Equality – 1972


Book Review

Towards a new Australia, Cheshire, Melbourne, 1972, John McLean (ed)
Reviewed in Arena, 30, 1972, pp. 8-12

Humphrey McQueen

In the decade following the defeat of the Labor governments in post-war Britain and Australia there developed the notion that political ideology was exhausted. In the context of the ALP, this assumption meant that nationalisation was no longer accepted as an intrinsic component of the party’s “democratic socialism”. To the extent that anything was salvaged from the wreckage of the experience of Labor in office, it was a commitment to “equality” – R. H. Tawney’s Equality found a new audience as right-wing Laborite Tony Crosland assured his readers that “socialism is about equality”. If nothing else had turned out right, at least the welfare state had redistributed incomes, as could be demonstrated from the continuous lamentations that taxation was crippling initiative.

Then, in 1962, came Richard Titmuss’s Income distribution and social change which demonstrated that all that the welfare state had done was to hold the distribution of income at pre-war ratios. To put the point in reverse, he had proved that the natural tendency of capitalism is for the rich to get richer and the poor to get poorer.

Titmuss was taken up by people such as Labor’s Frank Crean who devised a tax system by which the rich would be hurt: he promised to abolish all deductions, to offer a higher upper limit on non-taxable income, to redraft the tax schedules and he threatened a capital gains tax. None of this would have helped for very long as it largely bypasses the central fact – wealth in this society arises from capital, and unless wealth is attacked at the point of its production it cannot be equalised.

This preamble is necessary because its contents are now irrelevant to the plans of the ALP under Whitlam. The summary is important only because it enables us to see more clearly what it is that the ALP has rejected. What has been adopted in its place is evident from the recent collection of Fabian essays, Towards a new Australia.

While some of the contributions are irrelevant to a discussion of equality there is one notable absence: industrial policy. Calwell would take this silence as further proof that the new leaders have once again neglected the workers. It would be entirely wrong to suppose that technocratic laborism has forgotten the workers. It has an incomes policy in store for them and a new arbitration and conciliation system designed to facilitate its implementation. (For an idea of what is in store see Dunstan’s industrial relations bill.)

Among the contributors, there is widespread agreement that socialism is not on the agenda. The nominally furthest left of them – J F Cairns – concludes his piece by suggesting that a modified tariff structure is the most that a Labor government could achieve in the near future of a socialist nature. (p. 95) Crean makes some suggestions for reforming the tax system which are based on the explicit assumption that it is his job to help ensure the survival of a mixed economy. (p. 62) Another accountant, Chris Hurford, is even more adamant that “the market economy is here to stay”. (p. 46)

The tensions between the old and new Laborisms are clearly marked in the differing emphases given to income distribution by the two economic essayists, Hurford and Crean. Hurford represents the new school of technocrats and plans to make the poor richer by increasing the size of the cake so that their relative position will remain unaltered:

The Australian democratic socialist has never argued that complete equality was attainable. Economic growth requires incentives and is, therefore, not consistent with absolutely equal pay; it is helped immeasurably by rewarding managers in accordance with the profits and losses resulting from their work. I make no apologies for the fact that the ALP is pledged to aim for economic growth. Only in this way can we achieve that “bringing something better to the people” (Chifley’s words again) in economic and materialist terms without being negative and merely confiscating from one section to give to another. (p. 43)

Crean, on the other hand, accepts that the “labor movement would foster economic growth” because “everybody cannot have more unless more is produced”, but he recognises that “this should not sidetrack us from inequalities and distortions in present distribution.” (p. 77)

It is essential to remember that an increase in the size of the cake will not automatically mean that the poor will maintain their percentage. If Titmuss is any guide, the poor may well get a smaller percentage unless there is the most vigorous programme of “confiscation”. And even if the percentage remains constant, this level of distribution will increase the gulf between the rich and poor, so that if poverty is socially defined, the poor will have become poorer.

Hurford’s speculations are by no means the most important evidence of the ALP’s retreat from equality. For the real data, one must examine Hayden’s chapter on Labor’s proposals for national health, compensation and retirement schemes. All three will be financed from contributions by taxpayers, but not from the general tax fund. Special contributions will be required and it is these taxes which are at the core of Labor’s structured inequality.

The following table gives an idea of what Labor has in mind. Hayden stresses that the details are not final but this codicil is a sop to the rich and powerful, not a promise to revise the scales in favour of the poor; in other words, it is an election ploy to sooth the doctors and superannuation contributors. The rates are taken from page 223. The column on contributions as a percentage of weekly income has been added. Significantly, Hayden omitted this table from his own calculations.

Weekly            as % of                Weekly                as % of             Weekly
Income            AWE                    Contribution        wkly inc              Entitlement
    $                                                 $                                                   $
    50.82                  60                    0.87                  1.711                   21.25
  135.52                160                    2.30                  1.697                   53.15

This proposal would not be strange if it came from the Liberals, but as a working paper from the ALP, it demonstrates the degree to which equality no longer constitutes even a verbal commitment.

The same criticism applies to the health scheme under which everyone will contribute 1.35 per cent of taxable income. The anti-equalitarian aspects of this proposal are many and varied:

  1. taxable income is by definition a highly unequal basis upon which to tax people further as the rich have already sliced off a sizeable segment – moreover, it ignores income other than wages and salaries, that is, such things as expense accounts, staff holidays, company travel.
  2. a flat-rate of contribution reduces the progressive nature of any tax system;
  3. the provision of free services for low income families, runs head on into the phenomenon isolated by David Piachaud, namely, that this kind of means test taxes people into poverty and helps to keep them there.[1]

In defence, Hayden would claim that his proposals are less regressive than the practices at present and that he would equalise the services received. In the light of Titmuss and Piachaud, it would be unwise to suggest any certainties about the impact of any taxation proposal except to say that the unanticipated consequences invariably run counter to the poor, precisely because the laws of capitalism ensure that they will. Therefore, Hayden’s hoped-for equalization of services may or may not eventuate. In the case of the retirement benefits, it is clearly not intended to do so.

Whitlam has also spoken of the need for equality which he misuses in the same way as he does “internationalisation”. In his Fabian pamphlet Labor in Power, he informs us that “Equality with freedom is, I apprehend, the basic ideal and inspiration of democratic socialism.” For the next two pages, he does indeed devote himself to equality but not in the usual sense. He proposes an equalisation of resources between Federal, State and Local government so as to equalise the distribution of funds for health, education and urban living. This might have some “spin-off” effects in assisting the poor but these would be incidental. The main thrust of these proposals would be to assist the sixty to seventy per cent in the middle-income ranges. The tall weeds would be left out but so would the lower-income groups who have no access to these funds.[2] Whitlam talks about equality and means it. But it is an entirely new twist in which the question of income distribution is sidestepped.

In the months and years ahead it will be necessary to chart the progress of these schemes very carefully. For the present, it is sufficient to note their non-equalitarian bias and to wonder how much less effective they will be at reducing real differences in income than been those schemes which at least commenced from an equalitarian ideal.

[1] David Piachaud, “Poverty and Taxation”, Political Quarterly, 42 (1), January-March 1971, pp. 31-44. Piachaud concludes: “Many of the poor in Great Britain at the present time have, in effect, higher tax rates than any other section of the population. The benefits available to the poor are hard to comprehend and complicated and time-consuming to claim. Many poor families are taxed into poverty and are prevented by the system of taxes and benefits from raising themselves out of poverty.” Because our welfare system is not as extensive as Britain’s, this situation may not apply to anything like the same extent – but if the ALP’s proposals are implemented, its appearance becomes increasingly likely.
[2] Labor’s emphasis on urban development must be scrutinised in the light of what we know about local government in action. To the extent that money and power are transferred from Canberra, it is likely to fall into the hands of a local squattocracy of real-estate sharks and corruptible Labor aldermen. One only has to read Bryson & Thompson’s study of An Australian Newtown (Pelican, 1972) to realise how repressive local government is of the wishes and needs of the underprivileged. When some Labor councilors stood up for the residents in Balmain, they were expelled from the ALP. In Victoria, the forces of intervention use Richmond council employees to terrorise the Socialist Left at ALP branch meetings.