Current Issue #488

"We intervene or we sink": John Spoehr on the Case for Greater Government

The economic carnage and hardship generated by the Global Financial Crisis (GFC) in the US and Europe has left deep and painful scars, as chronic unemployment and underemployment persists in many communities.

The GFC was made worse in many parts of the world because of the imposition of austerity policies, inflicting suffering upon suffering. Harsh austerity programs have starved individuals and communities of the public investment they need to recover from financial crises.

We were much more fortunate in Australia. It was no accident that Australia avoided being plunged into recession by the GFC. Early and substantial intervention by the Rudd Government played a critical role in helping to sustain confidence in the banking and financial sector and bolster consumer and industry confidence. The Stimulus Package did what it needed to do – fill the investment gap created by the GFC. Without it we would have seen unemployment rise well above eight per cent nationally and close to 10 per cent here in South Australia. We know from this and from our long history of dealing with global economic crises that Australia must be willing to intervene with substantial stimulus rather than austerity measures if we are to avoid fanning the fires of recession.

While the Rudd Government implemented one of the most successful stimulus packages in recent history, leadership division within Labor inflicted mortal political wounds. This was enough to ensure victory for Tony Abbott and the Coalition in 2013. The 2014 Federal Budget that followed was a truly austere one. It was much like those imposed on communities in Europe in the wake of the GFC. For those with long memories, the policy prescriptions laid out by the Coalition in 2014 were familiar ones. They harked back to the 1980s, to John Hewson’s Fightback! Package and the numerous state-based audit commissions that laid out detailed neo-liberal economic restructuring programs involving widespread privatisation. Inspired by Thatcherism, these were radical attempts to dismantle Australia’s social democratic legacy.

Reflecting back on this time, even the staunchest advocates of systematic privatisation and outsourcing are now struggling to point to the benefits of it. Privatisation of South Australia’s electricity industry was heralded as a driver of greater efficiency and lower cost. It, along with the National Electricity Market within which it operates, has been a monumental policy failure.

The privatisation juggernaut rolls on at a national level, propelled by yet another dogmatic report by the Productivity Commission. The target this time is services rather than assets – public hospital services, social housing, specialist palliative care and human services in remote Indigenous communities. This general approach is well advanced in Britain and is being implemented in very subtle and seductive ways in Australia.

New financing mechanisms are bypassing and replacing established public sector providers and NGOs by directing funding to consumers. As alluring as the rhetoric of consumer empowerment surrounding this might seem, it amounts to a voucher system and voucher systems amount to privatisation. They lead to a deterioration in service quality and choice and depress wages and conditions in the sectors affected.

A fundamental change in the prevailing view about the role of government at the national and state level is needed to ensure that South Australia is a prosperous and inclusive place in the 21st century. There is a need to reclaim what governments do well in our collective interest and reject the idea that we must systematically abandon any role for government in the provision of goods and services and economic development leadership.

In his Whitlam lecture in 1998, the great Don Dunstan said, “We intervene or we sink”.

What did he mean by that? He knew, like many others of his generation, that powerful forces operate in capitalism to generate great concentrations of wealth and power. Periodically, these processes of accumulation are punctuated by deep economic crises when the model implodes, creating great hardship and mass unemployment. Social democratic movements in the 20th century responded to this, challenging the legitimacy of laissez-faire capitalism and offering an alternative worldview that acknowledges that, in the real world, we live in a mixed economy where the public and private sectors interact in complex ways. Both sectors contribute to the wealth and wellbeing of nations, companies, communities, individuals and households.

Essential to the functioning of a fair society is a democratic interventionist government. Through the institutions of government we seek to rise above self-interest and rivalries and strive for some approximation of a common good. This, of course, is all about values and, in particular, competing views about freedom, responsibility and the causes and consequences of prosperity, unemployment, poverty and inequality.

This land is fractured not just by drought opening up thirsty cracks in our red earth. Great social and economic fractures open up where inequality and insecurity grow and where governments fail to act with compassion and urgency. When they don’t act, the fractures become fertile ground for right wing extremism and reactionary nationalistic forces – fuelling fear and intolerance. As we watch the unfolding US election campaign we
might ask ourselves, ‘what does the rise of Trump signify? What does it tell us about what people are thinking and feeling about the quality of their lives and the state of their communities?’

Millions of Americans are experiencing hardship amidst affluence. They lack job security, decent wages and quality health care. An increasing number of Australians find themselves in a similar situation. Our answer to this in the past was a commitment to full-employment, nation building investment in infrastructure and universal public provision of education, health and community services.

The irony, of course, is that we are richer as a nation, as a state, than we were in the past. But with this has come a growing divide between rich and poor, between those in work and those unemployed and underemployed. The mechanisms for a fairer distribution
of income and wealth are breaking down in the name of trickle down economics – the mistaken view that rewarding the wealthy through tax breaks and corporate welfare rewards all others.

It doesn’t. It leads to greater concentration of wealth and erosion of the tax base. Meanwhile, Australian wages are stagnating at a time when housing and energy costs are escalating.

We are more vulnerable in South Australia to growing alienation if social and economic hardship is viewed, as it so often is these days, as an individual problem requiring case management, therapy and, dare I say, resilience training. This might be beneficial but what about our collective responsibility for solving problems that we have little control over as individuals. We must focus more on developing resilient and responsive policy, systems, workplaces, institutions and communities.

Privatisation of public infrastructure and services must be abandoned in favour of the establishment of modern and responsive public provision. Increased public investment in education, health, transport and our cities and towns is needed to underpin an inclusive approach to social and economic transformation in the 21st century.

Rapacious interests need to be challenged and held to account by well-resourced public institutions and active civic movements.

Public institutions need to be reinvented, not in the image of the private corporation or a precarious NGO, but in the interests of the diverse communities they serve. The great humanitarian and social reforms of the last century are the product of a great contest of ideas, political struggles and community action.

A new vision for a democratic public sector and responsive interventionist government is needed.


This is an edited adaptation of a talk John Spoehr gave at the Adelaide Festival of Ideas.

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