What can’t be said
Having recently read biographies of Paul Keating, Wayne Swan, and Craig Emerson, I’m astounded at their incredible levels of political commitment and investment in the Labor Party, and to Australia, during the Hawke-Keating period of government from 11 March 1983 to 11 March 1996.
However, their economics was fatally flawed.
Emerson’s account expands into the later period of the Rudd-Gillard-Rudd Labor governments (December 2007 to September 2013) too, and I’m just about to start reading Kevin Rudd’s autobiography. I note Rudd has a chapter entitled “It Really is the Economy, Stupid!” and whilst that’s very insightful, I’ll hope to find what can’t be said in Rudd’s book. I doubt I’ll find it, however.
With Labor, it always was the economy. It was that Australia must capture its land rent, in order to keep a lid on land prices and to protect the level of wages. It was simply P – R = W + I.
The federal Australian Labor Party actually grew out of the unions and the colonial labour parties founded by the supporters of the American social philosopher, Henry George, as a reaction to the 1890s depression in Australia which had followed on the heels of the 1880s land boom. Karl Marx had claimed that George’s land tax was capitalism’s “last ditch”.
But that’s right, the Labor Party was Georgist: a site for the Australian Capital Territory to be established on the basis of leasehold land tenure was selected in 1908; the federal land tax was introduced in 1910 and; the publicly-owned Commonwealth Bank of Australia was established in 1911.
Accordingly, the period 1890 to 1920 has come to be known as the Progressive Era, even though Wikipedia sees its anti-speculative influence to have only been upon the US, despite it clearly showing up in Australia, and even in the UK’s Asquith Government’s 1909 People’s Budget.
However, the Menzies Government abolished the federal land tax in 1952. In a 33 minute parliamentary speech on 24 February 1953 Labor leader Arthur Calwell, vehemently attacked the decision: “We of the Australian Labour Party have always believed that the land is the patrimony of the people, and that nobody has a complete and absolute title to it …. The land belongs to the people, and its use must be safeguarded and protected at all times …. We have always believed in the land tax, and when happy days come again we shall restore the measure, imposing the tax to the statute book of this country.”
But, no, apparently Calwell and Georgists were delusional; they’d become an embarrassment.
In 1963, Cyril Wyndham, the Labor Party’s new national secretary, considered P – R = W + I and the federal land tax policy was no longer palatable to an Australian public gravitating to home ownership in the buoyant 1960s. However, with Georgists such as Clyde Cameron still strongly advocating its raison d’être, it might be easier for Wyndham simply to write land tax out of the ALP’s 1964 platform altogether – without the mandatory party vote. [!]
And thus was born an historical 180 degree economic reversal – Labor’s unstated commitment to real estate speculation.
Nor did the unions, which had originally helped formulate Labor land tax policy, generate a fuss on the removal of the party’s key economic plank. In fact, the unions have now come to manage superannuation funds heavily committed to Australia’s speculative property market.
So, although the Reserve Bank of Australia belatedly applied a 17.5% cash rate in 1990 to curb the real estate bubble, it was ineffective and too late – the 1988/89 peak of the land price bubble had wrought its damage, and the Victorian and South Australian governments were dismissed as the recession set in.
Interesting to note, that none of the Labor biographies I’ve read to date mention the incredible 1988/89 land price bubble which introduced the 1991 recession when it burst—it’s what can’t be said, because Labor is now afraid to allude to the only tool that would have precluded the recession: a land tax, a “wealth tax“. [Gulp!] The Tories would make too much of that!
So the very party formed to abolish real estate bubbles, now acts to keep them inflated at any cost – more than $50 billion by the Rudd-Swan government in the case of the current residential real estate bubble.
This historic reversal by the Labor Party places it firmly in the same economic camp as the Tories. Its proposed fiddle with capital gains and negative gearing remains very much a “second best” solution for a workable economic policy for Australia.