The Libertarian Alternative

By Chris Berg

Libertarianism—the philosophy of government that pairs free market economics with social liberalism—presents a vigorous and viable political alternative to the old Left–Right partisan shouting match.

Libertarianism offers surprising new solutions to stagnant policy debates over issues such as immigration and civil rights, and provides a framework for tackling contemporary problems like privacy, the environment and technological change.

In The Libertarian Alternative, Chris Berg offers a new agenda for restoring individual liberty in Australia, revitalising politics and strengthening our sagging economy.

• Language: English
• Publisher: Melbourne University Publishing Ltd
• Release date: May 2, 2016
• ISBN: 9780522868463

Chris Berg

Chris Berg is a Senior Fellow at the Institute of Public Affairs. He is a regular columnist with ABC’s The Drum, and an award-winning former editor of the IPA Review. His most recent book (with John Roskam) is “Magna Carta: The Tax Revolt that Gave Us Liberty”, published by the Institute of Public Affairs in 2015. He is also the author of “Liberty, Equality & Democracy” (Connor Court Publishing, 2015), “In Defence of Freedom of Speech: from Ancient Greece to Andrew Bolt” (2012), and “The Growth of Australia’s Regulatory State” (2008). Berg is also the editor (with John Roskam) of “100 Great Books of Liberty” (Connor Court Publishing, 2010), and “The National Curriculum: A Critique” (2011).

Book preview

THE

LIBERTARIAN

ALTERNATIVE

THE LIBERTARIAN ALTERNATIVE

CHRIS BERG

MELBOURNE UNIVERSITY PRESS

An imprint of Melbourne University Publishing Limited

11–15 Argyle Place South, Carlton, Victoria 3053, Australia

[e-mail]

www.mup.com.au

First published 2016

Text © Chris Berg, 2016

Design and typography © Melbourne University Publishing Limited, 2016

This book is copyright. Apart from any use permitted under the Copyright Act 1968 and subsequent amendments, no part may be reproduced, stored in a retrieval system or transmitted by any means or process whatsoever without the prior written permission of the publishers.

Every attempt has been made to locate the copyright holders for material quoted in this book. Any person or organisation that may have been overlooked or misattributed may contact the publisher.

Cover design by Design by Committee

Typeset by Cannon Typesetting

Printed in Australia by McPherson’s Printing Group

National Library of Australia Cataloguing-in-Publication entry

Berg, Chris, author.

The libertarian alternative/Chris Berg.

9780522868456 (paperback)

9780522868463 (ebook)

Includes index.

Libertarianism—Australia.

Public administration—Australia.

Political parties—Platforms.

Australia—Politics and government—21st century.

320.5120994

Contents

Introduction

Part I: THE LIBERTARIAN ETHIC

1  How Free Markets Free People

2  The Libertarian Alternative

3  How We Went Left and Right

4  Market Success, Government Failure

Part II: LIBERTARIANISM APPLIED

5  The Spirit of Free Trade

6  Unlocking the Borders

7  How Incentives Can Save the Environment

8  The Intimacy of Free Speech

9  Peace and a Tolerable Administration of Justice

Part III: CHOICE, LIBERTY AND ECONOMIC REFORM

10  Personal Choice

11  How the Human Rights Project Lost Its Way

12  Economic Reform 2.0

13  A Different Way

Acknowledgements

Bibliography

Notes

Index

Introduction

IT HAS BEEN more than thirty years since the Hawke government began to deregulate and liberalise the Australian economy. We’re still not over it.

In December 1983, Bob Hawke and his treasurer, Paul Keating, floated the Australian dollar. Their decision was both inspired and visionary. It was also forced upon them. Speculators were flooding Australia with capital, betting that the dollar would appreciate against other world currencies. This was unsustainable.

The float was an epoch-defining decision. Australian governments started to place their faith in markets. In 1985, the government opened the banking sector—one of the most tightly monopolised and anti-competitive industries in the Australian economy—to foreign competition. Throughout the next decade, publicly owned businesses were privatised. Tariffs and other trade barriers were lowered. The labour market was substantially deregulated. The airline market was opened to competition. Ports were sold and restrictions on shipping liberalised. The final break with the past came with changes to the tax system—the introduction of the Goods and Services Tax (GST) in 2000 replaced a sales tax regime that had been instituted by James Scullin’s Labor government in 1930.

Australians tend to cringe at the myth-making of countries like the United States, which has suffused its own past with a complex political folklore, only tenuously connected to the historical record. But where Americans have George Washington and his apple tree, Australians have the larrikin Bob Hawke and the lanky Paul Keating ripping out the foundations of old Australia and propelling its economy towards the twenty-first century. The reforms of the 1980s and 1990s have become the stuff of legend.

The historian and journalist Paul Kelly set the tone with his 1992 book The End of Certainty. His account is seen as definitive not just because of the detail in his history of the politics of the 1980s but also for the overarching story he imposed on that period. Kelly argued that the Hawke–Keating reform agenda represented a definitive break with what he called the Australian Settlement. This settlement, which dated back to the first decades of the twentieth century, had five pillars: the White Australia policy, protectionism, the industrial relations arbitration system, state paternalism, and ‘imperial benevolence’ or faith in the rightness of the British Empire. The Australian Settlement had been sustained with remarkable bipartisan clarity throughout most of the twentieth century; its edifice was only chipped away after the retirement of Robert Menzies.

The irony was that Kelly’s book was released at the tail end of the reform movement he helped define. He created a test by which future governments and reform movements are now judged. When business leaders and political commentators speak today of ‘the need for reform’, they are consciously or unconsciously calling on The End of Certainty folklore. ‘Reform’, of whatever stripe, has become the gold standard of government. For the political class, a successful government is that which reforms; an unsuccessful government squibs on reform. But while one of the most common tropes in the Australian press is the business-leaders-urge-reform genre, in which CEOs and corporate lobbyists complain that politicians are avoiding tough decisions about economic change, rarely do they offer any specific proposals. The reform mantra has allowed each side of politics to dress up regulatory or legislative change as a great reform no matter what its purpose. For the Australian Labor Party, the Minerals Resource Rent Tax (MRRT) and the emissions trading scheme introduced by Julia Gillard’s government were considered great reforms. For the Coalition, abolishing those two schemes constituted great reform. Each harks back to the Hawke–Keating era not just as precedents for economic change but as some sort of justification for that change. Reform has become the sine qua non of government.

What made the reforms of the 1980s significant was not their constituent parts but that they added up to an agenda. Governments of the time deliberately shifted the Australian economy from one system of political economy to another. They began to instinctively favour market solutions to policy problems where their predecessors had looked to the state. It was a revolution in philosophy as much as it was a legislative program. Once the full significance of this revolution sank in, there was a host of books published by intellectuals of the old Left who believed that Hawke and Keating had hijacked the grand old Labor Party and its socialist-tinged traditions.¹ The sociologist Michael Pusey influentially argued that the Commonwealth bureaucracy had been captured by economic rationalists, a sort of reverse-Fabian takeover of the institutions of government.² These economic rationalists had a new idea of what Australia ought to look like and what values public policy should reflect.

So the budding reformists have a problem. Since John Hewson’s economic policy package Fightback! died at the hands of voters in 1993, there has been no driving vision of what Australia might look like, no vision of what values ought to underpin political change. There is scarcely any serious contest of ideas. We can attribute that to a generation of politicians too weak to build and defend a vision. It’s a neurosis that infects the entire political class.

The Libertarian Alternative, in all modesty, is my attempt to offer a new agenda. Libertarianism is a political philosophy that favours liberty in all its facets. The libertarian agenda is deceptively simple but powerful and ambitious. It wants people to be free to trade across national borders and to move their families across them too. It provides a philosophical structure for open markets, unencumbered by excessive regulation and red tape, exposed to and strengthened by engagement with a global marketplace. It views overregulation not simply as a cost to business but as a brake on human progress and innovation. It takes seriously the choices people make about how they spend their money and sell their labour, without assuming that policymakers and the government know better what values those people are weighing up when they make risky decisions. It views entrepreneurs as the central driver of economic growth, and the key to future living standards. And it says that decisions are better when they are made by the people they affect. Libertarianism offers a new and important perspective on the biggest issues facing Australian society, from human rights to the environment and inequality, from trade to sexuality and gender. It provides a new way through our moribund political debates.

The first part of The Libertarian Alternative explains the libertarian ethic—the underpinnings of the philosophy of individual freedom and its relationship to the social good we all desire: human flourishing. I give a potted history of this philosophy and its deep, largely forgotten roots in Australian history. To be a libertarian in Australia today is to be part of a distinct tradition that can be traced back to the nineteenth century.

The libertarianism I argue for is a fundamentally practical one. It takes people as they are. It treats human society as an impossibly complex, endlessly diverse and infinitely exciting web of relationships and ideas. It asks what economic and political system suits a world in which people have different preferences and want to lead different lives, form different communities and enjoy different lifestyles, but all have equal rights. Government can only limit our liberties, not enhance them. Markets and civil society, by contrast, facilitate such difference, encourage toleration and cooperation, and take advantage of the natural pluralism of a free people.

In the second part of the book, I apply these principles to the policy issues that matter most today. Libertarianism exposes old problems to a new light, helping us understand how to tackle them and what’s at stake in doing so. I start with the big two: trade and immigration. Nothing reveals the distinctiveness of libertarian thought more than its insistence that trade and immigration are two sides of the same coin: the case for opening borders to goods and capital is the same as that for opening borders to people. I examine the inequality debate and argue that before governments try to ‘fix’ economic inequality, they should first realise they’re already making the problems of poverty and inequality worse. I discuss how environmental problems are fundamentally property rights problems, and how to handle the biggest of them all: climate change. I consider freedom of speech and privacy, two of the thorniest issues of modern public policy. Some conservatives argue that libertarianism can’t handle questions of national security and foreign policy—I make the case for a security policy that respects individual freedoms, and a non-interventionist foreign policy.

In the third part of The Libertarian Alternative, I return to the domestic sphere to tackle freedom of choice, consumerism, and what the human rights debate tells us about the state of libertarian ideas today. The economist Adam Smith wrote that all that was necessary to allow a nation to thrive was ‘peace, easy taxes, and a tolerable administration of justice’.³ What made sense in 1755 is even more compelling now, as technological change and innovation eliminates many of what our predecessors saw as the necessary limits on the market economy. We’re on the edge of a revolution in the way we work, the way the economy functions, and the way we relate to each other. Exploiting these possibilities to the fullest will mean rethinking what government is for—and recognising its limits. That theme ties this book together.

Libertarianism is a philosophy of optimism. It is a philosophy that understands what institutions can and cannot do. It embraces change. It embraces difference and diversity and pluralism. It wants government out of your wallet and out of your bedroom. Libertarianism, alone, wants individual freedom in all its dimensions.

Part I

THE LIBERTARIAN ETHIC

1

HOW FREE MARKETS FREE PEOPLE

THERE’S A STRANGE hole in the standard story of the reform era. This story is all about tariff reduction, privatisations and economic deregulation. But what about social policy? The last two decades of legislative change have seen revolutions in policies that affect Australians’ relationships and wellbeing. The years in which governments opened up the economy were also years in which governments decriminalised homosexuality and reduced controls over liquor licences.

In part, the reason for the absence of social policy in the standard reform story is because that story is a myopically Commonwealth one, told from the perspective of Canberra rather than the state governments which carry the bulk of responsibility for social issues. But there is also a sense that economic policy is serious whereas social policy is somewhat less so. Serious thinkers talk about tax rates and opening markets up to competition. The unserious—whether their hearts are bleeding or cold—obsess about gay marriage, free speech and immigration policy. These are the ‘soft’ areas of public policy, those which excite the hoi polloi but offer no grand vision of the future.

On matters of economic policy, commentators and policymakers have convinced themselves that their decisions are value-neutral—that how the economy is structured is a technical question which can be answered by experts. The job of government is to take that expertise, which is usually concentrated in Treasury, and make it politically palatable enough to slide its way through parliament. By contrast, social policy concerns nothing but value judgements. Treasury modelling can add nothing to the question of whether Australians should be allowed to marry a person of their own sex. The serious thinkers who hold a disproportionate sway over the high ground of Australian policy debate stay away from such issues because it would undermine their pretence of ideological neutrality.

But that neutrality is nonsense, a self-deluding mask. Economic policy is no less a question of values and philosophical disposition than any other public question. The revolution of the 1980s was not in economic evidence. Hawke and Keating saw philosophical value in transforming Australia into an open market economy. After all, their critique of the conservatism of past governments was not that Robert Menzies had been ignoring the best empirical findings on how to structure economic policy, but that the Menzies era was insular and premised on dependency. As one official in the Barack Obama administration put it, policymakers tend to use economic research ‘the way a drunk uses a lamppost; for support, not for illumination’.¹ The great mass of scholarship, is, for the political class, a rhetorical crutch at best. Politicians and the governments they steer are driven by their values, not by evidence.

That lack of interest in evidence isn’t something to be distressed about. It’s just the nature of politics, which is a contest of world views, not a tool for sorting through various claims about truth. Ideology is not something to be suppressed in politics but is fundamental to the entire system. It is the lens through which we look at the world—we understand how the world is in ideological terms and we imagine how the world could be in ideological terms. Even the most technocratic expert imposes their values on their perception of the world. What we believe are the major problems facing society are filtered through our value systems.

One should not apologise for having a philosophy of government. One ought to apologise for pretending no such philosophy exists.

The flip side of the reform mantra is that it has shaped expectations within the political class about what governments should do when they achieve power. Governments want to be seen to be doing things. The word ‘government’, with its root in ‘governing’, implies management and stability, but governments today are active, constantly changing things and altering the established order. There was no more telling example of this than the way Julia Gillard’s government defended its management of federal parliament by constantly reminding the press of how many pieces of legislation it had successfully shepherded into law. In 2012, its last full year in power, the Gillard government passed 206 separate pieces of legislation. Not all of this was new law, of course—some of it was amended law, some of it repealed old law. But in total it added up to 8150 pages of legislation—8150 pages of change which the Australian community had to factor into its daily business. It included some major policies central to the vision of that government—such as the MRRT and the emissions trading scheme—but also a host of minor legislative changes, everything from the laws governing cybercrime, investment managers, marine safety, industrial chemicals, shipping registration and income tax, to those regulating electronic health records, corporate governance, parliamentary scrutiny, digital television, illegal logging, the management of public broadcasting, and ‘anti-dumping’ restrictions.

That number of pages is high by historical standards (the second-highest since 1999, the year the GST was introduced) but still within the normal range. Parliament typically passes more than 6000 new pages of legislation a year. That’s an incredible amount. The first Australian parliament in 1901–02 only passed 358 pages’ worth, and until 1965 no parliament passed more than 1000 pages. The enormous jump in legislative activity began in the early 1970s with Gough Whitlam’s government and has increased almost exponentially since.

It’s hard to see how this legislative output is justified. Australians have to obey more than 100 000 pages of Commonwealth legislation. Then there are all the laws at the state level. Then local by-laws. Then the reams and reams of pages of regulation that exist to elaborate that legislation. In other words, modern governments impose enormous restrictions on the society they govern. As High Court chief justice Robert French said, Australians live under a ‘mountain range of statutory words’ that restrict what we can do and build vast bureaucratic empires with sprawling powers.² The Income Tax Assessment Act, for example, is published in seven volumes. All up there are more than 16 000 pages of federal tax law. Federal Court chief justice Patrick Keane said that ‘opening the tax act is like entering the door to a parallel universe’.³

In the United States there is such a large amount of criminal law that it has been estimated by serious scholars that 70 per cent of the population has committed a crime which is punishable by jail time. One such crime is disturbing mud in a cave on federal land.⁴ Australia has not travelled as far down the American path but there are many complaints of overcriminalisation. Social advocacy groups point out that the criminalisation of petty offences disproportionately harms disadvantaged groups. (After all, it is not bankers and real estate agents who get fined under anti-swearing laws, but Indigenous and homeless people.)

Australian governments have proposed filtering the internet to protect citizens against ‘extreme’ content. Mandatory data retention will store our internet records for up to two years—including information that will allow authorities to track virtually everywhere we have been—just in case we are suspected of a crime or sued in the future. Governments have asked us to dob in our fellow citizens for everything from violating water restrictions to mislabelling seafood. A preventative health taskforce in 2009 recommended that the government do everything from subsidising gym memberships to regulating portion sizes in restaurants. A Senate committee wanted all new televisions to be installed with a parental lock to prevent children from seeing violence and hearing obscenities. Governments have tried to ban traditional men’s clubs. There are twelve suburbs in Canberra where domestic cats are only allowed if they are locked up at all times. Heritage listings and native vegetation laws undercut the right of property owners to earn a living through their property. Indeed, heritage laws have gotten so out of hand that some councils are listing entire suburbs of wartime Housing Commission properties. Councils provide colour charts of approved paint schemes for homes, and installing an air conditioner can require approval from the local bureaucracy.

Bar and pub lockout laws shut down nightspots in an attempt to prevent so-called ‘alcohol-induced’ violence. Melbourne’s lord mayor even tried to make hailing cabs on the street illegal on Friday and Saturday night, though it’s not clear how that would have helped reduce the harm of alcohol consumption. The Australian Health Department has recommended that workplaces run education programs about alcohol, impose health checks on employees, and make alcohol-prevention strategies part of the industrial relations award system. Many local councils are trying to use their powers over planning policy to impose control over lifestyle choices. For instance, New South Wales councils have been refusing planning permits to businesses that use trans fats in cooking. Other councils have been raising rates for businesses they don’t approve of—for instance, pokies venues—in an attempt to get them to leave.

Our sense of community is being eroded by the fact that so many barriers are put in the way of social organisation. Look at the byzantine regulations that Australians have to navigate to hold a simple, traditional street party. It is intimidatingly complex. Organisers have a legal requirement to provide information sheets to volunteer food handlers. Setting up a simple children’s lemonade stand is a matter of bureaucratic dudgeon. One of the reasons that it is so easy to get information about the regulatory barriers to