After Neoliberalism

Quiggin, John
Book
A e Neolibe alism
Global Thinke s Se ies
P o ided in Coope a ion wi h:
ANU P ess, The Aus alian Na ional Uni e si y
Sugges ed Ci a ion: Quiggin, John (2024) : A e Neolibe alism, Global Thinke s Se ies, ISBN
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‘John Quiggin is he in ellec ual equi alen o a dazzling i ewo ks display.
I walk away om e e y encoun e wi h a b igh new insigh , and his book
is no excep ion. Ag ee o disag ee, P o esso Quiggin is a e i able o e o
esh insigh s.
‘Spanning nea ly ou decades, his olume b ings oge he some o P o esso
Quiggin’s mos p o oca i e con ibu ions, d i en by a deep commi men
o equi y. I will pique you cu iosi y and encou age you o wo k owa ds
abe e wo ld.’
And ew Leigh, Pa liamen a ian and au ho
o The Sho es His o y o Economics
AFTER
NEOLIBERALISM

GLOBAL THINKERS SERIES
AFTER
NEOLIBERALISM
JOHN QUIGGIN
Published by ANU P ess
The Aus alian Na ional Uni e si y
Canbe a ACT 2600, Aus alia
Email: [email p o ec ed]
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Con en s
Lis o ables ix
Acknowledgemen s xi
Abb e ia ions xiii
In oduc ion 1
1. Whi e ash o Asia? 9
2. The e olu ion o neolibe alism 27
3. Neolibe alism in Aus alia 47
4. P i a isa ion and na ionalisa ion in he 21s cen u y 63
5. Looking back on mic o‑economic e o m: ascep ical
iewpoin 77
6. Wha ha e we lea ned om he Global Financial C isis? 105
7. The los golden age o p oduc i i y g ow h? 123
8. Financial ma ke s: mas e so se an s? 139
9. Basic o uni e sal? Pa hways o a uni e sal basic income 155
10. The case o a ou ‑day s anda d wo king week 169
A e wo d 181
Index 185
1
In oduc ion
Since we eme ged om he lockdown phase o he COVID-19 pandemic
ha began in 2020, i is clea ha some hing impo an has changed.
Oldce i udes abou wo k and li e, go e nmen and poli ics, and he way
he economy wo ks we e being ques ioned e en be o e he pandemic.
Now hey appea o ha e collapsed al oge he .
The con as be ween ou cu en si ua ion and ha a he u n o he 21s
cen u y is s a ling. As he sun ose on New Yea ’s Day 2000 and i became
appa en ha he much-p edic ed ‘Millennium Bug’ had ailed o bi e, he
wo ld seemed o ha e en e ed a new e a o capi alis p ospe i y. Tha new e a
had been p ophesied in nume ous w i ings, anging om academic wo ks
such as F ancis Fukuyama’s The End o His o y (1992) o ai po bes selle s
like Thomas F iedman’s The Lexus and he Oli e T ee (1999).
Many e ms ha e been used o desc ibe he se o ideas and policies ha held
sway a he beginning o he 21s cen u y.
In mos cases, hese e ms we e ini ially posi i e o neu al, bu hey became
p ima ily pejo a i e o e ime. This e lec s he ac ha c i ics o a uling
ideology need e ms o desc ibe i . By con as , hose who accep and
implemen such an ideology a ely see i as such.
Te ms used o desc ibe he newly dominan ideology included ‘economic
a ionalism’, he ‘Washing on Consensus’ and ‘ma ke libe alism’. Poli ical
and economic commen a o s inally se led on ‘neolibe alism’.
As is usual wi h any widely in oked poli ical concep ( o example,
‘democ acy’ o ‘socialism’), he e m neolibe alism has been used and misused
in many di e en ways. The ange o di e en uses o ‘neolibe alism’ has led
some (p ima ily suppo e s o neolibe al ideas) o sugges ha he e m is
no hing mo e han a slu , applicable o any hing le -winge s dislike.

AFTER NEOLIBERALISM
2
Bu i is s ill ue, as US Sup eme Cou Jus ice Po e S ewa amously
said o obsceni y, ha e en i we can’ de ine neolibe alism p ecisely, we
can ecognise i when we see i . P ope ly unde s ood, i is he ideological
unde pinning o he e a o inancialised capi alism ha eme ged om he
economic c ises o he ea ly 1970s and emained dominan o he es o
he 20 h cen u y.
The cen al idea o neolibe alism was ha ma ke s, pa icula ly inancial
ma ke s, gene ally ou pe o m go e nmen s in he alloca ion o esou ces
and in es men s. Neolibe alism came in a a ie y o o ms, e lec ing
he a ie y o libe alism i sel , bu was di e en om p eceding o ms
o libe alism because o he need o espond o he successes and ailu eso
social democ acy in he second hal o he 20 h cen u y. In one o m o
ano he , neolibe alism became he unques ioned basis o he hinking
o bo h cen e- igh and cen e-le pa ies a ound he wo ld.
My own academic ca ee has coincided almos exac ly wi h he e a o
neolibe alism. My i s jou nal a icle was published in 1979, he yea
Ma ga e Tha che became p ime minis e o he Uni ed Kingdom (UK)
and inaugu a ed he p og am o adical e o m ha became known as
Tha che ism. I began wo k on his e ospec i e olume in la e 2022, jus
a e Liz T uss ended he b ie and disas ous s in in he same posi ion. He
sole accomplishmen in ha pe iod was o demons a e ha a Tha che i e
policy p og am was no longe accep able, e en o inancial ma ke s.
Be ween hose endpoin s, neolibe alism su ged a ound he wo ld, aking
di e en o ms in di e en coun ies and eaching a iumphal high poin
in he 1990s. Successi e inancial disas e s, culmina ing in he Global
Financial C isis (GFC) o 2008, disc edi ed he cen al ideas unde lying
neolibe alism. Howe e , hese ideas emained pa o he men al equipmen
o he poli ical and policymaking classes. As soon as he immedia e c isis
was o e , neolibe alism e-eme ged in zombie o m,1 d i ing disas ous
policies o aus e i y ha p oduced a decade o mise able economic
pe o mance h oughou he capi alis wo ld.
I is only in he las i e yea s o so ha new hinking has begun o ill he
gap le by he ailu e o neolibe alism. Ideas like uni e sal basic income,
a ou -day wo king week and au onomous emo e wo k ha e mo ed om
1 My book Zombie Economics: How Dead Ideas S ill Walk Among Us (Quiggin 2010) de eloped his
ope, desc ibing he li e cycle o zombie ideas, om bi h h ough li e and dea h o eanima ion in
undead o m.
3
INTRODUCTION
he ma gins o he cen e o he policy deba e. The mo emen owa ds
gende equi y has ex ended o encompass measu es including pa en al lea e
and expanded p o ision o childca e. P i a isa ion has been eplaced by an
expansion o public en e p ise in a a ie y o ields. Se ious e o s a e inally
being made o b ing global inancial ma ke s unde con ol.
O e he 40 yea s o neolibe alism, I ha e w i en hund eds o jou nal
a icles, book chap e s and opinion pieces p esen ing a c i ical iew o he
dominan ideology and, mo e ecen ly, ad oca ing al e na i es. In his book,
I ha e picked a ep esen a i e selec ion o hese, unning om he 1990s o
he las couple o yea s.
The book is o ganised as ollows.
Chap e 1, o iginally published in 1987, was my i s en u e in o he
public deba e o e p oduc i i y and economic g ow h. I was published
in he Cu en A ai s Bulle in, a pee - e iewed jou nal p oduced by he
Wo ke s Educa ional Associa ion. The jou nal made aluable con ibu ions
o Aus alian public deba e om i s incep ion in 1947 un il 1998. The gap
c ea ed by i s depa u e has been illed by online publica ions, mos no ably
The Con e sa ion.
The a icle was a esponse o a s ing o je emiads pu ou by suppo e s o
wha came o be known as ‘mic o-economic e o m’, p edic ing economic
disas e i he policies hey p oposed we e no implemen ed. The supposed
poo pe o mance o he Aus alian economy ela i e o ha o Japan was
o pa icula conce n.
My cen al obse a ion, epea ed in di e en o ms in much o my
subsequen wo k, was ha he supposed decline o Aus alia’s ela i e li ing
s anda ds was la gely a s a is ical illusion, and ha he apocalyp ic scena ios
in which Aus alians we e doomed o become he ‘whi e ash o Asia’2 we e
unlikely o e en ua e.
Re eading he a icle a e nea ly 40 yea s, I would change almos no hing.
Iha e dele ed wo igu es ha I could no longe ep oduce om he a ailable
da a and ha added no hing o he analysis.
2 As Dobell (2015) obse es in ela ion o he ‘whi e ash o Asia’ ca chph ase, ‘Pinning down g ea
quo es can be an expe ience as epheme al and exaspe a ing as hun ing he sna k.’ Ne e heless, Dobell
ul ima ely a ibu es he ph ase o Lee Kuan Yew, o me p ime minis e o Singapo e.
AFTER NEOLIBERALISM
4
Chap e 2 is a e ospec i e, examining he ise and decline o neolibe alism
om he 1970s o he COVID-19 pandemic. I p esen a ‘ h ee-pa y’
model, in which he main mo emen s d i ing con empo a y poli ics a e
ca ego ised as neolibe al (so o ha d), T umpis 3 and le is . In conclusion,
I discuss he equi emen s o a success ul le esponse o he c isis and o e
some sugges ions o a way o wa d.
Chap e 3, d awn om my 1996 book, G ea Expec a ions, u ns he ocus
back o Aus alia. I desc ibe he backg ound o Aus alian neolibe alism
( e e ed o a he ime as ‘economic a ionalism’ o ‘mic o-economic
e o m’). The g ow h o he s a e om he Second Wo ld Wa o he
Whi lam go e nmen is con as ed wi h he subsequen e ea unde F ase ,
Hawke and Kea ing. The chap e ends wi h a discussion o he Na ional
Compe i ion Policy, which u ned ou o be he las majo ins almen o
mic o-economic e o m.
Chap e 4, w i en o he Commi ee o Economic De elopmen o
Aus alia and published in hei jou nal G ow h, deals wi h wha is a guably
he mos dis inc i ely neolibe al policy p ojec , ha o p i a isa ion.
The Tha che go e nmen , in pa icula , ocussed hea ily on e e sing
he g ow h o public en e p ise ha had aken place o e he cou se o  he
20 h cen u y. By 2002, when his chap e was w i en, he p ojec was
unning ou o s eam. The p omised bene i s o p i a isa ion had no been
deli e ed, and new p i a isa ion p oposals we e acing inc eased opposi ion.
My a icle p oposed a e i al o he concep o he mixed economy, in
which bo h p i a isa ion and na ionalisa ion we e a ailable as policies o
achie e an app op ia e balance be ween he public and p i a e sec o s.
Twen y yea s la e , wi h la ge-scale Aus alian go e nmen ini ia i es in
elecommunica ions and ene gy in as uc u e, including he Na ional
B oadband Ne wo k (NBN) and public in es men in enewable ene gy,
such a policy seems o be eme ging.
Chap e 5, i s published in The Economic and Labou Rela ions Re iew,
was no able a he ime o ea ing neolibe al mic o-economic e o m as
a policy agenda wi h a ixed beginning and end. Mos commen a o s ag ee
ha mic o-economic e o m in Aus alia began wi h he loa ing o he
dolla by he Hawke go e nmen in 1983. When he chap e was o iginally
3 I o me ly used he e m ‘ ibalis ’, which is unsa is ac o y in a ious ways, as is Pike y’s ‘na i ism’.
Donald T ump leads and exempli ies he poli ical endency I am alking abou , so ‘T umpis populism’
seems he bes e m o desc ibe i .
5
INTRODUCTION
published, he dominan assump ion was ha ‘ e o m’4 was essen ial and
would con inue inde ini ely. By con as , I a gued ha he p ocess had
al eady ended wi h he in oduc ion o he goods and se ices ax (GST) in
2000 and ha , o he mos pa , he e o m agenda had been exhaus ed.
O e ime, his la e poin has become con en ional wisdom. Calls o a
e u n o ‘ e o m’ a e obliga o y in a ious con ex s bu a e no longe aken
se iously by anyone.
The main poin o he chap e was ha he bene i s o e o m had been
o e sold in a ious espec s. Mos ele an ly o con empo a y deba es,
Is essed he ole o unsus ainable inc eases in wo king hou s and wo k
in ensi y as a d i e o he b ie and illuso y ‘p oduc i i y mi acle’ o he
ea ly 1990s. In he wake o he pandemic lockdowns, issues o his kind a e
coming o he o e, wi h he ise o emo e wo k and calls o a ou -day
s anda d wo king week.
Chap e 6, i s published in he Aus alian Economic Re iew, was w i en
in he a e ma h o he GFC and summa ised he key a gumen s o my
book, Zombie Economics: How Dead Ideas S ill Walk Among Us. I a gued
ha he c isis p o ided su icien e idence o ejec he dominan models in
academic mac o-economics and inance heo y, as well as policy claims such
as he ‘ ickle-down’ hypo hesis and he case o comp ehensi e p i a isa ion.
In eali y, ew o hese lessons we e lea ned, and much o he policy esponse
o he c isis has been i ele an o coun e p oduc i e. Asa esul , we ha e
lea ned some un la e ing lessons abou he economics p o ession, including
policymake s, commen a o s, cen al banke s and academic economis s.
In Chap e 7, which is based on a pape p esen ed o a Rese e Bank
con e ence, I e u n o he opic o p oduc i i y g ow h. By he ime he
pape was p esen ed in 2011, i was clea ha he supposed ‘p oduc i i y
mi acle’ o he 1990s was, a bes , a empo a y blip, and ha all he measu ed
gains had subsequen ly been los . By his ime, Aus alians ecognised ha
calls o ‘ e o m’ and ‘imp o ed p oduc i i y’ we e li le mo e han code
wo ds o ‘wo k ha de wi h ewe esou ces, and p oduce mo e’. As hese
calls we e inc easingly igno ed, wo k in ensi y declined, and p oduc i i y
slowed. In u he w i ing, no included in his olume, I made he case
ha p oduc i i y g ow h in Aus alia is mainly d i en by imp o emen s
4 The wo d ‘ e o m’ is equen ly used wi h a posi i e conno a ion, implici ly assuming ha change is
bene icial. Howe e , his usage equi es some le el o ag eemen on he desi able di ec ion o change. I use
i o mean simply ‘a change in o m’, wi hou any implica ion as o he desi abili y o ha change.
AFTER NEOLIBERALISM
6
in in o ma ion and communica ions echnology (Quiggin 2017; 2018).
Since we impo mos o he associa ed equipmen , echnological p og ess
is mani es ed in imp o ed e ms o ade a he han measu ed mul i ac o
p oduc i i y. The main lesson om his analysis is ha Aus alian wo ke s
inc easingly alue wo k–li e balance o e inc easing ma e ial li ing s anda ds.
Chap e 8, based on an a icle in a special issue o Poli ics & Socie y, deals
wi h he ise o inancial ma ke s o domina e he global economy in he
e a o neolibe alism. I con as he adula ion acco ded o he ‘Mas e s o he
Uni e se’ in he 1990s wi h he disas ous eali y o he Global Financial
C isis and o e a numbe o sugges ions o cons aining he size and
ac i i y o he inancial sec o .
Chap e s 9 and 10, w i en as he e a o neolibe alism was d awing o
aclose, look o wa d a he han backwa d o possibili ies o adical, e en
u opian change.
Chap e 9 deals wi h he idea o a uni e sal basic income (UBI) and
ad oca es wha has been called a Li able Income Gua an ee (Quiggin, Klein,
and Hende son 2020). The cen al idea is o app oach a UBI by ocussing
ini ially on ex ending a li able income o la ge g oups o people. This
would be done by aising inadequa e bene i s like JobSeeke o a li able le el
and expanding eligibili y o suppo ac i i ies such as olun ee ing. This
‘Basic i s ’ app oach may be con as ed wi h a ‘Uni e sal i s ’ app oach
o making a paymen o e e yone in he popula ion bu se ing i a a le el
insu icien o suppo a li ing s anda d abo e he po e y line.
Chap e 10 p esen s a gumen s o a ou -day s anda d wo king week.
Wo king a angemen s o many kinds we e upended by he COVID
pandemic. This expe ience showed ha di e en ways o wo king we e
possible, no ably including emo e wo k. Mo e b oadly, he expe ience o
he pandemic has es a ed deba es abou educing s anda d wo king hou s
ha ha e been ozen unde neolibe alism. S anda d wo king hou s ell
s eadily om 1850 o he 1980s bu ha e been i ually unchanged since
hen. A ou -day week is long o e due.

7
INTRODUCTION
Bibliog aphy
Dobell, G aeme. 2015. ‘Lee Kuan Yew, Aus alia and “whi e ash”’. Aus alian Jou nal
o In e na ional A ai s 69: 363–72.
F iedman, Thomas. 1999. The Lexus and he Oli e T ee: Unde s anding Globaliza ion.
New Yo k: Fa a , S auss and Gi oux.
Fukuyama, F ancis. 1992. The End o His o y and he Las Man. New Yo k: The F ee
P ess.
Quiggin, John. 2010. Zombie Economics: How Dead Ideas S ill Walk Among Us.
Pape back Edi ion. P ince on: P ince on Uni e si y P ess. doi.o g/10.1515/
9781400842087.
Quiggin, John. 2017. ‘The P oduc i i y Commission’s Mul i- ac o P oblem’. Inside
S o y. 31 Oc obe 2017. insides o y.o g.au/ he-p oduc i i y-commissions-mul i-
ac o -p oblem/.
Quiggin, John. 2018. ‘The No -So-S ange Dea h o Mul i ac o P oduc i i y
G ow h’. Aus alian Economic Re iew 51, no. 2: 269–75. doi.o g/10.1111/1467-
8462.12275.
Quiggin, John, Elise Klein, and T oy Hende son. 2020. ‘Mee he Li eable Income
Gua an ee: A Budge - eady P oposal Tha Would P e en Unemploymen
Bene i s Falling o a Cli ’. The Con e sa ion. 1 Oc obe 2020. hecon e sa ion.
com/mee - he-li eable-income-gua an ee-a-budge - eady-p oposal- ha -would-
p e en -unemploymen -bene i s- alling-o -a-cli -146990.
9
1
Whi e ash o Asia?
Fi s published in 1987 as Quiggin, John. ‘Whi e T ash o Asia’. Cu en
A ai s Bulle in 64: 18–25.1
In oduc ion
In ecen yea s i has o en been claimed ha in he absence o adical
changes in economic policies and social a i udes, Aus alians will soon be
he ‘poo whi e ash’ o Sou h-Eas Asia. The ph ase i sel appea s o be
due o Si Rode ick Ca negie, chai man o he mining company Conzinc
RioTin o Aus alia, bu o he commen a o s anging om Max Walsh,
edi o o he Aus alian Financial Re iew, o Lee Kuan Yew, p ime minis e
o Singapo e om 1959 o 1990, ha e made he same gene al claim.2
In1984, he claim was he subjec o a con e ence o he Aus alian Ins i u e
o Poli ical Science (AIPS), whose p oceedings ha e ecen ly been published
as Poo Na ion o he Paci ic?: Aus alia’s Fu u e? (Scu 1985).
The basis o he claim is he ac ha , since abou 1870, when Aus alia’s
income pe capi a was he highes in he wo ld, Aus alia’s a e o g ow h in
pe capi a g oss na ional p oduc (GNP) has been slowe han ha o mos
o he na ions, wi h he esul ha we ha e allen o abou wel h on he
in e na ional ladde (depending on how he measu emen s a e made).
1 I wish o hank Pa Quiggin o ex ensi e help wi h he p o ision and in e p e a ion o demog aphic
da a, and B uce Chapman, S e e Dow ick, F ed G uen and Tom Nguyen o use ul discussions on he
issues examined he e. None o hese should be assumed o sha e he iews exp essed he e.
2 As no ed in he In oduc ion, subsequen analysis has sugges ed ha Lee Kuan Yew was p obably
he i s o use he e m.
AFTER NEOLIBERALISM
10
This ela i ely poo pe o mance is illus a ed by s a is ics such as hose in
Tables 1.1–1.3. Table 1.1 ( aken om Hughes 1985) illus a es he ela i e
pe capi a GDP o Aus alia and o he de eloped na ions o e he pe iod
1870–1976. A leas a i s sigh , i gi es e idence o a d ama ic decline in
Aus alia’s ela i e s anda d o li ing. Table 1.2 ( aken om Dow ick and
Nguyen 1986) gi es mo e es ima es o pe capi a GDP o he coun ies o
he O ganisa ion o Economic Co-ope a ion and De elopmen (OECD)
o e he pos wa pe iod.
Table 1.1 Rela i e GDP pe capi a (USA=100)
Yea G ow h a e
Coun y 1870 1890 1913 1929 1960 1976 GDP GDP p. cap.
Aus alia 173 145 107 74 75 80 3.2 1.1
Aus ia 53 58 48 54 69 2.6 2.1 NA
Belgium 123 104 82 75 66 84 2.1 1.5
Canada 80 77 81 70 78 91 3.8 2.0
Denma k 69 66 73 64 66 76 2.9 1.9
Finland 52 42 41 39 54 71 3.1 2.2
F ance 87 71 67 66 67 87 2.2 1.9
Ge many 68 60 58 51 70 81 2.5 2.0
I aly 69 46 42 37 43 53 2.3 1.6
Japan 35 33 29 32 35 77 3.8 2.6
Ne he lands 123 87 69 70 69 80 2.7 1.4
No way 63 52 47 50 65 85 2.9 2.1
Sweden 54 48 55 61 79 88 3.0 2.3
Swi ze land 104 88 74 85 85 78 2.4 1.6
UK 103 81 67 70 67 124 1.8 1.3
USA 100 100 100 100 100 100 3.5 1.9
Sou ce: OECD
The main in e es o hese ype o da a o ad oca es o he whi e ash hesis
is he ela i e anking o di e en na ions, and, he e again, Aus alia seems o
ha e pe o med poo ly. By con as , o e abou he las 30 yea s, he na ions
o Sou h-Eas Asia ha e enjoyed e y apid g ow h in pe capi a incomes.
Ob iously, i hese ends a e ex apola ed, hese na ions will, a some poin ,
o e ake us. Hughes (1985) has unde aken such an ex apola ion, and he
esul s a e p esen ed in Table 1.3.
17
1. WHITE TRASH OF ASIA?
o g ow h a es o be highe o hose na ions ha a e ini ially wo se o .
Thus, du ing he pe iod when she specialised in ‘copyca ’ manu ac u ing,
Japan eco ded annual g ow h a es o he o de o 10pe cen . WhenJapan
became a echnological leade in he 1970s, he g ow h a es ell o 3o 4pe
cen , and i was poo e Sou h-Eas Asian na ions ha eco ded s ikingly
apidg ow h.
I is wo h conside ing he ex apola ions p esen ed by Hughes in he ligh o
his con e gence e ec . They a e based on he assump ion ha he ASEAN
na ions can con inue hei cu en (o , a he , 1970–81) g ow h a es long
a e hey ha e caugh up o and su passed Aus alia, and, o ha ma e ,
he o he de eloped na ions. Such an ex apola ion implies ha , by he yea
2131, Singapo e would ha e a pe capi a GDP nine imes as la ge as ha
o he OECD na ions bu would s ill be g owing mo e han wice as as .
Dow ick and Nguyen (1986) ci e a numbe o es ima es showing ha , all
hings being equal, a poo na ion should ca ch up wo- hi ds o he di e ence
wi h a ich one o e a pe iod o 25 yea s. As le els o GDP con e ge, so,
in gene al, do a es o GDP g ow h. An impo an consequence o his
‘ca ch-up’ e ec is he sha p decline in he a iance o pe capi a GDP
among he de eloped na ions. Since 1973, di e ences in a es o g ow h
ha e also allen sha ply.
The o he majo ac o ha has been shown o a ec he a e o g ow h o
pe capi a GDP is popula ion g ow h. In gene al, s udies o compa a i e
g ow h indica e ha a 1pe cen inc ease in he a e o popula ion g ow h
is associa ed wi h an inc ease in o al GDP o be ween 0.3 and 0.9pe cen .
Since his is less han he inc ease in popula ion g ow h, pe capi a GDP
g ow h is educed as popula ion g ow h inc eases.
One no ewo hy issue ha can only be men ioned b ie ly is he ela ionship
be ween economic g ow h and spending on a mamen s. In he classical
heo y o economic g ow h, a mamen s expendi u e is a s aigh o wa d
sub ac ion om sa ings de o ed o p oduc i e in es men . On he o he
hand, he e has been an in luen ial school o hough sugges ing ha
‘mili a y Keynesianism’ has played a i al ole in p e en ing s agna ion and
p omo ing g ow h.
Looking a he bes and wo s pe o me s in Table 1.2, he Uni ed Kingdom
and Japan, i is no ewo hy ha one has s uggled o main ain Impe ial
p e ensions, while he o he has been o cibly p e en ed om making

AFTER NEOLIBERALISM
18
majo  a ms expendi u es. O all possible pa hs o g ea e wo ldwide
p ospe i y, a educ ion in a ms spending seems bo h he mos appealing
and one o he mos p ac ical.
In gene al, howe e , he mos impo an poin o be de i ed om he
s udy o in e na ional g ow h a es is he ac ha di e ences in bo h o al
le elso GDP and he a e o g ow h o GDP ha e become gene ally smalle
o e he pos wa pe iod. Di e ences in g ow h a es among he de eloped
na ions since 1973 ha e been e y small indeed, wi h 15 o he 24 na ions,
including Aus alia, alling in a ange o only 1.5pe cen . As ega ds he
de eloped na ions, ela i e g ow h is an issue whose ime has passed.
Assessing Aus alia’s pe o mance
1870–1930
In ligh o hese gene al commen s on in e na ional compa isons, wha
can be said abou Aus alia’s economic pe o mance? Pe haps he mos
impo an  ea u e o Table 1.1 is ha he pe iod o sha pes decline is he
60 yea s om 1870 o 1930. Since 1930, Aus alia’s pe capi a GDP has
mo ed b oadly in line wi h ha o o he de eloped coun ies, al hough i has
been sligh ly below a e age. Se e al obse a ions may be made a hispoin .
Fi s , he e is no much alue in sc u inising ou p esen ins i u ions o he
sou ces o poo economic pe o mance in a pe iod be o e many o hese
ins i u ions we e o med. Fo example, many commen a o s place a g ea
deal o s ess on highly p o ec ed indus ies such as mo o ehicles and
ex iles. Ye he mo o ehicle indus y only da es om he Second Wo ld
Wa , while he i s a i s on ex iles we e imposed in 1926. I compa isons o
ela i e g ow h a e o be he ouchs one o economic pe o mance, i would
seem ha he high p o ec ion o hese ac i i ies has g ea ly imp o ed ou
pe o mance. E en such a ene able body as he A bi a ion Commission
(p e iously he A bi a ion Cou ) only da es om 1904, owa ds he end
o he pe iod o sha pes decline.
Second, while Aus alia’s compa a i ely poo pe o mance since 1870 is
blamed on a ious de ec s in ou sociopoli ical sys em and, pa icula ly,
on go e nmen policies, no co esponding analysis is gi en o he p e ious
cen u y. Du ing his pe iod, Eu opean Aus alia was ans o med om
as a ing con ic se lemen imposed on a con inen occupied by hun e –
19
1. WHITE TRASH OF ASIA?
ga he e s3 o he iches socie y (in e ms o measu ed pe capi a GDP)
he wo ld had e e seen. I is a ely sugges ed ha his spec acula ly good
pe o mance was he esul o b illian managemen by he ule s o he
ime. Ra he , i is a ibu ed o luck in he o m o ou endowmen s o
na u al esou ces. Fo many w i e s i is his endowmen o na u al esou ces
ha makes ou decline in ela i e g ow h a es since 1870 so di icul o
belie e. This be ays muddled hinking. The p ice o p ima y commodi ies
ela i e o o he goods has allen signi ican ly o e he las cen u y so ou
endowmen o na u al esou ces is much less o an ad an age now han i
was in 1870. The e o e, con a y o he popula iew, i would ha e been
su p ising i Aus alia (o any o he p ima y commodi y expo e ) had
main ained highe han a e age a es o g ow h o e his pe iod.
The discussion so a has implici ly inco po a ed he assump ion ha
measu ed GDP pe capi a is a use ul basis o compa ison. Howe e ,
some ea u es o he Aus alian da a make i pa icula ly un eliable o
his pu pose. Fi s , he da a p esen ed by Hughes a e based on popula ion
coun s ha exclude Abo iginal people,4 al hough hei (low-paid o unpaid)
labou made a signi ican con ibu ion o measu ed GDP. Since Abo iginal
people o med 9pe cen o he popula ion in 1870 and only abou 1 pe
cen in 1930, bo h he ini ial le el o pe capi a GDP and he subsequen
decline a e exagge a ed o his ex en .
Second, he Eu opean popula ion in 1870 was e y a ypical, e lec ing a
on ie socie y wi h high a es o immig a ion (p edominan ly by young
adul males) and a small ini ial popula ion. In pa icula , he masculini y
a io ( he a io o males o emales) was much highe han o o he de eloped
coun ies. Fu he mo e, his a io was highes in he mos p oduc i e age
g oup ( hose be ween 15 and 65). Since measu ed GDP is domina ed by
he wo k o men and excludes much o he wo k done by women, i is no
su p ising ha Aus alia’s measu ed GDP pe capi a should be e y high.
O e he pe iod 1870–1930, Aus alia’s masculini y a io app oached ha
o he USA (Table 1.4). The Aus alian popula ion was also signi ican ly
younge on a e age han ha o o he na ions. Fo example, in 1870 he
3 Since his a icle was published, schola ly and public discussion o Abo iginal land managemen
has emphasised he ole o ac i e p ac ices, including o ms o ag icul u e and aquacul u e and he use
o i e o manage landscapes (Gammage 2012; Reede -Mye s, L, B aje, TJ, Ho man, CA, e al. 2022).
Ne e heless, mone a y measu es such as GDP, he cen al opic o his chap e , a e no applicable
oAbo iginal socie y be o e Eu opean con ac . GDP measu es a e only meaning ul in he con ex o a
ma ke economy.
4 The e m ‘Abo iginal’ also encompassed To es S ai Islande s.
AFTER NEOLIBERALISM
20
p opo ion o Aus alians aged o e 65 was only 1.7pe cen compa ed wi h
3.6pe cen o he USA and 7pe cen o he UK. While his was o se
by a co espondingly highe numbe o child en, he wo k o ce o e all was
subs an ially younge han ha o o he coun ies. In an e a when capaci y
o ha d physical wo k was essen ial, his was conduci e o high pe capi a
GDP. Once again, Aus alia app oached he in e na ional no m in his
espec o e he pe iod 1870–1930, and his was e lec ed in a decline
in ela i e pe capi a GDP.
Table 1.4 Masculini y a ios 1870–1930
AUSTRALIA UK USA
1870 121 95 102
1880 117 95 104
1890 116 94 105
1900 110 94 104
1910 108 91 106
1920 103 92 104
1930 103 92 102
Sou ces: US Bu eau o he Census—Vi al s a is ics: Ra es ( a ious yea s); UK Gene al
Regis e O ice Census Repo s ( a ious); ‘Popula ion o Aus alia’; ESCAP Coun y
Monog aph 9
Aus alia now appea s no as an ex eme ou lie bu as a membe o a g oup
o leading na ions, including he UK and he Low Coun ies. While i is
appa en ha he USA o e ook his g oup be ween 1870 and 1930, and
ha se e al o he coun ies ha e caugh up, he pic u e o d ama ic ela i e
decline de i ed om GDP pe capi a may be seen o be g ea ly exagge a ed.
1930 o he p esen
Al hough he da a p esen ed in Table 1.1 ha e been shown o be misleading,
he e is no doub ha Aus alia’s economic pe o mance be o e abou 1930
was somewha unusual. Fo mos policy pu poses, howe e , i is mo e use ul
o conside he subsequen pe iod, and in pa icula he pe iod since he end
o he Second Wo ld Wa . Du ing his pe iod, Aus alia’s pe capi a GDP
g ow h pe o mance was any hing bu unusual. As Table 1.2 shows, i was
wi hin 0.5pe cen o he a e age o he 12 iches na ions in each o he
h ee sub-pe iods.
21
1. WHITE TRASH OF ASIA?
Dow ick and Nguyen (1986) p o ide a mo e o mal es o pe o mance.
They es ima e se e al equa ions ha ela e pe capi a GDP g ow h in a
ange o coun ies o ini ial income le els and popula ion g ow h a es.
Aus alia’s g ow h a e is almos exac ly ha p edic ed by he equa ions,
wi h he de ia ion anging om +0.5pe cen o −0.3pe cen . Simila
esul s a e ob ained by G uen (1986), using a sligh ly di e en da ase .
How can his be squa ed wi h he di e s a is ics o ou slip down he
in e na ional ladde p esen ed by ad oca es o he whi e ash hesis?
Asweha e seen, con e gence means ha di e ences be ween income le els
should sh ink. Thus, i is no su p ising ha Aus alia’s pe capi a GDP has
g own mo e slowly han ha o na ions ha we e ini ially poo e .
Howe e , his alone canno accoun o he ac ha some na ions ha e
o e aken us. The explana ion o e ed by he in e na ional g ow h models
is ha Aus alia’s popula ion has been g owing abou 1 pe cen as e han
he OECD a e age. This implies a educ ion in ela i e pe capi a GDP
g ow h o abou 0.4pe cen . Because di e ences in income le els among
de eloped coun ies a e now e y small, e en such a small di e ence implies
a la ge slip down a ladde o compa a i e le els. In essence, his says mo e
abou he poin lessness o such league ables han any hing else.
A poin o pa icula ele ance in he assessmen o Aus alia’s economic
pe o mance is ha , un il ecen ly, Aus alian policy has ocussed on absolu e
as much as pe capi a GDP. This has e lec ed de ence conce ns and he
exis ence o a gene ally sha ed ideology o de elopmen . Thus, while i
may be sugges ed ha immig a ion and a i policies ha e led o alowe
pe capi a GDP han migh o he wise ha e been possible, i  should be
ecognised ha hese policies we e implemen ed wi h a gene al accep ance
ha some cons ain s in a e age income we e a easonable p ice o pay o
mo e apid absolu e g ow h.
This accep ance is qui e explici , o example, in he B igden Repo , and
is implici in he ejec ion o s anda d economic c i e ia o he assessmen
o p ojec s seen as p omo ing ‘de elopmen ’, no ably h ough i iga ion
and No he n de elopmen . Cu en iews, including my own, end
o place a low o e en nega i e alue on de elopmen and popula ion
g ow hpe se. In assessing pas pe o mance, howe e , we should be clea
ha ou p edecesso s did no miss he a ge . Ra he , hey aimed a , and hi ,
a di e en a ge .
AFTER NEOLIBERALISM
22
One aspec o he ela i e g ow h deba e and he cu en economic c isis
has been a se ies o con lic ing claims on he ole o mig a ion. Geo ey
Blainey and o he s ha e called o es ic ions on mig a ion as a esponse o
ecession, while Helen Hughes and o he s ha e p oposed a e u n o he mass
immig a ion policies o he 1950s and 1960s as a esponse o poo ela i e
pe o mance. The deba e has been con using and, equen ly, con used.
One majo sou ce o con usion has been a ailu e o dis inguish be ween
sho - e m mac o-economic e ec s o mig a ion and longe - e m e ec s on
g ow h in pe capi a incomes. Oddly enough, he e idence he e sugges s
ha bo h sides ha e go hei a gumen s back o on . The c i ics o
immig a ion ha e gene ally ocussed on sho - e m employmen e ec s,
bu he e idence he e sugges s ha hese a e neu al o sligh ly a ou able.
On he o he hand, ad oca es o mass immig a ion ha e equen ly
ocussedon long- e m e ec s, bu he e idence, including ha p o ided by
G uen, and Dow ick and Nguyen, suppo s he iew ha high popula ion
g ow h ends o educe pe capi a GDP g ow h. I is likely ha he
e ec s o mig a ion will be somewha mo e a ou able han hose o high
a eso na u al inc ease, since mig an s a e likely o be people o wo king
age. Ne e heless, he e idence does no suppo he p oposi ion ha
mass immig a ion is likely o p omo e high a es o g ow h in pe capi a
(asopposed o o al) GDP.
Bo h sides o he deba e sha e he iew ha mig a ion policy should be
de e mined p ima ily by ai ly na ow economic conside a ions. This is a
na u al consequence o he ‘ ela i e g ow h’ app oach. In my iew, policy
should p ima ily e lec social decisions on he cos s and bene i s o g ea e
cul u al di e si y, highe popula ion densi ies and o he such e ec s o
expanded mig a ion. We should iew wi h suspicion any claim ha ou
economic ci cums ances necessi a e ei he sha p educ ions o massi e
inc eases in immig a ion.
Playing he ela i e g ow h game
In he p eceding sec ions, he speci ic con en ions made by he ‘poo whi e
ash’ school ha e been c i icised. The objec o his sec ion is o examine
he gene al implica ions o his mode o a gumen . The misleading claims
made by use s o hese a gumen s e lec he biases inhe en in hei manne
o assessing economic pe o mance.

23
1. WHITE TRASH OF ASIA?
One no ewo hy ea u e is a s ong endency o selec and p esen s a is ics
in such a way as o make ela i e economic pe o mance o any pa icula
coun y look bad. Con e sely, i is possible o selec s a is ics ha make any
pa icula coun y look good, and his exe cise is occasionally unde aken
by go e nmen s acing e-elec ion. Howe e , in mos coun ies, he pu pose
o in e na ional compa isons is ypically o demons a e he poo ela i e
pe o mance o he coun y conce ned, and hence o emphasise he u gency
o adop ing wha e e policies he pe son making he compa ison wishes
o ad oca e. Viewed simply as a way o emphasising he u gency o one’s
case, he ela i e g ow h game may seem ha mless enough. In ac , howe e ,
i yields a se iously dis o ed a i ude o economic policy issues.
Fo example, i would be gene ally ag eed ha Aus alia’s economic
pe o mance since 1973 has been conside ably wo se han du ing he
pos wa pe iod om 1945 o 1973. Howe e , a conce n wi h ela i e
g ow h a es yields p ecisely he opposi e conclusion. Du ing he ele an
pe iod, Aus alia’s pe capi a g ow h a e has been much close o he OECD
a e age han in ea lie pe iods.
A second ea u e o his app oach is ha i ocusses a en ion on na ow
measu es o GNP wi hou any conce n o quali y o li e. In a gene al
con ex , e en he mos igidly o hodox economis would ecognise ha
inc eases in GNP a e no necessa ily bene icial i hey a e ob ained a he
expense o inc eased wo king hou s. In mains eam economic heo y, wha
ma e s is ha he alloca ion o esou ces should e lec indi idual p e e ences
ega ding he ela i e alue o inc eased leisu e and highe income.
Dis o ions a ise when ou comes di e ge om hese p e e ences. Ye , in he
con ex o he ela i e e iciency deba e, Hughes eels ee o w i e ha in
Aus alia, ‘a high p e e ence o leisu e dis o s he alloca ion o esou ces’.
Calls o inc eased wo king hou s, sho e holidays and o he imp o ed
condi ions ha e been common. Less angible aspec s o he quali y o li e,
such as he p o ec ion o he en i onmen , a e ypically igno ed comple ely
in his deba e, excep as sou ces o needless egula ion.
The dis ibu ion o income is ano he issue ha goes by he boa d in his
app oach. Indeed, playe s o he ela i e g ow h game such as Michael
Po e a e conce ned o dec y dispu es o e he dis ibu ion o income
as a majo obs acle o he good o ‘ he communi y as a whole’, which is
ypically measu ed by a e age pe capi a income. In he con ex o e y poo
de eloping coun ies, one could pe haps a gue ha an inc ease in he size o
AFTER NEOLIBERALISM
24
he cake ma e s mo e han mo e equi able sha ing, since he achie emen
o an a e age income compa able o ha o he de eloped wo ld would
make almos e e yone be e o .
I is, howe e , e y di icul o apply his a gumen o he de eloped wo ld.
The wellbeing o he poo in a ange o de eloped coun ies is la gely
independen o he mino a ia ions be ween hem in a e age income. Fo
example, he USA has a pe capi a income 20pe cen la ge han ha
o he o he de eloped coun ies, bu i s pe o mance on measu es such
as in an mo ali y and homelessness, which a e closely ela ed o le els o
dep i a ion, a e among he wo s in he de eloped wo ld.
A mo e sub le ea u e o he ela i e g ow h game is he way in which key
policy issues a e p ejudged. Fo example, he e is conside able scope o
deba e o e he impo ance o ex e nal compe i i eness as compa ed o
measu es o domes ic wellbeing such as unemploymen le els. The ela i e
g ow h app oach implies a single-minded conce n wi h compe i i eness
on he assump ion ha e e y hing else will come igh in he end. This is
seen a i s wo s in he p olonged de la ion imposed by Ma ga e Tha che ,
which, a e he se ing wo e ms in o ice, has ye o p oduce angible
domes ic bene i s.
A second impo an ea u e o he ela i e g ow h game is ha issues
ela ing o he o e all wo ld economy a e la gely igno ed. This is despi e
he ac ha , among he de eloped coun ies, he wo s pe o me s p io
o 1973 did almos as well as he bes pe o me s since 1973. Inso a as
he sha p down u n since 1973 is discussed a all in he ela i e g ow h
li e a u e, i is ypically ega ded ei he as he esul o an exogenous shock
in he o m o he inc ease in O ganiza ion o he Pe oleum Expo ing
Coun ies (OPEC) oil p ices o as he esul o mis aken domes ic policies
adop ed independen ly (bu simul aneously) by a la ge numbe o di e en
coun ies.
The mos impo an opic o economic analysis should a emp o analyse
he p oblems o he wo ld economy and seek o p opose emedies a a global
le el. The ela i e g ow h app oach o ally excludes his ask om he agenda.
Se e e di icul ies, pa icula ly in he o m o in ac able ade de ici s, ha e
been encoun e ed by coun ies ha ha e a emp ed o main ain g ow h a es
subs an ially in excess o hose o hei ading pa ne s. Examples include
coun ies as di e se in hei ins i u ional s uc u e and policy backg ound as
F ance, Aus alia and he USA.
25
1. WHITE TRASH OF ASIA?
Agains his backd op, suppo e s o he ela i e g ow h app oach poin o
he success o he Eas Asian coun ies in main aining high g ow h a es.
In he las wo yea s, howe e , he Philippines has en e ed a seemingly
in ac able economic c isis, Sou h Ko ea has encoun e ed signi ican
balance-o -paymen s p oblems, and Singapo e has issued o ecas s o
nega i e eal g ow h. All o hese p oblems may be aced o low expo
demand associa ed wi h he poo pe o mance o he wo ld economy as a
whole. Playe s o he ela i e g ow h game ha e essen ially no hing o say
abou his issue.
Concluding commen s
P ophe s o all kinds ha e long ound p edic ions o impending doom an
indispensable aid in gaining and holding he a en ion o hei audiences,
especially when hey can p omise ha ca e ul obedience o he p ophe ’s
commands is he only me hod o a e ing his doom. The p edic ion ha
Aus alians will soon be he poo whi e ash o Asia has been used in
p ecisely his ashion.
While shock ac ics may some imes be salu a y, i is ex emely un o una e
ha he ad oca es o his app oach ha e chosen o ocus on mino , and
apidly dec easing, di e ences in g ow h a es a a ime when g ow h
h oughou he de eloped wo ld has been pain ully slow. The p ospec o
signi ican wo ldwide alls in a es o g ow h, and e en in he ac ual le el
o pe capi a income, is uncom o ably close. In his ligh , a gumen s abou
which na ion is doing he leas badly a e no me ely i ele an bu posi i ely
damaging o p ospec s o in e na ional coope a ion.
The e is, no doub , subs an ial scope o imp o emen in Aus alian economic
pe o mance wi hin he cons ain s imposed by he wo ld economy. E o s
owa ds such an imp o emen a e likely o be mo e ewa ding i hey a e
mo i a ed by he desi e o imp o e he li es o Aus alians a he han
aneed o keep up wi h he in e na ional Joneses.
AFTER NEOLIBERALISM
26
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Quiggin, John. 1987. ‘Whi e T ash o Asia’. Cu en A ai s Bulle in 64: 18–25.
Reede -Mye s, Leslie, Todd J. B aje, Cou ney A. Ho man, Emma A. Ellio Smi h,
Ca ey J. Ga land, Michael G one, Ca la S. Hadden, e al. 2022. Indigenous
oys e ishe ies pe sis ed o millennia and should in o m u u e managemen .
Na u e Communica ions 13, A icle no. 2383. doi.o g/10.1038/s41467-022-
29818-z.
Scu , Jocelynne E., ed. 1985. Poo Na ion o he Paci ic?: Aus alia’s Fu u e? Sydney:
Allen & Unwin.
33
2. THE EVOLUTION OF NEOLIBERALISM
Wi h his g ow h in ac i i y came hugely inc eased powe and p o i abili y.
As ea ly as 1987, inancial i ms we e being desc ibed as he ‘Mas e s o he
Uni e se’, a ph ase coined in Tom Wol e’s (1987) no el, The Bon i e o he
Vani ies. The ise o he inancial sec o , and he concomi an decline o
he ade union mo emen , ipped he balance o poli ical powe in a ou
o neolibe alism.
Ha d neolibe alism
Al hough he ising poli ical powe o he inancial ma ke s acili a ed he
gene al shi owa ds neolibe alism, his de elopmen also depended on
a esu gence o neolibe al policy ideas. In sha p con as wi h social
democ a s, he ad oca es o neolibe alism we e eady wi h answe s o he
c isis o he 1970s.
In mac o-economics, he mone a is c i ique o Keynesianism de eloped
by F iedman (1968) was apidly accep ed, e en ually e ol ing in o he
in la ion- a ge ing egime ha emained in e ec un il he GFC.
In iscal policy, he ‘ ax e ol s’ o he 1970s led o a consensus on he need
o es ain he g ow h o go e nmen . The pe cei ed success o ai line
de egula ion in he USA led o a b oade mo emen in a ou o de egula ion
and p i a isa ion. To emphasise he dis inc ion om mac o-economic
policy, hese policies we e equen ly e e ed o as ‘mic o-economic e o m’
(Quiggin 1996). This ph ase cap u ed he posi i e conno a ions o ‘ e o m’,
a e m long used o desc ibe libe al and social democ a ic policy inno a ions
while e e sing he subs an i e con en .
The ad ocacy o F iedman (1962), and F iedman and F iedman (1980),
played a c ucial ole in p omo ing ee ma ke conse a ism in he USA.
Many o hese ideas had been de eloped by economis s associa ed wi h he
Uni e si y o Chicago, whe e F iedman wo ked o mos o his long ca ee .
In he UK, a c ucial ole was played by ‘ hink anks’ such as he Ins i u e
o Economic A ai s (Cocke 1995).3 The ideas de eloped by hese hink
anks o med he basis o he i s sys ema ic implemen a ion o a neolibe al
policy p og am, unde aken by he go e nmen o Ma ga e Tha che in he
UK om 1979 onwa ds.
3 The same was ue in Aus alia (Cahill and Bede 2005).

AFTER NEOLIBERALISM
34
The co e goals o he p og am we e o:
1. abandon Keynesian mac o-economic s abilisa ion, based on ac i e iscal
policy, in a ou o an independen cen al bank wi h a di ec i e o
con ol in la ion a all cos s
2. emo e he s a e al oge he om ‘non-co e’ unc ions h ough p i a isa ion
o go e nmen business en e p ises and he sale o public housing
3. ejec edis ibu ion o income excep o a basic ‘sa e y ne ’
4. minimise he ole o he s a e in co e unc ions such as heal h, educa ion
and income secu i y h ough con ac ing ou , ouche schemes and
soon.
Tha che a ained he i s and second o hese goals e y success ully.
Al hough policies o mone a y con ac ion implemen ed in 1979 p oduced
a deep ecession, wi h millions le unemployed, he go e nmen pe sis ed
and succeeded in b inging an end o he in la iona y upsu ge o he
1970s. Mos o he publicly owned in as uc u e sec o (elec ici y, wa e ,
elecommunica ions, ai po s and ailways) was p i a ised.
The UK go e nmen made conside ably less p og ess on he hi d and
ou h objec i es. The e we e also subs an ial educ ions in he p og essi i y
o he ax sys em, bu Tha che ’s mos ambi ious mo e in his di ec ion,
he eplacemen o council a es wi h a poll ax, was a disas e , leading,
e en ually, o he down all. The a emp o wind back public in ol emen
in heal h and educa ion was simila ly limi ed, mee ing pa icula esis ance
in he case o he Na ional Heal h Se ice. The esul was ha , al hough he
scope o public sec o ac i i y was wound back h ough p i a isa ion, he
size o go e nmen was no . The cen u y-old end o g ow h in he sha e
o na ional income going o he go e nmen was hal ed in he 1970s bu
no e e sed.
Tha che ’s ideas o med he co e o a ha d neolibe alism ha apidly
becamedominan h oughou he English-speaking wo ld. I was embodied
in such documen s as he Figh back! plan pu o wa d by he Libe al and
Na ional pa ies in Aus alia in 1993 and he Con ac wi h Ame ica
p oposed by he US Republican Pa y led by New Ging ich in 1994.
Al hough nei he o hese p og ams p oduced immedia e elec o al success,
mos o he policies hey p oposed we e e en ually implemen ed.
35
2. THE EVOLUTION OF NEOLIBERALISM
Beyond he English-speaking wo ld, he global sp ead o neolibe alism was
d i en less by poli ical ad ocacy and mo e by in e na ional ins i u ions.
Thedeb c ises o he 1990s p oduced wha Williamson (1990) desc ibed
as he Washing on Consensus, a e m ha e lec ed he sha ed iews o he
US T easu y, he In e na ional Mone a y Fund (IMF) and he Wo ld Bank,
all based in Washing on DC.
Less ema ked upon, bu equally signi ican , was he Eu ope-based consensus
o he OECD, he Eu opean Commission and he Eu opean Cen al Bank
(ECB). The ECB, c ea ed in he 1990s as pa o he poli ical p ojec o
uni ying Eu ope a ound a common cu ency, ep esen s a pa icula ly pu e
ins i u ional embodimen o ha d neolibe alism (Palley 2013).
The ise o neolibe al ideas ein o ced, and was ein o ced by, he esu gence
o ai h in he inancial sec o . Du ing he ascendancy o social democ acy,
banking had been bo ing, sa e and igh ly egula ed. The emblems o
capi alism in he mixed economy we e indus ial i ms like Gene al Mo o s
and Gene al Elec ic.4 By con as , he b eakdown o social democ acy in he
1970s saw he ise o inancialised capi alism, domina ed by global banks
like Ci ibank, and Wall S ee in es men banks such as Goldman Sachs.
The key idea he e was he e icien ( inancial) ma ke s hypo hesis. Ini s
s ong o m, pu o wa d by Fama (1970), he hypo hesis s a es ha inancial
ma ke s p o ide he bes possible es ima e o he alue o any in es men .
Al hough he e was ne e any good suppo ing e idence o his claim,
i became pa o he ‘common sense’ o he neolibe al e a. One esul was
he epida ion wi h which go e nmen s awai ed he e dic o ‘ he ma ke s’
on budge s and o he policy decisions.
So neolibe alism
The esu gence o a inancialised o m o global capi alism om he 1970s
onwa ds came as a shock o he le . The e we e some a emp s a esis ance,
no ably by he Mi e and go e nmen , which came o o ice in F ance in
1980, bu all such a emp s ailed in he ace o he powe o global capi al
ma ke s. By he 1990s, he iumphalis decade ha ollowed he collapse o
4 By he ea ly 2000s, Gene al Mo o s was a shadow o i s o me sel , while Gene al Elec ic had
become, in essence, a inance company, domina ed by i s GE Capi al business.
AFTER NEOLIBERALISM
36
he So ie Union, he dominance o neolibe alism was clea ly e-es ablished.
O e he cou se o he 1980s and 1990s, mos social democ a ic pa ies
accommoda ed o he new eali ies.
As no ed abo e, his accommoda ion was o en p esen ed as a new Thi d
Way, allegedly anscending he dispu e be ween social democ a s and ha d
neolibe als. In eali y, howe e , he Thi d Way amoun ed o li le mo e
han a so e sion o neolibe alism (Callinicos 2001). So neolibe alism
in ol ed accep ance o mos o he co e elemen s o he neolibe al p og am,
including p i a isa ion, a acks on ade unions, unc i ical accep ance o
he dominan ole o he inancial sec o , and a emp s o hal o e e se he
g ow h o he public sec o .
O e he cou se o he 1980s and 1990s, mos social democ a ic and libe al
pa ies in he English-speaking wo ld adop ed so neolibe alism in one o m
o ano he . Some examples, signi ican in hemsel es, bu also symbolic o
he shi in economic hinking include:
• he decision by he Hawke–Kea ing go e nmen in 1983 and 1985 o
loa he Aus alian dolla and de egula e he inancial sys em
• he Clin on Adminis a ion’s suppo o ‘ he end o wel a e as we know
i ’, demanded by he Ging ich-led Republican pa y in 1994. This
measu e was ini ially seen as success ul because i s ad e se e ec s we e
masked by he s ong g ow h o he 1990s. A e g ow h slowed in he
2000s, howe e , he absence o wel a e suppo con ibu ed subs an ially
o he g ow h o po e y. E en mo e s iking we e inc easing mo ali y
a es among signi ican g oups, such as middle-aged whi e Ame icans
• Tony Blai ’s c ea ion o a ‘New Labou ’ pa y, in which he socialis
objec i e o me ly s a ed in Clause IV o i s Cons i u ion was abandoned
(Labou coun s 2023). Be o e he change, he objec i e was s a ed as:
[ ]o secu e o he wo ke s by hand o by b ain he ull ui s o
hei indus y and he mos equi able dis ibu ion he eo ha may
be possible upon he basis o he common owne ship o he means
o p oduc ion, dis ibu ion, and exchange, and he bes ob ainable
sys em o popula adminis a ion and con ol o each indus y
o se ice.
• This changed o:
a dynamic economy, se ing he public in e es , in which he
en e p ise o he ma ke and he igou o compe i ion a e joined
wi h he o ces o pa ne ship and co-ope a ion o p oduce he
37
2. THE EVOLUTION OF NEOLIBERALISM
weal h he na ion needs and he oppo uni y o all o wo k and
p ospe , wi h a h i ing public sec o and high quali y se ices,
whe e hose unde akings essen ial o he common good a e ei he
owned by he public o accoun able o hem.
The ejec ion o public owne ship embodied in he New Labou pla o m
was e lec ed in policies o p i a isa ion and p i a e owne ship o public
in as uc u e. Along wi h ai h in he e iciency o inancial ma ke s, and
acquiescence in, o suppo o , an i-union policies, suppo o p i a isa ion
ep esen ed one o he mos consis en a eas o ag eemen be ween so and
ha d neolibe als. This suppo pe sis ed, despi e ou comes ha anged om
medioc e o disas ous. The P i a e Finance Ini ia i e, pu sued wi h igou
by he Blai go e nmen in he UK, was one o he mos no able examples
o ailu e.
Despi e accep ing he co e elemen s o ha d neolibe alism, so neolibe als
a emp ed, in a ious ways, o mi iga e he g owing inequali y ha ine i ably
esul ed om he implemen a ion o he neolibe al p og am. In pa icula ,
so neolibe al go e nmen s a emp ed o imp o e he unc ioning o
he social wel a e sys em a he han elimina ing i o s ipping i down
o a minimal sa e y ne . Ne e heless, he egali a ianism o adi ional
social democ acy was abandoned, wi h a gumen s abou he dis ibu ion
o income and access o communi y se ices being eplaced by discussion
o sa e y ne s o he e icien p o ision o se ices o ‘cus ome s’.
This shi was equen ly exp essed in e ms o olde deba es abou equali y
o oppo uni y as opposed o equali y o ou comes. Howe e , al hough he
ad oca es o so neolibe alism a e pa icula ly iendly o he upwa dly
mobile, he hos ili y o inhe i ed p i ilege ha cha ac e ised ea lie ad oca es
o equali y o oppo uni y la gely disappea ed. Some suppo e s o so
neolibe alism ook he a gumen o i s logical conclusion, ejec ing e en he
idea o equali y o oppo uni y (Ca anagh 2003). This is a leas consis en .
In he p esence o se ious inequali y o ou comes, i is impossible o p e en
pa en s om passing hei ad an ages on o hei child en. Unde hese
ci cums ances, i is he e o e impossible o achie e equali y o oppo uni y.
Mo e ma ked di isions a ose in ela ion o social issues, pa icula ly hose
ela ed o mul icul u alism, eminism and en i onmen alism. In he USA
and Aus alia, he sha pness o hese di isions, commonly e e ed o as
‘cul u e wa s’, masked a subs an ial con e gence on economic policy
(F ank2007).
AFTER NEOLIBERALISM
38
The mos success ul implemen a ion o so neolibe alism was p obably ha
o he Hawke–Kea ing Labo go e nmen in Aus alia be ween 1983 and
1996. The pla o m on which Labo was elec ed was an in e en ionis one,
cen ed on he idea o an ‘acco d’ on p ices and wages. The Acco d was
nego ia ed be ween he Labo Pa y and he Aus alian Council o T ade
Unions, o which Hawke had been a success ul p esiden , al hough i was
hoped ha a ba gained consensus inco po a ing business g oups could be
achie ed (G uen and G a an 1993).
The combina ion o inancial ma ke p essu e and he sp ead o neolibe al
ideas ensu ed ha he go e nmen ook a di e en di ec ion, beginning
wi h he decisions, in 1983 and 1984, o loa he dolla and unde ake
subs an ial de egula ion o he inancial sys em. Howe e , he success o he
Acco d in cons aining wage g ow h and allowing a non-in la iona y eco e y
om he ecession o he ea ly 1980s was an impo an coun e ailing o ce.
Ano he example was he ailu e o he ha d neolibe al e o m o he ax
sys em a ou ed by he hen easu e Paul Kea ing, based on he idea o
using a goods and se ices ax (GST) o inance cu s in he op ma ginal
a e o income ax. In he ace o esis ance om he union mo emen ,
and a lack o suppo om business, P ime Minis e Bob Hawke ejec ed
Kea ing’s p e e ed op ion. Ins ead, he go e nmen implemen ed a e o m
p og am wi h subs an ial p og essi e elemen s such as a capi al gains
ax. The Hawke–Kea ing go e nmen also edesigned he social wel a e
sys em, in eg a ing i wi h he ax sys em and main aining o imp o ing i s
p og essi e edis ibu i e e ec s (G uen and G a an 1993).
The ela i e success o so neolibe alism unde Hawke and Kea ing was no
su icien o p e en g ow h in inequali y o e ime, o he de elopmen o
abloa ed and dange ously uns able inancial sys em. Ne e heless, a measu e
o hei success can be gained by looking a he disas ous pe o mance o
New Zealand, whe e bo h he Labou go e nmen elec ed in 1983 and he
Na ional Pa y go e nmen ha succeeded i om 1990 o 1999 emb aced
ha d neolibe alism in a pa icula ly doc inai e o m and wi h subs an ially
wo se economic ou comes (Hazledine and Quiggin 2006).
Thus, he di e ences be ween ha d and so neolibe alism, while no as
signi ican as claimed by ad oca es o he Thi d Way, we e mo e han
cosme ic and cul u al.
Neolibe alism eached i s peak o poli ical and economic success in he
1990s. Neolibe al globalisa ion was seen as an uns oppable o ce, by bo h
en husias s (F iedman 1999) and c i ics (Ma in and Schumann 1997).

39
2. THE EVOLUTION OF NEOLIBERALISM
Social democ a ic pa ies we e in e ea h oughou he wo ld. Financial
ma ke s we e booming in de eloped and de eloping coun ies alike.
Thecollapse o he So ie bloc had inally disc edi ed he al e na i e o e ed
by communism.
The c ises o he 21s cen u y
Amid he iumphalism o he 1990s, many p edic ed ha he 21s cen u y
would be one o hype capi alis p ospe i y. The esul s ha e u ned ou
e ydi e en ly.
The cen u y began wi h a spec acula c ash: he bu s ing o he US s ock
ma ke bubble, ocussed on ‘do com’ in e ne s ocks, in 2000. The ‘do com’
bubble-and-bus was no able because i occu ed a he cen e o global
capi alism, a he han in pe iphe al coun ies whe e inancial capi alism
was a ecen a i al, as had been he case wi h he Asian inancial c isis o
1997 and ea lie eme ging ma ke c ises.
The expansiona y mone a y policy allowed a easonably apid eco e y
om he do com bus bu uelled a specula i e boom, ocussed on eal
es a e, ha culmina ed in he GFC o 2008. Fa om being he omniscien
Mas e s o he Uni e se, he inancial sec o was shown up as co up and
incompe en . As well as b inging an end o he widely sha ed p ospe i y
o he 1990s, he s ock ma ke collapse unde mined he cen al ene
o neolibe alism, namely, he e icien ( inancial) ma ke s hypo hesis
(Quiggin2011).
The GFC was ollowed by yea s o aus e i y, in which he cos s o bailing
ou he inancial sec o we e bo ne by he o e all popula ion in he o m
o wage s agna ion and educed public se ices. Banke s and he inancial
sys em we e bailed ou , while o dina y people we e made o pay hep ice.
The si ua ion was wo s in he Eu ozone, whe e he design o  he ECB
made i i ually impossible o adop any policy excep aus e i y,
acoun e p oduc i e ocus on cu ing budge de ici s and con olling he
non-exis en h ea o in la ion. The esul has been a decade o ecession
in mos o he de eloped wo ld. E en in he USA and he UK, which ha e,
on some measu es, eco e ed, li ing s anda ds ha e ne e e u ned o he
p e ious g ow h pa h, and he inequali y o income has been mo e e iden .
AFTER NEOLIBERALISM
40
Despi e i s dea h as a c edible heo y o economics and poli ics, howe e ,
neolibe alism has s umbled on in zombie o m o nea ly a decade,
main aining i s hold o e majo poli ical pa ies and o ganisa ions such
as he OECD, he IMF and he Eu opean Commission. In gene al, he
economics p o ession has lea ned almos no hing om he GFC (Quiggin
2013). Ideas like aus e i y ha should ha e been decen ly bu ied long
ago con inue o w eak ha oc h oughou he wo ld and, mos no ably, in
Eu ope (Bly h 2012).
Finally, in 2020, jus as he long and g inding eco e y om he GFC
seemed o be nea ing comple ion, he COVID-19 pandemic smashed he
global economy. The managemen o he pandemic a ied om compe en
o disas ous, bu i depended almos en i ely on go e nmen s. The inancial
sec o played i ually no ole on he managemen o he pandemic bu
came o unsca hed, as usual.
Poli ical implica ions
Jus as he economic ideology o neolibe alism lumbe s on in zombie o m,
so, un il ecen ly, has he poli ical sys em i suppo ed. Insu gen s o a ious
kinds ha e gained suppo nea ly e e ywhe e, bu he al e na ion be ween
di e en e sions o neolibe alism con inued o nea ly a decade a e he
c isis, only coming o an end in 2016.
Du ing he decades o neolibe alism ha began in he 1970s, he poli ical
sys em, nea ly e e ywhe e, was based on elec o al compe i ion be ween he
ha d and so e sions o neolibe alism, ypically ep esen ed by (nominally)
conse a i e and social democ a ic pa ies, espec i ely. Wi hin he poli ical
class, and among business leade s and policymake s, he e was a nea -
uni e sal consensus in suppo o neolibe al ideas. To ake any posi ion
ou side he spec um de ined by he so and ha d a ian s o neolibe alism
gua an eed ma ginalisa ion and exclusion om se ious poli ical deba e.
Ye , despi e i s dominance, neolibe alism ha dly e e achie ed b oad suppo
among he public a la ge. Ra he , he seeming success o neolibe alism
concealed he con inued s eng h o cu en s ha emained subme ged o
decades, becoming poli ically signi ican only in occasional e up ions.
41
2. THE EVOLUTION OF NEOLIBERALISM
The mos impo an o hese subme ged cu en s was wha may now be
called T umpism, a e i s mos success ul exponen (so a ). The co e o
T umpism is a o m o nega i e o de aul iden i y poli ics bes unde s ood
using he idea o he ‘unma ked ca ego y’, om linguis ics and sociology.
Campos (2019) illus a es his:
An unma ked ca ego y is p esen when he ca ego y is conside ed
so no mal o o dina y in a pa icula con ex ha i goes
unno iced. Theca ego y is he de aul se ing in ega d o social
expec a ions, and i in a sense emains in isible p ecisely because i
is so dominan … Fo example, i you had asked a lawye in 1960 o
name h ee cha ac e is ics ha e e y cu en Sup eme Cou jus ice
sha ed, i is e y likely he lawye would no ha e men ioned ei he
ace o gende .
As Campos u he obse es:
Wha ‘iden i y poli ics’, so-called, has done is o slowly and pain ully
and pa ially ans o m being a whi e man in Ame ica in o a ma ked
ca ego y. And makes a lo o he people who ha e become whi e
men a he han membe s o socie y’s in isible de aul ca ego y e y
uncom o able.
We may use ully add he unma ked ca ego ies ‘Ch is ian’, whe e ‘Ch is ian’
is in e p e ed in a sense o cul u al iden i ica ion a he han any speci ic
eligious belie , and he e osexual, among o he s.
The mos poli ically po en o m o de aul iden i y poli ics, and he ele an
one he e, is ha o a o me ly unchallenged dominan g oup acing he
eal o pe cei ed p ospec o becoming a poli ically weak and economically
declining mino i y.
T umpis de aul iden i y poli ics is closely linked o suppo o ‘s ongman’
ule, exempli ied by cu en p ac i ione s such as E dogan, O ban, Pu in
and, o cou se, T ump himsel . This may be because he one uni e sal ea u e
o de aul iden i y poli ics is a wo ship o masculini y. Thea ical displayso
masculini y a e a s anda d ea u e o T umpis poli ics (T ump himsel is
absu d enough, bu Pu in’s ba e-ches ed ho seback ides ake hese displays
o he poin o pa ody and beyond).
Du ing he pe iod o neolibe al dominance, ha d neolibe als pande ed
o T umpis s in he o ical e ms bu igno ed hem whe e e hei iews
con lic ed wi h he neolibe al policy agenda, mos ob iously in ela ion o
AFTER NEOLIBERALISM
42
ade and mig a ion. Now, he balance has been es o ed. The T umpis s
a e in cha ge bu use ax cu s and handou s o a ou ed c onies o main ain
business suppo .
Opposed o he T umpis s in c i ical ways, bu simila in o he s, is a dispa a e
g oup ha may be called, o wan o a be e e m ‘ he le ’. As well as
asmall g oup who adhe e o Ma xis o o he adical c i iques o capi alism,
he ‘le ’ in his sense includes en i onmen alis s, eminis s, unionis s,
old-s yle libe als and social democ a s, and a wide a ie y o g oups whose
pe sonal o cul u al iden i y is h ea ened by T umpism.
Al hough he le has no been as success ul as he T umpis s in poli ical
e ms, he issues aised by he le , including inequali y, acial injus ice,
gende oles and global hea ing, ha e now eplaced he conce ns o
neolibe alism, such as ma ke s and compe i ion, a he cen e o he policy
agenda o cen e-le pa ies. Ra he han ad ancing a posi i e agenda o
hei own, as hey did in 1980s and 1990s, he opponen s o he le ha e
elied p ima ily on elec o al p agma ism, a guing ha a small- a ge s a egy
is he bes way o elec ion wins.
The way o wa d
The ailu e o neolibe alism poses bo h challenges and oppo uni ies o he
le . The g ea es challenge is he need o con on T umpis populism as a
powe ul poli ical o ce in i sel , a he han as a sou ce o poli ical suppo
o ha d neolibe alism. Gi en he dange s posed by T umpism, his is an
u gen ask. One pa o his ask is ha o a icula ing an explana ion o he
ailu e o neolibe alism and explaining why he simplis ic policy esponses
o T umpis poli icians will do no hing o esol e he p oblems.
The o he is o appeal o he posi i e elemen s o he appeal o populism, such
as solida i y and a ec ion o longs anding ins i u ions, and o coun e pose
hem o he sel -seeking indi idualism cen al o neolibe alism, pa icula ly
in he ha d e sion wi h which igh wing populism has long been aligned.
The g ea oppo uni y is o p esen a p og essi e al e na i e o he
accommoda ions o so neolibe alism. The co e o such an al e na i e
mus be a e i al o he egali a ian and ac i is poli ics o he pos wa social
democ a ic momen , upda ed o ake accoun o he adically di e en
echnological and social s uc u es o he 21s cen u y. In echnological
49
3. NEOLIBERALISM IN AUSTRALIA
Jus ice Hen y Higgins, laid down he p inciple ha he basic wage should
be su icien o p o ide o he needs o a amily o i e, es ima ed a
42shillings a week.
The ideas o he New P o ec ion we e gi en in ellec ual subs ance by he
epo o he B igden Commi ee (1929). The commi ee a gued ha ,
while p o ec ion yielded a lowe pe capi a income han would ee ade,
i inc eased he demand o labou , and, he e o e, he size o he popula ion
ha could be suppo ed a a gi en eal wage, such as ha laid down in he
Ha es e judgmen . Mo e gene ally, his poin may be es a ed as saying
ha p o ec ion o a labou -in ensi e indus y leads o an inc ease in he
equilib ium eal wage. This esul was o malised as he S olpe –Samuelson
heo em (S olpe and Samuelson 1941).
The a emp o secu e social equi y h ough he wages sys em was suppo ed
by a se ies o inno a i e wel a e policies, including age pensions, wo ke s’
compensa ion and he beginnings o a sys em o unemploymen elie .
These policies we e based on he assump ion ha amilies wi h an employed
(male) b eadwinne would be adequa ely p o ec ed by he a bi a ion
sys em and sough o assis hose who empo a ily o pe manen ly ell
ou side his g oup. Thus, i has been desc ibed as a ‘wage-ea ne s’ wel a e
s a e’ (Cas lesand Mi chell 1994).
Aus alian social wel a e policies we e mos dis inc i e in he pe iod om
he Fede a ion o he G ea Dep ession. Hancock’s classic s udy Aus alia,
i s published in 1930, c i ically examined ea u es o he poli ical economy
o Aus alia, including a i s, he a bi a ion sys em, public en e p ises and
he ole o he S a e as a d i ing o ce in economic de elopmen :
The Aus alians ha e always disliked scien i ic economics and
(s ill mo e) scien i ic economis s. They a e ond o ideals and
impa ien o echnique. Thei sen imen s quickly ind ph ases and
hei ph ases ind p omp exp ession in policies. Wha he economis s
call ‘law’ hey call ana chy. The law which hey unde s and is
he posi i e law o he S a e— he democ a ic S a e which seeks
social jus ice by he pa h o indi idual igh s. The mechanism o
in e na ional p ices, which signals he wo ld’s need om one
coun y o ano he and in i es he na ions o p oduce mo e o his
commodi y and less o ha , belongs o an en i ely di e en o de .
I knows no igh s, bu only necessi ies. The Aus alians ha e ne e
el disposed o submi o hese necessi ies. They ha e insis ed ha
hei go e nmen s mus s uggle o so en hem o elude hem o
mas e hem. (Hancock1930, 66–67)

AFTER NEOLIBERALISM
50
I is his se o a i udes ha ecen ad oca es o mic o-economic e o m
ha ese ou o o e come. A one le el hey ha e been success ul. O e he
pas 20 yea s, he a i has been i ually abolished o mos indus ies,
hes uc u es o inancial egula ion ha e been swep away, public en e p ises
p i a ised o p epa ed o p i a isa ion, and he powe o he a bi a ion
sys em has been g ea ly educed. The need o become ‘in e na ionally
compe i i e’, and he package o policies his implies, is accep ed by poli ical
leade s o bo h majo pa ies, by bu eauc a s and business leade s, and by
he majo i y o economic commen a o s.
Ye , on he whole, he Aus alian public emains uncon inced. The iew
ha go e nmen s mus s uggle o ‘so en, … elude … o mas e ’ he ha sh
demands o he ma ke place emains pa o he Aus alian e hos.2 Almos
wi hou excep ion, when he policies o mic o-economic e o m ha e
been pu o he elec o al es , hey ha e been ejec ed.3 Popula opposi ion
o e o m c ys allised in he la e 1980s a ound he ph ase ‘economic
a ionalism’ (Pusey 1991) and does no appea o ha e aba ed signi ican ly.
In he absence o any clea economic bene i s om e o m, policies ha e no
been implemen ed wi h popula suppo bu ha e a he been imposed on
he basis ha ‘ he e is no al e na i e.’
The clash be ween public and eli e opinion makes he economic assessmen
o mic o-economic e o m an issue o mo e han academic in e es . Gi en
he chance, many Aus alians would willingly u n back he clock o e o m.
A ca e ul assessmen o he gains and losses o mic o-economic e o m, and
o he a eas in which e o m has succeeded and ailed, may help o guide he
pa h o e o m and o iden i y policies ha would yield g ea e bene i s o
o dina y Aus alians han he policies adop ed in he pas .
2 The ex en o which Aus alians a e unique in his espec may be deba ed. Hende son (1995) gi es
an in e es ing discussion o popula esis ance o e o m in Aus alia and ab oad.
3 The clea es example is he 1993 ede al elec ion, which was a ejec ion o he Coali ion’s package
o e o ms as a whole, including he labou ma ke e o m package Jobsback and changes o Medica e.
I was no me ely a ejec ion o he p oposed goods and se ices ax (GST). The e o ming G eine
go e nmen in New Sou h Wales was educed o a p eca ious mino i y s a us by i s i s elec o al
es , and, unde he leade ship o John Fahey, de ea ed ou igh a i s second. The de ea s o he Field
go e nmen in Tasmania and he Goss go e nmen in Queensland we e also due la gely o popula
hos ili y o e o m. So a , he Kenne go e nmen in Vic o ia is he only e o ming s a e go e nmen
o ha e been e u ned wi h an ou igh majo i y. Howe e , because o he bipa isan commi men o
e o m, he de ea o one e o ming go e nmen means no hing mo e han i s eplacemen by ano he .
51
3. NEOLIBERALISM IN AUSTRALIA
The Aus alian se lemen ?
One o he mos comp ehensi e p esen a ions o he case in a ou
o mic o-economic e o m is gi en by Paul Kelly, o me edi o o
TheAus alian newspape . Kelly (1992) desc ibes wha he calls ‘ he Aus alian
se lemen ’, which he claims domina ed Aus alian socie y and economic
policy om 1901 un il he 1980s. Kelly iden i ies he economic elemen s
o he se lemen as consis ing o indus y p o ec ion, a bi a ion, and
S a e pa e nalism. He links hese economic policies wi h Whi e Aus alia
and Impe ial bene olence, which he ini ially de ines as ‘dependence on a
g ea powe , ( i s he UK, hen he USA) o i s secu i y and inance’, bu
subsequen ly desc ibes exclusi ely in e ms o a i udes o he UK.4 Kelly’s
package ep esen s an ex ension o he ‘Fede a ion i ec a’, consis ing o
p o ec ion, a bi a ion and Whi e Aus alia, c i icised by Hende son (1990).
The link be ween in e en ionis economic policies, and he ideas o
impe ialism and Whi e Aus alia is misleading. The ideas o Whi e Aus alia
and Impe ial bene olence ce ainly domina ed policy up o Wo ld Wa II—
he Whi e Aus alia policy was, in ac , a B i ish Aus alia policy, and i was
egula ly claimed ha Aus alia was ‘98pe cen B i ish’ (Hancock 1961,
128). Howe e , he all o Singapo e in 1942 spelled he end o poli ical
eliance on he UK, and o Aus alia’s ole as a B i ish ou pos .
The Whi e Aus alia policy was unde mined by he mass mig a ion
p og ams a e Wo ld Wa II, which d ew la ge numbe s o sou he n
Eu opean mig an s, who, be o e he wa , had been ega ded as ‘a semi-
colou ed ace’, o be subjec o he mos s ingen con ols (Hancock
1961, 126). Th oughou he pos wa Keynesian boom, bo h he Whi e
Aus alia policy and he Impe ial connec ion we e s eadily e oded. The e m
‘Whi e Aus alia’ had been o icially d opped in 1941, and he end o he
policy came in 1966, when bo h he Libe al–Coun y Pa y go e nmen
and he Labo opposi ion commi ed hemsel es o a non-disc imina o y
immig a ion policy.
4 I one ocusses ins ead on dependence on he USA, i would be appa en ha his aspec o
he se lemen is ali e and well. Indeed, bo h he blowou in o eign deb and he MX missile c isis,
when inancial ma ke s ell sha ply in esponse o Aus alian a emp s o asse a limi ed deg ee o
independence in o eign policy, sugges s ha inancial de egula ion ein o ced Aus alia’s posi ion
asaclien s a e o he USA.
AFTER NEOLIBERALISM
52
By he ea ly 1970s, when economic in e en ionism eached i s peak, he
las es iges o he Whi e Aus alia policy we e swep away, and he UK,
which en e ed he Eu opean Communi y in 1973, became i ele an in
economic as well as poli ical e ms. The link be ween he Whi e Aus alia
policy, he Impe ial connec ion and in e en ionis economic policy is
long dead. All we e widely suppo ed policies o he Fede a ion e a, bu in
he cu en policy deba e, mos p ominen opponen s o mic o-economic
e o m a e also opponen s o acially disc imina o y immig a ion policies
and o a nos algic emphasis on B i ishness. The a emp by ad oca es o
mic o-economic e o m, such as Kelly and Hende son, o link he policies
hey oppose wi h he Whi e Aus alia policy is a he o ical de ice, exploi ing
he p inciple o guil by associa ion.
A mo e undamen al di icul y wi h he idea o an Aus alian se lemen
pu o wa d by Kelly and Hende son is he ailu e o ake any accoun o
he changes in he poli ical and economic amewo k b ough abou by
he 30 yea s o ull employmen ha ollowed he Second Wo ld Wa
(Smy h 1998). No adequa e explana ion o his excep ional pe iod in
ou economic his o y has ye been de eloped. A he ime, howe e , ull
employmen was seen simply as he esul o he adop ion o Keynesian
mac o-economic policies.
The belie ha go e nmen in e en ion could gua an ee ull employmen
na u ally ansla ed in o b oad con idence in he capaci y and esponsibili y
o go e nmen s o manage o he aspec s o he economy. On he o he
hand, he appa en capaci y o iscal policy o main ain ull employmen
unde mined he main a ionale o a i policy as a de ice o p o ec ing
employmen . Inc easingly, economis s came o see a i s as an indi ec
and ine icien mic o-economic app oach o wha was p ope ly seen as a
mac o-economic p oblem. I any hing o alue is o be de i ed om ideas
o an Aus alian se lemen , a p ope accoun mus be aken o he ole o
Keynesian ull employmen policy.
The Whi e Pape and he pos wa boom
F om Wo ld Wa II onwa d, Aus alia’s social and economic ins i u ions
became mo e like hose o he es o he de eloped wo ld. In pa , he
p essu es o he G ea Dep ession o ced Aus alian go e nmen s o pay
g ea e a en ion o he economic logic o he ma ke place. Unp o i able
s a e en e p ises such as bu che shops and obacconis s we e abandoned,
53
3. NEOLIBERALISM IN AUSTRALIA
and he doc ine ha wage a es should be based on an indus y’s capaci y
o pay became he cen al de e minan o wage se ing. Mo e no ably, o he
coun ies became mo e like Aus alia. Whe eas Aus alia’s s a e-owned
ailways and public u ili ies we e an excep ion in he 19 h cen u y, by he
ea ly pos wa pe iod i was he USA’s insis ence on e aining such en e p ises
in p i a e owne ship ha looked excep ional. A e Wo ld Wa II, he ea ly
Aus alian expe imen s wi h he social wel a e sys em we e ma ched, and on
mos measu es ou ma ched, by Eu opean wel a e s a es.
Ne e heless, he pe iod om 1945 o 1975 was one o s eady expansion o
he ole o go e nmen in Aus alia. The enhanced mic o-economic ole o
go e nmen was unde w i en by adical changes in mac o-economic policy.
Aus alia en e ed he pos wa wo ld wi h an explici commi men o he
main enance o ull employmen , embodied in he 1945 Whi e Pape on
Full Employmen in Aus alia. The Whi e Pape was he de ining documen
o economic policy be ween 1945 and 1975. Fo he i s and possibly he
only ime, he Aus alian go e nmen accep ed an obliga ion o gua an ee
ull employmen and o in e ene as necessa y o implemen ha gua an ee.
Pa icula ly wi h espec o ade policy and inancial egula ion, he
pe cei ed demands o mac o-economic managemen o e ode any conce ns
abou mic o-economic e iciency. A no ewo hy example o hese p io i ies
was he adop ion o quan i a i e impo con ols by he Menzies go e nmen
as a esponse o balance-o -paymen s di icul ies. A he same ime, he
appa en success o go e nmen s in main aining s able ull employmen
whe e ma ke s had ailed suppo ed he iew ha go e nmen judgemen s
o social needs we e likely o be supe io o eliance on ma ke ou comes.
The Libe al–Coun y Pa y go e nmen s ha held o ice h ough mos
o hepos wa boom ad oca ed a middle cou se be ween he laissez- ai e
doc ines o conse a i e pa ies be o e Wo ld Wa II and he socialis
objec i e p oclaimed by he Labo Pa y. In he in ellec ual clima e
o he imes, his led o a g adual expansion o he ole o go e nmen .
Howe e , go e nmen policy lacked any eal cohe ence o in ellec ual basis.
The ad oca es o in e en ion we e ill-p epa ed o mee he c i ique o
hei policies ad anced by suppo e s o mic o-economic e o m om he
1970sonwa d.
The mos no able example was he ‘p o ec ion all ound’ policy ad oca ed
in pa icula by he Coun y Pa y unde Si John McEwen. In p ac ice,
his policy in ol ed assis ing he impo -compe ing manu ac u ing sec o
AFTER NEOLIBERALISM
54
and hose segmen s o he u al sec o o ien ed o he domes ic ma ke a
he expense o he majo expo ing indus ies. Howe e , he ac ha nea ly
e e yone ecei ed some assis ance obscu ed he undamen al poin ha
assis ance o one indus y is, in e ec , a ax on o he s. I is no su p ising
ha he concep o he ‘e ec i e a e o p o ec ion’ was i s de eloped in
Aus alia. A a ie y o de ences can be ad anced o p o ec ionis policies,
bu ‘all ound’ is di icul , i no impossible, o a ionalise.
The Whi lam go e nmen
The Whi lam go e nmen was elec ed in 1972 wi h a p og am based on
amix u e o incompa ible elemen s. On he one hand, a he agg ega e le el,
Whi lam a ou ed Keynesian mac o-economic policies and a subs an ial
expansion o he ole o go e nmen . On he o he hand, he go e nmen ’s
s ance on a i policy and, o a lesse ex en , wi h espec o go e nmen
business en e p ises, o eshadowed la e de elopmen s in mic o-economic
e o m.
Whi lam pu sued an essen ially ee-ma ke indus y policy and, indeed,
boas ed ha his was he i s genuine ee en e p ise go e nmen in
Aus alian his o y. The mos no ewo hy examples o Whi lam’s ee
ma ke app oach o indus y we e he 25pe cen ac oss- he-boa d a i
cu o July 1973 and he bi e ly esen ed decision o abolish he boun y
paid o a me s o pu chases o supe phospha e. O mo e long- e m
signi icance was he es ablishmen o he Indus ies Assis ance Commission
(la e he Indus y Commission) in 1973, eplacing he old Ta i Boa d.
Since i s es ablishmen , he commission has ac ed as a public ad oca e o
mic o-economic e o m in e e y a ea o he economy.
Ano he impo an decision, he signi icance o which was no ecognised
a he ime, was he aboli ion o he old Pos mas e -Gene al’s Depa men ,
h ough which elephone and pos al se ices we e supplied, and i s
eplacemen by wo s a u o y co po a ions, Aus alia Pos and Telecom
Aus alia (now Tels a). This decision may be seen in e ospec as he
beginning o a p ocess in which la ge numbe s o go e nmen se ices ha e
been i s co po a ised and ul ima ely p i a ised. I should be emphasised,
howe e , ha he Whi lam go e nmen saw he c ea ion o s a u o y
au ho i ies as a me hod o inc easing he e iciency o public sec o p o ision,
and, he e o e, o suppo ing he con inued expansion o he public sec o .

55
3. NEOLIBERALISM IN AUSTRALIA
In o he a eas o policy, he Whi lam go e nmen ook a mo e in e en ionis
s ance. I pionee ed he imposi ion o equi emen s o en i onmen al
impac s a emen s. The es ablishmen o he Medibank heal h insu ance
sys em ep esen ed a majo expansion o di ec go e nmen in ol emen in
an a ea whe e policy had p e iously been con ined o he use o subsidies
and ax concessions. Whi lam g ea ly inc eased public expendi u e and he
ole o he na ional go e nmen in a eas such as educa ion. Mos no ably,
he go e nmen ’s policies wi h espec o in e na ional capi al lows we e
diame ically opposed o i s posi ion in a ou o ee ade in goods.
Fo eign di ec in es men was es ic ed, and de ices like he a iable
deposi equi emen we e used o con ol sho - e m capi al lows.
The mix u e o in e en ionis and laissez- ai e ideas in he Whi lam
p og am seems in ellec ually incohe en and has ce ainly ne e ecei ed an
adequa e de ence. I migh be possible o cons uc such a de ence a ound
he idea o a la ge, bu a ionally o ganised, public sec o ope a ing in a eas
cha ac e ised by scale economies and ex e nali ies, complemen ing a p i a e
sec o in which un es ic ed compe i ion p e ails. Bu i such an idea is
p esen in Whi lam’s de ence o his go e nmen ’s eco d (Whi lam 1985),
i is ha d o disce n.
The e ea o he S a e since 1975
Despi e some impo an mic o-economic e o ms, he Whi lam go e nmen
emained expansionis and in e en ionis un il 1975. In some espec s,
he Hayden budge o 1975, which embodied a educ ion in he budge
de ici a a ime o high unemploymen , may be seen as signalling a e ea
om his posi ion. Ne e heless, he e a o he e ea o he S a e began in
ea nes wi h he elec ion o he F ase go e nmen .
The F ase go e nmen , 1975–83
The elec ion o he F ase go e nmen in 1975 ma ked he abandonmen
o he goal o ull employmen . Mac o-economic policy unde F ase was
based on he slogan ‘ igh in la ion i s ’. Al hough i was no ecognised
a he ime, he abandonmen o he ull-employmen objec i e had he
e ec o unde mining go e nmen in e en ion in gene al, and, hence,
o laying he basis o mic o-economic e o m. Mo e gene ally, he F ase
AFTER NEOLIBERALISM
56
go e nmen was he i s since Wo ld Wa II o ansla e he adi ional
Libe al he o ic o ee en e p ise in o an explici commi men o cu back
he ole o go e nmen .
F ase ’s mac o-economic policy ocussed p ima ily on he need o educe
agg ega e eal-wage le els. This iew had some plausibili y a he ime. Real
wages had isen subs an ially unde he Whi lam go e nmen . T easu y
in oduced he concep o he ‘ eal wage o e hang’, ep esen ing he ise
in eal wages abo e ha which could be jus i ied by p oduc i i y g ow h.
Labou ma ke policy unde F ase was domina ed by he a emp o d i e
a e age eal wages down, and, mo e gene ally, o weaken he powe o he
ade unions. The passage o sec ions 45D and 45E o he T ade P ac ices Ac
1974, p ohibi ing seconda y boyco s, ce ainly had his e ec . Al hough
he in en ion was o es o e he au ho i y o he A bi a ion Cou ,
sec ions45D and 45E ha e p o ed use ul o employe s seeking o bypass
a bi a ion and push h ough labou ma ke e o ms.5
Finally, F ase sough o oll back he g ow h in go e nmen expendi u e
and axa ion ha had occu ed o e he pos wa pe iod. Success in his
a ea was limi ed. Al hough he e was plen y o public suppo o ax cu s
( he‘ ax e ol ’ in he USA da ed om his pe iod) and some suppo o
he gene al idea o educed go e nmen spending, he e was li le suppo
o speci ic cu s in expendi u e. Mo eo e , g ow h in unemploymen and in
he p opo ion o he popula ion aged o e 65 implied a subs an ial inc ease
in wel a e expendi u e wi hou any change in policy.
Al hough he p ima y ocus o he F ase go e nmen was on e enchmen
a he agg ega e le el, he go e nmen unde ook se e al ini ia i es ha
may be seen in e ospec as impo an s eps owa ds mic o-economic
e o m. The mos no able was he es ablishmen , in 1979, o he Campbell
Commi ee o inqui e in o he inancial sys em ( he Aus alian Financial
Sys em Inqui y). P og ess on implemen ing he ecommenda ions o
he commi ee, which epo ed in 1981, was limi ed by se e al ac o s,
including he opposi ion o he Labo Pa y and he Democ a s, who
con olled he Sena e. Ne e heless, he eco d o he F ase go e nmen
was one o subs an ial inancial de egula ion.
5 The ac ha he push o labou ma ke e o m elies hea ily on legisla ion c ea ing new ci il and
c iminal o ences, and on he e i al o common law o ences, unde lines he poin ha he use o he
e m ‘de egula ion’ is a misnome .
57
3. NEOLIBERALISM IN AUSTRALIA
The F ase go e nmen did no achie e i s main objec i es. Unemploymen
luc ua ed be ween 5 and 6pe cen un il he 1981–83 ecession, when i
peaked a abo e 10pe cen . Al hough in la ion came down om he peaks
expe ienced unde he Whi lam go e nmen , policies based on con ol o
he money supply ailed o deli e a e u n o he low in la ion a es o he
1960s. A e some success in cu ing back public expendi u e as a sha e o
g oss domes ic p oduc (GDP), he ecession o 1981–83 led o a blowou
in unemploymen bene i s and labou ma ke p og ams.
As a esul o his lack o success, and o he go e nmen ’s mixed eco d on
a i policy, i became ashionable, pa icula ly in Libe al Pa y ci cles, o
see he F ase pe iod as a ‘missed oppo uni y’ o mic o-economic e o m.
This iew, which may be aced back o Hende son (1983), gains some
c edence om he ac ha F ase himsel has eme ged as a c i ic o many
aspec s o mic o-economic e o m. Ne e heless, he ‘was ed yea s’ iew o
he F ase pe iod is essen ially anach onis ic, since i p ojec s he conce ns
o a la e pe iod back on o he policy deba es o he pas . A mos , his iew
may be ele an o he go e nmen ’s inal e m, domina ed by he 1981–83
ecession. As Kelly (1992, 38) obse es:
I was a e 1980 ha he adical libe als launched hei e ol and
he demand g ew o ee ma ke e o ms. I is w ong o a ack F ase
o ailing o implemen hese policies in 1976 and 1977 when,
ankly, i ually nobody was calling o hem.
E en in he pe iod 1980–82, he key disag eemen s conce ned mac o-
economic policy. F ase was c i icised p ima ily o eso ing o Keynesian
expansiona y policies in esponse o he ecession ha commenced in 1981.
Few pa icipan s in he policy deba e a his ime placed much weigh on
he se o policy issues ha we e subsequen ly labelled as mic o-economic
e o m. In subo dina ing hese issues o mac o-economic policy conce ns,
he F ase go e nmen adhe ed o he economic o hodoxy o he day.
AsPuplick (p i a e in e iew 1990, quo ed in Kelly 1992, 98) obse es:
‘Amy hology s a ed o be buil up by his o me close associa es abou wha
F ase had ailed o do in o ice a hei u ging.’
Mos o hese poin s a e e ec i ely conceded by Hende son (1994, 256–60).
The my h o ‘ he was ed yea s’ unde F ase is impo an , p ima ily because
i gi es suppo o a ‘c ash h ough o c ash’ app oach o e o m. Any
willingness o comp omise will, i is a gued, open he loodga es o he
in e es g oup p essu es which we e seen as esponsible o F ase ’s alleged
AFTER NEOLIBERALISM
58
policy weakness. This app oach, d awing on public choice heo y o
addi ional suppo , was esponsible o he e usal, un il i was oo la e, o
o me Libe al leade Hewson o comp omise on any de ail o he Figh back
p og am, and he e o e ul ima ely o he Libe als’ loss o he ‘unlosable’
1993 elec ion.
The Hawke–Kea ing go e nmen s
The elec ion o he Hawke–Kea ing Labo go e nmen in 1983 was a
pi o al e en in he his o y o mic o-economic e o m. Du ing he F ase
go e nmen ’s e m o o ice, he Labo Pa y had gene ally opposed e o m
and ad oca ed a con inua ion o he policies o he Whi lam e a, hough
wi h a p e e ence o a slowe pace o change and g ea e a en ion o
economic cons ain s. The Hawke–Kea ing go e nmen was elec ed on
he basis o a ai ly adi ional social democ a ic p og am, embodied in i s
1982 pla o m. The cen epiece o he pla o m was he idea o a P ices
and Incomes Acco d. Al hough i was subjec o lexible in e p e a ion o e
ime, he Acco d implied an expansion o he ‘social wage’ in he o m o
communi y se ices and wel a e bene i s, and go e nmen in e en ion in
he in e es s o wo ke s, in e u n o es ain in eal and nominal wages.
The i s Hawke go e nmen ook se e al s eps along hese lines. Howe e ,
he leade s o he Labo Pa y we e in luenced mo e and mo e by he
in ellec ual clima e o he ime, which s ongly a ou ed mic o-economic
e o m, pa icula ly in he a eas o a i policy and inancial de egula ion.
Wi h he con e sion o he leading igu es in he go e nmen , signalled
by he loa o he dolla in Oc obe 1983, he cause o mic o-economic
e o m had bipa isan suppo o he i s ime. Those membe s o he
public opposed o e o m, al hough nume ous, had nowhe e o go.
The loa ing o he dolla was a signi ican s ep in i sel . Accep ance o o he
mic o-economic e o ms, and o he gene al desi abili y o cu ing back
he public sec o , soon ollowed. The nex impo an s ep was made in he
T ilogy commi men s o 1984. The commi men s we e:
• Commonweal h ax e enue would no be pe mi ed o g ow as a
p opo ion o GDP.
• Commonweal h spending would no g ow as e han he economy as
a whole.
65
4. PRIVATISATION AND NATIONALISATION IN THE 21s CENTURY
ea ly ading. In bo h he p i a e and he public sec o s, he e a e incen i es
o he o ganise s o IPOs o se p ices below he expec ed ma ke p ice,
he eby allowing hose pa icipa ing in he loa o bene i om i s -day
‘s ag’ p o i s.
Fi s , he nega i e consequences associa ed wi h a ‘ ailed’ loa (one in which
no all sha es on o e a e aken up) a e gene ally g ea e han o a loa
ha is o e subsc ibed. This is pa icula ly ue in ela ion o poli ically
con o e sial p i a isa ions, whe e a ailu e o pu chase sha es can be
ep esen ed as a lack o con idence in he go e nmen .
Second, he alloca ion o unde p iced sha es p o ides oppo uni ies o
gi e a ou s o indi iduals and g oups whose goodwill may be aluable
in u u e. Such a ou s we e a p ominen and con o e sial ea u e o he
ecen s ock-ma ke bubble in he USA. The alloca ion o discoun ed sha es
o employees and o he s has been a common ea u e o p i a isa ion in
Aus alia and elsewhe e.
T ans e s ha e also a isen in ela ion o p i a isa ion by ade sale. In many
de eloping and ansi ional coun ies, p i a isa ion by ade sale has been
he occasion o la ge-scale exp op ia ion o public weal h. Aus alian
expe ience has been mo e a ou able, om he iewpoin o he public.
Al hough some asse s, such as he New Sou h Wales S a e Bank, appea
o ha e been sold a un easonably low p ices (Walke and Walke 2000),
he e ha e been o he ins ances, such as he sale o Vic o ian elec ici y
dis ibu ion en e p ises, whe e he p ice paid appea ed un easonably high
in he ligh o he egula o y egime ha de e mined subsequen ea nings.
In some cases o his kind, such as he p i a isa ion o ai po s, egula ions
ha e been elaxed o allow highe p o i s, e ospec i ely alida ing high
salep ices.
Quali y o p ices and se ice
The impac o p i a isa ion on p ices and se ice quali y has a ied,
depending pa icula ly on he na u e o egula o y changes in oduced a
he ime o p i a isa ion. In gene al, di ec impac s on p ices ha e been
small, excep whe e go e nmen s ha e sough o inc ease he sale p ice o
asse s by aising cos s o consume s. The mos no able ecen example was
he leasing o Aus alian ai po s, which was accompanied by la ge inc eases
in landing cha ges (up o 100pe cen ) and o he cha ges such as pa king
ees, and he in oduc ion o a ange o new cha ges, such as axi le ies.

AFTER NEOLIBERALISM
66
The p i a isa ion o monopolies, when combined wi h p ice egula ion,
has ypically led o a educ ion in se ice quali y, as monopoly i ms seek
oppo uni ies o educe cos s and aise p o i s. O e ime, he in oduc ion
o s eadily mo e in usi e egula ion has educed bo h he incen i es o
lowe se ice quali y and he di e ences in ope a ional e iciency be ween
p i a e and public monopolies.
In some o he ins ances, p i a isa ion has led o he adop ion o a mo e
business-like and ‘cus ome - ocussed’ app oach. This has ypically been
associa ed wi h an inc ease in he quali y o se ice o p o i able cus ome s,
bu also wi h a emp s o disca d unp o i able cus ome s and uncompensa ed
communi y se ice obliga ions.
Sa e y and eliabili y
P i a isa ion has gene ally been accompanied by a decline in he sa e y
and eliabili y o in as uc u e se ices, pa icula ly when accoun is
aken o exogenous echnological ends, which ha e gene ally imp o ed
he eliabili y o equipmen o all kinds. The cos educ ions associa ed
wi h p i a isa ion and, o a lesse ex en , co po a isa ion, ha e ocussed
pa icula ly on educ ions in o e s a ing in a eas such as main enance, and
on he elimina ion o edundan capi al capaci y, equen ly e e ed o as
‘goldpla ing’. All hings being equal, cos sa ings achie ed in his way mus
in ol e some loss o eliabili y and, in some cases, sa e y.
The shi om public o p i a e owne ship educes incen i es o sa e y and
eliabili y. The poli ical cos s o ailu es in in as uc u e sys ems can be
se e e. By con as , he cos s o p i a e in as uc u e owne s o occasional
b eakdowns a e ela i ely modes . Hence, i such ou comes a e o be
a oided, in usi e egula ion is likely o be necessa y.
Ano he possible esponse is he in oduc ion o a legal egime based on
he s ic liabili y o in as uc u e p o ide s o economic losses associa ed
wi h sys em ailu es. A cu en class ac ion agains Esso in ela ion o he
consequences o he Long o d explosion and sys em ailu e in Vic o ia may
se a p eceden in his espec . Su p isingly, ela i ely ew suppo e s o he
adop ion o he US model o p i a e p o ision o in as uc u e se ices
seem o welcome he a i al o a sys em o egula ion in which he h ea
o li iga ion plays a cen al ole, as in he USA.
67
4. PRIVATISATION AND NATIONALISATION IN THE 21s CENTURY
None o he discussion abo e es ablishes whe he he ne impac o
educ ions in main enance expendi u e is posi i e o nega i e. Te ms
like ‘goldpla ing’ and ‘ edundancy’ end o imply ha he e is oo much
eliabili y, bu goldpla ing makes sense in some con ex s (compu e s) and
edundancy in o he s (ai c a con ol sys ems).
Wages, condi ions and wo k in ensi y
Like o he aspec s o mic o-economic e o m, p i a isa ion has imposed
cos s on wo ke s in he o m o inc eased s ess and a as e pace o wo k.
Al hough anecdo al e idence o inc eases in wo k in ensi y abounds,
s a is ical e idence is limi ed. The Aus alian Wo kplace Indus ial Rela ions
Su ey unde aken in 1995 ound ha mos employees epo ed inc eases
in s ess, wo k e o and he pace o wo k o e he p e ious yea , while less
han 10pe cen epo ed educ ions in any o hese a iables (Mo ehead
e al. 1997).
Dawson, McCullough, and Bake (2001, 4) examine he inc ease in wo king
hou s o ull- ime wo ke s and conclude:
Fo many Aus alian wo ke s, hei amilies and communi ies,
ex ended wo king hou s ha e led o inc eased le els o a igue and
dec easing le els o social suppo . This in u n has he po en ial
o comp omise sa e y and he long- e m heal h and wellbeing o
wo ke s and he o ganisa ions ha employ hem.
Ano he sou ce o e idence comes om he supply side. The combina ion
o inc eased wo k in ensi y and longe hou s o wo k has ende ed ull-
ime employmen inc easingly una ac i e. The ull- ime pa icipa ion a e
( ull- ime employmen plus hose seeking ull- ime wo k as a p opo ion
o he popula ion aged be ween 15 and 64) ell du ing he 1990s o bo h
males and emales. The decline in emale pa icipa ion in he ull- ime
labou o ce ep esen s he e e sal o a long- e m end owa ds inc eased
pa icipa ion.
E iciency gains and losses
Once all ans e s o and om wo ke s, consume s and axpaye s ha e been
ne ed ou , he impac o p i a isa ion can be assessed by compa ing he
alue o he en e p ise in p i a e owne ship, measu ed by he sale p ice,
wi h i s alue in con inued public owne ship, measu ed by he p esen
AFTER NEOLIBERALISM
68
alue o he ea nings ha would ha e been ealised unde con inued public
owne ship. The s a ing poin o any such assessmen is wha may be called
he equi alence hypo hesis, namely, ha in he absence o some speci ic
sou ce o e iciency gains o losses, he alue o he asse will be he same in
public o p i a e owne ship. Hence, in he absence o ans e s such as hose
discussed in he p e ious sec ion, p i a isa ion will ha e no e ec on he ne
wo h o he public sec o (Fo sy h 1993).
In his sec ion, a ange o possible sou ces o e iciency gains and losses a e
conside ed. Al hough i is di icul o assess hem indi idually, a ma ke es
is p o ided by a compa ison o sale p ices wi h ea nings o egone h ough
p i a isa ion.
Ope a ional e iciency
One o he s onges claims o p i a isa ion is ha i will inc ease he
ope a ing e iciency, and he e o e he p o i abili y, o he en e p ises
conce ned. Empi ical s udies ha e yielded mixed esul s, al hough he
balance o e idence a ou s he hypo hesis ha p i a isa ion inc eases
ope a ing e iciency. Bo che ding, Pomme ehne, and Schneide (1982)
su eyed he li e a u e on municipal se ices and epo ed ha , in mos
s udies, ei he he p i a e sec o was ound o be mo e e icien , o no
signi ican di e ence was obse ed. Howe e , in s udies o elec ici y and
wa e se ices, ei he he public sec o has been ound o be mo e e icien
(Pesca ice and T apani 1980; Bha acha yya, Pa ke , and Ra iee 1994),
o no signi ican di e ence has been disco e ed (By nes, G osskop , and
Hayes 1986).
His o ically, public en e p ises ha e had a wide a ie y o objec i es,
and i is easonable o assume ha many o he en e p ises in he s udies
su eyed by Bo che ding, Pomme ehne, and Schneide (1982) had
nei he a p o i -maximisa ion objec i e no a cos -minimisa ion objec i e.
One esul o his di e si y o objec i es is he common inding ha he
a iance o pe o mance measu es is highe o public han o p i a e i ms
(Bha acha yya, Pa ke , and Ra iee 1994).
A cen al ea u e o public sec o e o m in Aus alia has been he a emp
o eplace he di use objec i es o adi ional public en e p ises wi h an
objec i e o p o i maximisa ion subjec o he sa is ac ion o clea ly de ined
communi y se ice obliga ions. This has mos commonly been achie ed
69
4. PRIVATISATION AND NATIONALISATION IN THE 21s CENTURY
h ough co po a isa ion. Co po a ised go e nmen business en e p ises
ha e compe ed e ec i ely wi h p i a e i ms in many indus ies, sugges ing
ha any di e ences in ope a ing e iciency mus be modes . I should also
be no ed ha many o he weal h ans e s associa ed wi h p i a isa ion,
such as uncompensa ed inc eases in he in ensi y o wo k, also a ise in
co po a ised go e nmen business en e p ises.
Regula o y isk
In some ins ances, such as cases whe e go e nmen s ha e owned i ms ading
in compe i i e ma ke s, p i a isa ion in ol es no changes in egula ion.
Howe e , such cases, ypically a ising om public escues o ailing i ms,
ha e been ela i ely in equen . As public owne ship expanded du ing he
i s 80 yea s o he 20 h cen u y, na ionalisa ion was used p ima ily as a
me hod o egula ing indus ies ha we e, o we e seen o be, cha ac e ised
by ma ke ailu es such as na u al monopoly o ex e nali y.
In hese ci cums ances, p i a isa ion c ea es a egula o y isk ha does
no exis unde public owne ship. Small di e ences in he a es o e u n
de e mined by egula ion imply la ge ans e s be ween consume s and
p i a e monopolis s. By con as , unde public owne ship, his isk is
in e nalised, since, o mos egula ed in as uc u e se ices, consume s
and axpaye s (o , mo e p ecisely, esiden s o he ele an ju isdic ion) a e
he same people.
This analysis di ec ly con adic s a widely held iew o public policy
inAus alia, namely, ha he e is, in some sense, a con lic o in e es in
go e nmen s bo h owning and egula ing business en e p ises. This iew
lacks any analy ical basis. I is analogous o an a gumen ha a con lic a ises
when a p i a e company con ac s wi h, o di ec s he ac ions o , a wholly
owned subsidia y.
The cos s o egula o y isk a e subs an ial. In Vic o ia, he ailu e o p i a e
buye s o ake egula o y isk in o accoun led o he o e op imis ic p ices
paid o Vic o ian elec ici y asse s. These pu chases ha e been ollowed
by esales and lowe p ices, and by igo ous en -seeking ac i i y aimed
a alida ing he o iginal pu chase p ices by secu ing mo e a ou able
egula o y ea men .
AFTER NEOLIBERALISM
70
Cos o capi al
The c ucial e iciency di e ence in a ou o public owne ship a ises om
di e ences in he cos o capi al. The e u n demanded by in es o s in
p i a e equi y in he a e age la ge company includes a isk p emium o
a ound six pe cen age poin s o compensa e o he company’s exposu e
o agg ega e economic isk. I he a e o in e es on go e nmen bonds is
5pe cen , in es o s in a ypical s ock will expec a e u n o a ound 11pe
cen . The equi y p emium is smalle o companies wi h s able e u ns, o
o hose ha a e only weakly co ela ed wi h he economy as a whole, and
la ge o hose wi h highly cyclical e u ns, such as companies in ol ed in
cons uc ion.
The ma ke ’s a e sion o isk is e lec ed in he di e ence be ween he
e u n demanded by in es o s in p i a e equi y and he a e o e u n on
go e nmen bonds o good-quali y co po a e bonds. This di e ence is
called he equi y p emium, and i s size ep esen s a longs anding puzzle
o economis s. Mos economic models imply ha i capi al ma ke s
sp ead all ele an isks e icien ly and a a low cos , he equi y p emium
should be no mo e han one pe cen age poin , and p obably less. A a ie y
o explana ions o he ‘equi y p emium puzzle’ ha e been o e ed, mos o
which inco po a e he ailu e o p i a e capi al ma ke s o sp ead isk as well
as is assumed in neoclassical models o he inancial sec o .
As G an and Quiggin (2003) obse e, i he demand o a high a e
o  e u n on equi y a ises om ailu es in p i a e capi al ma ke s, he e is
no eason o apply his a e o e u n in e alua ing public in es men s o
de e mining he p esen alue o income s eams lowing om go e nmen
business en e p ises.
An assessmen o Aus alian p i a isa ions
As has been a gued in his pape , he e ec s o p i a isa ion can be assessed
by examining he di e ence be ween he sale p ice ealised o an asse
and he p esen alue o ea nings o egone unde public owne ship, a e
ne ing ou ans e s o and om wo ke s, consume s and buye s o asse s.
Such analyses o ac ual and p ospec i e p i a isa ions ha e been pe o med
o he Commonweal h Bank (Quiggin 1995), Commonweal h Se um
Labo a o ies (Hamil on and Quiggin 1995), Tels a (Quiggin 1996a), he
New Sou h Wales S a e Bank (Walke and Walke 2000) and he Vic o ian
elec ici y indus y (Quiggin 2002a), among o he s.

71
4. PRIVATISATION AND NATIONALISATION IN THE 21s CENTURY
In all cases, he analysis indica ed a ne wel a e loss om p i a isa ion.
In he case o Vic o ian elec ici y, howe e , he loss was bo ne by he
buye s (mainly US elec ici y companies) who paid p ices ha we e, a leas
in e ospec , excessi e. Hence, he ne impac on Vic o ian esiden s was
oughly neu al, wi h gains o axpaye s being o se by losses o wo ke s
and consume s.
Based on his e idence, i seems unlikely ha he p i a isa ion o e icien ly
un go e nmen business en e p ises in co e a eas o go e nmen ac i i y
such as in as uc u e is e e likely o be bene icial, excep du ing ma ke
bubbles, when buye s may be willing o pay p ices ha exceed he long- un
p i a e ma ke alue o asse s.
The case o ena ionalisa ion
Thinking he un hinkable
Un il abou 1980, he idea o a subs an ial educ ion in he scale and scope
o public sec o economic ac i i y lay ou side he ealm o accep able public
deba e. Cocke ’s (1995) classic s udy o he B i ish hink anks ha i s
ad oca ed p i a isa ion, such as he Ins i u e o Economic A ai s, was
ap ly i led Thinking he Un hinkable. Such is he powe o con o mism
in human a ai s ha wi hin a decade o i s en y in o he public deba e,
he insu gen idea o p i a isa ion had become an o hodox dogma, and
heconcep o na ionalisa ion was, li e ally, un hinkable o many.
This poin may be illus a ed wi h e e ence o he Aus alian deba e.
C i icisms o p i a isa ion, such as hose o Quiggin (1995) and Walke
(1994), ha e been he subjec o igo ous deba e (Ha haway 1997; O ice
1999). Howe e , un il ecen ly, a gumen s ha he app op ia e esponse o
he ailu es o p i a isa ion is a e u n o public owne ship (Quiggin 2000)
ha e simply been igno ed.
This posi ion is slowly changing, al hough he public deba e is lagging
behind e en s in he eal wo ld. Rena ionalisa ion in a ious o ms has
aken place in nume ous coun ies, some imes as a delibe a e a emp o
o se excessi e p i a isa ion, bu mo e equen ly in esponse o he ailu es
o p i a ised i ms and he associa ed egula o y s uc u e.
AFTER NEOLIBERALISM
72
In Aus alia, Minis e o Small Business Joe Hockey ecen ly sugges ed
ha i migh be necessa y o s a e go e nmen s o e-en e he insu ance
business ollowing he collapse o HIH Insu ance and Uni ed Medical
P o ec ion. The un hinkable is becoming hinkable once again.
The mixed economy
In mos OECD coun ies, go e nmen s, and go e nmen business
en e p ises, p oduce a ound 30 pe cen o o al ou pu . This p opo ion has
ended o g ow o e ime, e lec ing he inc easing economic impo ance o
he sec o s in which go e nmen ac i i y is concen a ed, such as heal h
and educa ion. La ge-scale p i a isa ion has o se o e e sed he end
owa ds a la ge go e nmen sec o in se e al coun ies, including he UK.
Ne e heless, i seems clea ha , o he o eseeable u u e, OECD coun ies
will ha e mixed a he han ee-ma ke economies.
In a mixed economy, e en suppo e s o u he p i a isa ion should
welcome he a ailabili y o na ionalisa ion as a policy op ion. I p i a isa ion
is, as is some imes supposed, i e e sible, i should be unde aken wi h g ea
cau ion. By con as , i bo h p i a isa ion and na ionalisa ion a e easible,
i is possible o adjus he bounda y be ween he p i a e and public sec o s
op imally in esponse o new in o ma ion and changed ci cums ances.
Ne e heless, he policy ele ance o na ionalisa ion is g ea es in cases
in which p i a isa ion has al eady gone oo a . The e idence ci ed in
his pape sugges s ha his is he case in Aus alia, and ha a numbe o
p i a isa ions al eady unde aken ha e educed bo h public sec o ne wo h
and he wel a e o he communi y as a whole. I ollows ha , in he absence
o  ansac ions cos s, ena ionalisa ion would imp o e wel a e.
Ta ge s o ena ionalisa ion
The s onges candida e o ena ionalisa ion in Aus alia a p esen is
Tels a. E en suppo e s o p i a isa ion, such as T easu e Pe e Cos ello,
ag ee ha he cu en s a e o pa ial p i a isa ion is highly unsa is ac o y.
When he cu en go e nmen ’s p oposal o pa ial p i a isa ion was unde
conside a ion, he same iew was exp essed in Quiggin (1996b) and de ided
by membe s o he go e nmen . On he o he hand, gi en Tels a’s monopoly
powe , ull p i a isa ion would be accep able o o he ma ke pa icipan s
only i i was accompanied by mo e s ingen egula ion. The implied
73
4. PRIVATISATION AND NATIONALISATION IN THE 21s CENTURY
egula o y isk educes he ma ke alue o Tels a, which is well below any
easonable es ima e o he alue o u u e eal ea nings, discoun ed a he
eal bond a e.
The p i a isa ion o Tels a could be inanced in pa by he sale o pe iphe al
asse s, such as Tels a’s pay-TV in e es s and join en u es in Hong Kong.
This idea, along wi h p oposals o mo e ex ensi e s uc u al sepa a ion, has
been discussed by Quiggin (2002b) and Tanne (2002), and c i icised by
Eason (2002).
Rena ionalisa ion o in as uc u e asse s ha ha e been ully p i a ised is
u he o , excep in cases such as ha o Rail ack, in which he p i a e
ope a o ails comple ely. Ne e heless, i would be highly desi able o
es o e ull public owne ship o he oad sys em and o eplace he p esen
a bi a y pa chwo k o olls wi h a a ional sys em o oad-use cha ging.
Less u gen , bu s ill highly desi able, is he ena ionalisa ion o na u al
monopoly in as uc u e such as wa e supply in Sou h Aus alia, and
elec ici y dis ibu ion in Sou h Aus alia and Vic o ia.
Concluding commen s
The limi a ions and ailu es o p i a isa ion a e widely ecognised, bu
he ob ious implica ion—namely, ha a leas some p i a ised en e p ises
should be ena ionalised— emains un hinkable o many. Thus a ,
ena ionalisa ion has occu ed p ima ily as an eme gency esponse o he
ailu e o p i a e i ms p o iding essen ial se ices. As ins ances o his kind
b eak down he no ion ha p i a isa ion is i e e sible, i may be possible o
unde ake a mo e sys ema ic and a ional econside a ion o he app op ia e
oles o he public and p i a e sec o s.
Bibliog aphy
Bha acha yya, A una a, Ellio Pa ke , and Kambiz Ra iee. 1994. ‘An Examina ion
o he E ec o Owne ship on he Rela i e E iciency o Public and P i a e Wa e
U ili ies’. Land Economics 70, no. 2: 197–209. doi.o g/10.2307/3146322.
Bo che ding, Thomas, We ne Pomme ehne, and F ied ich Schneide . 1982.
‘Compa ing he E iciency o P i a e and Public P oduc ion: The E idence
om Fi e Coun ies’. Supplemen 2, Zei sch i ü Na ionalökonomie / Jou nal o
Economics: 127–56.
AFTER NEOLIBERALISM
74
By nes, Pa icia, Shawna G osskop , and Ka hy Hayes. 1986. ‘E iciency and
Owne ship: Fu he E idence’. Re iew o Economics and S a is ics 68 (May):
337–41. doi.o g/10.2307/1925517.
Cocke , Richa d. 1995. Thinking he Un hinkable: Think-Tanks and he Economic
Coun e -Re olu ion 1931–1983. London: Ha pe Collins.
Dawson, D ew, Ki s y McCulloch, and Angela Bake . 2001. Ex ended Wo king
Hou s in Aus alia: Coun ing he Cos s. Wood ille: Cen e o Sleep Resea ch,
Uni e si y o Sou h Aus alia.
Eason, Ros. 2002. ‘Wha Role o Tels a?’. E a Pape s 41, E a Founda ion.
Fo sy h, Pe e . 1993. ‘P i a isa ion: P i a e Finances and ublic Policy’. In P i a isa ion:
The Financial Implica ions, edi ed by Ke in Da is and Ian Ha pe , 8–22.
S Leona ds: Allen and Unwin.
F iedman, Thomas. 1999. The Lexus and he Oli e T ee: Unde s anding Globaliza ion.
New Yo k: Fa a S auss and Gi oux.
Fukuyama, F ancis. 1992. The End o His o y and he Las Man. New Yo k: The F ee
P ess.
Ging ich, New . 1994. Con ac wi h Ame ica. New Yo k: Republican Na ional
Commi ee.
G an , Simon and John Quiggin 2003. ‘Public In es men and he Risk P emium
o Equi y’. Economica 70, 1–18. www.js o .o g/s able/3548814.
Hamil on, Cli e, and John Quiggin. (1995). ‘The P i a isa ion o CSL’. Discussion
pape no. 4, The Aus alia Ins i u e, Canbe a, June 1995.
Ha haway, Ne ille. 1997. ‘P i a isa ion and he Go e nmen Cos o Capi al’.
Agenda 4, no. 1: 1–10. doi.o g/10.22459/ag.04.02.1997.03.
Mo ehead, Alison, Mai i S eele, Michael Alexande , Ke y S ephen, and Lin on
Du in. 1997. Changes a Wo k: The 1995 Aus alian Wo kplace Indus ial
Rela ions Su ey. Melbou ne: Addison Wesley Longman Aus alia.
O ice , Robe . 1999. ‘P i a isa ion o public asse s’. In P i a isa ion: E iciency
o Fallacy? Two Pe spec i es, edi ed by CEDA (Commi ee o Economic
De elopmen o Aus alia): 1–22.
Pesca ice, Donn and John T apani III. 1980. ‘The Pe o mance and Objec i es o
Public and P i a e U ili ies Ope a ing in he Uni ed S a es’. Jou nal o Public
Economics 13: 259–76. doi.o g/10.1016/0047-2727(80)90016-x.
81
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
Ge ing p ices igh
In he ea ly phases o mic o-economic e o m, much a en ion was ocussed
on ‘ge ing p ices igh ’ and, in pa icula , on elimina ing policies ha
unnecessa ily ‘dis o ed’ he p oduc ion and consump ion decisions o
p i a e i ms and households. The pa adigma ic example o a ‘dis o ing’
policy was a i p o ec ion. The case o a i e o m was bols e ed by
he a gumen ha , i a go e nmen wished o assis pa icula indus ies,
i should do so h ough subsidies, which did no dis o he p ices aced
byconsume s.
Unde he policy o ‘p o ec ion all ound’, he impac o a i s on ag icul u al
p oduce s had been pa ially o se by a ange o p ice s abilisa ion and
suppo policies. The g adual emo al o hese policies began wi h he
Whi lam go e nmen ’s con o e sial aboli ion o a boun y on pu chases o
supe phospha e and he 25pe cen cu in a i s, in oduced in July 1973.
The consensus in a ou o ‘p o ec ion all ound’ had ma ginalised bo h
ad oca es o he adi ional ee- ade al e na i e o p o ec ion, and
suppo e s o s a egic indus y policies and mic o-economic planning.
As a esul , ad oca es o mo e comp ehensi e and sys ema ic go e nmen
in e en ion, such as Whi lam, ini ially made common cause wi h hose
who a ou ed ex ensi e ee-ma ke e o m. Bo h g oups we e classed as
‘economic a ionalis s’1, ha is, ad oca es o a ionally designed policy,
asopposed o he ad oca es o he s a us quo, in which policy was d i en
by a mix u e o his o ical p eceden , lobbying, and ad hoc esponses o
c ises. Unde he F ase go e nmen , he ee-ma ke elemen o economic
a ionalism became dominan , and he e m came o imply a desi e o educe
he ole o go e nmen , a he han, as unde Whi lam, o apply he powe
o go e nmen mo e a ionally and sys ema ically. Much la e , ollowing he
popula c i ique o Pusey (1991), ‘economic a ionalis ’ acqui ed a p ima ily
pejo a i e conno a ion.
Unde he case-by-case app oach pu sued du ing he 1970s, p oposals o
a i e o m we e ini ially mos success ul in indus ies wi h ela i ely low
p o ec ion. In he highly p o ec ed indus ies mos h ea ened by impo
compe i ion, such as mo o ehicles and ex iles, clo hing and oo wea ,
a i s we e supplemen ed by quo as. As a esul , he a iance o e ec i e
1 Fo u he discussion o he genesis o he e m ‘economic a ionalism’, see Quiggin (1997a). and
Schneide (1998).

AFTER NEOLIBERALISM
82
a es o p o ec ion inc eased subs an ially du ing he 1970s, as shown in
Table 5.1. The i s wo ows o da a show he mean and a iance o a i
a es om 1971 o 1991.
Table 5.1 E ec i e a es o p o ec ion (%) 1971–91
1971 1973 1983 1988 1991
Mean e ec i e p o ec ion a e 36 27 25 19 15
S anda d de ia ion o e ec i e
p o ec ion a es
25 20 43 36 29
Sou ce: Indus y Commission
I was no un il 1988 ha he case-by-case app oach was eplaced by
agene al p og am o educing a i a es ac oss he boa d, a p ocess ha is
s ill incomple e.
Co po a isa ion and p i a isa ion
A second s and o mic o-economic e o m ocussed on imp o ing he
e iciency o go e nmen business en e p ises. One o he i s , and
mos success ul, ins ances was he c ea ion o he s a u o y au ho i ies
Aus alia Pos and Telecom Aus alia om he o me Pos mas e -Gene al’s
Depa men , apublic se ice depa men unde di ec minis e ial con ol.
Mo e gene ally, he e o m o go e nmen p o ision o ma ke ed se ices may
be seen in e ms o a spec um. A one end is he adi ional depa men al
s uc u e o na ional, s a e and local go e nmen s. A he o he end is a
p i a ised i m, subjec only o no mal comme cial egula ion. The poin s
on he spec um include:
1. ull cos p icing
2. compe i i e ende ing
3. comme cialisa ion
4. co po a isa ion
5. p i a isa ion.
Each s ep along he e o m spec um in ol es an inc ease in eliance on
p o i as he p ima y guide o managemen decisions, and a educ ion in
di ec public accoun abili y. These wo changes a e di ec ly linked: inc eases
in p o i abili y a ise p ecisely because manage s a e no subjec o cons ain s
imposed h ough public accoun abili y and a e he e o e ee o manage
en e p ises so as o inc ease e enues and educe cos s.
83
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
F om he pe spec i e o ad oca es o mic o-economic e o m, he objec o
e o m has been o mo e as a owa ds p i a isa ion as possible, subjec o
cons ain s a ising om po en ial ma ke ailu es o poli ical es ic ions.
Unde he Na ional Compe i ion Policy (NCP), adi ional a angemen s
a e conside ed, p ima acie, o be an i-compe i i e, and go e nmen s a e
equi ed o conside op ions such as comme cialisa ion and co po a isa ion.
Fo much o he 1980s and 1990s, i seemed ha mo emen along he
e o m spec um led inexo ably o ull p i a isa ion. By he la e 1990s,
howe e , poli ical esis ance o p i a isa ion had ha dened. A cen al
elemen in he decline o suppo o p i a isa ion was he ealisa ion ha
he budge a y a gumen s ha had been used o jus i y ea ly p i a isa ions in
Aus alia and he UK we e spu ious. The budge a y con en ions p e ailing
un il he mid-1990s allowed he p oceeds o asse sales o be ea ed as
cu en e enue o , in some cases, nega i e expendi u e.
In assessing he iscal impac s o p i a isa ion, he app op ia e compa ison
is be ween he sale p ice and he p esen alue o income o egone as a esul
o p i a isa ion. In mos cases, i his compa ison is unde aken using he
eal bond a e as a discoun a e, sale p oceeds a e less han he p esen alue
o ea nings o egone on any easonable es ima e (Quiggin 1995; Walke
and Walke 2000). The di e gence is p ima ily due o he ‘equi y p emium’,
ha is, he di e ence be ween he eal a e o in e es on bonds and he
a e o e u n demanded by in es o s in p i a e equi y. This di e ence,
abou six pe cen age poin s on mos es ima es, is oo la ge o be consis en
wi h he s anda d consump ion-based capi al asse -p icing model, unde
which asse p ices a e de e mined by consume s a ionally op imising he
expec ed u ili y o li e ime consump ion in e icien asse ma ke s (Meh a
and P esco 1985; Koche lako a 1996).
Mo eo e , he equi y p emium is independen o any di e gences in public
and p i a e discoun a es a ising om di e en ial axa ion ea men and
om ans e s ha may be associa ed wi h unde p icing in cases o
p i a isa ion by public loa . Di e ences a ising om he la e sou ces
should be ne ed ou in he e alua ion o p i a isa ion.
The e a e s ong g ounds o supposing ha obse ed ma ke impe ec ions,
such as ansac ion cos s in household bo owing and lending (Cons an inides,
Donaldson, and Meh a 1998), and he absence o insu ance ma ke s o
sys ema ic isks such as unemploymen and business ailu e (Mankiw 1986;
Weil 1989; G an and Quiggin 2002), play an impo an ole in explaining
AFTER NEOLIBERALISM
84
he anomalously la ge equi y p emium. I so, as G an and Quiggin (2003)
obse e, he app op ia e discoun a e o e alua ing p i a isa ion is likely o
be close o he eal bond a e, implying ha mos Aus alian p i a isa ions
ha e educed wel a e.
Suppo e s o p i a isa ion ha e a gued o a p esump ion in a ou o he
ma ke a e (Ha haway 1997) o ha e sough o change he ocus o he
a gumen away om iscal impac s o b oade e iciency e ec s (O ice
1999). In he absence o e idence suppo ing he use o he ma ke a e,
he i s posi ion is pu ely ideological. As ega ds he second, i is impo an
o ake accoun o impac s on consume s, employees and o he s. Howe e ,
assuming he sale p ice is equal o he p i a e ma ke alue o ea nings
unde p i a isa ion, a compa ison o his sale p ice wi h he p esen alue
o expec ed ea nings unde con inued public owne ship cap u es he main
e iciency e ec s o p i a isa ion.
De egula ion and e egula ion
The i s big ins ance o de egula ion in Aus alia was he de egula ion
o inancial ma ke s in he 1980s, ollowing he ecommenda ions o he
Campbell and Ma in Commi ees o Inqui y and he decision o loa
he Aus alian dolla in 1983. De egula ion o he ai line indus y, and he
abandonmen o he long-s anding wo-ai lines policy, ollowed in 1990.
Re o ms o elecommunica ions and ene gy ma ke s in he 1990s a e
also commonly e e ed o as de egula ion. In hese cases, in which a
ela i ely simple, al hough highly es ic i e, egula o y egime, based on
publicly owned s a u o y monopolies, has been eplaced by a complex se
o egula ions designed o acili a e compe i ion, ‘ e egula ion’ migh be
amo e app op ia e e m. Con inued use o he e m ‘de egula ion’ e lec s,
in pa , he idea ha he new egula o y s uc u es a e in e im measu es,
pa ing he way o he eme gence o a ully compe i i e ma ke .
Measu ed agains he, admi edly ambi ious, objec i e o a compe i i e
ou come equi ing only he basic egula o y unc ions o s anda d company
law, de egula ion in Aus alia has been almos uni o mly unsuccess ul.
In banking, he posi ion o incumben i ms has been s eng hened,
mos no ably by me ge s allowed in an icipa ion o de egula ion. En y
by o eign banks, ega ded ex an e as he main sou ce o compe i ion, has
been limi ed and ansien . Compe i ion has been u he educed by he
i ual disappea ance o he building socie y sec o when he egula o y
85
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
cos s o a banking licence we e emo ed, while he implici Commonweal h
go e nmen gua an ee, a ising om he Rese e Bank’s ole as lende o
las eso , emained in place. This end has been pa ially o se by he
eme gence o non-bank mo gage o igina o s in he 1990s.
The aboli ion o he wo-ai lines policy induced a numbe o compe i o s
o en e he ma ke om 1990 onwa ds. The i s wo en ies, bo h using
he name Compass, we e cos ly ailu es. Al hough ex e nal ac o s such as
he i s Gul Wa played a ole, he en an s we e poo ly capi alised, and
he e we e ex ensi e ba ie s o en y, no ably including he incumben s’
con ol o e minals. P essu e o libe alise access o e minals de eloped in
he wake o he Compass ailu es, bu he incumben s buil up al e na i e
ba ie s o en y such as equen lye schemes. Se e al o he en e p ises
announced plans o en e he ma ke du ing he 1990s bu ailed o secu e
he necessa y inance. A hi d ailu e was he a emp by egional ai line
Impulse o en e he capi al ci y ma ke , beginning in 2000. Sho ly a e
Impulse commenced se ice, he ou h (and so a he only success ul)
en an , Vi gin Blue, also en e ed he ma ke . Unlike p e ious en an s,
Vi gin Blue had he backing o an in e na ional ca ie .
The success o Vi gin’s en y depended on a se ies o ad e se e en s ha had
a ally weakened one o he incumben ai lines, Anse . The las o hese
was he e o is a ack o Sep embe 11, 2001, which occu ed immedia ely
a e Anse ’s decla a ion o bank up cy and ensu ed ha a emp s o e loa
he ai line would no succeed. Thus, he compe i i e en y o Vi gin has
esul ed in he eplacemen o he symme ical duopoly imposed unde  he
wo-ai line policy wi h a S ackelbe g leade – ollowe model, in which
he dominan i m ( he leade ) se s he condi ions unde which i s i al
( he ollowe ) compe es.
The ou come in he elecommunica ions sec o has been simila , wi h
Tels a ac ing as a S ackelbe g leade . O cou se, his ou come ep esen s an
inc ease in compe i ion ela i e o he s a ing poin o s a u o y monopoly.
Simila ly, in he elec ici y sec o , al hough he e a e mo e i ms han be o e,
mos e ail consume s a e e ec i ely dealing wi h monopolis s.
E en unde he mo e limi ed c i e ion o educ ions in p ices, success has
been limi ed. The in e es a e ma gins cha ged by banks o household
cus ome s ose in he a e ma h o he specula i e boom and bus o he
1980s. Al hough ma gins ha e subsequen ly allen, his has been o se by
as eady inc ease in ees and cha ges.
AFTER NEOLIBERALISM
86
Business class and s anda d economy ai a es ha e gene ally isen, bu
he p opo ion o discoun a es and he size o discoun s ha e inc eased.
Using an index numbe app oach, Quiggin (1997b) concluded ha he e
had been no signi ican change in he cos o a s anda d baske o ai a es,
consis ing o a mix u e o business-class, ull economy and discoun a es.
Fo sy h (1998) c i icised he claim ha discoun a es should be ea ed as
asepa a e commodi y and concluded ha a e age a es had allen as a esul
o de egula ion. Bailey (2003) inds li le change in p ices be ween 1992
and 2003.2
P ices o elecommunica ions se ices ha e allen in eal e ms, bu his
educ ion has me ely con inued a end ha p e ailed h oughou he
20 h cen u y. Mo e p ecisely, he egula o y cons ain s on Tels a’s p ices
embody a equi emen o con inue he a e o p ice educ ions obse ed
be o e he ad en o compe i ion. In mos yea s, his cons ain has been
binding, implying ha he agg ega e impac o e egula ion on p ices has
been ze o. As wi h ai lines, he e has been a edis ibu i e e ec . Consume s
wi h mo e elas ic demand and lowe ma ginal cos s o se ice ha e bene i ed
a he expense o hose wi h less elas ic demand and highe ma ginal cos s.
In his case, unlike ha o ai lines, he edis ibu ion has gene ally a ou ed
business a he expense o households. (In bo h cases, i mus be assumed
ha educ ions in business cos s ul ima ely low h ough o households.)
The mos s iking single ou come o de egula ion was he specula i e boom
and bus in equi y ma ke s in he 1980s, he magni ude o which was la gely
a ibu able o inancial de egula ion. The ise o ‘en ep eneu s’ engaged
in specula i e akeo e s was widely seen as a posi i e ou come o inancial
de egula ion, imposing ma ke discipline on lazy incumben manage s
(Bishop, Dodd, and O ice 1987). In e ospec , howe e , i is appa en
ha he en ep eneu s had li le capaci y o imp o e he alue o he
en e p ises hey con olled and p ima ily illus a ed he maxim, a ibu ed
o JK Galb ai h, ha ‘genius is a ising ma ke ’. When equi y p ices declined
a e 1987, he co po a e s uc u es buil up by he en ep eneu s collapsed
wi h hea y losses.
2 A mo e ele an compa ison would be he change in ai a es compa ed o ha which would ha e
aken place unde con inued egula ion. P esumably, his would ha e been ela i ely modes o e he sho
pe iod assessed by Quiggin and Fo sy h, bu i migh ha e been signi ican o e he 1990s as a while.

87
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
No accu a e es ima e o he wel a e loss associa ed wi h his episode has
been made. Howe e , Sykes (1994) es ima es he olume o losses incu ed
by c edi o s and bondholde s a A$20billion o a ound 5pe cen o annual
GDP in he 1980s.3 As was no ed by Milbou ne and Cumbe wo h (1991),
much o his loss was ans e ed o e ail cus ome s o he banks in he o m
o inc eased ma gins be ween bo owing and lending a es.
Ano he subs an ial wel a e loss a ose om he pa allel ollou s o hyb id
ib e op ic cable unde aken by Tels a and Op us in he mid-1990s. A a
cos g ea e han would ha e been incu ed in an o de ly ollou o cable o
all me opoli an a eas, Tels a and Op us p oduced wo se s o cables, each
co e ing abou hal he popula ion, wi h an o e lap es ima ed a 90pe
cen . The o al wel a e loss was a leas A$4billion and possibly as much as
A$8billion (1 o 2pe cen o GDP).
Agains hese losses mus be se imp o emen s in ope a ing e iciency,
associa ed wi h educ ions in o e s a ing and he elimina ion o es ic i e
wo k p ac ices. Based on obse ed changes in p ices, he ne impac appea s
o be abou neu al in he case o elecommunica ions and ai lines. On he
o he hand, as no ed abo e, inancial de egula ion p oduced a subs an ial
wel a e loss in i s i s decade om 1983 o 1993. Ou comes since 1993
appea mo e a ou able, bu a inal e alua ion mus awai he end o he
cu en economic cycle.
Compe i ion and compe i ion policy
Du ing he 1990s, he p ocess o mic o-economic e o m changed adically,
as did i s con en . Inc easing public esis ance o policies such as p i a isa ion,
combined wi h an upsu ge o hos ili y o ‘economic a ionalism’ in gene al,
made i di icul o implemen e o m h ough poli ical p ocesses, excep
in a c isis a mosphe e such as ha ollowing he collapse o s a e banks in
Vic o ia and Sou h Aus alia.
As a esul , e o m in he 1990s was o en implemen ed wi hou open
poli ical deba e. The mos no able example was he NCP, which g ew
ou o he epo o he Hilme Commi ee (Hilme , Rayne and Tape ell
3 Since o he losses we e incu ed by employees, cus ome s and o he s, his is likely o be a lowe -
bound es ima e o wel a e cos s. On he o he hand, in a comple e analysis i would be necessa y o ake
accoun o gains o en ep eneu s. Despi e mos o he leading en ep eneu s ha ing incu ed pe sonal
as well as co po a e bank up cy, i appea s ha a numbe o hem managed o e ain signi ican pe sonal
weal h a e he c ash, in addi ion o consump ion expendi u e du ing he boom in housing p ices.
AFTER NEOLIBERALISM
88
1993), appoin ed in 1992 o inqui e in o, and ad ise on, app op ia e
changes o legisla ion and o he measu es in ela ion o he scope o he
T ade P ac ices Ac 1974 and he applica ion o he p inciples o compe i ion
policy. Ad oca es o e o m wi hin ede al go e nmen policy ci cles used
he Hilme Repo as he basis o a enewed push o public sec o e o m,
cen ed a ound he Council o Aus alian Go e nmen s (COAG).
By i ue o i s eliance on in e go e nmen al nego ia ions and emo eness
om open poli ical deba e, he COAG p ocess pe mi ed u he ex ensions
o e o m o be p esen ed as a ai accompli, embodied in he Commonweal h
Compe i ion Policy Re o m Ac 1995 and he associa ed Compe i ion
P inciples Ag eemen . By he ime i s implica ions we e ealised, he
NCP was bo h Commonweal h and s a e law, backed up by he powe
o he Na ional Compe i ion Council (NCC) o penalise ecalci an o
a dys a es.
This p ocess in u n p oduced a coun e - eac ion, in which NCP became
a scapegoa o all he ad e se consequences o mic o-economic e o m
and o many ends independen o ha e o m. A ypical example was
he closu e o banks in coun y owns, which was due in pa o inancial
de egula ion and in pa o long-s anding demog aphic ends bu had
no hing o do wi h NCP.
The NCP p og am had h ee main componen s. The i s was a once-o
e iew o all s a e and ede al legisla ion, equi ing ha any legisla ion wi h
an i-compe i i e e ec s should be jus i ied on he g ounds o public bene i .
A no able ou come was he de egula ion o he dai y indus y, discussed by
Edwa ds (2003). The second was a equi emen o go e nmen business
en e p ises o adop p ices based on he p inciple o ‘compe i i e neu ali y’.
The hi d, and in he end he mos signi ican , was he c ea ion o a new
sys em o egula o y o e sigh o public and p i a e en e p ises decla ed as
monopolies.
A leas a i s sigh , i may appea pa adoxical ha he ul ima e ou come
o NCP was a subs an ial expansion o egula ion. The implemen a ion o
NCP equi ed he es ablishmen o he NCC and he o ma ion o a mo e
powe ul Aus alian Compe i ion and Consume Commission (ACCC)
om he o me T ade P ac ices Commission and P ices Su eillance
Au ho i y. In addi ion, each o he s a es es ablished egula o y bodies.
In one sense, his expansion o egula ion ep esen s a e ea om he
o iginal aspi a ions o ad oca es o mic o-economic e o m, who hoped o
89
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
eplace go e nmen monopolies wi h compe i i e ma ke s. In mos cases,
i has now been ecognised ha he co e unc ions his o ically pe o med
by go e nmen monopolies a e, in ac , na u al monopolies, jus as he
ad oca es o go e nmen in e en ion had claimed.
Howe e , he egula o y unc ions now being pe o med by bodies like
he ACCC a e no new. In he pas , hese unc ions we e pe o med by
he same s a u o y monopolies ha p o ided he ele an se ices. F om
an enginee ing iewpoin , such in eg a ed managemen has ob ious
ad an ages. In mos cases, howe e , he accoun abili y ha a ises om
ex e nal egula ion has yielded ne bene i s.
Labou ma ke e o m
As has al eady been no ed, labou ma ke policy unde he Hawke
go e nmen was an excep ion o he gene al end owa ds mo e ma ke -
o ien ed policy. The Acco d on P ices and Incomes s eng hened he ole
o cen al wage ixa ion h ough he A bi a ion Commission. Mo eo e ,
he policy deals h ough which he go e nmen and he Aus alian Council
o T ade Unions eached an ag eed posi ion in ol ing low o nega i e
g ow h in eal wages ypically included in e en ionis policy ini ia i es, o
which he mos no able we e Medica e and compulso y supe annua ion.
The cen alised app oach was g adually abandoned in a ou o a sys em
o en e p ise ba gaining, which emains he mos impo an ins i u ional
amewo k o wage-se ing. Subsequen e o ms, such as he in oduc ion
o Aus alian wo kplace ag eemen s (indi idually nego ia ed employmen
con ac s) ha e had only a modes e ec .
The e ec s o labou ma ke e o m, in he s ic sense o changes o indus ial
ela ions policies and ins i u ional amewo ks, appea o ha e been modes .
Howe e , he changes in labou ma ke s a ising, di ec ly o indi ec ly, om
mic o-economic e o m ha e been d ama ic. They include declining union
membe ship and a educ ion in he p opo ion o he wo k o ce wi h
adi ional ull- ime jobs (35–45 hou s pe week), o se by g ow h in bo h
pa - ime (mos ly casual) employmen and in jobs wi h long wo king hou s
(45+ pe week). Policies ha ha e a ec ed labou ma ke ou comes di ec ly
ha e included compe i i e ende ing, educ ions in indus y assis ance, and
co po a isa ion o p i a isa ion o go e nmen business en e p ises. Indi ec
bu equally p o ound e ec s ha e a isen om inancial ma ke de egula ion
and he esul ing inc ease in he in luence o inancial ma ke s.
AFTER NEOLIBERALISM
90
Mic o‑economic e o m and mac o‑
economic policy
The e m ‘mic o-economic e o m’ e lec s a conscious con as wi h he
mac o-economic policies ha domina ed economic policy in Aus alia om
Wo ld Wa II o he la e 1970s. Howe e , pe cep ions o he ela ionship
be ween mic o-economic e o m and mac o-economic policy ha e changed
o e ime.
The ocus on mic o-economic e o m in he ea ly 1980s e lec ed he
ailu e o Keynesian s abilisa ion policies, and he mone a is al e na i e
o mone a y g ow h ules, o e e se he ise in unemploymen ha ook
place du ing he 1970s. Along wi h he apid g ow h o he cu en accoun
de ici ollowing he loa ing o he dolla , pe sis en high unemploymen
was seen as he p oduc o s uc u al igidi ies ensu ing ha policies o
mac o-economic s imulus would esul in highe in la ion a he han
g ow h in ou pu . Thus, mic o-economic e o m was ini ially ad oca ed as
an expansiona y policy, o be combined wi h s imula o y iscal policy and
he wage and p ice es ain gene a ed by he Acco d on P ices and Incomes.
The a ou able expe ience o he policy esponse o he ‘Banana Republic’
c isis o 1986, when a sho -li ed inc ease in in e es a es succeeded in
educing he cu en accoun de ici wi hou gene a ing a ecession, led o
a new hypo hesis ega ding he impac o mic o-economic e o m. Many
commen a o s, such as Higgins (1991), sugges ed ha he economy had
become mo e ‘ lexible’ in i s esponse o economic shocks.
Among o he hings, he op imis ic iew o he bene i s o e o m e lec ed
in Higgins’s assessmen was used o jus i y he main enance o high in e es
a es du ing 1989, as a esponse o in la iona y p essu es and cu en
accoun p oblems. The esul ing ecession showed ha he economy was
no as lexible as had been hoped.
The ecession was he longes and deepes in pos wa his o y. The leng h
and s eng h o he expansion o he 1990s can be explained, in la ge
measu e, by he se e i y o he p eceding ecession. The 10 yea s o
expansion be ween 1993 and 2003 we e jus su icien o educe he a e
o unemploymen o 5.6pe cen , he same a e p e ailing in 1989, be o e
he onse o he ecession.
97
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
Fu he e idence may be ob ained om mo emen s in wo king hou s o
ull- ime wo ke s. To he ex en ha an inc ease in wo king hou s e lec s a
demand by employe s o inc eased wo k e o , s anda d mic o-economic
easoning implies ha wo k e o pe hou will also inc ease. Thus, we
would expec o see wo k e o and hou s o wo k mo e oge he in mos
cases. Un il abou 1980, a e age hou s o wo k o ull- ime employees
had declined ai ly s eadily o mo e han a cen u y. Al hough he e a e no
o mal measu es o wo k in ensi y, any compa ison o wo king condi ions
be ween 1980 and, say, 1950 o 1930 indica es a educ ion in wo k
in ensi y. Inadequa e wo k in ensi y was equen ly ci ed as a eason o
poo economic pe o mance by ad oca es o mic o-economic e o m, such
as Blandy e al. (1985).
A e age hou s o wo k o ull- ime employees ose be ween 1980 and
1994, eaching a peak o 45 hou s pe week, be o e s abilising in he la e
1990s and declining sligh ly a e 2000. Wooden and Loundes (2002)
a ibu e he inc ease in wo king hou s o an income e ec a ising om
wage es ain du ing he Acco d pe iod. This seems plausible o he 1980s,
bu he con inued inc ease in wo king hou s a e he end o he Acco d
is almos ce ainly due o employe demands. Fo example, analysis o
en e p ise ba gaining nego ia ions a his ime unde aken by he Aus alian
Cen e o Indus ial Rela ions Resea ch and T aining (1999) showed ha
employe claims ypically included i ems ha would lead o longe and
mo e lexible (a he employe ’s disc e ion) wo king hou s.
Public conce n abou s ess and he in ensi y o wo k ose s eadily in line
wi h he inc ease in ull- ime wo king hou s. Conce ns abou inadequa e
wo k in ensi y, dominan in he 1980s, we e eplaced by discussion o
excessi e wo k in ensi y, which eached a high poin in he la e 1990s. The
modes decline in ull- ime wo king hou s ha has been obse ed since
hen is consis en wi h he iew ha he inc ease in wo king hou s in he
ea ly 1990s was a sho - e m esponse o he compe i i e p essu e associa ed
wi h mic o-economic e o m and o he inc ease in employe ba gaining
powe ollowing he ecession. Since he issue o inc eased wo k in ensi y as
a sou ce o measu ed p oduc i i y g ow h was i s aised in he mid-1990s
(see, o example, Quiggin 1996), one o he cen al poin s in he deba e
has been he claim ha inc eases in p oduc i i y gene a ed by inc eased
wo k in ensi y a e unsus ainable. The s ong o m o his claim is ha
wo k in ensi y will e en ually e u n o le els mo e in line wi h wo ke s’
p e e ences, and ha he measu ed p oduc i i y inc eases associa ed wi h
inc eased wo k in ensi y will be e e sed. The weak e sion is ha , i wo k

AFTER NEOLIBERALISM
98
in ensi y s abilises a a highe le el, he measu ed a e o p oduc i i y
g ow h will decline in he absence o con inued g ow h in unmeasu ed
labou inpu s. Con e sely, as no ed by Pa ham (2002a), con inued g ow h
in p oduc i i y would imply ha unsus ainable g ow h in wo k in ensi y
was no a majo sou ce o measu ed p oduc i i y g ow h.4
G ow h accoun ing appea s o suppo he s ong e sion o
he unsus ainabili y hypo hesis. Full- ime wo king hou s declined a e
1998–99, and i seems likely ha wo k in ensi y also declined. A he same
ime, he a e o mul i ac o p oduc i i y g ow h ell below i s long- un
a e age.
The implica ions may be seen by supposing ha inc eases in he pace o wo k
con ibu ed a 5pe cen inc ease in e ec i e labou inpu du ing he pe iod
om 1993–94 o 1998–99 ( oughly equi alen o he loss o wo 10-minu e
ea b eaks each day), and ha hal o his inc ease in wo k in ensi y has
subsequen ly been e e sed. I labou ’s con ibu ion o MFP is weigh ed
a 70pe cen , his would imply ha inc eased wo k in ensi y con ibu ed
3.5 pe cen age poin s o he 4.8 pe cen age poin inc ease abo e he long-
e m MFP end obse ed in he mid-1990s cycle, and ha dec eased wo k
in ensi y con ibu ed 1.75 pe cen age poin s o he 2 pe cen age-poin
sho all in MFP g ow h, ela i e o he long- e m end, obse ed since
1999–2000.
Income and inequali y
As Pa ham (2002, 22) obse es, inequali y in ma ke incomes g ew in bo h
decades o he mic o-economic e o m pe iod:
The dis ibu ion o ea nings among indi iduals became mo e
unequal in he 1990s. Howe e , he inc ease was a con inua ion o
he g ow h in ea nings inequali y du ing he 1980s, a he han a
s ep up in he 1990s.
This inding is consis en wi h in e na ional e idence sugges ing ha
ma ke -o ien ed e o m is associa ed wi h inc easing inequali y o incomes.
Inequali y has isen subs an ially in he USA, he UK and New Zealand.
4 To be mo e p ecise, i is necessa y o ocus on p oduc i i y g ow h in excess o he long- e m end
g ow h a e o 1pe cen .
99
5. LOOKING BACK ON MICRO-ECONOMIC REFORM
In Aus alia, un il he mid-1990s, g ow h in ea nings inequali y was o se ,
a leas in pa , by changes in he ax and wel a e sys ems ha we e, on
balance, p og essi e. Since 1996, a numbe o hese changes ha e been
e e sed as a esul o he ex ension o mic o-economic e o m o he ax–
wel a e sys em. The mos impo an single changes ha e been he cu s in
income ax a es o highe income ea ne s in oduced along wi h he goods
and se ices ax, cu s in capi al gains axes and es ic ions on access o
wel a e paymen s, gene ically e e ed o as ‘mu ual obliga ion’.
Consume choice and wel a e
In mos , bu no all, cases, mic o-economic e o m has been associa ed wi h
an expansion o consume choice. Al hough he e a e ew well-es ablished
echniques o measu emen o he bene i s o consume choice, s anda d
a gumen s a ound e ealed p e e ence imply ha mo e choice is always
bene icial. These a gumen s a e based on he s anda d model o indi idual
consume so e eign y. In some cases, communi a ian c i ics o such
a gumen s may a gue ha he bene i s o indi idual choice a e o se by
losses o communi y alues.
The expansion o shopping hou s p o ides an example. F om he iewpoin
o indi idual consume s, an expansion o shopping hou s is ce ainly
bene icial. Since his bene i is no aken in o accoun in s anda d measu es
o he ou pu o he e ail sec o , his is an ins ance whe e he p oduc i i y
bene i s o mic o-economic e o m a e unde s a ed. F om a communi a ian
pe spec i e, howe e , he expansion o shopping hou s has e oded adi ional
dis inc ions be ween weekdays and weekends, and unde mined a ange o
communi y ac i i ies p emised on he assump ion ha nea ly e e yone will
ha e weekends ee o wo k.
Summa y
In agg ega e, mic o-economic e o m has been associa ed wi h a modes
inc ease in he a e o g ow h o labou p oduc i i y, mos o which can
be a ibu ed o inc eases in he pace and in ensi y o wo k. The ex a
g ow h in MFP du ing he p oduc i i y cycle o he 1990s, equi alen o
4.8pe cen o GDP, ep esen s an uppe bound o he agg ega e bene i s
o mic o-economic e o m. A co ec es ima e would be close o ze o, and
possibly e en nega i e.
AFTER NEOLIBERALISM
100
Ra he han seeking o jus i y a comp ehensi e p og am o mic o-economic
e o m in e ms o la gely spu ious p oduc i i y bene i s, o on he basis o
un ela ed a gumen s abou mac o-economic pe o mance, i is p e e able o
assess indi idual e o ms on a case-by-case basis. As has been a gued abo e,
some e o ms ha e yielded posi i e ne bene i s, bu o he s ha e no .
Mic o‑economic e o m: success o
disas e ?
The se o policy p og ams ad oca ed unde he banne o ‘mic o-economic
e o m’ is oo complex, and he associa ed se o ou comes oo a ied, o
admi any simple cha ac e isa ion. Mic o-economic e o m has been nei he
he success claimed by ad oca es such as he P oduc i i y Commission, no
he disas e implied by many popula c i iques o ‘economic a ionalism’.
Taking he wo decades o mic o-economic e o m as a whole, he agg ega e
impac o he e o m p og am on he wel a e o he Aus alian communi y
has been small. Pe iods o s ong g ow h in p oduc i i y and ou pu , such as
he mid-1990s, did li le mo e han eco e he g ound los as a esul o he
impac o he ac i i ies o ‘en ep eneu s’ in he 1980s, and he associa ed
‘ ecession we had o ha e’. Much o he appa en p oduc i i y g ow h o
he 1990s has been dissipa ed as wo ke s ind ways o winding back he
inc ease in he hou s and in ensi y o wo k ex ac ed h ough he unila e al
epudia ion o implici labou con ac s in his pe iod.
As wi h he cu a e’s egg, he only e dic on mic o-economic e o m ha is
bo h b ie and accu a e is ha i is ‘good in pa s’.
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6
Wha ha e we lea ned om
he Global Financial C isis?
Fi s published in 2011 as Quiggin, John. ‘Wha Ha e We Lea ned om
he Global Financial C isis?’ Aus alian Economic Re iew 44: 355–65. doi.
o g/ 10.1111/j.1467-8462.2011.00661.x.
In oduc ion
The Global Financial C isis (GFC) ha b ough he wo ld’s inancial
sys em o he b ink o ailu e in Sep embe 2008 was he mos signi ican
economic e en since he b eakdown o he B e on Woods sys em in he
1970s. Th ee yea s on, unemploymen a es in he USA and he EU emain
close o 10pe cen . The expendi u e equi ed o sal age he sys em has
pushed public deb o dange ously high le els in many coun ies. Millions
o households ha e aced bank up cy o o eclosu e, and millions mo e a e
s ill a isk.
The c isis was no an icipa ed by he g ea majo i y o he economics
p o ession. E en as he inancial sys em began o collapse in 2007 and
2008, cen al banks insis ed ha he si ua ion was unde con ol, and ha
he modes measu es hey had unde aken would be su icien o main ain
inancial s abili y and economic p ospe i y. Admi edly, cen al banks a e
mo e o less obliga ed o main ain a con iden s ance in public, bu he e is
li le e idence o any p i a e misgi ings, le alone p epa a ion o a c isis on
he scale ha ul ima ely eme ged.
AFTER NEOLIBERALISM
106
Meanwhile, academic mac o-economis s we e celeb a ing he con e gence
be ween Real Business Cycle and New Keynesian schools (aka ‘ eshwa e ’ and
‘sal wa e ’), symbolised by he de elopmen o dynamic s ochas ic gene al
equilib ium (DSGE) heo y. Dynamic s ochas ic gene al equilib ium is he
idea ha mac o-economic analysis should no be conce ned wi h obse able
eali ies like booms and slumps, bu wi h he heo e ical consequences o
op imising beha iou by pe ec ly a ional (o almos pe ec ly a ional)
consume s, i ms and wo ke s. This con e gence o he wo schools i ed
nicely wi h he ‘G ea Mode a ion’, a educ ion in he ola ili y o ou pu
and o he economic a iables beginning in he 1980s and i s no ed in he
ea ly 2000s. The esul s may be seen in he p oceedings o a con e ence on
he opic (Wood o d 2009). I discuss he G ea Mode a ion and DSGE
heo y la e in his chap e .
I is o in e es , hen, o conside how policymake s and academic economis s
esponded o he shock o Sep embe 2008. A la ge and unexpec ed
mac o-economic c isis, o igina ing in inancial ma ke s, migh be expec ed
o yield impo an lessons abou economic policy, economic heo y and
he beha iou o c ucial economic a iables, e lec ed in subs an ial changes
in he esea ch p og am o academic mac o-economics, he se ings o
economic policy and he way in which economics is augh .
In eali y, howe e , such changes ha e been modes o he poin o
in isibili y. A e a b ie , hough in ense, emb ace o Keynesian s imulus
policies in heimmedia e a e ma h o he c isis, policymake s ha e la gely
e u ned o he policies ha p oduced he c isis.
Wi hin academic economics, he e ec s we e e en mo e limi ed. While
Keynesian economis s such as Paul K ugman had mo e in luence in he
policy deba e han be o e, hei c i icisms ha e had li le o no impac on
he p ac ice o academic economis s. Reading ecen issues o he leading
gene al jou nals, i would be i ually impossible o in e ha he wo ld
economy had app oached collapse in la e 2008, ha US unemploymen
emains nea 10pe cen o ha economic heo y had been a ec ed in any
way by hese e en s.
The aim o his a icle is o examine he lessons o he GFC, conside ed in
e ms o h ee di e en ques ions:
1. Wha should we ( he economics p o ession) ha e lea ned om he GFC?
2. Wha , i any hing, ha e we ac ually lea ned abou economic heo y
andpolicy?
3. Wha ha e we lea ned abou ou sel es as a p o ession?
113
6. WHAT HAVE WE LEARNED FROM THE GLOBAL FINANCIAL CRISIS?
Iceland seems like an ideal, i somewha ex eme, es case o his
iewpoin . The go e nmen has main ained consis en budge
su pluses, and pu sued libe al economic policies, jus as he
consen ing adul s iew sugges s. On he o he hand, e en allowing
o he ola ili y associa ed wi h a small economy, Iceland’s cu en
accoun de ici s a e a beyond he le el which should, on adi ional
iews, lead ine i ably o an economic c isis.
The subsequen collapse o he Icelandic inancial sec o , and wi h i he
en i e economy, showed ha he adi ional iew was co ec .
Financial ma ke s a e aluable bu dange ous
The dange s o un e e ed inancial ma ke s ha e been e iden e e since
he ea ly 18 h cen u y, which saw he Sou h Sea Bubble in B i ain and he
Mississippi bubble in F ance. The lessons o hese ea ly bubbles ha e been
o go en and elea ned epea edly o e subsequen cen u ies. Economis s as
di e se as Fishe , Keynes and Hayek p oduced analyses o inancial ma ke
ins abili y. Ne e heless, e e y new boom p oduced a new c op o heo is s
eage o p oclaim ha ‘ his ime is di e en ’ (Reinha and Rogo 2009).
No episode o o ge ing was as comple e and consis en as ha o he 1990s
and ea ly 2000s. No only was he s anda d claim ha ‘ his ime is di e en ’
epea ed wi h new igou , bu an in ellec ual co age indus y a ose o explain
away p e ious disas e s such as he Du ch ulip mania (Ga be 2001) and
e en he G ea Dep ession (Cole and Ohanian 2004). The e icien ma ke s
hypo hesis, in i s a ious o ms, enabled de ende s o inancial ma ke s o
shi be ween ul a-s ong claims, on he one hand, ha inancial ma ke s
p o ide he bes possible guide o in es men and asse alue, and ul a-weak
allback posi ions on he o he , such as he obse a ion ha i is impossible
o e e yone o be success ully agains he ma ke .
The GFC has sha e ed hese belie s, bu p og ess owa ds a be e
unde s anding o inancial ma ke s has been e y limi ed. The esul has
been a se o con adic o y policies. On he one hand, he ob ious ailu es
o he ligh -handed sys ems o egula ion epi omised by he Basel II
amewo k1 ha e p oduced a se ies o ini ia i es a he na ional and global
1 The Basel Commi ee on Banking Regula ions, headqua e ed a he Bank o In e na ional
Se lemen s in Basel, was es ablished o enhance inancial s abili y by imp o ing he quali y o banking
supe ision wo ldwide. The Commi ee has es ablished a se ies o in e na ional s anda ds o bank
egula ion, mos no ably i s landma k publica ions o he acco ds on capi al adequacy, commonly
known as Basel I, Basel II and, mos ecen ly, Basel III. See www.bis.o g/bcbs/his o y.h m.

AFTER NEOLIBERALISM
114
le el designed o p e en a epe i ion o hese ailu es. Mos no ably, he
BaselIII amewo k has igh ened up capi al equi emen s ac oss he boa d.
On he o he hand, mo es owa ds mo e undamen al e o m, aimed a
educing he size and cos o he inancial sys em, ha e gone nowhe e.
On he con a y, he main conce n o policymake s has been o es o e
p e-c isis ‘no mali y’ as apidly as possible.
We a e all Keynesians in a c isis
Finally, i seems ha we ha e lea ned ha , wha e e he heo e ical case o
nonin e en ion, no go e nmen o cen al bank will pe mi a comple e
economic collapse o he ype ha h ea ened na ional economies in
la e 2008. Unlike he condi ions o ‘o dina y’ ecession go e nmen s a e
willing o ole a e a p esen , such a collapse h ea ens e e yone, no me ely
heunemployed.
The ini ial eac ion o he c isis was a e u n o Keynesian iscal s imulus,
e en by go e nmen s like ha o Ge many, whe e Keynesianism has had
li le suppo . B oadly speaking, he expe ience o he c isis suppo ed he
Keynesian iew. Coun ies ha adop ed a la ge disc e iona y iscal s imulus,
no ably, including China and Aus alia, pe o med much be e han hose
ha did no .
Un o una ely, i is di icul o ob ain a clean expe imen in iscal policy.
Disc e iona y iscal policy is designed o be coun e cyclical, and au oma ic
s abilise s a e coun e cyclical by de ini ion, meaning ha iscal s imulus will
be posi i ely co ela ed, o e ime, wi h ecessions. De i ing lessons om
compa a i e pe o mance in he GFC aises a di e en kind o p oblem.
The s onges disc e iona y iscal s imulus was unde aken in coun ies
such as China and Aus alia, whe e he shock was en i ely ex e nal and
whe e policymake s had some wa ning o i s a i al. The good ou comes
expe ienced in hese coun ies migh be, and ha e been a ibu ed o, he
absence o a domes ic shock. A a he less con incing coun e a gumen ,
o en hea d in he Aus alian deba e, is ha ou ela i ely good pe o mance
depended on s ong demand om China a he han on policies o iscal
s imulus. Since China adop ed he same policies, his appea s o be a claim
ha Keynesianism wo ks, bu only in China.
Mo e impo an ly, pe haps, he iscal s imulus policy adop ed by he Obama
Adminis a ion in he USA was hal -hea ed and poo ly a ge ed, and i
became con used, a leas in he minds o he public, wi h he equally poo ly
115
6. WHAT HAVE WE LEARNED FROM THE GLOBAL FINANCIAL CRISIS?
designed bailou o he US banking sys em unde aken in he dying days o
he Bush Adminis a ion. As a esul , he US iscal s imulus has been widely
ega ded as a ailu e.
Un o una ely, he e o e, he Keynesian lessons we e only hal -lea ned.
Assoon as he immedia e c isis was pas , he e was a esu gence o an i-
Keynesian and, o a la ge ex en , p e-Keynesian hinking. Howe e , he pic u e
is no en i ely bleak. In Aus alia, he T easu y has adop ed aconsis en ly
Keynesian analysis. In e na ional bodies such as he IMF ha e also ended
o look a he e idence mo e b oadly and o suppo an expansiona y s ance
in bo h iscal and mone a y policy. Ne e heless, he dominan end in
policy has been owa ds a apid e e sal o Keynesians imulus.
The w ong lesson: aus e i y
As he c isis has con inued, he main ocus o a en ion has u ned away om
he e iden ailu e o inancial ma ke s and owa ds he alleged ailings o
go e nmen s. The unde lying ideas can be seen as a e i al o he ‘T easu y
iew’ o he 1920s.
The T easu y iew embodies wo key elemen s. In iscal policy, he T easu y
iew embodies a p edominan —indeed, nea -exclusi e— ocus on keeping
ai h wi h bondholde s, ejec ing no only de aul bu any ole ance o
in la ion as a way o sha ing he bu den o unsound deb . This posi ion is
in e wined wi h a con ac ionis mac o-economic analysis, in which cu s in
budge de ici s a e supposed o p omo e ‘business con idence’, pa icula ly
i hey a e achie ed h ough educ ions in expendi u e.
Aus e i y policies ha e been adop ed e en whe e he e is no immedia e
c isis in public deb , as in he UK and he USA, bu he p oblem has been
sha pes in Eu ope. In he p ocess o bailing ou he inancial sys ems
and esponding o he sha p down u n in economic ac i i y, Eu opean
go e nmen s gua an eed p i a e deb and ook on subs an ial deb s o hei
own. Fo many pe iphe al coun ies, such as Po ugal, I eland, G eece and
Spain, hese deb s ha e p o ed unsus ainable. Now, he bondholde s a e
demanding ha ull epaymen o hei claims should be ensu ed by he
adop ion o ‘aus e i y’ measu es ha a e i ually ce ain o p oduce a new
ecession i implemen ed as planned.
AFTER NEOLIBERALISM
116
O e he las yea and a hal , Eu ope has aken a se o s op-gap measu es
aimed a p o ec ing i s weake economies agains p essu es om bond
ma ke s. Eu opean s a es ha e sough o p opi ia e bond ma ke s h ough
en o cing economic aus e i y and u hlessly cu ing spending. The e is
conside able p essu e, no ably om he Ge man go e nmen and he ECB,
o ins i u ionalise aus e i y.
Ins i u ionalised aus e i y will badly damage Eu opean economies in he
sho e m. Howe e , i s long- e m consequences will be much, much wo se.
E en i hese measu es somehow calm bond ma ke s, hey will u e ly des oy
he EU’s emaining poli ical legi imacy. Eu opean poli icians wo y abou
he economic consequences o ailu e. They should be a mo e wo ied
abou he poli ical consequences. The sys em hey a e d i ing owa ds is
a hinly disguised e sion o he gold s anda d ha w eaked ha oc in he
1920s and will ha e he same oxic poli ical allou .
The si ua ion in he USA is equally di e. A he s a e and local le el, he
combina ion o declining e enues and balanced-budge equi emen s has
necessi a ed la ge-scale educ ions in bo h employmen and se ices. This,
in u n, has con ibu ed o he leng h and dep h o he US ecession.
A he ede al le el, he same pa e n is now eme ging. A e he ini ial
ound o iscal s imulus in 2009, he Obama Adminis a ion ook he iew
ha  he economy would eco e wi hou addi ional in e en ion. By he
ime he alsehood o ha iew became clea , he 2010 elec ions had
p oduced aRepublican majo i y in he House o Rep esen a i es.
The new Cong ess was esolu ely opposed o any u he iscal s imulus.
Mo eo e , by h ea ening o en o ce a de aul on US go e nmen deb , he
Republicans we e able o nego ia e a policy package in ol ing la ge-scale
expendi u e cu s. The e o s o he Obama Adminis a ion o nego ia e a
‘g and ba gain’, in which hese and u he cu s would be combined wi h
modes inc eases in ax e enue, cemen ed a consensus on he need o
immedia e adop ion o aus e i y policies, despi e weak economic g ow h
and a con inuing decline in he US employmen –popula ion a io.
Expe ience unde aus e i y policies has con i med he alidi y o he
Keynesian analysis. The e has been no gene al eco e y, and pe o mance
has been pa icula ly disappoin ing in he USA and UK, whe e aus e i y
measu es ha e been chosen, e en in he absence o an immedia e
budge a yc isis.
117
6. WHAT HAVE WE LEARNED FROM THE GLOBAL FINANCIAL CRISIS?
Wha ha e we lea ned abou ou sel es?
The expe ience o he c isis sugges s some un la e ing lessons abou he
economics p o ession, aken b oadly o include academic economis s,
policymake s, cen al banke s and commen a o s. The collapse o he G ea
Mode a ion, and he nea -collapse o he global inancial sys em, p o ided
he p o ession wi h an oppo uni y and, indeed, an u gen impe a i e o
a undamen al econside a ion o ideas ha had been aken o g an ed
o 30yea s o mo e.
Un o una ely, like he Bou bon mona chs e u ning a e he all o
Napoleon, we ha e, o he mos pa , lea ned no hing and o go en
no hing. Ac oss a b oad spec um, he economics p o ession has sough he
as es possible e u n o p e-c isis no malcy, igno ing he ob ious e idence
ha i was p ecisely he ‘no mal’ assump ions o neolibe alism ha p oduced
he c isis.
The p oblems a e mos e iden in he beha iou o cen al banks, which
emain he dominan o ce in he de e mina ion o mac o-economic policy.
In he yea s leading up o he c isis, cen al banke s we e cong a ula ing
hemsel es on he c ea ion o an in la ion- a ge ing sys em ha had inally
hi bo h he explici a ge o low and s able in la ion and he implici a ge
o s eady and s able g ow h in eal ou pu ( ha is, he G ea Mode a ion).
I is a simple ma e o eco d ha he policies adop ed by cen al banks
du ing he G ea Mode a ion did no p e en i s ca as ophic collapse.
Mo e se iously, he e is a good deal o e idence o sugges ha long pe iods
o low and s able in la ion a e ac ually conduci e o asse p ice bubbles such
as hose ha led o he GFC.
A a minimum, his expe ience should ha e sugges ed a e hinking o he
sys em o in la ion a ge ing. E en assuming a con inua ion o in la ion
a ge ing, he cu en deb de la ion clea ly calls o a highe in la ion a ge ,
a leas in he sho un. Looking beyond his pu ely echnical adjus men ,
he use o al e na i e a ge s, such as he p ice le el o nominal income,
migh help o a oid he po en ial o de la iona y liquidi y aps inhe en in
he in la ion- a ge ing app oach.
AFTER NEOLIBERALISM
118
A mo e se ious esponse o he c isis would be he ecogni ion ha a single
ins umen , such as a sho - e m in e es a e, is insu icien when he
cen al bank mus no only achie e a balance be ween in la ion and ou pu
g ow h, as p oposed by he Taylo ule, bu mus also main ain he sys emic
s abili y o he inancial sys em. The la e equi emen sugges s he need o
a econside a ion o he sepa a ion be ween mone a y policy and p uden ial
egula ion ha was a cen al ea u e o he e o ms o he neolibe alism e a.
The gene al policy communi y, including economic commen a o s, hink
anks and policymake s, has done li le be e . The ac ha Aus alia
escaped he GFC la gely unsca hed has mean ha economic commen a o s
ha e el ee o igno e i . As Te y McC ann (2009, 21) w o e in dismissing
p oposals o an inqui y in o he inancial sys em: ‘No many dead o e en
inju ed in Aus alia. F om any sys emic aul , ha ’s o say.’
As he GFC has aded u he in o memo y, a en ion has e u ned o he
i ed mic o-economic e o m agenda o he 1980s. Misleading s a is ics on
p oduc i i y ha e been used o a gue he need o a new ound o e o m.
I would be a mo e use ul o ocus a en ion on he mac o-economic isks
ha s ill ace us, mos no ably in he e en o a slump, o e en a slowdown,
in China’s economic g ow h.
Tu ning o he academic economics p o ession, i would be un ai o say
ha economis s ha e igno ed he e idence o he inancial c isis. On he
con a y, as numbe s o pape s a e now being w i en o inco po a e
inancial shocks in o econome ic and mac o-economic models. Bu he e is
no sugges ion, as he e was in bo h he 1930s and he 1970s, ha he GFC
necessi a es any eassessmen o he ideas ha ha e domina ed economic
hinking since he 1970s o any signi ican change in he way in which
economics is done.
In e ms o he way in which economics is done, he selec ion o a icles
published in economics jou nals oday is almos indis inguishable om ha
o , say, 2007. The cen al ocus is on inc emen al con ibu ions on opics
o ashionable in e es . The aes he ic c i e ia on which a icles a e judged
( ocussed p ima ily on heo e ical igou ) means ha he e is no place in
he jou nals o he econside a ion o undamen al issues. Almos he only
excep ion is he publica ion o p esiden ial add esses and he like, whe e he
mos i mly es ablished membe s o he p o ession a e gi en some licence
o specula e.

119
6. WHAT HAVE WE LEARNED FROM THE GLOBAL FINANCIAL CRISIS?
As a as con en is conce ned, he majo i y o economic esea ch deals
wi h issues ha a e, while no necessa ily i ele an o policy conce ns,
a emo ed om he mos p essing issues o he day. This has p obably
always been ue o some ex en ,2 and he need o ex e nal unding o mos
esea ch has only exace ba ed he p oblem.
An ob ious di e ence be ween he GFC and he c ises o he 1930s and
1970s is he absence, a leas so a , o a well-de eloped al e na i e o he
dominan model ende ed p oblema ic by he c isis. Keynes (1936) o e ed
an al e na i e o he o hodoxy o classical and neoclassical economics,
which main ained he impossibili y o sus ained high unemploymen ,
excep as he p oduc o dis o ions in he labou ma ke . Keynes also o e ed
a solu ion— he use o iscal policy o s abilise agg ega e demand—and his
policy was adop ed, wi h g ea success, a e 1945.
When Keynesian economics i sel an in o di icul ies, beginning in he
la e 1960s, he mone a ism o Mil on F iedman (1968) p esen ed i sel
as an al e na i e. No such al e na i e is ye a ailable o us. Ou posi ion
is mos analogous o ha aced by economis s in he ea ly yea s o he
G ea Dep ession be o e he eme gence o he Keynesian al e na i e
o hedominan T easu y iew. I is, pe haps, oo much o hope o he
eme gence o a new Keynes o F iedman who can p esen a comp ehensi e
analysis o he ailu es o he cu en model and poin he way o wa d
oanew one.
Ra he , we mus look o a syn hesis, eco e ing he cen al insigh s o
he Keynesian e olu ion while e aining wha was aluable in F iedman’s
coun e e olu ion, and inco po a ing he insigh s o mo e ecen wo k on
beha iou al economics. Tha is a demanding esea ch p og am, and i is a
om clea whe e i will lead. All he mo e eason, hen, o he p o ession
o make a s a along hese lines—i necessa y, a he expense o es ablished
esea ch p og ams whose inadequacies ha e been shown up by he GFC.
2 Many yea s ago, I was s uck by eading a su ey o he a icles published in economic jou nals
du ing he G ea Dep ession, which ound ha only a small p opo ion add essed he p oblems o
unemploymen , mac o-economic policy and o he issues ela ed o he economic c isis ha had engul ed
he wo ld. Un o una ely, I did no eco d he e e ence and ha e ne e again been able o loca e his
a icle. Ne e heless, i had a signi ican impac on my own esea ch p io i ies.
AFTER NEOLIBERALISM
120
Less hub is?
The cen al heme o Quiggin (2010), e lec ed in he i le Zombie Economics,
was ha , al hough he ideas and policies cen al o neolibe alism3 had been
e u ed by e en s, hey none heless emain in luen ial. Less han a yea since
he book appea ed, he esu gence o hese zombie ideas is now almos
comple e.
Despi e being spec acula ly disc edi ed by he GFC, he ideas o neolibe alism
con inue o guide he hinking o many, i no mos , policymake s and
commen a o s. In pa , ha is because hese ideas a e use ul o ich and
powe ul in e es g oups. In pa , i e lec s he inhe en enaci y o
in ellec ual commi men s. Mos impo an ly, hough, he su i al o hese
zombie ideas e lec s he absence o a well-de eloped al e na i e. Economics
mus ake new di ec ions in he 21s cen u y i we a e o a oid a epe i ion
o he ecen c isis.
Mos ob iously, he e needs o be a shi om igou o ele ance.
The p e ailing emphasis on ma hema ical and logical igou has gi en
economics an in e nal consis ency ha is missing in o he social sciences.
Howe e , he e is li le alue in being consis en ly w ong.
Simila ly, he e needs o be a shi om e iciency o equi y. Th ee decades
o neolibe als pushing policies based on ideas o e iciency, and claims abou
he e iciency o inancial ma ke s, ha e no p oduced much in he way
o imp o ed economic pe o mance, bu hey ha e led o d as ic inc eases
in inequali y, pa icula ly in he English-speaking wo ld. Economis s need
o e u n hei a en ion o policies ha will gene a e a mo e equi able
dis ibu ion o income.
Finally, wi h he collapse o ye ano he economic ‘new e a’, i is ime o he
economics p o ession o display mo e humili y and less hub is. Mo e han
wo cen u ies a e Adam Smi h, economis s ha e o admi he o ce o
Soc a es’s obse a ion ha : ‘The wises man is he who knows ha he
knowsno hing.’
3 I used he e m ‘ma ke libe alism’.
121
6. WHAT HAVE WE LEARNED FROM THE GLOBAL FINANCIAL CRISIS?
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129
7. THE LOST GOLDEN AGE OF PRODUCTIVITY GROWTH?
o he business cycle (Quiggin 2000). A ypical business cycle con ained
wo p oduc i i y cycles, wi h p oduc i i y g ow h s onge in he cycle
co esponding o he expansion phase and weake in he cycle co esponding
o he con ac ion phase (Dolman, Lu, and Rahman 2006).
The p oduc i i y cycle plays a c ucial ole in he my h o he 1990s
p oduc i i y su ge, since i allows he yea s o s ong p oduc i i y g ow h
om 1993–94 o 1998–99 o be ea ed as a dis inc pe iod, while he
weake yea s a he beginning o he decade a e disca ded. The esul is a
widesp ead bu alse imp ession ha he 1990s was a pe iod o excep ionally
s ong measu ed MFP g ow h. In eali y, he a e age a e o MFP g ow h
o wo ABS p oduc i i y cycles om 1988–89 o 1998–99 was 1.6pe
cen —abo e a e age bu no excep ional compa ed o p eceding decades.
In summa y, MFP g ow h o e a p oduc i i y cycle is no a pa icula ly
use ul measu e o economic pe o mance. E en when measu ed co ec ly,
p oduc i i y es ima es combine he e ec s o long- e m echnological
g ow h wi h a subse o he ac o s ha de e mine a ia ions in sho - e m
pe o mance. In p ac ice, accu a e measu emen is impossible. In he case
o Aus alia’s supposed p oduc i i y su ge, he c ucial p oblem is he ailu e
o ake accoun o changes in wo k in ensi y.
Wo k in ensi y and p oduc i i y
Labou p oduc i i y is ypically measu ed in e ms o ou pu pe hou
wo ked. Howe e , his measu e can be p oblema ic. Fo example, en e p ise
ag eemen s and indi idual con ac s adop ed in place o awa ds commonly
elimina e b eaks such as ea b eaks, which we e ea ed as wo king ime
unde he awa d sys em. On he o he hand, employees ha e always aken
unau ho ised and un eco ded b eaks o a ious kinds. A no able example
ha has eme ged in he las 10 o 15 yea s is he use o o ice compu e s o
isi in e ne si es ha a e no wo k- ela ed. O much longe s anding is he
p ac ice o making p i a e phone calls du ing paid ime a wo k. Con e sely,
employe s may demand unpaid o e ime o con ac hei employees wi h
wo k eques s ou side o paid hou s.
Al hough hese p ac ices a e egula ly he subjec o dispu e, he no mal
si ua ion is one o equilib ium, in which some de ia ion om o icial hou s
is pa o he wage ba gain aci ly accep ed by bo h pa ies. The hou s o
wo k epo ed o s a is ical agencies will e lec some, bu no all, o he

AFTER NEOLIBERALISM
130
de ia ions om awa d-de e mined o con ac ually ag eed hou s. How
should hese ea u es o he labou ma ke be e lec ed in p oduc i i y
measu es? A leas concep ually, i seems clea ha he app op ia e measu e
is ac ual hou s wo ked a he han paid hou s.
Conside he case in which he numbe o hou s wo ked emains
unchanged, bu he pace o wo k a ies. In some indus ies, such changes
can be obse ed di ec ly and a e he subjec o explici wage ba gaining.
The a che ypal case is ha o p oduc ion-line wo k, in which employe s
ypically seek o inc ease he a e a which he line mo es, while wo ke s
and unions y o slow i down. The de elopmen o he wo d p ocesso in
he 1980s p o ides ano he example. Since he numbe o keys okes could
bemeasu ed di ec ly, employe s demanded highe a es, hus p ecipi a ing
an epidemic o epe i i e s ain inju y, a p oblem ha had exis ed p e iously
bu was ypically diagnosed as an indi idual pa hology a he han a b oade
occupa ional haza d.
The e is, in p inciple, no di e ence be ween an inc ease in he numbe o
hou s wo ked and an inc ease in he pace o wo k. In bo h cases, s anda d
economic logic implies ha an equilib ium wage ba gain will ypically
in ol e a commi men o hou s and e o g ea e han he le el ha would
be chosen by wo ke s in he absence o a mone a y incen i e.
In pa icula ins ances, depending on labou ma ke ins i u ions, he
ba gained ou come may in ol e mo e o ewe hou s and mo e o less
e o han would cha ac e ise a Pa e o-op imal ba gain. Howe e , he
gene al assump ion is ha a he ma gin, inc eased hou s and inc eased
e o a e equally cos ly o wo ke s when hey a e no malised by he
paymen equi ed o elici hem. I ollows ha , o he ex en ha inc eases
in ou pu a e de i ed ei he om unmeasu ed inc eases in hou s o wo k
o om inc eased in ensi y o wo k, he e is no co esponding inc ease in
p oduc i i y. I  hehou s o in ensi y o wo k we e p e iously sub-op imal
(o abo e he op imal le el), he e will be a ne wel a e gain (o loss), bu his
will be o second-o de magni ude ela i e o he change in ou pu .
Aus alian economic policymake s ha e shown conside able con usion on
his poin . Some ha e explici ly asse ed ha wo king ha de is a genuine
sou ce o p oduc i i y gains. Fo example, he P oduc i i y Commission
(1996, 24) asse ed ha p oduc i i y gains could be achie ed no only
h ough esou ce ealloca ion bu h ough people ‘wo king ha de and
wo king sma e ’. Mo e han a decade la e , he chai man o he P oduc i i y
131
7. THE LOST GOLDEN AGE OF PRODUCTIVITY GROWTH?
Commission epea ed an almos iden ical o mula ion (Banks 2011 20):
‘whe he p oduc i i y g ow h comes om wo king ha de o wo king
“sma e ”, people in wo kplaces a e cen al o i ’. The appea ance o sca e
quo es a ound ‘sma e ’ is e ealing. Whe eas in he 1990s his ph ase was
used in all se iousness, ‘wo king sma e ’ is now unde s ood as a piece o
managemen ja gon, ypically decoded as ‘We’ e gi ing you mo e wo k o
do wi h ewe esou ces, and i ’s up o you o igu e ou how o do i .’
The associa ion o e o m wi h ha de and less pleasan wo k is usually
implici . S anda d discussions o mic o-economic e o m and wo kplace
e o m a e ull o e e ences o ‘cu ing ou a ’, he ‘chill winds o
compe i ion’ and so o h. I is no ha d o wo ke s o disce n whe e he e is
a o be cu , o o obse e ha CEOs a e usually equipped wi h well-padded
windb eake s, e en in cases whe e hei mismanagemen leads o an ea ly
(bu gene ously compensa ed) depa u e. By con as , in deba es o e he
alidi y o MFP s a is ics, mos mains eam economis s—pa icula ly hose
associa ed wi h he P oduc i i y Commission—ha e denied ha changes in
wo k in ensi y a e an impo an sou ce o changes in measu ed p oduc i i y.
The mid-1990s saw an upsu ge in public conce n abou he pace o wo k,
wo k–li e balance, s ess and ela ed issues, which pe sis ed in o he ea ly
2000s, leading o John Howa d’s desc ip ion o he opic a an elec o a e
dinne in Melbou ne in 2002 as a ‘ba becue s oppe ’ (T egue 2023).
In he con ex o a s eng hening labou ma ke om abou 2000 onwa ds,
communi y esis ance o wo k in ensi ica ion, and o employe demands o
longe hou s o wo k, became inc easingly success ul.
While he in ensi y o wo k is di icul o measu e, he e is su icien
e idence o suppo he gene al pe cep ion o an inc ease in wo k in ensi y
in he 1990s. Fi s , as discussed abo e, inc eases in wo k hou s and in wo k
in ensi y a e subs i u es bo h as inpu s o p oduc ion and as sou ces o
disu ili y o wo ke s. I ollows ha , when he equilib ium wage ba gain
in ol es an inc ease (o dec ease) in hou s, i will also in ol e an inc ease
(dec ease) in wo k in ensi y. The da a on wo king hou s a e unequi ocal
and exac ly consis en wi h he idea ha luc ua ions in MFP g ow h may
be explained la gely in e ms o wo k in ensi y. As he ABS (2010) no es,
he p opo ion o ull- ime wo ke s wo king mo e han 50 hou s pe week
inc eased om 13pe cen in 1978 o 19pe cen in la e 1999 and ea ly
2000, be o e alling o a ound 15pe cen in 2010.
AFTER NEOLIBERALISM
132
The e is some di ec e idence on wo k in ensi y. The Aus alian Wo kplace
Indus ial Rela ions Su ey unde aken in 1995 (Mo ehead e al. 1997)
ound ha a majo i y o employees epo ed inc eases in s ess, wo k e o
and pace o wo k o e he p e ious yea , while less han 10pe cen epo ed
educ ions in any o hese a iables. This is consis en wi h e idence om
he UK and some, al hough no all, o he Eu opean coun ies (G een
and McIn osh 2001). Mo eo e , G een and Macin osh obse e ha he
inc eases in wo k in ensi y a e associa ed wi h highe p oduc i i y (as would
be expec ed) and a e posi i ely co ela ed wi h exposu e o compe i ion and
educ ions in union densi y.
De ences o he p oduc i i y su ge
As I ha e discussed elsewhe e (Quiggin 2006), belie e s in he p oduc i i y
su ge p oduced a a ie y o s o ies o explain he obse ed ou comes.
Asymme ic measu emen e o
Du ing he 1990s, he P oduc i i y Commission was he mos p ominen
p oponen o he claim ha he s ong g ow h in MFP epo ed by he ABS
e lec ed he eme gence o a ‘new economy’ as a esul o mic o-economic
e o m (Pa ham 1999). Unsu p isingly, he P oduc i i y Commission
ejec ed claims ha he appa en su ge in MFP g ow h was due, in pa o
in whole, o measu emen e o o cyclical ac o s.
By con as , as low a es o MFP g ow h eme ged in he 2000s, he
commission became much mo e sympa he ic o he idea ha measu emen
e o migh be a p oblem. The poo p oduc i i y g ow h o he ea ly
2000s was blamed on, among o he ac o s, he Sydney Olympics,
capi al expendi u e associa ed wi h he Y2K iasco (also e e ed o as he
Millennium Bug), he ansi ional e ec s o he in oduc ion o he GST,
and he d ough ha began in 2002 (Pa ham 2005). The d ough pe sis ed
well in o he decade, bu he o he ac o s should ha e been ansi o y.
As measu ed MFP pe o mance de e io a ed e en u he , a en ion has
shi ed o he mining sec o . I seems clea ha measu emen p oblems
associa ed wi h mining a e signi ican . In es men s in new o expanded
mines coun immedia ely as pa o he capi al s ock bu con ibu e o
133
7. THE LOST GOLDEN AGE OF PRODUCTIVITY GROWTH?
ou pu only wi h a delay o some yea s. Mo eo e , high mine al p ices ha e
led o he exploi a ion o less p oduc i e esou ces ha would o he wise be
uneconomic.
Since he quali y o he esou ce is no measu ed as an inpu , his p oduces
an illuso y decline in p oduc i i y. Richa dson and Denniss (2011) es ima e
ha he measu ed g ow h a e o labou p oduc i i y o e he i s decade
o he 2000s was educed by one pe cen age poin as a esul o dis o ions
in he mining sec o . This is a signi ican e ec , bu i is no su icien o
explain he decline in measu ed MFP g ow h a es.
The iew ha he disappoin ing pe o mance o measu ed MFP is p ima ily
due o measu emen e o has gone ou o a ou o e ime as disappoin men
has pe sis ed. Howe e , i equen ly e-eme ges in discussions o Aus alia’s
s ong mac o-economic pe o mance du ing and a e he GFC.
The idea ha ma ke -o ien ed mic o-economic policies p o ide signi ican
lexibili y in esponse o mac o-economic shocks has been in luen ial in
Aus alia since he beginnings o mic o-economic e o m in he 1980s. This
idea con ibu ed subs an ially o he policy misjudgemen s ha p oduced
he 1989–91 ecession, when i was supposed ha he economy was lexible
enough o handle a ‘sho , sha p shock o in e es a es’ and hen o bounce
back apidly om ‘ he ecession we had o ha e’.
Coun e -examples o his idea abound. The mos s iking is ha o New
Zealand, which has ollowed b oadly simila mic o-economic policies
since he 1980s, al hough wi h mo e adical mic o-economic e o m
un il he mid-1990s and a sha pe eac ion agains some aspec s o hose
policies subsequen ly. A he same ime, New Zealand has adop ed a
mo e es ic ionis mac o-economic policies. F om i s ini ial posi ion o
app oxima e income pa i y wi h Aus alia in he ea ly 1980s, New Zealand
ell sha ply behind, expe iencing an e en deepe ecession om 1987 o
1991 and wo subsequen ecessions in e spe sed wi h pe iods o mos ly
sluggish g ow h. By 2000, income pe pe son in New Zealand had allen
o a ound wo- hi ds o he Aus alian le el, and i has emained he e
since. While i is unwise o a ibu e such a huge gap o any single ac o
(Hazledine and Quiggin 2006), poo mac o-economic pe o mance is an
impo an pa o he s o y.
AFTER NEOLIBERALISM
134
The los golden age
The dominan in e p e a ion o he MFP s a is ics oday is o a los golden
age. The su ge in measu ed MFP g ow h is a ibu ed o he mic o-economic
e o m p ocess ha began in he 1980s and he slowing down o ‘ e o m
a igue’ in he 2000s.
The majo p oblem wi h his s o y is iming. I is di icul o see how
ase ies o e o ms unde aken o e 20 yea s o mo e can ha e p oduced
subs an ial p oduc i i y bene i s con ined o a single pe iod o i e yea s.
I is e en ha de o see how he bene i s o hose e o ms can ha e dissipa ed
so apidly, ha ing been al eady on he wane when he e o m p ocess was
s ill unde way.
The beginning o he p ocess o mic o-economic e o m is usually da ed o
he loa o he Aus alian dolla in 1983. The e is less ag eemen on he end
o he p ocess. As a as I can de e mine, I was he i s o o e an explici
end da e sugges ing ha he e a o mic o-economic e o m in Aus alia
‘began wi h a big bang— he loa ing o he dolla in 1983’ and ‘ended wi h
ano he big bang— he package o ax e o ms cen ed on he goods and
se ices ax (GST), which came in o o ce in July 2000’ (Quiggin 2004).
The e ha e been e ospec i e a emp s o backda e he end o mic o-
economic e o m, some imes as a as he elec ion o he Howa d
go e nmen in 1996, bu hese do no s and up o sc u iny. Al hough i
is ue ha he Howa d go e nmen ook a less consis en app oach o
e o m han i s Labo p edecesso s, i ne e heless in oduced se e al majo
e o ms in i s i s ew yea s in o ice. Many o he e o ms implemen ed
unde Howa d we e measu es ha had long been demanded by ad oca es
o adical e o m bu esis ed by he Labo go e nmen because o poli ical
sensi i i ies. These included he Wo kplace Rela ions Ac 1996, he pa ial
p i a isa ion o Tels a in 1998 and 1999, wa e on e o m in 1998 and,
mos no ably, he GST, legisla ed in 1999 and implemen ed in 2000.5
Mo eo e , many e o ms in oduced by he Hawke–Kea ing go e nmen
did no begin o ake e ec un il a e he MFP su ge. The mos no able o
hese is he Na ional Compe i ion Policy (NCP). Mos s a es did no e en
5 Following he su p ising achie emen o a Sena e majo i y in 2004, he las e m o he Howa d
go e nmen included he passage o a package o labou ma ke e o ms called Wo k Choices. These
e o ms we e mos ly epealed by he Rudd Labo go e nmen and canno be ega ded as a success ul
enewal o mic o-economic e o m.

135
7. THE LOST GOLDEN AGE OF PRODUCTIVITY GROWTH?
comple e hei legisla i e e iews o se up hei gene al egula o y bodies
un il he la e 1990s, and he NCP p ocess, wi h associa ed paymen s o
he s a es, was no comple ed un il 2005, when i was succeeded by he
Na ional Re o m Agenda. E en a e 2005, he push o mic o-economic
e o m con inued h ough a p oli e a ion o ee- ade ag eemen s, which
we e less ocussed on ade han on cons aining go e nmen in e en ion
in he domes ic economy.
The iming issue becomes mo e acu e when we conside ha he measu ed
p oduc i i y su ge did no begin un il a decade a e he loa o he dolla .
In ac , he yea s du ing which ‘e en he esiden galah in he pe shop’
was alking abou mic o-economic e o m we e cha ac e ised by he lowes
p oduc i i y g ow h o he en i e pe iod o which da a a e a ailable.
Hence, he s o y o he los golden age elies on he long-delayed bene i s
o he e o ms o he ea ly 1980s, combined wi h an ins an (indeed, in
some cases, e ospec i e) bene i om he e o ms o he la e 1990s. E en
i we we e o accep he s o y o he los golden age, he whole a ionale
o mic o-economic e o m is called in o ques ion. Fa om gene a ing
sus ained g ow h, he los -golden-age my h sugges s ha he decade o
mo e o mic o-economic e o m ha began wi h he loa ing o he dolla in
1983 p oduced only i e yea s o abo e-a e age p oduc i i y g ow h be o e
equi ing a enewed bu s o e o m me ely o sus ain pas gains.
Conclusion
In he economy o he 21s cen u y, inc eases in p oduc i i y a ise almos
en i ely om capi al deepening and imp o emen s in educa ion. Economic
heo y, he e o e, p edic s ha he a e o MFP g ow h, p ope ly calcula ed
o ake accoun o labou quali y, should be close o ze o. This p edic ion
is bo ne ou by he da a. Ne e heless, he my hical p oduc i i y su ge
o he mid-1990s con inues o domina e he hinking o policymake s,
leading o incessan demands o mo e mic o-economic e o m o gene a e
highe p oduc i i y.
The co ela ion be ween demand o highe p oduc i i y and inc eases in
wo k in ensi y is so e iden o mos Aus alians ha we ake i o g an ed.
Wha is s iking in his con ex is he ailu e o (mos ) Aus alian economis s
and economic commen a o s o accep he e idence on his poin . Unlike
i ually e e yone else in Aus alia, economis s ha e esolu ely denied ha
AFTER NEOLIBERALISM
136
he highe measu ed labou p oduc i i y g ow h e iden in he mid-1990s
was la gely due o inc eased wo k in ensi y, and ha he e e sal o hose
measu ed gains in he 2000 was due o he ac ha his in ensi ica ion
could no be sus ained.
A belie ha la ge inc eases in annual p oduc i i y g ow h a es can and
should be achie ed h ough mic o-economic e o m is no suppo ed by
he da a and can lead o bad public policy decisions. Mos no ably, he
belie lends suppo o he idea ha ‘Aus alians mus wo k ha de ’. On he
con a y, e idence om he labou ma ke is ha he wo k in ensi ica ion
o he 1990s was undesi ed and unsus ainable. Genuine imp o emen s in
p oduc i i y should pe mi educ ions in wo king hou s and wo k e o ,
a he han demanding mo e and ha de wo k.
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