The moment has passed: Megalogenis & the twilight of the reform agenda

by · May 8, 2012

Today, I’ll be reviewing George Megalogenis’ book, The Australian Moment, for you*. It is notable for two things. Firstly, it is hymn to Australia’s class war from above reform era of the 1980s and 90s — but tinged also with regret that since about 1993 the political class has lost the will to fight the good fight. Secondly, in making an argument that the reform agenda can be resurrected with popular consent today, he must engage in a lot of contortions and self-contradiction.

Megalogenis has something of a following on the mainstream Left, perhaps because of his wonkish persona and apparently moderate politics for someone working at The Australian. But a deeper reason is that he reflects a strong residual view that the ALP’s economic rationalist turn was “a good thing”. Mainstream Left politics, whether in the ALP, the unions or even the Greens, operates in the shadow of those times. You can see it in Megalogenis’ scribblings on the weekend supporting Swan’s budget cuts as “hard truths” that must be realised. So how does his pro-reform argument stack up?

Not explaining the crisis

Like most neoliberals, Megalogenis starts with the unravelling of the post-WWII long boom, the greatest and most sustained phase of economic growth in world history. And, like them, he cannot explain the boom. Instead, he immediately bemoans the downsides of prosperity: That “great society” welfare was unaffordable (page 15), that governments fooled themselves into thinking they could control economies, and that when wages rose workers “kept asking for more without offering anything in return” (21). Full employment, rather than being a good thing, drove people to “madness” (23).

For him it all goes wrong when, just as the global economy is running into problems, “The obedient Australia of the 1960s had entered the 1970s with a taste for self-destruction” (24). Poor Mega is unable to pin down exactly why this is so, but at one point he suggestively notes: “Excessive displays of manliness are a telltale sign of an insecure nation — and an immature one” (30). Cue apocryphal tales of trade union irresponsibility (53).

Recession hit a big-spending Whitlam government hard. Megalogenis sees parallels between the 1970s and today. The two crises, he says, are “connected by the same flawed assumption: that borrowing carries no risk if the purpose is nation-building” (70). That’s right, the US subprime bubble (a private debt problem) was actually the result of a “government-sanctioned push to permanently increase the home ownership rate in the US” (71). And here I thought it was caused by Alan Greenspan’s desperate attempts to prevent the meltdown of a weak US capitalism by inflating asset-price bubbles with ultra-low interest rates. But that doesn’t suit Mega’s line that greedy working people lead governments to borrow excessively.

Indeed, whatever problem he attacks, Megalogenis almost invariably finds a way to absolve the capitalist class and the rich. Massive tax avoidance by the wealthy in the late 1970s is thus blamed on “the people” (100). Strike action to defend wages against inflation is likened to illegally cheating tax, a type of “rorting” (105). “The trade unions were looking for their share of El Dorado” when they tried to defend living standards, and he blames the 1981-2 recession squarely on them (130).

Sacrifice without reward

It is now that the reform era begins, as Megalogenis’ heroes ride into town, and Australia greets “the decade of economic rationalism from the centre-left” (144). Their genius is the submission of government prerogatives to the logic of capital accumulation: “Once Hawke and Keating accepted the judgement of the international marketplace, they had to look at the economy from the perspective of Australian business” (166).

Everything in The Australian Moment is judged against this yardstick. So, former ACTU leader Bill Kelty waxes lyrical about how union participation in attacks on their own members was the act of a “transformative labour movement” (168). The “Banana Republic” crisis leads to public spending cuts, further lowering of real wages and speed-ups at work (180-1) but Mega praises the ALP for getting re-elected despite attacking its core supporters.

He basks in the glow of how from 1982-89 there was a net transfer of wealth of $50 billion (2010 dollars) from labour to capital (207). But did all this sacrifice actually work? For one thing, wage cuts didn’t kill inflation, which was still 7.8 percent in 1989, as record high interest rates further undercut living standards (195). Yet the ultimate result was a deep “recession we had to have” in 1990-1.

Megalogenis has no convincing explanation for why successful “reform” ended like this. At one point he is reduced to meaningless aphorisms: “Every recession should be necessary in that it corrects an excess” (207); “Economies turn on emotions … Booms and busts are two extremes of the human condition, and the job of government is to moderate the mood swings” (209).

Unemployment peaked at 11.2 percent in December 1992, but male fulltime employment took another nine years to return to pre-recession levels (210). The recession also gave Keating his chance to drive through enterprise bargaining, which further weakened union influence. Yet for Megalogenis this is the height of success. Not only has inflation finally been conquered (at massive social cost) but among the effects of liberalising the economy was that:

[T]he tension between labour and capital was released. Those with work wanted job security over wage rises, so they were less inclined to resort to industrial action. Competition, in turn, made business more reliant on quality workers. The old mateship models of militant trade unions and aloof employer associations had passed their use-by dates. (269)

So class antagonism subsided as jobs became more insecure? Or was the competition that drove greater precariousness actually causing more security for workers? Did unionism fall away because unions had led their members to sacrifice or because workers were less matey? The analysis is garbled.

Megalogenis reluctantly acknowledges that economic pain led ordinary people to turn against his beloved reform agenda. But he is torn, because he sees any easing up on disciplining the population as backsliding. So when Keating attacked John Hewson’s ultra-neoliberal 1993 election platform, he “had unconsciously written the anti-reform script for the 1990s” (262). Howard’s successful 1996 small-target strategy and the rise of Hansonism confirm for Mega a political class handing out concessions to contain discontent with neoliberalism.

Leaders lose their authority

But there’s a problem here, because his thesis is that with strong leadership popular consent could be won for further rounds of reform. He has to spin the post-1993 period in terms of leaders consistently giving voters handouts, playing to their greed rather than their willingness to be “obedient”. Thus, those episodes where Howard did try to return to economic rationalist form in his first term — perhaps most notably in the national waterfront lockout — are downplayed or omitted. Megalogenis even claims the unpopular GST was “the policy John Howard relied on to reconnect with middle Australia” (288). To report the backlash against these policies would be to acknowledge that further attempts to weld together a majority constituency for economic rationalism were tried (as Howard initially did), but failed.

After 1998, Megalogenis laments, “Howard allowed the pendulum between leader and voter to swing too far to the latter” (302). He gets it exactly the wrong way around. The problem was not lenient leadership, but a political class no longer having the authority or social base to drive frontal attacks. Megalogenis starts to lash out at “middle class” welfare, but is forced to define this apparently privileged layer as including pretty much anyone with a job — even if their income is low — who can “gorge on the magic pudding of government protection” (302-3).

With no reform heroes to look to, Megalogenis becomes increasingly schizophrenic about the “prosperity” economic rationalism is supposed to have delivered. Rising inequality and the obscene profits of banks and mining companies (not to mention the pay of CEOs) don’t trouble his attention, but rising mortgage debt is blamed on a popular desire for “perpetual consumption” (308). Yet only pages later he reveals that from 2002-7 mortgage repayments actually increased as voters “expressed their dissatisfaction with Howard’s bribes — by refusing to take his advice to keep enjoying themselves” (338). Still searching for a protagonist, at one point he bizarrely claims that, “placing a price on greenhouse gases was the first economic reform forced on Australia’s politicians by the community” (320).

Megalogenis’ argument is prettied up with pseudo-profound “social analysis” that takes in geography, gender, ethnicity and “generations” (baby boomers, X, Y and even his own W, whatever the hell that is) but assiduously avoids any serious consideration of hierarchies of social class and power. And of course there is a de rigueur chapter on the media, which rambles so badly I switched off completely. There are many interesting facts and stories, but they tend to either undercut his arguments or simply muddle what he is trying to say. The whole thing simply doesn’t hold together.

Reform exhausted

In Megalogenis’s world ordinary Australians are obedient except when they’re not. They get greedy when there are boom times, except now they want perpetual consumption to make up for austere times, except that they don’t. They respond well to strong leaders who push through attacks on their living standards, but only when there is no alternative program on offer. And when leaders go soft on reform they find voters easy to bribe, except that voters then reject their admonitions. Furthermore, economic rationalism delivered on its promises of prosperity for ordinary Australians after a period of pain, except that prosperity is built on personal debt and can only be sustained with more sacrifice and pain. And class antagonism magically disappears when the bosses win the class war, which makes workers so insecure that they will accept low wages, except that this competitive environment actually delivers security because bosses value quality workers, even though that competition led them to shed jobs in the first place.

Make sense to you? I thought not.

These contradictions reflect the incoherence of those arguing for a revived “reform” agenda. Megalogenis comes closest to admitting this when he considers Workchoices. Here was a classic “reform” policy, yet over two decades of wage restraint and a dramatic decline in union organisation and industrial action had left employers in the driving seat. All the policy did was provoke a backlash, with bosses showing little enthusiasm to rush to Howard’s defence.

Megalogenis is also unable to show how reform policies are connected with Australia’s avoidance of recession in the GFC. The current period of uninterrupted growth coincides with what he sees as the retreat of reform. He has to look the other way to not notice that economic growth has been kept afloat with the help of of asset price bubbles and high levels of private debt (with the Rudd stimulus adding to this some public money) . It’s just that, unlike overseas, they haven’t yet unravelled. Growth has been underpinned by the very debt he believes will lead to disaster. By contrast, his preferred period of high neoliberalism delivered a deep recession and a jobless recovery.

It is notable how lacking in confidence Megalogenis is to prosecute his case. Not only has the political class lost the ability to inflict economic rationalist medicine, its keenest journalistic enthusiast only exposes the exhaustion of such a project in his attempts to resurrect it. The key thing to understand is that the reforms of the 1980s and early 1990s didn’t just drive down living standards. Central to the project was the use of the ALP-union relationship to inflict a historic political defeat on the working class, thereby shifting as much of the burden of the crisis as possible from capital to labour. It is important to grasp that this defeat then led to the hollowing out of the very social forces that could deliver further rounds of reform on the same basis.

This is not to say that politicians cannot try to push through major attacks, say of the sort we see in Europe in response to recession. But the result is likely to be further collapse in support for the mainstream parties and a deepening of the crisis of the political class. There will be no repeat of The Australian Moment because there is no longer any social basis for it.

* I previously looked at his Quarterly Essay here.

Discussion5 Comments

  1. YuriAndrogynopov says:

    Great article its always fun to see how neolibs spin tales of the world crazier and less lucid than any acid trip.

  2. Daniel says:

    He doesnt see any traction with the Australian working class. Not much more to say.

  3. […] Further, the political institutions that managed previous waves of austerity within mainstream channels have been greatly weakened in their ability to play that role again. Marxists often talk about the great struggles that shook the advanced capitalist countries in the 1960s and 70s, and of the backlash that restabilised the system from the late 1970s (the “Thatcherite”, “economic rationalist” or “neoliberal” turn). In both periods, traditional trade union and social democratic organisations faced disruption but also played a role in containing discontent and managing retreat. The price was the erosion of their social bases (for the Australian case see here and here). […]

  4. Jim Rose says:

    the post-WWII long boom, the greatest and most sustained phase of economic growth in world history is known as the Menzies era.

    many on the Left look seem to look back longingly on big ming.

    No other period in Australian history has been named after an individual and so quckly see

    low taxes and small government were the secret of the post-WWII long boom.

  5. Mike Hansen says:

    “low taxes and small government were the secret of the post-WWII long boom.”

    That explains why Germany with a tax take of 40% of GDP is a economic basket case and Greece with a tax take of 33.5% is an economic success story.

    Oh, hang on.