Generation F’d: how neoliberalism consumed the future

This is an edited extract from Gen F’d? by Alison Pennington, published by Hardie Grant Books & Crikey, RRP $24.99. Available in stores nationwide on Wednesday, March 8. Pre-order your copy now.

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To truly understand how good jobs and the dream of owning a home unwound for young Australians and other outsiders, we have to zoom out and take stock of big changes made in our economy that incrementally dismantled opportunity over a generation. By understanding the logic behind those forces, we become empowered to overcome it, and ultimately replace it.

Those changes were led by the neoliberal political project, which tied our hands in a powerful whirring machine of profit-first, short-term thinking. If we can’t unpick the knots and reclaim our shared democratic economic planning, Australia risks dissolving the ladders of opportunity and mobility for good. As a United Workers Union cleaner said at a 2017 protest outside Parliament: “Trickle-down economics is a lie. The only thing trickling down is our sweat and our bank account balance.”

This is your brain on neoliberalism

Neoliberalism is a term associated with 19th-century ideas centred around free-market capitalism. Commonly, it refers to market-oriented reform policies, like lowering trade barriers, deregulating capital markets and eliminating price controls. Especially, though, neoliberalism refers to policies that diminish government’s role in shaping the economy and delivering services.

In practice, neoliberalism has given untold powers to private enterprises, and in the process has eroded our access to good jobs, incomes, services and infrastructure. In effect, it is tanking the future for the vast majority of us.

Neoliberalism has permitted companies to tear up their social contract with the Australian people, choosing quick shareholder returns over investing in the workers who deliver their profits and make the economy run. From airlines to aged care, corporate greed has debased our essential services, disposing of decent jobs in the process. In step with Australia’s supermarket duopoly, global big tech behemoths like Amazon and Google siphon value from every nook and cranny of our lives, competing for our diminishing incomes and attention. Meanwhile, as time-pressured, income-strapped workers are kettled into big retail stores, small businesses are bought up, disappearing from our neighbourhoods.

What neoliberalism really is, at its core, is a vicious political project of upward wealth distribution, from everyday people to big corporations and the CEOs who run them. The direct beneficiaries of this massive wealth transfer told us that the government was, in fact, ineffective, inefficient and self-interested. Our government — combining local, state and Commonwealth levels and all their departments and functions, which is the biggest and most influential actor in the economy, and one accountable to democratic power — was a mere support act. Government shouldn’t provide direct jobs, decent welfare supports, run quality services or build innovative and smart future-focused industries, they said. Justice and fairness, they said, is the terrain of free enterprising markets: those all-knowing, efficient, magical, self-correcting organisms that tend towards perfect balance.

Well, surprise, surprise, with the government’s exit from upholding and progressing living standards, real wages are lower than they were 10 years ago, workers’ share of the economic pie has shrunk to a post-war low, schools and hospitals are in a workforce crisis, and bulk-billing doctors are harder to see. The Productivity Commission found the rate of income poverty — defined as those earning below 50% of the median income — remained at 9% of all Australians over the period 1988–89 through to 2015–16, despite 27 years of uninterrupted economic growth. The Australian Council of Social Services, which uses a measure of income poverty after housing costs have been deducted, found there were more people living below the poverty line in 2018–19 (13.4%) than 20 years ago in 1999 (13.1%). Census data shows homelessness rose by 30% in the decade to 2016.

None of this was inevitable. Neoliberalism was conceived a generation before it weaselled its way into our lives. In history there are big moments when prevailing norms about how best to organise society dissolve under the weight of reality. So-called economic “laws” fail to stand up too.

In 1947, against the backdrop of the Keynesian ascendancy, a bunch of economists gathered in Switzerland to plan for a new global economy. Calling themselves the Mont Pelerin Society, they designed a set of mathematical models and ideologically charged notions of individual freedom and market exchange. The combined effect of the economists’ plan would naturalise the power of owners of wealth, break the collective power of workers, and displace the role of government spending in meeting human need. They designed neoliberalism.

Far from waiting for the best ideas to win, neoliberals like Milton Friedman set to work dispersing their ideas across the world through think tanks in business, politics, government administration and universities. Almost three decades after the Mont Pelerin Society had gathered at their Swiss hotel, in the 1970s, Keynesianism’s frame for analysing the economy and how to fix it was over-extended by globalisation, high inflation and unemployment. It was go-time for the neoliberals.

By the early 1980s, the global stagflation crisis had crashed on our shores. We faced negative growth, 7% unemployment and high inflation. With a highly unionised workforce chasing pay rises to keep pace with rising prices, big business considered workers too uppity, and profit rates unacceptably low.

Neoliberalism was there, patiently waiting to pounce, aided by Australia’s own neoliberal think tanks like the H R Nicholls Society, whose members included Peter Costello, federal treasurer from 1996 to 2007. It became the new cogent political economic frame to make sense of the crisis, resolving the business–labour stand-off in favour of business.

Key to the neoliberal regime winning supremacy has been its claims to price stability. Their academic economist foot soldiers entered the room waving around credentials, promising to slay our new common enemy: inflation. From the early 1990s, the Reserve Bank of Australia (RBA) started using its central bank powers explicitly to control inflation, which amounted to periodically destroying the number of jobs in the economy and workers’ spending capacity — an inflation-beating medicine workers are copping again right now. For decades employment has been artificially constrained, and the unemployed cruelly blamed for not finding work.

While Australia avoided the most extreme fundamentalist neoliberal “reforms” unleashed in places like the United States, the United Kingdom and New Zealand, the Labor government of Bob Hawke and Paul Keating still accepted the premise that government policy should focus on pumping up business returns, and believed those returns would be productively invested to lift growth and wages — this is what people mean by “trickledown economics”.

After being nurtured like seedlings with public money and a stable environment to grow into the post-war “golden age”, big corporations turned on the welfare state that created them, like knife-wielding lunatics. Finding influence with politicians at all levels of government in all major parties, they started consuming anything of value, flipping public goods into private gains, like housing.

Production in capitalist market economies is always dominated by profit-maximising actors. They’re programmed to hunt down profit. But something changed in the 1980s. Profit-maximising logic entered hyperdrive. Privatisations intensified during the 1990s, stripping our assets in utilities, banks, airlines, telecommunications and more. Everything in the way of business profit became a so-called barrier to economic growth, like taxation, unions, publicly owned utilities, and regulations against dodgy, harmful environmental and financial practices. And neoliberals pursued this intensified attack under the fallacy of “better economics”. Alongside the erosion of public services, tools of redistribution in the tax system were blunted to increase profits. To ensure everyday people toiling on the job delivering those rising profits got sweet-FA, unions and collective wage-setting were dismantled.

With workers’ share of the pie diminished on the job, other big policy changes introduced in the 1980s helped empower big business and reduce the role of government in creating economic opportunity for everyday people. In 1984, prime minister Bob Hawke committed to the “trilogy” of not increasing tax revenue, government spending or the budget deficit as a percentage of GDP, in what Professor emeritus Frank Stilwell termed “a self-imposed fiscal straitjacket”. Subsequent cuts to public spending, deepened financial deregulation, and the abandonment of government’s commitment to full employment all set in motion a deterioration of economic opportunity. Far from inevitable or natural, these actions were choices. The neoliberal storm brewed across the whole economy, amping up over the Howard years, moderating under Rudd and Gillard, and then jumping on steroids under Morrison.

If you want to know the true intention of the neoliberal agenda, it’s this: since 1975 the share of the economic pie going to workers has fallen from 58% of GDP to only 45% in 2022 — the lowest level in recorded Australian history. That represents the redirection of $26 billion in 2021 alone — and hundreds of billions since the mid-1970s.

Economist David Richardson tracked the impact of neoliberal forces in Australia on rising inequality post-war. In the years between 1950–60, almost all the benefits of economic growth went to the bottom 90% of income earners. Then, from 1983 to 2008, the tables turned: the top 10% of income earners started increasing their share of growth to around 40%. Shockingly, over the period 2010–19, the richest 10% pocketed 85% of the fruits of economic growth, with the bottom 90% receiving only 15%.

This isn’t mere “change”. It’s an upheaval.

Division is distraction

For decades we’ve been told that giving lots of power and money to individuals and corporations pursuing private profit-maximising interests was in our collective interest. 

But if you want to pursue a project that economically disadvantages the majority of people in the long run, then dividing people is paramount. To achieve this division, wealth has to be funnelled to chosen cohorts — a small group of winners — while the resources tap is turned off for the losers. 

In Australia, your age is one of the most powerful indicators in the winner–loser binary. It impacts everyone, and the demographic fissure is turbocharged by government policies, particularly when it comes to home ownership. But it’s not pensioners receiving meagre social security payments who are the beneficiaries of the neoliberal regime. The total bill for pension payments is less than the cost of tax concessions on superannuation alone, nabbed mostly by the wealthiest.

No, the real beneficiaries of intergenerational inequality, emerging from housing in particular, are the powerful network of investors, developers, banks and their lobby groups who derive mega-profits from ever-rising prices, as well as from workers’ lifetime debt bondage.

Not all young people are affected the same by government reducing its role in creating economic opportunity. Wealthy youth, for example, can more easily escape the relentless cycle of juggling work, study and money that besets many working-class people by simply having been born into better financial circumstances. For this group, better access to resources and power often translates into work benefits, like being able to walk into a job in the family business or finding internship placements via family networks — internships they can work unpaid because they have financial backing.

And then there’s impoverished youth, on the other hand, who of course never chose poverty, but whose economic opportunities were diminished because they were born, let’s say, in the late 1990s, when being the child of a renting single mother was a poverty sentence in itself. These youth, who are without family inheritance, housing wealth or ties to a family business that could offer employment opportunities, are most disadvantaged by the defunding of public institutions like schools, TAFE, Medicare and Centrelink.

Such institutions constitute the network of Australia’s public goods and create the building blocks of economic opportunity. When large segments of economic activity are driven by profit maximisation to the benefit of a smaller number of individuals, public services become the bastions of human dignity and civility. And when the economy inflicts unemployment and poverty by design, people will come to depend on these institutions all the more.

In fact, there were around 465,000 young people aged 15–24 in low-income households in 2017–18, with an average weekly disposable income of just over $416. They and their families depended on employee incomes and government welfare payments to make ends meet. I was one of them, alongside lots of young people I grew up with. Today, young people must also confront insecure work, exploitation and wage theft without the strong union infrastructure of their parents’ day.

The Hawke–Keating government negotiated the Prices and Incomes Accord in 1983 between business and unions, cooling wage demands in exchange for price controls. Cashing in industrial power, workers were told to forgo pay increases in return for receiving improvements in their entitlements and benefits (the “social wage”), including universal public health care and superannuation.

Combined with retention of the awards system of industry minimum wages, Australian workers fared better than workers in other anglophone countries under this unique Labor–labour–business bargain. But in the long run, unions’ strategic muscle — organising workers to demand higher wages and better conditions — was eroded. With legislation now pre-determining wages, how could workers organise? And what would be the point?

The result of unions being curtailed and business hijacking the levers of government — spending and regulation — has been a big shift in bargaining power to business. Whereas almost all the stock market gains (92%) made in the 30 years to 1988 were derived from economic growth, the majority of gains since have come from workers’ wages. 

And to distract us further, the big winners make sure workers, government and many businesses are all staring at their feet, rather than at the horizon. 

Short-term thinking, the Australian way

Stopping the neoliberal machine in motion is harder than you would think, not only because it is embedded in our institutions, government and wider society, but also because neoliberalism wields a very powerful weapon: it stops us all thinking long term. Beyond the pay cycle, beyond the four-yearly budget estimates, and beyond the electoral cycle. Like a pig scoffing from the resources plate, neoliberalism consumes future economic planning, political systems and the environment we all depend upon. 

Despite the damage wrought by neoliberalism, government — at federal, state and local levels — is still the biggest actor in the economy. It spends a whopping $580 billion every year and employs 2.1 million people. Government once used its power to maximise human welfare, moulding private sector activity to complement its democratic vision. For instance, the post-war policy architecture up to Whitlam’s 1970s was all about “crowding in”, signalling what was important to the public through big public investment and planning in many areas including education, health care, infrastructure and the arts. Then, the private sector would be invited to come along for the ride.

But from the 1980s, government’s critical role in leading economic activity began narrowing. Privatisation, outsourcing and marketisation handed the reins to private interests, undermining our collective long-term vision.

Business interests were parachuted into public administration, with ill-fitting metrics like productivity and efficiency dividends clumsily grafted onto public budgets. Armies of public servants and thousands of entities receiving government funds to do important stuff were suddenly forced to prove that receiving funds would generate immediate returns — or get no funds at all. Whole sectors of society, including mental health, the arts, and community and social services, have only known begging — locked in endless, resource-intensive, short-term grant cycles.

Far from innovative, inevitable forces of nature, most markets under Australian neoliberalism have been constructed, like unemployment services (now “Workforce Australia”), the NDIS, aged care and private education. They’ve sprung up where government has stepped back and, without regulation, often amount to a form of manufactured misery.

This state-sponsored business laziness has a strong history in Australia. When waves of squatters colonised Australia in partnership with the British administration, they got free land through systematic theft from First Nations People, and free labour through the convict transportation system.

Fast forward to today, and Australian managers still think productivity means cutting wages and tying people to their workplaces, forcing them to toil longer and harder to prove their commitment and worth. They still aim to make workers poorer and more tired, indebted and docile, despite their long-term need for healthy workers to make them money.

Our own publicly funded multimillionaires in human services are proud flag-bearers for the lazy business tradition. Unable to unpick longstanding expectations of an active role for government in supporting fairness and delivering services, neoliberals have focused on getting bankrolled for the stuff they know will be popular, like care for the aged and disabled. In the process, neglected citizens become “customers” and “clients”.

Really, in so many ways, we’ve come to resemble our former colony status: an export zone shipping resources out for foreign business owners, only now the golden fleece is coal and gas. The squattocracy of rich landowners that withheld more productive growth is now a private housing system dominated by investor behemoths, landlords and banks. The use of convict and Kanaka labour and other highly exploitative pre-union labour practices have returned through temporary migrant visa work and gig work.

After we dismantled our own productive capacity in industries like manufacturing and public sector services, we then placed UK- and US-dominated mining companies at the commanding heights of our economy. We let them dig, export and profit, all the while barely paying any tax. In fact, two-thirds of all mining companies pay no tax. In 2010, when attempts were made to tweak the power of our mining overlords and tax them, a coup orchestrated by the Murdoch press and the mining companies resulted in the disposing of an elected prime minister, Kevin Rudd, who received strong support from young Australians.

Even more embarrassingly, Harvard University recently ranked Australia 91st out of 133 countries on economic complexity. This is the legacy of extraction and export of unprocessed resources, of raw materials becoming the “backbone” of the Australian economy. We didn’t even try to add value to those resources, effectively relegating ourselves to a primary industry colony. Hell, we even buy back our own gas at inflated prices! And with government giving up on big national infrastructure projects too, under neoliberalism Australia is still without a high-speed rail network, mass renewable energy production or a quality broadband network.

There are encouraging signs that new governments are trying to reverse the direction of the Titanic, with federal Labor committing $1 billion to building advanced manufacturing, and the newly re-elected Labor government in Victoria planning to revive the State Electricity Commission to generate public renewable energy and wean the state off its dependency on offshore coal companies.

In a globalising, financialised, competitive economy, immediate returns became the priority of business. Govern­ment lets business get lazier, eating up workers’ wages, converting them into profits. Business then cuts secure, well-paid jobs, offshoring operations to exploit cheaper labour sources where possible, pursuing a logic that eats the conditions of their own possibility. Sitting on vast wads of cash, business has little interest in parting with their mega profits, which reached a post-war record high of 28% of GDP in 2022. Business investment in productivity boosters like new technologies, machinery and tools has collapsed since 2012, falling to just 10.5% of GDP in 2021 — the lowest rate in post-war history. This is despite billions allocated by the former Coalition government in tax breaks and other measures to stimulate a so-called “post-COVID business-led recovery”.

Business also demanded yet more anti-union laws at home that eroded secure jobs, wages and entitlements.

The loss of unions in Australia made workers cheaper and more docile, but it also dismantled an incredibly powerful organ of industry planning and coordination. Since unions work to improve job quality and stability in a sector, they’re also institutional bearers of knowledge and expertise. Increasingly stressed and insecure workers can’t apply valuable knowledge to improve their jobs because their abysmal work conditions stop them planning for their own lives.

People are focused on how they’ll get through the week, not what they’ll do next year. While we run around like headless chooks, powerful corporations swoop in, buy up competitors and expand operations. They plan for a future they control and will benefit from. It’s exactly what happened when the pandemic hit. Australia’s 47 billionaires doubled their collective net worth to $255 billion in the first two years of the crisis. Climate change offers boundless opportunities for the wealthiest to exploit the overwhelmed, monetise misfortune and expand power. Mining companies already have dibs on the thawing Arctic, and financiers running derivatives markets will trade in the incidence, or not, of catastrophic climate events.

Over time, everyday people — workers, students, carers — have been treated like cost burdens to be reduced or eliminated. Since humans are actually those running and reproducing the economy, this virus of short-term thinking has brought major destabilising consequences for all Australians, but especially young people. 

Access to good jobs, housing, health care, education, income and infrastructure builds human lives. Young people starting their lives especially depend on investment in these areas. But under neoliberalism, spending on vital public goods has been consistently cut for failure to demonstrate “value for money”.

We’ve reached an astounding dead-end for neoliberal policies. We once paid people to think, plan and produce for Australia. But the bridges out of our policy dumpster fire were burnt by the dismantling of active government over decades of neoliberalism. The result is an economy that can’t think for itself and that follows unsustainable signals without sufficient anchors for long-term investment in our collective future.

We need the next generation to send new signals that reorient resources to meet the enormous environmental, economic and political challenges that lie ahead. We need youth to reclaim long-term thinking.

False positivity

Declining economic opportunity for the next generation has been masked by influential changes to our experience of work and the stuff we buy. This decline tracks back to the neoliberal campaigns to cut workers’ pay and the offshoring of Australian manufacturing.

Since the 1980s, services jobs in industries like health care, education, professional and technical services, and hospitality have become dominant and now comprise around 80% of all jobs.

Aided by policies weakening worker rights, many of these new jobs — disproportionately worked by young people and women — emerged as lower paid, part time and casual. With a big new stock of lower-paid jobs compared to the once available blue-collar, unionised full-time jobs, wage stagnating forces set in. 

Wages stopped laying the groundwork for future economic security. And that was before the pandemic, when the newest inflation blowout has seen real wages go backwards at the fastest rate since records began.

So, how have Australians maintained their consumption of manufactured goods?

Enter China, our regional manufacturing powerhouse. China has facilitated the flow of complex and ever-cheaper technologies into Australian households, dazzling workers with TVs, smart home devices, iPhones and laptops.

Yet meanwhile, privatisation has meant that the cost of essential services — you know, the substance of life itself — has risen higher and higher.

You see, there are other ways that consuming cheap products has masked erosion in economic opportunity. The shift to a services economy has brought restaurants and cafes into our lives, meaning those with disposable income can put their feet up on weekends and be served a cooked breakfast. This simple luxury of being served has made workers feel richer. Along with manufacturing workers in China, Bangladesh, India and other regional neighbours, the predominantly young and low-paid workforce staffing Australia’s private services industries like hospitality effectively subsidises this mass masking of wage stagnation.

Housing is the most powerful system of manipulation, convincing people to take the neoliberal pill. Decades of house price inflation following the boom in the late 1990s made Australians feel richer than their wages suggested. With big mortgage debts, it also gave them a vested interest in the success and stability of financial markets, especially low and predictable interest rates. Workers were told by politicians and Reserve Bank governors that their mortgage payments could go up if they rocked the boat. It’s politically potent stuff, and helped the Howard government secure its reelection in 2004, campaigning on fear of interest rate hikes under a Labor government. As Labor’s bill to boost falling real wages was being considered by the Parliament in late-2022, RBA governor Philip Lowe made bigger threats, warning workers seeking to lift their wages risked triggering a “painful” recession.

Then there is the fairy tale about the constant progress of our “knowledge” economy. Perhaps the worst lie of all is that university-educated youth could navigate life without the help of power-building institutions like unions or even government. Raised with the comforts of trusted progress, the people’s capacity to defend and uphold institutions that pursue human advancement, including government policy, public education, blue-sky research, science and democratic politics, has been declining. Individual effort continues to be touted as the vehicle for expanding freedoms, for mobilisation and improving your lot.

The lucky country?

So, we must now confront the reality: youth have been sacrificed to a retrograde economy that is wired for short-term thinking and consumes opportunity. We’re ensnared in a machine stuck allocating resources in the “now” and on the “high inequality” setting. It’s not hard to see how neoliberalism’s capacity to corrode long-term thinking fails youth, who face crippling uncertainty about their future and enough years to live with the consequences. After all, young people exist in the future, when many of you won’t.

Accompanying growing economic hardship is a buffet of wider crises — pandemic, bushfires and floods. Youth have been burdened with a fight for a safe planet at the same time as the basics of life, which have been artificially withheld by private interests and governments asleep at the wheel.

But let’s be thankful for the fact that we can at least see exactly why the cards are stacked against many of us. Now, with this knowledge, we can make new cards, and an entirely new game. Like discovering new planets and putting them on the map, can we act on new information and create a new and better economy?

Starting anew means a complete break from the neoliberal rubble and pursuing a better, more positive path for Australia’s economy that runs exclusion, extraction and dispossession out of town. With an interest in ending the powers of rentier enterprise, fossil-fuel giants, and landlordism and demolishing insecure work, young Australians can lead a movement that transcends the neoliberal fossil-fuel-based ruins. And it can even do much more: by curtailing the power of sectional private interests baked into the fabric of the country since colonisation, youth can help drive change that makes amends for historic wrongs to Aboriginal and Torres Strait Islander people too, including expanding political rights, and resourcing sovereignty through Treaty, reparations and other public programs.

Don’t forget that when Donald Horne coined the term the “lucky country” in his 1964 book it was not in celebration of the nation’s ingenuity, but was instead a clear-sighted stab at Australia’s history of squandering advantages and putting dull-witted people in power. Our neoliberal run has provided ample opportunity to continue this unfortunate tradition. Without a broad people-powered movement committed to a new and hopeful vision for young Australians and future generations, the tentacles of neoliberalism will continue doing their dirty work, strangling the future.