Quarterly Essay 82

George Megalogenis

• Publisher: Quarterly Essay
• Year: 2021
• Print ISBN: 9781760642860
• eBook ISBN: 9781743821701
• Topic: Politics & International Relations
• Subtopic: Global Politics
• Index: Politics & International Relations

In the wake of the pandemic, will we see a new politics of social security and concern for the future? Australia faces recession. In the wake of the pandemic, will we see a new politics of care and fear, of social security and concern for the future?In this original essay, George Megalogenis explains what we know about recessions and unemployment and how governments should respond. He explores the gender and generational aspects of job losses, and the fate of higher education – what happened to the clever country? He considers the state of the federation and, as Australia is forced to make its own luck, asks: what future for a divided nation?

EXIT STRATEGY	Politics after the Pandemic
	George Megalogenis

Australia has a justified reputation for avoiding the super-shocks of the twenty-first century. Twice now we have been the exception to the global rule of systems failure. Ours was the only developed economy in the G20 that did not fall into recession during the global financial crisis of 2008–09, and we were one of only a handful of nations to eliminate community transmission of COVID-19 during the pandemic of 2020 and 2021.

Yet our policy ingenuity and social cohesion in the face of existential threats were undermined on both occasions by poor leadership once the immediate crisis passed. Twice now we’ve seen prime ministers at the peak of their domestic popularity fumble the reform tests they set for themselves.

When Scott Morrison broke his promise to vaccinate Australians by October 2021, voters would have felt a shiver of recognition. The manner of the backdown – not just the fact of it, but the sneaky way it was communicated – echoed Kevin Rudd’s politically fatal decision eleven years earlier to walk away from his great moral challenge of climate change.

The Liberal prime minister did not reveal the changes to his program in the formal setting of a press conference. Nor did he issue a statement on his official media site. Morrison waited until a Sunday evening, after the television news bulletins had gone to air and the first editions of the next morning’s papers had been printed, to issue a short, carefully worded statement on his Facebook account. “The Government has … not set, nor has any plans to set new targets for completing first doses,” he wrote on 11 April. “While we would like to see these doses completed before the end of the year, it is not possible to set such targets given the many uncertainties involved.” Future historians will be confronted by a deliberate gap in the official timeline. They will see the first confident announcement on the prime minister’s website last August that Australians would be at the head of the global queue for vaccines. They will see the dissembling as targets were missed, culminating in Morrison’s snippy insistence as recently as March that the revised program – at least one jab by October – was on track. But the admission that the exercise had run off the rails will not appear in the official record.

It was too smart by half. The vaccine rollout is the final and most difficult element in our great escape from the pandemic, demanding consistent leadership, public service competence and a high degree of community trust. Morrison, of all people, would know that a late-night post on Facebook, the home territory of anti-vaxxers and conspiracy theorists, risks confidence in the program. Only two months earlier, the prime minister had advised us where not to go for health advice: “Don’t go to Facebook to find out about the vaccine. Go to official government websites.”

When Rudd shelved his plans for an emissions trading scheme in 2010, he hoped to bury the announcement in the May budget papers. But the plan was foiled by journalist Lenore Taylor, who broke the story in The Sydney Morning Herald on 27 April. What the Labor prime minister should have done next was call a press conference at Parliament House to explain his decision. But he doubled down on his strategy of deflection by inviting the media to the Nepean Hospital in Penrith for a discussion of health policy. The local journalists refused to play the game. The first six questions were on climate change, and the long, tortured answers confirmed the futility of the exercise.

Rudd: “Given that international action has been slower than was originally anticipated and given the fact that the Liberal Party has now backflipped completely on this position and therefore the legislation has not been passed – given those two factors, it’s very plain that the correct course of action is to extend the implementation date.”

Compare with Morrison in 2021: “Now, I’ve been asked a bit about what our targets are. One of the things about COVID is it writes its own rules. You don’t get to set the agenda, you have to be able to respond quickly to when things change. And it’s certainly the case over the course of this past year, we’ve had to deal with a lot of changes.”

Rudd and Morrison were claiming to be both hero and innocent victim. They had steered Australia through the respective storms of the GFC and the global pandemic, thereby making us the “envy of the world.” But now sinister forces beyond their control had undermined their best intentions.

Rudd did not get away with it. The government “lost the support of around one million voters in just a fortnight,” Labor frontbencher Mark Butler wrote in his book Climate Wars. “One voter told me in my electorate of Port Adelaide, ‘I was never really sold on the whole climate issue, but was willing to back you in anyway – but when you just suddenly dropped the thing because things got too hard, you lost me. I thought you were all piss-weak.’” Within two months, Julia Gillard took Rudd’s job. Within four months, Labor was reduced to a minority government. Public satisfaction with democracy had been at a record high when Rudd led Labor into office at the 2007 election. It went into freefall in 2010, after his removal as prime minister, and by decade’s end had crashed to its lowest level since the constitutional crisis of the mid-1970s, while trust in government hit an all-time low.

Morrison had risen at the bottom of this long cycle of disillusionment; the fourth prime minister in eight years to claim power through the back door of a party-room coup. He took office in the winter of 2018 with no expectations, and exceeded them when he led his exhausted government to a narrow victory at the May 2019 election. His successful campaign was built around a relentless attack on an unpopular opponent, Bill Shorten, and a caricature of Labor’s spending and taxing policies. It was no more outrageous than Labor’s own scare campaign against the government in 2016. But Morrison made no attempt to talk up his own agenda. He assumed voters were disengaged, and directed that cynicism at his opponent. Undermining trust in government was a precondition for victory.

The prime minister drove that trust to even deeper lows with his passive and aggressive response to the Black Summer of fires, telling Australians he didn’t hold a hose, mate. All the world came to know him as the leader who had snuck off to Hawaii for a family holiday while his country burned. With expectations reset at zero, he exceeded them once more with his handling of the pandemic, only to revert to a point somewhere between the two extremes with the vaccine program. The setback might not hurt Morrison politically while voters remain comfortable with the security blankets of closed borders and economic stimulus. But a third wave of the coronavirus, requiring another extended lockdown, would test the electorate’s patience. Either way, Australia is once again in danger of snatching mediocrity from the jaws of achievement.

The key question for this essay is: can Australia restore faith in good government? Are we doomed to repeat the farce of the last decade, when we avoided the worst of the GFC only to succumb to policy gridlock and American-style electoral polarisation in the recovery? Or will the visceral experience of the pandemic allow us to reconceive the political economy of the nation?

Politicians who have only known the open economic model have been forced to provide care, and security against an invisible enemy, using the old tools of intervention. These levers are both familiar and alien at the same time. The closing of borders and the opening of the public purse to support people in lockdown came naturally enough. The difficulty has been in repairing the safety net and restoring public services that were previously entrusted to the market. COVID-19 has demonstrated a wicked genius for exploiting the gaps in the old model, most notably in the management of hotel quarantine for returned travellers, and in aged care, where the lines between private and public, and between the federal and state governments, were blurred.

Between the fires and the plague, Morrison learnt to be a more collaborative leader. He had no choice but to adapt to the realities of federation. The Commonwealth directed the economic response, but the states were responsible for their own health systems. The premiers exercised that authority at critical moments during the crisis, and elevated the standing of both levels of governments as the first and second waves were defeated. But the running of things by the Commonwealth, whether it’s the rollout of the vaccine or the safe return of Australians stranded in virus hotspots overseas, remains Morrison’s, and our, Achilles heel. While COVID-19 still burns around the globe and Australia remains poised between the elimination of community transmission and another outbreak, there is a still a risk that we slip from the short list of countries to be envied.

In 2020, we boasted the third-lowest death rate among the G20 countries, with only South Korea and China ahead of us, and were grateful that we didn’t have a leader like Donald Trump or Boris Johnson, who had neither the humility to heed the advice of experts nor the discipline to hold the line of lockdown. In June 2021, the United States still had the highest death toll in the world, and the UK the highest in Europe. But the perverse incentives of the coronavirus have inspired them to vaccinate their people as quickly as possible. The US is leading the G20, with 41.5 per cent of the population fully vaccinated, while the UK is second, with 39 per cent of the population receiving two jabs. Australia was at the bottom of the table, with just 2.2 per cent fully vaccinated. Even Zimbabwe and Myanmar had higher rates of vaccination at the time of writing.

This essay does not pretend to cover every lesson of the pandemic when the end point remains unknowable. The aim is to identify those parts of the old model that are irredeemably broken, and to provide a new answer to the question of what government should be responsible for in the twenty-first century.

The best place to begin the search for that answer happens to be the United States, where the great new policy experiment of intervention is also underway, with the results to shape the global economy for the remainder of the decade and beyond.

BEFORE AND AFTER NEOLIBERALISM

The United States has reached a historic moment of self-awareness, brought on by pandemic: the model of capitalism authored by Ronald Reagan is over. “Trickle-down economics has never worked,” Joe Biden declared in his first address as president to a joint session of Congress in April, “and it is time to grow the economy from the bottom and the middle out.” The statement would have been unremarkable if made by an economist. The idea that Reaganomics relied on a confidence trick has been understood in academic circles for some years. But Biden is the first US leader prepared to call neoliberalism’s bluff by deliberately increasing the size of government, and paying for it, in part, with higher taxes on companies and individuals.

The cost of Biden’s agenda, released within his first 100 days in office, totals US$6 trillion. It has three connected parts. The first, valued at $1.9 trillion and signed into law on his fiftieth day in office, on 11 March, was stimulus for an economy still ravaged by COVID-19. Something on this scale would have been delivered no matter who won the 2020 election. Almost a year earlier, on 27 March 2020, Donald Trump set the record for the largest emergency aid in US history, with a $2-trillion stimulus package, while Congress passed another $900-billion package last December.

An interesting detail for Australia is that Biden’s program boosted temporary income support for low- and middle-income earners at precisely the time the Morrison government was withdrawing both the wages subsidy known as JobKeeper and the COVID supplement to the dole known as JobSeeker. The US was lifting families with young children out of poverty and Australia was sending them back into it.

Biden wants to make history with his $2.3-trillion infrastructure plan and his $1.8-trillion families plan. Released within weeks of each other in March and April, they propose a permanent transfer of resources from the private to the public sector. The corporate tax rate is to jump by a third, from 21 per cent to 28 per cent, to help fund investments in buildings, utilities, manufacturing, scientific research and in-home care for the aged and people with disabilities. The top personal tax rate is to rise to 39.6 per cent – back to where it was before Trump cut it to 37 per cent in 2017 – to pay for record spending on education, child and family support. The tax hikes are modest by Australian standards. Even Tony Abbott, the prime minister who tried to impose the deepest cuts on government here in a generation, increased taxes to fund his own promises. He called them levies, but they were the same thing. Where Biden represents a break with the American politics of the past forty years is in his explicit rejection of the notion that government has to shrink.

His education policies are of particular interest to Australians, as successive Coalition governments here have squeezed the funding of public schools and universities. Biden has offered two years of free early education for all American children aged three and four, and two years of free community college after high school. Early learning has been a particular blind spot for both countries. The United States has the lowest rates of attendance in the developed world for children aged three and four, while Australia’s rates are below average for both years. Only 40 per cent of American children and 65 per cent of Australian children aged three attend early learning classes, compared to 100 per cent in Britain and France, and more than 90 per cent in most other European countries. In our own region, South Korea is at 92 per cent and New Zealand at 88 per cent. Australian policy-makers are not used to the Americans setting their safety net above ours. But it remains to be seen whether Biden provokes a race to the top on education here. The Coalition would need to abandon, or at least pause, its project to tilt the education budget towards private schools, which began with the first Howard government in 1996. And Labor would have to be prepared to fight an election on the issue.

Both sides will have noted that Biden’s agenda is popular. When polled, almost two-thirds of US voters agreed with tax increases for the wealthy. The same proportion supported the centrepiece of the plan for free education. Also, just over half (51 per cent) agreed with the statement that “trickle-down economics have never worked in America,” while only 26 per cent disagreed. “Any way you slice it, all of Biden’s economic proposals – and his mechanisms for paying for them – are popular,” according to FiveThirtyEight’s election analyst Nathaniel Rakich.

Biden appears to be an unlikely man to lead an economic revolution. A career politician, he had erred on the side of compromise since his election to the US Senate in 1972, age twenty-nine. But Reagan, a former Hollywood actor and governor of California, was seen as an improbable agent for change in his day. What both men have in common is that they assumed power in the teeth of an economic crisis. The US has held six presidential elections during a recession: in 1920, 1932, 1960, 1980, 2008 and 2020. The White House changed hands each time. The transformative elections for the American economic model were in 1932 and 1980. That places Biden in the sweet spot for reform, based on the precedents of Roosevelt and Reagan.

Franklin D. Roosevelt took office in 1933, with the unregulated model of capitalism discredited by the Great Depression. Almost one in four US citizens (24 per cent) were out of work. “Our greatest primary task is to put people to work,” he said in his inauguration speech in January 1933. “It can be accomplished in part [my emphasis] by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.”

Roosevelt’s New Deal program, which introduced social security to America in 1935, did not end the crisis. Unemployment remained above 10 per cent for the remainder of the decade; full employment was not achieved until the United States entered World War II. But it provided the first draft of the model that dominated economic thinking for the next half-century, with the federal government as an active player in the economy. The cycle of influence from America to Australia operated with a time lag of about a decade. We didn’t become New Deal–style nation-builders until 1943, when the tide had turned in the Pacific and John Curtin’s Labor government began planning the post-war reconstruction.

The apotheosis of the New Deal in the United States was Lyndon Johnson’s Great Society program in the mid-1960s, which introduced the Medicare and Medicaid health programs for the aged, disabled and low-income earners, and included a significant expansion in funding for education. Gough Whitlam’s program happened to be even more ambitious. He laid the groundwork for a superior safety net; one that proved to be more resistant to the sharper edges of neoliberalism than its American counterpart. Whitlam gave us Medibank, the first draft of our universal health-care system, as well as free tertiary education. But his timing was off. Labor took office in 1972 on the brink of the global economic storm of “stagflation” – rising unemployment and inflation – and as the orthodoxy was turning towards deregulation of markets.

Whitlam increased the size of the federal government by a third, but his dismissal in 1975 did not shift things immediately. The new prime ministe...

Table of contents

• Cover Page
• Title Page
• Copyright
• Contents
• Exit Strategy
• Correspondence
• Contributors
• Back Cover