Anarchism and the death of social democracy

In Australia the social contract consisted of a number of interlocking parts, such as centralised wage fixation and industrial arbitration; industry protection through tariffs and quotas; and a social welfare state enabled by the federal collection of a redistributive income tax.

The development and growth of the Australian labour movement, especially following the severe global economic downturn of the 1890s when free market economics held sway, played a vital role in ensuring that such a social contract could come about.

In its essence, the social contract led to the emergence of both a social welfare and developmental state that tamed and regulated the free market. Australian society became more egalitarian and the existence of the social contract was the key ingredient that facilitated the post war social and economic development of Australia, including the smooth post war immigration programme.

Though socialism was "on the books," the labour movement didn't make any serious attempt to bring it about whilst the social contract was in force. It should be stressed that Chifley's bank nationalisation initiative was in accord with orthodox economics, not neo-Keynesian economics, which displayed a preference for the socialisation of investment in order to smooth out the business cycle. In this way, Australian social democracy was largely on a par with that practised elsewhere.

The Bretton-Woods global economic order played a critical structural role in the advent of social democracy. Capital market controls and regulations, that prevented the large scale transfer of capital and the emergence of a global financial economy, provided the glue that enabled the formation of social contracts between capital and labour. In its absence, the easy transfer of large sums of capital across borders could be used to undermine wages and working conditions through the threat of capital strikes.

That was the situation in much of the advanced capitalist states - the US was a special category - but in the third world periphery it was open slather for western corporations.

However that social contract is now dead, and with it has gone social democracy. In its place we have seen the financialisation of the advanced economies and a commitment to extending free market discipline to the great bulk of the population, which does not include the corporate sector, given that it must be protected by the nanny state as corporations have been from time immemorial. As a result, the size of profits in the wages-profits share breaks records with the frequency of a female pole-vaulter.

In Australia, the Australian Labor Party has been especially dedicated to the dismantling of the social contract. It was the ALP that dismantled industry protection; a process first began by Gough Whitlam. It was the ALP that abandoned Keynesian approaches to fiscal policy; it was the ALP that moved away from centralised wage fixing and conciliation toward a deregulated labour market; it was the ALP that started to downsize the welfare state; it was the ALP that started to cut taxes for the rich whilst cutting social spending; and it was the ALP that started to deregulate the financial sector and so enabled the banks to make massive profits on the back of ballooning private debt.

All this was enabled by the Accord with the ACTU, which largely functioned to discipline the working class whilst the ALP and the ACTU got busy dismantling the social contract to please corporate Australia. Little wonder then that a key architect of the Accord, Bill Kelty, has high regard for Bill Shorten.

The Labor government remains committed to the pursuit of free market reforms. The Prime Minister on numerous occasions has been on the record as stating that the government wants to extend free market driven economic reform, even after 30 odd years of relentless neoliberal policies.

Gillard's big idea, even from opposition, was to extend market driven "user pay" principles to social service provision. The Gillard Government, and the ALP more broadly, has all the features of a Trotskyite movement only this time the emphasis is on "permanent reform."

Will neoliberal economic reform actually ever end?