Means and ends: macroeconomic theory and the Australian Labor party’s social democratic ideology

Abstract

This thesis contributes to the existing academic debate concerned with the ideological continuity (or discontinuity) of the Australian Labor Party (ALP). However, while much of this debate is primarily concerned with whether or not successive federal ALP governments have adhered to a form of socialist ideology, this thesis pursues a related but distinct line of ideological enquiry. It assesses the relative influences of Keynesian and market liberal macroeconomic theories upon the policy-making and ideology of successive federal ALP governments. The scope of this study spans the period since the macroeconomic controversy between these two theories began during the Great Depression and the period of the Scullin Labor Government (1929-1932). This analysis provides new insights into our understanding of the continuity which has existed in ALP ideology over time, and thereby adds to the existing literature on this subject. The thesis argues that although successive federal ALP governments have been periodically influenced by either Keynesian or market liberal theories, all have sought to use these theories to uphold the ALP’s key ideological objective of attempting to improve the living standards of the Party’s traditional constituency: defined as working people and their dependents. However, this thesis also establishes that while Keynesian and market liberal theories have offered successive federal ALP governments with cogent policy tool kits, designed to avoid or ameliorate the capitalist economy’s business cycle, the policy application of either theory has presented these governments with recurring and significant policy challenges. The challenges most consistently encountered in the implementation of Keynesian policies have been those associated with the timely deployment of cost-effective stimulatory public works programs, and those associated with overcoming the perceptions that Keynesian policy interventions are futile, wasteful, inefficient and inflationary. In relation to market liberal policies, this thesis argues that the Hawke Government’s implementation of the market liberal policies of fiscal and monetary restraints, and financial market deregulation, facilitated and then significantly contributed to the depth of the severe recession experienced during the early-1990s. Moreover, it is argued that this episode revealed that when timely and effective Keynesian stimulatory action is not taken, market forces can be slow to produce an employment recovery. This thesis concludes that although key Labor politicians believed that market liberal policies were not inconsistent with the ALP’s social democratic ideology, they have proven less reliable in maintaining the macroeconomic and employment stability required to improve the living standards of the Party’s working constituents. The evidence assessed in this thesis alternatively suggests that the Rudd Government’s successful handling of the Global Financial Crisis provides a valuable case study for the ongoing usefulness of Keynesian macroeconomics. While the effective implementation of Keynesian policies presents ongoing challenges for future federal ALP governments, this thesis concludes that there are strong grounds on which to defend Keynesian policies, given their capacity to both protect Australian workers’ job security in times of crisis, and facilitate sustainable economic growth over the longer-term.