I suggested the other week that the Coalition had embarked on a course of nostalgianomics, an economic policy based on a magic reversion to the “golden age of reform and prosperity” under John Howard.
Yesterday Joe Hockey, responding to Wayne Swan’s statement on the economy, elaborated on the theme.
For a long while it’s been normal for the Coalition to play down the global financial crisis as a way of undermining Labor’s claims have to handled it well, and argue that subsequent deficits are not the result of efforts to save jobs, or the impact of the crisis on tax revenue, but because Labor has a pathological need to waste money.
In the Coalition’s version of recent economic history, certainly in the form relayed by Tony Abbott last week, there was no financial crisis at all. The key event of recent times was the election of the Rudd government, which singlehandedly brought the golden age to a juddering halt by spending too much. Moreover, they spent it so badly that somehow, defying all economic laws, the money completely vanished, because there hasn’t been any jobs growth in the past 12 months.
Almost as if Kevin Rudd and Julia Gillard and Swan heaped billions of dollars into a giant bonfire in the Prime Minister’s courtyard and burnt the lot.
I’d call such a rewriting of history “Orwellian”, or even “Stalinist” if I was tempted to risk a reverse Godwin’s Law (you know who else claimed there wasn’t a financial crisis?), but it’s actually fairly standard politics, particularly from an opposition that for a long time now has been trashing its own economic credibility.
Yesterday Hockey went further, not merely failing to mention the events of 2008-09 at all — the government’s stimulus programs were instead “the greatest waste of taxpayers’ money in modern Australian history” — but offering an alternative account in which it was the Howard government that had handled the real economic crises. Hockey dwelt at length on the Asian financial crisis, then threw in the tech wreck (“which led to a near-recession in the developed world”) and the drought as evidence that the Howard government was the real economic crisis manager. “We guided Australia through those difficult episodes with a sure hand and sound policies that were consistent.”
One hopes Hockey doesn’t seriously believe that the Asian financial crisis is comparable to the events of 2008-09, that financial crises in Thailand, Indonesia, Malaysia and Korea, and subsequent crises in Russia and Brazil, were equivalent to the systemic threats in the very heart of modern capitalism. Surely he doesn’t think, say, that the bailout of Long Term Capital Management was comparable to the bailouts of Bear Stearns, Goldman Sachs, Morgan Stanley, Citigroup, AIG, Bank of America and the collapse of Lehman Brothers or the dispatch of Merrill Lynch. One hopes he doesn’t seriously think the “near recession” after the tech wreck was comparable to the recession across Europe and the United States that is still unfolding years later.
The Asian financial crisis did set in train events that demanded careful management from the Howard government, but they were foreign policy challenges: the collapse of the Soeharto government and the ensuing events in East Timor. The real economic achievement was Peter Costello’s efforts to sow the seeds of what later became the G20 — and his entirely justified criticisms of the IMF at the time.
Like Abbott last week, Hockey spent far longer detailing the economic achievements of the Howard government (it’s always the Howard government — Costello is never mentioned) than addressing contemporary economic challenges. He even claimed Fitch’s AAA rating in November for the Howard government — “the AAA rating … is built on our efforts, it is built on our surpluses, it is built on our Future Fund” — as a sort of belated economic gong, inconveniently awarded to the Coalition four years late, but their’s nonetheless.
If all this was a cover for a real economic agenda, you wouldn’t worry. But Hockey showed no interest in grappling with the most significant challenges facing the economy. What does the Coalition want to do about a persistently high dollar? The government has nailed its populist colours to the mast — it is now talking about intervening more and more to prop up dying manufacturing sectors such as the aluminium smelting industry, which employs a tiny number of Australians, sucks up hundreds of millions of dollars in subsidies a year and spews out 6% of our entire greenhouse emissions. The opposition, until recently making all sorts of similar noises, now appears betwixt and between, willing to continue current levels of protection but silent on where to go beyond that. What would they do if a real disaster did unfold in Europe, sending world financial markets into a deep freeze? Are they content to let monetary policy do the heavy lifting of stimulus?
And then there’s the real question that faces Labor and the Coalition and which, reading Wayne Swan’s statement, is an emerging concern of the government: what happens if there isn’t a disaster in Europe, but it merely drags along the bottom for another two years or more, tortured by uncertainty and the impact of the Axis of Austerity’s fiscal hairshirt, subduing global growth, keeping the Aussie dollar high and putting significant pressure on government revenues here? What’s the Coalition’s fiscal plan in an environment where not merely can they not return to the easy years of the pre-GFC era, but they face much lower revenue growth for years to come? Where are those “aspirational” tax cuts and big spending health programs in such a world?
The evidence they’re doing any thinking about this is thin on the ground. Instead, they want us all to bathe in the warm glow of nostalgianomics.