Voters throughout the Western world are expressing discontent and insecurity. Richard Wood considers the consequences for policy.
I HAVE recently returned from overseas discussions with a range of senior economic officials employed by governments and international organisations, as well as with United States and United Kingdom think tanks. Overseas, as in Australia, there is considerable angst being directed at governments in office, and considerable discussion of the causes of such angst. While there is no one simple explanation, analysts highlight feelings of insecurity in the community which result from major structural economic changes that have exposed individuals and businesses to increased competitive pressures.
This insecurity is reflecting, among other things, the apparent stagnation of real wages and high rates of unemployment. Although average living standards are increasing and high unemployment is often accompanied by relatively high rates of employment, that does not alleviate insecurity at the individual level.
There is even uncertainty about the value of one's own home, vividly reflected in the United Kingdom in the growing number of people being forced to sell and finding that they actually have negative equity in their homes.
Little wonder that electorates are taking it out on governments in office, almost regardless of political complexion.
Reinforcing this development is the growing acceptance that governments are themselves part of the problem.
Such feelings are probably most evident in the US, where the Republican victory in last November's Congressional elections unleashed a surge of political activity directed at reducing the role of government in fields ranging from social welfare to environmental regulation.
Some of this activity is not new, but the significant element of political bipartisanship is, as both perceive, that the electorate wants government to play a reduced role. In the US for example, the apparent public support for balancing the Federal Budget by cutting spending and having a tax cut has forced President Clinton to adopt a similar Budget-balancing strategy to the Republicans.
True, the Clinton proposals would take longer to balance the Budget and involve a smaller cut in spending but the basic strategy is the same. Even more exciting, there is now a developing prospect of bipartisan agreement on taxation reform that would radically alter the basis of taxation through a flat-rate "income" tax that exempted saving.
In the UK, the new leader of the Opposition Labor Party, Tony Blair, has not only got rid of the socialisation plank from his party's constitution but promises, if elected, a "wholesale review" of the welfare state designed to reduce dependence, deter fraud, bolster the family and make greater use of the private sector to provide welfare services. Mr Blair is also clearly distancing himself from the union movement, Labor's policies on industrial relations will be determined only after discussion with employers as well as unions.
The union block vote at British Labor Party conferences is also diminished, as is the policy role of the conference itself. Mr Blair evidently envisages a social democratic party that appeals to voters as individuals, rather than as members of a union movement with a declining role in society.
Given Mr John Major's lowly position in the opinion polls, and continued issues at by-elections, one might have expected his Government to have brought economic reform to a halt.
But not a bit of it.
In addition to cutting the size of central government, a massive privatisation of British Rail is proceeding on a basis designed to counter criticisms of previous privatisatiions no fewer than 25 companies operating passenger services on a franchise basis. In Western Europe too, a steady flow of privatisations is rolling back more and more government-operated enterprises.
It is evident that, notwithstanding the electorate's feelings of insecurity, few political parties overseas are espousing the cause of no further economic reforms. In part this is a response to the perception already mentioned, that government is increasingly seen as one of the main causes of instability.
But it is also a response to the growing realisation by governments themselves that, at least for the community as a whole, there is no security in a policy of standing still.
Failure to implement policy changes that allow businesses and individuals to compete internationally inevitably leads to lower living standards and even higher unemployment.
The pity of all this is that the overseas debate, and much of the action, seems to be passing Australia by. True, there is considerable interest overseas in the Federal Government's proposals to increase saving and, in the case-management approach, to handling the longer-term unemployed.
Generally, however, Australia is perceived as an economic reform backwater "because you have a cultural resistance to change", it was suggested. The perception that we are content with putting another prawn on the barbie is certainly one we could do without.
ADVERTISEMENT
No comments:
Post a Comment