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John Howard’s Australia

Monday, August 1, 2005

Since 9/11, australians have proven themselves once more to be “very satisfactory friends in peace, and the best of friends in war,” as President John Kennedy described them in 1962, attesting to “this happy relationship between two great people.” According to Prime Minister John Howard, “Australians have never asked others to do for us what we have been unwilling to do for ourselves.” But Australia’s participation in the coalition would not have been possible had Howard not won a political debate that consumed much of the 1990s about Australia’s place in the world and its national identity — and, having won power in 1996, had he not demonstrated in government that an instinctively conservative politician can govern successfully in accordance with his principles.

Australia is a nation conceived in peace: No war of independence marked its birth and no civil war its coming of age. But its national consciousness bears the deep imprint of war. “Australia was born on the shores of Gallipoli,” Billy Hughes, who served as prime minister during the First World War, once said. The Australian federation had been formed just 13 years before, and the Great War was the young nation’s first test, one that exacted a huge toll. Out of a population of 4.5 million, 60,000 gave their lives. To put that in perspective, the United States, with a population in 1914 over 20 times higher, lost 116,000 men. Its wartime sacrifice has been described as Australia’s spiritual bonding. Every town has a war memorial. The remembrance of Australia’s war dead and the celebration of its war heroes is a deeply-rooted part of its sense of nationhood. The National War Memorial in Canberra is one of the most visited places in the country, and Anzac Day 2004 saw record numbers of young Australians at Gallipoli.

Although Australia entered the First World War as part of the British empire, it did so enthusiastically. In part, this reflected ties of kinship and Australians’ dual identity as Australian and British. But Australia wasn’t just fighting Britain’s battles. It also evinced a hard-headed calculation of its own security interests. In the era of imperial expansion, which the First World War was to bring to an end, mastery of Europe would change the balance of power in the South Pacific. Australians recognized that the Royal Navy was the guarantor of their independence. Recognition of the need for allies went hand in hand with an assertion of Australian interests and, at times, a vocal presence in world affairs. At the Paris peace conference at the end of World War i, Billy Hughes insisted on annexing the South Pacific islands his country had captured from Germany and made little secret of his contempt for Woodrow Wilson, his Fourteen Points, and the League of Nations. Wilson returned the compliment, calling Hughes a “pestiferous varmint.”

The collapse of British power in the Pacific following the surrender of Singapore to Japan during the Second World War meant that from then on, American power was to be the cornerstone of Australia’s defense. Its most important bilateral relationship switched from Britain to the United States. Ten weeks after Pearl Harbor, the Japanese bombed a joint Australian–U.S. military force in Darwin on Australia’s northern coast; and at the battle of the Coral Sea, the U.S. Navy successfully thwarted a Japanese attempt to cut Australia off from America.

After the Second World War, Australia’s strategic imperative was to secure its alliance with the United States. Australian diplomacy achieved its greatest triumph when the Truman administration signed the anzus treaty in 1951. Under it, the parties declared their “sense of unity,” ensuring that “no potential aggressor could be under the illusion that any of them stand alone in the Pacific Area.” While clearly Australia has gained an immense strategic benefit from the anzus treaty, it has consistently been a far more reliable ally than many of America’s nato partners. Australia’s participation in the Vietnam War further strengthened the alliance with the United States, and Canberra continues to seek ways to deepen U.S. involvement in East Asia.

At the same time, Australian national identity evolved. Robert Menzies, Australia’s longest-serving prime minister, who was in office at the start of the Second World War and through much of the immediate postwar period, described himself as “British to his bootstraps.” There was no contradiction in being passionately Australian and feeling part of the British family. That began to change in the 1960s. A policy promoting Australian national identity was pursued energetically by Gough Whitlam’s Labor government, elected in 1972, and carried on by his successors. Yet modernization of the symbols of Australian nationhood was couched in positive terms, not in terms of setting the future against the past or trying to define the modern Australian nation by opposition to the country’s British roots.

That changed when Paul Keating became prime minister in 1991. Keating had been treasurer in the Labor government of Prime Minister Bob Hawke, which had come to power in 1983. At their best, these two politicians led one of the most impressive Australian governments. From the left, Keating drove the structural reform of the Australian economy that the previous right-of-center government had made necessary through its neglect. Keating deregulated banking and the financial system, floated the Australian dollar, cut trade tariffs and began to privatize state-owned banks and airlines. Defeating Hawke in an intraparty coup during a recession for which, as treasurer, Keating could have expected to receive much of the blame, he launched a cultural offensive to redefine Australia and its place in the world.

The title of a 1992 speech, “Australia and Asia: Knowing Who We Are,” says it all. Keating ridiculed Menzies, describing his premiership as an “almost endlessly regressive era [which] sunk a generation of Australians in Anglophilia and torpor,” and he opened up on his countrymen: “My criticism is directed at those Australians — or more accurately that Australian attitude — which still cannot separate our interests, our history, or our future, from the interests of Britain.” He instructed Australians to learn from what he called the geophysics of the situation: “geophysically speaking this continent is old Asia — there’s none older than this. It’s certainly not going to move, and after two hundred years it should be pretty plain that we’re not going to either.” The answer therefore was for Australians to embrace Australia’s “destiny as a nation in Asia and the Pacific.”

If Tony Blair could not succeed in persuading the British people that Britain is actually a European country, the task of persuading Australians that Australia is an Asian country was even greater. It is a proposition that Asian leaders themselves reject — Australia is seen as located “in” Asia but is not “of” Asia — and it perplexed Australians to hear their prime minister telling them there was something wrong with what they thought about themselves. But it played brilliantly among the cultural and intellectual elites, many of whom still regard Paul Keating as Australia’s lost leader. For them, Canberra’s most important bilateral relationship should be with Jakarta or Beijing rather than Washington.

Keating continues to provide this audience with the intellectual case for their Asian vision of Australia’s future. In a 2003 speech on Australia’s geopolitical and economic positioning, Keating argued that the Chinese economy — a $3 trillion economy generating $200 billion of new wealth annually — will propel the next stage of global growth: “While the twentieth century was the century of the Americas, the chances are the twenty-first century will be the century of Asia and we may see, for the first time, a real eclipse of American economic power.” Keating predicted that one day China would be the only country with the cultural and military unity to “deal with” the United States. This would leave Australia marginalized and isolated, looking wistfully for U.S. protection. Keating questioned the benefits of a free trade agreement with the U.S., and while he thought Australia should maintain the alliance with the U.S., Australia should, he thought, make its “own luck.”

To Keating’s Asian model of Australia John Howard counterposed his own. Where Keating’s model could be termed an either/or dialectic, Howard’s is additive. It absorbs Australia’s political and cultural endowments from Britain rather than attempting to exorcise them. Howard’s model explicitly rejects the idea that Australia must choose between its history and its geography. On coming to power, his government, Howard said, was convinced that “it was not only possible — but essential — for Australia to build and maintain links with major centers of global power and influence, whilst ensuring that key regional relationships were kept vibrant and strong.” “We should aggregate our advantages and our opportunities,” he told a British audience in 2003. “I have found it entirely counter-productive to have seen my country go through a process of saying, well, in order to make yourself more welcome in one part of the world, you had to be ruder to the other parts of the world and you had somehow or other to cut umbilical cords.”

Howard challenged Keating’s notion that the United States will go into relative economic decline. In pushing for a free trade agreement with the United States, Howard argued that “the United States economy will be more and not less important to Australia as time goes by. The significance of the United States in the world economy will grow over the next fifty years.” That view does not preclude deeper economic links with China, and Howard has also flagged a free trade agreement with China.

Howard has always been open and direct about the importance of the relationship with the United States, even before 9/11 calling it “the most important we have with any single country,” resting not just on American power, but of “equal, if not more significance,” on shared values and aspirations. Howard’s belief in the American alliance was deepened by 9/11. He was in Washington at the time, and as he was conducting a press conference in his hotel, the crash into the Pentagon could be seen through the hotel’s windows. This had a significant personal effect on him. It was on Air Force Two, which had been provided to fly him to Hawaii on his way back to Australia, that the mutual protection provisions of the anzus treaty were invoked.

John howard’s essentially conservative vision of international affairs, based on alliances of nations with shared interests and values, was made explicit in his decision to back the United States in the removal of Saddam Hussein. In his statement to parliament immediately preceding the war, the prime minister said that the alliance with America “has been and will always remain an important element in the government’s decision-making process on Iraq. The crucial long-term value of the US alliance should always be a factor in major security decisions taken by Australia.”

Although the prospect of Australian troops fighting in Iraq was initially viewed negatively by a majority of public opinion, Howard’s justification turned opinion around. By putting Australia’s participation in terms of its alliance with the U.S., and not exclusively in terms of wmd and United Nations resolutions, Howard avoided many of the postwar problems that beset Tony Blair. While the failure to find wmd has damaged Blair’s domestic credibility, the issue has had less salience in Australian politics because the public was given a robust national interest rationale rather than a neo-Wilsonian one. Consistent with this philosophy, Australia made it clear that its principal role should be in fighting the hot war, not the subsequent peacekeeping.

None of Australia’s former prime ministers backed the decision to support the U.S. on Iraq. His Liberal predecessor, Malcolm Fraser, whom Howard served as treasurer in the late 70s and early 80s, has been critical of Howard’s pro-U.S. position and spoken against the free trade agreement with the U.S. But, in contrast to his coalition partner Tony Blair, John Howard had the benefit of heading a right-of-center government. No Liberal or National Party mp broke ranks publicly over the decision, despite some personal hesitations. This enabled him to lead a united cabinet and party and to provide Australians a justification in terms of the importance of the U.S. alliance — which would have been inflammatory for Britain’s Labour party.

The visits to Canberra on successive days in October 2003 of President Bush and President Hu Jintao of China were diplomatic proof of the viability of Howard’s model of Australian identity and the foreign policy that flows from it. International relations is not a zero-sum game, and Australia’s close relationship with the U.S. does not come at the cost of its relations with China. Both China and the U.S. have an interest in developing constructive relations with one another, not least because of China’s hunger for economic growth, which is precisely where Australia’s interests lie. Indeed, Howard used his personal relations with the Chinese leadership to secure the largest-ever Australian resource deal — exporting liquefied natural gas from Australia’s North West shelf — against competition from countries such as Indonesia. Only if there were a serious strategic clash of interests between the U.S. and China would Australia be forced to make a choice between the two. But in such an extreme situation, it is very hard to foresee the circumstances in which Australian interests would be better served by reversing its 60-year relationship with the U.S. and throwing in its lot with China.

The validity of Howard’s view was buttressed by Australia’s response to the Indian Ocean tsunami, which provided Indonesia and Australia’s other Asian neighbors a test of whether Australia would live up to its good-neighbor rhetoric. It did. Howard immediately broke off his summer vacation — Christmas and the New Year coming at the height of the summer holiday — and took control of the government’s response, demonstrating that the challenge was being addressed. He ordered the deployment of army units and dispatched a ship, helicopters and a forensic team.

In a democracy, where the linkage between domestic politics and foreign policy is strong, a nation’s foreign policy, to be sustainable, should be an expression of its values as well as its interests. The Keating model is an Australian manifestation of the tendency of elites in western democracies to want people to be something other than what they are — in this case that Australians should be Asian. Howard has spared no effort to challenge this, deriding what he has called the “seemingly perpetual symposium on our self identity,” which, he has said, ended with the defeat of the Keating government in 1996. “We no longer navel gaze about what an Australian is. We no longer are mesmerized by the self appointed cultural dieticians who tell us that in some way they know better what an Australian ought to be.”

Challenging the cultural assumptions of the elite has been good politics and is one reason for Howard’s dominance — which, it should be said, came as a surprise to many who had followed his career before he became prime minister. He had not been a successful opposition leader when he won the leadership the first time around in 1985, after the defeat of the Fraser government, once describing himself as Lazarus with a triple bypass. Political longevity brings the benefit of experience, and Howard’s success reflects the integration of a conservative philosophy with political skills of a very high order.

The pattern many right-of-center politicians follow is to meet the minimum demands of their conservative base and then move to the center. Howard not only talks like a real conservative, unapologetically describing himself as a Burkean conservative and a believer in competitive capitalism; he has governed and won elections as one. In so doing, he meets the ultimate test of a true conservative leader — a Reagan, or a Thatcher, or a George W. Bush: not one’s deftness in moving to the center, but one’s ability to move the center of the political spectrum in a conservative direction. Paul Kelly, Australia’s leading political commentator, wrote after Howard’s fourth election victory last October that Howard had “moved Australia towards his own orbit.”

Like the u.s. and Britain, Australia’s economic performance deteriorated markedly in the 1970s. Unlike them, Australia’s economic reforms were initiated during the 1980s by a left-of-center government, which put the Liberal party and its junior coalition partner in limbo as the Labor government demonstrated through its actions that it was the party of economic competence and progress. To its credit, the Liberal party supported the key planks of the reform program, notably tariff reform and floating the Australian dollar, enabling them to pass the Senate, which remained under coalition control. Acting responsibly on these issues helped keep the Liberals in the arena; that party would have had no electoral viability at all if it had opportunistically opposed measures that were obviously necessary. But it remained hard for the party to regain its footing. During 13 years out of government, the Liberals went through five changes of leader before ending up with John Howard for his second time — an average of one leader every two years.

The Achilles heel of Labor’s economic reforms was its reliance on trade union cooperation to moderate labor-cost inflation. This was bought at the price of leaving Australia’s poor labor relations unreformed and was a major constraint on economic performance. But labor market rigidities would catch up with the Labor government. In a fairly mild recession (as measured by gdp) at the beginning of the 1990s, unemployment nudged post-1945 highs and interest rates went up to 18 percent. At the same time that it was being put on the defensive by the recession, Labor was inflicting additional damage on its reputation for economic competence by flirting with protectionism and losing control of public finances.

It should have been the Liberals’ moment and the 1993 election the Liberals’ to lose. Liberal leader John Hewson, a former investment banker and economic liberal (in the European sense), developed a technocratic, 385-page platform. Though sound from a policy viewpoint, it was politically naïve and electorally disastrous. Prime Minister Paul Keating’s response when Hewson challenged him to call a snap general election has entered Australian political legend: “No,” Keating answered, “I’ll do it slowly,” which he duly did.

By the time of the next election in 1996, the Liberals had learned from their mistake. Under John Howard, they waged a values-driven election campaign with a small number of policies designed to symbolize those values, much as Tony Blair was to do in Britain the following year. While Keating remained the darling of the elites, including many highly educated and wealthy Liberal supporters, Howard won the support of many natural Labor voters. For the first time, more Catholic voters — a core Labor constituency — supported the Liberals than Labor. Aspirational economic policies combined with socially conservative values peeled off support from Labor’s base. Howard won in a landslide, although he did not get a majority in the Senate.

As a national leader, Howard has conducted a conversation with the Australian people about Australian national identity and appropriated for the Liberal party the working man’s sense of nationalism, which previously had been the preserve of Labor. It is tied to Australia’s war experiences and values such as mateship, a very Australian characteristic which, in Howard’s words, “encompasses unconditional acceptance, mutual and self respect, sharing whatever is available no matter how meager, a concept based on trust and selflessness and absolute interdependence.”1

This dialogue has enabled Howard to explain his government’s policies in terms of how they are grounded in the values of mainstream Australia. Like voters in most countries — especially the swing voters who decide elections — Australians are not ideological. Giving back to Australians the legitimacy to believe about themselves and their country what Keating had tried to deny them and consistently pitching his policies in these terms have provided Howard his political equity. As his election strategist Lynton Crosby explained after his third election win in 2001, “people see John Howard as consistent and steady — always prepared to stand his ground if he thinks it is to Australia’s benefit. In an era of political cynicism this is a gold-like quality.”

Paradoxically, the 1996 election landslide was to create its own problems. That election was fundamentally about the removal of an unpopular government. To win, the Liberals had to demonstrate that there was minimal risk in voting for them, which constituted a negative mandate. After passing a landmark labor-reform law and with ongoing fiscal consolidation, the Howard government seemed to drift. As Howard himself would later put it, “once a government loses the appetite for economic reform, it loses some of its rationale for existence.” Having played it safe, he sensed that his first term could be his last. His government needed a sense of purpose.

He alighted upon tax reform, proposing a General Sales Tax (gst) to replace the existing inefficient structure of goods taxes and as a way to fund income tax cuts. Not only would he commit his government to passing gst, but he would also fight the election on it. The issue he chose could hardly have been more electorally challenging. No political party in the Western world had won an election by proposing an entirely new universal tax. International experience provided strong grounds for caution. Moreover, gst had formed the key element of John Hewson’s 1993 election platform and was the principal reason the Liberals had lost the election that year.

Proposals for a gst had been around for some years. In fact, Paul Keating had favored it when he was treasurer, but it was opposed by the trade unions and he had been overruled by Bob Hawke. This time around voters were ready to be persuaded that it might be necessary. They also thought that if John Howard was pinning his government’s reelection on it, there might be a good reason for it. At the outset of the campaign, Labor led the Liberal coalition by nearly a two-to-one margin (52 percent to 28 percent) among swing voters. Howard’s commitment to gst through a tough election campaign made the difference. At an end-of-campaign speech, Howard laid it on the line: “I utterly believe in what I’m saying and doing. . . . If ever I have gone into an election campaign believing from the moment I got up in the morning to the moment I went to bed, and in all my being that what I am doing is right for Australia, it is this election campaign.”

Even voters who thought gst wouldn’t be good for them supported it, believing it would be good for the country. Labor’s response — offering an incoherent grab bag of promises designed to buy off sectional interests — appeared to voters to be exactly what it was: opportunistic. John Howard won his statement of conviction, even at the cost of a reduction in his majority in the House of Representatives.

As part of the switch to gst, the Howard government passed an a$12 billion income tax cut, equivalent to about 1.7 percent of gdp, a significantly higher percentage than the first round of tax cuts proposed by the Bush administration. The income tax cuts were, Howard said, all about “encouraging middle Australia to have a go.” Taxes remained an issue through most of the next term. Going into the 2001 election, Howard talked about his emphatic commitment to return people’s tax revenue whenever possible. “As surpluses become available, they will be returned to the Australian people through lower personal income tax,” he promised. By contrast, Labor planned to roll back gst — which made the party seem backward-looking and carried the threat that a Labor government would increase income tax.

As it turned out, the 2001 election was dominated by the issue of illegal immigration. If the U.S. is a nation of immigrants, Australia is more so, with the highest proportion of foreign-born citizens of any country other than Israel, a trend encouraged by the Howard government with its expansion of the legal immigration program. But a few weeks before polling day, the government had prevented the Tampa, a ship carrying 433 asylum seekers whom it had picked up from a boat sinking in international waters between Australia and Indonesia, from entering Australian waters. Howard’s opponents accused him of racism and of using the Tampa as a “wedge issue.” In fact, the wedge was between the Australian mainstream and the elites. Eighty per cent of voters supported the government’s stand and held that Australia should welcome refugees from any country of origin provided they went through the right processes. Howard’s line — “we will decide who comes into this country and the circumstances under which they arrive” — expressed exactly what the vast majority of Australians thought, and on election day the coalition achieved the largest two-party preferred swing to an incumbent in 35 years.

The precondition for Howard’s reelection wins was maintaining the conditions for fairly rapid economic growth. Since 1996, the Australian economy has grown by over one-third, a product of annual growth rates similar to those of the U.S. (skipping the 2001 and 2002 growth pause that hit the U.S.) and significantly faster than the uk, whose economy expanded by only one-quarter over the same period. Economic growth was initially underpinned by strong productivity growth, which began in the early 1990s and accelerated in the second half of the decade, and more recently by rising world commodity prices. The Howard government’s first-term labor market reform was a big factor behind this acceleration. Australia had a centralized system of wage bargaining designed to produce a high degree of uniformity across enterprises. The reforms were designed to help the transition to enterprise bargaining while at the same time reducing union involvement. The impact of these changes has been dramatic as companies begin to regain control of the workplace. An example of this is waterfront industrial relations. One of Australia’s leading port operators more than doubled the number of lifts per hour from 15 to 34. These gains not only directly boosted dock productivity, but rippled through the economy. The improved predictability of port operations increased the efficiency of all sectors dependent on the ports.

But Australia has much further to go in reforming its labor market. Despite avoiding recession at the beginning of the decade, and with a tightening labor market, the fact that Australia’s unemployment rate of 5.1 percent is only a shade lower than America’s 5.2 percent suggests a labor market that is still not working properly. Although the government introduced further reforms, they had been blocked in the Senate, which was controlled by the opposition parties. The Senate also blocked some of the cuts in income taxes which formed part of the gst package, notably the increase in the threshold of the top marginal rate. While Australia’s overall tax burden at 34 percent of gdp is low by international standards, the structure of taxation results in high marginal tax rates. Before the 2005 budget, the 47 percent top rate of income tax took effect at only a$62,500 (U.S. $47,360).

In terms of political strategy, John Howard is not a right-of-center third way triangulator, or at any rate triangulation does not form part of his core political strategy. Rather, like a sailor, he tacks into wind. With the former, the aim is to appropriate or neutralize your opponents’ agenda, often at the cost of some loss of policy coherence and sacrifice of principle. With the latter, the objective is to maintain your direction as best you can under the prevailing circumstances. To be an effective advocate in the case he is making, Howard needs to feel intellectually consistent within himself about the policy trade-offs he is making. In the case of income tax, he took the best deal he thought he could get out of the Senate, which until the October 2004 election had been controlled by the left for the better part of a quarter of a century.

Going into that election, John Howard himself had thought the outer limit would be to retain the same number of coalition seats in the House of Representatives, which forms the governing majority. At his post-election press conference, he said that he had not thought the victory would be as great as it was, later admitting that on election day he had thought he’d lose one or two seats in the House of Representatives. As it turned out, he pulled further ahead of Labor, reinforcing a remarkable series of election wins — increasing his 1998 majority in the 2001 election and increasing it again in 2004, running nearly 10 percentage points ahead of Labor’s primary vote under Australia’s preferential system of voting. Still more unexpected, something in fact no one had predicted, was the coalition’s gaining a majority of the Senate under a voting system that had seemed loaded against it.

Any government entering its tenth year in office risks losing momentum and the sense of mission that is necessary for its continued political success. Howard’s use of his new mandate and his control of the Senate are typical of his incremental style — constantly pushing policy in a conservative direction while returning to complete unfinished business from his previous terms. As the impact of earlier economic reform has been absorbed, and with the economy being driven by strong commodity markets, Howard’s government has announced its intention to legislate for further labor market reform — although he is having a great deal of difficulty persuading Australians that now is the time for such change — and a welfare-to-work program. In May, Peter Costello, who has served as federal treasurer throughout Howard’s term in office and is his most likely successor, presented a budget demonstrating the political and economic virtuous circle of a government managing to keep spending growth in line with economic growth, year after year.

Costello’s budget increased spending by around a$2.5 billion a year, or less than 2 percent, cut taxes by a$6.25 billion a year — nearly three times the spending increase — and budgeted a surplus equivalent to 1 percent of gdp. Since 1997, the Australian government has been paying down debt. With net debt currently at 0.7 percent of gdp, the kind of number usually associated with an annual surplus or deficit, not the stock of national debt, Australia’s fiscal position is immensely strong. In effect, the commodity price boom has been used to pay off Australia’s national debt. With control of the Senate, Costello could announce the big increase in the threshold for top-rate tax, which will rise by nearly 80 percent in two years, that the government had promised but was unable to deliver as part of the package introducing gst in the second term.

The 2004 election result in part reflected high satisfaction with John Howard’s premiership. There was no generic hostility toward the government and no desire among voters to throw the incumbent out. But Howard’s fourth election victory was more than this. His tenure as Australia’s second-longest-serving prime minister has disproved the left’s deeply held belief that social change would render conservatism obsolete. Since becoming prime minister in 1996, he has shown that conservatism and progress go hand in hand. In times of change, people look to their government not to be told what to do, but for the stability provided by the trustees of their nation’s enduring values. “Political office comes and goes in the natural ebb and flow of the life of a nation,” John Howard once said. “You only have a short period of time to achieve your goals and to realize your dreams.” He has used his time in office to change the direction of his nation, an achievement that places him in the first rank of leaders.

1 November 10, 2003. In the same speech, Howard cited a moving example of mateship drawn from an account by an Australian prisoner of war in Singapore who couldn’t recall a single Australian dying alone without someone to look after him in some way. That, according to the prime minister, is mateship.

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