I am currently in Jerusalem, wondering whether I will be able to make it to London later this week. There is a public-sector strike scheduled for Britain tomorrow, which is expected to close schools and hospitals and there is talk of up to 12-hour delays in getting through immigration at Heathrow.
Britain certainly does not have the worst-performing economy in Europe. However, it is likely that there will be another recession in Britain next year – due primarily to the failure of the nations of continental Europe to resolve the problems caused by the euro zone crisis. Right now, Margaret Thatcher’s decision not to take Britain into the European single currency in the 1980s looks better by the day.
At a time of economic downturn and rising unemployment, the public-sector unions have taken a decision to strike for better retirement benefits for their members, who already enjoy relatively secure employment.
Many private-sector workers, whose taxes finance public-sector employees, can only dream of the pension entitlements about which the public-sector unions are demonstrating. The culture of entitlement, which has had a devastating effect on the economies of many European nations, remains a fact in Britain.
Writing earlier this month in the London Telegraph about the crisis in Europe, Kevin Rudd asked: ”How did Europe get into such a difficult situation?” The Foreign Minister’s answer was direct and accurate. Namely ”for years now, some European governments have been spending more than they earned and running up unsustainable levels of debt”. He argued that ”this has been manageable in the past because banks were willing to lend to governments and economic growth had been strong enough to keep the interest bill paid”. However, the global financial crisis changed all that.
The concept of governments spending more than they obtain in revenue is common to social democratic and conservative administrations. Yet it is more a phenomenon of social democracy. For example, in Britain today the leader of the Labour Party, Ed Miliband, and the shadow chancellor of the exchequer, Ed Balls, advocate greater spending and borrowing as the way of resolving current economic difficulties. The Conservative Prime Minister, David Cameron, with the support of coalition partners the Liberal Democrats, advocates long-running cuts to government spending and a clampdown on schemes and benefits as an entry to lifelong welfare.
It seems that Rudd’s position on economics has changed dramatically in recent times. When prime minister in February 2009, he wrote a widely quoted article in The Monthly titled ”The Global Financial Crisis”. Here Rudd maintained that the economic crisis ”is the culmination of a 30-year domination of economic policy by a free-market ideology that has been variously called neo-liberalism, economic liberalism, economic fundamentalism, Thatcherism or the Washington Consensus”.
Rudd went on to proclaim ”the great neo-liberal experiment of the past 30 years has failed” and to advocate for social democracy. He wrote that ”Labor, in the international tradition of social democracy, consistently argues for a central role for government in the regulation of markets and the provision of public goods”.
Well, you can’t have it both ways. In early 2009, Rudd argued the essential cause of the economic crisis was neo-liberalism, which is sometimes referred to as economic rationalism and is associated with expenditure restraint and debt reduction. In late 2011, Rudd argues that the essential cause of the economic crisis is deficit spending, funded by debt.
Australian politicians and senior bureaucrats cop a lot of criticism. Yet, a brief time in western Europe or the US serves as a reminder of how well Australia has been governed over the past three decades.
In the final years of Malcolm Fraser’s government, John Howard commenced the first tentative step towards financial deregulation. The cause of economic reform was embraced by the Hawke and Keating governments between 1983 and 1996 and followed by Howard and Costello until 2007. When the global financial crisis arrived in 2008, the Australian economy was in good shape and Australia was not afflicted by overspending, funded by debt.
During his years as prime minister between December 1949 and January 1966, Robert Menzies was no economic reformer. But in the early 1950s, Menzies and his Coalition colleagues made a conscious decision not to take Australia down the road of from-cradle-to-grave social welfare.
Consequently, Australia never adopted the ethos of entitlement which still affects western Europe and parts of North America. It is this concept which has bankrupted so many governments and which explains the public-sector strikes scheduled for this week in Britain.
Gerard Henderson is executive director of the Sydney Institute.