IPA Review Editorial, November 2008

Isn’t it great when events confirm your political prejudices?

If Kevin Rudd’s widely reported speech in early October is any indication, then the Prime Minister sees in the financial crisis the seeds of a grand, epoch-defining work program for the Commonwealth Government. Having come to national prominence claiming his opposition to the ‘Brutopian’ philosophy of Friedrich Hayek – as muddled as his understanding of Hayek’s actual writing was – Rudd has announced that the financial crisis was all the fault of ‘neo-liberalism’, and ‘a political and economic ideology of extreme capitalism’:

this crisis bears the fingerprints of the extreme free-market ideologues who influence much of the neo-liberal economic elite, free-market ideologues who have a naive belief that unrestrained markets are always self-correcting and that markets left to themselves will always achieve optimum outcomes.

It is a bit odd to criticise the ‘naive belief’ that markets self-correct while we all watch the financial market self-correct in the most dramatic of fashions.

Nevertheless, will historians be able to neatly split Kevin Rudd’s first term as Australian Prime Minister as defined at first by deregulation – his government, after all, appointed the first Australian Minister for Deregulation, not that it’s done much good – and then by a period where pro-regulatory forces were in the offence?

One could be forgiven for believing that the era of small government is over, if only we could remember when it had started.

In his October speech, Rudd recalled the character Gordon Gekko in Oliver Stone’s 1987 film Wall Street. It is somewhat disconcerting that Kevin Rudd is trying to build his political narrative off the dramatic licence of Stone – someone who may be an extremely talented filmmaker, but is also an anti-capitalist of the most lunar left. Stone, after all, thinks the Cuban dictatorship is just swell, and that the US Government is competent enough to kill its own President and keep it a secret for nearly half a century.

Unfortunately, the Prime Minister sees the financial crisis as a cheap morality play-greed caused the crisis, not bad regulations, or poor risk management, or bad decisions. According to his narrative, it is the role of the government (the good guys) to punish the finance industry (the bad guys). The same left-wingers who ridiculed the simplistic dichotomy of the War on Terror-remember George Bush’s apparently ‘inflammatory’ statement, ‘you are either with us or against us’?-are more than happy to jump aboard their own simplistic dichotomy when it comes to the evil and greedy traders on Wall Street.

Of course, we have to be careful seeing any hint of the future in a speech by this Prime Minister. If we could, then we would also be proud of our role as the founding members of the Asian franchise of the European Union, proud that it was our diplomacy that finally managed to enforce nuclear disarmament around the globe, and proud that our ‘moral leadership’ on climate change had managed to convince China and India to forego economic development and instead help fulfil Labor’s election commitment to save this fragile world.

In the middle of a financial crisis, it is particularly appropriate that this edition of the IPA Review leads with a piece on former Labor Prime Minister, Paul Keating. In many ways, the Labor Party is still a post-Keating party, and Kevin Rudd’s Government is a post-Keating Government. But as Greg Barns concludes, ‘Australia’s various and numerous challenges as a nation today require Keating boldness, not Rudd timidity’. The events of the last few weeks have shown us how true that really is.