Sacrificing Democracy for Growth

The Reid Oration, University of Western Australia 29th July 2003

Clive Hamilton

Executive Director, The Australia Institute

At a news conference soon after he became Prime Minister in 1996 John Howard said that the measure of success or failure of his government will be whether or not he can achieve a 4% growth rate. No one asked why.

No issue more preoccupies the modern political process than economic growth. As never before, economic growth is the touchstone of policy success. Countries rate their progress against others by their income per person, which can only rise through faster growth. High growth is a cause of national pride while low growth attracts accusations of incompetence in the case of rich countries and pity in the case of poor countries.

A country that experiences a period of low growth goes through an agony of national soul searching in which pundits of the left and right expostulate about ‘where we went wrong’ and whether there is some tragic fault in the national character.

The answer to almost every problem is ‘more economic growth’. The problem is unemployment; only growth can create the jobs. Schools and hospitals are underfunded; faster growth will improve the budget. We can’t afford to protect the environment; the solution is more growth. Poverty is entrenched; growth will rescue the poor. Income distribution is unequal; more growth will make everyone better off.

For decades we have been promised that growth will unlock possibilities of which previous generations could only dream. Economic growth will deliver a life of ever-increasing leisure, devices to relieve the drudgery of household work, opportunities for personal enrichment, and cures for the diseases of humankind. The lure of growth is endless.

Nowhere is the political and ideological force of growth fetishism more apparent that in the long, tortuous debate over how to tackle global warming. Here we are confronted by the most frightening threat to the future of the world, set out with chilling understatement in the various reports of the UN’s Intergovernmental Panel on Climate Change (IPCC). By the end of the century we could see Earth’s mean temperature rise by 6 degrees centigrade. (At the height of the last Ice Age, when New York was several metres under ice, Earth’s mean temperature was only 5 degrees cooler than it is now.) Sea-level rise of nearly 1 metre by the end of the century (the upper estimate of the IPCC), due mainly to thermal expansion of the oceans, would see Bangladesh lose 14 per cent of its entire land area, causing a flood of environmental refugees. Tens of millions more people, mostly in poor countries, will be exposed to vector-borne diseases such as malaria, schistosomiasis and dengue fever.

As if this were not daunting enough, in 2002 the US National Academies of Science not only endorsed the IPCC’s conclusions but produced a new report entitled Abrupt Climate Change: Inevitable surprises, which argued that global warming may trigger “large, abrupt and unwelcome regional or global climatic events” such as severe droughts and floods. The smooth curves of the climate models may hide the climate system’s propensity to switch suddenly to new states, with barely imaginable results. Even the authors of the National Academies report were concerned that their discussion may curdle the blood of the public:

It is important not to be fatalistic about the threats posed by abrupt climate change. Societies have faced both gradual and abrupt climate changes for millennia and have learned to adapt through various mechanisms, such as moving indoors, developing irrigation for crops, and migrating away from inhospitable regions.

There is only one answer to the terrible problems that are expected if nothing is done: immediately begin reducing combustion of fossil fuels and keep reducing it until fossil fuels are largely phased out. In 1997, after ten years of hard-fought negotiations, the rich countries of the world agreed to the Kyoto Protocol, which would see those countries reduce their emissions by around 5 per cent over ten to fifteen years.

This would have been a significant first step, yet the agreement instantly came under attack from the fossil-fuel lobby in the United States and Australia, and the recalcitrant parties managed to insert so many loopholes in the protocol that, after several international meetings culminating in a conference in Marrakech in 2001, it would, if implemented, result in minimal reductions in the rich countries’ greenhouse gas emissions. Despite this emasculation of the protocol, soon after his election in 2001 President Bush (whose victory was widely believed to have been financed by fossil-fuel giants such as Exxon and Enron) declared that even minimal emission cuts would be too costly and repudiated the protocol completely. Australia, poodle-like, followed the US lead.

There has been one reason for the reluctance of some of the rich countries of the world to reduce their emissions and help to stave off environmental catastrophe – the perceived impact of reducing emissions on the rate of economic growth and especially the growth of a handful of powerful industries. This has been enough to jeopardise the future of the world.

But on inspection the feared large economic costs of moving to a low-carbon economy prove illusory. Complicated economic models have been used to estimate the effects of cutting emissions on growth rates. These models systematically overestimate the negative effects on growth by making a series of assumptions that constrain how businesses can respond to the need to cut emissions. For example, the models underestimate the opportunities for costless energy savings; they underestimate the rate of technological change that would be stimulated by restrictions on the use of fossil fuels; and they wholly ignore the damage to the economy and human life that climate change itself will cause.

Yet, despite the fact that the models systematically overstate the costs of cutting emissions, they consistently produce estimates of reductions in economic growth rates that are, by any standard, minuscule. They typically conclude that cutting emissions as mandated in the Kyoto Protocol would see the GNP of the United States reduced by 1 per cent by 2012. What does this figure mean?

It means that with the required emission reductions GNP in 2012 is expected to be 1 per cent lower than it would otherwise have been. One per cent is a tiny amount. If nothing is done and the economy grows at 3 per cent a year over the period, US GNP will be about 40 per cent higher by 2012. According to the models, if policies to reduce emissions as specified in the Kyoto Protocol were implemented, GNP would be 39 per cent higher by 2012. Put another way, instead of GNP reaching a level 40 per cent higher by, say, 1 June 2012, it will not reach that level until 1 October 2012.

Exactly the same applies in Australia. Last year, the Howard Government commissioned new modelling after the Marrakech climate change conference in late 2001. When the Environment Minister quietly released the results last September − after sitting on them for five months − we learned that they concluded that the economic cost of the Kyoto Protocol will be higher if Australia does not ratify the treaty than if it joins other countries in cutting emissions. It concluded that by 2010 Australia’s GNP will decline by 0.40% if Australia stays out of the Kyoto Protocol (because of actions by other countries), but will decline by only 0.33% if Australia ratifies. At a growth rate of 3.5 per cent, by 1st July 2010 Australia’s GNP would be 36 per higher than in 2002; if ratifying the Kyoto Protocol has the modelled effect then GNP would be only 35.67 per cent higher. In other words, we would need to wait an extra 34 days until our GNP grew by 36 per cent.

The results demolish any remaining rationale for Australia’s continued refusal to sign up to the treaty, as the Howard Government has claimed consistently that it is not in Australia’s economic interests to do so. In his media statement accompanying the release of the modelling, Minister Kemp distanced the Government from the new evidence, claiming the work it commissioned addresses only ‘a limited set of the issues’. For years the Government has backed its anti-Kyoto stance by referring to the results of economic models, but when the models conclude that we would be better off ratifying the Kyoto Protocol, the Government ran a mile from them.

In the face of these minute effects on economic growth, Australia and the United States have refused to play a part in reducing global greenhouse gas emissions. This is the growth fetish taken to an absurd degree. Confronted with a high probability of environmental catastrophe on Earth, the richest people on the planet – people who systematically overeat and who air-condition the outdoor forecourts of gas stations – are unwilling to wait an extra few weeks to increase their incomes by 40 per cent. Understood this way, the growth fetish appears to be a form of madness.


In the 1930s and 1940s Papua New Guinea witnessed a proliferation of religious movements predicting an imminent new age of plenty. The people believed that the new age would be initiated by the arrival of ‘cargo’ sent by supernatural beings, a belief that grew from observing planes and ships that arrived from nowhere and brought cargo to colonial officials. Sometimes members of cargo cults built symbolic landing strips and warehouses, in preparation for the arrival of cargo, and abandoned traditional sources of sustenance as a mundane distraction.

Westerners might mock cargo cults as primitive superstition, but there are strong parallels with the modern growth fetish. Cargo cults and the growth fetish both invest magical powers in the properties of material goods, possession of which is believed to provide for a paradise on earth. This state can be attained through more cargo or more money; each has prophets whose role is to persuade ordinary people to keep the faith, to believe that more cargo or more money will arrive and will take believers to a plane of ecstasy.

While the colonialists who ruled over the cult members were defined by their possession of large amounts of cargo, those who rule over people in the grip of the growth fetish are defined by their ownership of large amounts of money, and in both groups there is a widespread belief that anyone can join the elite by acquiring similar magnitudes of cargo or money.

Westerners seem to differ in that they understand that the cargo does not appear from nowhere but must be produced, although many people believe that fortunes can be conjured from thin air, through pyramid selling, lotteries, stock market speculation, tax evasion, or myriads of get-rich-quick schemes. Like the cargo cultists, many Westerners are willing to abandon more traditional forms of sustenance, such as a nine-to-five job, in order to pursue manna.

The obsession with growth and the preeminence of economics are a recent phenomenon. In the 1960s economics was only one of several weighty aspects of political and social life. But in the 1970s, responding to instability in the world economy and the rise of economic rationalism, this all changed. Since that time, economists, and in particular neoclassical economists, have come to dominate public debate as never before. Economist became the new priesthood, a special caste who had access to arcane knowledge the dispensation of which could provide access to manna. They became the intermediaries between ordinary people and God − the divine power to which mortals must pay homage that is now understood to be the Market. Management of the economy is too complex and important to be ruled by the prejudices of the masses and decisions must be left to the experts who have been trained to understand the intricacies of the system.

“Trust us”, the people were told. Although the citizens were cowed into submission by the transcendent power of the Economy, there remained a deep vein of suspicion about ceding to these new experts so much control over their lives, disquiet that has been growing for years. After all the experts have been promising bliss for a long time, and its failure to materialise has generated a disturbing level of cynicism.

When I worked as an economist in the Commonwealth Government in the late 1980s it was understood implicitly that policy making in Australia was dominated overwhelmingly by a group of highly trained economists with an extremely narrow view of the world based on an unflinching faith in private markets. In Australia, it was the Hawke Labor Government that was captured by this view and I think there was one incident that symbolized how this capture occurred.

When Paul Keating became Treasurer in the first Hawke Government in 1983, his chief economic advisor was John Langmore, an economist with a passionate commitment to the down-trodden who described himself as a Christian socialist. Soon Keating received a phone call from the Secretary of the Treasury, John Stone, who invited him over to Treasury for a quite chat, without his advisers. Keating visited Treasury alone and came back a changed man; he had been convinced that the economic rationalists held the answer to Australia’s future and provided the program for Keating to make his mark on history.

In Canberra, the repository of ideological purity was the Productivity Commission (then called the Industries Assistance Commission) which relentlessly advocated deregulation of the economy and the minimization of the government’s role in everything. Unbelievable as it sounds, there was a section within the Commission whose role was to vet every report to ensure it did not deviate from the correct line, a section that was known even within the Commission as the ‘thought police’. One senior economist drawn from outside the Commission to serve on an inquiry tells of a meeting he and a junior staffer had with the thought police to discuss the draft report. At one point the staffer made an observation about the equity implications of the recommendations. One of the senior members of the thought police pulled an atomizer from under the table and sprayed him. His comment was regarded as too wet.

When Michael Pusey published his book Economic Rationalism in Canberra in 1991 the angry reaction of the economic rationalists and their camp followers in the press was astonishing. Everyone knew that Pusey’s basic thesis − that the policy heights had been captured by hard-line economic rationalists − was undeniable. Yet it was necessary to deny it, mostly because it was embarrassing for a Labor Government to be seen to be the architects and advocates of the most far-reaching pro-business revolution the country has ever seen. Yet by the time Four Corners investigated the phenomenon some years later, a senior Labor Minister (I think it was John Dawkins) was willing to say publicly that when the Government wanted new ideas it went to the Business Council of Australia, and a former senior Treasury official said that Treasury got up more of its agenda under Labor than it ever could have hoped for under the Coalition.


All of this illustrates the radical transformation of politics in the West over the last two decades, one that has seen the ideological convergence of the main political parties so that now, instead of a great struggle over diverging paths for society, there is a silent collaboration on the biggest issues, a convergence papered over by incessant squabbling over the things that matter less. Modern social democrats believe in growth just as strongly as their conservative counterparts, although perhaps some of them would, in a perfect world, like to distribute its fruits slightly more evenly.

Faced with the increasingly untenable nature of socialism and state ownership in the post-war period, and the absence of any coherent alternative to the crushing force of the neoliberal policy establishment, many social democrats felt they could do little more than fight a rearguard action as one after another of the pillars of the post-war social democratic consensus was knocked down. The tragedy was that so many of the most influential social democrats just surrendered. Instead of searching for a creative response to the new dispensation, they embraced Mrs Thatcher – secretly, of course. As the conservative commentator Geoffrey Wheatcroft observed in 1999, “Intelligent British Tories have quietly recognised that Blair’s New Labour is Thatcher’s greatest triumph”, an assessment confirmed in 2002 by Peter Mandelson, often seen as Tony Blair’s svengali, when he declared, “We are all Thatcherites now”.

The creeping capitulation of social democratic parties led to an extraordinary bipartisanship on economic policy – that is, on the questions that mattered most. As opposition to privatisation, free trade, competition policy and deregulation of the financial sector fell away, an elaborate dance of deception began.

The gap between the conservative and social democratic parties became one of product differentiation rather than ideology and, just as product differentiation and brand loyalty are marketing concepts, so political parties began to hire marketing specialists to help them sell their messages. In the same way that clever marketing is required to persuade sceptical consumers that one brand of soap powder is radically different from other, virtually identical brands, so political parties now hire experts to persuade sceptical voters that one party is radically different from its opponent.

Increasingly, modern social democratic politics is the politics of politicians who are not sure what they stand for but who employ advertising agencies to convince us that they stand for something. Today both conservative and social democratic parties complain that the other party has stolen its policies. So little that is fundamental separates them that almost any policy could be found in the platform of either party. The adoption of a particular policy is determined not by consistency with some broad ideology but by whoever thought of it first.

This process is now starting to turn in on itself. In New South Wales, for instance, when the Liberal party replaced Kerry Chikarovski, a right-wing leader who had lost two elections with John Brogden, a moderate, one party official observed that they had not been able to outflank the Labor Government from the right, so it was time to try to do so from the left.

Politics has made a transition from ideas to personalities. The spin doctor has replaced the policy analyst; the party platform can be found buried beneath the media strategy; image management now substitutes for bold reform; and choosing words is more important than choosing actions.

The disappearance of substantive difference between the conservative and social democratic parties has meant that both parties are more likely to attract careerists and opportunists instead of people committed to principles. We now see rising to prominence younger politicians who in their twenties were courted by both sides. They could have comfortably jumped either way but made a decision on the basis of which party would better facilitate personal advancement.

When Kerryn Phelps retired as president of the AMA two months ago she was asked if she would enter politics. She said she would. She was then asked which party she would join. She said she had not yet made up her mind. There are no fundamental differences of principle that make it obvious which party she should join.

The Labor Party has just experienced a battle for the leadership. But did Simon Crean and Kim Beazley represent two competing directions of the party? Two philosophies? Not a bit of it; there was nothing of substance that separate them. There were not even any differences in policies. Mr Beazley is best known for the so-called small target strategy – say nothing and that way no-one can criticise your policies – while Mr Crean declared during the leadership battle that he has not put many policies out in the public domain because it is better to save them for election time. There was no sense that if Beazley won he would take the party in a new direction.

As the day of the caucus vote approached the ABC’s AM program interviewed a Crean supporter who said that Crean could win over the caucus if ‘Simon’s personality came out a bit more in interviews’.

….he’s got a bit of a wicked humour, he’s actually got a very good sense of humour, he’s relaxed, he’s interested in people. I’ve seen him on some sports shows, for instance, where he’s been terrific.

Those of us who naively expected that Mr Crean would set out a vision of how his Australia would be different from John Howard’s were instead told to have faith in his wicked sense of humour. If this was a battle for the soul of social democracy in Australia then it’s time it was declared officially dead.


In politics today it is de rigueur to claim that everyone will be a winner. Social democrats-many of whom who like to differentiate themselves from Tories by embracing a thing called the Third Way – have proved masters of conflict avoidance. Yet far-reaching social changes involve often-titanic political struggles in which progress requires the defeat of entrenched forces. It is naive to expect otherwise. Although power structures are complex and multifaceted, the locus of power in modern society lies in the business community.

Unless we are to resort to the fatuous escape route of ‘expanding the pie so that everyone can have more’, we must confront the realities of economic and political power. Indeed, we have had enough years of witnessing Third Way politicians warming the seats of power to know that serious attempts at social reform have run into trenchant opposition and that the representatives of the Third Way have repeatedly sacrificed the boldness of social change for the moderation of practical politics.

Of course, the unwillingness of modern social democracy to consider power is a predisposition it shares with the defenders of neoliberalism. Nor has the Third Way challenged the model of human wellbeing on which the economics texts are based. It has not questioned the utilitarian philosophy of modern economics and the marketing society; it implicitly accepts the philosophy built around homo economicus, rational economic man, and all the anthropocentrism, individualism, materialism, and celebration of competition implied by it.

Democracy itself is subtly undermined by the refusal to consider the nature of power and the glib assumption that ultimate power lies in unfettered consumption behaviour. Democracy asserts itself when great issues that demand collective decisions grip a nation. In practice, governments represent the people best when they are protecting the people’s rights against threats from the powerful and providing for things that are best provided collectively – defence, roads, schooling, health care and environmental protection.

The act of collective provision is something that citizens do for one another. In contrast with the comatose sovereign consumer of neoliberalism, democracy needs something to do. By ceding so much decision making to the private choices of consumers in markets, electors have been transformed into political automatons. The capitulation of social democratic parties to the neoliberal idea has been central to this, so that the Third Way serves as a sort of civic tranquilliser, the post-modern opium of the people.

Modern social democracy argues that the pursuit of ideology is old-fashioned, that society today is not marked by class division but by a ‘messy plurality’, and that politics is no longer the art of struggles for class dominance and social transformation. The politics of struggle has been superseded, writes Anthony Giddens, by the politics of lifestyle, and the real concerns of ‘life politics’ involve questions of autonomy and self-expression.

There is some truth in this perception of modern attitudes and politics insofar as the dynamic of modern capitalism has shifted from the production to the consumption sphere. The problem is the uncritical acceptance of ‘life politics’ by advocates of the Third Way. There is no analysis of why people have retreated to lifestyle and no discussion of whether the messy plurality is a surface manifestation of deeper, systemic social changes.

The Third Way seems to be saying that if people want lifestyle that is what we must give them, without asking what forces lie behind the pursuit of identity and self-worth through lifestyle choices and brand association and how these perceptions are created and manipulated in the marketing society. Thus the ‘life politics’ of the Third Way is precisely the politics that suits the consumer society: it focuses on manufactured identity and the flim-flam of marketing, rather than the deeper urges of humanity. It is the politics of the masses caught in a web spun by corporations and their publicists. Nowhere in the writings on the Third Way can one find an analysis of how social structures condition thinking; nor can one find discussion of class consciousness or false consciousness or any inkling of why people believe what they do. The political superficiality of the Third Way is the ideal counterpart of the emptiness of modern consumer capitalism.


Economic growth has annexed the very idea of progress. While once powered by belief in technological advance, evolutionary biology or the ethical perfectibility of humankind, from the 1950s material expansion became the driving force of progress and the measure of success became growth of GDP. Now we consult the quarterly national accounts to divine how well we are doing as a nation. Having promised so much freedom and personal; choice neoliberalism is now confronted with a potentially fatal challenge. Will citizens be happy exercising their freedoms simply through occasional trips to the polling station and frequent visits to the shopping mall, or will the democratic impulse take them into uncharted territory where perhaps the values that underpin neoliberalism will themselves come under challenge?

It is hard to avoid the conclusion that the forces unleashed by affluence and democracy are getting out of hand, at least from the viewpoint of consumer capitalism. German sociologist Ulrich Beck is one of the most acute observers of the historical process:
“changing values and acceptance of democracy go hand in hand. An inner kinship exists between the values of self-determination and the ideal of democracy”.

Taking democracy seriously means accepting the right to personal self-determination. Yet the dominant conservative view is comfortable with only one form of self-determination – personal choice in the marketplace – which is a counterfeit form of self-determination. Beck has launched an attack on ‘conservative wailers’ of the moralising right for their attempts to constrain the historical evolution of democracy, attempts that are all the more surprising for conservatives who promote the free market as the last stage of freedom. Thus conservatives like John Howard one day bewail the decline in moral values and the next day promote the very economic policies that lie at the heart of the decline.

The tragedy of market economics is that if it did in fact accurately reflect the essential motivation of human life – an anthropic version of Nature red in tooth and claw – we would soon find ourselves living a nightmare. The makers of post-apocalyptic films such as Mad Max and Waterworld recognised that it is only selflessness, love for others, that stands between us and the hell of rational economic man.

Arising from these historic changes, the political culture of Western democracies has been transformed. Growth fetishism has mounted a three-pronged assault on democracy. First, it has said to the people: You must leave the important decisions to the experts, to the economists who understand how to maximize growth and thus give you what you want. Second, it has given us a world of ever-expanding choice, but only for those who value the freedom of the supermarket. It has disenfranchised those who want freedom to act collectively to restrict the market and keep its values out of areas of social and personal life where they do not belong. Finally, growth fetishism has been the magnet that has drawn the political parties together, converging on a faith in the ability of the market to deliver more wealth and thus more happiness. The convergence of the parties has deprived the citizenry of political choice.

The blame for this must be laid principally at the feet of the social democratic and labour parties. People no longer know what the parties of the Left stand for. The policies of these parties no longer resonate. Party loyalty has been eroded because the vision for a better future that once inspired the parties of the Left has dissolved. The more the parties converge in substance, the more they must attempt to differentiate themselves through spin. The politics of spin are the politics of falsity, and there is a popular belief that the democratic process has become an elaborate charade. The major parties, now dominated by careerists, lash out at their opponents with declarations of outrage while tacitly agreeing not to break the neoliberal consensus.

Growth fetishism and neoliberalism have undermined democracy. In its place we have seen the spread of a sort of market totalitarianism. Whenever we hear a politician, an economist or a World Bank official say that globalisation and the spread of the market are inevitable and there is nothing we can do to stop them we hear the spirit of democracy sigh.

But this is beginning to change. Western society’s preoccupation with economic growth is now running up against the manifest failure of higher incomes to improve wellbeing; this is the great contradiction of modern capitalism. Growing numbers of people are making life transforming decisions to escape from the money illusion; they are staging a withdrawal from the market in order to establish some balance in their lives. They are taking back control of their time from the work-and-spend cycle, time for their families, for their friendships, for their communities and for their own personal development. These people are the forerunners of a post-growth society, and I fully anticipate that they will soon want to take back democracy too.

Clive Hamilton is the Executive Director of The Australia Institute and the author of Growth Fetish (Allen & Unwin 2003).


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