Trickledown economics was wonderfully parodied in Thursday’s Fairfax cartoon which depicted a rotund cigar smoking executive relieving himself out of the window of his multi story executive suite.
Those who promote the ‘free market’ as a universal and necessary force for good, look back to Adam Smith and his Wealth of the Nations, in which he argues that “self interest and competition can lead to economic prosperity”, as their ideological and philosophical corner stone. Smith argued that it is the self interest of the farmer and the butcher for their personal economic growth that provides the consumer with their dinner, not a desire to relieve their hunger. There is of course considerable truth in this statement.
Smith argued that ‘charitable activity’ could not serve the common good, common good was better served by self interest out of which economic growth would expand and all would benefit. Whether Adam Smith’s theory was right for his time is one matter, whether it is right for ours is quite another.
Nearly 230 years since his death, the world is a very different place. Smith’s theory relates to products and not so easily to services, it cannot operate in a situation of monopoly, or indeed of oligopoly such as we have with the four major banks. Nor does his theory work in a situation in which human well being is measured as much through access to education, health and communication as it is through creature comforts. These essential ingredients in human life, not to mention a wider need for security and environmental sustainability, must be shared in common and must be provided through some common legislated agreement - taxation.
There is sufficient truth in what Smith argued for us to agree that protecting and enhancing personal ambition, effort and reward is necessary. If this is called ‘capitalism’, then capitalism is a worthy tool.
However unregulated capitalism, championed by those on the political right for whom the individual is everything and society is nothing, can (and has) become a monster which treats wealth as sacrosanct and people its sacrificial servants. Smith would see this as a perversion of the outcome he intended.
Many of the wealthiest in today’s world do not in fact produce anything. The market has morphed from a ‘produce market’ to a ‘finance market’ where vast sums are made out of wealth, not production. Moving money around with certain margins, gambling on the ups and downs of equities and bricks and mortar, indeed of currency exchanges and interest rates, is not what Smith had in mind when his arguments gave rise to his title ‘the father of the Free Market”.
And so we come to ‘penalty rates’. The unregulated market has produced gross inequity, a situation which threatens to collapse the national economy. It cannot be right, fair or in any ones interest for literally a handful of people to have wealth equal to the poorest 50% of the nation. It cannot be in the interest of the nation for the chief postman to have an annual salary and perks in the multiple millions and it is certainly not in the nation’s interest for those who own property to purchase much more of it and for those who own nothing to be destined never to live in their own house.
The issue with penalty rates is not the rates themselves, but what they symbolise. The poorest paid are faced with a further reduction, while the economically advantaged continue to have their ‘entitlements’ protected: thus contributing more to the inequity that threatens to undo us all.
While Labor is playing a very dangerous game ignoring the findings of the independently established ‘Fair Work Commission’, the government is continuing to legislate for the protection of self interested wealth at the expense of the ‘common good’ upon which the very fabric of sustainable national life depends.
Now back to Adam Smith, was his argument soundly based or was there a fundamental flaw? Considerable debate swirls around Smith’s religious belief and commitment. While Paul Oslington wrote Adam Smith as Theologian and speaks positively of faith inherited from his protestant mother, I am less convinced of his grasp of the Christian gospel. The Christian gospel makes clear that blessing, contentment, even happiness is not delivered through the pursuit of self interest, but through being a conduit of blessing to others. We are hard wired to belong and our belonging is deepened through the blessing we are to our family, to others and indeed to the whole created order. The contemporary economic order is in urgent need of reform so that self interest does not prevail; indeed that it gives way to common good. The counter intuitive reality for all human beings is that our wealth and security does not reside in what we have privately siloed, but in what is communally and equitably enjoyed.