Coping with Globalisation: Australian Economic Policy and the Third Way

Coping with Globalisation: Australian Economic Policy and the Third Way?

Tim Harcourt*

*Fellow, Australian APEC Study Centre, Melbourne, Australia.

Thanks to Dennis Glover, Andrew Leigh, Mark Latham, Geoff Harcourt, Tom Forrest, Tim Battin, Malcolm Sawyer and Philip Arestis for their suggestions and assistance with this paper. The views contained within are those of the author's alone and should not be attributed to any organisation to which he is affiliated.

Coping with Globalisation: Australian Economic Policy and the Third Way

1. Introduction

The ‘Third Way’ debate is gathering momentum in Australia for many different reasons than it is in other countries. Why is this so? Well, it comes down to our history as a colony of Britain and the experiences of our respective labour movements. The Third Way is controversial because some in the Australian Labor Party (ALP) argue, with some justification, that the ALP invented it.

The ALP leadership, past and present, has argued that the policies that the Hawke -Keating Labor Government of 1983-96 provided the basis of Tony Blair’s New Labour platform in the UK in 1997. As Paul Keating recently recalled saying to Tony Blair “Our way was not the third way, but the only way” (see Keating, 1999). In some ways selling “The Third Way” in Australia has been like trying to sell “The Joy of Sex”. To quote Paul Keating: “We were more interested in doing it than finding a label for it” (see Keating, 1999). Keating and others in Australian Labor circles argue that Australia provided Blair with the Third Way or variants of it, not the other way around. After all, Blair was a regular visitor to Australia, has strong personal relationships with several Australian political figures. Blair’s program for modernisation, it is said, was provided with a successful model in the Hawke-Keating government - one of the few successful social democratic governments that survived a political and intellectual era dominated by the right in most industrialised democracies. During the time that Bob Hawke was Prime Minister in Australia, Mrs. Thatcher dominated the British political landscape, the Reagan-Bush administrations were in power in Washington and Helmet Kohl dominated politics in what was then West Germany. In addition free market economics had become influential again in universities, think tanks and amongst government officials.

However, it is not all one-way traffic. Some younger politicians believe that the ALP should adopt Blair’s political philosophy and shape it according to their own political agenda.

This paper is divided into four sections.

The first section briefly discusses the origins of the Third Way debate with particular reference to the work of Anthony Giddens.

The second section explains the origins of the Third Way debate in Australia and its effects on Labor and non-Labor politics in Australia.

The third section of the paper looks at some of the specific Third Way economic policy issues, which have been more prominent in Australia.

The fourth section of the paper looks briefly at some of the future scenarios for the Third Way and Australia. The section discusses a number of themes that could be important to how much influence the Third Way is likely to have on Australian public policy in the new millennium.

II. What is the Third Way?

The Third Way project aims to build a coherent political philosophy and program in the wake of the ‘Left’s’ loss of credibility since the fall of the Berlin Wall and the failure of the ‘Right’ to integrate social policy with economic policy. The Third Way’s main intellectual architect is Anthony Giddens of the London School of Economics. Giddens’s book The Third Way (see Giddens, 1998) and his associated writings have influenced Tony Blair and his initiation of the ‘New Labour’ political program. In his book Giddens talks of the need for a renewal of social democratic thinking in the face of new policy ‘dilemmas’ such as: globalization, individualism, the terms ‘left and right’ themselves, political agency and the challenge of ecological problems (see Giddens, 1998; 27-28). Whilst Giddens does nor present a policy blueprint to deal with the ‘five dilemmas’ in detail, he does provide what he calls ‘Third Way values’ (Giddens, 1998: 66). These include:

• Equality
• Protection of the vulnerable
• Freedom as autonomy
• No rights without responsibilities
• No authority without democracy
• Cosmopolitan pluralism
• Philosophic conservatism

In order to promote Third Way values, Giddens provides broad outline of what he calls a ‘Third Way program’ (Giddens, 1998: 70) to reform public policy by better understanding the interaction between the state, individuals and civil society. The Third Way program consists of the following elements:

• The radical centre
• The new democratic state
• Active civil society
• The democratic family
• The new mixed economy
• Equality as inclusion
• Positive welfare
• The social investment state
• The cosmopolitan nation
• Cosmopolitan democracy

Whilst space does not allow a full discussion of the Giddens thesis (which is debated at length in The Third Way and its Critics – see Giddens, 2000), it is important to have some regard to the whole Third Way concept. The Third Way in the Australian context and its economic policy elements to be discussed in the following sections need to have regard at least implicitly to the origins of the Third Way concept as devised by Giddens and adopted rigorously by Tony Blair and New Labour.

III. Origins of the Third Way in Australia

This section looks briefly at the origins of the Third Way in Australia. First, it examines the influence of Australia in Tony Blair’s political development. Second, it examines the influence of Blair’s success to date on the Australian Labor Party. Finally it looks at the Third Way on the Australian political scene as a whole.

Tony Blair has close links to Australia. This has been highlighted by his biographer John Rintoul and by Australian academic Andrew Scott in his comparison of the modernisation process in British and Australian Labour parties (see Rentoul , 1996 and Scott, 2000).

Not only did Blair spend some of his childhood in Adelaide but he also had important Australian friendships whilst at Oxford University in the 1970’s. The three Oxford friends were Kim Beazley now Federal Labor leader, Geoff Gallop, Western Australian Labor Leader and Peter Thomson, a mature age student of theology. Whilst the two Western Australians have remained close to Blair, given their common vocation as professional politicians, it is claimed that Thomson has had a greater influence on Blair’s political and religious philosophy (Rentoul 1996, 41-48). Rentoul describes the importance of Thomson in influencing Blair’s views on the concept of community, which was derived from the Scottish philosopher John Macmurray. Blair’s political philosophy including his ideas of community and social cohesion is an important part of the Third Way. According to Rentoul and Scott, these developments came in part from his friendships with the three Australians at Oxford.

Later, as a politician in the early 1980’s, Blair continued to be influenced by his Australian connections. Blair visited Perth, Western Australia in 1982 just before being elected to parliament in 1983 in British Labour’s second crushing defeat by Margaret Thatcher. Blair gave a lecture to Gallop’s political science class at Murdoch University, which Rentoul says was an early sign of Blair’s interest in modernising the British, Labour Party. Blair’s lecture, which was later published, noted the Labour Party’s angst between traditional policies and the need for an acceptance for a mixed economy.

Blair said:

“ The Labour Party sits uneasily, squashed between the traditional Clause IV part socialism and the acceptance of a mixed economy” (Rintoul pages 88-89).

Rentoul suggests that Blair’s later campaign to remove Clause IV in order to modernise the Labour Party can be traced to his lecture in Western Australia in 1982. Blair’s reference to the mixed economy is important given that the Australian Labour Party went through similar arguments over its preferred stance on the mixed economy in the early 1980‘s as well. The 1980 'Labor essays' series, in fact, included a paper on the mixed economy by two economists who were active in the ALP (see G.C. Harcourt and P.Kerr, 1980). This was part a process where Australian Labor revised its policies and performance in the late 1970s which enabled it to govern at a federal (and state) level for most of 1980s. The ‘new mixed economy’ is also part of the Third Way program (Giddens, 1998:70)

After Blair's 1982 Australian visit, Australian Labor was elected under Bob Hawke and successfully won re-election throughout the 1980s and 1990s. By contrast, UK Labour languished in Opposition after the SDP split. The success of the Australian Labor Party in government was constantly compared to the British Labour party after the latter's electoral support had collapsed in the 1980’s (Scott, 2000: 3). This prompted regular visits by British Labour figures to Australia by Blair and Brown (thought by Neil Kinnock to be the ‘future generation’) in 1990, Blair again in 1995 followed by John Prescott (as documented by Scott: 2000; 4). During this period, Australia was competing for attention with Sweden and later the USA as possible ‘models’ for UK Labour. However, Australia, too was looking overseas ‘models’. For instance in the late 1980s, the Australian union movement was involved in its own ‘modernization’ program after visiting various Scandinavian and Western European countries in 1987 (see ACTU/TDC, 1987.)

While Blair continually learnt from the success of the Hawke – Keating Government in Australia, defeat came to the ALP in March 1996. This bought new circumstances. Whilst Blair’s New Labour were preparing for government, the ALP were picking up the pieces of defeat after 13 years (as the longest serving federal Labor Government in Australia’s history). Like the UK Tories, Australian Labor had a large ‘it’s time for a change’ factor going against it in the 1996 election.

Unlike the experience of British Labour in 1979-83, Australian Labor did not split asunder after its 1996 defeat. New Leader Kim Beazley performed credibly in opposition and the ALP regained many seats in the 1998 election and came within a whisker of returning to office. In fact the ALP won the two-party preferred vote but lost the election (which is based on Australia’s unique system of preferences). Australian Labor also performed well at State level, winning government in Queensland, Tasmania and Victoria and being re-elected in NSW in March 1999.

During Australian Labor’s opposition years, there has been debate about the ALP’s future policy direction. The left of the political spectrum (including within the ALP) has argued that Beazley should distance himself from the Hawke -Keating ‘modernisers’ and return to more ‘traditional’ policies. The right of the political spectrum has been critical of Beazley for standing for nothing or at worst running a ‘populist’ agenda. In addition, there are new generation/old generation questions involving the ‘Young Turk’ MPs Mark Latham and Lindsay Tanner. Tanner is from the left faction of the ALP and Latham is from the right. Neither held office in the Hawke - Keating government. Both Latham and Tanners are published authors and are active in the policy arena both within the ALP and in the mass media. Latham’s book Civilizing Global Capital deals closely with Third Way themes such as social capital and civil society (Latham, 1998). Tanner’s book Open Australia (Tanner, 1999) takes on a number of policies sacred cows particularly with reference to trade and industry policy. Whilst Tanner is less associated with the Third Way than Latham, his view, particularly on trade policy, have put him at odds with some ‘traditional’ left wing Labor views.

Of course, in discussing the Third Way in Australia it is important not just to look at one side of the political ledger. The Third Way and Tony Blair’s success is affecting non-Labor politics in Australia as well. Scott in fact draws some of the parallels between John Howard and Tony Blair in their own electoral role strategies (Scott, 2000 :121). Scott notes that some political observers thought that Howard’s cautious electoral strategies in 1996 (presenting as small a policy target as possible) was influential for Blair’s successful strategy in 1997. Both these strategies where in contrast to their own parties unsuccessful campaigns in the previous elections.

So to what extent can Australia claim to be the originator of the Third Way? In terms of Third Way philosophy, Australia would find it hard to make an explicit claim. For instance, Giddens, makes no mention of Australia in his The Third Way. The book’s preface says “ The idea of forming a Third Way in politics has been widely discussed over recent months - not only the UK but also in US, Continental Europe and Latin America” (Giddens, 1998). The sequel The Third Way and its critics only mentions Australia in reference to international comparisons of tax and poverty rates (Giddens, 2000: 90-100). Most of the international links in the Third Way are across the Atlantic or to Western Europe. But some in the ALP argue that Tony Blair is just doing to Labor what the Hawke - Keating government already did in government as part of the modernising process. Furthermore, they argue that all political parties need to go through modernising and repackaging process if they are going to grow and develop. In fact, it could be easily argued that there is a continuous modernising policy 'boomerang' between the Australian and British labour parties. As outlined by Scott (2000), the Blair’s ‘modernisation’ is similar to what occurred to British Labour under Gaitskell and Wilson in the late 1950s and early 1960’s. In turn, Australian Labor went through its own modernising under Whitlam in the late 1960’s, drawing on parallels of Wilson and Gaitskell.

But Blair has had an impact in Australia on both sides of politics. Successful politicians always get noticed particularly when success occurs in Britain and the US. Australia is a small country with close ties to both Britain and the US so success will always gain some political currency in the domestic political system. Blair has influenced Australian Labour just as Thatcher has influenced Australian Conservatives and in doing so has affected the political position of all political parties.

However, Australia has taken notice mainly because of Blair’s political success. With the exception of Latham (1998) and Tanner (1999) cited above, there has not yet been a serious discussion of the Third Way as a social movement or political philosophy.

This has occurred, to date, for a number of reasons. Firstly, there is the reluctance of Australia, in these republican times, to look particularly to the UK for ideas or leadership. Secondly, there is the challenge that the Third Way presents to the orthodoxies of left and right in Australian public policy. Thirdly, there is the public association of the Third Way with Mark Latham’s own policy platforms and the associated impact of political rivalry between and within ALP generations. Fourthly, there is the reluctance of Australians to embrace wide-ranging philosophies as such instead of judging practical policies on their merits. As the earlier Keating reference implied Australians are political ‘doers’ rather than ‘labellers’. Accordingly, Australian political parties are not so concerned with Tony Blair’s philosophy as with the electoral success of his policies. This will determine whether there will be ‘Third Way’ elements in the electoral platforms of the Australian parties in future elections.

IV. Selected ‘Third Way’ Economic Policy Issues

1. Macro Economic Policy

The centrepiece of macroeconomic policy under the Hawke-Keating Government was the prices and incomes Accord with the Australian Council of Trade unions (ACTU). The ACTU and the ALP signed the original Accord in 1983 when Labor was still in opposition. It was forged as an alternative economic strategy to the conservative policies of the day. However, the Accord also had its origins in the failure of the Whitlam Labor government to survive beyond three years (1972-75). During the term of the Whitlam government there was a noticeable lack of co-ordination between the ACTU and the Labor government and the key players vowed that this would not re-occur when Labor returned to the Treasury benches in 1983.

The formation of the original Accord was greeted with suspicion from all quarters. This was partly because of the Whitlam government experience but also because of the difficulties faced by Wilson and Callaghan in the UK in the 1960s and 1970s. The latter events affected Tony Blair and New Labour’s attitudes to the British unions. However, the Accord proved to be remarkably durable and lasted the entire 13 years of the Hawke-Keating government.