Challenge the Budget-Keynesian Economics and the Australian Labor Party

Challenge this Budget-Keynesian Economics and the Australian Labor Party

 

The Abbot governments first budget  strikes at the very heart of the fair go and Australian values, its reliance on small government and market forces are traditional Classical Economics which need to be challenged by the public in general but also by the Labor and progressive political parties in particular. 

Here is a very short history of the Labor Party and Interventionist/Keynesian Economic Theory.

 The Labor Party came about during the bitter days of the Shearers and Marine time strikes in the bleak days of the 1890's recession. The founding fathers knew that industrial and worker action although vital was limited in what it could achieve for working class and marginalized sections of Australian Society. They knew they had to have political representation at all levels of politics to achieve fair outcomes for its constituents. They also realized that a vital part of this representation was the ability to affect the economic and fiscal policies of the states and new nation coming into being. To this end the Labor party has had a continuing and abiding interest in Economics from its very beginning a fact that has often been overlooked in commentary and of course downplayed by its opponents.

From its very inception Labor wanted to “Civilize Capitalism” its avowed aim was to intervene in the capitalist state to drive economic reform and modeling so as to achieve better outcomes for the workers and underprivileged of Australia. Its fights, rivalries and even alliances with the Free Traders, Protectionists, Liberals and conservative elements within the parliaments of Australia at the beginning of Federation in large part tell the political history of the fledgling democracy.

The great names of Australian labor history are also (Watson, Fisher, Hughes, Scullin, Curtin, Chifley, Whitlam, Hawke, Keating) reminders that this great party has not only influenced the social, moral, cultural, fiscal and political parameters of Australian Society but that the Economic imperative has been at all times a defining argument and abiding focus of its reform agenda.

Although John Maynard Keynes did not publish his classic The General TheorHYPERLINK "http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money"yHYPERLINK "http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money" of Employment, Interest and MoHYPERLINK "http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money"nHYPERLINK "http://en.wikipedia.org/wiki/The_General_Theory_of_Employment,_Interest_and_Money"ey, until 1936 during the great recession. Social Democratic Parties have basically adopted his assumptions as their own. His underlying thesis is that in the Short Run total spending in the economy (Aggregate Demand) strongly influences economic output. He argued that intervention in the economy specifically in time of recession, or downturn is a must if a balanced outcome is to be achieved. He argued against the old classical theory and its fundamental principle that the economy is self‐regulating. Classical economists maintain that the economy is always capable of achieving the natural level of real GDP or output, which is the level of real GDP that is obtained when the economy's resources are fully employed. While circumstances arise from time to time that cause the economy to fall below or to exceed the natural level of real GDP, self-adjustment mechanisms exist within the market system that work to bring the economy back to the natural level of real GDP.

Various versions of these two opposing views have been argued, implemented and fought over in the intervening years in the great social democracies. The Rudd governments’ intervention in the 2009 downturn is classic Keynesian economics in action. The intervention arguably saved Australia from the worst aspects of the recession endure by most other advanced economies in the world. The Abbot governments’ first budget with its belief in small government and market freedoms is foundered on the Classical model. Its effect on the workers and vulnerable sections of society are already being felt. It is notable that progressive parties have generally adopted a Keynesian approach and conservative parties a Classical approach.

The Labor Party must not shrink before the onslaught of the conservative elements who happen to be in the ascendant at the moment on the Australian Political landscape but must with courage pronounce their views and acknowledge their past achievements. The Economic achievements of the Australian Labor Party (The oldest political party in Australia) are in no small measure responsible for the unique spread of wealth, prosperity, social equality, curtailment of big business hegemony and the prevention of the worst excesses of rampant capitalism that have prevailed in much of Australia’s’ History.

As Mark Latham said:

“The challenge for Labor is to shape, through community engagement, public opinion for egalitarian purposes.

In some areas such as family values, social trends are moving in its favour. In other fields, most notably economic aspiration, the party needs to rethink its policies and the way it communicates them to the electorate.”

Here then is Labor’s challenge; to refute the resurgence of the conservative’s Classical agenda and to communicate with pride in its’ past achievements the advantages of the interventionist Keynesian model of Economic management which has delivered so much for the Australian people and society, and which can keep on delivering.

 

John Condliffe

29.6.14

Further Reading:

 Dyrenfurth N, Bongiorno F. A Little History of the Australian Labor Party. University of NSW Press. Sydney, NSW. 2011

  Keynes, John Maynard. The General Theory of Employment, interest and money. Palgrave mac Millan, United Kingdom, 1936.

 Cliffs Notes. The Classical Theory http://www.cliffsnotes.com/more-subjects/economics/classical-and-keynesian-theories-output-employment/the-classical-theory 2013, Houghton Mifflin Harcourt. Viewed 29.6.2014

FinancialReview http://www.afr.com/p/lifestyle/review/labour_gets_left_on_the_outer_yb2UmXksqrC8f6bpWSy6gP Mark Latham. Labor gets left on the outer, 2013. Viewed 29.6.14.