Don’t include me among the critics who believe Kevin Rudd should not have spent time last week writing a 6100-word essay on the economic crisis, or that the Herald should not have carried the Prime Minister’s long missive on Saturday.
Certainly the essay was written for those with a special interest in politics and the economy, but it is important to have Rudd’s views set out in a considered way. And he was very upfront in warning that economic recovery is not about to happen any time soon.
During his address to The Sydney Institute’s annual dinner last year, Rudd advocated a practical and empirical approach to tackling problems, and he dismissed the old debates between left and right based on outmoded versions of reality.
Yet his latest essay turns on far more partisanship than any that John Howard and Peter Costello engaged in while the Coalition was in government between March 1996 and November 2007.
On some occasions, at least, Howard and Costello acknowledged the important economic reforms initiated by the Labor governments led by Bob Hawke and Paul Keating. Howard and Costello did so partly to acknowledge reality, but also because, when in opposition, they had supported Labor’s economic reform agenda on such issues as floating the currency, financial deregulation, privatisation of government-owned industries, winding back protectionism and industrial relations reform.
Rudd makes no such concessions about the Coalition’s achievements partly because Labor opposed it on tax, industrial relations reform and formalising the independence of the Reserve Bank; and partly because Rudd is so politically tribal on policy.
In his latest essay he does not mention Howard or Costello; and the achievements of Hawke and Keating receive only a fleeting reference. Rudd attributes the global financial crisis to the consequence of a decade of neo-liberal free market fundamentalism. And he points the finger, without naming any names, at the right, even though as recently as last year he said we need a real debate that transcends the old battle lines of the left and right of Australian politics.
There are very few names in the essay. Tim Geithner and Larry Summers, senior members of the US President, Barack Obama’s, Administration, are mentioned. But there is no reference to the fact that both men were players in American politics and/or financial markets before the onset of the GFC.
Then there are significant omissions. To wit, the former Democrat president Bill Clinton and the British Labour Prime Minister, Gordon Brown.
Rudd writes that the easing of regulatory restrictions on US commercial banks in 1999 was not wise. But he does not specifically mention that Clinton was in the White House at the time.
And his attempt to blame our economic discontents on neo-liberal fundamentalism and the right does not explain the basket case that is the British economy presided over by left-of-centre social democrats since 1997.
On March 31, Brown and Rudd addressed a function at St Paul’s Cathedral in London that was presided over by the Bishop of London. It was one of those religious occasions where participants bore witness to anything but the truth. No one mentioned that Brown, who became Britain’s chancellor of the exchequer in 1997, was primarily responsible for implementing what he himself termed “light touch” regulation.
The assembled congregation heard Brown condemn the unsupervised globalisation of financial markets without mentioning that, in Britain at least, he was presider-in-chief over what he later dubbed the global free-for-all.
The problem with Rudd’s partisanship is that it is capable of adversely affecting his long-term solutions to Australia’s economic problems. If right-of-centre politics is responsible for the GFC, then the British economy should be in a stronger position than Australia’s. It isn’t.
But to acknowledge this Rudd would have to concede that the Howard government made some correct decisions on taxation and expenditure, industrial relations including waterfront reform and financial regulation and oversight.
Rudd concedes that unemployment, inflation and interest rates will all increase in the short to medium term. But he does not explain how reregulating the labour market or introducing an emissions trading scheme before our competitors do so will improve our economic performance. Already there is concern about the effect of the scheme on the power industry in Victoria, South Australia and Queensland with long-term implications for employment.
The Prime Minister’s essay tells us much about his economic thinking. It will serve as a benchmark to assess his policies in, say, five years. From here, Rudd is on his own. He believes he knows the causes of the GFC and that he has the solutions to Australia’s economic problems. It’s a big call.