Where Next? Kevin Rudd and the Historic Role of the Social Democrat

The Murdoch press in Australia has been in a tizzy over Kevin Rudd's seven thousand word essay on the global financial crisis in the Monthly. It declares neoliberalism dead and gives a call to arms for social democrats.

I was struck by this warning about the possible rise of various kinds of extremism if social democratic governments fail to make progress.

Social-democratic governments across the world must rise to the further challenge of developing a practical policy response to the crisis that rebuilds shattered economic growth, while also devising a new regulatory regime for the financial markets of the future. This is our immediate challenge. But if we fail, there is a grave danger that new political voices of the extreme Left and the nationalist Right will begin to achieve a legitimacy hitherto denied them. Again, history is replete with the most disturbing of precedents.

But much of the rest of the analysis is, by now, fairly conventional. The politics of tarring the Liberals with a "failed ideology" is too good to resist though of course.

Not for the first time in history, the international challenge for social democrats is to save capitalism from itself: to recognise the great strengths of open, competitive markets while rejecting the extreme capitalism and unrestrained greed that have perverted so much of the global financial system in recent times. It fell to Franklin Delano Roosevelt to rebuild American capitalism after the Depression. It fell also to the American Democrats, strongly influenced by John Maynard Keynes, to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement. And so it now falls to President Obama's administration - and to those who will provide international support for his leadership - to support a global financial system that properly balances private incentive with public responsibility in response to the grave challenges presented by the current crisis. The common thread uniting all three of these episodes is a reliance on the agency of the state to reconstitute properly regulated markets and to rebuild domestic and global demand.

The second challenge for social democrats is not to throw the baby out with the bathwater. As the global financial crisis unfolds and the hard impact on jobs is felt by families across the world, the pressure will be great to retreat to some model of an all-providing state and to abandon altogether the cause of open, competitive markets both at home and abroad. Protectionism has already begun to make itself felt, albeit in softer and more subtle forms than the crudity of the Smoot-Hawley Tariff Act of 1930. Soft or hard, protectionism is a sure-fire way of turning recession into depression, as it exacerbates the collapse in global demand. The intellectual challenge for social democrats is not just to repudiate the neo-liberal extremism that has landed us in this mess, but to advance the case that the social-democratic state offers the best guarantee of preserving the productive capacity of properly regulated competitive markets, while ensuring that government is the regulator, that government is the funder or provider of public goods and that government offsets the inevitable inequalities of the market with a commitment to fairness for all. Social democracy's continuing philosophical claim to political legitimacy is its capacity to balance the private and the public, profit and wages, the market and the state. That philosophy once again speaks with clarity and cogency to the challenges of our time.

Rudd commits to ETS?

There are now several pieces in the Australian press suggesting that Rudd is now doubly committed to the ETS and willing to abandon petrol populism and tell the electorate some home truths. For example this from Dennis Atkins.

Process Stories: Can Rudd run an office?

Today the Weekend Australian is leading with the chaos in Kevin Rudd's office, targetting in particular two 28 year old aides, Lachlan Harris his Press Secretary and Alister Jordan his deputy Chief of Staff. It'll be interesting to see if Harris in particular is able to hang onto his job given that this is not the first time that he has become the story.

This confirms the general sense that the wheels are falling off the government here in Australia but the story itself feels somewhat beaten up, relying largely on bruised feelings in the press core(!) and the public service, most reported anonymously.

George Megalogenis is providing the most effective critique of the Rudd government's obsession with the news cycle and failure to provide true leadership and develop long term policy. His article today has this remark:

To a visitor from outer space, it would be hard to distinguish the job description of prime minister today from that of a talk show or game show host. The PM is a regular fixture on radio and television, where no topic is too small for him to discuss. He offers cash prizes to listeners and he sweats on the weekly ratings.

What was Rudd thinking?

Presumably we, (like Hawke, Keating and pretty much everyone else) are now over the gritted teeth initial reaction to not being consulted on Rudd's Asia Pacific community proposal and it's time to work out what the substance of the proposal is.

I have found the Lowy Institute's Interpreter blog useful on this. Sam Roggeveen believes that getting the regional structure right does matter, while Hugh White believes that Rudd is not truly serious about the proposal and that it does not do anything to address the serious issues facing the region. (If White and Greg Sheridan of the Australian agree on this then perhaps the proposal really is an utter waste of time!)

For Australia these important issues are strategic tensions between the US, China and Japan. White:

So let’s get real: before we can build forums or institutions that work effectively to create the kind of peaceful Asia we all hope for in the Asian Century, the region’s major powers are going to have to start accepting that they have to deal with one another on a rather different basis from the way they have been operating for the last few decades. To build Rudd’s vision, the US will have to start treating China as an equal, China will have to start treating Japan as an equal. These are big concessions, which will not easily be made, and so far there is little sign that they will be. Helping to mobilise these fundamental changes in relationships between major powers is the most urgent issue for Asia, and an immense challenge to Australian diplomacy. But nothing is more important for us.

Relations between those countries would seem to be very important to New Zealand too, so it would be great to see some more discussion of the background to Rudd's moves in the NZ press.