United States of Australia?

Are we witnessing the emergence of the United States of Australia?

Australia can have its cake and eat it too, because a healthy and materially secure population will repay enormous economic dividends. Instead, we're going further down the US path

Warwick Smith

In terms of social and economic policy Australia has, for the last 40 years or so, sat somewhere between the free market individualist policies of the Unites States and the social democracy approach of much of continental Europe. Australia has had effective social safety nets, free universal healthcare (as long as your teeth and gums don’t count as part of your body) and a relatively high standard of public education. However, our social safety nets and our healthcare system have never been as generous as those of Europe’s most successful social democracies.

Walking this line between the two apparent alternatives has been viewed by many as a good balance; humane but not too much of a burden to taxpayers. Political pressure has been maintained in both directions, balancing each other out and keeping us more or less static. Labor governments take us little baby steps closer to the European side and Coalition governments come in and take us a few baby steps back towards the US.

The 2014 coalition federal budget was aimed at dramatically upsetting this balance, taking several very large steps towards the US model.

Currently the majority of unemployed Americans get no unemployment benefits. Their public school outcomes are amongst the worst in the developed world and their public healthcare is extremely limited and particularly expensive for the mediocre outcomes achieved.

However, their system has resulted in relatively high levels of economic growth when compared to most of their European counterparts. The downside of this economic success story is that the overwhelming majority has gone to those who are already well off. The majority of US citizens have seen little or no growth in their real wages or material standard of living over the last 40 years. They work longer hours than Europeans, they have less paid leave, less penalty payments for working outside normal hours and less support should they lose their jobs. In other words, basically everything about the US system is worse for all but those at the top of the economic pyramid.

Perhaps even that would be OK if the US was the land of opportunity as it’s often claimed. Unfortunately even that’s not the case. In the US, thelink between sons and fathers income is twice as strong as it is for Scandinavian countries. In other words, a child born to poor parents in the US is twice as likely to stay poor as one born to poor parents in northern Europe. The same goes for educational and health outcomes.

Which of these two directions we want to take is a critical question but it is not one that we are answering with our eyes open. The backlash against the Abbott and Hockey budget has been strong but, for the most part, it has not stemmed from an awareness of these bigger picture issues.

As I have written elsewhere, there is no shortage of money to pay for a high standard of education, healthcare and welfare, it’s just a matter of political priorities.

We are a relatively low taxing country with low public debt. We know that investment in a first rate public education and health system is critical if we value equality of opportunity and long term economic prosperity. These facts, together with a raft of options available to increase government revenue, provide us with a choice that the Abbott government doesn’t want us to know exists. We really can have our cake and eat it too because a healthy, well educated and materially secure population will repay enormous economic dividends in the medium to long term. There is no imperative to choose between deep spending cuts and economic ruin.

Hockey and Abbott have made their choice. They want us to follow further down the US path. They believe that if you want something, you should pay for it yourself. If you can’t afford it then you don’t deserve to have it because you haven’t worked hard enough or tried hard enough. Their ideology doesn’t recognise the reality; in the kind of society they want us to have if you can’t afford something you probably weren’t born to rich enough parents.

If we consider the wellbeing of all Australians to be important then the Scandinavian model is the clear winner. We can and should increase the proportion of GDP taken in tax and use it to provide the best opportunities to our young people and the best quality of life we can to society’s vulnerable, regardless of where or to whom they were born. This means first class universal education and healthcare and the guarantee of a decent standard of living. If these are not our aims then what is the point of economic progress?

http://www.theguardian.com/commentisfree/2014/may/26/are-we-witnessing-the-emergence-of-the-united-states-of-australia?CMP=EMCNEWEML6619I2