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A social democratic response to the Great Depression of 2008

By Ken McKay - posted Thursday, 19 March 2009

To understand what is required for Australia to not only survive the Great Depression of 2008 but to emerge with a stronger and more vibrant society it is necessary to understand our recent economic history.

To quote George Orwell “Who controls the past controls the future”.

Some may question whether or not we are in a depression particularly when the technical definition of recession has not been met (two successive quarters of negative growth).


I am in no doubt that when the cascading economic crisis reaches its peak future historians will label the crisis as the greatest depression in history. We are staring into the abyss while deluding ourselves that the world’s economists will conjure up some magic in a Harry Potter manner.

The survival of the International Monetary system is dependant on the purchase of trillions of dollars worth of sovereign bonds. This is meant to occur when the financial institutions that are meant to absorb these bonds are collapsing and facing massive sovereign defaults from Eastern Europe.

To quote Darryl Kerrigan “tell them they’re dreaming”.

Who controls the past controls the future

The Howard/Costello cheerleaders such as Ackermann, Bolt and Milne will argue that the economic discipline of the Howard/Costello team has ensured Australia has the best opportunity of emerging relatively unscathed from the economic crisis. Debt was repaid allowing the government greater fiscal flexibility than other nations in the western world.

Is this assessment valid?

The alternative theory is that the resources boom provided a revenue windfall that has masked the deterioration of the basic economic fundamentals.

I will argue the second case and argue further that the Howard/Costello years will go down in history as the Rip van Winkle years. The failure to implement fundamental structural reform will undermine Australia’s ability to successfully emerge from the economic crisis. Furthermore the blind pursuit of ideological agendas as part of the wider 20th century cultural wars has created fault lines in our economic structure that threatening to send a tsunami to engulf future generations.


The Howard/Costello years saw the culmination of the cultural wars in Australia between the right and the left, which saw the right gain ascendancy on economic matters and the left on social issues. This manifested itself in the Liberal Party’s dominance in the federal sphere and the Labor Party’s dominance in state governments.

Quite simply the general population did not trust state-based conservatives to run the education system or the health system but on the same hand did not trust Labor to run the nation’s finances.

Labor on the national scene through partial acquiescence did not challenge the Liberals, they were like footballers stopping play to appeal to the referee about a foul in backplay that no one cared about and complaining about the penalty that never came while the Liberals crossed the line and were allowed to improve their position to make the conversion easier.

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About the Author

Ken McKay is a former Queensland Ministerial Policy Adviser now working in the Queensland Union movement. The views expressed in this article are his views and do not represent the views of past or current employers.

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