Inequality: Are we losing our identity?

Carmen Lawrence, MP

Fred Argy Where to From Here? Australian Egalitarianism Under Threat, Sydney, Allen & Unwin, 2003 (224 pp). ISBN 1-86508-852-8 (paperback) RRP $24.95.

Mark Peel The Lowest Rung: Voices of Australian Poverty, Cambridge University Press, 2003 (224 pp). ISBN 0-52183-062-1 (paperback) RRP $37.95.

Michael Pusey The Experience of Middle Australia: The Dark Side of Economic Reform, Cambridge University Press, 2003 (262 pp). ISBN 0-52165-844-6 (paperback) RRP $36.95.

I think most Australians still hold the view that ours is an egalitarian society. Indeed, some would argue that egalitarianism is the value that defines us. While there are signs that more and more Australians are uneasy about widening of income and wealth gaps, many still appear to accept the boast made by our leaders that ours is a nation of equals where the ethic of a ‘fair go’ governs our private and public relations. But is this really so?

Through the prisms of their respective academic disciplines (economics, history and sociology), and with different levels of abstraction, Argy, Peel and Pusey all question this comfortable assertion. Argy’s arguments are firmly based in aggregate, mostly national data; Pusey’s in repeated interviews with a panel of 400 middle-income Australians, and Peel’s account, in many ways the most engaging, on ‘conversations’ with a cross section of Australia’s poorest citizens from the large public housing estates of Inala in Brisbane, Mount Druitt in Sydney and Broadmeadows in Melbourne. The authors might disagree about the extent of the problem but all three conclude that inequality amongst Australians is increasing and that egalitarianism itself may be under threat as a defining social objective. And they all think that it matters.

All begin with the assumption that there is nothing inevitable about the way the economy operates and recognise that it involves choices which reflect values. All three writers illustrate—at different levels of analysis—some of the fallout from an increasingly aggressive and doctrinaire application of what Argy calls ‘hard’ liberalism. Argy defines ‘hard’ liberalism as an ideological form of economic liberalism which stresses the virtues of individualism. ‘Hard’ liberalism holds that forced redistribution is morally unjust and that governments have neither the competence nor integrity to intervene effectively in economic affairs (pp. 168–69). He lists its characteristic policy prescriptions as individual bargaining in the workplace, attacks on trade unions, pursuit of outsourcing and privatisation, opposition to public debt increases over the business cycle, low taxes and low government spending as ends in themselves, and opposition to most form of social regulation, including in the workplace.

Argy outlines with admirable simplicity and clarity both the nature of Australian egalitarianism—including those excluded from its historic embrace—and the threats to it today. He mourns the fact that, despite what he calls ‘an economic renaissance’, ‘Australia is in many key respects a less egalitarian society today than it has ever been in its history’ (p. xiii). He also challenges the view that a retreat from egalitarianism goes hand in glove with a liberal economy; that measures which reduce inequality inevitably weaken economic performance. For Argy (and Pusey and Peel) the appeal to economic efficiency as the pre-eminent social objective is ideological, not imperative.

Both Argy and Pusey identify the historic roots of our egalitarian ethic in a pragmatic commitment to sharing the wealth of the country and the benefits of productivity, particularly through the award and wage fixing system. Social analysts often call the resulting constellation of institutions, regulations, and policies the ‘Australian settlement’ or the ‘wage earners welfare state’. One of the features of this settlement was recognition that government could be—and should be—a major player in achieving equality. Argy details the ‘seven pillars’ that were deliberately created with the settlement: the virtual guarantee of full-time employment, the protection of wages and conditions of workers, an unconditional needs-based welfare safety net, a strongly progressive tax system, generous government provision of non-cash benefits such as education, health, and housing, a balanced distribution of regional economic opportunities, and the capacity for workers to be involved in workplace decisions affecting their wellbeing. His systematic analysis of the extent of erosion of these pillars and the reasons for the decline he identifies makes sobering reading.

Pusey is sceptical about the benefits of economic reform.

All three authors agree that one pressure producing widening inequality is the momentum of so-called ‘economic reform’ and the policy shifts which have increasingly seen equity traded off for efficiency. These same policy prescriptions have seen the market place given pre-eminence over other devices at the disposal of government to make decisions about the allocation of resources. Pusey is particularly sceptical about the benefits of such reform which he sees as an excessive response to the falling profit share of the post-war period and the failure of Keynesian economic policies to deal with the twin problems of rising inflation and unemployment. He is no enthusiast for the rigid application of libertarian free market policies which have come to dominate the political landscape. Nor are his subjects, many of whom are acutely aware that the major beneficiaries of the ‘reform’ are big business and high income earners. Some are angry, others reluctantly reconciled. Many express a potent sense of betrayal by their political representatives, although they are still prepared to place their trust in governments and public institutions to deliver policies to redress imbalances and inequalities.

Pusey begins with the experience of his subjects and asks whether they and their families have benefited from ‘economic reform’. He probes their understanding of the rationale for economic reform, its effects on their working lives, and their willingness to accept its outcomes. Pusey’s starting point is that, ‘Middle Australia itself is now the object of a radical experiment’ (p. 4)—and they are not very happy with the results.

In his interviews with ‘middle Australia’ Pusey documents the sense of betrayal his subjects feel that their implicit ‘contract’ with government has been torn up without their consent. Like Peel and Argy, Pusey demonstrates in the daily working lives of his 400 interviewees that the economic reform so admired by the financial markets and politicians has made life much more difficult for many Australians. They are coming to understand that the top down solutions, over which they have very little control, may not be in their best interests; this is a common understanding among those Peel describes as being on ‘the lowest rung’.

For the people of Inala, Mount Druitt, and Broadmeadows, the effects of the ‘hard’ liberal agenda, complete with more unemployment, more insecure employment, reduced educational opportunities, and a mean, often humiliating, welfare system are even more pronounced. They are as Peel puts it, ‘living at the sharp end of Australia’s reshaping’. A priest working in Mount Druitt captures the times exactly: ‘This is a place of great prophecy’, and Peel adds, ‘they are living in a future others will not acknowledge is already here’ (p. 2).

Peel eschews tabloid caricatures of the usual poverty stories.

In his sympathetic portrayal of the people in of these communities, Peel eschews tabloid caricatures of the usual poverty stories, leading us to a more complex understanding that, while acknowledging tragedy and despair, brings to light stories of hope, humour, and heroes. He allows us to see that many were pushed into poverty by ‘accumulating misfortune’ and ‘If they envied the rich anything, it was their safe distance from disaster’ (p. 8). He also repudiates an increasingly common view (also identified by Argy) that people have somehow brought hardship on themselves; that people deserve what they get and get what they deserve; and that they are only all too willing to defraud the system—welfare cheats and dole bludgers. Such vituperative labelling, especially when it comes from government, should be seen for what it is: a device that enables them to consign people in poverty to the ‘lowest rung’ of policy effort and innovation.

Peel, more than the other authors, underlines the importance of regarding poverty as an injustice, as an insult to human dignity and our common humanity. He invites us to care about people in poverty and to take action to reduce inequality, not out of a sense of the threat they are said to pose to the wider community but because it is simply unjust to do otherwise. The people he talked to want to hear more about what needs to be done to ensure that ordinary people have real opportunities and a decent life, as they began to hope was possible during the Whitlam years. Instead, as Peel hears it, ‘there was a fear that the hard times were back for good, that the time of full employment and better prospects for the poorest Australians had been a false dawn’ (p. 58).

Argy, who is otherwise sanguine about the progressive reform agenda, acknowledges that the old pillars of egalitarianism, especially those protecting low paid workers, have been allowed to erode, resulting in fewer job opportunities, diminished wages and conditions, more constricted access to welfare, a less progressive tax system, fewer regional opportunities and reduced worker power. Together with the tendency for outlays on health, education, transport, housing, and labour market programs to be used less for redistributive ends, the result is a ‘major retreat from egalitarian’ values—at least by contemporary governments. Australian workers now enjoy less protection than their counterparts on other developed nations.

He attributes this to ‘hard liberalism’, the ideological straightjacket increasingly advocated by bodies such as the IMF and conservative ‘think tanks’. While it may be convenient to saddle most of the negative consequences of ‘economic reform’ to this more hardline form of economic liberalism, there is at least an argument that even economic liberalism as defined by Argy is not value free, especially in its inherent assumptions about human motivation and the assumption of never-ending growth without environmental devastation.

Argy acknowledges that the old pillars of egalitarianism have been eroded.

Almost 30 years ago, at the end of my second year at university, I pulled the pin on economics. It had been my favourite subject and my preference for honours study. What repelled me then—and still does—were the unrealistic assumptions about human behaviour that underpinned the abstract and mechanical models of economic behaviour. My algebra was adequate for understanding the increasingly fashionable models, but I could not suspend disbelief for long enough to accept that they would survive even the most forgiving test against real world observations. They seemed less like vehicles for explaining human behaviour and more like devices for constructing elegant mathematical structures; more like indoctrination than exploration.

Psychology, the discipline I eventually embraced, suffered from some of the same weaknesses, but attempted to be rigorously empirical; models and theories were modified—and even abandoned—if the data did not fit. In economics, inconvenient observations were shoe-horned into the theory, relegated to the terrain beyond the model or simply assumed away.

Although they are difficult to ferret out, there are lonely economists who have argued —and continue to argue—that ‘economic theory is replete with logical inconsistencies, specious assumptions, errant notions, and predictions contrary to empirical data’ (Keen 2001, p. 4). They have also drawn attention to the fact that economic theory is often used to justify unjust and destructive social and environmental outcomes in the name of greater efficiency.

These three authors in their various ways and in eminently readable narratives all offer effective antidotes to that particularly venomous prescription. They demonstrate convincingly that there are alternative ways of approaching the choices we have and that governments can embrace egalitarian policies without wrecking the economy. What’s more the majority of Australians want them to do so. Indeed, they expect them to.


Keen, S. 2001, Debunking Economics: The Naked Emperor of the Social Sciences, Pluto Press, Sydney.

Dr Carmen Lawrence is Federal member for the Western Australian seat of Fremantle.

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