Home Sweet Home

4 August 2021
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Prioritising home ownership is a major plank in Federal MP Tim Wilson’s blueprint for liberal renewal, writes former Coalition adviser Clayton Ford.

THE NEW SOCIAL CONTRACT: Renewing the liberal vision for Australia by Tim Wilson

THE NEW SOCIAL CONTRACT: Renewing the liberal vision for Australia
Tim Wilson
The Kapunda Press, 2020,
pp240

Delivering his first speech to parliament in August 2016, Federal Liberal Member for Goldstein Tim Wilson said, “I have watched with frustration as small politics too often has stifled tackling the big challenges ahead of us. I do not love the game of politics. My interest is public policy and how we secure this country’s promise for future generations, and it is time to have some honest conversations.” Launched four years later in August 2020, in the depths of the quarantining, lockdowns, and financial crisis of the COVID-19 pandemic, Wilson’s book The New Social Contract provokes honest conversations around liberalism and intergenerational equity, and outlines a new (or renewed) social contract to achieve Australia’s promise.

Wilson opens his book lamenting popcorn politics (“morsels of puffed-up ideas that are easy to digest and which provide instant gratification but with so little intellectual nutrition that ultimately they don’t make a meal”) and the recent descent of politics in Western liberal democracies. He contends liberalism has the substance to nourish the nation’s intellectual hunger but has been missing in action, failing to adapt and remain relevant to today’s challenges.

The book’s first half is a wide-ranging exploration of the history, varying definitions, and branches of liberalism, particularly in the Australian context, leading into an examination of how liberalism has fared over the past 30 years. Wilson starts with the important distinction that liberalism is about more than narrow individualism or freedom; rather, it empowers individuals to take responsibility for their lives through the freedom to make choices. Wilson posits that while there is no single definition of liberalism, it is this theme of empowerment of individuals that sits at the heart of each of the branches of liberalism (classical liberalism, neo-liberalism, modern progressive liberalism, and even libertarianism).

Drawing on extensive research, Wilson explores the ‘unique’ Australian liberalism, which was able to evolve in the relatively blank canvas of a ‘new’ continent (acknowledging the lack of engagement with the original inhabitants), organically applying ideas from other parts of the world, rather than developing as a reaction to a pre-existing order. The author describes the principles of liberalism underpinning the Federation project and infused within the Constitution, and delves deeply into Sir Robert Menzies’ election speeches to highlight the diversity of ideas that constitute Australian liberalism.

Liberalism must refocus on the empowerment of the individual.

The neo-liberalism that emerged in the 1970s and 1980s in response to the post-War Keynesian consensus was the last time liberals reviewed and renewed their ideological principles to adapt to modern challenges. However, the economists’ focus on freedom and individualism swung liberalism’s pendulum away from individual empowerment and advancement, and became more aligned with efficiency and an “era of equity extraction” (capital, environmental, technological, and social equity). This undermined the social contract as it existed in Australia and, by deprioritising the liberal idea of justice, eroded liberalism’s social licence. Wilson further suggests:

Imbalanced liberalism risks diminishing electoral appeal as it no longer offers the best avenue for many individuals to live the fullness of their aspirations and their lives. The neo-liberal era has increasingly allowed distant, unaccountable, and centralised political power and capital to gain the upper hand.

Tim Wilson

A still from Tim Wilson’s video on the then ALP Government’s 2013 proposal for a Referendum on Local Government recognition, a proposal subsequently abandoned.

In the book’s second half, Wilson first looks forward to why liberalism must refocus on the empowerment of the individual if it is to maintain a sustainable constituency through looming demographic challenges. While the policy focus of successive Australian governments has been on an aging population and a growing older generation, millennials are emerging as the most populous generation, counterbalancing the traditional influence of the baby boomers. Noting “most people approach politics based on the current stage of their life”, the author dives deep into the demographic data to demonstrate the “dichotomy between opportunity and security” and how it affects the constituency for liberalism. Younger people are yet to accumulate assets and hence less invested in the status quo, instead seeking opportunity (and may be lured by idealism, socialism, and redistribution) to advance their interests. Older people tend to be more interested in security to preserve the value of their accumulated assets, and maintaining the status quo. Hence property ownership—the primary asset of wealth accumulation—is central to this attitudinal shift.

However, across the Western world, increasing numbers of the largest age demographic groups are no longer identifying with the liberal vision, perhaps most starkly seen in the support in recent elections for socialist candidates such as Corbyn (UK) and Sanders (US). It’s not that their aspirations for a good job, family, and home have changed, but they are finding it harder to achieve them. They feel burdened by compounding economic and environmental debt, and disenfranchised from the established liberal order. Wilson warns this “generation’s experiences have brought about a profound change in their attitude”, and “there is no reason to believe that these people’s voting behavior will change as they grow older.”

Home ownership is the primary vehicle for wealth storage and accumulation.

In the Australian context, the increasing unaffordability and dwindling rate of home ownership illustrates this challenge. The democratic distribution of land—in contrast to the European model of hereditary privilege—was the foundation of the modern Australian social contract. Yet Wilson demonstrates how the rising cost of housing is undermining the structure of the original social contract. Over the past 30 years, the price of housing as a ratio of annual household income has doubled to nine times. Between 1998 and 2015, the average age of a home purchaser rose from 38 to 45, and the average age of a homeowner rose from 58 to 67. Between 2002 and 2014, home ownership rates for those aged 35-39 fell from 61.0 to 48.4 per cent, and for couples with dependent children fell from 55.5 to 38.6 per cent.

Home ownership is more than a roof over one’s head; it is the primary vehicle for wealth storage and accumulation, and often enables the establishment of a small business or other investments. As homeowners are significantly more likely to vote for the Liberal Party, the decline in home ownership, particularly among a generation increasingly unable to see their aspirations fulfilled through liberalism’s lens, forewarns of a quiet revolution coming via the ballot box. Wilson writes:

This data should concern any liberal, not just because it raises questions about the political constituency for those who want to apply liberalism practically, but also because it raises structural questions about an open economy and society and the freedom for social mobility.

Locking out younger generations from the property market is also entrenching intergenerational inequity, exacerbated by a tax and transfer system that redistributes income from those of working age to those of retirement age. With older people paying less income tax, and the primary wealth accumulation vehicles of property ownership and superannuation attracting tax concessions, Wilson decries “a direct transfer from those who are ‘having a go’ to those who have ‘had their go’.” When launching the book, Wilson observed that Edmund Burke’s concept of a social contract, incorporating intergenerational equity, had informed much of his own thinking, and spoke of the need to build a bridge between the aspirations of younger Australians and the expectations of older Australians in order to keep society together and ensure an environment of mutual respect.

Wilson was policy director at the IPA from 2007 to 2013, and in the concluding chapter the author prescribes four foundational policy focuses to begin renewing the Australian social contract:

  • empower individuals and decentralise power, particularly through reasserting federalism and fiscal decentralisation
  • prioritise home ownership through public policy by seeking to increase affordable supply and reduce red tape
  • allow younger Australians to prioritise purchasing their first property over compulsory superannuation
  • ensure intergenerational justice in the tax system through simpler taxes, applied more broadly to consumption than income, and reduced concessions However, the path towards implementing these policy prescriptions is less clear. With respect to previous discussions about decentralisation, Wilson notes:

Little followed and the reason is simple: to be a liberal involves ultimately wanting little power, and that rarely comes naturally to those who pursue the institutions of power. To understand the importance of decentralisation for liberalism is to appreciate the inherent skepticism that should pertain to centralized power. … the only pathway to a truly liberal society is central leaders recognising that they aren’t the solution to the problem, they are often the problem.

In his first speech to parliament, Wilson said, “And that is why I am here—to lead change, to turn liberal values into liberal action.” The New Social Contract aims to start the conversation about foundational repair to rebuild liberalism’s relevance for future generations. Through his deep understanding of Australia’s liberal traditions, and astute analysis of the demographic and intergenerational challenges eroding the social contract and driving a quiet revolution, Wilson challenges liberals (and Liberals) to renew the social contract as outlined above, thereby entrenching liberalism into the psyche of new generations, and securing future chapters of the continuing Australian liberal story.

Clayton Ford was an adviser to the Howard Government, and now works in corporate public affairs.

This article from the Winter 2021 edition of the IPA Review is written by former Coalition adviser, Clayton Ford.

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