Still the lucky country

Julianne Schultz introduces a special report on Australia - a nation anxious to recover its old conf

On the April morning I was due to start the punishing journey back to Australia, I woke with a minor ailment, one quickly cured with antibiotics. "Don't put yourself under pressure waiting here," the hotel concierge advised. "See a doctor and get a prescription when you get to Heathrow."

This sounded sensible. Airports these days are towns, where you can shop and eat and drink. But not, I soon discovered, see a doctor - at least at the world's busiest airport.

"There are doctors at Australian airports. Even third world airports have medical centres," I fumed later to the steward.

"Yes, that's one of the reasons I want to leave this country," he said. "It doesn't work any more. My wife and I want to migrate to Australia, but we haven't got family there, enough points to get in or a spare A$100,000 to invest."

The price of entry to Australia has risen over the past 220 years. Once a dumping ground for criminals and ne'er-do-wells, it became home in the decades after the Second World War to nearly seven million immigrants, many of them "ten-pound Poms" wanting to start over in a sunny new country with a promising future. Tens of thousands still want to go. Last year more than 130,000 migrants arrived, a fifth of them from Britain. Australian cafes, shops, offices and hospitals are filled with British backpackers working their way around the country, undeterred by gruesome tales of murder in remote locations. But the traffic is not all one-way. More than a million Australians - one in 20 - live abroad, at least 300,000 of them in Britain.

The force field connecting the two countries is magnetic - it both attracts and repels. The pull of the cosmopolitan centre, for those living in a country that the former prime minister Paul Keating once described as the "arse-end of the earth", is nothing new. It has operated since settlement.

Yet the scale of the current Australian diaspora is unprecedented, drawing happy-go-lucky youngsters, the best and brightest graduates, high achievers and retirees seeking new challenges. Researchers find only a tenuous link between the political climate and emigration, but undoubtedly many have left disappointed by the direction the country has taken since 1996. Intercontinental moves need a push to amplify the pull.

Over the past decade under John Howard's leadership, Aus tralia has become a much more cynical, unimaginative and materialistic place. Gone is the sense of crafting a unique environment, characterised by cultural diversity, openness, inclusiveness, Aboriginal reconciliation and a creative yet pragmatic approach to policymaking. The spirit captured by the Sydney Olympics and beamed to the world in 2000 has dissipated. That outward-looking, self-confident Australia has become defensive, socially and culturally divided and domestically complacent. It still works better than most places, but it is no longer a demonstration project on the future.

Instead, Australians have jettisoned much of their carefree larrikinism and learned to be fearful, seeking solace in perfectly appointed homes bursting with appliances.

Lost confidence

The country has grown fat on China's insatiable appetite for minerals and energy, repaid in ever-cheaper consumer goods purchased with ballooning credit cards and mortgage redraws. The wealth generated by the long-running boom - the quantum of tax revenue is unprecedented, and even the treasury regularly revises its projections upwards - has not been directed into renewing social or economic infrastructure, or building social, educational and cultural capital. It has not been evenly distributed, although almost everyone is better off. As in most countries that have adopted a neoliberal economic agenda, the rich have got richer than they could have imagined, but more than a million households still live in relative poverty. And as interest rates and petrol prices rise, so do the numbers in financial stress.

After an unimpressive first two terms, the post-2001 world suited Howard. He is not afraid of being divisive: indeed, he has made an art of targeting those he casts as "elites" in a series of culture wars aimed at imposing his narrowly nationalistic view of what it means to be Australian. He has learned how to appear empathetic when necessary.

Despite widespread opposition, Howard has pulled Australia into ever closer lockstep with George W Bush's America since 11 September 2001, when by mischance he was in Washington, DC, not far from the Pentagon, as one of al-Qaeda's piloted planes crashed into it. Australia's membership in 2003 of the "coalition of the willing" was trenchantly opposed with large rallies and widespread activism. Yet, when the troops departed for the Gulf, the opposition appeared to fade away, in part because the involvement, though costly, is only a notch above the symbolic. As other countries have withdrawn troops, Australia has maintained its small commitment of about 1,500 troops in the region, most engaged in training, logistics and support in southern Iraq. Only one Australian soldier, Jacob Kovco, has died: a result of "skylarking" on the base, not enemy fire.

In consequence, Iraq does not generate the same passion in Australia as in Britain or America. Australians are accustomed to deal with great and powerful allies, and prepared to accommodate them so long as the cost is not too high, the action not too close to home and the benefits tangible - a pragmatic, if unattractive national trait.

The cynicism that marks this engagement has been repeated time and again during the past decade, in immigration, Aboriginal affairs, foreign relations, security, climate change and education. Mapped on a flow chart, the pattern would be boxed as denial, followed by distraction and finally belated action. As this year's election approaches, we have moved to the belated action frame, with (uncosted) initiatives announced daily on education, Aboriginal affairs, climate change, broadband and health. While this cynical style has enabled many to feel "relaxed and comfortable" - Howard's stated ambition - it has had a corrosive impact on the character and confidence of the nation, sapping initiative, stifling creativity and undermining public engagement.

Immigration is a good example. Successful management of mass immigration has been central to the creation of the ethos of contemporary Australia, once at the international forefront with policies that integrated new arrivals while respecting cultural and religious differences. This was built into every facet of public life, from language classes and anti-discrimination laws to a dedicated national television network with an explicitly multicultural mission. Its success could be measured in many ways, the most tangible being very high rates of intermarriage between people of different backgrounds.

A new spirit

Howard was never comfortable with multiculturalism, a concept he had branded "politically correct", and once elected he set about dismantling the mechanisms that ensured - until December 2005, when thousands of drunken "Aussies" fought equal numbers of louts "of Middle Eastern appearance" at Sydney's Cronulla Beach - that Australia stayed free of ethnic violence. In January 2007, Howard signalled it was dead when he renamed the Department of Immigration and Multicultural Affairs the Department of Immigration and Citizenship and started drafting multiple-choice questions to test would-be citizens' understanding of Australian values.

Yet immigration has been at record levels for five years. Typically of the bait-and-switch trick that has characterised Howard's premiership, the very real impact of this increase has been deflected by public focus on the plight of some refugees. Howard has made political hay for years by sowing the seeds of social distrust and then declaring, like the authoritarian father he often resembles: "We will decide who comes into this country" - and then suggesting a judgement based on ethnic characteristics.

But the mood of the country is changing, as shown by the strong public reaction that forced the release late last month of Dr Mohamed Haneef, after he was wrongly charged with recklessly supporting terrorism. Every week, polls provide evidence of less support for the government, a trend that has left many mystified. Never before when the economy has boomed has the electorate been so ungrateful. "It is as if they are no longer listening," senior ministers say. It is clear most people are no longer convinced that "father knows best". Instead, according to internal Liberal Party polling, they consider the 68-year-old premier an "old, tricky and dishonest" liability.

Polls now show that, beneath the complacency fostered by strong economic growth, dissatisfaction is real, and not confined to core Labor supporters. Some of the prime minister's most strident critics are former leaders of the Liberal Party, affronted by the reactionary insularity that has been encouraged by his willingness to foster an "us and them" mentality, targeting Muslims and refusing to apologise for past injustices to Aboriginal people or, most recently, to Dr Mohamed Haneef for his "crime" of association.

Just as British Labour learned how to develop and implement an inclusive modernisation agenda from the Hawke-Keating years, John Howard learned from Margaret Thatcher, his political heroine. A photo of them together is on proud display in each of his offices. Howard mastered the code words that ensured sufficient numbers responded "quickly, effortlessly, automatically and emotionally" to his agenda. He skilfully pitched his message to a media that had been bullied and wooed and used his favourite medium - talk-back radio - to reach lower middle-class and working-class "battlers" whom he rewarded with a complex system of family income support, noisy nationalism and force-fed fear. In this he became the "stealth bomber of libertarian politics".

The competing visions at the heart of the Australian story were categorised by the historian Manning Clark as the battle between the "enlargers" and the "punishers and straiteners". The past decade has not belonged to the enlargers.

In 1964, the writer and academic Donald Horne sought to jolt the complacency of another era when punishers and straiteners prevailed. He famously described Australia as "a lucky country run mainly by second-rate people who share its luck". There is still a lot of luck in the country; there are fewer second-rate people; things work and life is good. But the spark of creativity and flair has not burned brightly for a long time.

Even if the polls are wrong and Labor does not win the 16 seats it needs to form a government later this year, a new spirit is budding. It promises to displace the fearful cynicism that has prevailed and pushed many people abroad. Over the past year more than 300,000 people have flocked to see Keating: the Musical, a witty, high-camp political cabaret that celebrates Paul Keating's bold vision, his flamboyant language and personal style.

It's a sure bet that in 2017 Howard: the Musical will not be the sell-out show of the year.

Julianne Schultz is editor of The Griffith Review

This article first appeared in the 20 August 2007 issue of the New Statesman, The most important protest of our time

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What Marx got right

...and what he got wrong.

1. You’re probably a capitalist – among other things

Are you a capitalist? The first question to ask is: do you own shares? Even if you don’t own any directly (about half of Americans do but the proportion is far lower in most other countries) you may have a pension that is at least partly invested in the stock market; or you’ll have savings in a bank.

So you have some financial wealth: that is, you own capital. Equally, you are probably also a worker, or are dependent directly or indirectly on a worker’s salary; and you’re a consumer. Unless you live in an autonomous, self-sufficient commune – very unusual – you are likely to be a full participant in the capitalist system.

We interact with capitalism in multiple ways, by no means all economic. And this accounts for the conflicted relationship that most of us (including me) have with capitalism. Typically, we neither love it nor hate it, but we definitely live it.

2. Property rights are fundamental to capitalism . . . but they are not absolute

If owning something means having the right to do what you want with it, property rights are rarely unconstrained. I am free to buy any car I want – so long as it meets European pollution standards and is legally insured; and I can drive it anywhere I want, at least on public roads, as long as I have a driver’s licence and keep to the speed limit. If I no longer want the car, I can’t just dump it: I have to dispose of it in an approved manner. It’s mine, not yours or the state’s, and the state will protect my rights over it. But – generally for good reason – how I can use it is quite tightly constrained.

This web of rules and constraints, which both defines and restricts property rights, is characteristic of a complex economy and society. Most capitalist societies attempt to resolve these tensions in part by imposing restrictions, constitutional or political, on arbitrary or confiscatory actions by governments that “interfere” with property rights. But the idea that property rights are absolute is not philosophically or practically coherent in a modern society.

3. What Marx got right about capitalism

Marx had two fundamental insights. The first was the importance of economic forces in shaping human society. For Marx, it was the “mode of production” – how labour and capital were combined, and under what rules – that explained more or less everything about society, from politics to culture. So, as modes of production change, so too does society. And he correctly concluded that industrialisation and capitalism would lead to profound changes in the nature of society, affecting everything from the political system to morality.

The second insight was the dynamic nature of capitalism in its own right. Marx understood that capitalism could not be static: given the pursuit of profit in a competitive economy, there would be constant pressure to increase the capital stock and improve productivity. This in turn would lead to labour-saving, or capital-intensive, technological change.

Putting these two insights together gives a picture of capitalism as a radical force. Such are its own internal dynamics that the economy is constantly evolving, and this in turn results in changes in the wider society.

4. And what he got wrong . . .

Though Marx was correct that competition would lead the owners of capital to invest in productivity-enhancing and labour-saving machinery, he was wrong that this would lead to wages being driven down to subsistence level, as had largely been the case under feudalism. Classical economics, which argued that new, higher-productivity jobs would emerge, and that workers would see their wages rise more or less in line with productivity, got this one right. And so, in turn, Marx’s most important prediction – that an inevitable conflict between workers and capitalists would lead ultimately to the victory of the former and the end of capitalism – was wrong.

Marx was right that as the number of industrial workers rose, they would demand their share of the wealth; and that, in contrast to the situation under feudalism, their number and geographical concentration in factories and cities would make it impossible to deny these demands indefinitely. But thanks to increased productivity, workers’ demands in most advanced capitalist economies could be satisfied without the system collapsing. So far, it seems that increased productivity, increased wages and increased consumption go hand in hand, not only in individual countries but worldwide.

5. All societies are unequal. But some are more unequal than others

In the late 19th and early 20th centuries, an increasing proportion of an economy’s output was captured by a small class of capitalists who owned and controlled the means of production. Not only did this trend stop in the 20th century, it was sharply reversed. Inherited fortunes, often dating back to the pre-industrial era, were eroded by taxes and inflation, and some were destroyed by the Great Depression. Most of all, after the Second World War the welfare state redistributed income and wealth within the framework of a capitalist economy.

Inequality rose again after the mid-1970s. Under Margaret Thatcher and Ronald Reagan, the welfare state was cut back. Tax and social security systems became less progressive. Deregulation, the decline of heavy industry and reduction of trade union power increased the wage differential between workers. Globally the chief story of the past quarter-century has been the rise of the “middle class”: people in emerging economies who have incomes of up to $5,000 a year. But at the same time lower-income groups in richer countries have done badly.

Should we now worry about inequality within countries, or within the world as a whole? And how much does an increasing concentration of income and wealth among a small number of people – and the consequent distortions of the political system – matter when set against the rapid ­income growth for large numbers of people in the emerging economies?

Growing inequality is not an inevitable consequence of capitalism. But, unchecked, it could do severe economic damage. The question is whether our political systems, national and global, are up to the challenge.

6. China’s road to capitalism is unique

The day after Margaret Thatcher died, I said on Radio 4’s Today programme: “In 1979, a quarter of a century ago, a politician came to power with a radical agenda of market-oriented reform; a plan to reduce state control and release the country’s pent-up economic dynamism. That changed the world, and we’re still feeling the impact. His name, of course, was Deng Xiaoping.”

The transition from state to market in China kick-started the move towards truly globalised capitalism. But the Chinese road to capitalism has been unique. First agriculture was liberalised, then entrepreneurs were allowed to set up small businesses, while at the same time state-owned enterprises reduced their workforces; yet there has been no free-for-all, either for labour or for capital. The movement of workers from rural to urban areas, and from large, unproductive, state-owned enterprises to more productive private businesses, though vast, has been controlled. Access to capital still remains largely under state control. Moreover, though its programme is not exactly “Keynesian”, China has used all the tools of macroeconomic management to keep growth high and relatively stable.

That means China is still far from a “normal” capitalist economy. The two main engines of growth have been investment and the movement of labour from the countryside to the cities. This in itself was enough, because China had so much catching-up to do. However, if the Chinese are to close the huge gap between themselves and the advanced economies, more growth will need to come from innovation and technological progress. No one doubts that China has the human resources to deliver this, but its system will have to change.

7. How much is enough?

The human instinct to improve our material position is deeply rooted: control over resources, especially food and shelter, made early human beings more able to reproduce. That is intrinsic to capitalism; the desire to acquire income and wealth motivates individuals to work, save, invent and invest. As Adam Smith showed, this benefits us all. But if we can produce more than enough for everybody, what will motivate people? Growth would stop. Not that this would necessarily be a bad thing: yet our economy and society would be very different.

Although we are at least twice as rich as we were half a century ago, the urge to consume more seems no less strong. Relative incomes matter. We compare ourselves not to our impoverished ancestors but to other people in similar situations: we strive to “keep up with the Joneses”. The Daily Telegraph once described a London couple earning £190,000 per year (in the top 0.1 per cent of world income) as follows: “The pair are worried about becoming financially broken as the sheer cost of middle-class life in London means they are stretched to the brink.” Talk about First World problems.

Is there any limit? Those who don’t like the excesses of consumerism might hope that as our material needs are satisfied, we will worry less about keeping up with the Joneses and more about our satisfaction and enjoyment of non-material things. It is equally possible, of course, that we’ll just spend more time keeping up with the Kardashians instead . . .

8. No more boom and bust

Are financial crises and their economic consequences part of the natural (capitalist) order of things? Politicians and economists prefer to think otherwise. No longer does anyone believe that “light-touch” regulation of the banking sector is enough. New rules have been introduced, designed to restrict leverage and ensure that failure in one or two financial institutions does not lead to systemic failure. Many would prefer a more wholesale approach to reining in the financial system; this would have gained the approval of Keynes, who thought that while finance was necessary, its role in capitalism should be strictly limited.

But maybe there is a more fundamental problem: that recurrent crises are baked into the system. The “financial instability” hypothesis says that the more governments and regulators stabilise the system, the more this will breed overconfidence, leading to more debt and higher leverage. And sooner or later the music stops. If that is the case, then financial capitalism plus human nature equals inevitable financial crises; and we should make sure that we have better contingency plans next time round.

9. Will robots take our jobs?

With increasing mechanisation (from factories to supermarket checkouts) and computerisation (from call centres to tax returns), is it becoming difficult for human beings to make or produce anything at less cost than a machine can?

Not yet – more Britons have jobs than at any other point in history. That we can produce more food and manufactured products with fewer people means that we are richer overall, leaving us to do other things, from economic research to performance art to professional football.

However, the big worry is that automation could shift the balance of power between capital and labour in favour of the former. Workers would still work; but many or most would be in relatively low-value, peripheral jobs, not central to the functioning of the economy and not particularly well paid. Either the distribution of income and wealth would widen further, or society would rely more on welfare payments and charity to reduce unacceptable disparities between the top and the bottom.

That is a dismal prospect. Yet these broader economic forces pushing against the interests of workers will not, on their own, determine the course of history. The Luddites were doomed to fail; but their successors – trade unionists who sought to improve working conditions and Chartists who demanded the vote so that they could restructure the economy and the state – mostly succeeded. The test will be whether our political and social institutions are up to the challenge.

10. What’s the alternative?

There is no viable economic alternative to capitalism at the moment but that does not mean one won’t emerge. It is economics that determines the nature of our society, and we are at the beginning of a profound set of economic changes, based on three critical developments.

Physical human input into production will become increasingly rare as robots take over. Thanks to advances in computing power and artificial intelligence, much of the analytic work that we now do in the workplace will be carried out by machines. And an increasing ability to manipulate our own genes will extend our lifespan and allow us to determine our offspring’s characteristics.

Control over “software” – information, data, and how it is stored, processed and manipulated – will be more important than control over physical capital, buildings and machines. The defining characteristic of the economy and society will be how that software is produced, owned and commanded: by the state, by individuals, by corporations, or in some way as yet undefined.

These developments will allow us, if we choose, to end poverty and expand our horizons, both materially and intellectually. But they could also lead to growing inequality, with the levers of the new economy controlled by a corporate and moneyed elite. As an optimist, I hope for the former. Yet just as it wasn’t the “free market” or individual capitalists who freed the slaves, gave votes to women and created the welfare state, it will be the collective efforts of us all that will enable humanity to turn economic advances into social progress. 

Jonathan Portes's most recent book is “50 Ideas You Really Need to Know: Capitalism” (Quercus)

Jonathan Portes is senior fellow The UK in a Changing Europe and Professor of Economics and Public Policy, King’s College London.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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