Is ‘economic management’ Labor’s Achilles heel?

I suspect the obituaries for Labor’s campaign have already been written: Bill Shorten performed above expectations, won back Labor’s ‘base’ but failed to appeal to swinging voters on ‘economic management’. There is truth in this interpretation but the conservative political argument about economic management has become more difficult since the Global Financial Crisis.

chris and bill.jpg

Alex Ellinghausen The Sydney Morning Herald

The 2013 Australian Election Study suggests that ‘economic management’ is a strength for the Coalition. Some 82.7% of Liberal voters in 2013 considered ‘economic management’ very important, compared to 64.9% of Labor & 39.6% of Greens’ voters. In 2013 81.5% of Coalition voters when forced to choose between Labor and Coalition opted for Coalition as superior economic managers. In contrast only 52.6% of Labor voters opted for their party. Among Green voters 42.4% of Green voters opted for Labor although 31.5% found no difference between the parties. In 2013 62.1% of Liberal voters believed economic situation of country had weakened over last year compared to 30.4% of Labor 31.5% of Greens.

This judgment largely reflected partisan loyalty. There as not a huge gap in more grounded perceptions however, when asked to rank their satisfaction with the state of the economy on a scale of 0 to 10 Liberal voters were at 4.3, Labor voters at 5.7 and Green voters at 5.9. Among voters concerned with economic management the Coalition is favoured. Green voters’ preference for Labor as economic managers reflects their general sympathy for Labor as a party of the left.

The importance of economic manager is also apparent from an analysis of the determinants of individual voting. Perceptions of Coalition superiority on economic management had a greater negative impact on the likelihood of voting Labor than the issue of refugees and asylum-seekers. It was the reverse for the probability of voting Green.

Logistic regression: 2013 Australian Election Study:Labor and Green voting in the House of Representatives.

Influence of believing Coalition to be closer to their views on refugees and asylum-seekers, health and Medicare, management of the economy and taxation.

Voting Labor

Beta Standard Error P-Value Odds ratio
Refugees &asylum-seekers -.555 .111 .000 .462
Health & Medicare -1.581 .194 .000 .141
Management of the economy -1.166 .120 .000 .246
Taxation -1.044 .143 .000 .266

Voting Green:

Beta Standard Error P-Value Odds ratio
Refugees &asylum-seekers -1.818 .258 .000 .162
Health & Medicare -1.161 .376 .002 .313
Management of the economy -.297 .195 .128 .743
Taxation -.995 .271 .000 .370

For most voters economic management is largely a ‘valence issue’: electors voters tend to agree that it is a good thing even if they diverge about which party can best achieve it, and the extent it should be privileged over other goals. Such valence issues contrast with ‘positional issues’ such as ‘border protection’ on which voters disagree as to whether it is desirable. Labor v Coalition campaigning is largely about valence issues. As I have shown for the last two federal elections, especially 2010, there have been notable regional divisions among Australian voters on questions of economic management: mining regions reacted strongly against Labor in 2010 and 2013. The ebbing of the mining boom makes it likely that this division will decline in significance this year. Thus Labor has become more competitive in Western Australia and central Queensland.

But what is ‘economic management’? On one view the indicator of this employed by voters is the Commonwealth annual budget deficit. In this view the shift from surpluses under the Coalition to deficits under Labor by 2013 has established a poisonous legacy for Labor. There is evidence from the 2012 United States elections that concern about budget deficits makes conservative voting more likely. Despite these concerns Democrats still won the 2012 election comfortably.

The ongoing global financial crisis has undercut the orthodoxy of the noughties: that the neoliberal economy would run on autopilot and require at most gentle nudges by interest rate variations. We now live in an  economy dependent on debt, be it government, households or Chinese business enterprises. Australian policy elites are in awkward position of condemining budgert defcits in the abstract while accepting their existence in the medium-term as a means to boost demand. This position is unpopular with the hard, Abbott-loyalist right, such as Andrew Bolt, to whom budgetary balance must be the priority. The acceptance of budget deficits has weakened the conservative case on economic management.

I suggest it for this reason that the Turnbull government has sought to define ‘economic management’ as being around ‘jobs and growth’ rather than the deficit as an end in itself. This direct appeal to economic interest might seem a risky strategy. Some on the left anticipate that voters will reject Turnbull as a plutocrat, especially as he struggles to espouse convincingly the populist social conservatism of Howard and Abbott.

In a capitalist economy, however, it seems reasonable for individual voters, as Turnbull has argued, to conclude that the employability of workers depends on the profitability of their employer. To the Coalition the road to profitability lies through reduction of company tax and the control of excessive wage increases, but the left’s position is remarkably similar: profits are to be maintained by neo-protectionist ‘buy local’ policies or by direct subsidies. Both left and right share a view of ‘the economy’ criticized by Frederich Hayek: that it is a machine of conscious design where jobs are created either by beneficent employers or a benign government enforcing their will on malign globalizing capitalists or by the subsidizing of good green capitalists.

It is not irrational for voters to distrust business as self-interested, and to regard conservative parties as excessively influenced by business but also to believe that placating business is the way to create jobs. Workers with minimal assets and frequently encumbered by debt are reluctant to challenge their employers. Workers may share a common interest against capital, but what is in the interests of voters as a collective is not necessarily in their interests as individuals as Mancur Olson demonstrated. British voters are suspicious of business in many particular matters but retain a broad commitment to a capitalist economy. As the 2015 British election shows the latter sentiment is more likely to win out at the ballot box.

There is historical precedent for Turnbull’s pivot from budgetary repair to ‘jobs and growth. In 1929-30 Australian voters turned against conservative austerity. In response the conservatives choose a new popular leader in Joseph Lyons, and recast their economic appeal. They came to accept the inevitability of budget imbalance but argued that only they could restore Australian access to the loan market and hence boost employment.

One section of the left has sought to challenge the cul-de-sac of anti-corporate ‘populism’, this is the ‘policy wonk’ left which argues that egalitarian polices can actually increase growth. But this position struggles for traction against labourist traditionalists and the post-materialist Greens. Progressive policy wonks face the problem that they lack a strong base.

For a time the global financial crisis seemed, as Kevin Rudd claimed, to mark the end of neoliberalism. Despite this, in 2016 a modified economic conservatism remains a key electoral asset to the Coalition.

Geoffrey Robinson is a Senior Lecturer in Australian Studies at Deakin University