A social democratic response to the Great Depression of 2008

The conservatives adopted a more sinister strategy on the state scene: rather than moderating their unpalatable social views they embarked on a policy of fiscal starvation of the states to create a climate of financial mismanagement to aid their state counterparts.

In essence the “Shadow” raped the future of our nation.

The windfall revenue from the resources boom rather being reinvested in economic infrastructure either physical or human was squandered on welfare transactions to the middle class. In essence, bribes to swinging voters in marginal seats.

What is the social democratic alternative?

As mainstream economists rediscover Keynes, should the social democratic response be to simply increase aggregate demand by increasing government expenditure?

If that is all social democrats come up with we will fail future generations. Social democrats must also come up with supply side reforms that are social democratic not simply watered down neo-liberal reforms.

The failure of social democrats to advance integrated supply side and demand side economic policies led to the dominance of neo-liberalism, it is incumbent on social democrats to pursue supply side reforms and develop an integrated reform agenda. It is not good enough for social democrats to abandon the advancement of social justice via economic reform and pursue only social policy reform as the vehicle of advancing social justice.

This paper will focus on industry policy reform, social democratic investment reforms and housing supply side reforms.

Industry policy

Economic policy under Howard/Costello has focused on the enterprise as the vehicle for reform. The basis of this philosophy has come about from the Business Council of Australia. It was modeled on the Japanese system of the 1970s and 80s. However there are stark differences between the industry structure of Australia and Japan. The Japanese model that was examined comprised large enterprise or related ventures.

Therefore enterprise agreements would have impacts on large proportions of the workforce, furthermore the training and other infrastructure to support changes at the enterprise level had the benefits of economies of scale.

Contrast this with the nature of the Australian business community where on international comparisons the vast majority of employees are employed in small business or at best medium-size businesses.

The cost of infrastructure to support business change is significantly higher due to loss of economy of scale. To illustrate this, if in a Japanese firm there was a classification restructure that changed the mix of skills that affected 200 employees the training institutions are more able to adapt because of the volume of throughput. A similar change in the Australian context may only affect four to six employees. For training institutions to design new training arrangements for such a limited throughput significantly increases the cost and thus is a limiter to change.

Furthermore, many Australian businesses simply do not have the specialist expertise to negotiate or undertake workplace reform. Hence, there are a significant proportion of businesses whose labour relations strategy is to avoid enterprise bargaining and attempt to implement a wage freeze to maintain competitiveness. Thus labour productivity also freezes.