COVER STORY The populist wedge: political disaffection comes to Australia
by Chris McCormack
News Weekly, April 22, 2017
Recently, Craig Milne from the Australian Productivity Council (not the Australian Productivity Commission), reflected on the effect of free trade in Australia over the last 40-plus years.
The result has been an increase in unemployment from around 2 per cent between 1950 and 1970 to a claimed 5.9 per cent today. Youth unemployment is even higher, and the figures are further distorted by the inclusion of people who are engaged in as little as one-plus hour of work a week being classed as employed.
Manufacturing has fallen from 29.7 per cent of gross domestic product (GDP) in 1957 to 6.5 per cent of GDP today. Many skilled and high-skilled jobs have been lost offshore. It appears that while some workers have found new employment with comparable wages, many have been forced into lower-skilled, lower-waged, and casual work.
To take one example, two years after Mitsubishi’s 2004 closure in Adelaide, a third of the retrenched workers were in full-time employment, a third were unemployed and a third were under employed.
The foreign debt has exploded from 15.2 per cent of GDP in 1983–84, to 54.6 per cent in 2013–14. We rely on mineral exports to pay for goods we no longer produce at home.
The casualisation of work, the diminishing pool of skilled, fulltime, well-paid jobs, rising cost of living pressures, unaffordable housing and wage stagnation are leading to voter disillusionment. In addition, governments of both persuasions have pursued policies to subsidise child-care providers in the mistaken belief that more women in the workforce will raise productivity, while gutting family benefits to coerce women of childbearing age into the paid workforce, which has the effect of reducing the birth rate.
Commentators have pointed out that the take-up rate of women re-entering the workforce as a result of putting more funding into institutional child care, at the expense of family home care, is likely to be small. In Canada, for example, child-care subsidies were shown to be a net burden on taxpayers, with only 40 per cent of the child-care subsidies recovered through taxes from the 7 per cent increase in female work participation.
Both feminists and big business have pushed policies to coerce women into full-time work. John Howard did help families, but that has since been eroded by the Gillard/Rudd and now the Abbott/Turnbull governments.
Government support for cuts to penalty rates further exacerbates the angst many feel. Adding to the feeling of powerlessness of many is the vacuum of any sensible policy put forward to alleviate these concerns and points of tension in the community.
The economic condition of many Australians mirrors many aspects of the American experience. The Democrats and Republicans have both heralded deep globalisation as the answer to any supposed economic hurdles, but the result has been spectacular falls in meaningful employment, manufacturing and industry.
Between 2000 and 2014, one estimate (Robert E. Scott, “Trade, not productivity, is the culprit”, Manufacturing Job Loss, Economic Policy Institute, August 11, 2015) says 5 million jobs were lost in manufacturing in the United States with manufacturing output falling 10.3 per cent between 2007 and 2009. Another puts the number of people employed in the manufacturing and agricultural sectors shrinking from one in three people in the post-World War II era to one in eight people now. The manufacturing and agricultural economy shrank from 33 per cent to 12 per cent, while the services economy grew from 24 per cent to 50 per cent in that same period.
Clearly, not all workers who were employed in the manufacturing and agricultural sectors can seamlessly migrate to jobs in the services sector (where the growth industries have been finance, insurance and real estate, doubling its employment share from 10.5 per cent to 21.4 per cent) while professional and business services – that is, marketing, managing, consulting, computer services and health and education services – grew from 13 per cent to about 30 per cent.
Many semi-skilled workers in manufacturing or agriculture cannot just pick themselves up after retrenchment or being forced to sell the family farm and utilise the skills required for these white-collar, professional jobs.
Similarly, while so-called rustbelt Americans could see their jobs disappearing in a seemingly relentless manner, they could also see bank executives and elites growing ever wealthier: even as banks were collapsing and being bailed out with billions of dollars during the GFC.
This disconnect between the elites in the media, banking and political arenas and the general population was a festering sore that found its cure in the election of Donald Trump. At face value, the ultimate anti-globalist, anti-establishment, non-politically correct candidate.
So, what does all this mean for Australia?
In the absence of any cogent policies to deal with the concerns of the disaffected by either of the major parties at the last federal election, many Australians voted for One Nation, gaining it four Senate seats. More recently it won it three upper-house seats in the West Australian election, with the Liberal Democrats gaining one. The Shooters, Fishers and Farmers Party retained its one seat. One Nation polled only 0.5 per cent less overall than the National Party.
Since the federal election last year when 12 per cent of voters cast their vote for a party other than the Coalition, Labor or the Greens, this number is now 19 per cent, according to Newspoll. The Coalition lost nearly 19 per cent of its vote in the Northern Territory election last August and nearly 16 per cent in the recent WA election. Federally, the rise of the Nick Xenophon Team and Family First in South Australia, and independents such as Derryn Hinch, Jacqui Lambie and David Leyonhjelm all display a trend towards electing candidates who are not major party apparatchiks.
The recent defection of Cory Bernardi from the Liberal Party (to form his own Australian Conservatives Party), reflected differences on cultural issues such as same-sex marriage, abortion, Muslim immigration, and the rest.
In fact, it was after Cory Bernardi spent time as part of a delegation to the U.S. in the lead-up to the U.S. election that he made the decision to defect from the Liberals, perhaps prompted by the anti-establishment feeling that culminated into the election of Trump.
Simply parroting the economic benefits of free trade no longer cuts it with the voters as the job market continues to contract. Holden claims the end of the automotive industry will mean 45,000 direct jobs lost and another 135,000-270,000 jobs lost indirectly when it follows Toyota in October and shuts down, shrinking manufacturing to a level below that of Greece. In comparison, The World Bank shows manufacturing is 23 per cent of the German economy, 18 per cent of the Japanese economy and 12 per cent of the US economy. No amount of government hyperbole and promises of transition welfare will placate the growing anger of voters as their jobs are shipped offshore to nations with lower costs of doing business.
In an article by Paul Kelly (“The Crisis of Conservatism”, The Australian, February 25–26, 2017), it is argued that the policies of the Howard government were more encompassing of “mainstream Australians”, as John Howard called them, and this underpinned his enduring success. The failure since then to set a new policy agenda that deals with the downside of deep globalisation is responsible for the fragmentation of the conservative voter base.
John Howard is quoted as saying: “We have to explain – and I think Malcolm Turnbull is well positioned to do this – the global benefits of openness in trade and economics and how much better off the world is because of globalisation and the export of competitive capitalism to Asia.
“This is a moral argument. If you want a moral challenge for the world, it’s eliminating poverty. That’s a much greater challenge than eliminating climate change. In the last 15 to 20 years we’ve lifted hundreds of millions out of poverty. This is a terrific story and its something the centre-right parties of the world should go on the attack over.”
Howard is partly right. Without America being open to Chinese manufactures, China would not have lifted more people faster out of poverty than ever before. However, the blind side of radical free trade policy is the growing inequalities in advanced economies undermining trust in both governments and the corporate sector, and fuelling political instability.
Until the major parties in Australia radically shift their thinking, a procession of jobs will be lost to nations with lower costs of production, while innovation will see more jobs done by smart machines. As a result, the major parties’ share of the vote will continue to be swallowed up by minor parties articulating an alternative that resonates with voters.
Edelman is a leading global communications marketing firm that does annual global polling on the level of public trust/distrust in governments, the media, corporations and other major institutions. In its most recent findings, more Australians distrust their leaders than trust them. Further, levels of distrust in government are growing over globalisation, eroding social values, corruption and the pace of change.
Prime Minister Turnbull went to the last election on the policy of “innovation,” which for most people means robots and smart machines replacing jobs. Edelman notes that both Australia business and government appear oblivious to the fact that automation may mean innovation to them, “but to the public, it can translate to job losses and communities in decline, which exacerbates the disconnect” between the workers and business and between voters and politician.
Given the growing electoral discontent and the fact that the Turnbull government has only a slim margin in the House of Representatives, now is the perfect time for the Nationals, who effectively hold the balance of power in the Government, to take the lead and arrest the haemorrhaging of votes to minor parties.
Traditional National Party supporters want policies for rural and regional Australia: building major infrastructure in the regions; reductions in irrigation water prices which have risen nearly 900 per cent since the introduction of free trade in water and the acquisition of more water for the environment; more quarantine funding to stop the now regular incursions of pests and diseases; and rebuilding farmers marketing agencies to counterbalance the skewed market power of major retailers. The right policies for the rural sector would in equal measure benefit small business.
The Nationals have everything to gain in pursuing a new policy agenda, and a lot to lose in continuing to support outdated radical free trade and deregulation policies.
Turnbull and the Coalition don’t seem to have been reading the Parliamentary Library’s briefing paper, Australia's Free Trade Agreements (December 2008), which assessed Australia’s free trade agreements (FTAs) since 2000. It found that the Thailand-Australia FTA resulted in Australia’s trade deficit rising from $711 million to $3.5 billion.
Similarly, after the Australia-U.S. FTA, motor vehicle exports fell by more than 200 per cent between 2004 and 2007, and automotive parts exports fell from $286 million to $131 million from 2003 to 2007. By 2007, Australia’s $13.6 billion trade deficit with the U.S. was the highest trade deficit Australia had recorded with any trading partner.
Prior to the agreement, a National Institute of Economic and Industry Research study warned that the Australia-U.S. FTA could cost the Australian economy up to $50 billion and 200,000 jobs. A 2008 IMF study predicted it would shrink the Australian economy by 0.03 per cent a year.
The 2008 Parliamentary Library briefing paper found that for all four FTAs completed at that time, “the FTAs were followed by higher Australian trade deficits and a much slower rate of reciprocal export growth.”
Dr Mark McGovern from QUT has pointed out (“Free trade agreements fail to boost Australian agriculture and food manufacturing”, The Conversation, September 17, 2015) that Australia’s trade performance in agriculture has been better with countries where we have no trade agreements than with those where we have signed FTAs.
Trump has recognised the loss of jobs and growing inequalities caused by deep globalisation policies and has indicated a shift in policy, either through increased tariffs or a destination-based tax system. Either policy, if implemented, will mean Australia will need to respond in more than platitudes if it is to compete with a new tax and trading paradigm from the world’s leading economy.
 Craig Milne, “Has trade liberalisation helped or harmed Australia?”, Australian Productivity Council, May 2014.
 Jason Dowling, “Who killed the car industry?”, The Sydney Morning Herald, November 13, 2015.
 Anthony Kryger, Economics Section, “Australia’s foreign debt: a quick guide”, Parliament of Australia, 28 October, 2014.
 Robert E. Scott, “Trade, not productivity, is the culprit”, Manufacturing Job Loss, Economic Policy Institute, August 11, 2015.
 Derek Thompson, “Where did all the workers go? 60 years of economic change in one graph”, The Atlantic, January 26, 2012.
 Newspoll, The Australian, April 10, 2017.
 Three years of Liberal/National pain at elections, The Australian, March 13, 2017.
 Dowling, Op. cit., November 13, 2015.
 Manufacturing, value added (% of GDP), The World Bank.
 Paul Kelly, “The crisis of conservatism”, The Weekend Australian, February 25–26, 2017.
 “The End of Poverty in China?”, Project Syndicate, March 28, 2017.
 2017 Trust Barometer, Trust in Asia Pacific, Middle East & Africa, pp73–74.
 Michael Priestley, Economics Section, Background Note, Australia’s Free Trade Agreements, Parliament of Australia, Parliamentary Library, December 2, 2008.
 Dr Mark McGovern, “Free trade agreements fail to boost Australian agriculture and food manufacturing”, The Conversation, September 17, 2015.