The Third Way Isn’t Dead Yet

Die-hard opponents of Corbynism can look to the Australian Labor Party as a model of non-radical social democracy. That’s exactly why the party needs to change.

Australian Labor Party leader Bill Shorten at a press conference on July 4, 2016 in Penrith, Australia. Mark Metcalfe / Getty

The next year may be pivotal for the future of social-democratic parties. Brexit could result in an early election and a Corbyn government. Corbyn and his agenda have captured the imagination of the Left, and not just in Britain. Even those not on the left wing of Labour have recognized that Corbyn’s critics within his own party struggle to outline an alternative agenda. However, to assume there is no clear alternative would be naive.

While some are enamored with Jacinda Ardern’s New Zealand Labour Party, its counterpart across the Tasman Sea may prove far more attractive to Corbyn’s critics. A member of the G20, with a population of twenty-five million, Australia will likely become the most populated Western country governed by a social-democratic party if Labor wins in federal elections due before mid-2019 (and if the Spanish PSOE fails to hold on to power).

The churn of three different prime ministers from the conservative Liberal-National Coalition has greatly aided Australian Labor and put it in a prime position. This is despite the unpopularity of party leader Bill Shorten and general disillusionment with politics stemming from Labor’s own revolving door for prime ministers. Electoral success, and the yearning for a viable alternative to Corbynism, will encourage those on the right wing of social-democratic parties elsewhere to look to Australian Labor.

Australian Labor has a history of capturing the imagination of social-democratic parties, starting with Australia’s initial characterization as a social laboratory, a “working man’s paradise,” in the early twentieth century. Whereas in Europe the breakthrough of social-democratic and labor parties did not occur until after the First World War, Australian Labor first formed a government in Queensland in 1899 and governed federally and at the state level by the first decade of the twentieth century.

Three destructive splits over the course of the twentieth century kept Labor out of power at the federal level for long stretches of the twentieth century. While it governed in the 1970s under Prime Minister Gough Whitlam — a progressive icon in the vein of Willy Brandt and Olof Palme, taking Labor in a more socially liberal and less laborist direction – it was the 1980s that cast a shadow over the party.

Australian Labor, which governed during the 1980s, seemingly provided a stable center-left contrast to Reagan and Thatcher. Though some dispute it, the Bob Hawke-Paul Keating model was a version of what would come to be characterized in the 1990s as Third Way social democracy. It enacted neoliberal measures — such as the privatization of the state-owned bank and airlines, ending free tertiary education, and dismantling centralized wage bargaining — at the same time as it expanded universal health care coverage and taxed capital gains. Paul Keating, then Treasurer and later Prime Minister, was the architect of many of these neoliberal reforms and a key figure in the right-wing faction of Australian Labor, having formed the right-wing NSW Centre Unity faction in 1979.

The influence of Australia loomed over British New Labour. Tony Blair and Gordon Brown visited Australia in 1990 while in opposition, seeking inspiration from a governing center-left party. Ed Balls described Paul Keating as “something of a hero for both Tony Blair and Gordon Brown.” The influence was such that Blair relied on former Labor prime minister Paul Keating for advice, stating, “I used him to get a sense of where we were as a government, and he was very clear about how we had to keep momentum up and stay together, remain in the centre and not drift to the left.”

Unlike many parties, Australian Labor has formalized national left and right factions, alliances of state-based groupings that operate beyond parliament — within the party machine and affiliated unions — combined with democratic centralism for members of Parliament. Whereas the links between the ALP left and the Corbyn supporting Labour left are weak, there are clear links between the Labor right faction and right-wing British Labour groups such as Progress and Labour First. The director of Progress, for example, worked in the NSW Labor Head Office, seen by many as the heart of the right-wing Labor factional machine. John McTernan, Tony Blair’s Political Secretary, also worked as the Director of Communications for Prime Minister Julia Gillard.

The radical transformative and democratic program of Corbyn’s Labour will be held up against Australian Labor’s narrower focus on material conditions for working-class and middle-income families. Australian Labor has never had the culture of ideas and engagement that its British counterpart has had, partly due to an Australian culture of anti-intellectualism that the right wing of the party has embraced. It is also far from a democratic mass party — it was described as one of the least democratic of the world’s labor or social-democratic parties by former National President and current Shadow Minister Mark Butler. Though there has been a shift to direct election of party leader, an insurgent candidate such as Corbyn would be unable to run for federal party leader, because the parliamentary party counts for half of the vote.

Australian Labor’s upcoming campaign pitch is a traditional “laborist” campaign focused on job security, increasing wages, and funding for public services such as health and education. Former Labor Treasurer and incoming National President Wayne Swan’s explanation of laborism as full employment, stronger worker voice, taming corporate excess, and progressive taxation gives an indication of the thinking behind this pitch.

Australian Labor has shifted away from the worst excesses of neoliberalism that it once defended and put forward the most economically progressive platform it has in some time, one that addresses inequality, includes a commitment for 50 percent of energy from renewable sources by 2030, and rejects corporate tax cuts. However, it is not seeking the kind of radical transformation beyond a low-tax social-democratic model that British Labour has pursued. It has a handful of egalitarian tax proposals — limiting tax deductions for rental losses to new investment properties, halving the capital gains tax discount, taxing private trusts as companies, reducing superannuation tax concessions on wealthy Australians— but these measures are balanced by commitments to maintain budget surpluses at 1 percent of GDP, increase funding for private and religious schools, support the Trans-Pacific Partnership trade agreement, outbid the conservative Coalition on income-tax cuts, and maintain most of elements of the hard-line approach to refugees that “inspired” Matteo Salvini.

Australia’s Special Path

The Australian context is very different from that in which Corbynism arose. Australia avoided the worst effects of the 2008 financial crisis due to a once-in-a-generation mining boom and the previous Labor government’s stimulus program. Conservatives here avoided the harshest elements of austerity, or saw them blocked in the Senate, and accepted deficits for electoral expediency. As a result, the radicalized social movements that arose from years of austerity elsewhere did not occur in Australia. While the country faces stagnating wages and a revived right-populist One Nation party, there has been no dramatic fall in real wages. But to succeed Australian Labor has to win over working-class voters in outer suburban areas and regional centers as well as more middle-class and multicultural seats in major cities. This is the coalition that social-democratic parties everywhere are seeking and success in Australia will be seen as proof-of-concept (despite the uniqueness of the electoral system: compulsory, ranked-choice voting in the House of Representatives).

The “Change the Rules” campaign being run by Australian trade unions gives a glimpse of the resonance that a laborist agenda has, opposing corporate tax avoidance while arguing for greater job security and wage growth. The secretary of the Australian Council of Trade Unions, Sally McManus, is the most prominent and left-wing leader the union movement has had in generation, openly stating that neoliberalism has run its course.

Australia’s industrial-relations laws are among the most restrictive in the democratic world, with the ability to terminate strikes, impose massive fines, bans on industry-wide pattern bargaining, and so-called “right to work” the norm. Union density has fallen from 40 percent in the 1980s to around 14 percent today. Restrictions on the ability of unions to organize and enter workplaces have made outright wage theft a business model.

But dismantling anti-union laws and changing the settings that make collective bargaining difficult would be only the beginning of a shift away from neoliberalism. Greater job security and wage growth alone will not tackle systemic inequality built into the institutional framework of the economy. The transformation needed to move beyond a neoliberalism fueled by extraction and speculation and to begin to democratize and decarbonize the economy requires the reshaping of Australia’s political economy.

There is potential for an Australian equivalent to Corbynism that subordinates the market to society, but the institutional change needed cannot be a carbon copy of what is occurring in the United Kingdom, nor can it be an attempt to turn back the clock. It will need to look to the future, maneuver within Australia’s federal system, deal with climate change and the dispossession of indigenous Australians. It must also come to terms with the historical influence of the landmark Price and Incomes Accord between the Hawke-Keating government and the Australian Council of Trade Unions, which left a lingering attachment to corporatist “grand bargains” between capital and labor.

The starting point will need to be unpicking the privatization, marketization, and outsourcing of public goods. Australia had one of the largest privatization programs in the OECD during the 1990s, second only to the United Kingdom but larger relative to GDP. While the provision of public services such as health, transport, and education is the responsibility of state governments, the Commonwealth can act to reverse the disastrous decisions made by restoring public delivery of employment services, undoing the outsourcing of core public sector work, reversing corporatization, and beginning to democratize public services by providing employee and consumer representation on boards, creating a new state-owned bank to compete against the big four banks and ensuring that natural monopolies such as the national electricity grid are in public hands. It can also reverse the trend of user fees, treating postsecondary education as a public good once more by making it free, abandoning the commitment to income-contingent loans as the large private material gains once promised no longer exist, leaving many saddled with debt.

The role that the Commonwealth plays as a funder of services will be pivotal to this agenda of restoring public control of public goods. Care can be decommodified by ending the trend of funding the private sector to provide public services such as early childhood education and aged care, instead funding direct, universal public delivery, expanding public health insurance coverage to cover dental care, and halting use of the National Disability Insurance Scheme to privatize publicly provided disability services by funding public providers of last resort. Government procurement policies can support more democratic alternatives to for-profit provision, the Victorian government’s Social Procurement Framework providing an example of what could be done.

It will, however, require far greater thinking within Australian Labor about less technocratic and more democratic models of ownership. The lack of discussion — shaped in part by Australian Labor’s long tradition of state-centered development and support for greater centralization at the expense of federalism — is in stark contrast to proposals for greater devolution of power and alternative models of ownership by British Labour.

Housing is one area where a more centralized role is direly needed. The cost of housing has long been an enormous problem in Australia, with the financialization of property a major contributor to both inequality and insecurity. A program of mass social and public housing-building, reviving the Commonwealth’s funding of residential construction by state governments, is needed. Across Australia, only 4 percent of housing is public or community compared to 18 percent in the United Kingdom, while housing in Sydney is more expensive than London. The assumption of home ownership built into Australia’s retirement system makes this even more urgent.

Outside capital cities, in regional areas, there has been growing spatial inequality. The conservative agrarian National Party has sought to address it, with limited success, by promoting the ad-hoc relocation of public sector jobs and pork-barrel infrastructure projects. What is needed is a strategy of community wealth-building, with all tiers of government coordinating to reduce the growing divide between cities and regions. An expanded public sector and government procurement policies can be anchors for investment in local communities. Renewable energy projects could get this started — working on a just transition for regional communities reliant on coal mining and coal-fired power stations.

Undoing privatization and adopting more redistributive policies will not be enough to transform and democratize the economy. It will require challenging powerful interests. Australia has an oligopolistic economy with vested interests such as mining, the banks, and News Corporation enjoying significant political influence that will need to be challenged. Mining barons have played a key role in funding climate sceptics and right-wing think tanks, attacking unions, and opposing land rights for indigenous Australians. Not only are the big four Australian banks among the most profitable in the world and have led a campaign for massive corporate tax cuts, a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has uncovered predatory behavior, including systematic deception of regulators and the charging of fees to the deceased. Their voices have been amplified by a highly concentrated media landscape, dominated by the Murdoch-owned press. Changing the economy’s institutional framework will require taking on these extractive and speculative vested interests, requiring taxing the windfalls from their super-profits, curtailing the influence they exert through campaign finance reform, and actively supporting greater media pluralism.

Economic change will also require rebalancing the economy, which was hollowed out during the mining boom, amid a decline in manufacturing (traditionally a more unionized industry) culminating in the closure of Australia’s automotive industry. A serious strategy for reviving manufacturing calls for public financing institutions, supported with government procurement and rebuilt vocational education. The former Labor South Australian government showed what can be done with government leadership, helping the transition from automotive industry by focusing on renewable energy and storage. It will take more funding for the CSIRO, the Commonwealth’s research organization, to provide the more capital-intensive, high-risk innovation that the private sector is often unwilling to do.

Grappling with the climate crisis is a fundamental challenge that has to be hardwired into every aspect of this agenda. The recent IPCC warning that we have just over a decade to avert catastrophic climate change has not shifted politics, with the ruling conservative Liberal-National Coalition dominated by climate-change deniers. Although Australia is highly exposed to climate change, dealing with it has been the third rail of Australian politics for both social-democratic and conservative leaders for the past decade, leading to the demise of multiple prime ministers. The structure of Australian capitalism has meant that the consensus on climate change that exists elsewhere, as in Europe, has not emerged; instead it is treated as a culture-war issue by the Right. Australia is one of the highest per-capita emitters and one of the largest coal-producing nations, coal being its second-largest export. Nearly two-thirds of its electricity generation comes from coal. A transition towards zero emissions is essential.

There are fault lines across the broader left which Labor would need to address in order to unite the Left behind any transformative agenda. Labor’s stance on asylum-seekers during the 2001 election led to an exodus of voters and members who would have once considered themselves on the Labor left, many ending up with the Greens. The Greens now constitute an electorally viable party to the left of Labor, able to muster around 10 percent of the vote and win seats in single-member electorates in multiple states and territories. To attract these disaffected voters back, Labor must drop the obsession with border security, promising to end offshore detention and demilitarize customs.

Sweeping institutional change will be incomplete unless Australia confronts the dispossession that enabled European settlement. Australia is the only British colonized country that has never signed a treaty with its indigenous inhabitants. The program should involve signing such a treaty and adopting the Uluru Statement from the Heart before any move to become a republic, as well as dismantling institutionalized discrimination such as welfare quarantining, and investment in liberating alternatives such as a trial of basic income in remote communities.

Crashing the Party

Any transformation must involve a democratization of Australian Labor itself. Labor has never been a mass party in the traditional sense and had under 50,000 members when it lost power federally. Among social-democratic parties across the Western world, affiliated trade unions arguably have the greatest influence within Australian Labor. Democratization plans have often pitched rank-and-file members against unions rather than creating a mass movement that includes both. The national party is federal, and some state branches are more democratic than others. Democratization should ensure all rank-and-file members get a say in all preselections and can directly elect National Executive and state Administrative Committee members. Each member’s vote should count equally in party leadership elections and there should be no activity or membership length requirements to vote in preselection and party leadership ballots.

With the rise of the far right across the globe, changes to global capitalism wrought by technology, and the urgency of action to avert catastrophic climate change, parties of the Left need to offer an ambitious transformative vision to be successful and build a better world.

But as in the 1980s, Australia may provide a glimpse of a future that some social-democratic parties will seek. Rather than shifting drastically to the left, the right wing of social-democratic parties may adopt incremental changes that focus on improving immediate material interests and alleviating excessive inequality but not offer the transformative agenda that is needed to head off the climate crisis or fundamentally democratize the economy. The attempt to try to rehash methods of the 1990s to seek a mythical “center ground” while we face a democratic and ecological crisis will leave social-democratic parties sleepwalking into disaster.

For those in social-democratic parties elsewhere who hope that their party will follow in the footsteps of British Labour, Australian Labor is already being promoted as bold and not offering “only easy answers“ like Corbyn. If it wins, it will be hailed by the right wing of social-democratic parties as the viable, moderate, alternative model. Those on the organized left wing of social-democratic parties across the globe need to build relationships and formal links, beyond Europe and the Atlantic, learn from one another, and support each other to ensure a leftward advance across all our sister parties.

For those in Australia, we must be creative and go beyond just undoing privatization and greater redistribution. The power of financially speculative and extractive industries needs to end. We need to re-embed, democratize, and decarbonize the economy. We have to draw together the intellectual strands for our own institutional turn, to push Labor beyond the limits of laborism and inspire the world — as Australia once did at the start of the twentieth century.