Labor’s mining of millennials’ envy is a cynical ploy that may work

A decade after Kevin Rudd’s declaration of a new economic epoch, global capitalism is yet to get the comeuppance the Left so keenly anticipated.

The 2008 global financial crisis appears as a blip on the chart of global growth. World gross domestic product has risen from $60 trillion to more than $85 trillion. It has grown steadily at about 3 to 4 per cent for eight years.

The contribution made to this by the Rudd government’s stimulatory frenzy is probably a fraction less than zero per cent.

The damage it caused to Australia’s fiscal reserves has left Australia dangerously exposed to external economic shock.

Rudd’s manifesto for the post-GFC world, expounded in his notorious essay in The Monthly, was an “activist state”, global regulation and a call to arms for governments to fight for social justice.

A decade later, economic growth in western Europe, where Rudd’s social democratic path was followed, is barely half the global average. In Trump’s rawhide America, growth is at 4.2 per cent.

The truth, barely acknowledged by chin-stroking commentators, is that the financial crisis was caused not by capitalism but by non-market failure.

The global free market survived despite, not because of, governments. It survived Wayne Swan’s Keystone Keynesian antics and survived the European Central Bank’s quantitative easing. Capitalism survived despite the US Federal Reserve’s best efforts to castrate it by severing its vital organ, risk, and dumping it in the taxpayer’s lap.

Labor’s delusion that government is better able to order economic affairs than markets has cost Australian taxpayers tens of billion dollars over the decade. Its legacy includes unplanned and unwanted school buildings, the National Broadband Network, an unreliable and expensive electricity system and debt that will pass to the next generation, and possibly the one after that.

Yet Labor is doubling down. Bill Shorten is campaigning on the party’s least diluted socialist platform since Gough Whitlam. He promises intrusive government, and more steeply progressive tax. He will re-regulate the Labor market and hand back more power to the unions.

He will attack private health insurance and penalise self-funded retirees. He will throw more money at public schools and public health under the pretence of improving services.

He will resume subsidies to wind and solar farms, bringing more pain to consumers.

Economic freedom fighters like Uber and Airbnb will face a torrid time. Labor’s addiction to regulate, combined with the trade union movement’s determination to keep every worker within their grasp, will bring down the curtains on the sharing and gig economies.

It amounts to a repudiation of the reformist thinking that began under Whitlam’s successor, Bill Hayden, and drove Labor thinking for a quarter of a century. In the 1980s Labor responded to global challenges; today it runs from them.

It is an old socialist agenda that would have been familiar to Labor leaders in the 1940s and 50s, one heavy on ideology and light on realism. Labor’s only innovation is to head to an election promising to increase taxes. The taxes may be targeted in theory at the rich, but they will touch middle-income earners and retirement savers.

A pro-tax manifesto would have been unthinkable 10 years ago. There are two reasons, however, why the strategy might work.

The first is that the majority of voters pays less in taxes than it receives in benefits, the consequences of which were explored in this column last week.

They include public servants, doctors, university lecturers and shareholders in wind farms whose dividends are largely determined by subsidies rather than the sale of electricity.

The second is that redistributive policies are likely to appeal to millennials who feel caught on the wrong side of an intergenerational wealth divide. They are principally young voters with post-school education. They have spent much of their adult life at university accumulating debt, and little or no time earning income.

Those who have clawed their way into the property market are on the first rung with large mortgages and little or no capital gain. Their superannuation savings are meagre, and in any case the justification for compulsory superannuation savings seems remote.

Meanwhile the reforms of the 90s, delivered by both Labor and Liberal governments, have made today’s retirees the wealthiest in history. The baby boomers are far more likely than their parents to be shareholders. Most own the property they live in, and a significant number own investment property.

Labor’s politics of envy has a subliminal appeal to millennials. Winding back negative gearing or capital gains concessions for investors appeals to their grievances, even though its effect will be to tighten the rental property market on which most of them depend.

Higher education on demand has inflated career expectations for some. A significant proportion find themselves employed in jobs for which they are over-qualified, on paper at least.

The Opposition Leader is relying on these voters to get him home. Labor already holds three-quarters of the seats that the 18-35 cohort predominates. The Coalition holds two-thirds of electorates dominated by the over-55s.

There is evidence that the financial crisis was a decisive event for those who experienced it in their late teens and early 20s, particularly in the US and Europe.

Shorten will know that intergenerational envy was one of Jeremy Corbyn’s most successful strategies in the last British election. If the voting age had been capped at 35, Corbyn would have won by a landslide.

Shorten will need broader appeal, since the millennials make up less than 30 per cent of the electorate. The pendulum is shifting in favour of the oldies, thanks to modern medicine.

In the meantime Labor is prepared to pit children against their parents and grandparents in a cynical game of demographic class warfare. It will weaken the social fabric as surely as appeasing the public sector workforce weakens the economy. It will do nothing whatsoever to open the career pathways and earning opportunities the millennials seek.

Nick Cater is executive director of the Menzies Research Centre.