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P. P. McGuinness, “Where Australia might be heading,”
The National Times, April 13 to 19, 1980, p. 38.

With the end of the century to come within the working life of the majority of Australians now alive, and the world economy in a state of great uncertainty, disarray and malfunctioning, the fate of the Australian economy and living standard is a matter of major concern.

We are in our endowments of natural resources extremely fortunate. But the pressures operating from inside and outside are such that there is a wide range of possibilities facing us: either, on the most optimistic scenarios, we could become a dynamic, prosperous and exciting place to live, or if things do not work out for the best Australia could end up a stagnant backwater, prey to whatever pressures more powerful countries might apply.

The impact of new technology, the rise of the newly industrialising countries of the third world, the effect of rising mineral exports on our manufacturing industry (along the lines of the “Gregory thesis” bringing about a rising value of the Australian dollar or a flood of cheap imports), the dominance of our industry by foreign interests as a result of unfettered investment from abroad is one set of worries.

The possibility that the response to these factors might lead to conservatism, protectionism, low growth, inability to adjust to changing technology and world market patterns, increasing bureaucratisation and inequity, and a rentier mentality throughout the population, is another.

This latter “scenario” is the pessimistic one set out in a new look at Australia’s social and economic future over the next generation.

This is the kind of thing which the authors of a new book on our prospects describe as the “mercantilist trend.” Australia at the Crossroads (Harcourt Brace Jovanivich) is the work of five academics, four of them economists, who got together with the assistance of the Shell group of companies in Australia to conduct an exercise in futurology.

(Before anyone dismisses the project because of the source of its finance being a multinational oil company, it should be noted that the book strongly recommends a resources rent tax similar to that supported by the Labor Party — the book is not a reflection of Shell’s views or interests.)

The authors are Wolfgang Kasper, professor of economics at Duntroon, Richard Blandy, professor of economics at Flinders University, John Freebairn, professor of agricultural economics at La Trobe University, Douglas Hocking, senior research fellow at Monash University and formerly chief economist for Shell Australia, and Robert O’Neill, head of the Strategic and Defence Studies Centre at the Australian National University.

For the most part, Australia at the Crossroads traverses ground familiar to anyone who is accustomed to worry about the proclivity of Australians to prefer short-sighted and narrowly self-interested options in economic policy matters. Much of it could be described as an extended (and much less readable) footnote to Max Walsh’s book Poor Little Rich Country (published by Penguin Books).

But what makes the book unusual and of special interest is that it is the first major public manifestation of the new intellectual fashion which is sweeping the universities of the developed countries, and which has hitherto received relatively little attention in Australia — the new Libertarianism. The group which prepared this book devoted a considerable amount of space to describing what they call the “Libertarian Alternative”:

We have called this scenario “the Libertarian Alternative”, partly for lack of a better word. “Liberal” has become one of the weasel-words of modern politics. “Market-oriented” is too narrow, and “competitive” too one-sided. We are aware that the term “libertarian” has the connotation in Australia of “licentious”, a notion which is rather out of place in a scenario that would expose many Australians to the discipline (and the rewards) of the market place.

We have chosen this label mainly because it is increasingly gaining currency in English speaking countries overseas in a wave of social thinking that is critical of growing State involvement and of growing controls over individual endeavour. We want “Libertarian” to be understood in the tradition of such social philosophers as Adam Smith, Friedrich Hayek, and Milton Friedman.

The old Sydney Libertarians, followers of Professor John Anderson would no doubt strongly object to this usage. Most of them (with one or two notable exceptions) are cosily ensconced in tenured sinecures in the universities or the Public Service and have long since become respectable family people.

And Friedrich von Hayek is a brilliant but faintly absurd economist and political philosopher who devoted some years of his life to trying to establish that John Stuart Mill did not go to bed with Harriet Taylor before Mr Taylor died.

This does not make the fact that a group of highly competent analysts have developed a “Libertarian” scenario for Australia any the less interesting. However, as with Hayek’s writings (and to a lesser extent Friedman’s) there is an air of unreality about the scenario they develop. The major policies upon which this scenario is predicated are:

(i) free international trade;
(ii) acceptance of the structural changes wrought by new technologies and the removal of protection;
(iii) elimination of restrictions on international capital flows and on free competition in the domestic capital markets;
(iv) resolute application of anti-monopoly and restrictive trade practices legislation [sic];
(v) de-regulation of many markets and other activities, especially in the area of entry by persons and films that wish to compete;
(vi) greater variation in relative occupational wages and of real wages in response to market forces;
(vii) reduction of the government’s role as a producer of many basic services, including education, health and welfare, and;
(viii) expansion of the government’s role as a provider of income maintenance and purchasing power for the acquisition by individuals of the basic services they want (through negative income tax, endowment and voucher schemes).

If such policies were wholeheartedly implemented, the authors believe, Australia by the end of the century would be a strong, powerful confident country, with a living standard roughly twice as high as that which would ensue from the “mercantilist” scenario. The authors say:

As a result of libertarian policies, Australians will, in the year 2000, enjoy living standards exceeding those now prevailing in Switzerland and West Germany, and will be among the wealthiest countries in the world early in the twenty-first century.

The first thing which needs to be said is that if the authors are right in their analysis of how free-market systems work, and if Australia were prepared to wholeheartedly adopt the libertarian policy approach, the could very well be right about the rosy prospects before us. They certainly have a strong case for predicting a mean and grey future for Australia if the “mercantilist” option is chosen.

But these are two very big ifs. The likelihood of any major political party, or any substantial segment of the electorate, suddenly abandoning the traditionally conservative protectionist and log-rolling approach which typifies Australian politics, and has ever since the white invasion, is small.

But even if there were a revolution in Australian attitudes, would the libertarian alternative be the best approach? The authors, in their desire to return to the doctrines of social optimisation by invisible tendencies operating in a free capitalist economy, doctrines which not even Adam Smith believed in, are simply peddling a Utopia.

Their scenario sounds attractive. In fact anyone who has an attachment to political liberty, equality of opportunity, social mobility and the abolition of poverty could not help feeling that this is the way Australia should go. But it won’t.

For even if all the policies advocated by the “libertarians” were implemented, there is simply no historical or theoretical ground for believing that the evolution of the economic system would take place upon the lines they hope for.

They have adopted the hardly new stance of implicitly building in an omniscient and freedom loving dictator who will put things back on the right path if the society strays from it.

Adam Smith, and the group of philosophers before him who developed the idea of a self-regulating and perfectly working system which would produce the best results for all if only it were left alone (except for making everybody act like ideal little capitalists) had some excuse; they were developing a model to replace the chaos of a political system which was motivated by ambition, the lust for power, the desire of glory and so on. To them avarice seemed to be greatly to be preferred as a social motivation.

But the reinvention of eighteenth century social theory under the guise of economic analysis is hardly a firm basis for economic policy in Australia or anywhere else.

(in order of appearance on
  1. Where Friedman is a pinko
  2. The Economic Guerrillas: A lecture in honour of Maxwell Newton
  3. The Libertarian Alternative
  4. Libel laws block insider's revelations of Australia's industrial mess
  5. But perhaps the merchants of doom have a point
  6. The Origins of Paddy McGuinness
  7. The Itch for Influence
  8. LA safe from religious poverty
  9. Aunty should hang up her boots in face of premature senility
  10. Warning: health is a budget hazard
  11. New ABC Tory chief won't rock the boat
  12. Time to sell the ABC
  13. Youth victims of the welfare con
  14. Paddy McGuinness on class sizes (1991)
  15. More teachers won't solve the problems in our schools
  16. Paddy McGuinness on Catholics and wealth distribution
  17. Paddy McGuinness proposes inheritance tax equal to handouts received by deceased
  18. Let them swim nude
  19. Time to legalise heroin
  20. State-sponsored sports rorts
  21. The blight of the baby-boomers
  22. To reduce the problems of crime and corruption, legalise heroin
  23. We should ban Olympics
  24. Evidence shows heroin policy is not working
  25. Wowsers deny society while killing children
  26. Will Australia compete?
  27. Canberra's social revolution
  28. Paddy McGuinness in 1994 on the 2012 class size debate
  29. Why not pay for the ABC?
  30. Paddy McGuinness on David Stove
  31. Sometimes the truth hurts
  32. Paddy McGuinness on compulsory, informal and donkey voting, and breaking electoral laws
  33. Thomas Sowell, McGuinness, Aborigines and other minorities
  34. Genocide with kindness
  35. Hyde, McGuinness and Sturgess on Chaining/Changing Australia
  36. Paddy McGuinness defends comparing IQ of races
  37. Do-gooders should glorify smokers
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