Global economy: Stiglitz, Glover deplore human cost of neoliberalism

It’s all very well outlining the problems with the global economy — but what about fixing them?

Dennis Glover deplores the fate of Doveton, Victoria, where he grew up. Picture: Mark Dadswell

Joseph Stiglitz is one of the most influential economists of our time: Nobel laureate, adviser to Bill Clinton when he was US president, chief economist of the World Bank. That he has become increasingly sceptical of the nostrums of mainstream economics deserves attention.

Stiglitz is also a popular writer whose books and articles have helped shape global debate and fed into a growing unease with the mixed record of neoliberal policies during this century. His time at the World Bank (1997-2000) led to increasing disillusionment with the global lender’s enthusiasm for cutting basic government services in the name of ‘‘structural adjustment’’, as described in his 2002 book Globalization and its Discontents.

More recently Stiglitz has become known for his critique of growing inequality, which he sees as economically and politically dangerous. Like Australian academic, political adviser and author Dennis Glover, he is outraged by the widening disparities that accompany economic growth, which led him to call for a no vote in Greece’s bailout referendum in July.

The Great Divide is a collection of newspaper articles written over the past few years, and serves as an introduction to Stiglitz’s views, albeit less thoroughly than his recent books. The primary focus is on the US, and here Stiglitz is an interesting guide to the failures of public policy and what he terms “the vicious cycle of inequality and recession”.

He is particularly concerned by the influence of the wealthy in American politics, where vast sums of money are required to run for office (witness Donald Trump) and politicians spend increasing amounts of time soliciting donations. This is less of a problem in Australia, although our opaque political funding laws and Clive Palmer’s short-lived success in the 2013 election suggests it is becoming more important.

During a visit to Australia last year, Stiglitz warned against adopting “American delusions”. He views Australia as far better governed than the US, and places particular stress on universal health coverage and the HECS scheme for repaying student fees. His warnings about anti­podean misunderstandings about the American model of higher education should be compulsory reading in government circles.

In his admiration for the economic management of Singapore and the Nordic countries, Stiglitz echoes a point made recently by Deakin University’s Andrew Scott in his book Northern Lights: that we should look beyond the Anglo­sphere for models of how to manage contemporary economies.

Glover, like Stiglitz, argues economics should be as much about morality as statistics. He claims many people have lost out significantly since the economic changes introduced under the Hawke-Keating governments of the 1980s and 90s. For someone who has worked closely with Labor politicians, his is a brave and personal book, an anguished account of what ‘‘economic reforms’’ mean on the ground. Glover grew up in Doveton, southeast of Melbourne, a significant manufacturing centre during his boyhood in the 70s. The failure of the car industry has led to the dramatic collapse of a once vibrant community in Doveton and other such areas, and the disappearance not only of jobs but of the whole sense of belonging that accompanied steady jobs and lifetime commitments between employers and employees.

An Economy is Not a Society is worth reading for the almost poetic ways in which Glover recalls a now lost working-class life, anchored around work, home and local neighbourhoods. His description of the physical deterioration of once neat and carefully tended neighbourhoods is a powerful reminder of the human costs of rationalisation.

Glover’s anger is personal; too many of the people he grew up with are victims of de­industrialisation who now work in part-time, unprotected and underpaid jobs, while others earn far more than they can easily spend.

Crucial to the lost working-class environment in which Glover grew up was a sense of community built around the workplace; I share with Glover nostalgic memories of the cafe­terias of my father’s workplace, in his case the Tasmanian Hydro-Electric Commission. The recent report of Catholic Social Services Australia into disadvantaged communities reinforces Glover’s complaints (Doveton is the third most disadvantaged postcode in Victoria). As he argues, economic reforms have created a “ ‘non-working class’, or perhaps more accurately the ‘once working class’ ”.

That is probably indisputable: more contentious is his claim that: “Our economic revolution has created it, and we collectively bear a moral responsibility to remove the ‘once’ and ‘non’ from its names.” Even if we accept the claim, the real problem is how to create the jobs that can provide the sense of purpose and stability for which Glover hankers.

In his criticisms of the economic reforms of the Hawke-Keating governments he passes over the work of ministers such as Brian Howe and Neal Blewett to smooth the transitions in the economy through carefully targeted policies and payments. But he is right to hold the Labor Party to account for overlooking the casualties of economic rationalism in its rush to court the “aspirationals”.

One of the standard questions in teaching comparative politics is why the US, unlike almost all other Western democracies, never had a significant labour party, which is usually assumed to explain much lower provision of government services in health and employment. Reading these two books together reminds us of certain basic assumptions about the role of the state that once differentiated Australia from the US, and which are now being eroded in the rush towards privatisation and outsourcing.

I ended both books with a similar sense of disappointment. Both are accurate in pointing to the problems of deindustrialisation and economic rationalism; both are critical of mainstream economics and call for renewed political energy. Stiglitz stresses the primacy of political choices and the centrality of government in taming and controlling the market. He argues for massive public investment in infrastructure, technology and education, and well-designed tax increases for the wealthy and for multinational corporations.

Glover, too, wants governments to act: “If people are jobless, give them jobs; if their houses are eyesores, beautify them and remove the stigma; if new blood is needed, bring it in; if an education will solve everything, give them the best money can buy.”

Who could disagree? But in practice what does this actually mean? And, most important, how does one preserve jobs for people without the skills required in an increasingly post-­industrial economy?

There is growing recognition of the need to increase government revenue, but it is hindered by 30 years of rhetoric that paints any taxation as bad, rather than the means whereby we collectively pay for what we cannot provide for ourselves. Glover and Stiglitz are good at pointing to the failures of present policies; they are less successful in constructing a persuasive narrative that would allow governments to respond to these failures.

Dennis Altman is professorial fellow in human security at La Trobe University.

The Great Divide

By Joseph E. Stiglitz

Allen Lane, 464pp, $49.99 (HB)

An Economy is not a Society: Winners and Losers in the New Australia

By Dennis Glover

Black Inc, 176pp, $19.99