Published in Business Spectator (Melbourne), 29 July 2010
http://www.businessspectator.com.au/bs.nsf/Article/Europe-Australia-economy-prosperity-ageing-growth–pd20100728-7S2NR?OpenDocument
Does history repeat itself? If you believe the great American writer Mark Twain it doesn’t, but at best it sometimes rhymes. English essayist Max Beerbohm went one step further. According to him, it is only the historians repeating one another.
And yet, despite the widespread claims of history’s one-way street, Australia’s present has an eerie resemblance to the past. Not Australia’s past, to be sure. For anyone with a remote memory of Europe’s 1980s, contemporary Australia must seem like a weird kind of time-travelling experience.
Not in the superficial sense, of course. Australians have been spared the return of the shoulder pads; we are not spending endless hours reassembling Rubik’s cubes; and we can only hope that Rick Astley’s comeback attempts won’t go anywhere.
Australia is living through a European 1980s revival. The 1980s in countries like Germany, Austria and Italy were a pleasant era to live. They were not perfect, of course, but the economy grew steadily, unemployment was low and manageable and social cohesion was strong.
If this reminds you of today’s Australia, it should. Australia is enjoying a feel-good phase, just like the one Europe experienced 20 to 30 years earlier. It is all the more remarkable since the rest of the developed world, on both sides of the Atlantic, is battling the consequences of the GFC. Tellingly, only the Australians have abbreviated the western world’s deepest crisis in decades with an acronym as if it was something that didn’t need spelling out.
Such smugness is the breeding ground of complacent policymaking. The higher you hold your head up, the less you see the pitfalls along the way. The more you ignore the real challenges of the future, the more time you dedicate to distracting side shows. The main reason why Europe is in such a bad shape today is precisely the lack of awareness of its real predicament in the 1980s.
Back in the 1980s, it was already abundantly clear for anyone with open eyes that Europe was heading for difficult times. Experts were warning of the effects of an ageing society. They were pointing at the growing education gap between the native population and migrant newcomers. They were warning of the long-term effects of the welfare state.
The writing was on the wall, but the Europeans rather painted it over and pretended to solve the more important things. They were worried about the forests dying; they were concerned that robots could dehumanise the workplace and alienate workers; they were afraid of the use of growth hormones in cattle farming. Genuine concerns, certainly, but not quite the actual problems of the continent.
Europe was preoccupied with all sorts of real and imaginary scandals. It happened with the glee of someone who occasionally needs a distraction from his all-too-comfortable life. Anyway, it was far more pleasant to discuss the rampant sexism in advertising than to actually reform the tax system, tackle the growth of a disaffected underclass, or consolidate public finances. It was an indulgence that Europe believed it could afford. As it turns out a generation later, it could not.
We are now watching history repeating itself in a different place. Australia is in an extremely fortunate situation as the only Western economy weathering the storms of financial crisis almost unscathed. Australia’s unemployment rate is less than half that of the US; total debt is not even a quarter of Germany’s; the economy will keep on growing when the rest of the world fears a double-dip recession.
Once again, Australia can pride itself as being the ‘lucky country’. It seems to grant Australian politicians in this year’s election campaign a luxury. Instead of having to crack tough nuts, they feel safe to go for the low-hanging fruit. No wonder last Sunday’s TV duel was full of the usual platitudes of ‘hard-working families’, ‘moving forward’ and ‘sustainable Australia’. But although it was mentioned umpteen times, ‘fair dinkum’ it was not.
Just as the Europeans of times past believed they were able to pick their issues and ignore their actual homework, their Australian cousins are about to disregard the actual tasks ahead of them. There are at least three.
First, Australia has to make a hard choice about where it sees itself in the region. If China’s rise continues, how will Australia define its position vis-à-vis the Chinese? It is an issue of economic importance, national identity and strategic alliances.
Second, how is Australia preparing itself for its ageing society? Europe wasted at least three decades in the preparation of the gargantuan demographic shift, but Australians are just about to repeat their mistakes if no action is taken on work participation and the retirement age.
Third, could Australia convert its population growth into a fundamental renewal and extension of its often inadequate infrastructure? It is bizarre that the growing population has come to be discussed as an impediment to our future prospects, when in fact it could be the source of growth for generations to come.
Through their economic good luck, Australians have been lulled into a false sense of safety. They feel invincible in the wake of a recent strong economic performance. They think they can afford the luxury of saying ‘no’ to further growth.
To any European still remembering the 1980s, this has the same nostalgic quality as shoulder pads, Rubik’s cubes and those daggy Rick Astley songs. But actually, we would want to see the return of none of these.
