political ideology
11 Feb 2009
Rudd Buries Neoliberalism
There's more at stake than a few quick political points in Rudd's recent attack on free market ideology, argues David McKnight
The banking crisis has thrown Kevin Rudd’s plans for his Government into chaos, but somewhere, deep down, he must be experiencing a twinge of pleasure. It’s the satisfaction of seeing your opponents stumble. The Germans have a word for gaining pleasure from someone else’s misfortune: Schadenfreude.
In this case the misfortune has befallen those who believe in neoliberalism, a class of people recently introduced by Rudd to the Australian public, but better known as economic rationalists.
In his essay "The Global Financial Crisis", published in February’s edition of The Monthly, Rudd argues that the crisis will be the catalyst for an epochal and historic change in prevailing ideas and policy making by western governments. This change will see the downfall of neoliberalism — which he defines as the "free market fundamentalism, extreme capitalism and excessive greed which became the economic orthodoxy of our time". Rudd points to the clear warnings over many years of a looming crisis in banking. But these, he claims, were ignored because of an anti-regulation culture, particularly in the US.
In effect, Rudd sees the financial crisis as the Berlin Wall of the free-market right, marking the end of an era.
Rudd’s statement has been attacked by many commentators. Former Labor treasurer Michael Costa called it "rambling" and "superficial". Liberal frontbencher Tony Abbott dubbed it "playground name-calling" while noting also that Rudd’s position "is actually a radical change in direction". The Australian’s Greg Sheridan claimed that "its historical and intellectual claims are entirely fraudulent".
Some political journalists have dismissed Rudd’s essay as mere rhetoric, seeing it as a fancy way of attacking Malcolm Turnbull. Perhaps this is because prime ministers are supposed to be pragmatic and are not meant to write essays about intellectual and ideological crises. Yet Rudd is not the first political leader to see Australian politics in ideological terms. At a celebration for the conservative magazine Quadrant in 2006, John Howard spoke warmly of "the battle of ideas" as he praised the "defining ideological struggle" waged by Ronald Reagan and Margaret Thatcher.
Rudd’s ideological statement is significant for many reasons. Firstly, it marks an important break not only with previous Labor approaches but also with the prevailing Anglo-American orthodoxy. Until recently it was taboo for any western leaders to attack free market ideology. The essay in The Monthly rejects the so-called TINA wisdom, the acronym borne of Thatcher’s claim that "There Is No Alternative".
Rudd is not proposing a radical alternative to the free market but rather is pointing out that the TINA approach has run out of steam. This marks him as very different from "Third Way" politicians like former British prime minister Tony Blair to whom he has often been compared. Neither Blair nor current PM Gordon Brown — nor, closer to home, Paul Keating — would ever have savagely attacked free markets in the way Rudd has.
Rudd’s criticism is sincere and consistent with his deepest beliefs as well as his early political statements. He criticised both the economist Milton Friedman and the "godfather" of the free market, Friedrich Hayek, in his maiden speech to Parliament in 1998. In that speech he prophetically called for tighter regulation of banks and global finance and predicted that the Howard government would be harshly judged if it failed to regulate. Today, 10 years later, Rudd’s debut has been vindicated.
The greater significance of Rudd’s essay is, of course, that it sets a benchmark for his own Government. The two biggest and deepest challenges facing Rudd — the economic crisis and climate change — require decisive government intervention because, in different ways, the untrammeled market helped create both problems.
On the other hand, some of the policies his Government is pursuing require a second look in the light of his analysis. In particular, Rudd’s schools policy proposes a market-based model, setting up competition between schools in which parents "vote with their feet" by moving students from "bad" schools to "good schools". A schools policy more in tune with Rudd’s opposition to neoliberalism would not use destructive competitive mechanisms but aim to fix "bad" schools.
However, Rudd’s attack on free market ideology does fit well with his self-anointment as an "economic conservative". According to Rudd, real economic conservatives see the damage that free markets do to social cohesion and order. It’s a view shared by religious leaders, among others. For example, Australian and world banking deregulation has delivered a bubble of soaring housing prices and bloated personal debt which have in turn torn the social fabric. Liberalised trade in alcohol and gambling has provided massive revenue for state treasuries but destroyed families. According to the doctrine of neoliberalism, free trade in gambling and alcohol sales is, of course, "economically rational".
Rudd is undoubtedly a pragmatic and ambitious politician, but he is also an intellectual. An interesting feature of his essay is his engagement with the intellectual foundation of neoliberalism via the work of economists such as Hayek and Ludwig Von Mises.
Hayek is an Austrian economist who is little known to the general public but who has had an enormous influence for 40 years in economic policy in the UK, Britain, Australia and elsewhere. Two generations of World Bank and IMF economists have been schooled in his ideas. Hayek believed that markets were efficient and self-correcting, that
they formed a "spontaneous order" within which individuals pursued
their own ends. Governments exist largely to enforce laws and contracts
and to protect property.
The detail of Rudd’s attacks on the philosophical roots of economic liberalism has prompted surprised and outraged protests from neoliberal think tanks. Indeed the Institute of Public Affairs denounced Rudd’s solution as "neosocialism".
But of course, Rudd’s attack on neoliberalism is not all ideological. He is also sharpening another weapon. His opponent, Malcolm Turnbull, worked for a number of years in one of the very institutions which are now widely blamed for the greed and chaos which has occurred: the merchant banks. With this weapon in his back pocket, we will certainly be hearing more about the evils of the free market in the banking and credit system.
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"Through the Spooking Glass, and What Kevin - and other REAL Fiscal Conservatives - Found There" as revealed the treatise of 'Global Financial Crisis' by K. Rudd = '...catalyst for an epochal and historic change in prevailing ideas and policy making by western governments.'
Huh¿
As you say 'He (Rudd¿) is not proposing a radical alternative to the free market but rather is pointing out that the TINA There-Is-No-Alternative approach has run out of steam.
With --> NO <-- 'There-Is-No-Alternative' does not necessarily imply that he (Rudd) has an alternative...
Saying what he (we) doesna have, doesna imply what he (we) does have¿
It possibly means Rudd has no alternative?
It potentially means Rudd is clueless!
It probably means he flies by the seat of his somewhat threadbare pants...
And it doubtlessly means the replacement to his new corduroy will be paid for, for many long generations - and WE will not look smarter for his idealized and stylized smarty pants¿
Jus a Smart-State ditty by Mr. Toad¿ (Sans Cane &...)
------------------------------------------------------------------ PS It likely means what the 'other REAL Fiscal Conservatives Found' was that Rudd was not entirely (at¿) there... at all!
PPS Why not buy a new pair of salty croc white shoes - while we 're into a spending frenzy.
Really...¿
dunno4sure¿
I am not sure how serious Rudd’s challenge to free market fundamentalism is.
In terms of action it seems the needs of the market have trumped, for example, the needs of the planet.
Rudd, Obama, Brown, and other major leaders “on the left” seem to me to be claiming to have found a compromise between free market capitalism and state intervention that represents the centre. In fact they have just redefined the centre and are often to the right of the general population on a number of substantive issues.
I won’t detail it here because that would require too much research but often if you look at surveys on an issue by issue basis the answers given by the general public are often much more “radical” than those given by the leaders who claim to speak for them. peace.
Wonder if e’ll see an end to the particularly distasteful neolib money grubbing idea - paying organizations to assist the unemployed, but paying them a shitload more if they keep people unemployed and on their books for over 12 months.
So far this wasteful and highly ineffective swindle hs made Ms Rudd MILLIONS
Then there’s his plan to compensate carbon users for any carbon tax. WTF - I’m a smoker can I get compensation for the extra money I spend on the sin tax on ciggies? can I get a rebate for all the sin tax I’ve paid on alcohol?
In fact they have just redefined the centre and are often to the right of the general population on a number of substantive issues.
AustinGMackell:
“”Rudd, Obama, Brown, and other major leaders “on the left” seem to me to be claiming to have found a compromise between free market capitalism and state intervention that represents the centre. In fact they have just redefined the centre and are often to the right of the general population on a number of substantive issues.””
Well said!
Peter Costello put Rudd’s whimpish essay through the cleaners. As he said at one stage:
Now, this is the regulatory system which I put in place, APRA, that regulatory system. Julia Gillard is extolling it to the world as the best in the world. And back here in Australia you have this miserable little essay from Kevin Rudd saying, “The whole global financial crisis is somehow the fault of the Liberal Party.” I gotta say to ya: every now and then someone makes a claim in politics that takes your breath away. And boy, this was one of them.
see the video here
http://www.abc.net.au/lateline/content/2008/s2481545.htm
I’m not sure whether the Institute of Public affairs parrotted Malcolm Turnbull, Turnbull parrotted them, or Turnbull just felt the need to try to score political points.
On my blog (http://truepolitik.blogspot.com/2009/01/turnbulls-reds-under-bed-scare.h… ), I wrote:
” … neo-liberalism’s ‘laissez-faire’ economics are not economically conservative, and are not financially conservative. They are irresponsible because they quite blatantly allow for financial crises such as we now have.”
Home page: http://truepolitik.blogspot.com
the_analyst
You say (in your blog)
Prudent financial regulations are the real reason why Australian banks do not need the same levels of financial assistance as the bailout of US and British banks and mortgage lenders.
Those prudential and financial regulations are entirely consistent with conservative economic policies.
I am not sure how you can fairly say that?
Australia’s Housing Affordability Index or stated differently the average mortgage repayment to household disposable income - is about 100% out of line (worse) with the US - prior to the implosion of US house prices…
Where is the prudent regulation in that?
Isn’t that to say that the prudent regulators in Australia continue to allow household mortgages - the largest asset base of the 4½ major banks - to be set on a foundation of rather tenuous & whimsical clay¿
This when it is known that the US mortgage industry has tumbled like a pack of cards?
This when it is known that the Australian mortgage industry has indebted its average client to almost twice that of its counterpart US domestic borrower?
Why are the Prudential Regulators NOT warning Australia that in terms of asset pricing internationally that domestic House Prices in Australia teeter at the brink of a massive collapse - and that the stalwart banks here have no hope - once that avalanche begins to rumble and the mortgage overburden ‘snow-pack’ slips down the Ozzie slopes - of ever surviving!
Not a snowball’s chance …
This when it is known that the International debt industry is in virtual freeze, and that the [open emphasis] Domestic Prudent Banks [close emphasis] cannot raise sufficient debt domestically or internationally and are thus ( as of last week ) eroding their shareholders equity base at bargain/fire-sale scrip issues to maintain their solvency and prudency caveat? And all 4½ banks talk of poorer ‘debt servicing’ profitability going forwards¿
This when it is known that the Treasury now has a neo-authority to raise AUD $200Bn debt for government spending, a ‘crowding-out’ that has the 4½ Prudent banks wringing their hands at the virtual yield bonanza - going forwards - that this big spend government most certainly ensures.
This when it is known that the 4½ Prudent banks will no longer have to assume $AUD dollar risk, to source sufficiently acceptable international liquid assets of foreign government(s) debt - as the incumbent government is NOW soon to sell guaranteed - though inflation adjusted Commonwealth junk bonds!
[…Australian house prices rose more (360% AUS - 140% US ) over the last twenty years than USA house prices, they have also not fallen as much in the last few years. USA house prices have fallen 25% since mid 2006. Australian house prices have only fallen 2% according to the ABS data. If Australian house prices were to fall 25% like in the US then they would still have outperformed USA house prices significantly over the last twenty years.
Source Cadence Capital - Australian House Prices and their impact on the economy and stock market. ]
No reasonable explanation is given by the prudential authority as to why the US/Australia disparity is allowed to exist – other than rather weak concepts and arguments of restricted land availability and net immigration. [Both arguments offered for house price sustainability in Florida, the state with the largest US house price increment, at the height of the US bubble!] [Land availabilty - bah humbug/malarky - this is the land of Liebensraum!]
(As to the UK banks … the arguments doubtless assumes a parallel. But then - is there someone out there that truly cares? ) dunno4sure¿
Prudential regulation [contd…]
The big 4½ have done fairly(¿) well over the last six months due in no small part to the Commonwealth guarantee.
Yet should domestic home prices slip a mere 10% (not an unreasonable expectation) the mortgage book of the big 4½ banks will have an asset backing reduction in the region of about AUD $80 Bn odd - of which 20%-25% of that could be(¿) for ‘stressed’ loans.
If that is the case - that is to say home prices slip a mere 10% - the big 4½ banks will be shy that amount in their obligation to their depositors and their other public lenders, with the stark likelihood that the Commonwealth guarantee contingency will metamorphasise (sp¿) into a real obligation to the Treasury!
But 10% is so(¿) small - when compared to the US’s experience - which, should anything close eventuate here, the Treasuries obligation would dwarf the AUD $42 Bn Cash-Splash obligation.
Parliament does not include this contingency in its bail-out plan proposal¿
Surely this is neither realistic, prudent NOR fiscal conservative management! […even worse for the cruising down of an errant ‘cash –splash highway’!]
Ironically the banks must realize that the only way to sustain domestic house prices is to continue propping the housing market with further loans. As such the big 4½ must continue to nourish and wet-nurse their own spawn – their own foul Ourobouros.
With this - the banking sector’s burden/cross/dilemma - that as soon as future unemployment bights into their ‘propping’ strategy - that there is no (other¿) platform to support the asset side to their accounts.
Thus —> from the banking sector’s perspective - unemployment cannot be allowed to increase.
[But it will…]
…and then, at such time - Julia Guillard will doubtless have nothing further to say re:- Australia’s outstanding Prudential regulation! By that time she will acknowledge that its all Costello’s doing¿ dunno4sure¿
errata ¿¿
unemployment bights¿ = knot so = enemployment bites
(unless, off coarse, its a noose = bights
bites)So sorry! *blush*
Denko, what are you talking about? The weird punctuation marks make your comments incomprehensible
¿ dunno4sure¿
I will have to read Rudd’s essay before I say too much, but confusing Austrian economics and neoliberalism is pretty egregious.
Neoliberalism is the bastardised free-market ideology which sold out and accepted that governments should be allowed to manipulate the money supply and interest rates, allowing asset bubbles to grow and burst - the tech bubble, the housing bubble and now the Treasury bond bubble. Just you wait, the T-bond implosion will be horrific, many times worse than anything so far.
In the end the Keynesians are going to look as stupid as anyone else.
For an interesting read, look up “Professor Fekete”.
I’m not going to waste time trying to save the blinkered Keynesians and Friedmanites from their own stupidity.
If you’re still reading this, well done, you might just have an open mind. Just buy gold and you will be OK.
May Voodoo and/or supply side economics, economic rationalism. and the all inclusive philosophy of those fads as embodied in Maggie Thatcher’s “there is no thing as society” all go away and let’s get back to where governments can borrow and build infrastructure for us all.
It has been hard to watch such things as toll roads where an operator gets a licence to print money and the prime mover in that makes a lot of money but that same person is not charged to drive on your and my roads
Can we get away from AAA ratings for governments?
Can we see the inconsistency that governments must not go into debt while there is hardly a company or person in Australia that has not gone into debt to get their business running nor a house and car for a person
it is inconsistent that the Federal and state governments are collectively the biggest business in this country yet they are the only ones that must not borrow
Its absurd
Ruddy Buddy
Ruddy neosocialist or radical fiscal conservative? Who knows, (and I suspect) who cares? In the current economic climate, any course of financial stimulus Rudd may support (or may not, for that matter), very few will well understand why. Apparently, this applies to many politicians of all colours, and particularly, most political commentators. So our Little Kev might as well go for it, boots and all… Damned if he do, damned if he don’t. Whatever.
I still think that Rudd is playing politics. And yes, most of his policies are still very much Free Market. His bail-out for the banks etc. is all about insane consumerism, spend, spend, spend, and has nothing to do with doing anything different. Most if not all of his Ministers are extreme Free Marketeers, especially that Martin Ferguson, and Wayne Swan, and they have certainly not indicated at any time that they may have questions about their ingrained beliefs. I doubt that too many of them have done any deep reading into economic theory.
Obama may be the Change President, but so far he has only done what all Free Marketeers want, pour money into banks and give to the very rich. Maybe he thinks different, but what he wants and what Congress will allow him are two different things. Same with Rudd if he is sincere, how does he get any changes past his own caucus members, let alone Turnbull’s Opposition.
The Big Boys and Girls are already fighting back from the bunkers, and they are formidably armed, what with their ownership and control of Media and Business. What Government is going to fight them? Rudd has already buckled and genuflected to Big Coal and Big Mining and Big Energy over Global Warming abatement.
His best mates are the Very Rich. No, I expect nothing good from Rudd. He is already totally compromised. Dazza.
Whether Kevin Rudd has buried ‘neoliberalism’ is yet to be determined, but I found David McKnight’s article thought provoking. I have a lot of time for Rudd, partly because he is not a lawyer, economist, grubbby businessman or union hack. One of the reasons I like him was because I read his demolition of the ideas of Frederich Hayek. As David McKnight says, the present economic meltdown tends to prove Rudd’s point. Since Rudd is not shackled by an economic education he is able to see what actually works to provide the best outcomes, rather than trying to fit facts to some economic theory. Having lived and worked through forty-five years of economic change I feel able to comment from experience.
1) Economic rationalists remind me of mediaeval monks in their adherence to Hayek’s doctrines. They
follow these theories with a religious fervour As the article says, “There is no alternative’ - TINA.
2) Under Tina, all public enterprise is inefficient - bad, all private enterprise is efficient - good. Thus
public enterprise must be sold. Never mind about the years of taxes, bonds and effort that went into
building it. In Victoria we lost the SEC, Gas and Fuel, Melbourne Harbor Trust and the State Bank.
With them went the apprenticship training schemes and quiet efficiency which underpinned them.
3) Clearly not all public enterprise is bad and not all private enterprise is good, and visa-versa. In some
circumstances in different areas and at different times one or other type will be better. What I have
noticed is that because private enterprise has to make a profit real service goes out the window. There
is a tendency for a privatised company to resemble a hollow tree after a few years. The structure is
still standing but the inside has been sucked out. The first real test of it will see the whole thing
collapse.
4) The article mentioned Paul Keating, a legend in his own mind. He privatised the Commonwealth
Bank “Which bank” paid CEO David Murray about seven million dollars a year, closed branches and
sacked staff by the bucket load. The Victorian State bank went with it. In the Great Depression, so I was
told, no one was thrown out of their home by the State Bank. Of course, that was most inefficient!
5) Now, customers at the CBA face frightened staff who earnestly enquire if they have served you well,
because someone in management will likely ring up to check on them. I fail to see any great deal of
efficiency in this, just ‘poverty stricken manangement practices’. I’m really looking forward to the
phone call.
6) One correspondent says that Peter Costello put Rudd and his whimpish essay in its place. Costello is
considered by many, who have knowledge of the subject, to have been the lazyest treasurer we have
had in this country. If any one could be referred to as a whimp it’s Costello, who didn’t have the guts
to stand up for himself against Howard. I’m surprised that anyone bothers to read what Costello has
to say.
7) Likewise Tony Abbott was mentioned. In the hope that Abbott reads this I want him to know, in words
which even he can understand, that the last time I saw a head like his, a Rabbi was operating on it. In
short, I have no respect for either him or his opinions. People like the black comedy team of Abbott
and Costello are probably appalled to find that TINA is being questioned.
Part of the reason that economic rationalism has lasted as long as it has are the huge technical advances which have happened over the last forty years. It has enabled smart systems to be put in place so that human expertise in an area could be replaced by computers. Resultantly managers, trained in Management, but not in the business they were in, were able to be brought in to “run” the enterprises. I suspect that we are reaching the limits of this technological bonanza and a more sensible approach may be in the offing. I hope that Kevin Rudd’s tentative steps in demolishing TINA’s house of cards will continue and bear fruit in due course
As for Rudd burying Neoliberalism, is someone smoking the weed? The Neoliberals, although somewhat poorer, very relative term, are still filthy rich, and still control all aspects of Big Business, with lobby groups very busy burying people who are trying to bury them. Who did Rudd kow-tow to with Global Warming? Big Business! And ALL of the leaders of Big Business are Neo-liberals, or whatever one may want to call them, because their ‘religion’ has many names. You do not really think that they are going to allow Rudd, even if he wanted to, and I do not believe he does, to interfere with their sucking at the trough? These groups are Multi-National, Global, and one little PM in some piddling country is not going to be allowed to affect them one little whit. Whether Obama is Pres in USA or not, it is still the big Multi-nationals who rule the roost, and in the end will control Obama, as they still control the Congress. Indeed, if he were to impede their greed to any extent, beyond some small allowances, easily disposed of at some later time, they may well compete with Mossad in exterminating him. Big Business will NOT tolerate interference!
US Presidents, other than Far Right Wing ones who control the Security services, seem quite easily disposed of, if history is any teacher.
The Neo-Liberals, Neo-Cons, Economic Rationalists etc. have been working assiduously for more than 30 years to control the world, and I see no real evidence of their control slipping. Sure, their greed got away from them, but they know that the ‘people’ will pay them back for their losses, because ‘their’ Governments will ensure it is so. Socialize the losses etc. Dazza.
Thats it dazza, anyone who believes Rudd is em-powered has got to be dreaming and that sure is going to turn into a nightmare the way the global mind control clock is ticking - most Australians are unfortunately dialed into the Lib/Labor/Green polarity switch - political sausage making machine - about the biggest choice for joe punter is whether or not to add sauce - me - I dont even want to come close to the BBQ - or ‘brain fry’ is probably the correct term - all that Rudd is doing with his essay is trying to establish some intellectual credo but any half witted bogan with a pipe knows this guy is on the take and receiving his orders from big daddy - little me Rudd and his little me Stimulus package is taking his orders not from above, not from the illuminati but from the global banking brotherhood who can write a cheque longer than this sentence without even breathing and thats about the full extent of policy achievement for our dull and dis-encumbered PM!
Lets face it - he’s apprenticeship for office was in China where he shared chop suey with Ross Garnaut and the two of them invented this mad dream we are experiencing now - the financiers of the party dream ( a whopping cover-up still) Ian Tang and Stanley Ho are the real puppet masters but they were not playing political favourites because our polling system is still vaguely democratic but the $ they are talking and their investments here means the ‘take’ was piddly and that’s the script we have inherited today and its evident in every press release from the energy minister Martin Ferguson who did’nt know what natural gas was until someone told him to stop farting at the Press Gallery meetings - now that he knows he selling all of it against the national interest to China and pretending at the same time to be a re-presentative of the state - when in fact he is a re-presentative of quite another - that being China.
Anyone who gets caught in the ‘feel good’ web of Rudd speak may miss the boat and get caught up in his externally concocted dream - and that aint good for no one!!
Multi nationals don’t control armies and Dazza you say ‘Big Business will NOT tolerate interference’ that is of course unless that interference is in the form of a bailout for their inadequecies!
And so far noone seems to be able to conceive of a more ‘controlled marketplace’ that will be good for the average punter, rather than the free-wheeling, marketplace that has got us into trouble due to far too much concern with the profit motive and far too little concern in creating a sustainable marketplace. A marketplace with government regulations about the behaviour of those entrusted with the capital and invested wealth of the nation.
Ideology can only get you so far and Kevin Rudd seems to be aware of that. However, while alcohol and gambling are encouraged in our society, the down and out, Mr and Mrs average will probably continue to gamble and hope for the unlikely big win and then turn to even more alcohol and/or a variety of illicit drugs when it doesn’t happen.