With the current pandemic shaking up the global economy, it might be time to look at democratic socialism as a viable economic model, writes John Wren.
AN EXTRAORDINARY WEEK in Canberra as the Morrison Government grapples with the COVID-19 pandemic. Australia has still not gone into a full lockdown like New Zealand has and this is in part due to the fragility of Australia’s Federal make-up. The pandemic has exposed this as well as the failings of globalism and neoliberal economic policy, practised by both sides of politics, but to a much greater extent by the conservative side. These obvious failings will impact the post-pandemic world economy profoundly.
Let’s first look at Australia’s Federal model. Since Federation, Australia has been a loose federation of independent states with free interstate trade, a common currency, foreign and immigration policies, defence and tax system (barring things such as state-based payroll and land taxes). In this sense, Australia is akin in structure to the European Union.
The Morrison Government only has the power to make decisions around those core areas. Healthcare is actually a state issue, although the Federal Government exerts influence via its tax-based funding model. Morrison is leaving the calls on lockdown to each state premier, as he must since it’s actually not his responsibility. This is why different states have responded differently to the crisis. It also explains why most states have closed their borders to each other. Victoria, NSW and the A.C.T. have not, but that’s largely because closing such a long border with substantial cross-border economies is simply too hard. How does someone living in Wodonga, Victoria go to work in Albury, NSW just across the bridge, for example?
Morrison has been forced to call a “national cabinet”, akin to a war cabinet composed of himself, Treasurer Josh Frydenberg and the state premiers and territory chief ministers in order to formulate common policy. Federal Labor leader Anthony Albanese should have also been included, but Morrison cannot help playing politics even in the time of COVID-19. Even so, this cabinet is now Labor dominant, forcing Morrison to compromise on traditional Liberal Party free-market thinking. His responses have been fast and breathtakingly socialist.
Morrison is now implementing Labor policies that would have been unthinkable even two weeks ago — he has introduced wage subsidies, increased Newstart, taxpayer-funded childcare and expanded funding of healthcare markedly. Private hospitals have effectively been nationalised for the duration of the pandemic. The JobKeeper wage subsidy program means the majority of Australians are now public servants, paid by the State. We now have a greater percentage of State employees than many former Soviet bloc nations. We can expect further social initiatives, too, as the pandemic progresses — we are still in its infancy, unfortunately. We will likely have many months more to go.
The more important observation, though, is that free-market capitalism is utterly unequipped to deal with a human crisis. We have seen it before, of course — we should have known but short-termism and greed mean humans tend to ignore the downsides and focus on the upsides.
As the Spanish philosopher George Santayana once said: “Those who cannot remember the past are condemned to repeat it.” The most obvious examples are the USA and British economies reverting to centralised command economies during WW2.
Why is this so? Free-market capitalism suggests that the profit motive is the primary human directive and that all business activities should be directed at maximising return on investment. In theory, this means that compromising the environment, providing poor pay and conditions for employees, indeed, even the manufacture of lethal products like tobacco and asbestos are acceptable if the market demands them.
Businesses are not human, although these entities are run by humans and directors are focused on generating a profit. In most Western democracies, there is a level of government legislation that seeks to rein in the worst excesses of capitalism — OHS laws and pollution laws, for example. The fact that we even need these laws is an indication of the flaws of unfettered capitalism. Unions have also served to counter capitalist power and Right-wing governments such as the current Liberal Government of Australia have actively sought to restrict union power.
In a humanitarian crisis such as the one we face now, capitalism cannot cope. The most unfettered free market in the world is the USA. With its near-total lack of a public health system, it is now facing both an economic and human catastrophe on a scale unparalleled in its history. American deaths will far outweigh the total number of deaths it sustained in Vietnam and WW2. President Trump, the arch-capitalist, has both made the situation worse through his own inaction and misinformation.
America could even become a failed State within the next 12 months as the deaths build up and anarchy on streets prevails. Even Trump has embarked on socialist initiatives to try to control the pandemic. The trillions he has allocated are too little and too late.
This sounds like an attack on capitalism. It is not. I believe in a free, capitalist society, but it must have an equally strong legislative framework that ensures the worst excesses of capitalism cannot be allowed to express themselves. Similarly, businesses must pay their way with appropriate taxation levels. The days of small laissez-faire government are obviously over. Clearly, we need bigger government with much more spending on education, healthcare and social safety nets for the unemployed, homeless, aged and infirm.
I see a future prosperous Australia with a Nordic democracy-style government, one that allows capitalist enterprise on the understanding with business owners that they must also do the right thing — comply with legislation, pay tax, or risk nationalisation. They can still be wealthy, but maybe not quite as wealthy as they are now.
Private healthcare was already on its knees before the crisis. Let’s use the pandemic to end it. Nationalise the private system, eliminate private health insurance and expand Medicare. Most people I know would rather pay more Medicare for a universal public system than Medicare and a subsidised private health insurance that can’t deliver in a crisis.
Similarly, private education. On near every measure, the Nordic countries outperform Australian students at both school and tertiary level. They pay higher taxes but get better taxpayer-funded education and their students do not emerge from university carrying crippling debts. Those interested in how these countries do it should read Melbourne academic, Andrew Scott’s book, ‘Northern Lights’.
When we emerge from the pandemic, Morrison and his Liberal cronies will try to revert to form. They are slow learners in the thrall of the big corporates who donate to them. Every Australian with a conscience must stand up when the time comes. A reversion to the old ways must not be allowed to occur. We have just seen the result.
In fact, if socialism is needed to bail out capitalism every decade or so, perhaps we should just stick to socialism — in the form of democratic socialism, of course. Is that too much to ask?
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