James Goodman, of the School of Social Inquiry at UTS, situates Rudd’s philosophy historically, arguing that his pricincipal goal is marketisation and that he fails to answer the problems of neo-liberalism
Kevin Rudd’s article on the “Global Financial Crisis”, published in The Monthly in January 2009, presents us with the key features of an emergent post-crisis social liberalism. This is best characterised as “Ruddism”, a dominant ideology, now strutting in its full plumage.
What are the key parameters of Ruddism?
Most important, we are told it is emphatically not neoliberalism. Rudd announces the end of an “epoch”, marked by a “seismic” shift: with the financial collapse of October 2008 we see the end of neoliberalism as an “economic orthodoxy”. The cause of that collapse is regulatory failure under neoliberalism: the solution, for “social democrats”, is to “save capitalism from itself”.
Rudd establishes a sharp divide between neoliberalism and his preferred social democratic approach. Neoliberalism is a form of “fundamentalism”, it promotes “extreme” capitalism and “excessive” or “unrestrained” greed. Social democrats embrace “open, competitive markets”, “private incentive”, and “public responsibility” centred on the “agency of the state”.
The imagined policy field is flanked by “extremist” free market neoliberalism, and statist protectionism. Rudd rejects the idea of an anti-market, protectionist, “all-providing state”. In the anti-socialist tradition, Rudd smears the “extreme Left”, linking it to protectionism, statism, and the “nationalist Right”.
Rudd steers a course between his two extremes. He commits himself to what he describes as the “cause of open, competitive markets”, albeit “properly regulated”. Marketisation is the principal goal of Ruddism. The social democratic caveat is secondary, pragmatic and contingent on “market failure”.
Such failures require treatment. The financial crisis proves that markets need to be “properly regulated” in order to deliver “productive capacity”. Climate change gets a mention, as do market inequalities. Here, social democrats offer a “commitment to fairness”, and thereby legitimise the market against extremists.
In his history of the present crisis Rudd blames anti-state neoliberalism. For thirty years, he claims, neoliberals have implemented the same orthodoxy, inspired by the same Hayekian principles. The problem for his diagnosis is that neoliberalism has changed over those three decades, and since at least the mid-1990s has openly embraced the state.
As the World Bank put it in 1997, the principal role of the state should be “steering” not “rowing”. The change of heart, to what some have called the “Post-Washington Consensus”, sees the state re-empowered as the central facilitator of marketisation. The story is not so much one of “roll back the frontiers of the state” as Thatcher put it, as using the state to promote the market.
In fact, anti-statist neoliberalism hasn’t existed as an orthodoxy since the days of Thatcher, and in any case never practiced what it preached. As many have observed, neoliberal policy itself has always been highly interventionist in its “pro-market” regulatory approach. It is a long time since neoliberal policy-makers believed that government activity needed to be “replaced” by markets.
So Rudd’s neoliberal “extremist” is a straw person: it hasn’t existed for some time, but is a necessary building-block in his anti-extremist self-presentation. The uncomfortable truth is that we have had at least a decade of pro-state neoliberal orthodoxy, that favours state policy geared to the “cause” of open markets.
This is the very same “cause” that Ruddism advocates: regulation for open markets.
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As Ruddism grasps the mantle of social democracy it is worth recounting its trajectory in Australia, and in the ALP. In the early Twentieth Century Australia was, as Stuart MacIntyre puts it, a “social laboratory” for social democrats. Even then, social democracy was positioned in the middle ground between rampant capitalism and revolutionary socialism.
Australia was its examplar. The federal Labor Government of 1910-1913 was the first nationally-elected social democratic administration; by 1914 Labor Governments had also been in power in all the States, and had made significant advances in state welfarism.
As such, Australian social democracy offered an “evolutionary” pathway to socialism. Eduard Bernstein and Karl Kautsky, key intellectuals of the Second International, and of democratic socialism, cited Australia as evidence of the capacity to socialise capitalism through electoral success and policy reform, proof that revolution was obsolete.
For their revolutionary counterparts, who established the Third International, the Australian variant of social democracy was a dangerous illusion. In 1913 Lenin characterised the Labor Party as a “liberal-bourgeois party” (and the Liberal Party as conservative), reflecting the character of class conflict under settler capitalism.
In formal terms the Labor Party began its days committed to state socialism, in 1890 aiming to nationalise “all sources of wealth”. By 1921 it had accepted the mixed economy, and did “not seek to abolish private ownership” if used in a “socially useful manner and without exploitation”.
In 1951 the Party sought “socialisation or social control” only “to the extent necessary to eliminate exploitation and other anti-social features”. With this, Labor became a clearly social democratic party, within the anti-Communist bloc, despite continuing to call itself “democratic socialist”.
Remarkably enough, the 1951 formulation remains in place, enshrined in the ALP Constitution. The only significant change, in 1982, was to underscore “democratic” socialisation, and define it in terms of regulation and redistribution rather than state ownership. As part of this, Labor expressed active support for “a competitive non-monopolistic private sector”.
Within this rubric, successive national platforms have moved ever-closer to embracing markets as the vehicle for ALP objectives, in contradiction with the commitment to “socialisation”. With this, the ALP has shifted to a market reform agenda best characterised as social liberal, rather than social democratic.
Which brings us back to Rudd, an insistent anti-neoliberal, a new social democrat?
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To convincingly monopolise market regulation for social democrats, Rudd has to characterise neoliberals as rabidly anti-regulation. With the financial crisis, social democracy triumphs. Unfortunately for Rudd, the crisis brought little in the way of policy division between avowedly neoliberal governments and their social democratic or social liberal counterparts. The G20 consensus that he praises is testament to this.
The differences are on the margins, between more or less regulation, or a stronger emphasis on pump-priming for consumption. What is remarkable is the uniformity, especially in terms of bank bail-outs. Yet even this is not new for neoliberals: as Rudd mentions, through the ‘80s and ‘90s the US Federal Reserve would routinely pump credit into the system to ride-out a slump.
The difference of course is the scale of the 2008 crisis, and the corresponding mountains of corporate welfare, now equivalent to about 10 per cent of global GDP. Given the muscular talk of necessary regulation, here at least, one might expect Ruddism to take off the gloves. But no, once the system is afloat, the G20 should exit the market, “pulling back from direct involvement”.
There should be “new rules of the system”, but the most we get is talk of prudential regulation, disclosure standards, consumer protection and the promotion of competition, with “supervisory frameworks to promote incentives”. There should not be “excessive” expansion of derivative markets, and some regard given to the impact of “incentive structures” and “executive remuneration”.
And remarkably, the International Monetary Fund, that avid defender of global finance marketisation, is to be rewarded with new funding, and strengthened “early-warning” and “oversight” powers (powers it has been seeking since the late 1990s). This is the Rudd package that will “prevent the race to the bottom” in financial regulation.
The minimalism jars with the anti-neoliberal rhetoric, and it is very tempting to assume bad faith. Ruddism could plausibly be a manipulative smokescreen. But what shines through the text most of all is not manipulation, but a rosy, almost dewy-eyed belief in the purity of the market, if only it could be regulated “appropriately”.
Market regulation of this sort is inspired by neoclassical economic theory: it is driven by an unshakeable faith in the competitive market as the foundation for prosperity. Once the regulations are in place to ensure the market is working, it is simply a matter of “harnessing” it to finance the provision of “public goods” and thereby secure welfare goals.
The model of course grossly underestimates the power of finance, most notably to remake the rules of the game. As demonstrated for instance by Ronan Palan, finance markets routinely normalise illicit activity. The key point is that the market is shaped not by regulation, but by accumulation.
For Rudd, regulatory failure caused the financial collapse. This may have been a precipitating factor, but the more fundamental driver was the wholesale financialisation of assets that occurred under neoliberal globalism, recreating the world as a speculative casino.
The ballooning of finance markets that led to the collapse reflects deepening global under-consumption, and its flip-side, over-production. China is now the workshop of the world, with wages held down by command capitalism; meanwhile, as David Harvey outlines, in the US real wages for workers have been falling for decades.
Rudd alludes to the resulting global divides, that paradoxically see China, amongst others, bankrolling the US. The answer for Rudd is to deepen cooperation and not to rock the boat. There is no sense of the underlying consequences, in terms of digging the hole deeper with escalating US debt, and deepened uncertainties.
The follow-up to Rudd’s Monthly article, published in July this year in the Sydney Morning Herald, offers nothing more in terms of regulatory muscle to restrain the excesses of the market. Instead it charts a new push for national global competitiveness to secure “a greater slice” of the global economy, centred on increased “productivity”.
Talk of “social democracy” is replaced by references to the “responsible centre”. Concerns about inequality are superseded by calls for “unity of purpose” and “nation building”. Rather than growth stimulus, a key goal is to retain the strongest “balance sheet of all major advanced economies”. Budget cuts are flagged, as are tax cuts for corporates. Regulation of markets is (ironically) redefined as “efficient regulation”.
Finally, and most offensively, “carbon efficiency” is figured as a “new competitive battleground”. The Government’s carbon pollution reduction scheme is now presented as a means of gaining competitive edge. Predicting that “output costs” will be 15 per cent higher if the scheme is delayed, Rudd explicitly states “that is why” the Government is committed to it.
The Ruddite brand of “social democracy” is packed full of contradictions, and is best characterised as a form of social liberalism. Devoted to the “cause” of “open markets”, it fails to answer the problems of neoliberalism. What gives it political power, at least for now, is its claim to be the “responsible” answer to neoliberal deregulation. As regulation fails, especially in terms of advancing climate change, that claim wears thin.