Howard’s legacy: don’t fall for his rhetoric

John Howard recently addressed the neoconservative American Enterprise Institute, breaking his long silence since his election defeat last November. His prepared speech has been posted on the Institute’s website.

Howard’s main claim is that his government “pursued a blend of economic liberalism - in the classical sense of that term connoting, as it does, a faith in market forces - and social conservatism. So far from being in conflict, the one reinforced another.”

Perhaps they do reinforce each other, but Howard and his government rarely practiced either. Howard spent a large portion of his speech arguing in favour of labour market deregulation, the need to protect society’s values from extremist threats, and the importance of promoting stable traditional family environments for the sake of children and social harmony. Whether you agree with what he said or not, I think he does hold genuinely well-intentioned sentiments.

These aims, for what they’re worth, aren’t necessarily bad things. However, in practice, Howard’s ideals of economic liberalism and social conservatism were rarely followed. Rather than falling for his grand and noble rhetoric, it’s better to look at what actually happened when he was Prime Minister. The way his policies were designed and implemented shouldn’t be forgotten.

Economic liberalism

Howard’s government, more often than not, hindered rather than favoured economic liberalism. For example, the WorkChoices reforms to labour market laws were sold as making the market more “flexible” and “efficient”, ultimately for the long-run benefit of everyone as employment expands and GDP per head increases. Yet the actual policy was not based on economic liberalism, and it is not certain that it will have these long-run effects. Rather, it was founded on an ideological drive to reduce union power and benefit wealthy employers.

While unions can be highly damaging in some instances, in others they bring benefits to workers that enable them to perform their jobs more efficiently; they may help to reduce turnover and associated costs; and they may press for the strengthening and enforcement of safety regulations.

WorkChoices went too far. It left a great imbalance in bargaining power among parties in the workforce, meaning that efficient and fair contracts became harder for many businesses and workers to agree on. The right of employees to bargain collectively was curtailed. The laws also ran to thousands of pages, imposing a litany of restrictions and regulations on the types of labour contracts businesses may enter into. That is not economic liberalism; it is not even deregulation.

Perhaps the laws might even be justified if there were long-run benefits for economic growth. However, almost all scholarly studies to date suggest that WorkChoices has done very little - or perhaps nothing at all - to generate output, employment or wages growth. These things are currently being driven by the strong economy, which in turn is underwritten by the mining exports boom. They would have been observed whether or not WorkChoices laws were passed or not.

The laws also unfairly disadvantaged many Australians in lower socio-economic groups and had a detrimental effect on the amount of time parents could spend with their children. Benefits were stripped away without fair compensation; even when contracts went too far and violated the new laws, enforcement was weak or non-existent. That is, WorkChoices wasn’t socially conservative either. It was more ideologically-based re-regulation of the economy, coupled with socially radical and regressive outcomes, than sensible labour market de-regulation.

WorkChoices aside, we can also look at the rest of the Howard government’s achievements over the 1996-2007 period. The size of government compared to the economy rose steadily over the period - hardly economic liberalism. While most public debt was paid off - a good move - and some government-owned corporations were privatised (notably Telstra), fiscal policies weren’t always sensible. Howard and Costello had it good; the world economy was doing pretty well most of the time, and the mining sector was booming here. Budget surpluses kept accruing - but rather than investing these in the infrastructure or “supply side” of the economy, they were returned as a continual stream of income tax cuts and spending programs in marginal electorates. This is partly why inflation is such a problem now.

While reducing tax burdens may be “economic liberalism” to some, favouring middle income earners with tax cuts and the rich with superannuation changes, while pouring money into pork-barrelling, is not. Family tax benefit part B, the welfare payments made irrespective of income, was a bad policy. So was the first homeowners’ grant, which simply boosted demand for housing without raising the supply. Coupled with the tax deductibility for rental losses on investment property, the Howard government was amazingly good at boosting the demand for housing and creating the appearance of making it more affordable and attainable - but without increasing the actual housing stock. This is why the housing affordability crisis is so bad in Australia.

Furthermore, higher education funding as a proportion of GDP was falling even though it was on the rise in all other OECD nations. Education is an investment in the nation’s future. There was a string of defence cost blow-outs and bungling of projects, not to mention the black hole where funding simply vanished into. Taxation reform mostly consisted of the GST, which was a good move, but little else. I can’t see an awful lot of economic liberalism in any of the above policies - or, for that matter, social conservatism.