Keshia Jacotine considers how and why the Australian Labor Party and the British Labour Party turned towards economic liberalisation
The Australian Labor Party (ALP) and the British Labour Party are in vastly different places – while the ALP still holds firm in opinion polls with a 4 per cent lead over the Coalition, their British counterparts pulled off a shock election result on June 8 with leader Jeremy Corbyn proving critics wrong by increasing Labour’s vote share more than any other party leader since 1945. While Labour was not able to form a government, Corbyn’s win signalled that the party’s existential crisis had come full circle; this could be seen as a fundamental rejection of the centrist policies favoured by Blair, known as the “Third Way” and a return to the democratic socialist foundations of the party. The defeat of Ed Miliband in the 2015 British General Election marked the beginning of a radical turn back to the left for Labour and has led to various reports about internal conflict within the Parliamentary Labour Party, which may seem remarkably familiar to Australians after the now infamous ALP leadership spills which led to two sitting Prime Ministers being ousted by their own parliamentary colleagues.
This piece will explore what appears to be a critical juncture for both parties; their respective embrace of the free market and economic liberalisation. Was this a necessary evil for both parties to return to government, a response to broader global economic liberalisation, or a genuine attempt at achieving equity through trickle down economics? The answer lies somewhere in between.
Hawke and Keating: Neoliberalism or “Laborism”?
ALP Prime Ministers Bob Hawke and Paul Keating are perhaps best remembered for the economic reforms which opened Australia’s economy to the world after decades of protectionism and stagflation. Arguably, these reforms were initiated by their Labor predecessor Gough Whitlam who took the first steps towards liberalisation through the flat 25% reduction of tariffs. The Whitlam Government inherited an economy that was one of the most protected and least competitive in the world and one that was suffering from stagflation.
Hawke and Keating continued with this program of economic liberalisation through the introduction of a variety of reforms such as the further reduction of tariffs, the deregulation of the financial sector, the floating of the Australian dollar and the privatisation of state assets. Within a wider context, this shift towards more economically liberal policies was indicative of the wider move within the English speaking world towards the Anglo-American model of Neoliberalism promoted and implemented by Margaret Thatcher and Ronald Regan. However, in retrospect, it would appear that the ALP is reluctant to label these reforms as being neoliberal in orientation but rather “Laborism”.
Recently, former Treasurer Wayne Swan argued that Whitlam, Hawke and Keating’s agendas were not strictly neoliberal but an example of “Laborism”. Swan argued that neoliberalism was a poor description of these policies as ultimately their aims were to create greater equity in Australia through trickle-down economics that would see the stand of living for working class Australians increase alongside wealthier citizens. Swan pointed to other social reforms that were implemented alongside tariff cuts and privatisation such as the reintroduction of Medicare – Australia’s publicly funded universal health care system, arguing that these reforms were not necessarily in line with what he believed to be the broader neoliberal doctrine.
Blair and the “Third Way”
Swan drew a parallel between the “Laborism” of the ALP and the “Third Way” of New Labour in the UK. The “Third Way” refers to a new ideology created by Tony Blair and New Labour in response to an argument that old class divisions between the “left” and “right” were now redundant, and that a greater move towards the centre of the political spectrum was not only necessary but practical. The original argument for a “Third Way” came from London School of Economics Sociologist Professor Anthony Giddens who argued that reformist governments could no longer rely on the left-right binary in the face of powerful globalising forces and that traditionally left-leaning governments such as the Labour Party needed to adapt to this by adopting more conservative policies.
In moving towards the Third Way, New Labour cast aside traditional party preferences for Keynesian economic policies which relied on state intervention and looked towards the ALP for lessons in how to “marry economic openness with social justice”. In doing so Blair and his Chancellor of the Exchequer Gordon Brown introduced reforms such as making the Bank of England independent and allowing for freer movement of labour between the UK and the European Union (EU). While it appeared that New Labour was continuing some of the economic reforms made by the previous Conservative governments, its commitment to a “21st Century Welfare System” which aimed to reform perceived inequities in the welfare system that were created by the policies of the Thatcher and Major governments.
A Necessary Evil?
“Neoliberalism” is a term that often gets used as a catch-all description of negative aspects of the modern world. This is something that is indicated by the reluctance of the ALP and Labour to refer to their policies as being “neoliberal” but rather “Laborism” or the “Third Way”. One of the legacies of New Labour has been a perceived failure of the “Third Way”; it has been argued that New Labour’s economic policies set the UK up for a spectacular fall during the Global Financial Crisis (GFC). Jeremy Corbyn and the movement which supported his rise to leader of the Labour Party defined their policies as being a return to the democratic socialist roots of the party, and that Corbyn’s success was an inherent rejection of the Third Way. However, the ALP appears to be content with continuing on the path set by Hawke and Keating and the answer behind this could lie in the relative success of the ALP and Labour’s decisions to embrace the free market; Thomas Piketty estimated that the share of income going to the top 1% is approximately 14-15% in Britain while in Australia it is estimated to be 9-10%. Unlike other Western economies such as the UK and the United States, Australia is still yet to undergo a recession and while the economic policies of Liberal Party Prime Minister John Howard are credited for assisting with this, Howard was continuing the neoliberal program first set out by Hawke and Keating.
So was embracing the market a necessary evil? It is easy to assess this with the gift of hindsight, however, it is important to place Britain and Australia’s move towards economic liberalisation within the context of the broader global shift towards neoliberalism. During the early 1970s, both countries underwent significant recessions with Britain requiring assistance from the International Monetary Fund (IMF) in 1976 and Australia undergoing a sustained period of “stagflation”. The Bretton Woods System had collapsed and it appeared that Keynesianism had failed both economies, and so it appeared that a shift towards freer markets was the radical change that was required to remedy this economic malaise. It can also be argued that neither party was truly neoliberal; both parties created an ideology that attempted to marry economic liberalisation with the democratic socialist values which they were founded upon. The varying successes of “Laborism” and the “Third Way” provides not only a story of how two democratic socialist parties sought to modernise through the creation of a new ideology, but also points towards why the ALP has remained firmly in the centre while Labour has taken a sharp turn back to the left. While both parties may have aspired to create a new identity; the attempt to marry the old and new ideas of the ALP and Labour instead created an identity crisis which carries through to the present day. However, in light of Corbyn’s election performance, questions now arise about whether Labour’s return to the left is still symptomatic of an identity crisis or a solid acceptance of a return to its roots.
Biography
Keshia Jacotine is an MPhil Candidate at Monash University and Visiting Scholar at Queen Mary, University of London.
Note: This article gives the views of the author, and not the position of the Crick Centre, or the Understanding Politics blog series.
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