Treasurer Jim “Chicken” Chalmers has somehow found the time to pen a 6000-word essay in The Monthly. I wish he hadn’t.
The Chalmers essay explicitly sets out the historic context of Kevin Rudd’s ill-conceived 2009 essay panning “neo-liberalism”, and Wayne Swan’s 2012 embittered sequel in which he whined about the vested interests that had just destroyed his government:
This global downturn is not the same as the last two. This latest crisis, of global inflation, has already begun to force the bluntest and fastest interest rate increases since the inflation-targeting era began, and this could cause recession in some of the economies that matter most to us.
The third crisis – supply chain pressures aggravated by a war, that became a price shock – came just months after the peak of the second. That one was a pandemic health crisis that triggered a supply shock. And both these crises have emerged in a global economy in many ways still defined by the effects of the first – the global financial crisis of 2008 that became a demand shock (and, outside Australia, a Great Recession).
The crises are defined by their differences but have a common thread: vulnerability. In each case our communities, economies, budgets, environment, financial and energy markets, international relationships, and our politics – already fragile enough – became more so.
While the latest inflation crisis began with events no Australian could control, Australian governments could have done more to prevent the fragilities left by the first two downturns. Successive leaders failed to find their way conclusively or convincingly past the neoliberalism of the pre-crises period. In other words, while the world was getting more uncertain, we had been growing more vulnerable. Domestic policies – and policy vacuums – accelerated rather than alleviated this problem.
…the Albanese government began the task in our first budget, helping with the costs of living, investing in skills, energy, early education and supply chains, funding our election commitments, and starting to put things on a more sustainable footing.
Chalmers sets about completing this 14 year’s Labor project by injecting values into our economic policymaking:
It’s clear now that the problem wasn’t so much more markets as poorly designed ones. Carefully constructed markets are a positive and powerful tool. As the influential economist Mariana Mazzucato has explored in her work, markets built in partnership through the efforts of business, labour and government are still the best mechanism we have to efficiently and effectively direct resources. But these considered and efficient markets were not what the old model delivered. And while the 2008 crisis finally exposed the illegitimacy of this approach, no fresh consensus has yet taken its place.
…When Labor spoke about a wellbeing budget, the then federal treasurer guffawed in Question Time about yoga mats and incense. Not only did he miss the preponderance of yoga studios in his own electorate and misread the fast-growing South Asian faith communities around Australia, he misunderstood people’s appetite for a more conscious sense of wellbeing. He missed perhaps the key lesson of the pandemic: that healthy economies rely on healthy people and communities.
…What we measure directs our action. If our measurements are flawed or incomplete, it follows that what we do will be too. Last year’s October budget sketched our approach to measuring what matters and fleshed out Australia’s first national wellbeing agenda, by tracking a range of outcomes broader than, but not instead of, traditional measures of economic strength.
What will this well-being economy look like?
…at least three objectives. First, an orderly energy and climate transition, with implications for living costs, employment, where and how we live, the commercialisation of technology, and the trajectory of our economic development. This means introducing cleaner, cheaper, more reliable and increasingly renewable energy, and adopting practices and technologies that limit our emissions. All while creating new industries, empowering workers and regions, and leveraging our traditional strengths.
Second, a more resilient and adaptable economy in the face of climate, geopolitical and cyber risks, unreliable supply chains, and pressures on budgets from an ageing population.
Third, growth that puts equality and equal opportunity at the centre. This is not only fair, it’s good economic policy. As an example, gender equality is not only desperately overdue in its own right, the failure to make meaningful progress remains one of the biggest handbrakes on our economic potential. This is wilful neglect, with economic and social consequences.
The same is true of other barriers and systemic inequities that lock out disadvantaged and disenfranchised communities. Our goal here is secure, well-paid jobs, but also getting our human capital right more broadly – seeing productivity and participation as a function of investing in people, especially their capacity to adapt and adopt new technology.
How do we build this more inclusive and resilient economy, increasingly powered by cleaner and cheaper energy? By strengthening our institutions and our capacity, with a focus on the intersection of prosperity and wellbeing, on evidence, on place and community, on collaboration and cooperation. By reimagining and redesigning markets – seeking value and impact, strengthening safeguards and guardrails in areas of unchecked risk. And with coordination and co-investment – recognising that government, business, philanthropic and investor interests and objectives are increasingly aligned and intertwined.
This is all a bit yoga and”new age” for my tastes but, so far, there is nothing in the treatise that I disagree with. Indeed, it is overwhelmingly right.
However, problems arise at precisely the same point that they did in the Kevin Rudd thesis. There is a misdiagnosis or, rather, misconception in the framing of the problem. It is a failure to define the terms of reference and it leads to all the wrong prescriptions to fix it.
That is, Australian “neo-liberalism” was never the problem. There is nothing wrong with private markets operating freely. Self evidently, the more the merrier. It was the germ of libertarianism that grew within neo-liberalism that turned it from public utility to private scab grab.
This failure to define terms leads to the Chalmers doctrine:
It’s not just our economic institutions that need renewing and restructuring, but our markets as well.
Here, government has a leadership role to play: defining priorities, challenges and missions – not “picking winners”. This is critical to guide how we design markets, facilitate flows of capital into priority areas, and ultimately make progress on our collective problems and purpose.
The neoliberal model is the opposite of this. It pretends to be agnostic on these questions, but ultimately a choice is still being made through passive de-prioritisation and the perverse outcomes and greater vulnerability that emerge over time.
So it’s not just our economic institutions that need renewing and restructuring, but the way our markets allocate and arrange capital as well.
Co-investment is a powerful tool at our disposal. The Clean Energy Finance Corporation has been a great success, partnering with investors to direct capital where it can have the greatest impact, not by subsidising returns but by helping structure investment vehicles in a rapidly emerging economic sector. We will employ this co-investment model in more areas of the economy, with programs already under way in the industry, housing and electricity sectors.
Collaboration is just as important as co-investment. The private sector is key and central to sustainable growth, and there’s a genuine appetite among so many forward-looking businesspeople and investors for something more aligned with their values, and our national goals. I’ve seen this for myself in the course of my work, and especially in the Investor Roundtable I’ve been convening as treasurer, representing trillions of dollars of capital and focused on housing, energy, data and digital, and more.
Australia’s neoliberal model failed where libertarianism dominated. Pre-2008 this was in banks and non-banks. After 2008, it was in miners and energy. Both hollowed out the industrial base to boot, the core of our national vulnerability.
But the policy responses made this worse. Rudd’s definition of failed “neoliberal markets” led him to “collaborate” and “co-invest” in banking bailouts rather than allow the greedy to fail, to bring justice to the criminal, to restructure toothless regulators, and to give new guard rails to capital markets.
This was a red rag to a bull for every vested interest in Australia’s already massively overconcentrated corporate sector. Hence, once the libertarian miners knew that the government was in the business of “collaboration”, they attacked it mercilessly, rolled the prime minister, then “co-invested” with Wayne Swan in writing their own tax code.
If there is one consistent theme in MB over this decade it is that the rise and rise of “collaboration” and “co-investment” between Canberra and private markets is the worst-case recipe for the very policy capture, overweened vested interests, falling living standards and rising inequity that Chicken Chalmer’s purports to fight!
We can already see this failure playing out in Chalmers’ actions. His prescriptions for the future well-being of Australians are absurdly limited and counter-productive:
In the Treasury portfolio, a depoliticised and more regular Intergenerational Report will provide a clear sense of our long-term economic future, and a Tax Expenditure Statement will provide a more transparent, accessible analysis of budget pressures. This work will be supported by structures that will better evaluate what’s working and what isn’t. The Employment White Paper will plan for the highly skilled workforce that maximises the potential of our people.
This presupposes mass immigration is good rather than examining the question of how it serves living standards. Why? Because Chalmers “collaborated” and “co-invested” in a population summit with big business.
He can blather about training Aussies all he likes, but mass immigration as it is currently structured only encourages businesses to reach offshore for cheap foreign labour instead, always pressuring wages lower and crush-loading every public service.
Or take the Chicken’s monetary reforms:
We will renovate the Reserve Bank, responding to the RBA Review. And we will renew and revitalise the Productivity Commission as a powerful think tank advising government on productivity, as well as prosperity and progress more broadly.
The terms of reference are far too narrow and should have included APRA and Basel III. The major monetary reform needed is to put macroprudential policy back inside the RBA and to remove incentives for property lending. Without these, the RBA will not change at all, let the industrial base where our key vulnerability lies.
Why? Because Chalmers is busy “collaborating” and “co-investing” with the big banks.
The Rudd/Chalmers doctrine and the key reforms cited by it only make economic probity, inequity, and fragility worse.
Why Labor is stuck in this muddled and gutless thinking is not entirely obvious. Kevin07 appears to dominate the party mindset in some very unhealthy manner. Or, perhaps it is a legacy of the cultural cringe that rose in the Keating years. Or, it is some yearning for a command and control economy that lurks in the heart of every China-groomed Labor hack. Perhaps it is mateship itself, which is so often just corruption looking for an excuse. I do not know.
What we can say for certain is that it is wrong for both the national interest and public utility.
The government’s role is to structure and regulate markets unless or until they fail in their purpose. If competition is displaced by cartels, regulators are corrupted by the regulated, greed substitutes for innovation, or creates public externalities, then the government should intervene to restructure and reregulate.
This balance is what delivers probity, fairness, meritocracy, capital and labour efficiency, productivity, and well-being.
Applied to Chicken Chalmers’s examples it would mean much simpler and more direct responses. Forget Intergenerational Reports and Employment White Papers to support mass immigration. Simply fix the price of labour that can be imported at a base salary of $100k. Voila! More training, more investment in capital, higher productivity, rising salaries, and living standards (sorry, “well-being”).
In the case of the RBA, stick APRA back inside the central bank and appoint somebody adept at using more tools more subtle than the cash rate without pandering to banking cronies.
So on and so forth. Use structural fixes for broken markets and let them trade. Do not engage in endless “collaboration” and “co-investment” that is an open invitation to the corporate fox to devour the hen house followed by the entire farm.
You’d think that Chalmers would have learned that much from Rudd’s catastrophic prime ministership.
