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Most ideologies, like most religions, have a foundational text that captures, in some form, the essential maxims that underpin belief. For economic conservatives the key text for their view of the world, as they would wish it to be, is Adam Smith’s An Inquiry into the Nature and Causes of The Wealth of Nations, published in 1776. All the familiar notions central to the working of the capitalist economy are there, as is the practical analysis of how an economy functions.
Smith advocated what he called the “System of Natural Liberty” where individuals could employ their capital free from “systems of preference or restraint” as long as they were within the law. We would recognise this as the central idea of all advocates of private enterprise, probably wrapped up in political propositions that the best government is that which governs least; that government has no place interfering in economic matters; that the market knows best; that individual self-interest and the profit-motive drive a commercial society; that restrictions on individual economic initiative should be limited and taxation kept as low as possible.
These are the ideas that shape the thinking of Prime Minister Abbott, Treasurer Joe Hockey, the Coalition Premiers around Australia and the conservative portion of the electorate. They have been made manifest in the recent insistence that there will be no “bail-outs”, no assistance to vulnerable industries, no “waste of taxpayers’ money” and a complacent assertion that all will be well now “the age of entitlement” is over and market forces are allowed to work.
Australia is, apparently, “Open for business”!
These august promoters of the values of The Wealth of Nations have evidently forgotten Smith’s caveat that there are three areas where the state had to find and deploy resources, in a manner that contradicted his “System of Natural Liberty” simply because they were too important to be left to individuals. They did not deliver profit but were nonetheless vital. No thinking person would challenge the first two – national defence and justice/law and order.
However, Smith realised what the current generation of conservative politicians would like to forget…that governments also have “the duty of erecting and maintaining certain public works and certain public institutions”, which, while they would not repay individual investment, “may frequently do much more than repay it to a great society.” (This is the penultimate paragraph in Book IV).
Smith understood that the interests of the “great society” must sometimes be the paramount concern of governments ideologically committed to individualism and laissez-faire. This opens up an area of debate in social and economic policy currently being neglected, which ought to feature more prominently in the national conversation about the immediate and long-term direction of planning for Australia’s future. It is a powerful argument for appropriate government investment and/or intervention in various fields.
For example, translated into the twenty-first century, Smith’s caveat demands government funding for health and education, but systemic under-funding to reduce government spending betrays the “great society”. Following the rejection of the Gonski Report and cuts across the whole sector, we now face proposals that more schools become semi-independent, which will surely intensify the current situation where suburban location, more than any other factor, dictates the quality of schooling. Health care generally, and the erosion of Medicare in particular, seems inevitably to be moving in a direction where wealth rather than health determines access to the best treatment.
Australia is uniquely a single nation in a vast continent, and Smith’s caveat should influence policy in a strategic sense. As the Prime Minister and Treasurer determine economic policy and deliver their budgetary plans for the next few years the electorate should look at the policies that, we have been forewarned, will consist chiefly of savage cuts in all areas of public expenditure. In considering these, the electorate must ask what such might mean for the “great society?” What “public works and…public institutions” will be diminished, and at what cost to the “great society”?
Smith’s caveat might also be a prompt for people to ask what steps the government might take to protect the Australian people against possible seismic shifts caused by geo-political or financial crises. Future-proofing will almost certainly mean that government is more directly involved in economic planning than conservative ideology would allow. Smith’s caveat comes down to simple questions such as what educational, industrial, agricultural, environmental and social resources can the nation ill afford to lose? To pick a few from a myriad we might ask – Can we afford to spend less on education and health (the prime concerns of the electorate –the “great society”) when this will cause great social harm? From a military perspective, can Australia really be without the capacity to build vehicles? Can we risk a situation where there might be no domestic airline? Shouldn’t food security, and valuable export earnings, be balanced against short-term profits from mining? Why is government investment in road and rail infrastructure so low? Isn’t the environment a public asset deserving protection? Why isn’t the government investing proactively in various forms of green energy?
And so it might go on…
With the prospect of a destructive budget on the horizon and an ideological determination in government ranks to foster Smith’s “System of Natural Liberty” (expressed in more familiar modern terms of course), it would be comforting to think that at least a few individuals recalled what they were probably urged to read in Economics 101 and remembered Adam Smith’s caveat.