Since December 2009, Labor has had an agonising problem. It has been unable to combat the brilliant wrecking strategies of its conservative opponents, who are prepared to do or say anything if it will assist in removing Labor from power.
While both sides of politics readily indulge in populism in opposition, Tony Abbott's opposition has pursued a strategy accurately summed up by Paul Keating as "if you don’t give me the job, I’ll wreck the place". This has included such tactics as walking away from a bipartisan policy on an emissions trading scheme, even after a deal brokered between the major parties over legislation, persistently claiming Australia represents a "sovereign risk" to foreign investors and that impoverished African countries were better destinations for foreign investment, claiming that Australia could default on its public debt, opposing economic stimulus to save jobs, rejecting the election costings process established by the Coalition itself when in government, and undermining consumer confidence with hysterical claims that a modest carbon pricing package would inflict massive damage on the economy.
It has also included the Coalition turning its back on some the key economic reforms of the past 30 years -- rejecting a market-based solution for carbon abatement in favour of a big government winner-picking approach, increasing company taxes, blocking reforms to lift Australians’ retirement savings and trying to block the extension of means-testing of middle class welfare.
Regardless of the content, the strategy has been masterful -- Abbott has turned a disastrous polling position in December 2009 into an almost unbelievable lead and is just one by-election from government. He has written a playbook for future opposition leaders with his performance.
Labor’s answer under Julia Gillard was initially to try to match the Coalition’s populism where it could on issues such as asylum seekers, climate change and its mining tax. But since clinging on to government, it has settled for doggedly pursuing a reform program and hoping voters would reward it for its diligence. In effect it has had no real strategy for dealing with the Coalition approach, especially as it has been unable to communicate effectively with voters due to its own ineptitude, Gillard's unpopularity and a hostile media environment.
Interestingly, the Democrats have gone through a similar, indeed more extreme, ordeal in the US as the Republicans have adopted an economic wrecking strategy so successful that Standard and Poor’s specifically blamed them for its ratings downgrade. Barack Obama has also tried to shift to the Right, particularly on fiscal policy, but like Labor here it has done little except alienate his party base and prompt them to look for alternatives.
In here and in the US, conservatives’ highly successful strategies have been informed by a simple belief that their opponents have no legitimacy, and anything is justified by efforts to remove them from office. In effect, one side -- the progressives -- have been left fighting under the self-imposed rules of traditional politics, while their opponents are operating with no constraints. It’s almost funny to watch, especially as the traditional major progressive parties in the US and Australia are hopelessly inept even when playing by the rules, let alone in the more freewheeling environment created by their opponents.
What are these parties to do? Their current strategies aren’t working.
Game theory provides an interesting solution, though not an especially pleasant one. The dilemma for progressive parties matches the "iterated prisoner’s dilemma" of game theory. Faced with a "prisoner’s dilemma" choice in which two players both benefit from co-operating, but one player gets greater benefit from not co-operating ("defecting"), the rational decision is for both players to defect. That's not how the model has worked in Australia in recent decades. Since the 1980s, both sides have, to various degrees, acted as what are called "super-rational" players -- that is, they have assumed that the other player is rational like them, and will reach the same conclusion as them, that there is benefit to both sides in co-operating, and have therefore decided to co-operate.
On occasion, the co-operation wasn't forthcoming over economic reform -- the Coalition, for example, tried to wreck Medicare and compulsory superannuation in the 1980s and 1990s, and Labor tried to block the GST even after John Howard had won an election that was in effect a referendum on it. But "super-rationality" has entirely broken down on the Coalition side since Tony Abbott became leader.
But in the iterated prisoner’s dilemma, you play multiple rounds of the same game and, crucially, remember what your opponent did last time. This changes the game entirely, and makes it more closely resemble politics. Under the iterated prisoner’s dilemma, the most effective strategy is "tit for tat" -- you co-operate until your opponent defects, then you defect as well, until they co-operate again, when you co-operate. Adding a small probability of co-operating even after a defection provides a circuit-breaker for cycles of defection.
But continuing to co-operate while the other side regularly defects is the worst possible outcome. That’s what Labor (and the Democrats) are doing now -- continuing to play the traditional game while their opponents refuse to. It's the suckers' play.
In short, progressives' smartest response to the defection by conservatives is to do the same, to stop playing by normal political rules, abandon the pursuit of reform and sound economic management and concentrate on punishing their opponents on the basis that continuing to co-operate simply means they lose, every time, whereas responding with defection is more likely to yield co-operation.
That, of course, is bad news for the public interest and good policy. Countries and economies naturally benefit from the party in government maintaining sound economic policies, even at some political cost to that party.
Over the longer term, however, the picture isn’t so clear. By continuing to co-operate rather than defect, progressives continually reward conservatives for defecting. This ensures that defection will become entrenched as a conservative strategy, permanently harming the national interest. By switching to tit-for-tat, progressives might cause temporary harm to the national interest, but in doing so compel conservatives to resume co-operating. In the long-run, Labor copying the Coalition in abandoning sound policy might mean both sides resume sound policy more quickly.