Tuesday, 21 February 2012

A party paralysed by ego and weak leadership

A party paralysed by ego and weak leadership

In my time I have seen political conflict, naked ambition, party room challenges, political positioning, skulduggery of various sorts, but I have never seen anything like the contest of Rudd v Gillard.

Until 2010, never had an Australian prime minister been stabbed by his deputy in his first term.

I know it is only one comment but when a backbencher says the former leader is a psychopath, you know that Labor has reached a new all-time low that reflects badly on Australia.

The Government is in paralysis. It has no authority to do anything. Yes, it can pass legislation but every piece of legislation is now under threat from a resurgent opposition. The leadership issue will have to be resolved. In the meantime there can be no sensible prospect of the Government making big decisions on issues like the referenda promised to the independents, school funding policy, and the urgent need to decide on a submarine fleet to protect our country in the 2020s and beyond.

The reason that Labor's faceless men, including the union heavies, installed Gillard was because Rudd's behaviour was erratic and he led a dysfunctional government and they thought Gillard would do better than Rudd. She failed to fulfil that expectation. The Coalition won more seats than Labor. Gillard ended up with a minority Government under the thumb of the Greens and a motley crowd of Wilkie, Oakeshott, Windsor and the left-wing Greens MP Adam Bandt. They all detest the Coalition; even Wilkie, who was duped and then unceremoniously dumped by Gillard, but they still support Labor.

The passage of time has exposed three critical aspects of this messy affair.

Gillard is not to be trusted; as evidenced by the promise not to introduce a carbon tax. This new tax was legislated after Gillard privately pressed Rudd not to proceed with his climate change policy and then campaigned against him for acquiescing with her position. Needless to say, the Australian public have lost faith with a PM who so blatantly breaks her word. Other examples, such as the private health insurance switch, have also dented public confidence.
Gillard is not in the same class as previous PMs. She could have survived as demonstrated by state leaders with initial minorities, who have gone on to build support. However her lack of authority and the inability to get on top of the job have undermined her position. Numerous examples, nearly on a weekly basis, have exposed her lack of political judgement. For example, her 'Toys R Us' speech at the National Conference last year contributed to the view that she is not up to the job and then the Australia Day affair showed that she can't run her own office, let alone the country.
Rudd has been tearing her down at every opportunity. It is laughable to say he has learnt from his experience as Foreign Minister and that he will be a better PM second time round. He has done one thing only since the Gillard coup; promote himself to revenge his overthrow. He is, if anything, more self-centred and more focussed on his own personal interest than ever. His return will tear the Labor party apart - not on policy but based on personality.
This is the real disaster for Labor. This contest has never been about policy because Labor no longer has a core set of values. Rudd and Gillard have both abandoned Keating's and Hawke's economic direction. As best as anyone can understand their view, they now adhere to strands of European democratic socialism but not with any coherence and, given the woeful state of European social democracy, not with any confidence. The lack of any philosophy makes Labor susceptible to pressure from minority groups, especially the Greens and the unions, both of which are further to the left than centre and right-wing elements within Labor.

An example of the 'suffocating' power of the unions was on show last week when the Government moved amendments to its legislation on the building industry. The legislation has deemed certain behaviour to be contrary to the public interest. The unlawful behaviour remains unlawful under Labor's changes but the amendment allows the private parties to agree to prohibit the regulator from pursuing unlawful behaviour. So the private interests are given the special right to nullify the public interest. The reason for the change has arisen because the unions have had to pay some huge penalties for unlawful behaviour. They don't like paying fines so Labor gives them the opportunity to coerce weak employers to agree to let bygones be bygones. It has escaped Minister Shorten that the point about a civil society is that the Parliament sets out standards and requires them to be observed. This incident reveals that Minister Shorten's insatiable ambition dwarfs his interest in upholding the rule of law; an unfortunate sign for an alleged rising star.

I do not know if Rudd will get back. But if his war against Gillard is successful then there are at least three options for Julia.

She could demand a Cabinet position. If she stays in Cabinet she will be forever taking notes and it will be for one reason only; 'Get Kevin'.

She could retire altogether. Kevin could make her High Commissioner in London. This would be the best outcome for Labor because if she stays then everything she says will be seen through the prism of leadership.

The best option for her personally would be to sit on the backbench for six months and not make any decisions about her future until she has had a chance to work out what she wants to do next. Making a decision in the heat of the moment when someone has just tried to finish your political career is usually problematic.

Whatever happens, it looks like an early election is well and truly on the cards. As Bob Hawke wisely once said about the Coalition, the party that can't run itself can't run the country. That is Labor's problem and a change is unlikely to make any difference. It seems that Labor has already sealed its fate.

Tuesday, 14 February 2012

Interest rates are rising, bank bashing is futile

In the last 12 months a cyclone in Queensland wiped out the banana crop and the price of bananas went through the roof.

My local market in South Melbourne sourced bananas through their usual wholesalers but most people cut back their banana consumption. But did anybody attack the farmers and wholesalers? Did Wayne Swan demand that the pre-cyclone price be retained? Did he suggest that South Melbourne people should take their business up the road to the Queen Victoria market?

No, there was no banana bashing then. There was no political benefit in bashing the local fruiterer or the farmer.

A financial cyclone has just been through Europe and the US. Some banks went broke and others have had to be bailed out by their governments. Now, a lot of governments are close to going broke and the banks are not in a good position to lend money to business.

In Australia, the environment in which banks operate is partly determined by international markets, the extent of competition allowed by the Government, the role of the Reserve Bank (RBA) and the demands of the shareholders. So, for example, if the RBA wanted to reduce interest rates then it could do so tomorrow. In the UK rates are close to zero. If Mr Swan really wanted to, and if he was silly enough, he could legislate to allow the Gillard Government to dictate interest rate policy. He could introduce the funny money scheme being touted by Bob Katter. The Government also has options to restructure the banking system to introduce more competition or make other changes.

For many good reasons, the Government has chosen not to make structural changes to a banking system that works pretty well. But governments like to look as if they are doing something. The public are worried and would like to know the Government is managing the situation. So instead the Government prefers to jaw-bone the banks through the media and tell the public that one of the problems is that the banks are greedy.

It is an easy option for a Treasurer with nothing else to offer. The banks have not helped their own cause. The public have had a gut full of shonky financial products and are easily stirred up by Tatts-like bonuses being paid to bank CEOs although no one cares about big payouts to footballers, entertainers and celebrity chefs.

But just because it's easier than ever to bash the banks, it is not a reason why bank bashing is a good idea. In fact, it might be that now is the worst possible time to be undermining the importance of the banking system.

Australians are not the only bank bashers.

US politicians ramped up their bank bashing in about 2007, just before the sub-prime fiasco. They needed to disguise the fact that the sub-prime disaster really got underway when the US Congress passed a law to 'encourage' financing of home loans to low income people. It's great for people to have their own home but, like a credit card, it's no help to let people rack up huge debts that they can't service. Of course bankers should take their fair share of the blame but it's pretty rich for US politicians to deflect public scrutiny of their own behaviour which played a key role in the whole mess.

The situation in Europe is different. Most banks were slow to adopt the sophisticated financial instruments being concocted in London and New York and so they avoided some of the worst problems of CDOs and other schemes. But they still needed some financial support and that was enough to highlight the fact that government debt was out of control well before the GFC.

The banking system in Australia is not in a mess, it's in good shape. We had neither the problem of the US with bad loans or the massive government debts racked up by European politicians. And even when debt was climbing under Keating, there was a heated public debate about debt and sufficient public understanding of the issues to support genuine fiscal reform such as the GST and the successful Howard program to pay off all Commonwealth debt.

Instead of bank bashing, Treasurer Wayne Swan should explain what is happening rather than trying to lay blame. It is all pretty obvious; the price of money is rising and our banks have to pay for it. It's like the bananas; when the price goes up you either cut consumption or resign yourself to the higher price. It's pointless to blame the middleman. Similarly the Coalition should drop its suggestion that the failure of the banks to respond to Swan is because he has no authority.

The banks should not be responding to Swan any more than any other business should be told how to run their business by the Government. Julia Gillard can barely run her office so she should not have a minister telling a bank what to charge for their services. Governments are hopeless at running businesses which is why Liberal and Labor governments sold so many government businesses in the '80s and '90s. For this reason it is inane for the Coalition to say that the Treasurer is weak because the banks don't take any notice of the Treasurer. A much better line for the Opposition would be to suggest that no one in their right mind should listen to the Treasurer on how to run their business. This line would allow the Coalition to still attack the Treasurer but avoid bank bashing.

For Swan, a bit less bank bashing and a bit more explanation of what is happening would be in the national interest. It would do him no harm either because he is sometimes far too shrill for a Treasurer and comes across as a second tier player. A bit more gravitas and less overt politicking would boost his chances of hanging onto the Treasurer's job when and if Kevin Rudd returns.

Tuesday, 7 February 2012

Labor, not the media, responsible for party woes

The rock solid Labor supporters will all be blaming the press for the hyper activity last weekend over Labor's leadership.

This week's delusion is that Monday's poll shows that Julia Gillard is doing better than some had thought and if only Labor MPs would stop talking about the issue then it would all go away.

We regularly had the same thoughts in the Howard-Peacock years. And sometimes the issues would subside for a while, but they always came back. Arguably we lost the 1987 and 1990 elections through a mixture of internal division and the wrong leader. There is a good case to say that we lost the 1993 election because we had the wrong leader with the right ideas, but not the political savvy to get into office.

History shows we got back in 1996 because we finally elected the right leader. It is not easy to find a good leader. In Australian politics once you have a good one, they tend to stay a while e.g. Hawke and then Howard.

The right leader is the one who has the experience, the balance between pragmatism and policy ideals, the sense of direction and the ability to engender some unity out of the rabble. Kevin Rudd was not a good leader. By my definition, anybody who loses the prime ministership in their first term clearly has not got what it takes to be PM. Julia Gillard has some good qualities that got her into the job, but it is obvious she does not have what it takes to be successful. On the carbon tax and Wilkie she has left the Australian public with no choice but to conclude that you cannot trust what she says.

Annoying and trivial as the press can be, the reason they are after Julia Gillard is because they can smell blood in the water.

They talk about Kevin Rudd because he invites them to do so. Labor might go back to Rudd but why? I doubt he has changed that much especially given the way he has been stalking Gillard. If he has not really changed and if he is motivated by revenge, which seems likely, then putting him back would lead to another disaster.

Labor's problem is that the unions swapped Rudd for Gillard, but she is no better. Neither of them have a compass to chart their course. They're both nominally social democrats.

Read the speech drafted for Gillard last week. For Tony Abbott, all he had to do was write his own speech and he was already ahead. Except for a funding scheme for TAFE students, Gillard's speech was more like a script for West Wing than a vision for Australia in 2012. The rest of it was waffle and it finished with waffle.

We will build a new Australian economy.

We will get the country ready for the future.

We will see our nation stick together.

We will see our nation win through.

Gillard said Rudd had lost his way but actually her speech demonstrates she is, at best, a social democrat living in a vacuum.

Rudd, the social democrat, in February 2009, poured scorn on neo-liberalism and then says that the practices of democratic socialism are the answer.

The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed… And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.

He spoke too soon; three years later the big problems are most obvious in Europe where the economic policy failures of democratic socialist governments have brought the entire eurozone to near collapse. The Europeans are struggling to save themselves let alone anyone else.

Kevin Rudd must find it embarrassing to reread his statement.

The challenge for social democrats today is to recast the role of the state and its associated political economy of social democracy as a comprehensive philosophical framework for the future...

The contrast between the competing political traditions within Australia on the role of governments and the market is clear. Labor, in the international tradition of social democracy, consistently argues for a central role for government in the regulation of markets and the provision of public goods.

Certainly inadequate regulation of the capitalist system was a major factor in the GFC, but the lack of productivity and rigid labour markets under Rudd's preferred system have exposed why Europe has not had the resilience to work their way out of the massive debts that threaten to bring down the eurozone.

The Gillard Government is full of waffle, directionless but still clinging to democratic socialism with its signature programs characterised by massive spending, burgeoning debt, the introduction of the mining tax and the establishment of a massive new government-owned broadband supplier.

It's no wonder that Labor is in trouble.

Labor today is not as forward-looking as Labor in the 1990s. Whereas in the 1990s some Labor people denounced social democratic philosophy, you never hear such comments today.

You never hear the sort of remarks made by Bill Hayden in an article in the Australian on September 5, 1995. Bill Hayden was well-respected, partly because when he got his chance to be treasurer in the dying days of the chaotic Whitlam government, he brought down an economically responsible budget. It was the only half-decent budget in the Whitlam years.

In his article he says;

I was deeply committed to a faith in democratic socialism. I believed big government was good for people, the bigger the better. I believed that competition was wasteful and destructive of human dignity, and so on.

I progressively discovered that we politicians – irrespective of our party labels -were not all that good at administering business enterprises. That instead of risking other peoples scarce capital in such things it was better to adopt a 'no lose' position; let the private investors take the risk.

The evidence justifying greater competition is overwhelming. For instance, we now enjoy cheaper and better telecommunications services and air travel. Air fares were 26% lower in real terms in 1995 than five years earlier.

These were not the products of some well-intentioned government, but rather the result of government making room for more competition and choice to determine outcomes and thereby to allow more freedom in the community.

If socialism is ideologically about extensive government enterprise and a large level of government spending, which it is, then I ceased being a democratic socialist long ago.

Seventeen years later Bill Hayden's comments are still relevant. Compared to Kevin Rudd, clinging to social democracy, and the vacuum of Julia Gillard, Bill Hayden was a leader who knew what he stood for and was a lot closer to the values of Australian voters than Gillard or Rudd.

No wonder the press gallery can sense the instability in Labor's ranks. Yes, the press exaggerate, they sometimes tell porkies and worse still they do it just to make a profit. But, as long as that political uncertainty of purpose and direction remains, the press will report every last snippet of internal Labor conflict and fill the front pages of our papers with scurrilous tales of leadership ambition.