Neoliberalism in Australasia

The best-known case of “social-democratic neoliberalism” is Tony Blair’s “New Labour” government. After eighteen years out of power, Blair brought Labour back to office in 1997 and proceeded to cement the shift Margaret Thatcher inaugurated in the 1980s. But the key case in the social-democratic slide toward neoliberalism is the little-discussed New Zealand Labour government of the 1980s, where the historic party of the trade unions implemented a pro-market program more radical than that of Ronald Reagan or Thatcher.

The influence of the Hayekian, “rationalist” Chicago School of economics was pervasive within the New Zealand Treasury. It permeated crucial elements of the New Zealand Labour Party, Finance Minister Roger Douglas in particular.

In New Zealand between 1984 and 1990 the tax system was simplified, with marginal taxes and progressive tax programs reduced. State-owned assets and public enterprises were commercialized and corporatized. Controls on capital movements were abolished. The financial sector was deregulated; a value-added  was introduced; the dollar was floated; and monetary policy was focused solely on keeping inflation levels low by containing wages, a result of the independence of the central bank.

New Zealand’s ostensible party of the Left thus voluntarily implemented orthodox macroeconomic stabilization policies of the sort often imposed on developing countries by the International Monetary Fund — and it did so unilaterally, without outside consultation. Here it was fundamentally the depoliticization of union activity that allowed for such a dramatic change in the balance of class forces inside the Labour Party — in essence, a change in the party’s class character. The government was able to run roughshod over the unions.

Those in the Labour government who designed the program — Finance Minister Douglas and the Treasury — did not merely argue that economic crisis made it necessary, but that the values of classical liberalism and laissez-faire required the disembedding of the economy from society through an autonomous, self-regulating system of markets. After Labour’s reelection in 1987, Douglas pushed an even more far-reaching economic program, privatizing many state-owned assets, introducing market principles into social policy, and implementing a flat-rate income tax.

Neoliberal doctrine had a similar influence in the Australia Treasury during the 1980s and a similar effect on the Labor Party via Treasurer (and later Prime Minister) Paul Keating between 1983 and 1996. Led by Bob Hawke, the party was elected in 1983 on a program of fiscal expansion.

But international economic pressures soon overtook Labor’s initial Keynesian optimism. The government floated the Australian dollar and deregulated the financial system, hoping it would encourage productive investment. In the run-up to the November 1984 election, Labor pledged that it would not increase public expenditure, taxes, or the deficit as percentages of GDP; in mid-1986, a rapidly falling dollar led Treasurer Keating to declare that Australia was in danger of becoming a “banana republic.”

This sense of emergency allowed the government to accelerate economic restructuring to ensure the competitiveness of Australian exports. The government cut tariffs and entered into bilateral and multilateral free trade agreements. It exacerbated income inequality with largely regressive changes to the tax code. And by 1988 it began supporting privatization of state property on a case-by-case basis.

After Keating became prime minister in December 1992 his government increasingly embraced the market, and pursued privatization despite electoral promises to the contrary. Industry policy consisted almost completely of relying on market forces and reducing tariffs.

Though the Australian Labor governments consulted with unions while the British and New Zealand Labour governments had no interest in incorporating unions into policy decision-making, the differences in the resulting macroeconomic policies shouldn’t be overstated. Each labor-party government adopted privatization, financial deregulation, and market efficiency–based criteria for judging the performance of state enterprises. The difference was a matter of degree. New Zealand, for instance, implemented the greatest amount of privatization.

The Australian experience does differ from the others in a couple important respects, however: the tax system was made more progressive in certain instances via the introduction of capital gains and fringe benefits taxes, measures that ran against the trend of regressive tax reform.

It also diverges in that certain “reforms” opposed by unions and welfare groups were withdrawn. Most notably, a goods and services tax proposed in the 1980s by labor-party governments in both Australia and New Zealand was abandoned in the former country and imposed in the latter country despite a lack of popular support.

The Decline of Laborism

Above all, though, the policies pursued in Britain, New Zealand, and Australia marked a clear break with the version of social-democratic thought and practice known as “laborism” — trade unionism extended into the arena of government. Via laborism the principle of mainstream trade unionism — “a fair day’s wage for a fair day’s work” — is pursued through parliament, safeguarding wage laborers’ wages and benefits and seeking full employment as the guarantor of their welfare.

Unlike European social democracy before World War I, laborists never sought a road to a society beyond capitalism — they merely promised to civilize capitalism on behalf of the working class. But they were centrally concerned with the political representation of workers as a class, even if their interests weren’t seen as incompatible with those of national capital.

Laborism is now in deep crisis, as are many of the unions that built and supported labor parties and social-democratic parties more broadly. These are directly connected phenomena: the diminished power of the unions and the subsequent embrace of market liberalization by labor-party governments can’t be separated.

As the party leadership changes their electoral appeals, downplaying any remaining association with the working class — and moves rightward in economic, social, and industrial relations policy — the only thing standing in their way is the unions. When the influence of trade unions is specifically excluded, even delegitimized, labor parties effectively stop being labor parties, and the trade unions — and, by extension, the working class — are disenfranchised.

The so-called modernization of social-democratic and labor parties thus leads to a crisis of working-class political representation. In Moschonas’ words, workers become “deprived of a political representation that is at once uncontested and more or less effective.”

The result is labor parties that do not represent organized labor and social-democratic parties that do not implement social-democratic policies.

And perhaps even the demise of class politics itself.

As Adam Przeworski notes in Capitalism and Social Democracy, there is nothing inherent in capitalism or in the logic of history that makes the emergence of classes as collective subjects inevitable. Class politics, strictly defined, only exists when class is an issue raised by political parties; specifically, parties which organize workers as a class. In the absence of working-class political parties, the class image of society does not exist within a country’s political discourse.

This is what makes the transformation of social democratic and labor parties so profound. As Moschonas remarks, this fundamental change is not purely ideological-programmatic; it “simultaneously affects the power structure and class character of the organizations, the membership culture, location in the arena of partisan competition, ideas, economic and social policies, political style, image — everything that goes to make up an identity.”

What Moschonas labels the “old coherence” of social democracy — “party of the working class, organization with a strong working-class presence, strong link with the trade unions, bi- and tripartite negotiation, semi-working-class/semi-catch-all ideological profile, etc.” — has unraveled almost everywhere.

As a result, the party elites and the leadership — which, even in the union-based labor parties, have become dominated by professionals of prosperous backgrounds — have gained a near-exclusive privilege in defining party identity. That identity is not a working-class one. And not only is it not anti-business, at times it does not even seek to be any more organizationally separate from business than social democracy’s bourgeois party rivals — as the Blair era in Britain demonstrates.

By the time New Labour triumphed in the 2001 British election, it appeared the left version of neoliberalism — pioneered in New Zealand — had been largely consolidated. The middle class was now the key point of reference. With the working class no longer, in Moschonas’s words, the “privileged sociological marker of social-democratic electorates,” such electorates became “now constructed on the basis of a profoundly inter-classist format, by far the most inter-classist in the whole history of social democracy.”

Moreover, the laborist “sub-tradition” within social democracy had effectively died. That the laborist parties would attempt to reinvent themselves as liberal parties in all but name, however, was by no means inevitable; it was a conscious choice. That choice came with what Chris Howell has dubbed a “unitarist” industrial relations project: one that recognizes “no distinction between the interests of labor and capital, no inherent sources of conflict between them, and thus no need for labor to have power to counterbalance that of the employer.”

That project was explicit in both the New Zealand and British cases; in the Australian example, given the formal compact between the Labor Party and the unions (known as the Accord), it could not be so simply pursued. This is not to say that the Australian unions could not have or should not have acted differently toward their ostensible government allies. But a labor government bound by such an accord must implement neoliberal policies more gradually and with a greater concern for the “social wage” than one free to disregard the wishes of unions.

It is only the persistence of this union link that mitigates the neoliberal leadership’s dominance within labor-party and social-democratic apparatuses and permits the category of “class” to exist within mainstream political discourse.

Union movements perform this discursive function simply by virtue of being movements comprised of workers, organized separately from their employers and managers. And despite the distance between the union bureaucracy and the rank and file, it remains a workers’ bureaucracy, an expression — however distorted — of working-class power. When labor-party leaders with neoliberal inclinations have to assent to the union bureaucracy, they are assenting to a power based on the organized working class.

It is this power that labor party leaders seem intent on dismantling — and which union leaders refuse to confront.

Corbyn-Mania and the Future of Labour

In 2007, British Labour Prime Minister Gordon Brown further curbed the power of unions in the party, stripping unions (and local Labour Parties) of the ability to submit political motions for debate at party conferences through a ballot process. Afraid of risking a Conservative electoral victory by provoking an early confrontation with Blair’s successor, the unions on Labour’s National Executive Council didn’t put up a fight.

After Labour lost anyway in 2010, Ed Miliband won the backing of three of the four biggest British unions and prevailed in the leadership election. Miliband explicitly distanced himself from the New Labour era and often sounded like a traditional social democrat; in July 2012, he became the first Labour leader since Neil Kinnock to address the Durham Miners’ Gala.

But sweeping reform still came last March, when the Labour Party endorsed the Collins Review. Initially motivated by (later discredited) claims of union misdeeds, the Review instated a £50 per union per candidate limit for all third parties including unions, required union members to “opt in” to become second-tier members of Labour (those lacking the power to select the parliamentary candidate), introduced “one member, one vote” for party leadership elections, introduced closed primaries for the selection of the candidate for London mayor (regardless of the wishes of London Labour), and mandated “registered supporters” pay a fee.

In short, the capacity of unions to shape the party has declined both in terms of financial resources (some estimates suggest union funding will drop by more than £4 million a year) and representation.

Yet at the conference, a number of important union general secretaries urged delegates to support the reforms. As Charles Gradnitzer remarked in the Weekly Worker, by effectively ending collective affiliation, “the trade unions themselves block-voted for Labour to ‘distance itself’ from them.”

Is a total break far off? Will a party founded to politically represent the working class — however imperfectly — soon become a purely bourgeois party of, to use Ed Balls’ words, “economic responsibility and fiscal rigor”? If the heirs of Blair manage to complete their project of permanently sidelining labor, the union leaders will have no one to blame but themselves.

The rise of Jeremy Corbyn, a strident supporter of trade unions and staunch opponent of New Labour, offers unions a chance to avoid this fate. To their credit, Labour affiliates like Unite, the Bakers’ Union, and ASLEF (and non-affiliated unions FBU and RMT) have backed Corbyn for Labour leader. But the union movement must be cohesive and united if it wants to be a credible political player — one which the Labour leadership is forced to take seriously and which can act as a counterweight to the vitriol directed at Corbyn.

Others have responded more enthusiastically. Corbyn’s candidacy has brought thousands of new members into the party, swelling it to its largest size in decades. This influx of support for the Labour left has enraged many party leaders, who fear matters are getting “out of hand” and “endangering the party’s electability.”

Last month the Daily Telegraph reported that Labour’s biggest capitalist donors would stop supporting the party if Corbyn won (as if this would be a bad thing). The traditional Labour right is also out for Corbyn’s blood. As Eddie Ford explains, “The Labour right are careerists who have mapped out their path since university. Therefore they will not easily go or casually waltz out of the party. In all likelihood, they will fight tooth-and-claw to control the Labour Party — something which they regard almost as theirs by right of birth.”

But the only way they can conceivably “defeat” Corbyn is by

pulling something dramatic out of the bag — whether that be a coup by seditious elements of the Parliamentary Labour party or at the party conference in September or by stubborn guerrilla warfare . . . [a] campaign of sabotage [taking] the form of very many Labour MPs refusing to serve under Corbyn, perhaps leaving him unable to form a shadow cabinet.

In other words, an amplified version of the longstanding tradition where the Labour conference votes for one thing and the parliamentarians do another.

The only way to overcome this sort of internal subversion is a sustained campaign by both the Labour rank-and-file and by Corbyn himself to thoroughly democratize both the party and its affiliated unions. Given the party’s historic conservatism — as well as the bureaucratization of its internal functioning since Blair’s rise — this will be no small task.

But recent history suggests that Labour cannot remain what Lenin called a “bourgeois workers’ party” for much longer — it will become either a bourgeois party pure-and-simple, or committed leftists will transform it into an all-inclusive alliance of unions, socialist groups, and partisans of the working class.

There will be, despite centrist dreaming, no Third Way.