The Liberal party is facing an existential crisis. In her address to the National Press Club on Wednesday Sussan Ley promised afundamental review of the partywhich would go deeper than the review into its electoral performance being conducted by Pru Goward and Nick Minchin.
On 3 May, theLiberal partydelivered the worst election result for a non-labour supporting party since 1943, when the United Australia party won only 14 seats out of 74. Out of this crisis, a new political party was formed, the Liberal party of Australia, with Robert Menzies as its leader.
The Liberal party did not just lose, it was smashed, said Ley, and so everything needs to be on the table: organisation, membership, getting more women into parliament, the policy development process, and the policies themselves. The only thing not up for review, she said, is values.
But what exactly are Liberal values? And how do they translate into policy?
The one most often mentioned, when Liberals talk about their values, is aspiration. But what exactly does this mean in contemporary Australia and how does the Liberal value of aspiration differ from Labor’s commitment to the very same thing?
The Liberals, Ley says, will always be the party of lower taxes, though how this squares with the party’s promise to lift defence spending is not clear. And it wants to make government better, not bigger. This is the traditional Liberal understanding of its core differences from Labor as the party of high taxes and big government, but it periodically needs reworking to accommodate shifts in both historical circumstances and people’s expectations of government.
Menzies had to do this in the mid-1940s, Hawke and Keating did it in the 1980s, with support from John Howard, and it is shifting again in ways which the Liberal party is yet to grasp.
Menzies’ most pressing challenge in the mid-1940s was organisational, to create a national political organisation out of what was an unwieldy association of state-based organisations operating under a variety of names. But he also had to modernisenon-labour’spolicies, as fighting a war had changed people’s expectations of government.
After the miseries of mass unemployment in the 1930s, the war had delivered full employment and people wanted it to continue into the peace. Labor was promising it would, aided by British economist John Keynes’s theory that government could manage demand and so smooth the ups and downs of capitalism’s economic cycle. Welfare provisions had also increased during the war, beginning with the introduction of child endowment by Menzies’ first government.
Curtin’s Labor government added a widow’s pension, increased the old age pension and eased the means test. In 1946 the Chifley government won a referendum to add social services to the powers of the commonwealth government. Previously this had been a residual power of the states.
Menzies had to convince non-labour to embrace an expanded role for government in managing the economy and providing welfare, while distinguishing the new party from Labor. This is the meaning of the oft-quoted explanation in his memoir Afternoon Light: “We took the name ‘Liberal’ because we were determined to be a progressive party, willing to make experiments, in no sense reactionary but believing in the individual, his rights and his enterprise, and rejecting the socialist panacea.”
It came down to a question of balance. Apart from a few prewar radical socialists and communists, both sides ofAustralian politicshave always supported private property and a mixed economy. Where they have differed, and still do, is over the balance between private and public provision, between the role of the market and the role of government or the state, in the distribution of resources.
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By the end of the 1940s the Labor and Liberal parties shared a commitment to full employment, to expanded welfare provision, and to government-led economic development, through immigration, tariff protection for new secondary industries, such as cars and white goods, and ambitious infrastructure projects like the Snowy Mountains scheme. Where they differed was over the extent of government planning, regulation and ownership: Labor for more, Liberals for less. Menzies labelled Labor’s greater commitment to government planning socialism.
The postwar consensus between Labor and Liberal on an active, expansive role for government lasted until the middle of the 1970s when western economies began to suffer from stagflation – the combination of high inflation and high unemployment which defied Keynesian solutions. New ideas started to circulate among policymakers. Neoliberalism was born, with its argument for a new balance between government and the market in the distribution of resources, which, it was argued, would free up the productivity-enhancing powers of competitive markets and return western economies to growth.
Its remedies were to reduce government spending, deregulate government-controlled markets, privatise government-owned enterprises and contract out the delivery of government-funded services.
By the 1980s a new neoliberal consensus was forming between Labor and Liberal that government’s role in the economy needed to be wound back. Much to the Liberal party’s chagrin, it was Labor that took the lead in implementing these new ideas. Coalition prime minister Malcolm Fraser was not convinced by neoliberalism though many Liberals were, including his treasurer, John Howard. Fraser lost the 1983 election to Labor.
Over the next 13 years, Labor implemented much of the neoliberal agenda and restructured Australia’s protected, highly regulated economy. The dollar was floated, foreign banks were allowed in, protective tariffs were progressively dismantled, government owned enterprises were sold off, government provided services were contracted out. Much of this was supported by the Coalition, and then implemented by it after it returned to government in 1996.
Again it was a question of balance and degree. The Coalition wanted faster and more comprehensive deregulation of the labour market in particular and the curbing of union power. And it wanted faster privatisation of Australia’s monopoly telecommunications provider, Telecom. In this it was held back by its Coalition partner, the Nationals, who have always argued that services to the bush should be subsidised. Labor, on the other hand, paired its support for market mechanisms in determining the distribution of resources with a strengthening of what it called the social wage.
The centre piece of this was Medicare, a new national health scheme, which the Coalition opposed all the way, as it had the version introduced by the Whitlam government as Medibank. It was not until 1995 that John Howard, in his second stint as Liberal leader, abandoned the Coalition’s opposition. This was not because of conviction but electoral pragmatism. By then Medicare was bedded down and a clear electoral asset for Labor on the side of government action, as it has continued to be.
Just as in the 1940s, a shift in the public’s expectations of government is under way, and non-labour must adapt to stay relevant. The neoliberal reform agenda has had its day. Its core reforms have been largely implemented, and some negative consequences are now evident, especially in the delivery of services, funded but no longer provided by government, which have endemic problems with negligence and fraud. Neoliberalism was always an elite-led policy agenda with weak popular support, especially in Australia, which has historically had high levels of government provision.
Now, as the problems facing the contemporary world have mounted up, so have the demands on government to solve them. The Labor government’s introduction of the National Insurance Disability Scheme and the ageing population have increased demand for government-funded services. The unstable strategic environment is pushing up defence spending. The energy transition away from fossil fuels needs decisive government leadership. And the inevitable disasters from the changes to the climate already baked in will put enormous demands on governments for emergency responses, for compensation for the destruction of property, some of which will no longer be insurable, and for adaptation, such as shifting whole communities out of flood plains to higher ground. The climate emergency we face is as threatening to life and property as the threat of Japanese invasion was in the early 1940s, in fact more so.
Prima facie, as the party that has historically favoured more active government, Labor is better placed to meet these challenges.
Complicating this challenge, for both sides of politics, Australian society today is much more complex than it was in Menzies’ day. Then, the main differences a government had to manage were between the working and middle classes, workers and business, country and city, and sectarian divisions between Catholics and Protestants. The three main parties were clearly linked to visible features of the society and economy.
Now, largely because of the postwar migration program, Labor and the Liberals must compete for the votes of a diverse range of ethnic and religious communities which do not fall naturally to either. Adding to this complexity is the expansion of the political agenda to include difficult and hard-fought differences over Indigenous issues, the environment and questions of gender and sexuality. When Menzies evoked the family home he could assume it was a taken-for-granted consensual symbol. This was no longer the case when, in 1988, John Howard put a blond nuclear family on the cover of Future Direction, the policy agenda of his first stint as Liberal leader which sank like a stone.
John Howard’s political genius was to shift the focus of the difference between Labor and Liberal away from the economic, where they largely agreed, to cultural and social questions about gender, multiculturalism, race and competing understandings of settler-Indigenous history. As Liberal leader and as prime minister, Howard skilfully used the so-called history and culture wars to the advantage of the Coalition, and subsequent leaders were carried along in his slipstream. A moderate like Malcolm Turnbull made no lasting impact and Peter Dutton was a clumsy imitation.
But, as is evident in the Liberal party’s historic loss of metropolitan electorates, the culture and history wars no longer work for it. In fact they have become a major handicap. Not only does the party have a problem with women, especially professional women, but also with non-white immigrants and their children, of whom there are increasing numbers in the electorate. As many commentators have noted, Dutton made a disastrous misinterpretation of the defeat of the voice referendum, concluding that it was mainly about race when it was actually about the Australian electorate’s habitual scepticism of the benefits of constitutional change.
A number of times in her address to the press club, Ley promised to listen to young people, where support for the Liberal party has collapsed. And she recognised that unaffordable housing was a challenge to their dreams for their future lives. Once one could get ahead by hard work and saving, buy a home, start a business or a family. But for many of today’s young people the traditional foundation of an adult life, home ownership, is out of reach, no matter how much they aspire to it and how much they work, unless of course they have access to family capital. House prices have grown so much faster than wages, and income is taxed more heavily than capital or wealth.
So here is some advice. If the Liberals want to make aspiration a core value, they need to commit to radical tax reform and to start taxing wealth. Even if they argue for an overall reduction of the government’s share of GDP, if their core value of aspiration is to have any meaning in contemporary Australia, they need to rebalance the tax take of income and capital so that it is possible to get ahead by hard work, as it was in Menzies’ day. And they need to stare down the inevitable indignant roars of wealthy older Australians whose wealth is the result of asset inflation as much as effort and enterprise.
Judith Brett is a political historian and biographer, and an emeritus professor of politics at La Trobe University. Her latest book is titled Fearless Beatrice Faust