The Shadow Treasurer, Chris Bowen, has set out a policy approach for the Labor Party’s future.
In a speech to the McKell Institute, Bowen attacked the “prejudice” and “lazy thinking” of the Abbott government.
Of the way forward for the ALP, Bowen said: “Well, it is certainly not to retreat inward, to shy away from trade, to resist technology in a Luddite fashion or to become more inward looking, more suspicious of foreign investment or more embracing of protection. But nor is it to retrench support for individuals, to cut investments in basic services or give up the fight for a more equal society and for equality of opportunity.”
Bowen said the ALP had to be the party of growth: “Labor is and should always be a party of economic growth.”
More than ever, Bowen said, the ALP also needed to be the party of opportunity and fairness: “…Equality of opportunity has always mattered to Labor. It’s what drives us. And it is now more important than ever before.”
Bowen began his speech with a tribute to the former NSW Labor leader, William McKell, who was Premier between 1941 and 1947. McKell also served as Governor-General from 1947 until 1953.
Transcript of speech by Chris Bowen to the McKell Institute.
Growth, Opportunity And Fairness: A Better Way
I’d like to thank the McKell Institute for the opportunity to speak here today.
Ever since I first read Vince Kelly’s “Man of the People” many years ago as a young lad, I’ve been an admirer of William McKell’s and respecter of his legacy.
An inherently decent man, McKell saw his mission in life as improving the lot of ordinary people.
He was a pragmatist who believed in practical actions, but he had a framework of beliefs which informed his policies: a belief in the virtues of hard work and fairness and, though he wouldn’t have used these words, in social mobility and equality of opportunity.
I’m very glad that the McKell Institute continues to honour his legacy with your important contributions to public policy and I can think of no other organisation more appropriate as a forum to share my views on the ferocious debate currently raging about the future of economic policy in our nation.
It is the McKell tradition that was alive in the economic and social reforms of the Hawke and Keating Labor Governments.
In the 1980s and 90s those Labor Governments pursued bold reform – floating the Australian dollar, unleashing competitive pressures in and on the Australian economy, reforming the state and the social compact – all the while governed by values that had at their very core, how we could spread opportunity and lift up those born into disadvantage.
It was this same tradition that guided the Rudd and Gillard Governments as we pursued economic reforms and oversaw long overdue changes and enhancements of our Age Pension for example, all while steering Australia through the global financial crisis, promoting economic growth, avoiding a debilitating recession.
The same values are still, of course, relevant to the political battle of today.
Looking at the rhetoric of our political opponents, it would be tempting to conclude that the declaration by the Treasurer of the end of the age of entitlement heralded a new era, that Australia’s conservatives had embarked on a new epoch of strict adherence to the rigid ideological theories of the hard right, an apogee of triumph for the adherents of Friedrich Hayek and Ludwig Von Mises in the Liberal Party.
This conclusion is tempting, but wrong.
Prejudice
Having thought about this issue deeply over recent months, having closely examined the rhetoric and policies of this Government, I’ve come to the view that we are not seeing a high point of ideology, but a low point of prejudice.
Prejudice is of course a “preconceived opinion that is not based on reason or actual experience”. Well that is what we are seeing in spades from this government.
Prejudice against ordinary people. Prejudice against people “from the wrong side of the tracks”.
Prejudice against the ability of people to improve their lives, to better themselves, but who may need a helping hand to do so. Prejudice against social mobility and equality of opportunity.
How have I reached this conclusion? By examining their policies and their words.
Joe Hockey has not ended the age of entitlement. He’s simply changed who is entitled. He has skewed Government support towards people he thinks are deserving.
The Treasurer is not shrinking the state. He is shifting the state.
How can he be ending the age of entitlement when he is overseeing the introduction of a massive new entitlement scheme, which costs more than $5 billion a year and sends cheques of up to $50,000 to people, regardless of income or assets, on the occasion of having a baby?
The Treasurer said recently: “payments are too broadly available to too many people” all the while introducing this massive new payment scheme.
If Joe Hockey really believed in the ending the age of entitlement, he would have supported the means testing of the private health insurance rebate, which he opposed.
The Government’s approach is so internally inconsistent, so lacking in logic that it cannot be described as an ideology or anything approaching it – it is simply prejudice.
Prejudice which leads the Government to conclude that the age pension is too generous while winding back measures which would have seen higher income earners pay a fairer share of tax on superannuation.
Prejudice which leads the Government to lock people under 30 out of Newstart while reversing changes which would have seen multinational corporations pay a fairer share of tax.
Prejudice which tells the Government it is OK to abolish the only tax concession that exists for low income earners to save through superannuation, but to reverse modest measures which made tax concessions for high income earners fairer.
Prejudice is also apparent in their words.
When the Treasurer expressed his incredulity at the anger in the community which met the government’s moves to unwind the universality of health care by introducing a seven dollar charge to see a doctor, he argued that it was merely a third of a pack of cigarettes or a couple of middies.
His message was perhaps accidental, but clear: if only ordinary people would give up these discretionary purchases then they could make their fair contribution to his budgets.
Our welfare spending is low by world standards
He talks of “leaners”, lumping in age pensioners, disability pensioners and working families who receive family tax benefits and complains they are making the budget unsustainable.
Of course, his case is so weak as to provide further confirmation that we are seeing prejudice and class warfare rather than considered policy analysis.
The Treasurer complains that we spend more on welfare than defence.
Well, as Greg Jericho has pointed out, even the United States with its famously minimalist welfare system and expensive defence infrastructure also spends more on welfare than defence.
Let’s look at a few facts:
Fact: Australia has the second lowest spending on welfare in the OECD.
Fact: Our welfare spending is not projected to grow. The Treasury’s latest Inter-generational report shows that welfare spending, which was projected to be 6.9% of GDP in 2010 will remain at 6.9% of GDP in 2050.
Fact: Dependence on welfare has been falling, not rising. The Government’s own McClure Report shows that the proportion of Australians with government transfer payments actually peaked in 1997 at 25% and has now fallen to 17%.
I share these facts with you because they underline the point: the Government’s policies can’t be driven by a coherent ideology or even a considered reflection on the facts because they ignore the facts.
The Government’s case that welfare spending is too high and is out of control simply can’t be sustained.
The only possible basis for this approach is prejudice.
So how should Labor, which has dedicated its existence to the improvement of the lives of ordinary people respond to this prejudice?
Perhaps with prejudice of our own? Or with a return volley of class warfare?
No, we are a better than that.
We respond with a considered framework, one which reflects our enduring values, modernised to deal with current opportunities and emerging challenges.
A response which rises above the prejudicial nonsense we hear from our opponents with a considered framework which will underpin the economic policies of a Shorten Labor Government.
Australia does face challenges. Indeed, we face big challenges. But they aren’t the challenges the Treasurer talks of. They have never passed his lips.
But every challenge is also an opportunity and we should be confident in our economic future if we get the policies and priorities right.
Given the Treasurer has never spoken of these challenges and opportunities, let me address them today.
The rise of technology
The world has seen advances in technology which were unimaginable even twenty years ago. This has improved our lives exponentially.
We are more efficient, healthier and living longer right around the world.
And the march of technology is getting faster.
3-D printers, automation and robotics are advancing at an ever increasing pace. They are improving the efficiency of the economy and are creating enormous opportunities for economies that make the right policy choices.
But what some have called the “second machine age” also presents dangerous shoals for countries and economies that don’t make the right choices, that don’t understand the challenges and don’t invest in the right things for the future.
These massive improvements in technology threaten jobs while at the same time creating opportunities for economies to create jobs and wealth in new areas.
As US economist Jared Bernstein has pointed out, the years since 2000 are the first time since records began in the United States’ economy that labour productivity increases have not been accompanied by increases in employment. He calls this, the jaws of the snake. Rolf Kleiner calls it the “great decoupling”.
When you have a look at this phenomena on a graph, you can see what they are talking about:
[Source: Into the Jaws of the Snake, R. E. Kleiner, 2013; data from the U.S. Bureau of Labor Statistics]
The GFC and its lingering aftermath can be blamed for some of the world’s bloated sea of unemployment in the United States, but nowhere near all of it. Something else, something deeper is going on. And we need to be aware of what this phenomenon is likely to mean for Australians in coming years.
We talk a lot about the need to increase productivity in Australia. So we should: we need to.
But we also need to examine what we need to do to ensure productivity increases actually result in a better economy providing more jobs, not a further hollowing out of middle and low level jobs and further increases in inequality.
In Australia, one of the great achievements of the Rudd and Gillard governments was ensuring that Australia’s unemployment rate did not go up anywhere near as dramatically as did the rate of unemployment in so many other countries during the GFC.
But now many countries are seeing their unemployment rate fall while ours remains with a six in front of it.
Unless we make the right decisions, the right investments now for the future we risk losing the great advantage that Labor engineered for our economy.
The Australian economic data doesn’t yet show a jaws of the snake effect.
There are however many examples of a trend developing.
Checking in baggage at an airport, buying groceries using automated checkouts at the supermarket (that is if you don’t buy your groceries on line) and the plethora of online retailers all represent growing mechanisation of our economy. The Australian Associated Press is even considering replacing journalists with computers, which use algorithms to turn raw data in stories, something that the Associated Press in the U.S. already does.
Labor values: Growth, opportunity and Fairness
So what is the right response to this phenomenon?
Well, it is certainly not to retreat inward, to shy away from trade, to resist technology in a Luddite fashion or to become more inward looking, more suspicious of foreign investment or more embracing of protection.
But nor is it to retrench support for individuals, to cut investments in basic services or give up the fight for a more equal society and for equality of opportunity.
In fact, these things are more important than ever before.
Lazy thinking and tired prejudice, coupled with rhetoric about leaners doesn’t prepare Australia for this future.
We need a Government which recognises what really matters to ensure Australia wins, not loses, in this global race.
And what really matters can be summarised in a few headings. Growth matters. Opportunity matters. And yes, fairness matters.
We need a society that invests in people and protects its social fabric.
It’s the fair thing to do and it’s the smart thing to do.
We need an economy which is innovative, agile, entrepreneurial and embracing of change.
To get there, we need a society which recognises the Government’s need to invest in the economy and in individuals to make this happen.
As Erik Brynjolfson, Andrew McAfee and Michael Spence recently persuasively argued in relation to these challenges:
“Globalisation and technological change may increase the wealth and economic efficiency of nations and the world at large, but they will not work to everyone’s advantage….Ordinary workers, in particular, will continue to bear the brunt of the changes, benefiting as consumers but not necessarily as producers. This means that without further intervention, economic inequality is likely to continue to increase, posing a variety of problems. Unequal incomes can lead to unequal opportunities, depriving nations of access to talent and undermining the social contract.”
Let me talk briefly about why each of these three things: Growth, Opportunity and Fairness are so important to Labor’s framework for our approach to economic management.
Growth
Labor is and should always be a party of economic growth.
Growth lifts people out of poverty. It turns aspiration into reality.
The Greens to our left can eschew economic growth if they wish. Labor never should and I don’t believe ever will.
Labor’s nation building policies since our earliest days were always about economic growth: we saw the potential for a large, productive and connected economy that many of our opponents never did.
That’s why we were committed to building the nation through the railways, the telegraphs and the hydro-electric schemes.
That commitment to growth has stayed with us.
It’s why Hawke and Keating reshaped an economy which had become sclerotic and inward looking.
And let us never forget that of the ten big reforms that the Grattan Institute identified as being responsible for Australia’s unparalleled and unprecedented twenty-three years of economic growth, nine were the responsibility of Labor.
And it was this commitment to growth which saw Labor act decisively and effectively to get Australia through the global financial crisis without recession.
But we need to innovate to keep the growth coming.
The investment phase of the mining boom has peaked.
We have locked in an increase in our national income as a result of the massive expansion in our mining capacity: no small feat.
But now the jobs and growth must come from somewhere else.
Our opponents appear to have little idea of from where it will come. They are too busy redistributing the pie to think about how to grow it.
But Governments can and must create the climate for growth.
We need a policy culture more promoting of entrepreneurialism, of innovation.
We need a government that believes in science let alone promotes it.
You’ve heard Bill Shorten, Kim Carr and me talk about the importance of science and innovation to our approach to government.
This is why: we understand that the changes in the world economy make science and innovation more critical to our economic future than ever before.
It is a vital part of our economic framework for Government.
The cuts to science and innovation in the budget were the most myopic of all. We’ll take a completely different approach.
We need a nation which embraces entrepreneurialism and risk taking. One that encourages venture capital and start-ups. That says to innovative Australians: don’t move to Silicon Valley: do it here!
But more than that, says to innovators around the world “move here to do it”.
Nations which create new ways of doing things will benefit from this second machine age, not be overtaken by it.
Labor has already announced some policy ideas to promote this culture.
But our ideas about an entrepreneurs visa and crowd sourced funding are just the start.
We are doing a lot of work in this area and will have more to say.
But underpinning our economic philosophy is a belief in economic growth and new ways of generating it.
The multiplier effect of new jobs in high technology and innovation is very high: we can harness technology to create new jobs that other new technology will inevitably replace elsewhere in the economy.
If we don’t do this, the price we pay be large indeed.
Opportunity
Labor knows that growth is critical, but is it not, by itself, enough.
The Liberals put equality of opportunity in the too hard basket.
The Treasurer says: “as each day passes, forces such as personal empowerment and personal choice, reduce our capacity to equalise opportunity.”
It’s easy to put something in the too hard basket when your prejudices tell you it doesn’t really matter.
My message to the Treasurer is this: you are dead wrong.
Improving equality of opportunity matters more than ever before.
And the rise of technology does not make it harder for governments to improve equality of opportunity, it provides new ways of doing so.
But equality of opportunity has always mattered to Labor. It’s what drives us. And it is now more important than ever before.
As a matter of fairness, every Australian, regardless of their parents’ income, regardless of whether they live in the city or the country, the Western suburbs or the North, should have the chance to grow to their full potential.
But it is not just about fairness. It’s an economic imperative.
We need every bit of available talent reaching its full potential in this global race.
And we have a long way to go.
In 2012 the Program for International Student Assessment provided a reminder of how much more work there is to do:
Disadvantaged students are up to three years behind their peers while regional and remote areas are almost a year behind city students.
The range of mathematical literacy scores between the lowest and highest performing students was wider in Australia than the OECD average
The impact of socio-economic background on performance in mathematical literacy means that those in the lowest socioeconomic quartile face a difference equivalent to around two-and-a-half years of schooling when compared to those from the top quartile.
If we are to harness the creative juices of the nation, we need everybody firing at full potential: we can’t afford to lose the creative abilities of our young people because they happen to be born in Tamworth and not Toorak.
It should not be about getting people to work until they’re ready to drop at 70, it is about dropping the prejudice such that our labour pool can be broadened.
And again, we can harness the technological revolution to help.
Massive Open Online Courses mean that anybody can get a taste of university education and can overcome the deficit of ambition which makes many people from lower socio-economic backgrounds assume they are not cut out for university because nobody from their family has done it before.
We could harness a world class broadband network to make the resources of any school available to all, twinning schools in rich and poor areas for example to open up opportunities to so many more.
Doing this will take an investment: it will mean a commitment to the Gonski funding model which had equality of opportunity at its heart and which this government has trashed.
It will take a Government which cares about equality of opportunity as a fundamental first step.
But it will take of course much more than that.
We have always recognised that a better and equal funding model will not be enough.
We need a focus on teacher quality, on innovative models which reflect what works in different socio-economic settings and on making sure that children from every socio-economic background are exposed to the wonders of information technology at an early age.
It will take a nothing less than a government which enters into a contract with the next generation that we will work to knock down the barriers to social mobility and enable them to grow to their full potential, regardless of their background.
They deserve nothing less and the nation needs nothing less.
RH Tawney said many years ago: “What a wise parent would wish for their children, so the State must wish for all its children.”
None of us would tolerate our children’s life chances being reduced because we are their parents.
Nor should the Australian Government tolerate the life chances of so many young Australians to continue to be reduced because of their economic background.
A Labor Government would continue our historical task of fighting for better life chances for Australians from all walks of life.
Fairness
There has been much discussion about fairness in recent times.
In Australia, the fundamental injustice of a budget which puts the vast majority of the burden of budget sustainability on low and middle income earners has sparked an important debate about fairness.
Again, the Treasurer says: “Criticism of our strategy has been political in nature”. Wrong again.
Our criticism goes to the fundamental unfairness of his policies and for good reason.
Around the world contributions of thinkers as diverse as Thomas Piketty, Christine Lagarde and the Governor of the Bank of England Mark Carney have put the issue of income inequality firmly on the agenda.
Christine Lagarde, who hails from the Conservative tradition of French politics and now heads the inherently conservative International Monetary Fund has described income inequality as casting a dark shadow over the global economy.
Incomes in the developed world have been getting more uneven. That is empirical fact.
Australia has not been immune. Since 1975, real earnings for the bottom 10% have risen 15% while real earnings for the top 10% have risen 59%.
Or, to look at it another way, since 1980 the top 1% income share has doubled, while the income share of the top 0.1% has tripled.
You don’t need to support an old style socialist redistribution program to think that Governments should have fairness at the centre of what we do.
Fairness and growth are not mutually exclusive aims. On the contrary, they are mutually re-enforcing.
To win the global battle in this technological age, everyone needs to feel they have a stake in our success. Everyone needs to know that if they contribute, there will be fair reward.
Government’s which eschew fairness and send the message that they don’t care about equity run the risk of encouraging fringe populist movements on the right and the left.
There is a reason that the winners of the recent European elections in so many countries were populist nationalist parties.
If people think that there government doesn’t care about them and the economic system doesn’t work for them, it makes it easier for populist parties which promote protection, foreign investment restrictions, and low immigration.
And inequality leads directly to a loss of equality of opportunity.
If incomes are increasingly disparate then it is the children of the people at the wrong end of that equation that suffer.
It is not good enough for the Treasurer to say that we should only care about equality of opportunity and that equality itself is not important.
As Christine Lagarde has said the problem with this approach is that “opportunities are not equal. Money will always buy better quality healthcare and education, for example….[t]he evidence also shows that social mobility is more stunted in less equal societies”.
Incomes, of course, will never be equal and nor should they be.
But a prejudicial approach which says we will make life harder for low and middle income earners and easier for people of means fundamentally misunderstands the challenge of our times.
That’s why we reject this Government’s approach.
And it’s why the fairness of our policies will be at the core of Labor’s framework of economic policy, together with growth and promoting opportunity.
Conclusion
William McKell understood the timeless project of Labor: promote growth as a means of creating wealth for ordinary people.
Drive opportunity so that all can benefit from that growth, regardless of their background.
He was a moderate, but a passionate reformer none the less. He was a leading implementer of Labor’s ideals in his day.
He was drawing on an already long Labor tradition.
As Nick Dryenfurth has pointed out, the founders of the Labor Party had already hit on a rather elegant way of describing Labor’s task.
The New South Wales Labor Defence Committee in 1890 laid down the aim of a political movement that worked to ensure that the people of Australia have the opportunity to “share in those things that make life worth living”.
These words can inspire us still. The challenges have changed, but our task is the same.
Our opponents offer prejudice and division. They seek to divide Australians into lifters and leaners.
Australia needs a Government which offers something better.
A message of hope and vision, not blame and division.
A Government which understands the challenges and opportunities of the massive changes underway in the world economy.
A Government which embraces these changes and makes them work for Australians of all works of life.
A Government which believes in investing in people so they can grow to their full potential, for their sake and the sake of the nation.
A Government which believes in embracing the potential of science and innovation, not sidelining it in myopic cost cutting exercises which constrain future growth and put more pressure on future budgets.
A Government which believes in growth, fairness and opportunity. In building up the capabilities of individuals and the nation as a whole.
We do have big challenges as an economy and a nation.
Prejudice, division and stale rhetoric about entitlement won’t meet the challenge.
But a commitment to growth, opportunity and fairness will.
