Path to progress hinges on commitment to trade and business

Is Australia next? People are legitimately asking this following the year’s seismic political shifts in the US and Britain.

Although the complex forces at play in both countries remain unclear, both decisions reflected a rejection of the establishment — mainstream politicians, big business, commentators — and a failure to make middle-class and low-income people feel better off.

Both nations were deeply divided and lacking a sense of shared prosperity.

Some commentators argue that our own election result and rising support for minor parties suggests we will follow the Trump and Brexit path. However, I believe Australia is a very different country.

Britain’s national character — informed by aristocracy, class hierarchy and colonialism — never made it a good fit with the EU. Americans, like Australians, forged their own identity. But where they emphasised freedom, our society was built on fairness.

The US was deeply divided from its outset. Its civil war ended slavery but left a weakened south and ingrained discrimination. Our nearest comparison, the Eureka Stockade and great industrial strikes of the 19th century, presented a choice: to adopt England’s hierarchical class structure or recognise and defend workers. By choosing the latter, Australia defined itself by fairness.

The issues that divide Americans — race, geography, economics — nurtured its anti-establishment backlash. While Australia may have inequality problems and pockets of entrenched disadvantage, we do not share these divisions.

Australia’s different value system and societal structure — evidenced by Medicare, mass education and the welfare safety net — are our greatest protection against division.

Our quarter-century of economic growth — underpinned by reforming governments in the 1980s and 90s, and our mining boom — has largely been shared around the country, further reflecting our values.

Average real income growth for Australia’s poorest households exceeds that of the highest income households in most OECD countries. In the US, the top 1 per cent of earners snared 85 per cent of the growth between 2009 and 2013.

The global financial crisis inflicted immense hardship on many, particularly in the US and Europe, who felt those responsible for the turmoil escaped without punishment. They felt the establishment destroyed their lives, stole their homes, yet continued their privileged existence.

Even if we lack the antecedents to adopt America’s example, it doesn’t mean we can be complacent or arrogant about the future. We must protect our capacity to grow while ensuring that everyone enjoys better quality of life, a sense of fulfilment and purpose, freedom of choice and new opportunity.

Our economic success has been undergirded by business investment and innovations that have brought costs down.

Opening our economy to global trade encouraged competition while delivering greater consumer choice and lower prices. Opening our door to skilled migrants brought new ideas and a more productive labour market. This is how the average Australian’s real income per capita has doubled during the past 40 years.

Growth is needed for a social safety net, for people to have increased spending power, an educated populace and empowered individuals with more choice than ever.

However, there’s no point quoting statistics at people to convince them they’re better off. We need to listen to them with empathy and understanding — not arrogance, blame and denigration.

People typically look to their leaders and institutions for comfort. But one of our biggest challenges right now is that people have lost faith in our politicians, religious leaders, businesspeople and civil society.

Minor parties on both sides of the political spectrum are gaining support with populist policies. This drift cuts across city and country, low and high-income groups, Left, Right and Centre. People think governments have run out of ideas and credibility. They certainly have run out of money to throw around.

Big business contributed to this growing distrust of institutions through the behaviours in some firms ahead of the global financial crisis. We cannot walk away from that fact. This combination of people feeling worse off, decreased trust in institutions and questioning of the tools of economic growth is our essential dilemma.

My fear for the country is that if we walk away from the things that have protected us, we’ll fail the people who need us the most. We need a new global mindset and a better approach to leadership across our institutions.

Leaders must tell the truth about the futility of trying to protect jobs and industries in a global marketplace. We must open up, not shut down, trade.

We should embrace digital technologies with the aim of producing goods and services in new and different ways. Skills and capabilities should be as valued as goods and services.

The formula for prosperity is simple to describe but not simple to achieve. At its core are successful businesses that invest and innovate to drive economic growth. Growth leads to more, better and higher-paying jobs and the capacity to achieve social goals.

We need incentives to drive global competitiveness so businesses can continue to deliver 80 per cent of economic output. A world-class education and skills system ensures people are resilient to global forces of change.

Flexible and creative workplaces improve productivity and create better jobs and higher wages. Stronger budgets ensure the government is capable of caring for our citizens.

Better leadership must be grounded in a deep understanding of global trends and how people feel about it. Leaders must show how technological change leads to progress, give a sense of vision and purpose, and step through how we are going to respond. This hinges on a commitment to the Australian values of fairness, honesty, compassion, respect, responsibility and courage. Leaders also need intellect, empathy and aspiration.

Old mindsets that start with protectionism and isolation will be our undoing. It is greatly unfair to spread false promises that anti-business, populist policies hurt nobody — its victims are the poorest people with minimal choices, not the most affluent.

I don’t believe we will head down the US path. But I also don’t believe we can afford to risk it, for the sake of short-term populism.

Jennifer Westacott is chief executive of the Business Council of Australia.