Economic credibility key to social democratic success

THE gap between policy intention and execution is usually far wider than anticipated.

IT'S in the nature of politics to generate friends and enemies by drawing borders and declaring hostilities.

Of all the many criss-crossed trench lines traversing our contemporary political battlescape, none is more enduring or more deeply dug than the one than defines Right and Left according to calculations of the size and ambition of government. For many commentators the global financial crisis proves the point.

Now, on the face of it you might think that the percentage of gross domestic product allocated to public as opposed to private expenditure might give only a limited perspective on the general health, happiness and wellbeing of citizens.

After all, many conservative governments spend more and save less well than their social-democratic rivals, if only because their favoured constituencies are sometimes more expensive to woo.


read the whole article in Today's Australian.

Edited extract from All That's Left: What Labor Should Stand For, edited by Nick Dyrenfurth and Tim Soutphommasane (New South Books, $29.95).

Unsung servants of Labor ideals

THE party's advisers bear little resemblance to the cynical pragmatists of popular myth.

In today's Australian, Dennis Glover writes "AS the ALP begins its official investigation into the causes of its recent near catastrophe, one group inevitably will be singled out for blame: political advisers. This is unjust, it is wrong and it's time someone said so. So I'm going to do something rare: write in defence of the political adviser." 

To read the interesting argument, link here.

Excessive market power in banking

Excellent ABC Radio interview this morning on excessive market power in banking with Josh Fear of the Australia Institute. Josh makes a number of strong points about the power of the Big 4 banks to generate ‘super-normal’ profits. Specifically, they use movements in their cost of funding as an excuse to lift interest rates and fees when RBA analysis confirms that since the GFC increased funding costs have lagged interest rate rises.

A particular suggestion Josh mentioned was previously raised by Per Capita in our Memo to the Prime Minister – the use of existing government infrastructure to provide low-cost savings and transaction accounts.  In today’s Fairfax papers, Elizabeth Knight, Katharine Murphy and Eric Johnston canvass a related idea of some merit, that Australia Post network could offer banking services, as the postal service does in New Zealand.

One point on which I’d disagree with Josh is his description of the current state of banking as a failure of market competition.  I’d argue the opposite – that we need greater competition in banking to provide the public with more choice and ease of switching between banking providers.

WA ‘opt-out’ organ donation scheme

Interesting to see today that the WA government has commissioned a proposal for an ‘opt out’ organ donation scheme, with a view to legislating such a scheme into law.  This is exactly the kind of behavioural choice policy that governments should be pursuing.  These policies recognize that people are not perfectly rational actors, that behaviour is predictably irrational and structures choices in a way that delivers outcomes without coercion.

Through its ‘Politics and the Brain‘ series, Per Capita has been exploring behavioural choice policy and has specifically highlighted potential for opt out organ donation, noting that countries with opt-out schemes have registered donor rates above 90%, while peer countries with opt-in schemes have donor rates below 10%.

Of course, the WA government could always go one step further and adopt the Israeli proposal that registered donors have priority access to organs over non-donors should they require one.

Left and right cross-dress to impress

By David Hetherington 

Political cross-dressing is something of a fashion of late. At the last election, Tony Abbott proposed the mother of all parental leave schemes - hardly a small government, free-market initiative. The Rudd/Gillard government has advanced an internet filter scheme to protect us from all that smut on the web - hardly the stuff of free-living, free-loving lefties. In Britain the conservative David Cameron talks of a Big Society, and seeks to distance himself from the choice and competition mantra of Tony Blair's New Labour.

What is going on? Well, the right is now wrestling with the same existential questions that have gripped the left in times past. It is travelling the same voyage of self-discovery recently trodden by its philosophical opponents. But is the right actually now where we've said the left has been for 30 years? Or, in shorthand form, has "right" become the new "left"?

To answer this, we need to recognise that both belief systems have experienced profound intellectual failures.

In the 1970s the limitations of the welfare state championed by the left became painfully clear as growth contracted and social unrest bit throughout the developed world. In 2008 the right had its own collision with reality when our 25-year experiment with ''let her rip'' free-market capitalism ended in the biggest market failure the world has ever seen.

Both movements were badly bruised by their brush with mortality. The reason the right appears to be soul-searching now is that its failure is so fresh. For an extended period, the Reagan-Thatcher approach seemed to deliver on its promise of low-inflation, stable growth, making the crash that much more stark.

A second reason why the right might seem like the new left is that the boundaries between the two have become blurred, as each side has cloaked itself in positions associated with the other, like some sort of retro fashion movement.

The interesting question is why has this happened. One reason is that the traditional support bases of left and right have splintered as class structures have broken down. Where tradies were once of the left, they now vote conservative - they're Howard's battlers. Where inner-city professionals were once reliably Liberal voters, they now vote Labor and, increasingly, Green.

Not only have the old support bases broken down, but the old debates have broken down, and the protagonists are struggling to define the contours of future debates. For decades, the intellectual battleground consisted of a set of well-worn contests. Market versus state. Bosses versus workers. Economy versus environment. These debates sustained the ideological warriors of left and right. But they have now been transcended, not because one side won or lost, but because economic and social change has made them redundant. The market and the state work best in tandem. Millions of workers are now their own bosses. Environmental adjustment provides economic opportunity.

What we need instead is to debate the real challenges facing the country. How to manage the dividends of our mining boom. How to transition to a low-carbon economy. How to improve our education system so that it delivers the skills, capabilities and resilience that will allow Australians to prosper in a dynamic, open society. These are the future battlegrounds of left and right.

So this borrowing of ideas, this cross-dressing we have seen from left and right, is really the product of three things. One, intellectual failures on each side, which have provoked great uncertainty among their adherents. Two, a fracturing of electoral support, which has led political leaders to chase new constituencies by borrowing ideas from the other side. And three, economic and social change that has left old debates redundant and forced the contestants to search for new points of difference. These are the reasons why the right might seem like the new left.

But the right is not the new left. Here's why. The right believes and will always believe in the primacy of the individual - this is its defining idea. Individual freedom, in particular, is the cornerstone on which most right-wing arguments are built: small government, free markets, Hayek's magic catallaxy. Add to this a deep distrust of the collective - as Margaret Thatcher famously said, there is no such thing as society.

Conversely, social justice, and the power of society to deliver it, is the defining idea of the left. The left believes that society is more powerful than the sum of its individual parts, that we create better lives by working together on common challenges and common endeavours.

The challenge for political parties is to integrate these defining beliefs into new policies tailored to a post-GFC world. For the progressive side of politics, this throws up the familiar old refrain of reconciling economic growth with social justice. But if the refrain is familiar, the answers must be different. They must go beyond the Third Way - the left's uncomfortable embrace of free markets and individual responsibility in welfare and justice.

Critically, the left must retain faith in the power of the state to advance fairness. The Henry Review contains many valuable proposals, but above all the government must heed its core proposition that progressive tax and transfers are the primary mechanism for fair income distribution. Equally, the state must be willing to recognise those instances where public provision is superior to private, as in the case of wholesale broadband. In these areas, the Third Way failed to deliver.

A new synthesis for the left would be built around ideas such as market design, human capital investment, behavioural choice policies and social innovation. Market design pre-empts market failures and prices social costs and benefits. Human capital investment lifts educational outcomes, stimulating growth and building individual resilience and life opportunities.

Behavioural choice policies, such as opt-out default super accounts and gambling self-exclusions, improve social outcomes without state coercion. And social innovation harnesses the power of community partnerships to develop local solutions to local problems.

These ideas will define the contours of the policy debate. Their embrace by the Gillard government would demonstrate that, for all the cross-dressing, right is not the new left.

This story was found in The Age, SMH, Brisbane Times and WA Today. Link here: http://bit.ly/bJpyTg. It is an excerpt of David Hetherington's speech at the 2010 Festival of Dangerous Ideas at the Sydney Opera House.

United front: the war against welfare excess

Tim Dusevic references Per Capita in his article in today's Australian. http://bit.ly/djsPqw

The Festival of Dangerous Ideas

Per Capita's David Hetherington will speak at the Festival of Dangerous Ideas in Sydney at the Opera House on 2/10/10. Check it out at http://bit.ly/cmYgdi