The decline of sensible politics

Media discussion of the Conservative debacle over the recent Federal and State elections has been partisan and lacking sound analysis. Whilst the public debate should be about economic philosophy and associated policies, media , academic, and political debate has been obsessed with character assassination and the left and right of the political spectrum. This breakdown in the standard of public debate demonstrates the rejection of post-World War II knowledge and experience. Theoretically, the debate over the left and right of the political spectrum centers around socialism versus free market capitalism. This ideological focus confuses growing authoritarianism in Australia with the ownership of the means of production which defines the political spectrum of an economic system.

Authoritarianism of the left, or socialism, as popularly construed, requires public ownership of the means of production in an economic system. That cannot happen under the Australian Constitution.

The reference point is Prime Minister Mr. Chifley's 1947 attempt to nationalize Australian banking. Nationalization of Australian banking was rejected as unconstitutional by the High Court of Australia; and the British Privy Council. The sticking point was section 92 of the Australian constitution which requires all trade, commerce, and intercourse among the States to be absolutely free.

However, left of center political leanings can exist through public ownership of productive resources. Targeted industries would be public ownership across key industries such as railroads, coal, and steel industries. However, when Australian political parties began to restructure the post World War II economy post 1983, Labor engaged in an extensive program of privatization. Privatization directly challenges any left of center ideological claims of socialism.

Whilst ownership of the means of production remains in private hands , Australian authoritarianism must rely upon legislation and regulation of industry. That constitutes a move to the far right of the political spectrum. Post 1983 structural reforms moved the Australian economy rightwards from a mixed capitalist economy to a corporatist economic system. In the 1988 Macquarie Dictionary of Australian Politics, on page 96, corporatism is defined as:

" A political system which rests on the direct involvement in government decision-making of a small number of corporations or groups which are functionally necessary for the stability and growth of the economy"

The Macquarie dictionary goes on to explain that there are two economic systems identifiable within a corporatist economic structure which define the political order as either fascist corporatism or Liberal corporatism. Fascist corporatism is defined as reflective of Mussolini's Italy i.e dictatorship, whilst Liberal corporatism is linked to Liberal democratic parliamentary institutions. Liberal corporatism captures the post 1983 structural reforms of the Australian economy which moved the post War economic system from Keynesian economic philosophy to supply side economics free market philosophy.

Very clearly, corporatism explains the contemporary Australian economic system and political framework. The selected groups of Australian corporatism comprise elites from various industries, social welfare, and environmental groups who influence government decisions. They were structured over the 1980's and 1990's by a drive for industry to speak with one voice similar to the contemporary emotive drive to structure "The Voice" for indigenous Australians. These groups have access to Government ministers and departments; but, are expected to support major Government policy direction under threat of exclusion. Consequently, the claim that modern Liberalism has its traditional roots in Menzies becomes fanciful. Menzies structured the post-War mixed economy under the interventionist economic philosophy of J.M.Keynes.

A free market element existed within the Menzies era ; but, remained under control until the collapse of the Bretton Woods international Monetary System in 1971. For example, when Prime Minister Holt tragically drowned in 1967, Jack Mc Ewan leader of the Country Party, threatened to withdraw from the Coalition if the then free market contender was elected leader of the Liberal Party. However, once Hawke began his free market structural reforms and introduced Thatcher's supply side economics, both sides of Australian politics abandoned Menzies traditions of an industrial policy built upon Keynesian economics and protectionism. From 1996 onwards, supply side free market theories dominated both sides of the political spectrum, so Keynesianism was officially consigned to history. To modern Conservative politics, the Menzies era became little more than a romantic historical reference.

Supply side economics was never an economic philosophy in its own right; but, a composite of a broad range of economic knowledge drawn from economic philosophies which have their origins in eighteenth and nineteenth century Europe. Over the 1970's and early 1980's, there emerged two versions of supply side economics that drew upon the economic philosophies of monetarism, Austrian economics, and neoclassical economic theories. Monetarism became the bible of monetary policy whilst real sector policy followed the theories and models from either neoclassical, or Austrian economics. For example, Reaganomics adopted a mix of monetarism and Austrian economics whilst Britain adopted a mix of monetarism and neoclassical economics commonly referred to as Thatcherism. Australia adopted Thatcherism.

The problem now facing the western world, is the failure of both Reaganomics and Thatcherism to manage the dislocations that have emerged following Covid and the European military crises. But the real problem for modern supply side economics really began in 2007 with the onset of the GFC. Following the GFC, monetarist theories dominated western central banks which engaged in Quantitative Easing (printing money). No recognized commentators talk about the role of QE in contemporary inflationary debate; but, the reality is that the disruptions to international supply chains through Covid and European hostilities have exposed QE as an inappropriate policy direction.

The important point is that modern monetarism does not recognize the real sector of an economy. The model only recognizes monetary phenomenon effects upon prices. To influence the real sector, monetarism relies upon monetary change to influence non-human assets within the model. Asset inflation therefore becomes the instrument of real sector growth. As monetary expansion increases asset values, consumers are assumed to borrow against rising asset values and spend on consumption which flows through to stimulate investment and employment. Real sector policy is modelled through neoclassical computable general equilibrium models to determine the necessary interest rate level necessary to manage inflationary expectations and employment in the real sector of the economic system.