Yesterday Scott Morrison caved in and agreed to provide support for Victorians affected by lockdown with a $500-a-week payment. The decision is being described by journalists as an ingenious political tactic to pressure premiers into only locking down on his terms. More accurately, it represents a recognition by Morrison that the narrative pushed by Labor — both at the federal and state levels — that this is “Morrison’s lockdown” has worked. Having stuffed up quarantine, aged care and the vaccination rollout, the government had little choice but to bow to demands to help Victorians.
This is a return to a narrative that predominated for the second half of last year and this year until the WA state election — in which Labor state leaders were “bedwetters” too ready to harm the economy by shutting down at the first cough and too ready to run up debt to cover the cost while Scott Morrison and Gladys Berejiklian understood the need to keep the economy open.
That idea — to the extent it was ever true — went west, quite literally, when Mark McGowan reduced his opponents in WA to a duo. Morrison’s international border closure suddenly extended off into 2022 and beyond, and the budget significantly increased the size of Australian government for the foreseeable future.
Voters, it seems, like life “under the doona”, as Morrison once derided it. Lockdowns are enormously disruptive when they occur but many people prefer working from home if they can. Closed borders are very popular, despite the cost they inflict on major industries like tourism and higher education. The complaints from sectors dependent on temporary migrant labour get an uncritical run in the pages of the Financial Review but no one else particularly cares. Closed borders have tapped into Australians’ barely-hidden dislike of high immigration (even among recent arrivals) and the negatives that they experience as a result — congestion, high housing costs, low wages growth.
As economist Saul Eslake explained in a recent piece, the economic effect of closed borders has been economically positive in terms of spending — with Australians prevented from travelling, they have spent more locally than we have lost from international tourism — and in terms of employment, with lower migration reducing the number of new jobs needed to keep unemployment falling. Eslake noted
Australia has some ‘form’ when it comes to forcing its citizens to spend on domestically-produced goods money that they would have preferred, if allowed, to have spent on foreign-produced goods (and services). We used to call it ‘protection’. We did it for almost 90 years, from federation until the late 1980s, when it finally dawned on us that the short-term gains from creating jobs in manufacturing were outweighed by the longer-term erosion of our living standards, relative to those in other countries which chose different economic development strategies.
On top of that is actual protectionism, with both sides of politics now moving to onshore parts of manufacturing deemed vital to Australia, as a new form of “security” has been identified as necessary: health security.
Nor is there a high level of concern about the astonishing debt we are racking up. With net debt forecast to reach nearly $1 trillion, support for the idea that the government should start paying down debt is negligible, with strong support for the idea that Australia should spend whatever it takes to help the economy recover.
That is, Australians have, fairly rapidly, abandoned two economic shibboleths of the last three decades — that being open to the world, in the long run, makes us wealthier than if we’re closed off, and that permanent deficits are not a viable fiscal strategy.
As Eslake notes, the short-term attractions of being a hermit kingdom are considerable. And Australians’ politics are shorter-term than ever.
But the cost might not just be in terms of putting off hard decisions until after the next election (or two). The cost might be in having to re-convince the electorate all over again about the benefits of economic liberalism and fiscal discipline.
It took a whole generation of politicians to establish what seemed to be a permanent political framework for economic liberalism in Australia. Not just Hawke and Keating, but politicians, economists and public servants of all kinds who argued the merits of economic reform from the 1960s onward — convincing the public of the sometimes counter-intuitive lessons of free trade, open markets and fiscal discipline.
It won’t be any easier to do the second time round, and not only or particularly because there’s no one of the calibre of Labor’s giants in politics.
This time around voters are wise to the pitfalls of economic liberalism — especially the inequality and unfairness that comes along with greater wealth. In net terms, some benefit a great deal from liberalisation, most benefit a little, and some lose out. Voters are also aware of how large corporations have worked hard to seize the benefits of liberalisation while lumping them with the costs, and how the power of corporations has grown in recent decades at their expense.
And this time around there are no international examples — no Thatcher, and no Reagan, though Reagan was more a corporate puppet with no fiscal discipline than a genuine neoliberal. In fact, neoliberalism is in retreat globally; Joe Biden has proven far more economically progressive than anticipated and Boris Johnson is profoundly profligate. Other than in the padded cell of the AFR‘s editorial office, no one is arguing for a return to neoliberalism.
For many, a retreat to the economic thinking that we last encountered during the Fraser years might be a welcome alternative to the last 30 years (especially amongst voters old enough to have once hated Fraser with all the passion they could muster). But not all that glistened in neoliberalism was dross; not every benefit only accrued to shareholders and corporate executives. Eslake is correct that at some point we’ll have to re-engage with the world. Who wants to tell voters — and assure them it will be done on fairer terms?