Notes

Introduction

1. See Peter A. Hall, The Political Power of Economic Ideas: Keynesianism Across Nations (Princeton University Press, 1989).

2. Christopher Hood, Explaining Economic Policy Reversals (Buckingham: Open University Press, 1994).

3. Kalecki came to hold views, later termed 'Keynesian', at least as early as 1933.

4. M. Kalecki, 'The Political Aspects of Full Employment' Political Quar­terly, vol. 14, no. 4, 1943, pp. 322-31.

5. For an example, see S. Steinmo, K. Thelen, F. Longstreth (eds), Struc­turing Politics: Historical Institutionalism in Comparative Analysis (New York: Cambridge University Press, 1992).

6. See his contribution to the aforementioned, Peter A. Hall, 'The Move­ment from Keynesianism to Monetarism: Institutional Analysis and British Economic Policy in the 1970s', in S. Steinmo, K. Thelen, F. Longstreth (eds), Structuring Politics: Historical Institutionalism in Comparative Analysis (New York: Cambridge University Press, 1992), pp. 90-113. See also The Political Power of Economic Ideas: Keynesianism Across Nations.

7. I do not wish to suggest that all Marxists or all neo-liberals draw on monetarist thought. Those who do are in the distinct minority in each case, especially the former.

8. Such a position is not to claim that there are not important changes that have to be accounted for, such as the growth of female part-time em­ployment, together with social changes such as increased male involve­ment in the domestic sphere. It is merely to acknowledge that a justification of this stance cannot be made here. One excellent attempt at such a justification, however, has been made by Jocelyn Pixley, Citizenship and Employment: Investigating Post-Industrial Options (Cambridge Univer­sity Press, 1993).

1. Keynesian Ideas, Keynesianism and Keynesian Social Democracy

I. D. Winch, 'Keynes, Keynesianism, and State Intervention', in Hall (ed.), The Political Power of Economic Ideas, p. 109.

2. A yet even more specific concept is that of the 'economics of Keynes' which is supposed to be distinguished from the economics of those purporting to be Keynes' disciples. See Axel Leijonhufvud, On Keynesian Economics and the Economics of Keynes (New York: Oxford University Press, 1968). The distinction is also made by those who wish to retrieve the more conservative side of Keynes' thought. See T.W. Hutchison,

249

250 Notes

Keynes versus the Keynesians (London: Institute of Economic Affairs, 1977).

3. Peter A. Hall, The Political Power of Economic Ideas: Keynesianism Across Nations, (Princeton University Press, 1989), p. 4.

4. Peter Hall is but one example. See The Political Power of Economic Ideas, p. 5.

5. J. Tomlinson, 'Why Wasn't There a 'Keynesian Revolution', in Econ­omic Policy Everywhere?', Economy and Society, vol. 20 no. I, Feb. 1991, pp. 108-9; Tomlinson's earlier work was pertinent to Britain: 'Why Was There Never a "Keynesian Revolution" in Economic Policy?' , Economy and Society, vol. 10, no. I, Feb. 1981, pp. 72-87. For a Canadian account, see R.M. Campbell, Grand Illusions: The Politics of the Keynesian Experience in Canada 1945-1975 (Peterborough: Broadview Press, 1987).

6. The two pieces on Germany in P.A. Hall's edited collection, The Pol­itical Power of Economic Ideas, by Harold James, 'What is Keynesian About Deficit Financing? The Case of Interwar Germany' pp. 231-62, and C.S. Allen, 'The Underdevelopment of Keynesianism in the Fed­eral Republic of Germany' pp. 263-90, both argue that Keynesian ideas had little influence on the 1930s or immediate post-war Germany. Simi­larly, Marcello De Cecco has argued that Italian policy owed little to Keynes. This is more obvious in Italy, however, due to the dominant individualistic political philosophy. See his 'Keynes and Italian Econ­omics', in Hall, The Political Power of Economic Ideas, pp. 195-230. In Japan also the politics was not receptive to Keynesian ideas: Eleanor M. Hadley, 'The Diffusion of Keynesian Ideas in Japan', in Hall, The Political Power of Economic Ideas, pp. 291-310. The more curious case is that of Scandinavia, where Sweden and Norway quickly ab­sorbed Keynesian ideas, while Finland and Denmark did not adopt Keynesian economic management in the narrow sense of the term. All four countries, however, had a commitment to interventionism: 1. Pekkarinen, 'Keynesianism and the Scandinavian Models of Economic Policy', in Hall, The Political Power of Economic Ideas, pp. 311-46.

7. This was in contradistinction to views held by Joseph Lyons, for in­stance. In a radio broadcast on 8 November 1933 he stated that

the Commonwealth Government has always taken the view that there are definite limits to provide full-time work and, further, that unem­ployment cannot be permanently eased by a policy of relief schemes of this kind ... The work provided would be largely of unproduc­tive and temporary nature, and at the conclusion of it those who had been so employed would again be relegated to the unemployed.

Cited in Public Investment and Full Employment (Montreal: International Labour Office, 1946), p. 194 fn.

8. G. Whitwell, The Treasury Line (Sydney: Allen & Unwin, 1986).

Notes 251

9. In The General Theory, Keynes used the term 'classical' in his attack on his intellectual opponents. Whenever the term 'classical' appears in the following thesis, in contrast, I use it in its broader meaning to include thinkers as diverse as Smith, Marx, Ricardo, and Sraffa.

10. Peter Hall, The Political Power of Economic Ideas, pp. 6-7. 11. See, for instance, her chapter, 'What Has Become of the Keynesian

Revolution?' in Milo Keynes (ed.), Essays on John Maynard Keynes (Cambridge University Press, 1975). From an American perspective see E.J. Nell, Prosperity and Public Spending: Transformational Growth and the Role of Government (Winchester: Allen & Unwin, 1988), wherein he argues that Keynesianism accepted the principles of the market to the extent that it responded to neoclassical criticism on the latter's terms. For a specific discussion of this aspect of Keynesian economics, see W.C. Peterson, 'Market Power: The Missing Element in Keynesian Economics', Journal of Economic Issues, vol. 23, no. 2, June 1989, pp. 379-91.

12. See B. McFarlane, Radical Economics (London: Croom Helm, 1982), p.72.

13. In Australia there is very little published material: E. Jones, 'Who Won the Post-War? The Legacy of Keynes', Journal of Australian Political Economy, 22, February 1988, pp. 73-90. Unpublished material includes E. Jones, 'Was the Post-War Boom Keynesian?', Department of Econ­omics, University of Sydney, October 1989; Annette Stevens, 'The Keynesian Revolution That Never Was', BA Honours thesis, Depart­ment of Politics, Macquarie University, 1984.

14. For example, Tomlinson has taken deficit financing as the cutting edge of Keynesian policy proposals whereas Booth has argued that this is far too simplistic. J. Tomlinson, 'Why Wasn't There a 'Keynesian Revo­lution' in Economic Policy Everywhere?', Economy and Society, pp. 108-9; 'Why was there never a 'Keynesian Revolution' in Econ­omic Policy?'. A. Booth, 'Defining a "Keynesian Revolution'" Econ­omic History Review, 37, 1984, p. 263; Booth, 'The "Keynesian Revolution" in Economic Policy-Making', Economic History Review, 36, 1983, pp. 103-23.

15. W. Salant, 'The Spread of Keynesian Doctrines and Practices in the United States', in P. A. Hall (ed.), The Political Power of Economic Ideas, p. 28.

16. This is notwithstanding the fact that the 1946 Full Employment Act was watered down in order to get it through Congress. Margaret Weir, 'Ideas and Politics: The Acceptance of Keynesianism in Britain and the United States', in Hall, The Political Power of Economic Ideas, pp. 71-2.

17. Jones, 'Was the Post-War Boom Keynesian?', p. 4. 18. Ibid. pp. 10-17. 19. Ibid., pp. 20-3. 20. Ibid., p. 36.

252 Notes

21. Ibid., pp. 14 and 16. 22. S.M. Sheffrin, Rational Expectations (Cambridge, 1983), p. 66; G.K.

Shaw, Rational Expectations (Brighton, 1984) p. 20. 23. Hall, The Political Power of Economic Ideas, p. 9. 24. G. Whitwell, The Treasury Line. 25. Hall, The Political Power of Economic Ideas, p. 10. 26. Ibid., p. II. 27. Ibid., p. 12. 28. Linda Weiss and John M. Hobson, States and Economic Development:

A Comparative Historical Analysis (Cambridge: Polity Press, 1995). See also, Peter Hall, Governing the Economy: The Politics of State Intervention in Britain and France (Cambridge: Polity Press, 1986), pp. 16-17.

29. The Political Power of Economic Ideas, p. 13. 30. Ibid. 31. R. Skidelsky, 'The Political Meaning of the Keynesian Revolution' in

Skidelsky (ed.), The End of the Keynesian Era (London: Macmillan, 1977), p. 34.

32. See G. Dow, 'What Do We Know About Social Democracy?' Econ­omic and Social Democracy, vol. 14, no. I, 1993, pp. 11-48, who seems to take this argument further.

33. A. Prezworski, Capitalism and Social Democracy (Cambridge Univer­sity Press, 1984), p. 207.

34. Keynes, cited in Prezworski, p. 207. 35. For instance, citations like Prezworski's are rarely, if ever, accompa­

nied by the previous paragraph wherein Keynes expressed that 'a some­what comprehensive socialisation of investment will prove the only means of securing an approximation to full employment'. For accounts emphasising Keynes' credentials as an egalitarian see R. Lekachman, 'The Radical Keynes', in H.L. Wattel (ed.), The Policy Consequences of John Maynard Keynes (Basingstoke: Macmillan, 1986), pp. 30-8. R.M. Glassman, Democracy and Equality (New York: Praeger, 1989), pp. 67-98. A. Fitzgibbons, Keynes's Vision: A New Political Economy (Oxford: Clarendon, 1988).

36. Prezworski, p. 207. 37. Ibid., p. 210. 38. John Vaizey, Social Democracy (London: Weidenfeld & Nicolson, 1971),

p.79. 39. Fred Hirsch, Social Limits to Growth (Cambridge Mass.: Harvard Uni­

versity Press, 1976), p. 7. 40. L.R. Klein, The Keynesian Revolution (New York: Macmillan Co., 1947),

p. 167. 41. J. Krieger, Reagan, Thatcher and the Politics of Decline (Oxford: Basil

Blackwell, 1986), pp. 22-3. 42. W.E. Paterson and A.H. Thomas, The Future of Social Democracy

(Oxford: Clarendon, 1986), pp. 3-4.

Notes 253

43. Lekachman, 'John Maynard Keynes', Encounter, December 1963, p. 38. See also 'The Radical Keynes' in H.L. Wattel (ed.), The Policy Consequences of John Maynard Keynes (Houndmills: Macmillan, 1986), pp. 30-38. However, Joan Robinson would argue that the whole de­bate over the distinction between micro-economics and macro-economics was a non-issue.

44. Lekachman, 'John Maynard Keynes', p. 43. 45. M. Kesselman, 'Prospects for Democratic Socialism in Advanced Capi­

talism: Class Struggle and Compromise in Sweden and France', Poli­tics and Society, vol. II, no. 4, p. 402.

46. See the discussion by A. Fitzgibbons where he distinguishes between Keynes and the Keynesians: Keynes's Vision (Oxford: Clarendon Press, 1988), pp. 133-53.

47. P.A. Hall, 'Conclusion: The Politics of Keynesian Ideas', in Hall, The Political Power of Economic Ideas, p. 390.

2. The Initial Embrace of Keynesianism in Australia

1. Cf. P.A. Hall, The Political Power of Economic Ideas, p. 4. 2. In Australia there is very little published material dealing with the na­

ture of the Keynesian consensus: E. Jones, 'Who Won the Post-War? The Legacy of Keynes', Journal of Australian Political Economy, no. 22, February 1988, pp. 73-90. G. Whitwell, 'The Power of Eco­nomic Ideas? Keynesian Economic Policies in Post-War Allstralia', in Stephen Bell and Brian Head (eds), State, Economy and Public Policy in Australia (Melbourne: Oxford University Press, 1994). Selwyn Cor­nish, 'The Keynesian Revolution in Australia: Fact or Fiction?', Aus­tralian Economic History Review, vol. 33, no. 2, 1993, pp. 42-68.

3. See n. 7 of Chapter I. See also Peter Hall's conclusion to his edited volume in which he observes that there was, in the countries where Keyneianism was accepted, a governing party of a social democratic disposition: 'The Politics of Keynesian Economics', in The Political Power of Economic Ideas. pp. 361-91.

4. J.M. Keynes, The General Theory of Employment. Interest and Money (London: Macmillan Press. 1973).

5. H.C. Coombs, Trial Balance (Melbourne: Macmillan Company, 1981), p. 3.

6. L.F. Crisp, Ben Chifley: A Political Biography, (Croydon: Longmans Australia, 1961), pp. 186 and 194. G. Whitwell, The Treasury Line, p. 58. R. Kuhn. 'Labour Movement Economic Thought in the 1930s: underconsumptionism and Keynesian economics', Australian Economic History Review, vol. 28, no. 2, September 1988, pp. 53-74.

7. Crisp. Ben Chijley. p. 169. 8. Cited in Whitwell, Treasury Line, p. 58. Theodore's prescriptions be­

came known as the 'Theodore Plan'. His plan involved an expansionist monetary policy; that is, reduction of interest rates and the acceptance

254 Notes

of budget deficits financed through central bank credit. This was in conflict with the Premiers' Plan favoured by the United Australia Party and conservative groups in the Labor Party.

9. Kuhn is careful, however, to distinguish between Keynesian economics and underconsumptionism. They are not the same thing though they are related. See Kuhn, 'Labour Movement Economic Thought in the 1930s', pp. 54-5.

10. Kuhn, p. 56. 11. Crisp, Ben Chijley, p. 170. 12. Ibid., p. 171. 13. A.G.B. Fisher, 'Investment Policy in a Progressive Society', Economic

Record, December 1934, p. 150. 14. The General Theory of Employment, Interest and Money, p. 378. 15. Chifley cited in Crisp, Ben Chijley, p. 171. 16. The theory of involuntary unemployment was developed by Keynes to

combat the notion that people were unemployed because of deficient character or that they were simply not seeking employment with suffi­cient vigour. 'People must be involuntarily unemployed if, in the event of a rise in the cost of living and a consequent drop in real wages, employers seek to hire additional workers and ... [they] willingly present themselves to be hired'. See R. Lekachman, 'John Maynard Keynes', Encounter, December 1963, p. 39.

17. Certainly, in the case of its British counterpart, this is the view of Robert Skidelsky, 'The Reception of the Keynesian Revolution', in Milo Keynes (ed.), Essays on John Maynard Keynes (Cambridge University Press, 1975), pp. 89-107.

18. H.Y. Evatt, Post-War Reconstruction: A Case for Greater Common-wealth Powers (Canberra: CGP, 1942), p. 57.

19. Ibid., p. 57. 20. Ibid., p. 7. 21. Ibid., p. 31. 22. Ibid., p. 24. 23. Ibid., p. 13. 24. Ibid., p. 57. 25. This is the view of some of the neo-marxist critiques. One lawyer of

the period, by way of contrast, has described the Evatt Bill as one of 'breathtaking boldness'. See K.H. Bailey, 'The Constitution and its Problems', in C. Hartley Grattan (ed.), Australia (Berkeley: University of California Press, 1947), p. 102.

26. Post-War Reconstruction, p. 23. 27. Ibid., p. 59. 28. Ibid., p. 75. 29. Chifley, 'Planning for Peace', Sydney Morning Herald, I December

1943, p. 6. 30. Chifley, 'Planning for Peace', Sydney Morning Herald, 2 December

1943, p. 4.

Notes 255

31. L.G. Melville, a Treasury official, wrote at the time: 'There is still conllict between those who believe our objective should be 'full em­ployment' and those who would prefer to aim at a 'high and stable level of employment', and between those who believe that full em­ployment should be sought through government planning and those who would leave it to private enterprise .. .' 'Some Post-War Prob­lems', Economic Record, June 1946, p. 4.

32. Full Employment in Australia (Canberra: C.G.P., 1945). 33. Ibid., para. I. This is not to ignore the view of some that, in respect to

outlining specific policies to achieve its ojectives, the document was quite vague. See J.S.G. Wilson, 'Prospects of Full Employment in Australia', Economic Record, June 1946, pp. 99-116.

34. Full Employment in Australia, para. 5. 35. Ibid., para. 12. 36. Ibid., paras. 19 and 20. 37. Cf. Full Employment in Australia, paras. 50-2. 38. Problems of a High Employment Economy (Adelaide: Hassell, 1944),

p.29. 39. Full Employment, para. 53. 40. Collected Writings of John Maynard Keynes, vol. 20, pp. 3-16, 359-

69, and specifically p. 13. Keynes foresaw that social welfare, or 'in­sular socialism', would be funded from progressive taxation.

41. AJ. Millmow, 'The Evolution of J.M. Keynes' Wage and Employment Theory 1920-1946', History of Economics Review, no. 17, Winter 1992, p.66.

42. Millmow, p. 66. 43. Ibid., p. 71. 44. J.S.G. Wilson, 'Prospects of Full Employment in Australia'. Economic

Record, June 1946, p. 111. 45. H.C. Coombs, Problems of a High Employment Economy, pp. 33-4. 46. Full Employment, para. 63. 47. Ibid., para. 69. 48. R. Lekachman, 'John Maynard Keynes', p. 38. 49. J.B. Chilley, Social Security and Reconstruction (Canberra: CGP, 1944). 50. Chilley, 'Planning for Peace', Sydney Morning Herald, 3 December

1943, p. 4. 51. Ibid., p. 4. 52. See, for example, Carol Johnson, The Labor Legacy (Sydney: Allen &

Unwin, 1989). 53. Oxford University Institute of Statistics, The Economics of Full Em­

ployment (Oxford: Basil Blackwell, 1944). 54. Chilley cited in L.F. Crisp, Ben Chijley, p. 251. 55. Laurel Black, 'Social Democracy and Full Employment: The Australian

White Paper, 1945', Labour History, no. 46, May 1984, pp. 34-51. 56. Black, p. 34. 57. L.G. Melville makes mention of Beveridge's view himself on the British

256 Notes

White Paper, wherein Beveridge distances his work from that of the drafters of the White Paper on the basis of, among other things, the latter being a mere anti-cyclical policy: 'Some post-War Problems', Economic Record, June 1946, p. 6.

58. Indeed, this is something that Coombs has conceded, but he explains that the political imperative was that unity be valued above all else. See, H.C. Coombs, From Curtin to Keating (Darwin: North Australia Research Unit and Australian National University, 1994).

59. Black, p. 35. 60. Black, op. cit., p. 39. 61. Cited in A.w. Stargaardt (ed.), Things Worth Fighting For: Speeches

by Joseph Benedict Chijley, (Melbourne University Press, 1952), p: 71. 62. D.H. Merry and G.R. Bruns, 'Full Employment: The British, Canadian

and Australian White Papers', Economic Record, December 1945, pp. 226-7. See also, Seymour Harris (ed.), The New Economics (Robson: London, 1948).

63. Merry and Bruns, pp. 227-8. 64. W.J. Waters, 'Australian Labor's Full Employment Objective, 1942- 45',

Australian Journal of Politics and History, vol. 16, no. I, 1970, p. 61. See also, E.R. Walker, The Australian Economy in War and Re­construction (New York: Oxford University Press, 1947).

65. Waters documents some of the reactions to the Paper: 'Australian Labor's Full Employment Objective', pp. 63-4.

66. M. Kalecki, 'Political Aspects of Full Employment', Political Quar­terly, vol. 14, no. 4, 1943, pp. 322-31.

67. Ibid., p. 324. 68. This is not surprising since Kalecki was one of six authors in the said

volume, The Economics of Full Employment. 69. Kalecki, 'The Political Aspects of Full Employment', p. 324. 70. Ibid., p. 325. 71. Ibid., pp. 325-6. 72. Ibid., p. 326. This issue will be addressed in much greater detail in

Chapters 6 and 9. 73. 'The Political Aspects of Full Employment', p. 328. 74. Chilley, Commonwealth Parliamentary Debates, 14 March 1944, pp.

1287-8. 75. Ibid., p. 250. 76. Peter Hall's collection demonstrates this conclusively. 77. The Political Power of Economic Ideas, p. 367.

3. Australian Keynesianism in the 1950s and 1960s

1. Annette Stevens, 'The Keynesian Revolution That Never Was' BA Hons Thesis, Department of Politics, Macquarie University, 1984.

2. Ibid., p. 3. 3. Ibid.

Notes 257

4. Ibid., pp. 32-8. 5. Ibid., p. 38. 6. G. Whitwell, The Treasury Line, p. 94. M.J. Artis and R.H. Wallace,

'A Historical Survey of Australian Fiscal Policy 1945-66', in Neil Runcie (ed.), Australian Monetary and Fiscal Policy, Selected Readings, vol. 1 (London University Press, 1971), pp. 410-11.

7. Stevens, pp. 34-5. 8. Ibid., p. 37. 9. Cited in Stevens, p. 39.

10. Paul Smyth, Australian Social Policy: The Keynesian Chapter (Ken­sington: UNSW Press, 1994).

II. Selwyn Cornish, 'The Keynesian Revolution in Australia: Fact or Fiction?' Australian Economic History Review, vol. 33, no. 2, 1993, pp. 42-68.

12. Ibid., p. 62. 13. Ibid., p. 64. 14. Ibid., pp. 50-I. 15. D. Copland, Back to Earth in Economics: Australia 1948 (Sydney:

1948). 16. This will be dealt with in more detail later in this chapter and in Chapter

6. 17. Cited in Cornish, p. 65. 18. Paul Davidson, 'Post-Keynesian Economics: Solving the Crisis in Econ­

omic Theory', Public Interest, Special Edition, 1980, p. 151. 19. J. W. Dean, 'The Dissolution of the Keynesian Consensus' , Public Interest,

Special Edition, 1980, p. 20. Emphasis in original. 20. See Peter Groenewegen and Bruce McFarlane, A History of Australian

Economic Thought (London: Routledge, 1990), chs 8 and 10. See also Paul Smyth's excellent account of the way social science had an influ­ence on Australian intellectual debate in the post-war boom period: Australian Social Policy: The Keynesian Chapter (Kensington: UNSW Press, 1994), esp. pp. 200-21.

21. Indeed Groenewegen and McFarlane would see that the components of what they term the 'Americanisation of Australian economics' go be­yond the neoclassical-Keynesian synthesis. Our reason in focusing on it is that it provides the most obvious connection between the Ameri­can influence and Keynesian ideas in Australia.

22. Keynes, The General Theory (London: Macmillan, 1936), pp. 378-9. 23. George Feiwel, 'Samuelson and the Age After Keynes', in G.R. Feiwel

(ed.), Samuelson and Neoclassical Economics (Boston: Kluwer, 1982), pp. 202-43.

24. Samuelson cited in Feiwel, 'Samuelson and the Age After Keynes', p.207.

25. 'Samuelson and the Age After Keynes', p. 207. By 'traditional eco­nomics' Samuelson was getting at what the pre-modern French word 'economie' meant. The term comes from the Latin 'oeconomia', which in turn comes from the Greek 'oikos', meaning clan or household, and

258 Notes

'nomos', meaning wise government, and the idea derives from tradi­tional custom before the rise of eighteenth century classical economics, or, as it was called, 'political economy'.

26. Cited in Feiwel, 'Samuelson and the Age After Keynes', p. 206. 27. Whitwell, The Treasury Line, p. 172. 28. M. Kalecki, 'Political Aspects of Full Employment'. 29. See his 'Outline of a Theory of the Business Cycle', and 'The Mecha­

nism of the Business Upswing', in M. Kalecki, Selected Essays on the Dynamics of the Capitalist Economy, 1933-1970 (Cambridge Univer­sity Press, 1971).

30. 'Political Aspects of Full Employment', p. 329. 31. R. Kuttner, The Economic lllusion: False Choices Between Prosperity

and Social Justice (Boston: Houghton Mifflin, 1984), p. 37. 32. Ibid. 33. See the English translation of his review article in Ferninando Targetti

and Bogulslawa Kinda-Hass, 'Kalecki's Review of Keynes' General Theory', Australian Economic Papers', December 1982, pp. 244-60. See Chapters 6 and 7 for a fuller development of Kalecki's views about the determination of the level of investment.

34. M.C. Sawyer, The Economics of Michal Kalecki (London: Macmillan, 1985), p. 134.

35. Ibid., pp. 128-35. 36. Ibid., p. 130. 37. O. Dow, 'The Transition from Markets to Politics: A Comparative Study

of Conflict over Economic Policy Since 1974', PhD Thesis, Depart­ment of Government, University of Queensland, 1993, p. 90.

38. Ibid., pp. 90-1. 39. Cf. G.C. Harcourt, 'The Theoretical and Social Significance of the

Cambridge Controversies in the Theory of Capital. An Evaluation', in Prue Kerr (ed.), The Social Science 1mperialists (Melbourne: Routledge & Kegan Paul, 1982), p. 294.

40. G.C. Harcourt, 'On Theories and Policies', in Prue Kerr (ed.), The Social Science 1mperialists, pp. 315-28.

41. Dow, 'The Transition from Markets', p. 91. 42. Sawyer, 1985, p. 135. 43. Dow, p. 99. This is an aspect of the present argument that will be

developed more in Chapters 6 and 7. 44. See G.C. Harcourt's tribute, 'Eric Russell 1921-77: A Memoir', Econ­

omic Record, December 1977, pp. 467-74. 45. See E.A. Russell, 'Wages Policy in Australia', Australian Economic

Papers, June-December 1965, pp. 1-26. 46. See T. Battin, 'Keynesianism, Labourism, and Socialism, and the Role

of Ideas in Labor Ideology', Labour History, no. 66, May 1994, pp. 33-44.

47. B.J. McFarlane, Economic Policy in Australia: The Case for Reform (Melbourne: Longman Cheshire, 1968).

48. Some scholars might object that there is no necessary connection be-

Notes 259

tween economic planning or interventionism, on the one hand, and Keynesianism on the other. As I shall suggest, however, in the post­Keynesian tradition they are very much related though, of course, ana­lytically distinct.

49. Economic Policy in Australia, p. 213.

4. The 19705, and the Whitlam and Fraser Periods

1. G. Whitwell, 'Economic Ideas and Economic Policy: The Rise of Econ­omic Rationalism in Australia', Australian Economic History Review, vol. 33, no. 2, 1993, p. 15.

2. Ibid., p. 15. 3. Ibid. 4. Ibid. 5. Apart from the important distinction to be drawn here, there is also a

distinction that one scholar has sought to draw between the work of A.W. Phillips on the one hand, and what economic theories have been associated with his name - most particularly, Phillips curve Keynesianism. Again, the present discussion makes no comment on this, but merely notes the existence of the controversy over whether or not Phillips has been treated fairly. See, R. Leeson, 'The Rise and Fall and Fall of Keynesian Economics?', Economic Record, vol. 70, no. 210, Septem­ber 1994, pp. 262-6; and his 'Monday 28 December, 1959, 9.30am: Origins of the Keynesian Discomfiture?', Murdoch University Working Papers in Economics, no. 92, March 1993.

6. See, for instance, G. Whitwell, The Treasury Line. Fred Gruen (ed.), Surveys of Australian Economics, (Sydney: Allen & Unwin, 1978), p. 135.

7. Cf. Louis Haddad, 'The Rise and Fall of Planning: A Global Perspec­tive' , Australian Journal of Public Administration, vol. 49, no. 2, June 1990, p. 107. This is not a pedantic point. It is quite important to note the way governing parties - and opposition parties - need to change their rhetoric as it relates to economic policy. In the context of the recession of the early 1990s, after what was widely (and correctly) perceived to be the burial of Keynesianism, the Labor government, and to a lesser extent, the Coalition (both widely recognised as parties driven by economic rationalism) needed to soften the language, if not change the policies, that had been used throughout much of the 1980s. As I shall argue in the next chapter, the One Nation statement was an attempt to do precisely this, without wanting to convey any admission of error during the 1980s.

8. 'Economic Ideas and Economic Policy', p. 26. 9. P. Groenewegen, In Defence of Post-Keynesian Economics: 1986 New­

castle Lecture in Political Economy (Department of Economics, Uni­versity of Newcastle, 1986), p. 4.

10. In Defence of Post-Keynesian Economics. See also, P. Groenewegen and B. McFarlane, A History of Australian Economic Thought (Lon­don: Routledge, 1990), p. 216.

260 Notes

11. B. Hughes, Exit Full Employment (Sydney: Angus & Robertson, 1980), p. 114.

12. Whitwell, The Treasury Line. H.C. Coombs, Trial Balance (Melbourne: Macmillan, 1981), p. 303.

13. Coombs, Trial Balance, p. 303. 14. F. Gruen, 'Australian Economics 1968-78: A Survey of the Surveys'

in Gruen (ed.), Surveys of Australian Economics vol. II (Sydney: Allen & Unwin, 1979), p. 236.

15. Ibid. 16. Hughes, Exit Full Employment, p. 57. 17. E.G. Whitlam, The Whitlam Government (Ringwood: Penguin, 1985),

p. 187. In the 1972-3 period, approximately $A3 billion entered Aus­tralia at a time when the GNP was $33 billion. See Catley and McFarlane, Australian Capitalism in Boom and Depression (Sydney: Alternative Publishing Cooperative Limited, 1983), p. 130.

18. K. Rowley, 'The End of the Long Boom', Intervention, no. 6, 1976, p. 60. In Rowley's view, even non-monetarists could find significance in the growth of the money supply. See also, H. Magdoff and P.M. Sweezy, The End of Prosperity: The American Economy in the 1970s (New York: Monthly Review Press, 1977). It should be pointed out, however, that these are views of quantity-theory-of-money Marxists.

19. E.G. Whitlam, The Whitlam Government, pp: 187-8. 20. S. Bowles, 'The Post-Keynesian Capital-State Stalemate', Socialist

Review, vol. 12, no. 5, 1982, p. 57. 21. Nor was there any anticipation on the part of the economically orthodox

that recession was about to occur. See Malcolm Sawyer's citation of OECD documents, 'Kalecki's Economics and Explanations of the Econ­omic Crisis' in Mario Sebastiani (ed), Kalecki's Relevance Today (Basingstoke: Macmillan Press, 1989).

22. Once again, the debate over the nature of the ideology of the labour movement is important but it cannot fully be explored here.

23. ALP Policy Speech, cited in Catley and McFarlane, Australian Capi­talism in Boom and Depression, p. 124.

24. Catley and McFarlane, Australian Capitalism in Boom and Depres­sion, p. 125.

25. Cf. Hughes, Exit Full Employment, p. 59. 26. P. Groenewegen, 'What are the Causes of the Current Inflation Rate?',

Current Affairs Bulletin, October 1975. 27. Hughes, 'The Economy', in Patience and Head (eds), From Whitlam

to Fraser: Reform and Reaction in Australian Politics (Melbourne: OUP, 1979), p. 12.

28. 'The Economy', p. 12. Emphasis in original. See also, Whitlam, The Whitlam Government, p. 197.

29. Australian Capitalism in Boom and Depression, pp. 127-8. 30. S. Clegg, P. Boreham and G. Dow, Class, Politics and the Economy

(London: Routledge & Keegan Paul, 1986), p. 312. Keynes and Kalecki, for example, recognised that in times of near or full employment there

Notes 261

would be irresistible pressures, other things being equal, towards infla­tion due to the increased bargaining power of labour. See Joan Robinson (ed.), After Keynes (Oxford: Basil Blackwell, 1973), p. 8; M. Kalecki, 'Political Aspects of Full Employment'.

31. Cited by B. Juddery, 'Keynesian Economics Showing its Age', Can­berra Times, 7 November 1973, p. 2.

32. See G. Dow, 'The Economic Consequences of Economists', Australian Journal of Political Science, vol. 27, no. 2, July 1992, pp. 258-81, for a survey of OECD data.

33. Cited in Hughes, Exit Full Employment, p. 86. 34. Exit Full Employment, p. 87. 35. Ibid., p. 88. 36. Commonwealth Parliamentary Debates, 23 July 1974, p. 504. 37. Ibid., p. 506. 38. Ibid., p. 507. 39. Ibid., p. 510. 40. Commonwealth Parliamentary Debates, 17 September 1974, p. 1276. 41. Ibid. 42. Ibid. 43. Ibid., p. 1291. 44. Ibid., p. 1290. 45. S. Bowles, 'The Post-Keynesian Capital-State Stalemate', p. 54. 46. Hughes, Exit Full Employment, p. 90. 47. Malcolm Fraser as late as October 1974 was prepared to admit that

governments before Keynes did not appreciate that unemployment would occur through trying to get balanced budgets in times of economic recession. See Hughes, Exit Full Employment, p. 179. Fraser's view was in response to the 1974 Crean budget and does suggest that a case could be made that there was some measure of a Keynesian consensus.

48. R. Catley, 'Socialism and Reform in Australia' in Wheelwright and Buckley (eds), Essays in the Political Economy of Australian Capital­ism, vol. II (Sydney: Australia and New Zealand Book Co. Pty Ltd., 1978), p. 34.

49. Michael Brezniak and John Collins, 'The Australian Crisis From Boom to Bust', Journal of Australian ,Political Economy, no. I, 1977, p. 21.

50. P. Hirsch, 'The Ideological Underlay of Inflation' in Hirsch and 1. Goldthorpe (eds), The Political Economy of Inflation, (Cambridge, Mass.: Harvard University Press, 1978), p. 276. See also, Fred Gruen, 'Economic Policy: Problems in the Eighties', in North and Weller (eds), Labor: Direc­tions for the Eighties (Sydney: Ian Novak, 1980), pp. 225-31.

51. Hughes, Exit Full Employment, p. 85. 52. Harcourt, 'The Social Consequences of Inflation' [1974], in O.P. Hamouda

(ed.), Controversies in Political Economy: Selected Essays of G.c. Harcourt (Sussex: Wheatsheaf Books,1986), p. 248.

53. Hayden, Commonwealth Parliamentary Debates, 19 August 1975, p. 53.

54. Ibid.

262 Notes

55. Ibid. 56. Ibid., p. 54. Total outlays were expected to increase by 23 per cent

compared with the 46 per cent of the previous year. 57. Hayden, Commonwealth Parliamentary Debates, 19 August, 1975,

p.64. 58. B. Hughes, 'The Economy', in Head and Patience (eds), From Whitlam

to Fraser (Melbourne: Oxford University Press, 1979), p. 29. 59. Australian Financial Review, 24 September 1975, p. 2. 60. Exit Full Employment, p. 114. 61. The political climate in this period, of course, was of extraordinary

significance in explaining how an opposition could be in the position to contemplate not allowing a budget its legislative passage. It is not in the scope of this discussion to add to an already extensive literature on this subject. The relevance of the extraordinary nature of the climate in 1975 becomes apparent at the point where the Minister for Minerals and Energy, R.F.X. Connor, had continued to seek low-interest loans from Middle East sources after his commission to do so had been re­voked. His subsequent forced resignation on 14 October was used by the Leader of the Opposition, Malcolm Fraser, as an excuse to defer a decision to pass or reject the budget in the Senate and thereby to force an early election. This action occurred on 16 October 1975. The Bud­get was announced on 19 August but, until early October, its legisla­tion was in the process of being debated in the House of Representatives.

62. Exit Full Employment, p. 125. 63. I.M. Fraser, 'Australia in the World Economy', The 1976 Copland

Memorial Address, Committee for Economic Development of Australia, 1976, pp. 4-5.

64. Ibid. 65. Ibid., p. 5. 66. Lynch, Commonwealth Parliamentary Debates, 4 March 1976, pp.

554-6. 67. Ibid., p. 557. 68. Ibid., pp. 557-8. 69. Ibid., p. 560. 70. C. Hurford, Commonwealth Parliamentary Debates, 4 March 1976,

p.562. 71. Ibid. 72. Ibid., p. 563. 73. M. Friedman, The Optimum Quantity of Money and Other Essays (Chi-

cago: Aldine Publishing, 1969), p. 8. 74. Lynch,Commonwealth Parliamentary Debates, 4 March 1976, p. 561. 75. Lynch, Commonwealth Parliamentary Debates, 17 August 1976, p. II. 76. Lynch, Commonwealth Parliamentary Debates, 17 August 1976. p. 11. 77. Ibid., p. 26. 78. Hayden, 'Australia's Economy', H.Y. Evatt Memorial Lecture (Adelaide

University Union Press, 1977), pp. 5-6. 79. Hayden, 'Australia's Economy', p. 6.

Notes 263

80. Ibid., pp. 17-19. 81. Ibid., p. 20. 82. Ibid., pp. 20-1. 83. ALP, National Committee of Inquiry: Report and Recommendations to

the National Executive (Canberra, 1979), p. 5. 84. 'Economic Issues and the Future of Australia' (Canberra, 1979). 85. Ibid., pp. 3 and 4. 86. Ibid., p. 11. 87. Ibid., pp. 12 and 13. 88. ALP, National Committee of Inquiry: Report and Recommendations to

the National Executive (Canberra, 1979), p. 6. 89. R. Willis, 'Employment', in J. North and P. Weller (eds), Labor: Di­

rections for the Eighties (Sydney: Ian Novak, 1980), pp. 94-5. For many years previous Ralph Willis was a lone voice in the ALP for an egalitarian incomes policy and what was to become aspects of the Accord. He was admired and supported, among others, by Eric Russell, to whom reference has already been made.

90. G. Harcourt and P. Kerr, 'The Mixed Economy', in Labor: Directions for the Eighties, pp. 184-95.

91. J. O'Connor, The Fiscal Crisis of the State (New York: St Martin's Press, 1973).

92. One example may illustrate what is meant. The fiscal limits experi­enced by governments could be significantly addressed, and more con­trol exercised over the use of profits by governments becoming directly involved in the production and marketing of goods in profitable indus­tries. Harcourt and Kerr, p. 186.

93. Above all, however, Harcourt had been stressing since at least 1974 that full or partial wage indexation had to be judged pragmatically. Under certain conditions, it may be that full wage indexation will lead, paradoxically, to lower wage outcomes by alleviating anxiety among wage-earning groups. If greater certainty could be provided the wage­wage struggle might be attenuated. G.C. Harcourt, 'The Social Con­sequences of Inflation' [1974], in O.F. Hamouda (ed.), Contoversies in Political Economy: Selected Essays of G.c. Harcourt (Sussex: Wheatsheaf, 1986), pp. 231-49 at pp. 242-3. 'On Theories and Poli­cies', p. 325.

94. 'The Mixed Economy', p. 188. 95. Ibid., p. 189. 96. 'Economic Issues and the Future of Australia', pp. 11 and 12.

S. The Hawke Years and the End of Keynesian Beliefs

1. Peter Ewer et al., Politics and the Accord (Leichhardt: Pluto, 1991), p. 11.

2. E.G. Whitlam, The Whitlam Government (Melbourne: Penguin, 1985), pp. 198-203. G. Singleton, The Accord and the Australian Labour Movement (Melbourne University Press, 1990).

264 Notes

3. 'The Statement of Accord by the Australian Labor Party and the Aus­tralian Council of Trade Unions Regarding Economic Policy, February 1983', reproduced in F. Stilwell, The Accord and Beyond (Sydney: Pluto, 1986), pp. 159-76.

4. Stilwell, p. 161. 5. Stilwell, pp. 163-6. 6. H. Stretton, Political Essays (Melbourne: Georgian House, 1987),

p.7. 7. Ibid., p. 8. 8. Singleton, p. 196. 9. S. Bell, 'Structural Power in the Manufacturing Sector: The Political

Economy of Competitiveness and Investment', in Bell and Wanna (eds), Business-Government Relations in Australia (Sydney: Harcourt Brace Jovanovich, 1992), p. 196.

10. Ibid. II. G. Maddox, 'Language, Tradition and Labor's Business Orientation',

in Galligan, B. and G. Singleton (eds) Business and Government Under Labor (Melbourne: Longman Cheshire, 1991), pp. 178-88.

12. Stilwell, p. 13. 13. Ibid., p. 12. 14. Ibid., p. 13. IS. Heald,.Public Expenditure (Oxford: Martin Robertson, 1983), p. 39. 16. Stilwell, p. 68. 17. Emy and Hughes, Australian Politics: Realities in Conflict (Melbourne:

Macmillan, 1988) p. 81. 18. Australian Financial Review, IS May 1985. 19. Heald, p. 35. 20. Stilwell, pp. 67-8. 21. I am not of course arguing that this is an insight exclusive to Keynesian

thought. American institutionalism in the line of Thorstein Veblen and J. K. Galbraith is but one other example.

22. Australia Reconstructed (Canberra: Australian Government Publishing Service, 1987).

23. Australia Reconstructed, pp. 21-3. 24. This renegotiation (Accord Mk. II) provided for a trade-off between

wage reduction (in the form of partial wage indexation) and taxation reduction, together with a productivity-based increase of 3 per cent to be negotiated and then earmarked for superannuation payment in July of 1986.

25. Most notably, this included the group of intellectuals based around Quadrant, such as Robert Manne, John Carroll, and C.D. Kemp, and Melbourne intellectuals more generally such as B.A. Santamaria.

26. See, for example, Michael Pusey, Economic Rationalism in Canberra: A Nation-building State Changes Its Mind (Melbourne: Cambridge University Press, 1991); G.c. Harcourt, 'Markets, Madness and a Middle Way', Australian Quarterly, vol. 64, no. I, Autumn 1992, pp. 1-17.

Notes 265

27. The Sydney Morning Herald, for instance, saw the statement as a 'kickstart'. 27 February 1992.

28. John Langmore and John Quiggin, Work for All: Full Employment in the Nineties (Carlton: Melbourne University Press, 1994), p. 76.

29. Sydney Morning Herald, 3 July 1993, p. II. 30. Work for All, pp. 76-7. 31. Restoring Full Employment (Canberra: Aust. Govt Publishing Service,

1993), p. iv. 32. Ibid., pp. 207-8. 33. Working Nation did subsequently advocate community-based and local

government activity in areas not impinging on established commercial activity. Such projects as tree planting, ecotourism, and sevices to the aged, were mentioned. The wages to be paid to participants in these projects, however, were well below the market rates, and any compari­son between the White Papers of 1994 and 1945, in terms of how the public sector could be used, would find that the two documents are incommensurate.

34. Julian Disney, 'On the right road, but not far enough', The Australian, 5 May 1994, p. 18.

35. First, there is simply not the scope to deal with the issue other than to deal with the aspects of it that impinge directly on the present discus­sion. Second, for the purposes of the argument being advanced here, there are actually more important questions to be posed. Why were some aspects of the Keynesian critique discarded, and why were others retained - and what explanation exists for the fact that different com­ponents of the Keynesian praxis were discarded at various points along the way?

36. Peter A. Hall, 'Conclusion: The Politics of Keynesian Ideas' in Hall (ed.), The Political Power of Economic Ideas: Keynesianism Across Nations (Princeton University Press, 1990), p. 367.

37. Paul McCracken et al., Towards Full Employment and Price Stability (Paris: OECD, 1977).

38. R.O. Keohane, 'Economics, Inflation, and the Role of the State: Politi­cal Implications of the McCracken Report', World Politics, October 1978, vol. 31, no. 1, pp. 108-28.

39. Of course, the McCracken Report was far from alone in this character­istic. See, for instance, later works by C.A. Greenhalgh, P.R.G. Layard, and AJ. Oswald (eds), The Causes of Unemployment (Oxford: Clarendon Press, 1983); M. Bruno and J.D. Sachs, Economics of Worldwide Stag­flation (Cambridge Mass.: Harvard University Press, 1985); J.F. Helliwell, 'Comparative Macroeconomics of Stagflation', Journal of Economic Literature, 26, 1988, pp. 1-28.

40. R.O. Keohane, 'Implications of the McCracken Report', p. 113. 41. Ibid., p. 114.

266 Notes

42. McCracken, cited by R.O. Keohane, p. 118, emphasis added.

6. The Political Economy of Wages, Inflation and Unemployment

I. A.W. Phillips, 'The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957', Economica, no. 27, 1958, pp. 283-99.

2. From a Marxist point of view, of course, these features are not defects but inherent characteristics of capitalism: unemployment is needed to sup­ply a reserve army of workers, and intlation is needed to eliminate debt.

3. H.C. Coombs, 'Problems of a High Employment Economy' (Adelaide: Hassell, 1944). See also Harcourt's discussion of views expressed by Keynesians in the immediate post-war period: G. Harcourt, 'Macroeconomic Policy for Australia in the 1990s', in Economic and Labour Relations Review, vol. 4, no. 2, December 1993, p. 171.

4. The term 'Keynesian' is used tentatively here as some would claim that this interpretation is such a violation of Keynesian theory that it is misleading to call it Keynesian. Sidney Weintraub, among many, has claimed that Keynes would have been dismayed by the Phillips curve. See his Capitalism and Unemployment Crisis (Reading: Adison-Wesley, 1978), p. 99. Once again, it is not within the scope of this discussion to resolve this issue, and so such terms will be used with qualification.

5. John Maynard Keynes, The General Theory of Employment, Interest and Money (London: Macmillan, 1973), pp. 105 and 106.

6. Harcourt, 'Macroeconomic Policy for Australia in the 1990s', in Economic and Labour Relations Review, vol. 4, no. 2, December 1993, p. 169.

7. None of this is to contradict Kalecki's emphasis on consumption as a determinant of demand, and therefore production. He merely pointed out that further investment in the form of public works above that which is necessary for full employment was supertluous.

8. For political reasons, the term 'sellers' intlation' is adopted in this part of the discussion rather than 'wage-push or cost-push intlation'. The former term presupposes no particular source of what is usually meant by the latter and more blaming term. The term is borrowed from P.A. Riach, 'The Language of Intlation', in E.L. Wheelwright and EJ.B. Stilwell (eds), Readings in Political Economy, vol. 2 (Sydney: Aus­tralia and New Zealand Book Company, 1976), pp. 53-60.

9. James Tobin, 'Intlation and Unemployment', American Economic Re­view, March 1972, p. 2.

10. Geoff Dow, 'The Transition from Markets to Politics: A Comparative Study of Contlict over Economic Policy since 1974', p. 90.

II. This will be developed more in the present discussion. 12. It is not quite this simple. Monetarists hold that unions present distor­

tions to the market, and that their tendency to cause distortions will be covered up by governments - an action which in turn often gives rise to intlation.

Notes 267

13. A. Gamble and P. Walton, Capitalism in Crisis: Inflation and the State (London: Macmillan, 1976), p. 60.

14. Dow, 'Transition from Markets to Politics', p. 92. 15. Dow, 'Transition from Markets to Politics', p. 93. This is not to claim

necessarily that all components of the inflation of the mid-1970s period originated in, and had causal connection with, the recession of the period. Clearly, many OECD countries were undergoing inflationary conditions prior to the recession of the 1970s.

16. Dow, 'Transition from Markets to Politics', pp. 93-4. 17. Fred Hirsch, Social Limits to Growth (Cambridge, Mass.: Harvard

University Press, 1976). 18. C.S. Maier, 'The Politics of Inflation in the Twentieth Century', in F.

Hirsch and 1. Goldthorpe (eds), The Political Economy of Inflation (Cambridge Mass.: Harvard University Press, 1978), p. 71.

19. F. Hirsch, 'The Ideological Underlay of Inflation', in Hirsch and Goldthorpe (eds), p. 271. The inflation as stop-gap theory is in fact one adopted by Friedman: excessive wage demands do not cause infla­tion directly; excessive wage demands give rise to further unemploy­ment, which governments try to cover up by excessive spending, which gives rise to inflation.

20. Michael Gilbert, Inflation and Social Conflict: A Sociology of Econ­omic Life in Advanced Societies (Sussex: Harvester, 1986), p. 19.

21. Edward Nell, Prosperity and Public Spending: Transformational Growth and the Role of Government (Boston: Unwin Hyman, 1988), p. 9.

22. 2nd ed. rev. (Boston, Houghton Mifflin, 1971). 23. Dow, p. 94. 24. J.L. Baxter, 'Inflation in the Context of Relative Deprivation and So­

cial Justice', Scottish Journal of Political Economy, no. 12, 1973, pp. 263-82.

25. Any number of works in the Keynesian, post-Keynesian, and institu­tionalist traditions make this point, but one is cited here: Goran Therborn, Why Some 'Peoples are More Unemployed Than Others (London: Verso Books, 1986).

26. Colin Crouch, 'Inflation and the Political Organization of Economic Interests', in Hirsch and Goldthorpe (eds), pp. 217-39.

27. In its more right-wing variety, this stance relies on an 'insider-out­sider' view of unemployment. The employed, the insiders, are told that their wage demands, if successful, will lead to even greater exclusion of the unemployed. This was a view held by John Stone, former Sec­retary to the Treasury.

28. More recently of course, the early 1990s have witnessed the almost complete abandonment of the centralised wages system and the princi­ples of the Accord - a system which delivered lower inflation than otherwise would have been the case. Throughout the post-1983 period inflation in Australia was lower than at any time between 1975 and 1983. In the absense of a system for determination of aggregate wage outcomes, the government can only use restrictive monetary and fiscal

268 Notes

policy to restrain wage claims, further aggravating employment prospects. The point is not to celebrate the Accord; in many respects it was and is increasingly inadequate. The point is to observe that it is precisely its chief virtues that came under attack or were never implemented.

29. Keith Cowling, Monopoly Capitalism (London: Macmillan, 1982), pp. 96-7.

30. Cf. Dow, 'Transition from Markets to Politics'. pp. 95-7. The precise nature of the Australian situation will be explored below with refer­ence to empirical evidence.

31. P.J. Reynolds, Political Economy: A Synthesis of Kaleckian and Post­Keynesian Economics (Sussex: Wheatsheaf, 1987), p. 24.

32. M.G. Schmidt, 'The Politics of Unemployment: Rates of UnemplOY­ment and Labour Market Policy', West European Politics, no. 7,1984, pp.5-24.

33. Ibid., p. 8. 34. Ibid. 35. Ibid., p. 21. 36. G. Therborn, Why Some Peoples are More Unemployed Than Others. 37. Ibid., p. 21. 38. Keynesianism, understood by Therborn in its more conservative sense,

needs to be accompanied by direct intervention in the economy and a consistently complementary monetary policy of low real interest rates. Why Some Peoples are More Unemployed Than Others, pp. 26-7.

39. Ibid .. pp. 27-8. 40. Ibid., p. 30. 41. Ibid., pp. 38-40 42. G. Dow, 'Transition from Markets to Politics', p. 154. Therborn, Why

Some Peoples are More Unemployed Than Others, p. 44. Therborn of course acknowledges that countries such as Switzerland and Japan have in some measure disguised their unemployment.

43. Dow, 'Transition from Markets to Politics', p. 154. 44. Why Some Peoples are More Unemployed Than Others, p. 46. 45. To raise the objection that Therborn's thesis is based on data produced

before the mid-1980s, and that therefore a reliance on his argument is flawed, is to miss the point that the present argument is focused on the mid-1970s to early 1980s period. Cogent arguments may very well exist to extend Therborn's thesis to include the 1990s, but such a temp­tation is resisted. The argument about to be put in Chapters 6 to 9 concerns only the 1970s and 1980s.

46. Why Some Peoples are More Unemployed Than Others, p. 51. 47. Ibid., p. 53. Hugh Stretton, 'Whodunnit to Social Democracy?', Over­

land, no. 132, 1993, p. 53. 48. Why Some Peoples are More Unemployed Than Others, p. 53. This is

too large a topic to consider in the present discussion. For further elabo­ration of how governments are able to exercise national independence in the face of 'economic' constraints see Colin White, Mastering Risk:

Notes 269

Environment, Markets and Politics in Australian Economic History (Melbourne: Oxford University Press, 1992); Garry Rodan, The Politi­cal Economy of Singapore s Industrialization: National State and Inter­national Capital (London: Macmillan, 1989. Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton University Press, 1990); Chalmers Johnson, MITI and the Japanese Miracle (Stanford Univer­sity Press, 1982).

49. Why Some Peoples are More Unemployed Than Others, p. 58. 50. M. Kalecki, 'A Theory of the Business Cycle', Review of Economic

Studies, February 1937, pp. 77-97. 51. M. Kalecki, Theory of Economic Dynamics: An Essay on Cyclical and

Long-Run Changes in Capitalist Economy (London: Allen & Unwin, 1954)

52. This occurs, at a general level, at times of full employment. In a more sectoral level, the increased bargaining strength of workers can sti11 play a role, but only in industries where specific shortages occur, and only where labour is well organised.

53. The discussion at this point does not so much specifically assess this claim (for that is the subject of the overall discussion) as much as it merely posits it in an attempt to consider its feasibility in terms of the argument at this particular point.

54. George Feiwel, The Intellectual Capital of Michal Kalecki: A Study in Economic Theory and Policy (Knoxvi11e: The University of Tennessee Press, 1975), pp. 38-9.

55. Cited in G. Whitwell, The Treasury Line, p. 264. Emphasis in the original. 56. Cf. Whitwell, p. 264. 57. This view is expressed in a 1979 paper cited in Whitwell, The Treas­

ury Line, p. 300fn. 58. See various treasury documents cited in P.A. Riach and G.M. Richards,

'The Lesson of the Cameron Experiment', Australian Economic Pa­pers, vol. 18, June 1979, pp. 21-35.

59. Why this was the case has been the subject of little research. But Riach and Richards put the case that this is probably due to a mixture of economic and institutional factors. First, the contracting money sup­ply, post-1973, had a depressing effect on demand and restricted the room somewhat for capital to raise prices on goods and services. Sec­ond, the Prices Justification Tribunal had an effect in its first eighteen months of operation. Third, the import-competing sector felt the competive effect of the 25 per cent across the board tariff reductions, and was not in a position to raise prices. And fourth, the Trade Practices Act of 1974 played a part in restraining monopolisation activity - a develop­ment which would, according to Kaleckian theory, lead to an increased tendency to set prices as a mark-up on labour costs. See, Riach and Richards, 'The Lesson of the Cameron Experiment', Australian Econ­omic Papers, vol. 18, June 1979, pp. 27-9; S. Dowrick, 'Has the Pattern

270 Notes

of Australian Wage Growth Been Unique?', in F.G. Castles (ed.), Aus­tralia Compared: People, Policies and Politics (Sydney: Allen & Unwin, 1991), pp. 124-39.

60. Leaving aside the former Yugoslavia, Australia's inflation rate was the sixth highest in the OECD for the period of 1984-1990. OECD Econ­omic Surveys: Australia, 199111992 (Paris: OECD, 1992) and OECD Economic Surveys: Australia, 1994 (Paris: OECD, 1994).

61. S. Dowrick, 'Has the Pattern of Australian Wage Growth Been Unique?', p. 127.

62. Ibid., pp. 133-5. 63. Ibid., p. 133. 64. A. Roncaglia, 'Wage Costs and Employment: The Sraffian View', in

J.A. Kregel, E. Matzner, and A. Roncaglia (eds), Barriers to Full Employment (London: Macmillan Press, 1988), p. 10.

65. See citations of the Fraser Government's submission before the Na­tional Wage and Wage Indexation Hearing, of November 1977, in P.A. Riach and G.M. Richards, 'The Lesson of the Cameron Experiment', esp. p. 31.

66. See Harcourt's citation of Riach's essay 'Labour-hiring in Post-Keynesian Economics (Adelaide: Mimeo, 1981): G.c. Harcourt, 'Post-Keynesianism: Quite Wrong and/or Nothing New?' in P. Arestis and T. Skouras (eds), Post-Keynesian Economic Theory: A Challenge to Neoclassical Econ­omics (Brighton: Wheatsheaf, 1985), p. 139.

67. Riach, cited in Harcourt, 'Post-Keynesianism', p. 139. 68. Riach and Richards, 'The Lesson of the Cameron Experiment', p. 31. 69. A. Roncaglia, 'Wage Costs and Employment: The Sraffian View',

p. 17. 70. Riach and Richards, 'The Lesson of the Cameron Experiment', p. 31. 71. 'Wage Costs and Employment: The Sraffian View', p. 18. 72. I do not mean to suggest that the more protracted form does not have

Keynesian solutions. I merely want to suggest two things. First, and following Kaldor, it will be all the more difficult to eliminate the un­employment which will result once capacity utilisation is allowed to shrink. And second, inaction in the earlier phase gives weight to the claims of anti-Keynesians only by default.

7. Public Expenditure and the Growth of Welfare

1. Peter Hall, The Political Power of Economic Ideas, p. 4. 2. David Heald, Public Expenditure, p. 35. 3. S. Brittan, 'The Economic Contradictions of Democracy', British Journal

of Political Science, vol. 5, no. 2, 1975, 129-59; The Economic Con­sequences of Democracy (London: Temple Smith, 1977).

4. Milton and Rose Friedman, Free to Choose (London: Seeker & Warburg, 1980).

5. Milton Friedman, 'Inflation, Taxation, Indexation', in Robbins et. al.

Notes 271

(eds), Inflation: Causes, Consequences, Cures (London: The Institute of Economic Affairs, 1974), p. 76.

6. Peter Saunders, Welfare and Inequality: National and International Per­spectives on the Australian Welfare State (Melbourne: Cambridge Uni­versity Press, 1994), ch. 2.

7. See Peter Saunders, Welfare and Inequality: National and International Perspectives on the Australian Welfare State, pp. 14-16.

8. The three-part commitment was to: (i) not increase Commonwealth tax revenue as a proportion of GDP; (ii) not allow Commonwealth government spending to grow faster than the economy; and, (iii) re­duce the federal deficit in money terms in 1985-6 and not allow it to grow as a proportion of GDP in the following two years.

9. Peter Saunders, Welfare and Inequality, p. 15. 10. Ibid., p. 17. 11. John Langmore and John Quiggin, Work for All, p. 46. 12. See, P. McCracken et al., Towards Full Employment and Price Stabil­

ity (Paris: OECD, 1977). 13. P. Keating, Address to the National Press Club, 13 April 1989. 14. David R. Cameron, 'Does Government Cause Inflation? Taxes, Spend­

ing, and Deficits', in Leon Lindberg and Charles Maier (eds), The Politics of Inflation and Economic Stagnation (Washington DC: The Brookings Institute, 1985), pp. 224-79.

15. Ibid., p. 243. 16. Ibid., p. 244. 17. Ibid., p. 245. 18. Ibid., p. 251. 19. Ibid., p. 268. 20. Ibid., p. 259. 21. This will be analysed in some depth in the section below. 22. R. Kuttner, The Economic Illusion: False Choices Between Prosperity

and Social Justice (Boston: Houghton Mifflin, 1984). 23. See Saunders, 1994, p. 17. See also, Office of EPAC, The Size of Gov­

ernment and Economic Performance -International Comparisons, Council Paper no. 4 (Office of EPAC, Canberra, 1985). The different results for the two periods has been explained by pointing to the difference be­tween maturing and mature economies. In mature economies in the OECD after 1970, there is no such correlation between taxation levels and economic growth. See Geoff Dow, 'The Economic Consequences of Economists'.

24. Saunders, p. 17. 25. Kuttner, pp. 187,217-18. See, in addition, Alan T. Peacock and Mar­

tin Ricketts, 'The Growth of the Public Sector and Inflation', in F. Hirsch and J. Goldthorpe (eds), The Political Economy of Inflation, for an argument that there is no relation between levels of public ex­penditure and rates of inflation in the OECD.

26. Dow, 'The Transition from Markets to Politics', p. 146.

272 Notes

27. OECD, Long-Term Trends in Tax Revenues of OECD Member Coun­tries 1955-1980 (Paris: OECD, 1981), p. 13.

28. H. Stretton, 'Has the Welfare State all been a Terrible Mistake?', in G. Evans and J. Reeves (eds), Labor Essays 1980 (Melbourne: Drummond, 1980), pp. 19-39. See also, Walter Korpi, The Democratic Class Struggle (London: Routledge & Kegan Paul, 1983).

29. Work for All, p. 37. 30. Julian Disney, 'Government and Public Welfare', in P. Coaldrake and

J. Nethercote (eds), What Should Government Do? (Sydney: Hale & Iremonger, 1989), pp. 166-78. Deborah Mitchell, Income Transfers in Ten Welfare States (London: Gower, 1991).

31. OECD, OECD Economic Outlook, no. 50 (Paris: OECD, 1991), p. 205. 32. Peter Self, 'Redefining the Role of Government', in P. Coaldrake, and

J.R. Nethercote (eds), What Should Government Do? (Sydney: Hale and Iremonger, 1989), pp. 13-42.

33. EPAC, Aspects of the Social Wage: A Review of Social Expenditures and Redistribution, Council Paper no. 27 (Canberra: Commonwealth Government Printer, 1987, p. 13.

34. Indeed the term itself had come into prominence by the late 1970s. See K. Brunner and A.H. Meltzer (eds), Public Policies in Open Econo­mies (Amsterdam: North Holland, 1978). This is not to presume, of course, that the new use of the term suggests that its accompanying concepts were new. In fact, they were a revival of 1930s neoclassical orthodoxy.

35. V. Argy, 'Some Notes on Fiscal Policy and Crowding Out', in J.w. Nevile (ed.), Policies Against Stagflation (Melbourne: Longman Cheshire, 1981), p. 238. (Reprinted from the Australian Economic Review, 1st Quarter 1979.)

36. Argy, 'Some Notes on Fiscal Policy and Crowding Out'. 37. Heald, Public Expenditure, p. 49. 38. Ibid., pp. 50-1. 39. J.W. Nevile, The Macro-economic Effects of Public Investment', Re­

search Paper to the National Infrastructure Inquiry, April 1987. 40. Langmore and Quiggin, Work for All, p. 47. 41. It was more the case that investment would determine savings levels.

J.M. Keynes, The General Theory of Employment, Interest and Money, pp. 110-11.

42. Arthur Okun, Equality and Efficiency: The Big Trade-off (Washington: Brookings Institution, 1975), p. 98.

43. C. Kearney and M. Monadjemi, 'Australia's Twin Deficits Problem', Working Paper no. 95, CAAER, University of New South Wales, 1987.

44. See Heald, Public Expenditure, pp. 10-32. 45. Rudolf Klein, 'Public Expenditure in an Inflationary World' in Lindberg

and Maier (eds), The Politics of Inflation and Economic Stagnation (Washington: Brookings Institute, 1985), pp. 25-52.

46. R. Watts, The Foundations of the National Welfare State (Sydney: Allen & Unwin, 1987). Elsewhere I have contested this claim. See T. Battin,

Notes 273

'What Didn't Work? Getting the Breakdown of Keynesianism into Perspective', Symposium of the Academy of Social Sciences in Aus­tralia, Bettina Cass and Paul Smyth (eds), forthcoming.

47. Adam Jamrozik, 'Universality and Selectivity: Social Welfare in a Market Economy', in Adam Graycar (ed.), Retreatfrom the Welfare State (Sydney: Allen & Unwin, 1983).

48. Richard Titmuss, Essays on the Welfare State (London: Allen & Unwin, 1958).

49. In 1992-3 the concessional treatment of superannuation contributions alone was of the order of $5.3 billion. Australian Treasury, Tax Expen­ditures Statement (Canberra: Australian Government Publishing Ser­vice, 1993). By 1994-5 this tax expenditure had grown to $7.3 billion, and continues to grow.

50. Such an assertion is meant as no comfort to those associated with the Dawkins initiatives in higher education, a period marked by severe under-staffing and lack of any principle in the implementation of the HEC scheme. A principled implementation of the latter would contain a significantly higher threshold for contributing graduates, would be progressive in its recouping of costs, and would not contain the scan­dalous policy of allowing discounts for 'up-front' payments by those with the financial means to pay.

51. Again, such a question is meant as no comfort to those in the Hawke government who led the attack on what they termed 'middle-class welfare'. Purportedly on egalitarian grounds, those who boasted the removal of forms of universalist welfare also engaged in handing out tax cuts to middle and high income earners, distorting the tax system in general to favour the affluent, and did nothing to embark on a road towards full employment - the most affirmative economic and social policy possible for the working class.

52. S. Littlechild, The Fallacy of the Mixed Economy (London: Institute of Economic Affairs, 1978). lM. Buchanan, J. Burton, and R.E. Wagner, The Consequences of Mr Keynes (London: Institute of Economic Af­fairs, 1978).

53. J. O'Connor, The Fiscal Crisis of the State (New York: St. Martin's Press, 1973).

54. Heald, p. 267. 55. Langmore and Quiggin, Work for All. See also, House of Representa­

tives Standing Committee on Transport, Communications and Infra­structure, Constructing and Restructuring Australia's Public Infrastructure (Canberra: Australian Government Publishing Service, 1987). Geoff Dow, 'The Economic Consequences of Economists', 1992. David Aschauer, 'Is public Expenditure Productive?', Journal of Monetary Economics, 23, 1989, pp. 177-200; 'Does Public Capital Crowd Out Private Capi­tal?" Journal of Monetary Economics, 24, pp. 171-188.

56. Dow, 'The Economic Consequences of Economists'; and, 'The Transition from Markets to Politics'.

57. The term 'public gross fixed capital expenditure' is used by some,

274 Notes

while other analyses employ the term 'gross fixed capital formation'. The first records the level of capital investment before depreciation is taken into account; the second is a measure of net investment after depreciation.

58. Philip Arestis, The Post-Keynesian Approach to Economics: An Alter­native Analysis of Economic Theory and Policy (Aldershot: Edward Elgar, 1992), p. 128.

59. The Post-Keynesian Approach, p. 129. 60. O.P. Hamouda and G.c. Harcourt, 'Post Keynesianism: From Criti­

cism to Coherence?', Bulletin of Economic Research, January 1988, pp. 1-33, at p. 14.

61. The Post-Keynesian Approach, p. 130. 62. J. Nevile, 'The Macro-Economic Effects of Public Investment', in Con­

structing and Restructuring Australia's Public Infrastructure, pp. 218, 219, and 234.

63. Russell Mathews, Public Investment in Australia: A Study of Austra­lian Public Authority Investment and Development (Melbourne: P.W. Cheshire, 1967), p. 49.

64. See Dow's compilation of the data in 'The Economic Consequences of Economists' .

65. The explanation for a high commitment to capital investment on the part of some countries, to which Kalecki would have been able to at­test, is to be found in the political realm. Public capital investment has to be paid for. In its radical tradition social democracy is predisposed that this investment be financed through taxation upon capital. Apart from the direct beneficial effects of such taxation providing finance for public investment, there are the effects, noted above, of complementarity and of the prevention of private sector stagnation under conditions of less than full capacity. The theory of slow-down of capacity utilisation and subsequent stagnation was developed by Josef Steindl, Maturity and Stagnation in American Capitalism (Oxford: Blackwell, 1952).

66. In the social democratic tradition, the obvious examples are education, health, and housing.

67. EPAC, Aspects of the Social Wage: A Review of Social Expenditures and Redistribution (Canberra: Office of EPAC, 1987), pp. 13-16.

68. B. Hughes, Exit Full Employment, p. 91.

8. The Place of Institutions

1. See P. McCracken et al., Towards Full Employment and Price Stabil­ity, p. 218.

2. Phillipe C. Schmitter, 'Interest Intermediation and Regime Governabil­ity in Contemporary Western Europe and North America' in Suzanne Berger (ed.), Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics (Cambridge Univer­sity Press, 1981), pp. 285-327.

Notes 275

3. Suzanne Berger, Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics, p. 21.

4. All of these authors share a belief that institutional arrangements are important in economic development to the extent that each would be prepared to say, with perhaps different qualifications, that institutions are capable no less of altering the prospects of economic success within any given advanced economy. While some prefer to place their work within the corporatist framework, others do not find the term 'corpo­ratism' helpful. (Some, for example, see the term as too reminiscent of fascism in Italy.) However, certain practices that many would asso­ciate with tripartite decision-making by representative groups from government, unions, and business, whether or not this is called corpo­ratist, command broad assent in the named collection of scholars. See P.A. Hall, Governing the Economy, pp. 17-20; The Political Power of Economic Ideas: Keynesianism Across Nations; 'Policy Paradigms, Social Learning, and the State', Comparative Politics, vol. 25, no. 3, 1993, pp. 275-96. Manfred G. Schmidt, 'The Politics of Unemployment: Rates of Unemployment and Labour Market Policy,' West European Politics, no. 7, 1984, pp. 5-24.

5. See Theda Skocpol, States and Social Revolutions (Cambridge: Cam­bridge University Press, 1979); 'Political Responses to Capitalist Cri­sis: Neo-Marxist Theories of the State and the Case of the New Deal', Politics and Society, vol. 10, no. 2, 1980, pp. 155-201; Theda Skocpol and K. Finegold, 'State Capacity and Economic Intervention in the Early New Deal', Political Science Quarterly, no. 97, pp. 256-78; Margaret Weir and Theda Skocpol, 'State Structures and the Possibili­ties for 'Keynesian' Responses to the Great Depression in Sweden, Britain and the United States', in Peter Evans, Dietrich Rueschemeyer, and Theda Skocpol, (eds), Bringing the State Back In (Cambridge University Press, 1985), pp. 107-63.

6. Peter Hall, Governing the Economy, p. 17. 7. See his intoduction to P.A. Hall, The Political Power of Economic Ideas,

p. 12. 8. M.G. Schmidt, 'The Politics of Unemployment: Rates of Unemploy­

ment and Labour Market Policy', West European Politics, no. 7, 1984, pp.9-1O.

9. This should not be interpreted as a contradiction. The assumption of some institutionalists, shared by the author, is that institutions do not exist in a vaccum; ideas and interests act on institutions to determine political outcomes. See P.A. Hall, 'The Movement from Keynesianism to Monetarism: Institutional Analysis and British Economic Policy in the 1970s', in S. Steinmo, K. Thelen, F. Longstreth (eds), Structuring Politics (Cambridge University Press, 1992), pp. 90-1.

10. As it stands, this is a crude way of describing the role of material interests. For one thing, I am not unfamilar with the notion that ideas sometimes playa part in how particular interests come to be perceived.

276 Notes

A more nuanced discussion of interests is offered in Chapter 9. II. Christopher Hood, Explaining Economic Policy Reversals (Bucking­

ham: Open University Press, 1994), p. 71. Even allowing for the pos­sibility that Hood has over-stated the degree to which the corporatist countries have adopted monetarism, there is something to the claim (in so far as many of the full employment countries of the 1980s are now suffering increasing unemployment).

12. I am grateful to John Pullen for pointing this out to me. 13. Tony Cutler, Karel Williams, and John Williams, Keynes, Beveridge

and Beyond (London: Routledge & Kegan Paul, 1986), pp. 7-8. 14. For a comparison, see United Nations Department of Economic Af­

fairs, Maintenance of Full Employment (New York: United Nations, 1949).

IS. Hall, The Political Power of Economic Ideas, p. 363. 16. The fourth factor, the World War of 1939-45, of course, is an exog­

enous circumstance which affected many countries, Australia included. 17. This expressed commitment, it must be emphasised, is far from a sufficient

condition, and some might argue not even a necessary one. The Re­serve Bank of Australia, for instance, still has the official charter of maintaining full employment, which must come as a shock to those who have observed its economic policy and advice over the 1980s and 1990s.

18. Stretton, 'Whodunnit to Social Democracy?" p. 53. 19. Not only were these Keynesian social democratic principles and poli­

cies not followed, but any hope of Kaleckian notions of more radical reduction of income differentials were never part of the agenda.

20. Annette Stevens, 'The Keynesian Revolution that Never Was'. 21. G. Therborn, Why Some Peoples are More Unemployed than Others, p.

97. 22. David R. Cameron, 'Does Government Cause Inflation?', p. 259. 23. Cited in Walter Korpi, 'Political and Economic Explanations for Un­

employment: A Cross-National and Long-Term Analysis', British Journal of Political Science, no. 21, 1991, p. 329.

24. Geoffrey Garrett, The Politics of Structural Change: Swedish Social Democracy and Thatcherism in Comparative Perspective', Compara­tive Political Studies, vol. 25, no. 4, 1993, pp. 521-47.

25. Ibid., pp. 522 and 540. 26. Ibid., p. 525. 27. Garrett is not suggesting that exogenous circumstances, of themselves,

can determine ideological direction. His own example of the simulta­neous dominance of 1930s fascism and social democracy illustrate this. Garrett, The Politics of Structural Change', p. 542.

28. Garrett, The Politics of Structural Change', pp. 530-1. 29. For instance, to explain the way in which Hawke changed the direc­

tion of the debates about financial powers of the Commonwealth and the States in 1990 and 1991 owes very little to the institution of federalism

Notes 277

itself, but more to the ways in which ideas and interests attach them­selves to institutional arrangements.

30. What makes for greater optimism for the future is that in a High Court case in 1988, over interstate trade of crayfish, all precedents to inter­pretations of section 92 had to be disregarded since they had made the section unworkable. Section 92 is now held to relate to what the founders of the Constitution meant it to relate to, interstate trade. See, D. Solo­mon, 'Revolution on the High Court', Australian Society, June 1988, pp.39-40.

31. M. Pusey, Economic Rationalism in Canberra: A Nation-Building State Changes Its Mind (Melbourne: Cambridge University Press, 1991).

32. It seems reasonable to assume from Pusey's book, and from his public statements since its publication, that he sees much of the present di­rection of economic policy as emanating from approximately this time.

33. Whitwell, chs. 6 and 7. 34. Ibid., p. 175. 35. Ibid., p. 167. 36. Hood, Explaining Economic Policy Reversals, p. 138. 37. J.W. Nevile, 'Economics and Ideals: Has the Age of Chivalry Gone?'

(University of New England: 1990), p. 10. 38. R.H. Nelson, cited in w.J. Barber, 'The Spread of Economic Ideas

Between Academia and Government: A Two-Way Street', in D. Colan­der and A.W. Coats (eds), The Spread of Economic Ideas (Cambridge University Press, 1989), p. 121.

39. P.A. Hall, The Political Power of Economic Ideas, pp. 371-83. 40. In fairness to Whitwell, he would not claim that his work is an expla­

nation of wider shifts, but just part of the explanation. Pusey's posi­tion is somewhat harder to define.

41. Hall, 'The Movement from Keynesianism', pp. 95-6.

9. The Role of Interests and Ideas in Policy Change

I. What Marx pointed to was a contradiction in capitalism between the conditions for growth (unemployment and potential new markets) and the conditions for consumption (high demand and realisation of invest­ment). The extent to which Marx's diagnosis of nineteenth century capitalism was accurate is not at issue. What is at issue is the sugges­tion that mature economies in the late twentieth century do not require large growth rates in order to maintain full employment. See, Dow, 'Transition from Markets to Politics', pp. 135 and 154.

2. One of the factors this ability is contingent upon is the degree of ho­mogeneity within sections of capital itself in terms of the demands it makes upon government. Whatever demands capital may make on govern­ment for, say, expenditure on infrastructure, its ability, as a monolithic entity, to act rationally is considerably circumscribed unless enough

278 Notes

sections of it are united. This is sometimes witnessed in employers' representative bodies, and manufacturers' demands of government policy.

3. Although it is not the claim that the concentration of increased capital is alone sufficient to explain the change in capitalist interests. See A. Bhaduri and J. Steindl, 'The Rise of Monetarism as a Social Doc­trine', in P. Arestis and T. Skouras (eds), Post-Keynesian Economic Theory: A Challenge to Neo-Classical Economics (Sussex: Wheatsheaf, 1985), pp. 56-78; J. Steindl, 'Some Comments on the Politics of Full Employment, in S. Biasco, A. Roncaglia and M. Salvati (eds), Market and Institutions in Economic Development (London: St Martins, 1993), pp. 183-91.

4. F. W. Scharpf, 'A Game-Theoretical Interpretation of Inflation and Unemployment in Western Europe', Journal of Public Policy, vol. 7, no. 3, 1987, pp. 227-57.

5. 'A Game-Theoretical Interpretation', pp. 544-47. 6. See Tim Battin, 'A Break from the Past: The Labor Party and the Po­

litical Economy of Keynesian Social Democracy', Australian Journal of Political Science, vol. 28 no. 2, July 1993, pp. 221-41. FJ.B. Stilwell, The Accord and Beyond (Sydney: Pluto, 1986).

7. Economic groups which tend to be beneficiaries of Keynesianism, Scharpf held, were welfare clients, the unemployed, and the unskilled. Monetarism attracted political support from rentiers and capitalists, managers and entrepreneurs, and self-employ~d professionals. 'A Game-Theoretical Interpretation', p. 541.

8. Christopher Hood, Explaining Economic Policy Reversals (Buckingham: Open University Press, 1994).

9. Ibid., pp. 3-5. 10. Ibid., pp. 148-9. ll. Ibid., p. 11. 12. One finding over recent years has been that Australian society has become

more unequal even apart from the factor of unemployment. See M. Lombard, 'An Examination of Income Distribution in Australia, 1983-89', Macquarie University School of Economic and Financial Studies, Research Paper no. 340, March 1991; P. Saunders and G. Matheson, 'An Ever-Rising Tide? Poverty in Australia in the Eighties', SPRC Discussion Paper no. 30, June 1991. There is some significant dis­agreement among researchers in this field, though many of those who claim that poverty has not increased concede that the numbers of people at the bottom, who rely on social security, have increased. See, for example, P. Raskall, 'Widening Income Disparities in Australia', in S. Rees et al. (eds.), Beyond the Market: Alternatives to Economic Rationalism (Sydney: Pluto Press, 1993), pp. 38-53. Some research­ers, Raskall included, have seen unemployment as central to studies on poverty and inequality, and have found widening disparities over a longer period. See, R.G. Gregory and B. Hunter, 'The Macro Economy and the Growth of Ghettos and Urban Poverty in Australia' (ANU:

Notes 279

Centre for Economic Policy Research, Discussion Paper no. 325, April 1995).

13. I would not want to be dismissive of the decline-of-mass-production argument. Arguably, the saturation of western markets, and the slow­down of growth in the 1970s, does have a bearing on this debate. Given the lack of correlation between growth rates and levels of employ­ment, however, it is far from clear that the slowdown of economic growth can play a definitive role. In the future, it seems that growth will come through the more intensive working of existing industry and a shift to service industry. Cf. E.J. Nell, Prosperity and Public Spend­ing: Transformational Growth and the Role of Government (London: Unwin Hyman, 1988) pp. 251-9.

14. G. Garrett, 'The Politics of Structural Change: Swedish Social De­mocracy and Thatcherism in Comparative Perspective', Comparative Political Studies, vol. 25, no. 4, 1993, p. 540.

15. Hood, p. 73. 16. Ibid., p. 73. 17. Ibid., pp. 69-70. 18. Ibid., p. 71. 19. Ibid., p. 77. 20. Ibid., p. 151. 21. Edward Nell, Prosperity and Public Spending, fn.l p. 45. 22. This is not to claim that financial capital always enjoys the same

advantaged position over government. In the 1950s and 1960s in Australia, monetary and regulatory prudential policy was pursued which disad­vantaged financial capital vis-a-vis its more contemporary counterpart.

23. M. Olson, 'How Ideas Affect Societies: Is Britain the Wave of the Future?', in A. Gamble et al. (eds) Ideas, Interests and Consequences (London: Institute of Public Affairs, 1989), pp. 23-51 at p. 46. Olson's view here might be said to be surprising given the focus of his previous work on the importance of organised interests and institutions.

24. Olson, 'How Ideas Affect Societies', p. 47. 25. Cf. Dow, 'The Transition from Markets to Politics', p. 119. 26. J. Steindl, 'Some Comments on the Politics of Full Employment, in

S. Biasco, A. Roncaglia and M. Salvati (eds), Market and Institutions in Economic Development (London: St Martins, 1993), pp. 183-91; 'Reflections on Kalecki's Dynamics', in Mario Sebastiani (ed.), Kalecki's Relevance Today (London: Macmillan Press Ltd., 1989), pp. 309-13; A. Bhaduri and J. Steindl, 'The Rise of Monetarism as a Social Doc­trine', in P. Arestis and T. Skouras (eds), Post-Keynesian Economic Theory: A Challenge to Neo-Classical Economics (Sussex: Wheatsheaf Books, 1985), pp. 56-78.

27. Making this claim may leave the author open to criticism from some radical schools of Australian political economy. Peter Love's Labour and the Money Power, for example, is a good example of the argument that the Australian labour movement has suffered ideologically, and in

280 Notes

terms of its conception of power, because of its assumption that only financial capitalism was evil, and that all other capital was essentially redeemable. Elsewhere I have taken issue with some of Love's conten­tions. See, T. Battin, 'Keynesianism, Socialism, and Labourism, and the Role of Ideas in Labor Ideology', Labour History, no. 66, May 1994, pp. 21-33.

28. Bhaduri and Steindl, 'The Rise of Monetarism', p. 56. 29. Ibid., p. 57. 30. Ibid., p. 60. There does not seem to be reason to believe that the shift

in power in Australia was all that different than in Britain. From the late 1960s there has been a dramatic decline in manufacturing while the increase in financial capitalist activity has been steady. See Joseph Halevi and Peter Kriesler, 'Structural Change and Economic Growth', in Greg Mahony (ed.), The Australian Economy Under Labor (Sydney: Allen & Unwin, 1993), p. 9.

31. 'The Rise of Monetarism', pp. 62-3. 32. 'Formerly the debtors were prominently represented by industry and

their interests were opposed by the banks which allied themselves to the rentier. One can find examples in history when there was an alter­nation of the preponderance of one or the other of these groups'. J. Steindl, 'Some Comments on the Politics of Full Employment, in S. Biasco, A. Roncaglia and M. Salvati (eds), Market and Institutions in Economic Development, p. 185.

33. 'The Rise of Monetarism', p. 63. 34. J.K. Galbraith, The Culture of Contentment (Boston: Houghton Miflin,

1992). 35. J.K. Galbraith, 'The Joys of Recession', The American Prospect,

no. 16, Winter, 1994, pp. 8-9. 36. 'The Joys of Recession', p. 9. 37. Galbraith also considers the role of American farmers where, peculiar

but not exclusive to American politics, the guarantee of fixed prices has meant that the farmers' opposition to deflationary policies is not as fierce as it might otherwise be.

38. 'The Joys of Recession', p. 9. 39. Ibid. 40. In the public debate leading to and following from the Labor

Government's 1993 Green Paper, Restoring Full Employment, many opinion polls cited evidence that the Australian public would favour a progressively structured jobs levy to finance job creation.

41. However, granting the validity of his claim that pensioner groups favour recessionary policy in times of low inflation, it would not seem valid to claim that this is relevant for the period of the 1970s where high inflation predominated.

Notes 281

10. Conclusion

1. In fact the best research suggests that such a conclusion is far from obvious. Paul Hirst and Grahame Thompson's recent analysis is a very useful critique of the often uncritical stance adopted by those who assert that national economic sovereignty is no longer possible. See P. Hirst and G. Thompson, Globalisation in Question: The Inter­national Economy and the Possibilities of Governance (Oxford: Polity Press, 1996). See also Andrew Glynn, 'Social Democracy and Full Employment', New Left Review, 211, 1995, pp. 33-55.

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Index

academic economists. role of. 208 Accord. the. 107. 113. 199. 216

Keynesian character of. 108 sabotaging of. 109

aggregate demand. 61. 150-1. 195 Argy. Y .• 169 Australia Reconstructed. 112-13 Australian Council of Trade

Unions (ACTU). 97. 107. 109. 112. 148. 216

Australian Labor Party (ALP). 30. 34-5. 37. 41. 49-50. 57-8. 72. 90. 99. 101-4. 106-8. 134. 158-9. 196.204-5.216. 232.242

Australian Treasury. 23. 74. 83 Australian Worker. 35

banking. 36. 55. 231 Barber. W.J. 208 Bell. S .• 109 Berger. S .• 192 Bernstein. E .• 24-5 Beveridge Report. 45 Beveridge. W .• 44-6 Bhaduri. A .• 236 Black. L.. 44-6. 55-7 Bruns. G.R. 46 bureaucracy. 193. 206

and economists. 207

Cameron. D .. 161. 163. 202 capacity utilisation. 135

and excess capacity. 150-1 capital. 230

and its resistance to government intervention. 151

and sectors of. 231. 234-6 interests of. 213-14 vis-a-vis labour. 233

capital expenditure. 180

capital stock. 178 Catley. R .• 89 centralised wages system. 76 Chifiey. J.B .• 1. 3. 34-6. 39. 42-3.

46.49. 51. 55-6. 58-60. 63. 77.87.113.174.241.242

and his conception of socialism. 44

Chifiey government. 8. 43-4. 48. 50. 55-7. 75. 198. 200. 205

Commonwealth Bank. 35. 55. 113

Conciliation and Arbitration Commission. 104-5. 193. 198

see also Industrial Relations Commission

constitutional reform. 200 Coombs. H.C .• 34. 40-1 Copland. D .• 60 Cornish. S .• 58-61 Crawford. 1.. 76 Crean. F .• 92-4. 100 Crisp. L.F .• 34 Crouch. C .• 131 crowding-out thesis. 19. 169-70.

179 current account, difficulties of and

unemployment, 139 Curtin and Chifiey governments.

43,48,50 Curtin, J., 35, 94. 113 cyclical nature of the capitalist

economy. 145

Davidson. P. 62 democratic socialism. 15. 27. 103.

106. 199, 241-2 and connection with

Keynesianism, 11 distribution of income, 40. 125 Dow. G., 164. 166, 180

295

296 Index

Dowrick, S., 147 Duverger, M., 203

economic growth and unemployment, 138

economic interests, 195 see also interests

economic orthodoxy, 94, 104 economism, 118, 123, 189,211 effective demand, 126 Evatt, H.Y., 37-9, 42, 101, 174 exogenous circumstances, the role

of, 203 extraordinary circumstances, the

role of, 219-24

Fadden, A., 57 Fourteen Powers Referendum, 58 Fraser government, 84, 99-102,

146, 149, 164, 198, 244 Fraser, J.M., 97-8 Friedman, M., 96 Full Employment in a Free

Society, 44 Full Employment in Australia, 39,

41, 44, 102, 196 full employment, 11, 15, 18, 24,

28-9, 36, 39-45, 47-8, 56, 58, 66, 68-9, 110, 125, 150, 176, 178, 181, 197,213

maintenance of, 67, 216 political significance of, 67, 70,

214

Galbraith, J.K., 133, 237-8 Garrett, G., 192, 203-5, 222, 226 General Theory, The, 34-5, 63,

66,69, 171, 178, 194 Goldthorpe, J., 131-2 Gorton, J., 97 Groenewegen, P., 75, 84, 88

Hall, P., 1, 5, 22-3, 49, 118, 192-3, 196-7, 208-9, 218

Harcourt, G.c., 72, 95, 103-6 Hawke, R.J" 90, Ill, 114, 148

Hawke and Keating governments, 84, 163, 174,216

see also Hawke government and Keating government

Hawke government, 81, 109, Ill, 113-14, 158, 198-9,244

Hayden, W.G., 84,91,95-7,99, 101-2, 107

Heald, D., 110-1, 154, 170, 176 Henderson, R., 102 Higgins, c., 143 Hirsch, F., 27, 94, 131-2, 234

and Social Limits to Growth, 131

Hobson, J.M., 23 Hood, C., 1, 218-20, 222-30, 236 Hughes, B., 84, 89, 96-7 Hurford, C., 99

ideas and ideology, 232 ideas, 30, 51

as against organised interests, 231

change in, 159 interaction with interests and

institutions, 196 power of, 2, 7,77, 127, 223 precise function of, 238-40 role of, 152, 192, 212, 223, 229,

233, 244, 247 the left's under-emphasis of,

247 ideology, meaning ascribed to,

6-7 incomes policy, 71, 73-4

importance of, 148 Industrial Relations Commission,

193, 198 see also Conciliation and

Arbitration Commission inflation, 40, 59-61, 65, 71, 73,

87-94, 100, 119, 124 as symptom of class struggle,

132 different kinds of, 127-8 policies to address, 105

Index 297

infrastructure, 179 institution of the political party,

201-4 institutional development,

significance of, 227 institutional impediments to

reform, 204-5 institutional 'sclerosis', 219 institutional reform, 55, 77 institutionalist economics, 125 institutions, 30, 51

and their interaction with ideas and interests, 194

role of, 4-5, 25, 76, 192-3, 224 institutions of state capacity in

Australia, 197-209 interests, 24, 30, 51

indeterminacy of, 232 perception of, 233-4 power of, 2, 230 role of, 66-7, 192, 229, 233 role of, as a determinant of

policy, 213 within wider society, 237-8

investment, 38, 46, 68, 112-3, 126, 135, 195-6, 207-8

and socialisation of, 126, 200, 238

its importance in eliminating unemployment, 178-82

social and economic, 199 investment decisions, 178

Jamrozik, A., 174 Jones, E., 21-2, 44

Kalecki, M., 4, 5, 20, 47-8, 53, 66-71, 73, 125, 131, 135-6, 141-2, 150, 178-9, 195, 197, 212,216,224,231,240,243

Karmel, P., 76 Kautsky, K., 24 Keating, P., 110-12, 114-15 Keating government, 247 Keohane, R., 119 Kerr, P., 104-5

Kesselman, M., 29 Keynes, J.M., 2,4, 15, 17, 19-20,

24, 26-7, 36-7, 40-1, 63, 66, 69-71,73, 117, 126, 129, 131, 136, 138, 153, 171, 173, 178-9,240,243

and The General Theory, 2, 22, 195

Keynesian consensus, 92 Keynesian economics, outline of,

1, 9, 15-6, 18-9, 24 Keynesian full employment, 107 Keynesian ideas, 112

distortion of, 118 the reception of in Australia,

33-43 Keynesian social democracy, 9,

11, 15-6, 24-6, 30-1, 93, 154 essential political nature of, 189,

190-1 Keynesian theory

and inflation, 129-35 and wages and employment, 149 misunderstanding of, 95

Keynesianism, passim, esp. 1-6, 8-11, 15, 22-8, 30, 33, 44, 49-50, 62, 71, 73, 77

and bastard Keynesianism, 20, 72, 128, 134, 146, 149

and direct intervention, 137-8 and its interconnection with

taxation and public expenditure, 227-8

and its supposed connections with inflation, 130

and socialism, 103 and the claim that it was suited

to a particular period, 220-1, 226

and the neoclassical-monetarist view on wages, 148-50

and the New Right, 156 and the welfare state, 153-55 attacks upon, 99-101 competing conceptions of, 83,

99

298 Index

conditions particular to Australia, 21

different meanings of, 16-7 gross misunderstanding of,

243-4 highly contested meaning of, 20 institutionalisation of, 58 misunderstanding of, 97, 118,

120 Phillips Curve, understanding of,

123, 127 understanding its breakdown,

241, 244-8 variations in, 53, 69

Klein, R., 173 Korean War, 60 Korpi, W., 192 Kuttner, R., 68, 164

Labor Call, 34 Labor Daily, 35 Labor Party, see Australian Labor

Party labour, interests of, 214 Langmore, J., 115, 171 Lekachman, R., 28 Liberal Party of Australia, 100 Liberal-National Party Coalition,

134, 232 Lynch, P., 98-9, 100-1

Maier, C., 131-2 marginalist theory, 149 Marshall, A., 65 Marx, K., 30 Marxist analysis, 3, 10 Marxist and neo-Marxist critiques

of Keynesianism, 26 Marxist critiques of Keynesian

social democracy, 43 Mathews, R., 179 McCracken, P., 189 McCracken, Report, 119-20, 189 McDonald government, 104 McFarlane, B., 75-6, 89 McMahon government, 86

Meade, J., 60-1 Menzies, R.G., 2, 55, 242 Menzies government, 55-6, 75-6,

198,200 Merry, D.H., 46 Mill, J.S., 5, 30 mixed economy, 104, 242 monetarism, 6-7, 71-2, 73, 86,

100, 108, Ill, 127-8, 155-8 and function served by ideology,

235 interests served by, 235-6

money, wages and real wages, 145-7

National Committee of Inquiry (of 1978), 103-4, 106

nationalisation, 46, 50, 55-6, 58, 87-8

Nell, E., 132 neo-liberalism, 7 neoclassical economics, 18-20, 72,

149 neoclassical orthodoxy, 40 neoclassical synthesis of

Keynesianism, 10, 58, 61-6, 77, 90, 124, 146, 148

neoclassical-Keynesians, 133 Nevile, J., 179 New Classical macro-economics,

149, 169-70, 172 New Right, 2, 7, Ill, 155-7,

168-9, 172, 175, 182, 191 Non-Accelerating Inflation Rate of

Unemployment (NAIRU), 138

O'Connor, J., 105, 176 oil shocks of the 1970s, 139

role of, 222 Olsen, M., 231-2 One Nation, 114

alleged Keynesian character of, 115

Organisation for Economic Cooperation and Development (OECD), 98, 118-9

Index 299

and comparisons of inflation-budget deficit correlations, 162

and employment-investment correlations, 180-1

broad comparisons within, 138-40, 226

comparisons of wage share within, 147-8

variations within, 153

Phelps, E., 96 Phillips Curve, 83, 85, 123-4,

126, 244 planning, 37, 57, 76, 207-8 political business cycle, the,

143-5, 181, 200 political parties, electoral

competition between, 204 post-industrialism, II post-Keynesianism, 15, 20, 22, 29,

54, 60, 73-4, 124, 149, 243 Post-War Employment Policy, 45 Post-War Reconstruction, 38 potential profits and full

employment, 229 and realised profits and full

employment, 229 Prezworski, A., 26 profits, 213 profits share, 142-3, 147 public borrowing, 179 public capital formation, 56, 76 public choice school, 155 public expenditure, 167, 173,

176-7,227 comparative analysis of, 160-9 disaggregation of, 177

public sector, lOa, 116, 138, 228 Public Sector Borrowing

Requirement (PSBR), 170-1 Pusey, M., 206-7

Quiggin, J., 115, 171

Reagan administration, 244

Reserve Bank, 115 Restoring Full Employment, 116 Riach, P.A., 145 Ricardo, D., 30 Richards, G.M., 145 Robinson, J., 20, 71, 73 Roncaglia, A., 151 Russell, E., 74

Salant, W., 21 Salter, W.E.G., 74 Samuelson, P., 63-5 Saunders, P., 164 savings and investment, 19 Says, J.B., 195 Scharpf, F., 215-16, 223 Schmidt, M.G., 136-7, 192-3 Schmitter, P.c., 191-2 Scullin, J., 34 Scullin government, 35, 104 Singleton, G., 109 Skocpol, T., 192 Smith, A., 30, 65 Smyth, P., 57, 75 social democracy, and its

relationship to social investment, 181-2

social expenditure, 182 social wage, 105, 108-9, 148, 198 social welfare, 39, 42, 58, 68,155,

182 and the debate between

universalists and selectivists, 174-5

socialism, 57-8, 87, 102 see also democratic socialism

stagflation, 10, 54, 61, 81-2, 100, 103-4, 123, 127, 138

supposed nature of, 120 state-society relations, 192,

196-7 Steindl, J., 235-6 Stevens, A., 54-7 Stilwell, F., 110 Stretton, H., 109, 198-9 Swan, T., 74

300 Index

technology and unemployment, 140

Thatcher, M., 222 Thatcher government, 163-4 Theodore, E.G., 34 Therborn, G., 137-9, 192,

201-2 Titmuss, R., 174-5 trade union movement, 216 trade unions, 215 Treasury, . the (Australian), 143-4,

201, 206, 208 Trudeau, P., 99 twin deficits thesis, 171

Vernon Report, 76 Vernon, J., 76 Vietnam War, 119

wages and labour costs, 140-7 wages and wages share, 213 wages share, 141-2, 147, 213 Walras, M.E.L., 65 Waters, W.l., 46-7 Weiss, L., 23

Whitlam government, 77, 84-5, 87,98, 168, 179-81, 198, 205-6, 216, 244

and its social expenditure, 182 and wages, 148 and wages policy, 146-7 defence of economic

performance, 243-5 extravagance of the claims made

against, 183-4 Whitlam, E.G., 77, 86, 88, 91, 95,

98, 183, 205 Whitlam Labor government, 242 Whitwell, G., 18, 23, 74-5, 81-3,

206,208-9 Wicksell, K., 65 wider sections of society, interests

in, 215-16 Willis, R., 104 Wilson, H., 99 Wilson, J.S.G., 41 Woods, B., 86, 119 Working Nation: The White Paper

on Employment and Growth, 117