Kevin Rudd claimed, in February’s Monthly, that neo-liberalism was no longer the dominant paradigm for governments and he was right.
His government has massively increased interventions of government into the market by spending on a range of programs that are designed as infrastructure building and counter cyclical spending, so thanks John Maynard Keynes. However, that essay and the more current debate on which treasurer has the best market credentials (my deficit is stronger than yours!) fail to recognise that neo-liberalism is not just about the financial crisis or even about economic policies.
This gap in understanding emerged in last week’s history bickering at the Paul Kelly launch. I find myself in unusual agreement with Kelly that Keating and Howard had very much in common as economic reformers. Rudd was wrong in his claim that Howard did not build on Keating’s reforms, because he did extend many aspects of the neo-liberal market models introduced by the previous government. Rudd similarly fails to note his own government’s continued use of market frameworks in many policy areas because he uses a very limited definition.
Neo-liberalism, or neo classical economics, assumes that human nature is predictable as individuals act rationally on the basis of self interest. Equations therefore can predict and explain our choices and there is no need to explore more complex bases for human behaviours such as relationships, optimism, irrational exuberance and idiocy.
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These are excluded as tastes as are the pressures and pleasures of belonging to family, society, community or other groupings. Market theory is problematic to politicians because it is value free and creates winners and losers as power and resources are unevenly distributed.
As politicians usually want to impose their value system on their social system so the past three decades have seen various versions of market models in the economic sphere, with different overlays of social interventions. The more conservative parties may push social control, and law and order. The ALP mitigated some market effects with social wage spending. However, Howard preferred to shift spending to higher-income earners and families as his forms of control.
Under both regimes, there was a major shift of political and media interest onto economic performance as though it was the only aspect of society that mattered. GDP growth and interest rates drowned out any serious debates about the society we wanted, assuming that wealth was the main aim and would solve all problems.
We heard little on the social effects of inequality, whether markets were the best ways to deliver education, financial services, labour, health, care, creativity or how to create resilient societies to deal with climate change. Money was assumed to equate quality of life. The assumption was that the market was the best provider of options for almost everything so governments were only to intervene where markets failed.
That dominance of markets is neo-liberalism. Its failure to understand human behaviour meant it was unable to control irrationality and manipulation in the markets but that is only one part of the process. Reading the Rudd essay again, I am concerned that his solutions are very limited and don’t question anything but limited regulation. He claims we need to fix market failure by fixing the money supply in the present crisis and increase regulation but that is it!
There is no evidence that he is really questioning the basic assumption of markets as the best form of distribution. This mean that his government will retain too many market-based policies in power, transport, health, education, child care, skills, community and unemployment services.
I am not arguing against markets, where appropriate, but against the ideological assumption that competition and markets are always preferable. This is what needs urgent reviewing to create more equity, efficacy and therefore efficiency.
So: please, Kevin Rudd, can you extend your critique to those left-over policies that have not been appropriately looked at?
Didn’t ABC Child Care suggest that looking at markets as the preferred form could create problems? Can we please have a proper debate about the appropriateness of your neo-liberal policy making outside financial areas? Can we, for instance, talk about education and even early-childhood services, as more than increasing human capital for the labour market?
The lesson from the GFC is “do not wait for the next (social) crisis” before fixing the problems. As citizens in a supposed social democratic state, we need discussion of the proper roles of markets, communities and public spheres. Then we can decide what society we want in the future, not just what GDP we want.