THE HON MARK DREYFUS QC MP
Shadow Minister for the Arts
Equity and Prosperity in Australia
What is the role of egalitarianism in our future prosperity?
Fifth Renate Kamener Oration
Melbourne University, 24 August 2014
Introduction I acknowledge the traditional owners of the land on which we meet, and pay my respects to their elders, past and present.
I also acknowledge the Kamener Family, and thank Larry in particular for inviting me to speak this afternoon.
And I would like to thank you all for attending today and supporting the Renate Kamener Indigenous Scholarship. The scholarship was established by Bob, Larry and Marty Kamener and the Australian Jewish Democratic Society to honour Renate Kamener's commitment to supporting reconciliation, and providing opportunities to Indigenous Australians. I believe that my speech this afternoon, ‘Equity and Prosperity in Australia’, touches on some of the ideas and ideals that moved Renate to be so committed to social justice throughout her life.
The topic of my speech this afternoon is clearly very broad. It brings to mind a host of economic arguments about the distribution of wealth in our society, and some disturbing trends now evident across market economies, including our own.
Many of you will be aware of Thomas Piketty’s sweeping study of the dynamics of the accumulation and distribution of capital, titled Capital in the 21st Century. Translated this year into English, Piketty argues that while there was a period of rising equity in the wake of the world wars last century, this was an anomaly caused by the capital shocks of the two wars, decolonisation and the rise of the post-war welfare state. Piketty uses rigorous empirical research to show that while the rate of return on capital outstrips economic growth, as it generally does in market economies, wealth inequality will increase because capital grows faster than economic output increases. Piketty also attacks what he refers to as an ideology of meritocratic extremism, used to justify massively increasing executive packages of the kind that continue to make headlines, and that represent another aspect of rising inequality.
It is from studies of this kind that the Occupy Movement drew their slogan ‘We are the 99 per cent’. And it is in response to the issues raised in studies like Piketty’s that leaders as diverse as Pope Francis, President Barack Obama and the head of the International Monetary Fund, Christine Lagarde, have all nominated responding to inequality as one of the key challenges we face.
I think the sweeping economic arguments raised in studies such as Piketty’s are of great importance, and should form part of the public debate here in Australia. But this afternoon I will be focusing on a question that fits within these broader themes: what is the role of egalitarianism in our future prosperity?
My Labor colleague and Shadow Assistant Treasurer, Andrew Leigh, wrote a book last year called Battlers and Billionaires: The Story of Inequality in Australia. In it, Andrew demonstrates that while Australia has a tradition of egalitarianism, in recent decades Australia has become less rather than more equitable.
Let me give you just a few of the numbers highlighted by Andrew to demonstrate this point. Since 1975, real wages for the bottom tenth of workers have risen 15 per cent, while at the same time wages for the top tenth have risen 59 per cent. Today, the richest 50 people in Australia have more wealth than the bottom 2 million. The richest 3 people in Australia have more wealth than the bottom 1 million.
Andrew also highlights our changing consumption patterns, noting that the past decade saw a 70 per cent increase in annual Porsche sales, and a fivefold increase in Maserati sales. The number of helicopters in Australia has more than doubled, and our private jet fleet has almost tripled.
And despite our AAA credit rating and over 20 years of uninterrupted economic growth, by the end of the last decade more than two million Australians were living below the poverty line, including over half a million children.
So despite our egalitarian ethos, the fact is that inequality in Australia is rising. There are many reasons for this, including changing technology, the effects of globalization, the impact of de-unionisation, and, most importantly for the purposes of my talk today, shifts in government policy.
This year’s federal Budget is a case in point. Just one example of a measure that starkly demonstrates the impact of government policy on equity is the Prime Minister’s proposed paid parental leave scheme.
Under this policy, new mothers will receive support linked directly to their income. After the Prime Minister reluctantly agreed to reduce the maximum payment earlier this year, it is still proposed that mothers earning $100,000 or more will be paid $50,000 for six months after having a child. This means that when a baby is born into a high-earning household they will they get nearly five times as much government support as a baby born into a low-earning household. The Coalition likes to justify this inequity as a workforce ‘entitlement.’
As the Guardian Australia’s cartoonist First Dog on the Moon so aptly put it, for low income households ‘The age of entitlement isn’t over, it’s just over there where you can’t reach it.’
It is clear today that we have a lot of work still to do in building a genuinely egalitarian society.
That equity and prosperity are linked is increasingly clear. Nobel laureate Joseph Stiglitz argues that growing inequality is not a necessary byproduct of economic growth, as is sometimes asserted. Rather, Professor Stiglitz contends that the alarming level of modern inequality is in fact a constraint on economic growth and an obstruction to increasing the prosperity of our society.
Stiglitz testified powerfully before the US Senate Budget Committee earlier this year. He noted that real median household income had actually fallen in the last quarter century in the US, while most of the proceeds of economic growth had accrued to the already wealthy. Stiglitz said:
An economy in which most citizens see no progress, year after year, is an economy that is failing to perform in the way it should… [O]ur high inequality is one of the major contributing factors to our weak economy and our low growth.
This sentiment has been echoed by leading economic institutions. Both the IMF and the OECD, bodies known primarily for their dry economic work, this year released studies indicating that inequality was a brake on growth.
I am not an economist, and so I do not intend to give you a lecture on macroeconomics this afternoon, or to try to summarise the detailed arguments that have been made by economists such as Professors Piketty and Stiglitz, or our own Dr Leigh.
I am a parliamentarian, however. Encouragingly, those economists have concluded that growing inequality is not an inevitability. Inequality is governed by the choices we make as a nation. It is the role of our governments and our parliamentarians to lead the community in making those choices by clearly explaining the policy choices before us as a community, and advocating for those policies we believe best serve the values we hold. Because it is only through the implementation of policies that serve our values that we are able to build the kind of nation we want for ourselves, and for our children. And egalitarianism is a value that I, and I believe a great many Australians, hold dear.
We can choose policy settings which ensure both that our economy grows, and that this growth is fairly shared. We can decide that our community will care for the disadvantaged. We can make sure that all can participate in the prosperity we build.
There is, as Michael Sandel has put it, a big difference between a market economy and a market society. It is the enduring conviction of my own political tradition that society precedes the market. When one of the first Labor parliamentarians, George Black, rose to give his maiden speech in the NSW Legislative Assembly in 1891, he said he was in that place to do nothing less than ‘make and unmake social conditions’.
Though our policy prescriptions have changed, that mission remains the same.
This afternoon I want to focus on the ways in which policies that promote equity in our society help to build the long term prosperity of our nation. And while I do not intend to give a partisan speech, what I say will inevitably have a political character. Because the issues I am discussing today are very much the subject of political debate today, and I think it is important to engage in that debate. That being said, I will be examining principles rather than personalities, and if I am critical of our current government from time to time, I hope you will understand such criticism is not only inevitable in a discussion of this kind, but desirable in a society that values the contest of ideas.
This afternoon I want to focus on three practical examples of the way in which our egalitarian ethos underpins our prosperity.
First, I will discuss the central role that an egalitarian approach to education plays in building our nation’s long-term prosperity. Second, I will consider some of the ways in which equity manifests in our justice system, and examine the importance of access to justice to our national wellbeing. Finally, I will address the question of intergenerational equity, a principle at the heart of the doctrine of ecologically sustainable development, and an application of egalitarianism that I believe is now of critical importance to our nation’s future.
While these may appear to be disparate areas of policy, I am discussing them to highlight the importance of considering equity in the formulation of a very wide range of government policies.
I: Education and economic prosperity
Education is of course crucial to both the prosperity of our community, and to its sense of fairness and equity.
President Obama has said that education is “not only a pathway to opportunity, but it’s a prerequisite for opportunity.” Education is such an essential component of the good life that we recognise it as a basic right. Article 26 of the Universal Declaration of Human Rights says simply “[e]veryone has the right to education.” That article exhorts communities to provide free, compulsory education at basic levels, and to provide that higher education “shall be equally accessible to all on the basis of merit.”
The importance of education in the lived experience of Australians is profound. It often strikes me that, decades after the excitement and tumult of the Whitlam era, the one reform of that time most etched in the popular consciousness is the Whitlam Government’s investment in education and the abolition of university fees. A large part of my generation, no matter what they think of Whitlam or politics more generally, bear gratitude to a political leader who changed the course of their lives with that reform. They know that access to education based not on wealth but on merit enabled them to lead the sort of lives not available to their parents. The principle that anyone with the ability and the desire to go to university should be able to strikes a deep chord in our community. It is now seen, rightly, as a matter of basic fairness. It is an aspect of Australian egalitarianism we are rightly proud of.
But access to education is not just a matter of equity. As ours becomes a knowledge economy more reliant on highly skilled labour, as our competitors invest heavily in their own education systems, it is also an economic priority. A society in which access to education is not meritocratic is one that misallocates valuable resources. A society that discourages its young people from pursuing training cannot hope to compete in the high-skill, high-tech industries of the 21st century.
Again, it is worth remembering that the equitable provision of higher education is a very recent achievement. We must not take it for granted. As a community we made a conscious choice to adopt this policy, this social condition, and we can unmake it.
Indeed, it seems that the current Government is set on precisely that course. The Government, having come to power promising no cuts to education, has proposed in its first Budget to slash funding to universities, to allow universities to drastically increase the fees they charge students, and to impose a real interest rate on student debt.
Incredibly, it is still in late August unclear how much of Education Minister Christopher Pyne’s package of proposed budget measures will pass the Parliament.
However, we should speak clearly about the effect these policies would have on our society if passed. The Government’s proposals would be the single largest assault on fair access to education in living memory. University education would once more become the preserve of those parents who could afford it. The imposition of higher interest rates would be highly regressive. Perversely, graduates on lower incomes would pay more for the same education than their higher-earning peers, and women would be disproportionately impacted.
These policies would also effect a gross intergenerational inequity, a topic I will return to, as a generation educated at great public expense pulled the ladder up behind itself. Our children would be saddled with enormous debts at the very beginning of their adult lives, putting home ownership and other traditional markers of adulthood further out of reach.
Aside from this gross unfairness, the Abbott Government’s education proposals are also economically wrong-headed. They will not help us compete globally: even before the cuts announced by the current government, Australian public investment in education was amongst the lowest in the OECD. Government ‘savings’ on education are a false economy. These measures will only shift the cost of higher education to students. The American experience with this style of funding is instructive. In that country, student debt has become a $1.2 trillion dollar nightmare which Forbes magazine last year declared was ‘crippling the economy’.
II: Justice and equality under the law as a driver of prosperity
It is tempting, when dealing with my topic this afternoon, to focus on those issues of inequity that this year’s Budget has brought into such sharp focus, such as education. And when we speak of prosperity and equity, it is easy to focus on access to the labour market, on private versus public investment in social goods, and on social mobility in material terms.
But I want to talk about prosperity and equity in terms that go beyond economics. We can judge the prosperity and the equity of our society not just by what happens in our marketplaces, but also by what happens in our justice system. Fyodor Dostoyevsky famously said: ‘The degree of civilisation in a society is revealed by entering its prisons.’ I would extend this sentiment to our courtrooms, our tribunals, and everywhere the law touches on the lives of Australians. We should consider our justice system a cornerstone of the sort of society we want to build.
At a fundamental level, the rule of law is of course essential to our prosperity, a fact increasingly recognised by economists. Clear rules enforced by independent courts
provide the stability necessary for us to transact trustingly with one another. The strength and independence of the institutions that uphold our rule of law helps us compete for foreign investment.
But law, or more properly justice, is also an essential component of an equitable society. The rights that our law enshrines set the standard our society expects in all areas of our public and private lives. Our laws are worthless, however, unless we have true access to justice. A ‘right’ only able to be enforced by the wealthy is really nothing more than an arbitrary privilege.
Sadly, recourse to the law is often out of reach for the less privileged members of our community. Legal advice and representation can be prohibitively expensive. Legal processes can be inaccessible to the layperson. All too often, those most at need of the protections of the law might not even be aware that these protections exist.
It is for this reason that it is so important to properly fund legal assistance services. We need Legal Aid Commissions to provide advice and representation to those who cannot afford a private lawyer. We need Aboriginal and Torres Strait Islander Legal Services to serve the Indigenous peoples of this country who have been marginalised by the law for so long. We need community legal centres to reach out to the public, to provide information and advice, and to lead public participation in making the law itself fairer.
Regrettably, the current Government has made savage cuts across the sector in both the December Mid-Year Outlook and the May Budget, and I fear that there are more to come. It has changed funding arrangements to prevent community legal centres from performing advocacy or law reform work.
The Government has, for instance, completely defunded the Environment Defender’s Offices (‘EDOs’). EDOs are community legal centres that operate in each state and territory. These small and highly dedicated organisations are in a real sense the environment's own legal team. They empower their local communities to protect the environment through law. They provide the community with legal advice and representation in public interest environmental matters, and they work to improve our environmental laws.
More than that, though, EDOs serve the long-term prosperity of our society. They make sure that companies abide by laws designed to protect our valuable natural heritage and the vital ecosystem services that underpin resources such as productive farmlands. EDOs make sure that governments make environmental decisions in a rigorous and scrupulous way.
In an area of the law where the rights of communities come up against the commercial ambitions of large corporations, or the decisions of governments, the EDOs provide some hope of levelling the playing field. In short, they work towards real justice by ensuring that the powerful also comply with the laws of our nation.
If we are not careful to properly support access to justice, our legal system will increasingly serve the interests of the already wealthy and powerful, rather than our community as a whole.
And we will also be less prosperous as a nation if access to justice is diminished. Legal assistance services make sure our courts are not clogged by unrepresented litigants, they run test cases which clarify the law, and they help legislators to identify and address systemic problems in our legal system.
In dry economic terms, the cost-effectiveness of community legal centres and the worth of the public service they render have been recognised by the Productivity Commission in its recent Draft Report on Access to Justice Arrangements. This work, commissioned by the last government, provides a rigorous economic analysis of the importance of access to justice, and how it might be enhanced. It strongly suggests that access to justice is another area of our society where equity and prosperity are mutually reinforcing.
III: Intergenerational equity – sustainability and our future prosperity
I want to now discuss another threat to equity that we face as a nation, and that is the threat to intergenerational inequity. Challenges to intergenerational equity arise from many sources relating to the sustainability of our economic and environmental policies, but today I will focus on the particular threat posed by climate change.
Climate change is a policy area that moved me to enter Parliament when I did in 2007, and I then had the privilege of representing Australia at international negotiations on measures to combat climate change. It is a policy area that is of critical importance to our national interest, and so it’s a topic that I often return to in speeches such as this one.
For decades scientists have been warning that rising concentrations of carbon dioxide and other greenhouse gases in the atmosphere are contributing to climate change. I will not attempt to detail now the alarming predictions of an unequivocal consensus of the world’s climate scientists regarding what will happen to our nation and our planet in the coming decades if we do not act decisively – and urgently – to reduce global carbon dioxide emissions. It is sufficient to say that global temperatures will continue to increase, sea levels will rise, ocean acidity will increase, rainfall patterns will change and extreme weather like cyclones, storms and floods will become more severe.
The effect of these unfolding environmental changes on our future prosperity may be catastrophic. Even the very conservative climate change trajectories now considered ‘best case’ by bodies such as the Intergovernmental Panel on Climate Change point to an increasingly dire human and economic cost arising from the growing frequency and intensity of natural disasters like fires, floods and drought.
And we are already seeing these kinds of impacts in Australia. The 2003 Canberra bushfires and the 2009 Black Saturday fires here in Victoria were of almost unprecedented intensity, and defying well-established patterns of fire behaviour they burned with a speed and ferocity that our emergency services struggled to effectively respond to. The Black Saturday fires in particular resulted in the devastation of many communities and the loss of 173 lives. The fires that devastated communities in the Blue Mountains in October last year, well before the usual fire danger season, are another case in point. Catastrophic floods have devastated parts of Queensland twice in just the last four years, again with a shocking loss of life.
Writing about the 2012-13 summer, the Climate Commission, an independent body of eminent scientists that was abolished by the Abbott Government as one of its first acts in office, concluded that:
The Australian summer over 2012 and 2013 has been defined by extreme weather events across much of the continent, including record-breaking heat, severe bushfires, extreme rainfall and damaging flooding. Extreme heatwaves and catastrophic bushfire conditions during the Angry Summer [as the Commission called it] were made worse by climate change.
The point I am making is that climate change is not, as some denialists claim, a misplaced concern about the weather in a hundred years' time. It is already affecting us. It is already costing Australian lives. It is already costing our economy billions of dollars. And if we do not work to address this challenge as a matter or urgency, the impacts we are already experiencing are very likely to intensify, and will exact an increasingly great, economic, social, environmental and human cost on our nation in the years and decades ahead.
And there is another threat to our long term prosperity that arises from climate change, and that is the threat that it poses to the geostrategic balance, and consequently, to our national security. Events in Iraq and Syria in recent months have led to an increased focus on national security. And I have always held that the protection of the nation’s security must be a paramount responsibility of government, and a matter that should transcend partisan politics.
However, in addition to the need to respond to the relatively immediate threats to the safety of our citizens posed by a resurgence of terrorist threat, a responsible approach to our national security also requires that we look ahead, and work proactively and strategically to respond to – and if possible, to mitigate – threats that we can clearly see on our horizon.
The fact that climate change is a critical national and global security matter is not in doubt. For over a decade now a mounting volume of reports from eminent, independent and pragmatic organisations such as the Council on Foreign Relations, the US National Research Council, the Australian Strategic Policy Institute and the Lowy Institute for
International Policy have highlighted the significant potential for climate change to disrupt the geostrategic balance in ways that will significantly threaten global security.
For example, in it its January 2010 edition of Global Strategic Trends, the United Kingdom’s Ministry of Defence warned that:
Climate change will amplify existing social, political and resource stresses, shifting the tipping point at which conflict ignites, rather than directly causing it.
A similar warning was sounded by the US Department of Defence its February 2010 Quadrennial Defence Review, in which it stated that climate change ‘will play a significant role in shaping the future security environment.’
Along similar lines, President Obama’s National Security Advisor, Tom Donilon, spoke last year about the intersection between energy, climate change and national security policy, stating that:
The fact that the environmental impacts of climate change present a national security challenge has been clear to this Administration from the outset. The President’s National Security Strategy recognises in no uncertain terms that “the danger from climate change is real, urgent, and severe. The change wrought by a warming planet will lead to new conflicts over refugees and resources; new suffering from drought and famine; catastrophic natural disasters; and the degradation of land across the globe.”
It will come as no surprise that Australian intelligence and security agencies have come to similar conclusions to those of our closest strategic allies, with our 2013 Defence White Paper sounding a particularly clear warning about the likelihood of climate change driving regional instability.
I reiterate that national security should be a matter that transcends partisan party politics. And I note that even John Howard belatedly realised that an effective policy response to climate change was in the national interest, and both he and his successors as leaders of the Liberal Party, Brendan Nelson and Malcolm Turnbull, embraced the need for an emissions trading scheme.
And yet when the current Prime Minister saw a political opportunity for himself in opposing an effective climate policy, he took that opportunity with both hands, replaced Malcolm Turnbull as the leader of the party and embarked on what must have been the most reckless and dishonest political scare campaigns against a vital national policy in living memory.
And now the Abbott Government is crowing about what it presents as an achievement – the tearing down of a meticulously crafted, economically responsible, long-term, economy-wide reform designed to reduce dangerous carbon pollution. A policy that, by pricing carbon pollution, was the best chance Australia has for reducing the
intergenerational inequity being caused by the growing impacts of climate change. A policy that the Abbott Government proposes to replace with nothing more than a hollow slogan; a farce of a policy bereft of content and without meaningful effect.
In a related policy area, despite promising to support the Renewable Energy Target while in opposition, the new Prime Minister appointed a known climate science denier, Dick Warburton, to head a review of this policy that is at the heart of Australia’s renewable energy industry. The uncertainty caused by the Government’s backflip on its commitment to the RET, even before the Government announces its decision on the RET’s future, is already costing our nation jobs and investment in an industry vital to our nation’s long term prosperity.
In announcing his new policy on climate change last year, President Obama said:
We don’t have time for a meeting of the Flat Earth Society. Sticking your head in the sand might make you feel safer, but it’s not going to protect you from the coming storm. And ultimately, we will be judged as a people, and as a society, and as a country on where we go from here.
While I certainly believe in the benefits of ongoing economic development, the unequivocal scientific consensus makes clear that our prosperity cannot be assessed with reference only to metrics such as our Budget position across the four-year forward estimates. What matters is not just what happens in our economy in the short term, but what happens in the coming decades. Economic growth can and should continue, but we must work hard now to delink that growth from growth in our greenhouse gas emissions. While the worst of the predictions about climate change impacts are unlikely to manifest for some years to come, to take no action now, and so to bequeath our children an economically and environmentally ravaged world to survive in, would, I feel, be an act of unforgivable intergenerational inequity.
This afternoon I have ranged across three diverse policy areas that relate to the question of how egalitarianism underpins our nation’s long-term prosperity. But there is clearly a common denominator. And that is that equity should always be a touchstone in any government’s approach to policy formulation and implementation. It is my view that improving equity is an objective that we should constantly seek to progress, and that parliamentarians should always run the ruler of fairness over what we are planning to do. Because while I like to think that our egalitarian ethos is founded in a sense of fairness, it is also the foundation of our nation’s long term prosperity.
Writing in The Guardian on Friday, my colleague Dr Jim Chalmers wrote:
Judged on their decisions to date, we now have a government that sees inequality as an objective to be met, not a challenge to be overcome. This is appalling in the here and now and devastating for the future.
I hope that our Government comes to understand just how far it has moved from the egalitarian ethos that for so long has underpinned our fairness and prosperity as a nation. I hope that the Government comes to understand this soon, and corrects its course. I will be doing all I can to make clear to the Government the importance of equity to our national wellbeing. I would encourage you all to do the same.