Neoliberalism: what is it good for?

This discussion emerged from an email from my colleague Gene Tunny wondering whatever happened to Australian exceptionalism — that period during which he cut his teeth in the Treasury when Australian policy makers worked tirelessly to reshape the Australian economy to make it more productive and government politicians regarded this as one of their core tasks.

We talked about how past leaders made big changes, like reducing tariffs and improving education. I painted a picture from my own — unusual — point of view which is that my father was an important figure in helping 'sell' economic reform to governments in the 1960s and then became part of early neoliberalism as an academic advisor to the Department of Prime Minister and Cabinet beginning shortly after the election of the Whitlam Government to around mid-1976.*

I argue that early neoliberalism was highly successful. It picked plenty of low hanging fruit and saw itself as problem solving. As it became a dominant way of thinking, it became formularised — and understood as a summary aesthetic that 'market based' solutions were better. This idea was way too vague and vibey to be of practical use, but it operated to systematically bias the way people thought about things and set them up to make mistakes that were so large that there’s a fair case to be made that late reform did more harm than good. As I wrote in this op ed in 2014:

"Australia was a standard-bearer in areas like trade and agricultural protection, the two airline policy and shopping hours. There, with the stroke of a pen, we swept away the detritus of a century’s ad hoc political favouritism. And unlike our peers in the Anglosphere, we also expanded funding for the safety net – bolstering equity.

But beyond that, as we’ve learned (or have we?), considering policy alternatives against a criterion as crude as how ‘free market’ they are doesn’t work so well. In infrastructure, utility and financial reform, where monopoly and asymmetric information problems abound, regulation remains inevitable and new rent seeking political pathologies lie in wait for those unpicking the old ones. Here our reform efforts brought forth excessively priced mortgages, toll-ways, desalination plants and airports with the political and official insiders championing the changes parachuting into lucrative careers with the corporate beneficiaries of their reforms to lobby their successors. We’ve seen massive over-investment in electricity transmission and under-investment in other infrastructure."

Gene and I discuss a range of policy questions, but Gene is interested in my experience in reforming car manufacturing in Australia and we spend a fair bit of time on that. We also discuss the Higher Education Charge (HECs) and the outsourcing of the Commonwealth Employment Services to illustrate some of the good and the bad of the new approach. And we also talk about the disasters like public-private partnerships for infrastructure, particularly toll roads. We also swapped some ideas about how New Zealand has done so much worse than Australia since the '70s. I don't know about Gene, but my speculations on that subject should be taken as just that — speculations and pretty uninformed.

* In case you're interested, the new PM, Malcolm Fraser did not get rid of him. Instead Dad had always felt bad about giving the ANU only half of his time so he withdrew from the arrangement with PM&C when there seemed to be less interest in his services.