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The myth of Australian egalitarianism

The Committee for Economic Development in Australia (CEDA), which is usually a pro-business, neo-liberal leaning organisation, released a major report on April 21, 2015 – Addressing entrenched disadvantage in Australia. It was accompanied by a Press Release- CEDA Report: More than a million Aussies living in poverty a disgrace – and an Op Ed article – Australia must do more to address entrenched disadvantage and a – Blog post. They clearly wanted the message to get out! Australians like to think we live in a fair society. The CEDA Report should shake us out of our ‘egalitarian’ dreamland. It is a shocking indictment of an income and wealth rich society that such a high percentage of our population have no hope of prosperity or even a modicum of security. It is an indictment of a policy regime that deliberately undermines the chances that many young Australians have of a decent material life while it shamelessly transfers public resources to the children of the rich to purchase even better schooling facilities. As the Report states – it is a disgrace that so many people in such a wealthy nation can be so poor.

One of the (faux) motivations of the Report is the “entrenched disadvantage … impact on government budgets and lower workforce participation”.

So the narrative and research is framed within the erroneous belief that Australians have to work longer to maintain our material standards of living in the context of an ageing population because this will reduce “the fiscal pressures associated with providing welfare support” (see the summary in the Blog post).

That framing should be rejected.

But it is true that with rising dependency ratios (a high proportion of non-workers in the population), the remaining
workers have to be more productive to maintain material standards of living for all over time.

Thus, apart from the questions of human rights and distributional equity, the bean counters should be concerned with entrenched and rising disadvantage because it undermines output and income generating process and reduces the prosperity of the nation as a whole.

Of course, it severely damages the individuals and their families who become locked into entrenched disadvantage.

Before I discuss the findings of the Report, here is some context.

In the most recent – Global Wealth Databook 2014 – in 2014, Australia had a GDP per adult of $US95,397 (this is a measure of income prosperity) and Wealth per adult of $US430,777, rising from $US 103,151 in 2000.

The following two graphs show the distribution of GDP per adult for 2014 (US dollars) for the 181 countries that the Databook collected data for, and Wealth per adult for 2014 (US dollars) for the 173 countries that data was available for, respectively.

The countries are ranked left to right, largest to smallest. The red columns are Australia to highlight the average prosperity of the nation.

The degree of inequality in income and wealth per adult across the World is stunning as I am sure you will agree. Where you are born is a lottery but really matters (on average).

GDP per adult, 2014 (US dollars)
GDP_per_Adult_2014

Wealth per adult, 2014 (US dollars)
Wealth_per_Adult_2014

As the CEDA Report data shows, the concept of the average (per adult) measure of prosperity is highly misleading if not meaningless in the face of the internal distribution of fortunes within the nation.

At school, we studied the book, the Australian Legend, written by Russel Ward and published in 1958 by Oxford University Press.

The book was about the so-called ‘Australian identity’. His main thesis was that the demands of the Australian outback and bush life in the early colonial period had built an Australian (white) culture that was egalitarian in nature.

Apparently, Australians had a sense of the so-called ‘fair-go’ and ‘looked out for each other’ and considered each other as ‘mates’.

It was a blokey narrative. Ward defined the “typical Australian” as “a practical man, rough and ready in his manners … taciturn rather than talkative”. Hospitality was forged in the bush tradition to ensure that a newcomer, as long as they weren’t black, yellow or some other non-white colour, was made welcome.

The frontier was harsh and so Australians (white ones) were considered to be highly resourceful, innovative and daring. But at the same time, we were workers who had to battle isolation and the elements and this fostered a collectivist culture – solidarity, ‘Jack is as good as his master’ sort of ethos.

This 2008 review of that work and of Ward’s life – The Legend turns fifty – is interesting. He was a very interesting character who was a member of the Communist Party and felt all of the discrimination that the Australian version of McCarthyism delivered in the early 1950s.

The Australian Legend is a powerful narrative and elements of it are undoubtedly representative of something about Australian culture.

But the notion that Australia is an egalitarian and fair country does not meet the reality. Australia has the “ninth-highest level of inequality among 34 rich countries” (Source).

In the full employment period between WWW2 and the mid-1970s, when the Government acted as a mediator between labour and capital to ensure that working conditions were safe, that wage settlements allowed workers to participate in productivity growth, and that there was adequate income support for those who could not work or were temporarily between jobs.

Over that period, real GDP growth and productivity growth were much stronger than now and “gap between the highest and lowest incomes narrowed steadily” (Source).

That trend ended in the mid-1970s with the onset of Monetarism (neo-liberalism). Full employment was abandoned, labour market regulations were slowly dismantled, the gap between real wages growth and productivity growth widened so that the wage share fell dramatically, and income support systems were modified and became part of a pernicious attack on the prosperity of the most disadvantaged Australians.

Further, the idea that collective thinking dominated the nation’s psyche did not match the persistent attacks by the conservative media, business groups and a string of neo-liberal governments (both conservative and Labor) on the unemployed. They were now characterised as indolent and the term ‘dole bludgers’ entered the national lexicon to our eternal shame.

People were poor we were told because they had ‘individual’ issues and didn’t want to work hard enough or were happy to bludge on the rest of us. Individualism became the hallmark of the national ethos not egalitarianism.

Fairfax press economist Ross Gittins wrote in his article (July 17, 2013) – Egalitarianism in Australia is just a facade – that:

In the 1910s, the top 1 per cent (individuals who, by today’s standards, had pre-tax income of more than $200,000 a year) received about 12 per cent of all personal income. That is, 12 times what they would get if incomes were distributed equally.

But this share declined steadily to reach a low of about 5 per cent of total income by 1980.

He notes that this decline in inequality was due to the influence of trade unions, a progressive tax system, and targetted, means-tested income support.

It was also aided by the fact that unemployment rarely went close to 2 per cent and there was no unemployment. The government sector was an implicit employer of last resort. A person could always get a job somewhere in the public sector if they wanted to work.

But this changed with the rising dominance of neo-liberalism. Now, the “share of the top 1 per cent of income earners has recovered from 5 per cent to about 9 per cent” and it is rising fast.

Since that time, the Australian government has acted more as an agent for the rich and the corporate interests than it has for all Australians.

Trade unions have been undermined by harsh industrial laws, the progression in the income tax system has been eroded and more indirect taxation has been imposed, and income support systems have been retrenched.

Unemployment is higher as is underemployment as work has become more precarious as labour market regulations have been relaxed.

Ross Gittins says that our economy is generating:

… a lot more income, but also a lot less equal distribution of that income. The people urging this greater emphasis on materialism have captured most of the benefits, while the rest of the community doesn’t quite seem to have noticed what’s going on.

We still are beguiled by “the egalitarian facade” because the reality is shocking to us. To stare into a national mirror and see how unfair our nation is and how cruelly we treat those in need (both residents and refugees) is a confronting experience. Instead we prefer to dream on that we are all ‘mates’ in this thing together.

That is the context for understanding what the CEDA Report has found.

What did the Report find?

1. “An estimated four to six per cent of our society experiences chronic or persistent poverty or deprivation.”

2. Poverty and deprivation is concentrated among:

Older people;

Less-educated people;

Households with no employed members;

Particular geographic areas;

Indigenous Australians; and

Those with chronic health problems.

3. “The longer a person spends with significant disadvantage, the more likely he or she is to be stuck there.”

4. “Children who grow up in a homewith entrenched disadvantage are also more likely to face the same problem.”

“530,000 children were living in jobless households in 2012 … the future does not bode well for many of these children”.

5. The policy environment in place is inadequate for dealing with this problem and in many cases exacerbates it.

The Report considers “how serious is disadvantage?” in Australia.

It finds that:

13.9 per cent of the population (or 2.55 million Australians) had an income below that necessary to acquire a socially accepted standard of living.

Further, around one million people “faced very deep social exclusion in 2012”.

Poverty in Australia is persistent and repeating. A significant proportion of those who enter poverty fail to get out again.

The Report stresses that the characteristics noted above (where poverty is concentrated) do not:

cause entrenched disadvantage. What the characteristics show is that there is a high prevalence of disadvantaged people among those groups, and that their risk of remaining in or re-entering a disadvantage spell is high.

The “cycle of disadvantage begins early in life” and without strong educational attachment becomes entrenched.

The policy environment in place fails to recognise that:

… people who experience entrenched disadvantage are likely to need help to establish a stable domestic base before they can transition successfully into employment.

The Report considers the approach of the Australian government is flawed because it is harsh (‘too many sticks and not enough carrots’) and is concentrated on forcing people to seek work even though there are insufficient jobs to go around.

The income support available to the unemployed is also deliberately kept below the poverty line because as one Treasurer said recently, the government thinks people should be working not living on the dole.

Successive government refuse to acknowledge that there are not enough jobs. The – The unemployed cannot find jobs that are not there!.

Please read my blog – The best way to eradicate poverty is to create jobs – for more discussion on this point.

Further, as the previous quote emphasises, the Report considers that the problem of entrenched disadvantage requires policies that are multi-dimensional – improve housing, transport, skills, job availability, personal physical and mental health, educational retention etc.

The neo-liberal onslaught has undermined these things. There is a chronic shortage of state housing in Australia as government have cut infrastructure spending to ‘save’ money.

I remind readers of the innovative solution to homelessness adopted in the US state of Utah. In this Mother Jones article (March/April 2015) – Room for Improvement – we learn that:

In the past nine years, Utah has decreased the number of homeless by 72 percent—largely by finding and building apartments where they can live, permanently, with no strings attached. It’s a program, or more accurately a philosophy, called Housing First.

The solution to homelessness is to provide homes! Duh.

The solution to unemployment is to provide jobs! Duh.

The solution to poverty is to provide income or income-earning opportunities (see last solution)! Duh.

If a person doesn’t have stable housing then it is very difficult to have a stable job history. We punish the homeless in Australia by withdrawing income support because they fail to attend interviews with their ‘case managers’ in the Job Services industry. Why? They are homeless without a letter box! Sheer brutal idiocy by our policy makers.

We have defunded support for mental health patients even though many young people who become psychotic in their teenage years can be assisted to live fulfilling adult lives if the problem is detected early enough and solutions designed to ensure the illness doesn’t undermine their educational progress.

I have been involved in a project in the past the demonstrated that clearly. Yet without adequate funding, teenagers develop psychosis, fail to cope with school, drop out and step onto the path of permanent disadvantage and despair, often committing suicide some time later.

We also have pumped public money into private (elite) schooling while starving our public education system of funds. The latter is justified by spurious claims about the need for fiscal rectitude, the former is hidden under the carpet.

The result is that our schooling system fails many young Australians who then find the lack of education to be the first step along the road to entrenched disadvantage.

Conclusion

The CEDA Report should shake us out of our ‘egalitarian’ dreamland. It is a shocking indictment of a income and wealth rich society that such a high percentage of our population have no hope of prosperity or even a modicum of security.

It is an indictment of a policy regime that deliberately undermines the chances that many young Australians have of a decent material life while it shamelessly transfers public resources to the children of the rich to purchase even better schooling facilities.

As the Report states – it is a disgrace that so many people in such a wealthy nation can be so poor.

We are not all mates over here!

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    This Post Has 7 Comments
    1. Australia has never been an egalitarian nation. How could it have been with its origins in class cursed Britain. Mateship,insofar it ever existed,is a strictly working class phenomenem.
      The 2 legged Australin sheep like to swallow hook line and sinker the myths they are fed by the hierarchy.
      The current over the top drivel surrounding the centenary of the Gallipoli fiasco is a good example.

    2. Dear Bill

      You say that Australian GDP per capita is 95,387. That sounds incredibly high. According to Index Mundi, Australian GDP per capita at PPP is 43,000 for 2013. According to the same source, Australian GDP at the official exchange rate is 1.488 trillion for 2013. If we divide that figure by Australia’s population of 22.5 million, we get 67,636, still a far cry from 95,387. Has the Australian dollar risen a lot since 2013?

      Regards. James

    3. On one issue: union membership – I cannot fathom why this has fallen so far and so fast over the last 30 years across the world (with the interesting exception of Scandanavia). Even in the uni system in Australia it is only about the national average of 17% or so. But I note that even in the high density emergency services in recent years ie jobs with very high density – wage outcomes have not been much better than average. It really is a sad state.
      As to the Australian ethos – two articles in the AFR today on Anzac strip that legend totally bare. One thing Keating was right about is that this should be more a day of shame than anything else. This was a totally unnecessary tragedy.

    4. It would not surprise me if most of that large per capita wealth was purely from inflated land prices, which would be a massive driver of inequality; it’s in the bloody land!

      Even in Pikety’s work it has been found that the increase in the return to capital is due to “housing” (read land, as buildings are a form of capital and constructions costs are flat while land prices sky rocket: http://1drv.ms/1IOwRfU

      This all due to that stupid (possibly intentional) Neo-classical/Neo-liberal economic idea that somehow land and capital can be conflated. Now people are surprised when graphs like this show up:
      https://medium.com/the-ferenstein-wire/a-26-year-old-mit-graduate-is-turning-heads-over-his-theory-that-income-inequality-is-actually-2a3b423e0c
      http://www.economist.com/blogs/freeexchange/2015/03/wealth-inequality?fsrc=scn%2Ftw%2Fte%2Fbl%2Fed%2Fnimbysinthetwentyfirstcentury

      If equality is to be restored we must do as Stiglitz prescribes, we must tax the land:
      https://henrygeorgedevon.wordpress.com/2015/04/20/stiglitz-on-land-rent-and-george/

      Bill Mitchel, I think you have misunderstood the purpose of George. Economic rent collection is irrelevant to whether the government runs a deficit; it’s a matter of equal rights, equality of opportunity and economic justice. Community created unearned incomes must be socialised, while privately created incomes from labour and capital must be privatised.
      If rent collection exceeds the need for government expenditures (read need to reduce inflation through taxation), then the government should run a deficit by distributing the excess rents in a citizen’s dividend. That is how George (for me) fits into the context of MMT.

      Economic rents collected + desired fiscal deficit – government expenditures = citizen’s dividend.

    5. Chris, as a former unionist (now retired),most of that time in an emergency service,I could give you chapter and verse why unionism has declined.

      Most Australian unions are closely aligned with the Labor party. Many union officials see that affiliation as a sure road to political office rather than as a means to better represent the interests of their members.
      This leads to a lack of confidence in the leadership by the rank and file,lack of interest in union matters and to splits. The ALP has hardly proven to be worker friendly over the past 30 or more years. That party is afflicted with the same neoliberal disease as the Tories.

      Weakness in the union movement will inevitably be exploited by employers and their representaives in government. The pushing of individual employment contracts in latter years is a prime example of the hierarchy encouraging a dog eat dog attitude in the workforce.

      The old motto of all for one and one for all has been buried in the detritus of our national decline.

    6. @podargus I agree and it scares me since reading this blog how much the left (or what’s left of it) has Neo-liberal policies as an an akmost unquestionable policy stance. I’m still do angry at Wayne Swann promising surpluses during the GFC. Why oh why. It hurts to think as its constantky joe used again him without debate.

      I read atlas shrugged recently (know your ur enemy right?). I feel like I’m the flip side of the philosophy. I’m ready to strike and let the stupid people win and get what they deserve. Earth will sort it out long term that’s guaranteed. I’m starting to feel a Gaia vibe to keep my sanity.

    7. Hi, interesting article, It is really sad that there is so much disadvantage in Australia, the rich are a minority and so are the poor. It is dreadful that some have more than enough while others struggle to provide the basics. I work with those who have nothing. It is not easy to find affordable housing or empower them to become independent, they need handouts cause life is so chaotic that it is hard to get out of the poverty cycle.

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