Urgent case for reform

For more than two months, federal and state governments have shut down much of Australia’s commerce, and Canberra spent big to compensate for the losses the lockdowns have caused. As a result, we’ve flattened the curve of virus infections and prevented an economic collapse.

Now comes the hard work. Our leaders need to liberate what Keynes called the economy’s ‘animal spirits’ — that is, the passions and competitive instincts that are essential to economic growth.

At CIS, we’ve long promoted the intellectual case for classical liberalism in Australia: limited government, light regulation, low taxes, free markets, competition and, of course, private ownership of capital and property. During the Hawke-Keating and Howard-Costello eras, our ideas helped influence public policy.

The result was two decades of productivity-enhancing reforms and, from the early 1990s, almost 30 years of growth with low inflation, low unemployment and, according to the Productivity Commission, no great widening in inequality.

However, in the Rudd-Swan era, Australia just rested on the windfall of our China boom. Ever since, the political class has essentially settled into the complacency of prosperity. Those days are over.

Alas, the coronavirus crisis has given a worrying boost to those who say the state is the only feasible guardian of our prosperity. However, a high-taxation, big spending, protectionist agenda can only lead to the suppression of enterprise, starvation of investment, lack of innovation and rise of the power of organised labour as we outline in our latest video.

Unless the intellectual case for economic reform and free enterprise is made rigorously and repeatedly by those of us who can influence policy makers, there will be a tendency towards state intervention in the marketplace. And with that, inevitably comes the death of enterprise and a sluggish economic recovery.

We are hardly alone in making the case for reform, but we must be ready for what William Hague has called “an immense ideological conflict.” As the former British foreign minister and Conservative party leader argued in the UK Daily Telegraph this week:

“It will be a conflict in which the natural supporters of free enterprise as the foundation of human progress, and fiscal responsibility as the bedrock of a confident economy, will suddenly find themselves on the back foot. In [recent months], the state has intervened in the lives of families and businesses more than ever before in peacetime. It is only too easy to think that what has happened can become the new normal.  

“There is a danger that, subtly and imperceptibly, the public will grow accustomed to a smaller space for individual liberty and a bigger role for the state, changing the acceptability of other ideas — supposedly to secure a better future through larger, more powerful and more dominating governments.

“Conservatives, and other champions of an open, free and enterprising society based on sound money, need to think about this now. Otherwise we will emerge from the dark and tragic tunnel of this crisis to find ourselves in a landscape we don’t recognise.”

We at CIS fully agree with Hague. And we hope you do too.