ASIA
30 August 2014
Australia needs economic liberalism, inclusive growth and Asian literacy
Australia needs more economic liberalism, inclusive growth and Asian literacy. Tony Abbott, Australia's likely new Prime Minister, will not deliver that.
Australia needs more economic liberalism, inclusive growth and Asian literacy for the next phase of its development. But the Liberal Party, under the leadership of Tony Abbott, which will win the upcoming elections, will not deliver that. The "liberal roots" of Australia's "Liberal Party" are unfortunately very shallow.
The word "liberal" can mean different things to different people.
In the US, supporters of the Democratic Party are regarded as "liberals", even though their economic policies are to the left of the Republican Party. Democrats practice social liberalism which seeks to balance individual liberty and social justice. They are thus more socially progressive on issues like poverty, inequality, migration, gender, race relations, birth rights, sexual freedoms etc.
Most economists believe in "economic liberalism", meaning that the economy should be based on private property and free markets, without privileges and favours for special groups. Government intervention should only address market failures, such as environmental pollution. Economic liberalism maximizes economic efficiency and prosperity.
Australia's Liberal Party governed the country for most of the three decades until 1983. It did not practice either economic or social liberalism. The overall approach of the Liberal Party was inward-looking and protectionist. Ironically, a brief Labor Government in the 1970s launched dramatic liberalism initiatives, notably a 25% cut in import tariffs, and recognition of the Communist Chinese Government which opened the door to economic relations.
A Labor Government elected in 1983 inherited the consequences of the Liberal Government's non-liberal policies. The country stumbled from crisis to crisis in the mid-1980s.
This provided the platform for the greatest wave of economic liberalism that Australia has ever known. Floating of the Australian dollar. Entry of foreign banks. Reduction of import protectionism. And an awakening to Australia's Asian neighbourhood. Australia was fundamentally transformed.
While a Liberal government from 1996 to 2007 continued with economic liberalism, the pace of reform faded. The government did however improve public finances by virtually eliminating national public debt.
When the present Australian Labor government came to power in 2007, it was greeted with the global financial crisis. Despite massive infighting and leadership changes, stimulus policies helped make Australia the best performing OECD economy these past years. While this has added to public debt, debt remains low by international standards. Australia was also able to benefit from China's own massive economic stimulus, which drove exports of Australia's natural resources.
Recognizing that continued reform will be necessary, the Labor Government launched a White Paper on Australia in the Asian Century. Despite its international favour, the objective was to provide a framework for a new phase of domestic reforms to prepare and equip Australia and Australians for the "Asian Century" in which we are living.
When Australia's Liberal Party wins the upcoming national elections, it will inherit a new paradigm, which requires a new phase of economic and social liberalism.
Asia continues to lead global economic growth. But the gloss has gone off big countries like India and Indonesia. And China has now moved to a lower growth path. We still have an Asian Century, but it is softer, with greater diversity between countries. But we also have growing competition for Asian markets, including from the US, which is undergoing an energy boom itself.
Economic stimulus was justified at the time of the global financial crisis in 2008. It must now be unwound. Since we have entered a new paradigm, we should not keep spending and borrowing. Neither political party has accepted this. The new Prime Minister, Tony Abbot, has committed to bring the budget back to balance over the next decade (!), and is rashly promising massive spending and handouts.
Australia will jettison its reputation of fiscal responsibility. This must be avoided at all costs. It is imperative to wage a vigorous campaign against middle class welfare, corporate welfare, tax cheating and other inefficiencies.
It is also imperative to launch a new wave of economic liberalism. Australia does not score well enough in global scorecards for innovation, competitiveness, ease of doing business, openness to foreign investment, and product market regulations. It is thus not surprising that Australia’s productivity growth decelerated markedly around the turn of the century.
Let's turn now to the issue of social liberalism. Australia also needs to take the challenge of inclusive growth more seriously. When opportunity is offered to all citizens, we have both a stronger society and a stronger economy.
But Australia has been moving in the opposite direction. There is now a considerable gap between the richest and poorest – the top 20% of the population earn six times as much as the bottom 20%. And lone parents, people with disability, and Indigenous Australians suffer from relative exclusion from the jobs market.
One of the greatest dramas is the lot of Australia's migrant population. Australia is proud of its selective migration policy, which focuses on attracting skilled migrants. But all too often these skills are not well used. Between 36 per cent and almost 50 per cent of 11,450 new migrants surveyed said they did not use their skills or qualifications in their job more than three years after arriving in Australia.
Finally, as identified by the government's White Paper on Australia in the Asian Century, Australia needs to improve its "Asian literacy". Australian citizens, especially businessmen, need to understand Asian markets, societies and politics, especially now that diverse destinies are unfolding in the region.
There is perhaps no-one more in need of improving his Asian literacy than Tony Abbott.
Abbott has a curious proposal to help Australia manage the growing numbers of refugees (mainly from Afghanistan, Iran, Sri Lanka and Pakistan) who are often ferried to Australia by Indonesian fishermen and others. Abbott proposes to buy up Indonesian boats to stem the flow of refugees! This has been received with ridicule, derision and offence in Indonesia. And quite rightly so!
There is much more that could be said about Tony Abbott. For example, he is a Rhodes scholar, though this can be quite difficult to believe at times.
But it seems very clear that, even after several years leading Australia's political opposition, he does not have a cogent and sensible strategy for the country. And the business and middle class elites which support him are culturally and instinctively programmed to lobby for privileges and favours, the very policies that ultimately drove Australia to crisis in the 1980s -- rather than reform through enlightened economic and social liberalism. Australia's Liberal Party is not a liberal party, it is a conservative party. And it will come to power just at the time when Australia needs a real liberal party.
Australia has reached a turning point in its economic trajectory. It needs to reset for a new economic context. It needs new leadership based on sound analysis, and clear vision and strategy. Most regrettably, it does not have that.
Executive Director
Asian Century Institute
www.asiancenturyinstitute.com
The word "liberal" can mean different things to different people.
In the US, supporters of the Democratic Party are regarded as "liberals", even though their economic policies are to the left of the Republican Party. Democrats practice social liberalism which seeks to balance individual liberty and social justice. They are thus more socially progressive on issues like poverty, inequality, migration, gender, race relations, birth rights, sexual freedoms etc.
Most economists believe in "economic liberalism", meaning that the economy should be based on private property and free markets, without privileges and favours for special groups. Government intervention should only address market failures, such as environmental pollution. Economic liberalism maximizes economic efficiency and prosperity.
Australia's Liberal Party governed the country for most of the three decades until 1983. It did not practice either economic or social liberalism. The overall approach of the Liberal Party was inward-looking and protectionist. Ironically, a brief Labor Government in the 1970s launched dramatic liberalism initiatives, notably a 25% cut in import tariffs, and recognition of the Communist Chinese Government which opened the door to economic relations.
A Labor Government elected in 1983 inherited the consequences of the Liberal Government's non-liberal policies. The country stumbled from crisis to crisis in the mid-1980s.
This provided the platform for the greatest wave of economic liberalism that Australia has ever known. Floating of the Australian dollar. Entry of foreign banks. Reduction of import protectionism. And an awakening to Australia's Asian neighbourhood. Australia was fundamentally transformed.
While a Liberal government from 1996 to 2007 continued with economic liberalism, the pace of reform faded. The government did however improve public finances by virtually eliminating national public debt.
When the present Australian Labor government came to power in 2007, it was greeted with the global financial crisis. Despite massive infighting and leadership changes, stimulus policies helped make Australia the best performing OECD economy these past years. While this has added to public debt, debt remains low by international standards. Australia was also able to benefit from China's own massive economic stimulus, which drove exports of Australia's natural resources.
Recognizing that continued reform will be necessary, the Labor Government launched a White Paper on Australia in the Asian Century. Despite its international favour, the objective was to provide a framework for a new phase of domestic reforms to prepare and equip Australia and Australians for the "Asian Century" in which we are living.
When Australia's Liberal Party wins the upcoming national elections, it will inherit a new paradigm, which requires a new phase of economic and social liberalism.
Asia continues to lead global economic growth. But the gloss has gone off big countries like India and Indonesia. And China has now moved to a lower growth path. We still have an Asian Century, but it is softer, with greater diversity between countries. But we also have growing competition for Asian markets, including from the US, which is undergoing an energy boom itself.
Economic stimulus was justified at the time of the global financial crisis in 2008. It must now be unwound. Since we have entered a new paradigm, we should not keep spending and borrowing. Neither political party has accepted this. The new Prime Minister, Tony Abbot, has committed to bring the budget back to balance over the next decade (!), and is rashly promising massive spending and handouts.
Australia will jettison its reputation of fiscal responsibility. This must be avoided at all costs. It is imperative to wage a vigorous campaign against middle class welfare, corporate welfare, tax cheating and other inefficiencies.
It is also imperative to launch a new wave of economic liberalism. Australia does not score well enough in global scorecards for innovation, competitiveness, ease of doing business, openness to foreign investment, and product market regulations. It is thus not surprising that Australia’s productivity growth decelerated markedly around the turn of the century.
Let's turn now to the issue of social liberalism. Australia also needs to take the challenge of inclusive growth more seriously. When opportunity is offered to all citizens, we have both a stronger society and a stronger economy.
But Australia has been moving in the opposite direction. There is now a considerable gap between the richest and poorest – the top 20% of the population earn six times as much as the bottom 20%. And lone parents, people with disability, and Indigenous Australians suffer from relative exclusion from the jobs market.
One of the greatest dramas is the lot of Australia's migrant population. Australia is proud of its selective migration policy, which focuses on attracting skilled migrants. But all too often these skills are not well used. Between 36 per cent and almost 50 per cent of 11,450 new migrants surveyed said they did not use their skills or qualifications in their job more than three years after arriving in Australia.
Finally, as identified by the government's White Paper on Australia in the Asian Century, Australia needs to improve its "Asian literacy". Australian citizens, especially businessmen, need to understand Asian markets, societies and politics, especially now that diverse destinies are unfolding in the region.
There is perhaps no-one more in need of improving his Asian literacy than Tony Abbott.
Abbott has a curious proposal to help Australia manage the growing numbers of refugees (mainly from Afghanistan, Iran, Sri Lanka and Pakistan) who are often ferried to Australia by Indonesian fishermen and others. Abbott proposes to buy up Indonesian boats to stem the flow of refugees! This has been received with ridicule, derision and offence in Indonesia. And quite rightly so!
There is much more that could be said about Tony Abbott. For example, he is a Rhodes scholar, though this can be quite difficult to believe at times.
But it seems very clear that, even after several years leading Australia's political opposition, he does not have a cogent and sensible strategy for the country. And the business and middle class elites which support him are culturally and instinctively programmed to lobby for privileges and favours, the very policies that ultimately drove Australia to crisis in the 1980s -- rather than reform through enlightened economic and social liberalism. Australia's Liberal Party is not a liberal party, it is a conservative party. And it will come to power just at the time when Australia needs a real liberal party.
Australia has reached a turning point in its economic trajectory. It needs to reset for a new economic context. It needs new leadership based on sound analysis, and clear vision and strategy. Most regrettably, it does not have that.
Author
John WestExecutive Director
Asian Century Institute
www.asiancenturyinstitute.com