Australia’s inequality debate

This blog post was first published on Fundweb today.

Having returned from my trip to Australia it is instructive to reflect on what I saw. The country still seems to be surprisingly close in cultural terms to Britain in particular and to a lesser extent to America.

In many respects it is like a Britain 2.0. Similar to the original but with better weather and a far larger land area. Then again it has its own specific twists that differentiate it from other parts of the Anglosphere.

Take the debate about inequality. An essay on “the 0.01%” by Wayne Swan, the new Treasurer (finance minister), in this month’s issue of The Monthly magazine caused a familiar stir.

Swan explicitly followed Barack Obama’s 2012 State of the Union speech in arguing that rising income inequality is “the defining issue of our time”. As in America the opponents of this drive have accused its supporters of engaging in “class warfare”. Swan’s article also implied, although he did not say it implicitly, that everyone should be prepared to make sacrifices if necessary.

It also referenced several British discussions on the same topic. He pointed to the recent series in the Financial Times on “capitalism in crisis” and a book by Stewart Lansley, an economist, on The Cost of Inequality. In addition, he reminded readers that the Archbishop of Canterbury wrote an article in the Guardian which linked last year’s riots to poverty.

However, it would be unfair to suggest Swan’s article was entirely derivative of international debates. Back in 2005 he had a book published, Postcode: the splintering of a nation, which touched on many of the same themes.

In any case there are at least three ways in which the Australian debate seems to differ from that in America or Britain.

First, the emphasis by many in the Australian Labor Party and its sympathisers on egalitarianism as a central part of the country’s national identity. Australians offer refer to this as the idea of giving everyone “a fair go”.

Second, Australia’s economy, at least in aggregate, has done much better than that of America or Britain in recent years. Its problem is an over-reliance on the booming mining sector rather than a decline in economic output in aggregate.

Finally, the villains in Swan’s morality tale are not just bankers – although these are unpopular in Australia too – but mining magnates such as Clive Palmer and Gina Reinhart. This unpopularity helped the government, in which Swan is a leading figure, to get a Mineral Resources Rent Tax passed in the Senate last week. No doubt his tirades against the super-rich were at least partly motivated by a desire to collect more revenue from them.

Egalitarianism, whether in Australia or elsewhere, is not inherently wrong. If it is linked to a drive to make society as a whole richer it can be a positive impulse.

The problem is that it is generally posed in populist terms – through such notions as “shared sacrifice” – as a way of making austerity acceptable. This is a particular danger when powerful figures such as Obama and Swan claim to speak for the poor and against shadowy vested interests.