Will Morrison government learn from its Covid success or return to trickle-down economics? | Peter Lewis | Opinion

Reality constantly reminds us that the biggest risk the pandemic poses is to those who think it is less than it seems. From the White House to the safe house, this is a virus that locks on to system weakness and exploits individual arrogance.

The US presidential race is paralysed because one of the candidates believed he had the power to wish it away and let freedom reign, while countries like Sweden that chose to let it run are paying a higher economic cost than those whose governments swung into action.

Closer to home, Victorians have been living the repercussions of the previously unchallenged orthodoxies that you can outsource public safety and transform the care for our oldest and most vulnerable from a public service into a market.

It’s as if the virus is engaging in a real-time critique of the free market ideology that decrees big government is bad, taxes are a burden, caring for others is counterproductive and the market will always determine the best course of action.

As Kurt Anderson has outlined in his excellent new book Evil Geniuses, these assumptions lie at the heart of a political model ruthlessly promoted for the past 50 years by an organised cabal of wealthy industrialists, libertarians and the “useful idiots” they seconded to their cause.

Now, as the world thinks through a recovery to the pandemic’s shock, the Friedman model of trickle-down economics, deregulation and rabid individualism is finally coming under scrutiny.

This context takes centre stage as the Morrison government releases its delayed budget later on Tuesday. Like so much of what this government does, the plan has been broken into so many pre-packaged announce-ables that it’s hard to see a bigger picture. But there is one.

While there is no hiding the fact that the prematurely celebrated budget surplus is history, the levers the government is pulling seem geared to getting the economy back to where it was before the crisis hit. It’s business as usual with a deferred payment plan.

We caught this thinking in the government’s initial response to the forced lockdown: incentives for small businesses to invest in expansion when all they were thinking about was survival; incentives for home renovations when a new pagoda is the last thing on anyone’s mind.

These were textbook Freidman-inspired attempts to bookkeep our way through a downturn, giving business and individuals financial incentives to do things that were against their disposition. Unsurprisingly, they were undersubscribed and fell flat.

It wasn’t until the crisis prompted the government to put money directly into the pockets of those most vulnerable that the strategy began to work. Doubling unemployment support and providing struggling businesses with a Keynesian lifeline may have been anathema, but it got money circulating in a shocked economy.

The big question for today’s budget is: can the government can learn from these successes? Early indications suggest not.

The choices the government is making speak to a desire to go back to the way things were. Tax cuts for those in work over maintaining support for the most vulnerable. Co-payments to businesses to employ trainees rather than actually creating jobs in the caring industries or the public service. Further distorting the housing market with homebuyer grants rather than directly supporting much-needed social housing for low-income earners.

It’s part of a broader mindset that sees virtue in reversing promised wage increases to key public sector workers in the name of fiscal rectitude or pushing for further deregulation in workplace rights.

While the pandemic has disrupted the game, the strategy seems to be to get the old engine running again.

Indeed, the only real Australian policy challenge to the Friedman playbook over the past three decades – the creation of a worker-controlled, not-for-profit national pension scheme – is the one part of the economy that has been systematically and consciously drawn down and weakened during the pandemic.

But speak to the public and they don’t want a return to the old game, because it never really worked for them. Instead, and in overwhelming numbers, they would like to see the government take a different direction.

Which of the following options is closest to your view on the best way for Australia to recover economically following the Covid-19 pandemic?

As results in this week’s Essential Report shows, support for new approaches is broad and deep, crossing the normal partisan lines.

This is the faultline that could open up this week as the government and then the opposition unveil their economic plans for the next stage of the crisis. Back to where we were? Or building back better?

This is a simple economic choice. Is it enough to give the well-off a tax break in the hope they will spend a few dollars more? Or would a virtuous cycle of investment in social need – from social housing to early learning, from disability support to fixing aged care – give us the best chance of rebuilding.

And which of the following is closest to your view on the best way to create jobs and grow the economy?

Given the choice, the public wants public money directly invested in jobs rather than playing the tired old games of hit and hope.

This is more than just a debating point; it goes to the operating model that will define the response to a K-shaped recession, where the losers fall down further and winners keep on thriving.

Surely the challenge will become how to bridge the two axes, with policies designed to connect them and bring them closer together; not to penalise the winners, but to create a more inclusive economy and build the better post-Covid society that Australians crave.

Peter Lewis will discuss the findings of this week’s Essential Report with Guardian Australia’s political editor Kathrine Murphy at 1pm. Click here to join them

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