Last weekend was a relatively quiet one in so far as news goes. Apart from the pandemic, that is. And an unexpected discussion about supply-side economics.
On Friday July 24, Josh Frydenberg addressed the National Press Club in Canberra following the release, the previous day, of the Economic and Fiscal Update. Initially he focused on what the Morrison government has done to help Australians who are suffering due to the economic impact of COVID-19.
The Treasurer then looked into the future. He argued that growing the economy “will be key to reducing our debt as a share of GDP”. Tax reform, reducing the rigidity of Australia’s complex industrial relations system along with cutting red tape all got a mention.
Then it came to the question/discussion period. There reference was made to the former British prime minister Margaret Thatcher and the former US president Ronald Reagan.
Frydenberg referred to an editorial in The Australian Financial Review which said that Australia is having its Keynesian (i.e. big spending) moment but made the obvious point that Australia needs a “supply-side revolution” (i.e. economic growth) to step in.
The Treasurer then said that “it is important to go to the supply-side” and added that Thatcher and Reagan were “an inspiration” in this respect. He then focused on the need “to provide a boost to aggregate demand”. This was a reference to tax cuts and decreasing regulation.
Media reports of Frydenberg’s performance were unexceptional. Until he appeared on ABC TV’s Insiders last Sunday.
Watching his interview with presenter David Speers, which contained many interruptions, you got the impression that Speers believes that anyone who takes what he termed “inspiration” from the likes of Thatcher and Reagan must be some kind of nutcase.
The Treasurer responded that Thatcher and Reagan dealt very successfully with the challenges they faced and mentioned stagflation — the combination of high unemployment and high inflation.
He also referred to the huge reduction in days lost to strikes during the time of the Thatcher government. Those who understand the condition of Britain when Thatcher came to office in May 1979 will know what Frydenberg had in mind.
When the Treasurer pointed out that the Reagan administration had played a key role in the collapse of the communist Soviet Union and the end of the Cold War, Speers wanted to condemn what is termed Reaganomics and “trickle-down economics”.
Frydenberg responded that Reagan won a maximum of two terms and Thatcher won two elections and resided at 10 Downing Street for close to a dozen years. Clearly the British and the Americans thought better of Thatcher and Reagan respectively than Speers does today.
Frydenberg wrapped up his part of the discussion by saying that “Thatcher and Reagan are figures of hate for the left because they were so successful”. He went on to state that he also took inspiration from John Howard and Peter Costello.
It was not long before the left fired-up. Insiders had not finished when ACTU secretary Sally McManus tweeted that “Margaret Thatcher’s policies were about crushing worker rights” and added “inequality soared”.
Throwing the switch to hyperbole, leftist author Mike Carlton replied: “Back to the horrors of The Hungry Mile of the 1930s, when Sydney’s wharfies would queue at dawn in the uncertain hope of getting a shift”. Really.
Now there is no evidence that Frydenberg wants to crush workers’ rights. His concept of greater flexibility in industrial relations is aimed at increasing both productivity and employment. With the latter would come a potential increase in trade union members, which would be of benefit to the ACTU. Moreover, McManus overlooked the fact that the Thatcher government made it possible for many low paid Brits to become homeowners.
Frydenberg was correct to identify hatred of Thatcher and Reagan with the left, not with mainstream social democrats like Tony Blair in Britain and Bob Hawke in Australia.
In his memoir A Journey, Tony Blair (who was prime minister of Britain from May 1997 to June 2007) acknowledged that “the credibility of the whole New Labour project rested on accepting that much of what she (Thatcher) wanted to do in the 1980s was inevitable, a consequence not of ideology but of social and economic change”.
While not necessarily agreeing with the way Thatcher governed, Blair argued that this “didn’t alter the basic fact (that) Britain needed the industrial and economic reforms of the Thatcher period”.
In The Hawke Memoirs, the late Australian prime minister criticised those who attempted to ridicule Reagan.
Before he became Labor leader in early 1983, Hawke ridiculed the US president at times. However, this changed after they met as heads of government.
Hawke wrote that “while Reagan did not have a black belt for detail or intellectual prowess, he was rock-solid on the elementary verities that would shape the world to be passed on to future generations”. Namely, “the virtues of the free world over the authoritarian societies and command economies of the Soviet system”.
It makes no sense for the left to dismiss the achievements of Thatcher and Reagan. Just as it makes no sense for conservatives to dismiss the achievements of Blair and Hawke.
As to the current debate, it is all too simplistic to dismiss Frydenberg’s plans for Australia’s recovery after the pandemic as “trickle-down economics” and supply-side economics.
The ANU’s Professor Selwyn Cornish is an economic historian who advised Labor frontbench Chris Bowen on his book The Money Men: Australia’s Twelve Most Notable Treasurers (MUP, 2015). Not surprisingly, Cornish believes that Frydenberg should take his inspiration from such former Labor prime ministers as Paul Keating. But Cornish has acknowledged that both Reagan and Thatcher did well in moving beyond big spending Keynesian policies and focused on the need to encourage economic growth.
At a time of pandemic-induced deep recession it makes sense to look at all successful democratic leaders — including Thatcher and Reagan.
Postscript: In last week’s column, two first names were incorrect. The references should have been to Justices Salvatore Vasta and Sarah Derrington.