Why didn’t neoliberalism start during the Fraser Liberal Government?

Many people associate the beginning of neoliberalism with the election of conservative governments influenced by the New Right and theorists such as Friedrich Hayek and Milton Friedman. A useful question to ask, then, is why didn’t the vanguard neoliberal period commence during Australia’s conservative Liberal government (1975-1983) led by Prime Minister Malcolm Fraser? One explanation is that the nature of the Gough Whitlam Government’s Dismissal — which has its 40th anniversary today — was an important factor that prevented the incoming Fraser Government from implementing many economic policies it agreed with, but politically could not impose on the electorate.

The vanguard period of neoliberalism is characterised by the initial and most intense period of implementation of neoliberal policies. Neil Davidson usefully agues that neoliberalism, in each location it has been introduced, has usually required a vanguard phase that includes ‘an entirely new political regime’ fully committed to the implementation of neoliberal reforms. This phase occurred in Australia under the Hawke-Keating ALP Government (1983-1996). Policies implemented by them included: floating the Australian dollar and abolishing exchange controls; deregulating the financial and banking sectors; dismantling the tariff system and promoting ‘free trade’; widespread industry deregulation; privatisation of government-owned entities; corporatisation of government departments and contracting out of services; marketisation of the retirement payments system; the adoption of competition policy frameworks; and, over time, the introduction of a ‘deregulated’ labour market in the form of enterprise bargaining.

The Whitlam Government Dismissal occurred after the Liberal Party Opposition blocked ‘supply’ (finances needed to keep the government running) and, with no resolution to the situation, Governor General John Kerr intervened by sacking Whitlam and appointing Fraser as interim Prime Minister. The Governor General is the British Crown’s representative in the Commonwealth of Australia, with the authority to dismiss a Prime Minister and, thereby, a democratically elected government. The Dismissal was a seismic event in Australia politics, deeply shaping the trajectory of political parties and civil society in the next period.

Political narratives of the Dismissal have tended to focus on the actions of key individuals — in this case Whitlam, Fraser and Kerr. Yet, the labour movement was an important player in the events before and after the sacking. There were widespread strikes and demonstrations over the blocking of supply and in the wake of the government’s removal. As soon as the sacking was announced, tens of thousands of workers took strike action and the Australian Council of Trade Unions (ACTU) was pressured to call a general strike. While Whitlam called on voters to ‘maintain the rage’ against the sacking, industrial action petered out in the lead up to the general election on 13 December 1975. The Liberal Party was elected to office in a landslide.

Despite Australia being in the deepest economic crisis since the Great Depression, and having just experienced an administrative coup against a democratically elected government, the Fraser Government did not (or could not) implement widespread neoliberal reform. This is despite Fraser, his then Treasurer John Howard, and other leading party members being influenced by such neoliberal luminaries as Margaret Thatcher, Ayn Rand, Friedman and Hayek (the latter two visiting Australia in 1975 and 1976 respectively).

Contra Naomi Klein’s thesis in The Shock Doctrine that ‘shocks’ of various kinds have created the ruptures that led to the introduction of neoliberalism, the presence of economic crisis, political crisis, and politicians committed to neoliberal ideas was not propitious for the introduction of the neoliberal project in Australia under Fraser. Indeed, these factors were part of the reason such a project could not be driven through. Fraser was unable to use the political upheaval around the Dismissal to advance a definitive crisis resolution in the form of a vanguard neoliberal policy project imposed on the labour movement and broader public. This is tied up with how the social forces represented by the labour movement and (less directly) by the ALP itself were profoundly antagonistic to his administration in the wake of the Dismissal. Fraser’s perceived complicity in Whitlam’s unprecedented method of defeat created a political polarisation and prevented (unlike with the following ALP Hawke-Keating government) any agreement on economic management or restructuring based on wage indexation or suppression.

Although Hawke, then head of the ACTU, pursued an agreement with the Liberal Government on economic management, both Fraser and certain powerful ACTU affiliates rebuffed him. Fraser took a confrontational approach to the management of industrial matters, implementing an inflation-first approach (contributing to unemployment), repressive labour laws, and in 1982 a national wage freeze. The unions, whose high levels of organisation and strength could not be easily defeated in the process of some kind of confrontational assault, quickly defeated many of his industrial policies.

Similarly, at the end of the 1970s and start of the 1980s the Fraser cabinet was debating tariff policy and closely following the economic transformations occurring abroad — particularly those under Thatcher and Reagan — for signals as to how to proceed locally. Yet, Fraser stood against the drive within the Liberal Party to implement a generalised neoliberal policy framework — even, as Michael Pusey argues, in a context of a state bureaucracy increasingly influenced by and committed to orthodox and neoliberal theory. Although Fraser established the Campbell Committee of Inquiry into Australia’s Financial System, which recommended extensive financial deregulation, he did not implement the findings. In fact, he literally threw the report in a bin in his office because he believed it could not be carried through politically.

The ability of a government to cohere a hegemonic neoliberal project within political society is the necessary factor in successfully implementing neoliberalism. This is not always possible if the balance of social forces isn’t favourable to the government of the day. As such, Fraser was unable to cohere a political project to defeat the unions or to implement widespread economic reform. Those who plotted Whitlam’s Dismissal may have imagined that it would play to their advantage, but in fact Australian vanguard neoliberalism could not be implemented under Fraser. Instead, the project had to await the election of Bob Hawke’s social democratic and labourist Government in 1983.