Thatcher, the ALP & the dregs of neoliberalism

If there’s one thing the entire Australian Left agrees on right now it’s that “Thatcherism was a very bad thing”. But beyond that, it may be appropriate to ask what exactly it is that people think was a bad thing. The answer to that question rests on one’s interpretation of what exactly was going on in the high neoliberal period of the 1980s, and what followed it. There is an uncomfortable fact that many local progressives are also trying to dance around, one that impacts on their view of the domestic political situation. That fact is that the highpoint of the ALP’s federal political success with the Hawke and Keating governments shared much of its DNA with Thatcher’s neoliberalism, here understood as a political project to shift the balance of forces in the class struggle towards capital, and thereby enact a historic redistribution of wealth and power upwards.

Of course some on the Left, like Ben Eltham in New Matilda, might claim that at the core of Thatcherism is something else — that “she symbolises the ideal of the free market as the single dominant philosophy of conservative politics” and that she “really did believe in the primacy of individuals over collectivities, especially the state”. Eltham uses this to claim that Tony Abbott and the neoliberal think-tank, the Institute of Public Affairs (IPA), are her true heirs in this country. While this might tell us something about Thatcher’s ideology, it informs us little about what types of policies and social changes she enacted. For example, far from being hostile to the state as she sometimes implied, in practice Thatcher’s project was one of massive and brutal state mobilization on the side of big business, as demonstrated by a series of major confrontations with unions.

Others have pointed to Thatcher’s especially confrontational style, contrasting it to the “consensual” manner in which the ALP-ACTU Accord was implemented. Some also contend that Labor’s “social wage” reforms softened its wage cutting, financialisation and privatization program. Yet even here the difference is one of quantity and not quality. It’s true the leading unions agreed to the Accord. But Hawke also smashed two unions that bucked the trend — the Builders Labourers’ Federation in 1986 and the pilots’ strike in 1989, the latter by using the military as scabs. Meanwhile the government stood by as employers used the courts to break union attempts to act outside the Accord, such as at Dollar Sweets in 1985, using the threat of further rogue actions by the New Right to discipline other unions into staying in the Accord.

It is true Thatcher managed to push through significant cuts to the welfare state, but as Cabinet papers from 1982 reveal she blocked more radical plans for fear of their political unpopularity, and was forced to publicly restate support for the NHS. In Australia the 1983 National Economic Summit saw major progressive reforms scrapped to appease business, undermining the original Accord agreement within months of it being signed. And while Medicare was introduced, welfare and social spending were soon subject to Budget austerity, welfare tightening and so on. As Philip Mendes has noted [PDF], this led the IPA’s Michael Warby to argue that Hawke and Keating had introduced a number of policies, including greater targeting of welfare “which we heartily endorse … Indeed there is a very good argument that the ALP government engaged in more thorough economic reform than a Liberal government would have.” Further, the government

eliminated the remaining universal payments via the introduction of an assets test on pensions, and the means testing of family allowances. In addition, it imposed a number of compliance initiatives designed to reduce the number of persons receiving income support payments, replaced unemployment benefits for 16 and 17 year olds with a job search allowance worth half the then junior unemployment rate (May 1987), introduced the Newstart scheme linking unemployment benefits to compulsory training and revoking the traditional notion of an unemployment benefit as an entitlement (1990), and introduced “mutual obligation” measures in the 1994 White Paper on Employment to tighten social security regulations and make beneficiaries more accountable. … Many of these policies mirrored proposals made by the think tanks, and were enthusiastically welcomed by CIS and IPA operatives.

Superannuation was introduced in lieu of wage rises, and it has since become apparent that it hasn’t delivered stable or substantial returns. Accumulated savings have driven financialisation rather than a hoped-for manufacturing recovery. Left-wing economist Frank Stilwell, who had initially been enthusiastic about Labor’s potential to deliver progressive change, concluded in 1993:

The original Accord envisaged wages policy as a component in a broader program of progressive economic and social reform. In practice, wages policy has been integrated into a quite different program of austerity and regressive distribution. (Quoted here)

In 2011 Keating reminisced about this representing a “big contribution from the unions and the ACTU in particular under the Accord of reducing real wages and letting the profit share rise.” This was a reduction in wages that sharply contrasts with real wages growth during Thatcher’s prime ministership. The reward for this sacrifice was the “recession we had to have” which pushed unemployment to around 11 percent in 1992 and left economic conditions significantly worse for large sections of the working class.

Whitewashing Left neoliberalism

British neoliberalism was never simply a shift to an idealized set of policy settings that fit with Thatcher’s Hayekian influences. Indeed, one could say that Hayek was no Hayekian either, because like Thatcher he saw “liberty” as a product of social engineering that might require the use of “dictatorial” state power to enforce it. Rather, neoliberalism has always been a class project, with national variations in how it was implemented. It is only by downplaying its class character, by mixing up ideology and practice, that one ends up ignoring the fact that in Australia it was a product of the Left in government.

But such confusion is absolutely necessary if one wants to whitewash Labor’s 1980s project, and what differentiates Labor from Abbott’s Coalition. As Jean Parker pointed out in a perceptive paper on the ALP response to the GFC at last weekend’s Australian Left Renewal Conference in Sydney, Rudd’s famous Monthly essay was careful to define neoliberalism in the narrowest possible terms as the most extreme free market ideology and practice, thereby detaching it from its relationship to Labor’s record. For Rudd there is no problem with capitalism or markets per se, and social democracy is redefined thus:

Social-democratic governments face the continuing challenge of harnessing the power of the market to increase innovation, investment and productivity growth — while combining this with an effective regulatory framework which manages risk, corrects market failures, funds and provides public goods, and pursues social equity. Examples of such a government are the Australian Labor governments of Bob Hawke and Paul Keating during the 1980s and early ’90s.

Rather than being the neoliberals that the neoliberal think tanks believed them to be, in Rudd’s account “Hawke and Keating pursued an ambitious and unapologetic program of economic modernisation” entirely within a social democratic framework. This is revisionism that cannot explain the intense debate on the Left in the 1980s and 90s about whether Labor was still in any way true to its social democratic origins. Rudd gets closer to the truth, however, when he says that social democracy’s historic mission is “to save capitalism from itself”.

One of the problems with focusing on ideology is that it misses how neoliberalism-in-practice has not been a continuous process towards free market nirvana. In both the UK and Australia the initial radical phase of neoliberalism petered out as the years of bitterness and sacrifice eroded the social and political basis for the neoliberal program. After Thatcher was dumped in the wake of the Poll Tax debacle, the Tories only managed to limp on under Major until 1997 thanks to a weak and divided Labour opposition. Keating unexpectedly won in 1993 by effectively running against his own economic rationalist legacy, now personified as John Hewson, only to be bundled out three years later because he had not really reversed course.

By the mid-1990s neoliberalism in both countries was deeply unpopular and politically poisonous, but the disorientation of the Left ensured there was no sustained opposition. The result was piecemeal erosion of public services and workplace rights tempered by sufficient handouts to minimize the political cost of reform. With the good fortune of a long period of debt-driven expansion up to the GFC, incumbency during the War on Terror, and oppositions deeply traumatised by previous defeats, the Howard and Blair governments avoided having the full extent of their political weakness exposed until near the end. In Australia wages growth even recovered under Howard, ironically producing some economic relief for workers after the Accord despite the dramatic weakening of union power the Accord had initiated.

As Left Flank has argued before, the process of economic reform has eroded the social base of both sides of politics. Neither side can easily construct a stable popular majority for another round of harsh restructuring like the high points of the Thatcher and Hawke-Keating experiments. But because the advantages gained by capital in that period have not been reversed, because there has been decay of social services and a breakdown in solidarities, the unwillingness of the political class to effect positive change is punished with ever more volatile swings by a detached and bitter electorate that treats governments with disdain. Kevin Rudd offered a brief break in this trend by connecting with the anti-politics sentiment prevalent in the electorate. Aside from this, both sides of politics posture in various ways about the heroic reforms of the past yet lack the authority to repeat them, before too long turning to desperate scapegoating and other distractions to try to gain temporary advantage.

This is especially acute for the ALP because, as social attitude surveys in recent years show, a majority of voters (including Liberal voters) not only rejects economic rationalism but pines for what one might call old fashioned social democratic policies. Yet these cannot simply be tacked onto the really existing Labor Party (an NDIS here, some small increases to some welfare payments there) to make up a social democratic program that could save it. Something similar is true for Abbott, no doubt fantasizing he can “do a Thatcher” but without the means to drive that through. Indeed he has already been hosing down the expectations of his IPA constituency, proclaiming he will not be a Whitlam of the Right.

Abbott and the Liberals, like Gillard and the modern ALP, are much less heirs of Thatcherism than the final incoherent dregs of neoliberalism as a political project.

I’ll take a closer look at Abbott’s problems in my next post. Thanks to Liz Humphrys for informing my thinking and providing some of the quotes.