of the competitive realities that remain evident from Australia's ongoing interaction and dependence on the international economy, a reality that does pose policy limitations although still allowing for significant policy possibilities. Hence, the purpose of this article is to provide greater intellectual honesty about likely policy trends even under a future Labor government, and why the hopes of those on the Left, at least those who do not give adequate attention to competitive realities, may be misplaced.

Although Rudd attacks Howard's supposed emphasis upon the economic imperative above issues such as equity, both Labor and Coalition governments will continue to give adequate attention to competitive realities such as ensuring that the nation's taxation and labour market costs remain competitive. This necessity is evident to all national governments wishing to benefit from interaction with the international economy. While Australia did prosper under high tariff levels for many decades even after the Chifley Labor government supported the General Agreement on Tariffs and Trade in the late 1940s which encouraged nations to reduce trade barriers, it was inevitable that the promotion of freer trade would eventually force Australian governments to adopt policies that would cause a considerable degree of social upheaval as the need for economic reform could no longer be delayed.

Though total Australian government outlays increased from around 18 per cent of gross domestic product (GDP) in 1960 to 35.5 per cent in 1985, by the early 1970s the need for policy change was necessary if the wealthy democracies (including Australia) were going to maintain their high standard of living. With US and British negotiators at the 1944 Bretton Woods Agreement not implementing capital controls to prevent corporations and citizens moving their funds abroad to evade higher labour and taxation costs, the rise of developing nations with their high-quality and cheaper manufacturing products demanded urgent attention.

This need became increasingly evident after US companies, which dominated the world economy and trade during the 1950s and much of the 1960s, began to invest abroad and locate parts of production offshore in order to reduce costs and compete more effectively. It was also recognised by Australian policy makers, with the Industry Assistance Commission's 1973-74 Annual Report noting that Australia's industries needed to be made accountable for the assistance they received, while suggesting that the nation shift its financial resources to its "land-intensive rural industries" where it was clear that Australia "has an export advantage" which would help aid the ongoing importance of service industries.

With Australia's situation reflecting its traditions and development, Labor and Coalition governments have adopted policies that ensure that the nation remains competitive in order to attract enough investment and revenue to provide the vast resources that Australians expect in regard to their social welfare needs. Hence, Labor governments (1983-96) also gave greater policy support to floating exchange rates and the discipline of the market after Australia experienced adverse economic conditions during the 1970s, including higher levels of unemployment and inflation.