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Kevin Rudd: Australia’s champion prime minister of rhetoric

By Chris Lewis - posted Wednesday, 4 February 2009


In a previous On Line Opinion article (September 16, 2008), I noted the level of intellectual dishonesty displayed by Kevin Rudd with his rhetorical attack on a supposed mean spirited Howard in an article titled “Howard’s Brutopia” (The Monthly, November 2006).

Since September 2008, Rudd has adopted considerable reforms that have upheld Labor’s policy platform: a minimalist (yet important) shift towards carbon trading to reduce greenhouse gas emissions, targeting vulnerable groups in a bid to boost consumption with $21.5 billion given to pensioners, families, and low-to-middle income earners in two packages (latest February 3, 2009), and increasing resources for public education and health.

But now Rudd - who is fond of telling us how Australia is in a better position to deal with the current crisis without giving credit to the Howard government’s elimination of Commonwealth debt - is guilty of another massive fib. In his Australia Day Citizenship address (January 26, 2009), Rudd declared:

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… this great global crisis is not of Australia’s making, but as Australians we are left to deal with it … The causes of this crisis are complex. But ultimately they go to a set of values that are the very antithesis of our own. Values of unrestrained greed, encouraged by an ideology of unfettered markets. Nothing of courage and certainly nothing of concern or compassion for others, or the consequences of their actions.

Further, in the February 2009 issue of The Monthly, Rudd reportedly calls for immense policy change after 30 years of neoliberalism “with its flawed brand of free-market fundamentalism” which culminated in the current global financial disaster which he believes represents the ultimate expression of “extreme capitalism and excessive greed”.

Such arguments are flawed. Australian governments (including Labor) and voters embraced such policy decisions in recent decades because they believed that it was necessary to uphold both national and international economic goals. And if US consumption (more than 25 per cent of world GDP in 2007) had not been boosted by debt (and even sub-prime lending), then Australia may not have enjoyed the same level of economic growth in recent years.

In other words, Australia owes much of its standard of living to policies that fuelled the growth of the international economy in recent decades. Without appropriate reform in line with the changing demands of the international economy, Australia may not have been ranked 4th out of 179 countries by the 2008 United Nations’ Human Development Index based on 2006 data in regards to education enrolment, adult literacy levels, per capita GDP, and life expectancy.

And with Rudd now calling for government to be the regulator of the financial sector and “funder or provider of public goods” as government “offsets the inevitable inequalities of the market with a commitment to fairness for all”, where was Rudd’s concern about the greater role being played by the private sector when cutting the size of the public sector in Queensland when working for the Goss Labor government?

No, Rudd would never admit his own contradictions as he sought to be all things to all people prior to the 2007 federal election. After all, Rudd (a supposed social democrat) even bragged of being a fiscal conservative unwilling to rock the boat with grander levels of spending as Labor reaffirmed its commitment to keep taxes and spending at a similar level of GDP.

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In other words, it was only when Australia’s economy was threatened by the current financial and economic crisis that Rudd abandoned much of his support for the economic status quo (besides a greater commitment to infrastructure): although he hoped that a booming non-democratic China would help Australia escape the looming crisis. As if.

So what are the solutions? According to Rudd one answer is to adopt greater financial market regulation. No doubt that such a measure will be introduced in the nations that need such reform, particularly the US. It is called common sense: sensible nations must make important adjustments as they seek to balance competitiveness and compassion.

There is also a need to do something about the obscene wages given to some “superior” individuals. After all, the former prime minister Howard also expressed disgust at the pay levels of CEOs, which in the US averaged $10.5 million in 2007 for the 500 largest corporations (some 344 times the pay of typical US workers).

But Rudd has no real idea how to solve the problems confronting Australia. While he warns against greater protectionism in coming years, as this “exacerbates the collapse in global demand”, he contradicts himself with a recent multi-billion dollar car assistance package intended to promote Australian jobs.

Rudd’s rhetorical support of open trade also ignores the reality that Western nations are losing their productive capacity as they rely more and more on services. Though the decline of manufacturing jobs had slowed in recent years because of strong global growth, the top 21 economies (including Australia and excluding China) lost 7.3 million manufacturing jobs since 2000 (double the losses of the previous five-year period) with the G-7 economies accounting for about 85 per cent of the decline: the US lost 20 per cent, the UK 24 per cent, Japan 12 per cent, Germany 7 per cent, France 11 per cent, and Canada 9 per cent.

While small increases were noted in Taiwan and the Philippines with larger gains recorded in Vietnam, it was China which generated 5 million new manufacturing jobs since 2002 although its gross manufacturing employment levels were lower than during 1998 and 1995 (Joseph Carson, Global Economic Research, April 4, 2008).

Western societies have a simple choice. They either accept freer trade and the reality that many jobs are being lost to nations which utilise their lower wages, or they adopt measures to effectively compete with emerging economic powerhouses, especially when certain developing nations have immense labour cost advantages and little tolerance for the same social and environmental constraints that come from an effective civil society?

But given Rudd’s observation that neoliberal policies have wrongly driven down tax rates and diminished our capacity for necessary infrastructure, will Rudd now raise taxation levels to pay for a variety of economic, social and environmental needs?

Will Rudd spend vast amounts to provide measures that will ease the need for Australians to borrow less given that Australia’s household debt to disposable income ratio increasing from about 38 per cent in 1983 (70 per cent in 1996) to 160 per cent by December 2007?

Will Rudd continue to give higher grants to first home buyers to help inflate house prices, or will he spend vast amounts to help a growing minority afford public-subsidised housing?

Will Rudd still urge trade unions to limit wage claims to aid business investment at a time when the purchasing power of low-skilled workers continues to wane?

Will Rudd offer necessary assistance to help ensure that Australia does not become China’s quarry and Japan’s beach, as he promised prior to the 2007 federal election?

And where is Rudd’s example of an effective social democracy to show us the way? Is it Sweden, which has reduced its level of government outlays from 72 per cent of GDP in 1993 to 56 per cent by 2006? Is it Norway which has invested a considerable proportion of its oil revenue into shares to become one of the richest nations in the world in per capita terms given that its Pension Fund was valued at about $US300 billion by early 2009? Or is it Iceland that spent and borrowed so much that its bank sector quadrupled as a share of GDP between 2000 and 2007 before going broke, and which reduced its corporate tax rate to 18 per cent by 2002 after being 50 per cent at the end of the 1980s.

Kevin Rudd, tell us what policies should have been introduced in the past 30 years to aid Australia’s economic growth and how we could have avoided the same policy pressures as evident in all Western nations. I am sure that Hawke, Keating and Howard would like to know.

And with the US and other Western nations (including Australia) generally supporting freer trade, and no other nation prepared to take over the role of the US currency where all currencies are tied to one which is fixed to the price of gold, what should the US have done instead of abolishing capital controls and fixed exchange rates to make its own economy more competitive?

Certainly, the current financial crisis proves there are still many flaws within the international economy, but those on the Left (including Rudd) are fibbing when they pretend they can simply save the world through greater government intervention.

In the end, deficit spending is just another form of protectionism as Western nations seek to meet the needs of their democratic populations while maintaining leadership within international relations. When debt levels become completely unsustainable, it will be interesting to see what the powerful Western nations will do to reaffirm their influence against rising powers less willing to embrace democratic traditions.

So Rudd should realise that so-called neoliberal trends actually did offer a policy approach that endeavoured to uphold national and international economic needs through the ongoing promotion of the international economy, notwithstanding that growth was increasingly fuelled by higher levels of debt, with China benefiting most in terms of manufacturing employment.

What is left in this new form of protectionism is just what is best between government spending or tax cuts, another important source of competition between centre-left and centre-right politicians and their supporters.

On America’s recent $US825 billion plan, which includes about $550 billion in spending and $275 billion in tax cuts, opinion is divided. While Paul Krugman noted that “public spending provides much more bang for the buck than tax cuts”, especially when the option of interest rate cuts is gone (New York Times, January 25, 2009), Daniel Mitchell (a senior fellow at the Cato Institute) continues to argue that the best stimulus is to downsize government and implement a flat tax.

But even centre-left political parties will make policy decisions with political considerations. As noted by Henry Ergas (The Australian, January 27, 2009), the Rudd Labor government’s $4 billion assistance plan for the building industry, “with commercial property accounting for some 12 per cent of the investments made by Australian super funds, reductions in commercial property prices would also have an impact on the funds and especially on those that have been negligent or tardy in writing down the value of their property investments”.

In the end, Labor will merely tinker at the edges in its willingness to provide a greater level of government intervention when compared to the Coalition, unless of course freer trade is rejected and higher taxation rates begin to emerge in more powerful and influential Western nations.

Just as I previously suggested in On Line Opinion (September 16, 2008), Rudd is Australia’s champion prime minister when it comes to offering rhetoric rather than intellectual honesty about the difficulty of finding policy decisions that address the many strengths and weaknesses associated with freer trade.

Rudd needs to focus on the future rather than making supposed intellectual claims about the past, as if he would have done anything differently or better.

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About the Author

Chris Lewis, who completed a First Class Honours degree and PhD (Commonwealth scholarship) at Monash University, has an interest in all economic, social and environmental issues, but believes that the struggle for the ‘right’ policy mix remains an elusive goal in such a complex and competitive world.

Other articles by this Author

All articles by Chris Lewis

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