The conceit of Chalmerism

Jim chalmers’s vision for remaking capitalism is the manifestation of our worst fears for the post-pandemic world. BY NIck Cater.

Jim Chalmers has just 11 months left to redesign capitalism, a system of trade and commerce formalised in the 18th century that led to exponential growth in wealth and comfort.

In an essay published in The Monthly this week, the Treasurer declares 2023 to be “the year we build a better capitalism” to help us “keep our heads against an undercurrent of global economic turmoil”.

“The world is entering a stream full of perilous white water,” he warns. Australia must find “a new way across the river – rock-hopping and wading through the peril and polycrisis of 2023 … to build a better future on the other side”.

Behind the overworked fluvial metaphor is a plan to turn the dictionary definition of capitalism on its head. It will no longer be an economy in which trade and industry are controlled by private owners. Rather, it will be choreographed by government ministers on behalf of the state. The government’s role, says Chalmers, is to “design markets, facilitate flows of capital into priority areas, and ultimately make progress on our collective problems and purpose”.

Chalmerism, in other words, is not as new as he supposes. It is the socialisation of the economy in which markets are forced to bend to serve our supposed collective interests rather than the interests of millions of individuals who invest their capital and labour in the expectation of reward.

For Chalmers, the omnishambles in the energy sector is not some dreadful experiment that is going horribly wrong but a model for the entire economy. He describes the clean energy sector as “a perfect example” of how governments can control the flow of investment when it “ensures the flow of first-class information”.

You don’t have to be a student of Friedrich Hayek to realise the government lacks the knowledge to enable it to meet the infinite variety of needs of millions of individuals.

You just have to study the lessons of history to realise the information available to the government is no match for the flow of information from the price mechanism. When that mechanism is destroyed, as the government has done in the energy sector by administering a fatal mix of subsidies and coercion, we’re off on the road to serfdom.

Hayek is branded by the left as the father of neoliberalism. Neoliberalism, like capitalism, is an “ism” the left invented to rubbish a way of ordering political and economic affairs in a manner that self-evidently works. Chalmerism, on the other hand, is the manifestation of our worst fears for the post-pandemic world: fiddle-finger governments puffed up by the conceit that temporary economic intervention to control public health was such a brilliant idea it should be made permanent.

Neoliberalism was the consensus that lent a degree of continuity between the governments of Bob Hawke, Paul Keating and John Howard. The bipartisan accord was broken under Kevin Rudd, who wrote an essay in The Monthly attempting to mount the case that Hayek, and by implication Hawke and Keating, had got it wrong.

Rudd wrote that the time had come for social democrats to save capitalism from itself. Like Chalmers 14 years later, the call for government intervention was predicated on an assumed crisis. Whenever the left declares a crisis it means something must be done. As Thomas Sowell once wrote, the word “crisis” is one of many of the progressive left’s substitutes for evidence or logic.

Naturally, Chalmers blames the former Coalition government in part for the crisis now upon us. He speaks of “the drift and drag, the stagnation and wasted opportunities that defined the Australian economy for much of the 2010s”.

That would be the drift and drag under which median household income increased from $1234 at the 2011 census to $1746 in 2021, an increase of 20 per cent in real terms. It would be the stagnation that increased the number of US dollar millionaires in Australia from 740,000 in 2010 to 2.2 million in 2021, 16 per cent of the adult population. It would be the decade of wasted opportunity during which private wealth not only grew enormously but was distributed more widely. The Gini coefficient, a widely accepted measure of inequality, fell from 72.7 to 62.6 in contrast to the US where it rose four points to 85.

Chalmers insists the nation’s health should be gauged by metrics other than per capita GDP, which rose from $53,862 in 2010 to $62,619 in 2021. He argues that the government must intervene to ensure women’s participation and economic equality. He probably won’t want to hear that the number of women in the workforce increased by 1.17 million between the two censuses. The proportion of women engaged in unpaid childcare fell from 36.4 per cent to 34.5 per cent while the proportion of men remained static at 25.5 per cent. That is surely a measure of achievement in the eyes of the progressive left.

The steady progression towards a better Australia that characterises the post-war years fits uncomfortably in the progressive narrative. It struggles to accommodate the idea that enterprising individuals empowered to control their destiny with the minimum of hindrance leads to a fairer and more prosperous nation for all.

It is bound by the conceit that the public interest is best defined by third parties and financed by the power of taxation, rather than public preferences revealed through the marketplace.

Chalmers appears to sense objections to his radical plans from the crusties in Treasury, the Reserve Bank and the Productivity Commission still clinging to the free-market consensus of yesteryear. He plans to “redefine and reform” all three bodies, which in effect means bringing them to heel. Where Hawke, Keating, Howard and Tony Abbott sought to win the argument, Chalmers in the dismal fashion of his day prefers to ensure the argument is never made.

The risk of government error is multiplied by restricting the choir to singing from one song sheet. The polycrisis we face is not the concocted cataclysm of inflation, supply chain disruption, pandemic management and climate change that looms so large in the Treasurer’s mind. It is a policrisis: a crisis caused by politicians executing the “ideal plan of government”, as Adam Smith called it, imagining they “can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard”.