Swan’s song stings the affluent and powerful

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Sunday, 11 March 2012 12:40 by Ad astra
Isn’t it a pity that no sooner had Wayne Swan introduced a debate on the growing disparity between the affluent and the rest of the community, it degenerated into mindless slogan-slinging. ‘Class warfare’, ‘the politics of envy’ were the predictable responses from those defending those specifically targeted: Gina Reinhart, Clive Palmer and Twiggy Forrest. Despite being well able to defend themselves and able to deploy their vast resources to voice their opinions, Tony Abbott was quick off the mark, followed by the bellicose Joe Hockey, with these hackneyed slogans, slogans they trot out every time they perceive an attack on the upper echelons of society. We saw them during the debate on means testing the private health insurance rebate, and more recently after the Gonski report that queried the extent of Government support given to wealthy private schools. It’s not the slogans that are so offensive; rather it is that they serve as a paltry substitute for informed debate, one we as a society need to have.

Before we get into this important subject, let’s look at what Wayne Swan actually wrote in his March 1 Monthly Essay: The 0.01 Per Cent: The Rising Influence of Vested Interests in Australia. Read it in its entirety here.

Swan begins: “A decade ago, as I waited for my order outside a Maroochydore fish and chip shop, a tall, barefoot young man strolled past wearing a T-shirt that read: ‘Greed is good. Trample the weak. Hurdle the dead.’ Those brutal lines seemed to encapsulate what was then a growing sense of unease in Australia. The world of my Queensland childhood, governed by its implicit assumptions of equality and mutual care, was being driven from sight by a combination of ruthless individualism and unquestioning materialism. Looking out for number one was not only tolerated but encouraged by a government whose agenda, particularly in industrial relations, seemed very far from the social contract, based on a fair day’s pay for a fair day’s work with a decent social safety net for the vulnerable, that had served our nation so well for so long.

That is what is troubling Swan. Should we be troubled too?

Later on, referring to “…a global conversation raging about the rich, the poor, the gap between them, and the role of vested interests in the significant widening of that gap in advanced economies over the last three decades, Swan says: “This is a debate Australia too must be part of. We’ve always prided ourselves on being a nation that’s more equal than most – a place where, if you work hard, you can create a better life for yourself and your family. Our egalitarian spirit is the product of our history and our national character, as well as the institutions and safeguards built up over more than a century. This spirit informed our stimulus response to the global financial crisis, and meant we avoided the kinds of immense social dislocation that occurred elsewhere in the developed world.

“But Australia’s fair go is today under threat from a new source.

“To be blunt, the rising power of vested interests is undermining our equality and threatening our democracy. We see this most obviously in the ferocious and highly misleading campaigns waged in recent years against resource taxation reforms and the pricing of carbon pollution. The infamous billionaires’ protest against the mining tax would have been laughed out of town in the Australia I grew up in, and yet it received a wide and favourable reception two years ago. A handful of vested interests that have pocketed a disproportionate share of the nation’s economic success now feel they have a right to shape Australia’s future to satisfy their own self-interest.

“So I write this essay to make a simple point: if we don’t grow together economically, our community will grow apart.

“Of course, rewards should be proportionate to effort, recognising the hard work and entrepreneurship that create wealth and employment. We should not seek pure equality, but we do need to combat the types of disparities in opportunity that damage our society. That’s why providing more people with a good education and a decent job with fair rights and conditions should be an economic as well as a moral goal.


Referring to the many who journeyed to Australia to escape grinding poverty and inequality arising from the industrial revolution, he says: “Here they saw a chance to create a more equal society in which some of the wealth actually made it to the bottom. And they did it by vesting the role of ameliorating poverty not in an aristocracy but in a democratic state. This is the best way to understand the greatest Australian achievements of the last two centuries: a living wage, a welfare system, public health care, mass home ownership, and accessible technical and higher education.

That’s what Swan’s essay is about Tony Abbott, Joe Hockey, Gina Reinhart, Clive Palmer and Twiggy Forrest.

Yet without reading his essay, without hearing his National Press Club address, how many would know? All we hear is childish slogans and the ravings of shock jocks; we see full-page ads from Twiggy, and largely uninformed comment from journalists whose writings are light on information but redolent with rhetoric. We are being seriously shortchanged, as we so often are.

Swan quotes President Obama who described ‘rising income inequality as the defining issue of our time’. Swan reminds us that tackling rising inequality has been one of the defining issues of his political life, captured in his 2005 book Postcode. He points out that between 1979 and 2007 in the US, the top 1% saw their after-tax incomes rise 275%, while the middle two thirds saw their after-tax incomes increase by less than 40%, and that a recent Pew Research Center survey found that friction between rich and poor in the US is now a greater source of social tension than the issues of race and immigration. The trenchant opposition in Congress to legislation designed to tax the rich at a higher rate, and to health bills that provide health cover to the poor, has intensified this. Republican candidates have pledged to repeal the Dodd–Frank Act that imposed better regulation on the financial sector after the 2008 Wall Street collapse. In US politics, the rich are the beneficiaries; the poor can take pot luck. Do we want that here?

In the US, the middle class, the conduit for aspirational citizens to move through from poverty to affluence, is shrinking, as is economic mobility. The same applies in the UK. Yet in the East the middle class is growing as the poor elevate themselves to a better place.

With the hollowing out of the middle classes in much of the West, Swan fears that in Australia we are headed in the same direction, with the rich not just becoming even more affluent, but also exercising increasingly strident influence on public policy, as we saw the miners that Swan targets do at rallies protesting about the mining tax, taking out whole page advertisements in the press in opposition, and spending large sums on lobbyists.

John Maynard Keynes said that legitimacy of capitalism rests on the existence of an implicit social contract between the rich and the rest. Swan is concerned that the very rich miners are breaking this social contract.

President Obama makes a similar point when he says that well-funded lobby groups give ‘an outsized voice to the few’ by ‘selling out our democracy to the highest bidder’.

Swan points out that the vested interests that he is targeting misrepresent their self-interest as the national interest.

Let’s look more deeply at what Swan’s detractors accuse him of.

First, some, like Gerry Harvey, make the point that even billionaires are entitled to their opinion and the right to express it. Gerry, we all accept that. It’s how they do so which alarms, by using their excessive market power born of great wealth. It is the way they exert disproportionate influence, well above what ordinary folk can do, that is concerning Swan, and acting in their own interests in so doing.

Next, Joe Hockey, in his usual superficial way, says Swan wants ‘to kill the goose that is laying the golden eggs’. No Joe, he does not want to kill it, he just wants a fairer share of its eggs for the rest of us.

More thoughtful contributors to the debate argue that this nation is built on the courage and determination of entrepreneurs who take risks in order to make a profit. Of course, and they are vital to our nation. Swan does not dispute this. Economists point to the fact that our miners employ many people, as indeed they do. Miners employ 200,000, about 2% of Australia’s workers. We all know that. We also know that during the GFC the miners shed jobs faster than most sectors, far from saving us from recession.

Politicians and some economists insist that big business, such as mining, must be encouraged by tax breaks and incentives such as start up subsidies, and certainly should not be taxed higher, because they employ these workers, they create the wealth, and that wealth ‘trickles down’ to those at the lower levels of society. Indeed ‘trickle down economics’ is their principle raison d’être for supporting big business in debates about income equality. If it were not for these entrepreneurs nothing would trickle down to the masses, they say. So these pillars of free enterprise, these captains of industry, need support, encouragement, and above all they don’t need to be taxed more.

In his book Zombie Economics – How dead ideas still walk among us, Queensland University’s John Quiggin debunks many of the contemporary theories, zombie theories as he calls them, that economists still embrace, among them ‘trickle down economics’.

Despite eminent economists such as John Maynard Keynes, Adam Smith and John Stuart Mill supporting income redistribution through progressive taxation, there has been no shortage of economists who argue conversely – that we should let the rich get richer, and wait for the benefits to trickle down to the poor. These economists still exist and are still arguing that today. We hear them doing so in the context of the debate that Swan initiated. Another slogan, which is more seductive than ‘trickle down economics’, is ‘all boats rise with the tide’, implying they all rise by the same amount. It sounds eminently plausible doesn’t it, even although it is demonstrably false?

In a paragraph headed Death – the rich get richer and the poor go nowhere, Quiggin uses a telling graph of household income in the US from 1965 to 2005 which shows that while those in the top 5% increased their income by over 60%, those in the bottom 10% did not increase it at all, and even those on the 50th percentile, the half way mark, increased by less than 10%. It was only those on the 80th percentile or above that showed a substantial increase. The top half boomed; the bottom half stagnated. Not much trickle down there.

Of course these are US figures and Swan acknowledges that the disparity demonstrated there is not as pronounced here. But it is precisely these figures that alarm him. He fears that we are on a similar course to inequality here, propelled by the aggressive advocacy against public policy, such as the mining and carbon taxes, waged by the very wealthy who can afford to use their financial power to buy influence in newspapers, radio stations and through lobbyists, and subvert public policy designed to share prosperity more equitably among all our citizens. In my view he is right. Those who bother to use factual evidence to refute his contentions might find themselves in great difficulty proving their point. Which I suppose is why they resort to mouthing slogans or clinging to outmoded and debunked economic theories, such as ‘trickle down’.

In case readers think that all Swan is about is making the poor wealthier, this is what he says: “It’s not just about putting dollars in people’s pockets, but about building a better society; a society that creates wealth and spreads opportunity, a society that lifts up the worst-off and gives everyone a decent shot at a decent life.”

This is what it’s about, and Swan sees this better, more equitable society being threatened by the activities of a very wealthy few who use their wealth and power to unfairly buy influence in order to thwart good public policy in the national interest designed to ‘lift up the worst-off and give everyone a decent shot at a decent life’.

It is a disgrace that the debate about this critically important issue has been debased by slogans, superficial arguments, and debunked economic theories, and is so bereft of thoughtful, well-argued dialogue based on facts and figures. Find if you can one decent article or editorial that argues a cogent case.

What hope is there for an equitable society when the antagonists to Swan’s contentions are incapable or unwilling to mount a convincing case, and our media sit back with almost nothing to contribute but ‘he said, she said’, and trite mantras that miserably fail to address the simple point that Swan’s essay makes: “… if we don’t grow together economically, our community will grow apart.”


What do you think?