The Wages of Protection: In Australia, Reforms

By October 24, 2007Trade

Continuing on the latest edition of “The American” published by AEI, this paragraph stood out in a thorough and engaging piece by Duncan Currie on John Howard, Australia’s prime minister and a good friend to the United States. In “Howard’s End?” — yes, Howard’s amazing political run appears to be near an end — Currie notes that it was the left/liberal Labor Party that led the reforms that salvaged an Australian economy accustomed to protection.

Australia’s post–World War II economic expansion officially ended in 1971. Reliant on mineral resources and protectionism, the nation had resisted serious free-market reforms for decades. The result, by the late 1970s and early 1980s, was sclerosis and recession. The consensus favoring high tariffs, centralized financial markets, and onerous labor regulations had been essentially bipartisan.

Hawke’s Labor government, with Keating serving as treasurer, finally gave Australia an economic face-lift in the 1980s, daring to float the currency, slash tariffs, and overhaul the wage structure. “The Hawke-Keating policies were about taking power off the cabinet table and giving it to the markets,” says Keating, now 63. He claims that the reforms were the beginning of the concept of “The Third Way,” an idea he says Tony Blair “stole” for Britain’s Labour Party after visiting Australia.

These policies were a huge practical success—the country emerged from recession in 1991 and has been growing ever since. But by helping Australia, the Labor Party hurt itself: the decline in union membership and growth in international trade that followed its reforms created a whole new class of Liberal voters.

Suppose that’s old news to all you Australia-watchers out there, but it was only vaguely familiar background here. Instructive background, to be sure ….

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