Tuesday, April 07, 2015

Explaining "fairness"

This morning's NewsLtd papers had a Simon Benson splash of a statement supposedly made by nine business groups. At the time of writing I can't find the statement on the websites of the biggest three - the BCA, ACCI or AiG.

I am always suspicious of stories clearly written off the back of a "drop" to one journalist that is rewarded with a splash. The AFR has posted the story online but it looks as if it has been entirely written from the News story not the document. It is not beyond the realm of possibility that one of the named groups doesn't actually support the statement and it has been prematurely released.

But drawing on the AFR story the guts of the statement is as follows:

With the Prime Minister signalling a 'dull' budget and the Opposition Leader continuing to focus almost exclusively on budget 'fairness' you could be mistaken for thinking there is no significant problem with the state of the nation's finances.

It's also tempting to look at Australia's relative prosperity, built on a quarter of a century of economic growth, and attribute it to luck or a rich endowment of natural resources. It's a comforting thought that growth is somehow automatic and that year in, year out, despite our many challenges we will continue to improve our lot.

The reality of where prosperity comes from, however, is much more sobering and if neglected will set us on a path to economic despair." Past giants of economic reform did what was right for the long-term benefit of Australia and not because it was politically expedient - it very rarely if ever was. They shared a commitment to the national good and emerged from both the Liberal and Labor parties and even the Senate cross-benches.

Today, our leaders must stand on the shoulders of these reform giants and ensure our living standards remain among the highest in the world.

We cannot continue to mortgage our nation's future on the questionable assumption that we may be in a better position to fix the budget on the never-never, particularly given the need to allow for future economic shocks like another global financial crisis and the cost of servicing debt.

There is no escaping that reform is hard and often unpopular in the short-term but achievements by those who came before show that long-term benefits can be achieved if approached in the right way.

Our message to today's leaders is simple: governing is not just the responsibility of government, it is the duty of all members of Parliament, and we must stand on the shoulders of reform giants before it is too late.

Unfortunately like most such statements lately everyone is talking about "reform" but there is very little detail of what reform might actually be needed. There is also no explanation in any of this what the apparent link is between business conditions and Government debt and deficit - other than the work of the Government and business community to use the budget position as a way to clobber both business and consumer confidence.

But the story was drawn to my attention because of the offhand manner in which the business lobby groups have sought to dismiss "fairness" as if Labor is merely pursuing this because of genuine reasons including values rather than a convenient label for destabilising the Government.

So let's explain "fairness."

I can understand the difficulty in part. The ALP website says Labor is for Fairness but the text that follows is a mixed bag on university fees, NDIS, housing affordability, sex discrimination and domestic violence.

Bill Shorten made a better fist of it in October 2014 in a speech to the National Policy Forum when he said:

But I think that chapter one must begin with Labor’s belief in fairness.

Fairness drives prosperity, it underpins growth, it lifts living standards, it creates jobs – it gives everyone the chance to fulfil their potential.

Fairness insists upon the equal treatment of women, supporting their march through the institutions of power.

Fairness demands we care for the vulnerable, it demands we speak up for the powerless, include the marginalised and uplift the disadvantaged. And fairness is a pact between generations. That means opening the doors of education, from the earliest years giving every young Australian the chance to go on to a great school and onto university or training.

Fairness between generations means that Australians should not have to work hard all their lives, only to retire poor.

And fairness between generations means caring for the environment - passing on to our children a healthier national estate than the one we inherited.

That’s the higher ground I want Labor to reach for.

Unsurprisngly Nick Cater, now Executive Director of the Menzies Research Centre, outlined a different view in The Oz in September 2014. Cater confusingly claims that "fairness" was not part of Labor's policy platform from 1949 to 1980, and that Hawke's use of it was limited. Yet he then quotes from Chifley's 1949 campaign speech to try to contrast that view from Shorten's.

The more complete reference in Chif's speech is:

I well remember when, by their thousands, breadwinners, ill-clad and underfed, queued at factory gates seeking work. We, the Labor Party, feel we have a sacred responsibility to see that all sections of the community receive justice, and that the less fortunate section of the community has protection from want, unemployment and insecurity.

We affirm for every man the right to receive a fair return for his labour, enterprise and initiative. But we do say that it is the duty and the responsibility of the community, and particularly those more fortunately placed, to see that our less fortunate fellow-citizens are protected from those shafts of fate which leave them helpless and without hope. That is the objective for which we are striving. It is, as I have said before, the beacon, the light on the hill, to which our eyes are always turned and to which our efforts are always directed.

We work and fight, not for personal gain, but that our fellow-citizens may labour under good and ever-improving standards and conditions, free from want, insecurity and misery.

Cater tries to argue that the Chifley vision is restricted to fairness in terms of return for effort and welfare as a protection from "shifts of fate."

What Cater is really on about is trying to position Labor as believing the solution to all ills is to spend our way out of them. He then refers to the whacky Tony Mackin view that Labor's economic stimulus did nothing other than push up the dollar.

I don't think you'd have seen any difference between Chifley's reaction to the Abbott budget from Shorten's. Chifley would approve of the Opposition Leader making a submission to the minimum wage case.

A better attack on Labor's use of "fairness" was made last month by Kelly O'Dwyer at the CIS. She said, in part:

Fairness’ is being hijacked as a one-word slogan by Labor and the Greens to encapsulate a very narrow concept while ignoring many crucial dimensions of fairness. 

Fairness is not only complex at a micro level; it is also complex at the macro level as well. There is absolutely no question that fairness involves assisting the truly disadvantaged and marginalised. But it also involves questions of intergenerational fairness. Amongst other things, it also involves looking at the hidden winners and losers, questions of personal responsibility and reward for effort, and complex transitional questions.

In what is part of a now common Liberal trick O'Dwyer actually questioned the "fairness" of a progressive tax system. To O'Dwyer "user pays" is fair and anything smacking of cross-subsidy is unfair.

In doing so O'Dwyer is tapping into the earlier critique of the term "social justice" which questioned who had the authority to determine the appropriate distribution of incomes in a "socially equitable" way.

(It is also notable that both Shorten and O'Dwyer touched on "intergenerational" fairness - though one used it to talk of the environment and the other of debt.)

The response of the neoliberals is that the only "fair" way to distribute resources and incomes is through "the market."

This is not the place for a full critique of neoliberal conceptions of the market. But it is worth noting that the observed human preference for "fairness" demonstrated by the ultimatum game is not well represented in markets.

Governments (and firms actually) exist because markets can't resolve all issues. Representing "fairness" is one of them. And the answer to the question of "how can Government's decide" is simply because Government's are elected.

Despite the great fear of the upper classes that expansion of the vote would see the poor appropriate all the wealth of the rich, it doesn't happen. Social mobility is part of the reason - too many people have aspirations of being rich to support full expropriation.

Surprisingly people's bias for fairness also extends to balancing fairness in reward for effort as well as fairness of opportunity and fairness of outcome.

Unfortunately when given a microphone today Bill Shorten simply responded by saying he was up for reform but would support things that were fair, and not things that were unfair without any further explanation.

And it really is time for him to say a little bit more.

Firstly, fairness is good for the economy. Increasing income and wealth inequality restricts economic growth; and it isn't solved by economic growth.

Secondly, fairness is good for our security. Crime is more prevelant the larger the poor underclass is.

Thirdly, fairness is moral. Even Hayek understood that the "shafts of fate" play just as much a role in those who are very well off as those who are destitute. Lang Hancock just happened to fly under a storm and find the Hammersley range. Which song will be a hit depends as much upon the network of people who like and recmmend it as it does the song's intrinsic qualities.

To really win Bill Shorten needs to use every opportunity to explain how fairness "drives prosperity, it underpins growth, it lifts living standards, it creates jobs – it gives everyone the chance to fulfil their potential." He needs to stop assuming that the population at large understands or shares his view. Clearly the Australian business community doesn't - and they need to!

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