Dry: In Defence of Economic Freedom

Dry: In Defence of Economic Freedom

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Much of the world is still horrible but during the final quarter of the 20th Century life spans greatly increased almost everywhere especially in the once-poor countries of East Asia. The economic order that achieved these momentous gains is now threatened by ‘anti-globalisation’.

We began the new millennium with blessings close to home. Australians were enjoying sustained economic growth of 3 to 4%. Real wages had increased by 3.8% a year since 1995-96.

Inflation was around 2%. Unemployment had been reduced from around 11% to fewer than 7% although much ‘hidden unemployment’ had to be conceded. We had escaped the so-called ‘Asian melt-down’ almost without the need to notice it. We had a budget surplus of 2% of GDP but less than two years later we found ourselves worrying about how to finance a military contribution to the fight against terrorism or, far worse, a war.

These benefits were associated with the partial reversal of a long downward trend in Australia’s relative living standards. When compared with other rich countries – all of Western Europe, the US, Canada, Australia, New Zealand and Japan – Australia’s per capita GDP, expressed as the percentage of these, declined from 132.3 in 1950 to 99.9 in 1975 where my story begins. They declined further to 88.6 in the 1992 recession but since then rose to 95.5 by 1999. The improvement had not been brought about by a favourable shift in our terms of trade – the ratio of the prices at which we import and export. Between 1990 and 2000 these had moved against us by about 7%.

Other countries at other times had done much better – post war Germany and Japan and the Asian Tigers despite their recent difficulties, for instance. It was, nonetheless, a remarkable turnaround. It did not occur by chance but was caused by a period of exceptionally good government from 1983 tailing off in quality during the 1990s.

Federal politicians that had once led the charge for economic freedom and generously supported a reforming Labor Government returned some way towards bad old ways. They squandered much of the budget surplus that they may need to finance international conflict. They extended the tariff protection of the motor and textile clothing and footwear industries. They subsidised enterprises that could not raise their capital at market prices, for instance, a Queensland magnesium mine and the Darwin to Alice Springs Railway. They needlessly put money into the housing industry after the industry’s downturn had passed. Following upon what was admittedly a frustrating time in the Senate, they ceased trying to reform the labour market. They used the foreign investment powers to prevent the commercial take over of the petroleum gas producer Woodside. Trying to out-Hanson Hanson, they imposed costly requirements on Telstra that we all pay for. They maintained the wheat export monopoly. In all these things and more they behaved as though the privileges they granted were acts of their own benevolence rather than employment of powers and moneys held in trust. I contend that our children will pay for these inefficiencies that always attend privilege. In short, they have partly reverted to the bad habits of the Fraser years.

My thesis is that our changed fortunes did not arrive by chance and that the gains could all too easily be squandered.

During the final quarter of the Century most of the world experienced a struggle between liberalism and socialism. In almost every country, socialism gave ground and the more extreme forms of it were discredited. But nowhere has liberalism yet swept away the habits of three generations of increasing collectivism. It is now threatened by the pursuit of causes rather than philosophies and it remains the case that everywhere Government is bigger and the area of private action left to individuals smaller than at the beginning of the 20th century. Nevertheless, although the journey to liberalism is far from over and is beset by aimless meandering, much has been gained.

This is an account of how attitudes and public policies were changed in Australia. It recounts the journey during the last quarter of the 20th Century of an ideal concerning the proper conduct of public policy – its travails, considerable successes and partial setback. Many people played parts in the drama. The unfolding story tells what an illdefined but, nevertheless, identifiable group, that I call ‘the Dries’, believed, learned, did and failed to do. It shows that argument, properly used in a liberal democratic society, can bring changes by legitimate, peaceable means, and that ‘the good fight’ is worth the effort.

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