Social Democrats and NEO-Liberalism: A Case Study of the Australian Labor Party
| Author | Ashley Lavelle |
| Published date | 01 December 2005 |
| Date | 01 December 2005 |
| DOI | http://doi.org/10.1111/j.1467-9248.2005.00555.x |
| Subject Matter | Original Article |
Social Democrats and Neo-Liberalism:
A Case Study of the Australian
Labor Party
Ashley Lavelle
Griffith University
Social democratic parties have been agents in the neo-liberal transformation of public policy in
recent decades. There has been debate about the reasons why social democrats have embraced
market policies, with particular emphasis given to ideological trends, globalisation and electoral
factors. This paper aims to shed further light on this debate by examining the case of the Aus-
tralian Labor Party (ALP), which was a prominent social democratic exponent of neo-liberalism
during its time in office in the 1980s and 1990s. In Labor’s case, the primary cause of the shift
from pledging social reform and interventionist government to neo-liberalism was the lower levels
of economic growth that followed the end of the post-war boom in the 1970s. Social democrats
rely on strong economic growth to fund redistributive policies. Thus when recession occurred in
the 1970s it eroded the economic base to Labor’s programme. While this paper focuses on the
story of the ALP, it may provide some answers as to why social democrats elsewhere have adopted
neo-liberalism.
Neo-liberalism has dominated public policy-making since at least the 1980s. Social
democrats have often been important players in the global market revolution. By
examining the case of the Australian Labor Party (ALP), this paper sheds light on
the debate about why social democrats have taken this policy direction.
As with much of the international literature, common explanations for Labor’s1
support of what is known in Australia as ‘economic rationalism’ revolve around
the role of ideology, globalisation or electoral motivations. While these explana-
tions are not without merit, a more important factor was the collapse of the post-
war boom in the early 1970s, which removed much of the revenue base for the
interventionist policies Labor had previously pursued. Because government inter-
vention was considered much less viable, it is suggested, this eventually gave rise
to market-based approaches.
This emphasis on the post-war boom’s collapse is supported by evidence showing
that Labor’s retreat from a high-spending ‘programme’ in 1975 was a direct
response to the recession, in particular to the reduced economic growth wrought
by the eclipse of the post-war expansion. This retreat foreshadowed Labor’s
embrace of economic rationalism in the 1980s and 1990s. Explanations that focus
on ideological trends, electoral motivations or globalisation as causes of this shift
are less persuasive because of their inability to account for the abruptness of Labor’s
policy reversal in office.
POLITICAL STUDIES: 2005 VOL 53, 753–771
© Political Studies Association, 2005.
Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
754 ASHLEY LAVELLE
Because social democrats elsewhere are likely to have been similarly affected by
the collapse of the post-war boom, the conclusions drawn in this paper about the
ALP have potentially wider relevance.
Social Democrats and Neo-Liberalism
Neo-liberalism remains the dominant policy-making approach internationally, and
is often associated with the ‘Washington Consensus’, a term devised by John
Williamson to describe a neo-liberal agenda in 10 policy areas, including, among
other things, fiscal austerity, free trade, foreign direct investment, privatisation and
deregulation (Callinicos, 2003, p. 2). Its Australian version, ‘economic rationalism’,
normally refers to a policy-making approach that favours markets over govern-
ment intervention (Carroll, 1992, p. 7), and which pushes policies similar to those
comprising the ‘Washington Consensus’ (see Pusey, 2003, p. 1). However, Jupp
uses the term more broadly in the area of immigration to describe a policy whose
success or failure was measured by economic criteria, including ‘budgetary savings,
efficient and effective administration, and outcomes which would increase
the national wealth’ (Jupp, 2002, p. 142). For the purposes of this paper, neo-
liberalism and economic rationalism are used interchangeably, and it is argued that
the ALP made early steps towards neo-liberalism in 1975 both in the narrow and
broad senses described above.
Political support for the ‘Washington Consensus’ varies (sometimes greatly) from
country to country, but recent decades have witnessed a trend internationally
towards the neo-liberal model of government (Kane, 2004). As part of this trend,
social democratic parties since the 1970s have eschewed tax and social policies
aimed at improving equality in favour of markets (Kitschelt, 1994, p. 3; Pennings,
1999, p. 743). Common explanations for the embrace of neo-liberal policies by
social democrats – as well as politicians more generally – include ideological trends,
globalisation and electoral factors. For instance, the dominance of free-market
ideology was stressed by the late Pierre Bourdieu, who spoke of politicians ‘[l]ocked
in the narrow, short-term economism of the IMF worldview’, and of the ‘work of
“new intellectuals”, which has created a climate favourable to the withdrawal of
the state and so submission to the values of the economy’ (Bourdieu, 1998, pp.
5–6). Fellow French academic Susan George views neo-liberalism’s hegemony as
‘the result of fifty years of intellectual work, now widely reflected in the media,
politics and the programs of international organisations’ (George, 1997). Many
others also see ideological shifts as having played a part, if not the leading one, in
the shift to neo-liberalism.2
Many writers suggest that traditional social democratic policies are untenable in
light of the policy-limiting consequences of economic globalisation.3Thus globali-
sation, which is commonly assumed to mean a reduced role for government, might
be seen as a contributor to the adoption of ‘small government’ policies. One weak-
ness of this position has been exploited by Paul Hirst, who gathers empirical evi-
dence revealing an exaggeration of the degree of global economic integration to
deny the footloose nature of capital or that governments are unable to implement
independent macroeconomic policies (Hirst, 1999, pp. 84–6). As we shall see in
the case of the ALP, it was not globalisation that was the primary cause of the shift
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