As Richard Denniss observes, the ideology of neoliberalism – or, in common Australian parlance, “economic rationalism” – a set of ideas so dominant as to seem like common sense, at least to the political class, has, quite suddenly, lost its grip on thinking about public policy.
The political right in Australia now routinely advocates government intervention to achieve all kinds of goals, from the preservation of coal-fired electricity generation to the construction of sporting stadiums. The Labor Party, which took the lead in the early years of neoliberal reform, has shifted even further, advocating higher taxes on companies and high-income taxpayers to fund measures like the NDIS and Gonski programs.
On the other hand, as Denniss notes, neoliberalism (like every other ideology in history) has never been applied in its purest forms. Cosy deals with favoured businesses on the one hand and occasional gestures towards social equity on the other can be observed through the 1980s, 1990s and 2000s. What, if anything, is different today?
Before starting, it’s important to distinguish between “hard” neoliberalism and the “soft” neoliberalism sometimes called the “Third Way.” Hard neoliberalism, most prominently represented by Margaret Thatcher, combined market-oriented policies of privatisation and pro-business regulation with attacks on social welfare and regressive income redistribution. Its high point in Australia was the Fightback! package put forward by John Hewson in 1993. Following the unexpected defeat of Fightback!, John Howard and Peter Costello pursued a more cautious version of the same agenda.
In contrast, soft neoliberalism involved an attempt to soften the impact of neoliberal policies by strengthening the welfare “safety net” and maintaining some progressivity in the tax system. The successive versions of the Accord under the Hawke government were the most notable embodiment of soft neoliberalism in Australia. Within the Hawke government, there was a sustained tension between the soft neoliberalism of the Accord and the hard neoliberalism of Paul Keating and Peter Walsh.
From the 1980s to the global financial crisis, the range of opinion from “hard” to “soft” neoliberalism defined the Overton Window, representing the range of opinions that could be taken seriously within the Australian political class. As Laura Tingle observed as recently as 2015, in her Quarterly Essay Political Amnesia, to argue against economic rationalism was to invite “ridicule or contempt.” In retrospect, the fact that such arguments were even deemed worthy of mention was an indicator that the grip of economic rationalism was loosening.
In both its hard and soft forms, neoliberalism was an elite project relying on a broad consensus within the political class. Neoliberalism never attracted strong public support; rather, it relied on acquiescence and acceptance of Thatcher’s dictum that “there is no alternative,” acronymically abbreviated as TINA.
But in the wake of the global financial crisis, even that acquiescence disappeared. For a political class still saturated in neoliberal ideas, this represented a crisis of legitimacy. The public was no longer listening to talk about markets and choice, but the political class was still in thrall to these ideas. Again, Laura Tingle captured the problem (from the perspective of the political class) in her 2012 Quarterly Essay, Great Expectations.
The breakdown of neoliberalism, in Australia and throughout the English-speaking world, has been most dramatic on the political right. In the absence of mass enthusiasm for neoliberalism, the right has long relied for electoral support on a combination of class support from big and small business, hostility towards trade unions, and appeals to social attitudes which could, until recently, be described as “conservative,” including attachment to the monarchy, traditional family values and faith in strong leaders. Where necessary, these were backed up by appeals to racial and religious bigotry, sometimes overt, but mostly coded as opposition to “political correctness.”
Taken together, one might call this “default identity politics.” It’s the inverse image of what’s commonly referred to as “identity politics,” based on membership of a minority or (in the case of gender) underrepresented group. The default identity is one that is taken to be typical of people in the country concerned, and entitled to deference from others who differ in various ways from the default.
The core claim of default identity politics is that these “real Australians” (or “real Americans,” etc. have been ignored and overridden by a minority who do not share their values – radicals, foreigners, elites and so on. Although this theme is an old one, going back to Robert Menzies’ “forgotten people,” it has gained in intensity as the population has become more diverse, with the result that only a minority of people fit the default identity.
The result has been a proliferation of minor parties, of the far right, right and centre right. Examples in the last two Senates include Pauline Hanson’s One Nation; Australian Conservatives; the Palmer United Party, aka the United Australia Party; Family First; Katter’s Australian Party; and Derryn Hinch’s Justice Party. Some of these parties represent specific components of the right-wing base, some are personal vehicles for aspiring demagogues and some a mixture of the two.
Although not a major source of electoral support, the coherent policy direction of neoliberalism provided the glue that held this coalition together. The collapse of faith in neoliberalism has dissolved the glue.
Abbott’s term as leader of the Opposition and then as prime minister completed the eclipse of neoliberalism. Consider his three-word slogans: “Axe the Tax,” “Stop the Boats” and “Fix the Debt.” Axe the Tax represented Abbott’s rejection of a market-based response to climate change. Stop the Boats was a gesture to the prejudices of the base. Fix the Debt was code for the neoliberal program embodied in the Commission of Audit report and Joe Hockey’s 2014 Budget. But the message was too deeply hidden for the voters to understand that Abbott’s promises to protect public expenditure were (in the terminology made famous by John Howard) “non-core.” Once the 2014 Budget failed, concerns about neoliberal orthodoxy were finished.
In particular, concerns about the “level playing field” disappeared. Industries were supported or punished according to their position in Abbott’s culture war politics. The vehicle industry was punished because the companies were seen as being in league with the unions. Coal was promoted, while solar energy was denounced. Even more absurdly, bogus claims about the health risks of sound from wind turbines were promoted by the very same people who had spent decades deriding environmental concerns of all kinds.
Abbott’s replacement by Malcolm Turnbull seemed to promise the possibility of a shift to soft neoliberalism. Turnbull had mouthed all the right words during his previous stint as leader and throughout his period in the wilderness. As prime minister, however, he turned out to stand for nothing except handouts to his own class. He embraced, or acquiesced in, climate-science denialism, culture wars on marriage and refugees, and, finally, outright racism.
The change is evident in a comparison with the first upsurge of One Nation in the late 1990s. At that time, the mainstream conservative parties had enough self-confidence to reject Hanson. Strikingly, Tony Abbott led a legal vendetta against Hanson, which led to her being jailed for supposed violations of electoral law (the charges were, quite properly, overturned on appeal).
By contrast, the second time around, the LNP was eager to find that Hanson had “matured.” In reality, Hanson’s racism and bigotry were more entrenched than ever, but were now in tune with those of the dominant groups in the LNP base, led, ironically, by Tony Abbott.
On the left, the picture during the era of neoliberalism was a mirror image of that on the right. Under Hawke and Keating, Labor led the way in promoting a soft version of neoliberalism. Environmentalists, feminists and old-fashioned Labor voters might have been disillusioned by the politics of privatisation and deregulation but they had nowhere else to go. Labor lost support to the Greens but got most of it back in second preferences.
In the wake of the global financial crisis, the contradictions emerged in full force. After Kevin Rudd’s brief flirtation with a reinvigorated social democracy in his Monthly essay on the crisis, Labor retreated to the familiar ground of soft neoliberalism for the remainder of its time in office.
Yet in the last few years, the spell of neoliberalism has faded. Labor has proposed higher taxes and increased public expenditure, and has largely, though not entirely, repudiated privatisation and asset sales. There hasn’t been any obvious electoral cost to this; rather, Labor has been consistently ahead in Newspolls federally and has gained ground at the state level.
This process has been far from painless. There have also been some curious realignments. Bill Shorten, long seen as a right-wing opportunist, has taken a series of stands bolder than anything seen from Labor in decades. Meanwhile, Anthony Albanese, long the darling of the party’s progressive membership, has attacked Shorten from the right, calling for pro-business economic policies and surrender to Turnbull’s class war. Overall, however, the shift away from soft neoliberalism is unmistakable.
Why has the realignment gone more smoothly on the left than on the right? In part, the breakdown on the right has assisted the process of change on the left. The collapse of hard neoliberalism has undermined the capacity of the right to make any coherent argument on economic policy. It’s obvious, for example, from the Turnbull government’s flailing around on tax policy that the cuts it eventually introduced were driven by class interest rather than by any real faith in markets.
In part, it’s a matter of generational turnover, as leaders whose political views were formed in the economic upheaval of the 1970s and 1980s pass from the scene. These leaders were saturated in neoliberal ideology and took as obvious common sense the worship of financial markets central to that ideology. Younger activists, who have experienced the chaos and corruption of weakly regulated financial markets, find laughable the idea that the fluctuations of these markets represent the considered judgment of experts.
It is important not to be complacent about this. Bad as hard neoliberalism was, its collapse has opened the way for the darker and more dangerous forces of racism and bigotry, which now dominate the political right in Australia, and around the world. In the long run, these forces will be defeated, as they always have been. But the damage that can be done in the meantime is huge.
It is clear, however, that a policy of cautious compromise is not going to work. The only alternative to the right-wing politics of fear is a left-wing politics of hope.
John Quiggin is an Australian Laureate Fellow in economics at the University of Queensland and the author of Zombie Economics. His blog, at johnquiggin.com, presents commentary from a social-democratic viewpoint.
This correspondence featured in Quarterly Essay 71, Follow the Leader.
ALSO FROM QUARTERLY ESSAY