The Road to Serfdom & Capital in the 21st Century

Hugh Mackay, in a recent article about the 2014 federal budget,  asks Australians to consider: is this the Australia we really want to be? To answer this question we all need to reflect on the important role of ideology in the formulation of policy and what we personally believe, as citizens, is important.

Joe Hockey, when he was shadow treasurer, delivered a speech that flagged the direction the likely new federal government was to travel. I was in London at the time and watched him interviewed several times in the media about the ‘end of the Age of Entitlement’. The fact that he delivered the speech at the “UK’s original free-market think-tank”, the Institute of Economic Affairs, rather than in Australia is probably not so widely known.

Founded in 1955, the IEA was inspired by the ideas of economist Friedrich Hayek espoused in The Road to Serfdom. Heavily influenced by the rise of totalitarian states in the preceding decades and his experience of WWI, Hayek’s ideology and economics have been cornerstones of neoliberal and libertarian thought and the basis for many politicians’ conviction that ‘the market’ was the best solution to combat the evils of centralised planning.

Hayek’s book was much-admired by thinkers on the ‘left’ and ‘right’ at the time and the current political orthodoxy has direct lineage to his economics.  Considering the context of when he wrote, it made a great deal of sense to be concerned about preventing the rise of repressive, centrally planned, fascist or socialist states. Hayek believed that government needed to only really perform tasks that free markets were unable to do.

The role of government in contemporary society remains a key question and Mr Abbott, Mr Hockey et al have decided to drastically reduce the scope of what government should do. George Orwell encapsulated the issue in his commentary about Hayek’s book:

[Hayek] does not see, or will not admit, that a return to “free” competition means for the great mass of people a tyranny probably worse, because it is more irresponsible, than that of the State. The trouble with competitions is that somebody wins them.”

This viewpoint is what has led to tens of thousands of Australians marching against the government’s budget last weekend. There are too many losers from the government’s budget and potentially, a massive rise in inequality and loss of opportunity, regardless of social background.

The federal treasurer is undoubtedly right to suggest that we need to ensure future generations are not saddled societally debilitating and unsustainable debt.* He has clearly failed to address this issue in an equitable manner, partly because the government’s ideology of reducing government interference and leaving it to the ‘invisible hand of the market’. For most, Hockey has gone too far and is clearly framing ideological policy that is at odds with Australian values. There is just too much unfairness in what the market will deal out to the majority for anyone to be comforted by Mr Hockey’s assertions that the pain is shared.

*One wishes Mr Hockey and his colleagues were as passionate about their environmental, as well as economical legacy to the next generation.

Public Education and Structural Inequality in Australia

If you were an advocate of public education, you would have been surprised to hear no reference to it in the speech, but perplexed to discover the truth later in the evening when the commentators got to work on the fine print.    Hugh Mackay

Considering Joe Hockey’s ideology, it is probably unsurprising that Public Education was not a feature of his budget speech. For more than three decades, governments of all persuasions, have supported the market for education, citing choice, and encouraged the rapid growth of other non-government sectors. There are range of issues here but needless to say, the recent budget further erodes state support for public education with massive cuts to funding. The new policy, that de-regulates our tertiary institutions, is another example of Orwell’s point, about the problem of competition, when there is a winner (there are many more losers). I wonder how the regional universities will fair in what will become two-tiered university system very rapidly?.

Education policy is not an area that much interests the current federal government, they just want to get out of the way and let the churches and market have more power. This is clearly ideology in line with Hayek and an acceleration of the prevailing political orthodoxy. It will increase inequality and goes against the grain for many, if not most Australians, who will struggle to cope with the rising cost of education. Ironically, in this, the centenary of World War One, Germany, a nation burdened by the totalitarianism in its recent past, has made tertiary education free for its citizens while we send our young people off to the market. One wonders what citizens can expect from government policy next year, in commemoration of Gallipoli, for our youngest citizens? Surely it is not more societally structured inequality?

This viral video, about inequality in America, is quite shocking, even for those who think they know what the data says on the matter and I have heard many talk about not wanting these kinds of socially terrible outcomes here, in Australia. This is really worth watching to the end:

After viewing the above clip, many will feel that Thomas Piketty’s bestselling book, Capital in the 21st Century, is an antidote to the relentless, obligatory faith in the prevailing political orthodoxy. Piketty, an economist based at the École d’économie de Paris, has really set the cat among the pigeons with his rational use of large data sets that expose the economic history of inequality to closer scrutiny than it has had for some time. I’ve not finished reading it yet but it is obvious that even the most ideologically opposed to his thinking have to acknowledge the historical patterns he highlights.

Piketty is not popular with many economists and certainly has plenty of barbs, taunting his colleagues, throughout the text:

“They (economists) must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.”

This is the best of the articles about the importance of Piketty’s book and if you do not have time to digest his 700 page tome, I recommend you spend the time reading it.

Conclusion

Leaders need to be held to account for their policy decisions, especially in light of election promises.  It is also essential that electorate is more than just informed about how much petrol prices will increase or which programs are to be cut, we need to know more about the ideology that informs these decisions. We need more people explaining, rationally, how the political orthodoxy, currently hacking into the collective good in the name of fiscal responsibility, has arisen.

Thomas Piketty’s research and data will assist many leaders to explain what is going on, and why, but what really matters is what we collectively value. As always, the right decision is somewhere in between what both sides of the argument believe.

We do all need to contribute to the greater good but there are some other fundamentals of civil society that are essential and in need of some polishing. Trust is key. Trust is what holds our communities together and politicians need to have integrity and set standards of ethical leadership. They need to do much better in this area.

Much better.

Featured image: a ‘wordle’ of Joe Hockey’s budget speech.

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The views expressed at this site are my own and do not necessarily represent those of my employer.

2 Comments

  1. Nick Guggisberg:

    Hi Darcy, nicely brought together critique. There is one point I would like to add though, and that is I don’t think ideology sufficiently explains what’s going on here. I think VALUEs are what helps explain much of this current dog’s breakfast of a federal budget. Just like the video on wealth distribution in America highlights the inequalities in that society, applying an overview of ideology only goes some way to explaining why those with power are happy for this to continue. If Hockey truly believed in small government, so that market mechanisms can be allowed to allocate/distribute resources (&wealth) unhindered, then he wouldn’t accept $22k payments from businesses and wealthy people for access to him, as this actually distorts and undermines the functioning of the free market. I believe that his (& others like him) values actually dictate that they believe wealthy & powerful people have a right to be rich and powerful, and poor and powerless people deserve to be poor & powerless. He thinks that it’s reasonable that his party uses it’s office to raise funds by charging people $22k for meetings with the treasurer to lobby for special treatment then pocket the money to pay for political advertising to stay in power, then cut funding to health & education so there’s more money to distribute to his rich & powerful mates. Abbot’s VALUES mean it’s OK for his daughter to benefit from these rich & powerful mates while he publicly states we’re all going to share the pain. His VALUES state that it’s reasonable for unemployed people to go without ANY form of income for 6 mths despite there’s no jobs, but we’re going to label these people as UNDESERVING. His VALUES state that he’s very comfortable to shift public debt to young people to get an education while he received his for FREE. His VALUES state that he’s comfortable for Australia’s resources to be made available to rich multinational companies to exploit without paying reasonable tax & royalties for the privilege of the once in a lifetime opportunity to make sqillions from them. His VALUES state that he believes that there should be Dames and Lords, i.e. the rich have a right to be rich, and the poor are undeserving therefore it’s their fault. This man & his supporters should move to America, because that’s where they’re taking Australia. Like in America where it appears the market is worshiped the most, they too don’t remain faithful to their stated ideology when the going gets tough. If they did, then they wouldn’t have allowed the state to bail out all the banks, they would have let the market sort it all out. In my view it’s VALUES that explain their hypocrisies. But at the end of the day, it appears we’re still skinning the same cat the same way, but explaining it differently.
    Regards
    Nick

  2. Kate:

    On a basic level I’m very pleased that Piketty’s book has garnered such attention from quarters which normally blithely ignore the issue of inequality. Will be first on my reading list when reports are finished!

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