How Australia’s Labor Movement Helped Build Neoliberalism

Elizabeth Humphrys

In the US and UK, conservative politicians like Ronald Reagan and Margaret Thatcher kick-started neoliberalism. In Australia, however, it began in the 1980s with a fateful Accord introduced by Labor prime minister Bob Hawke and supported by Australia’s trade union leadership.

British prime minister Margaret Thatcher with Australian prime minister Bob Hawke at 10 Downing Street, London, 1986. (Getty Images)

Interview by
Bruce Knobloch

How Labour Built Neoliberalism by Elizabeth Humphrys, a political economist at the University of Technology Sydney, is a groundbreaking account of the rise of neoliberalism in Australia. Going against the mainstream left account, Humphrys argues that neoliberalism should not be regarded as an ideology or doctrine, but as a political project underpinned by state power. Author and Guardian columnist Jeff Sparrow summarizes her point in a Sydney Review of Books essay:

For Humphrys, neoliberalism should not be understood solely in terms of [a] particular political or even economic doctrine. It should be seen as a political practice, undertaken in response to an economic downturn, with the aim of restoring profitability and facilitating capital accumulation. To that end, it seeks to disorganise and defeat the organisations of the labour movement and increase the proportion of national income transferred from the working class to the capitalist class.

Crucially, Humphrys identifies the Australian agents of this political project not in the Liberal Party, but in the mainstream of the union movement and the Labor Party. This is an important difference between the Australian experience of neoliberalism, and that of the United States or the UK, where the policy shift was introduced by Reagan and Thatcher, respectively.

How Labour Built Neoliberalism has found a wide readership and set a new standard in Australian political-economic research. Even Wayne Swan, former Australian Labor Party treasurer and deputy prime minister between 2007 and 2013, claims to have taken a look — although he was not so amenable to Humphrys’s argument.

For those who wish to build an alternative to the neoliberal era, however, Humphrys’s work is indispensable. Bruce Knobloch caught up with Elizabeth Humphrys to discuss How Labour Built Neoliberalism and how the labor movement can build a better world, after neoliberalism.


BK

Why did you write How Labour Built Neoliberalism?

EH

I have two related broader interests. One is the relationship between the state and civil society, and how the state acts to manage dissent. The second is how we deal with the state’s efforts not just to control progressive movements coercively, but to incorporate them consensually into state-led projects.

More specifically, I wanted to ask: How did the collapse of the labor movement in Australia, and in many countries from the 1980s onward, happen? What is the future for workers’ organizing and workers’ power? The book comes out of the intersection of these concerns.

BK

Your book centers on a prices and incomes “Accord” in Australia from 1983 until 1996. What was the Accord, and why do you think it’s so important to understand what happened then?

EH

The Statement of Accord was an agreement between the trade union federation, the Australian Council of Trade Unions (ACTU), and the Australian Labor Party (ALP). It was drawn up in 1982 after a decade of five recessions. There was mass unemployment and high inflation at the same time. As in other highly industrialized economies, there was a search for ways to manage that situation.

It was a consensual agreement, and once the Labor Party had won a landslide election in 1983, after seven years of conservative rule, it was implemented as government policy. The initial document was wide-ranging. It said the government would act to keep prices down. But of course, some prices — things like doctors’ and architects’ fees — are the income of the middle class and the wealthy. The Accord also promised to hold down “excessive” wage rises and to attempt to deal with unemployment over the longer term.

So it was a move away from a Keynesian focus on full employment to an inflation-first approach. But alongside, it promised increased government spending on the social wage. The government rolled out two other key policies: introducing a universal contribution-based pension system called superannuation, and reinstating the national universal health care system, Medicare.

That’s where the unions and the Labor Party came to an agreement. The problem is, over time it became an agreement mostly about wages. Only wage rises didn’t keep up with inflation as the agreement had promised. There was real wage suppression, and some argue it was far more effective than the wage suppression that happened under Thatcher and Reagan.

BK

In your book, you talk about the dominant narrative of neoliberalism. What do you mean by this?

EH

One of the questions that I asked is, how is neoliberalism generally understood? How do academics and the Left talk about it? Broadly, they talk about it in a particular way, which I call the dominant narrative. This says that neoliberalism is a project of the Right, that the benchmark examples are Thatcher and Reagan. According to this narrative, labor and social-democratic parties didn’t play a pioneering role in the coming of neoliberalism; rather, they followed in the wake of conservatives, implementing a moderate, modified form of the same doctrine.

I’m not the only one to contest aspects of this narrative. What’s crucial to understand is that this account of neoliberalism is based on what happened in the UK and the United States. However, when you look at Australia, New Zealand, France, and a few other countries, social-democratic parties actually led the way, implementing neoliberalism in its breakthrough phase.

In the case of Australia, we’re talking about a consensual social contract that smoothed the way for neoliberal restructuring. In New Zealand, the Labour Party took a confrontational approach with the trade unions, implementing what was called Rogernomics, named after Reaganomics.

What I argue is that neoliberalism is not always a coercive project of the neoliberal “new right,” where unions are simply the victims. In the case of Australia, it was a consensual project that incorporated the unions into political-economic restructuring.

BK

And at its core, the goal was to increase what Marxists call the rate of exploitation, lifting profit rates for the national capitalist classes. And only then would living standards and public provision of universal services be taken seriously.

EH

Yes, absolutely. I wanted to inject into the debate a focus on the role played by the labor movement’s leadership. And I found it wasn’t only in Australia that the labor movement played a difficult, complex, and contradictory role in the rollout of neoliberalism.

John Krinsky’s work on the fiscal crisis in New York City Council in the late 1970s highlights another example of where union leaders played a regressive role. That’s why I end the book by asking: If we stop thinking of neoliberalism as beginning with Thatcher and Reagan, but instead, if we think of its Australian form as beginning with the election of the Hawke government, what are the implications? Where is the break and where is the continuity from previous eras?

BK

What was the role of the Communist Party of Australia (CPA) in the period immediately before the Accord, under the Fraser government? How did this lead to their later strategy of national cooperation? It seems a startling turn of events — but to reduce the change to a “sellout” isn’t very satisfactory.

EH

By the early 1980s, the Communist Party of Australia had broken with Stalinism. It is better thought of in that period as a New Left party. It was not a massive party, but was quite strong in particular unions, including the Australian Metal Workers’ Union (AMWU) and the Building Workers’ Industrial Union (BWIU). Under Fraser’s government, those unions had a militant approach, including a “hot shops” strategy, where they fought to protect living standards and tried to develop deep delegate and activist structures.

Just a few years later, they signed on to the Accord, to hold wages down. It was quite a shift. But I think it’s a mistake for left critics of the Accord to view it as a simple case of bad people making bad decisions or union leaders selling out. We need to think about the mechanisms whereby militant union leaders and activists are incorporated into state projects of restructuring.

To put ourselves in the shoes of those union leaders, there was rising mass unemployment, particularly in the metals sector, where a lot of my research has been focused. Every time there was a recession, more jobs were lost than were remade in the recovery afterward. Historically, there had been labor shortages in Australia — that’s one of the key factors underpinning earlier growth in wages and conditions. But by the late 1970s, there were significant numbers of unemployed people within the ranks of the unions. Union leaders were quite concerned about that. Unemployment benefits were low and as inflation went up, so too did poverty rates.

Given that the Labor Party has traditionally expanded social welfare in good times and used a profitable economy as the basis for any kind of social reform, I think union leaders saw the Accord as a way to win progressive policy in circumstances that weren’t favorable.

On the other hand, in the early 1970s, the Whitlam Labor government was elected on a wave of social protest and a desire for change. It implemented some quite radical reforms before being hit by the oil shocks and the international economic crisis. When they were dismissed in a soft coup by the governor-general and the conservative parties in 1975, there was enormous hostility between the labor movement and the incoming Fraser government. In those circumstances, a consensual approach to managing the economy was not possible.

As a result, the Accord agreement was used in a polemical way in the 1983 election, to frame electing the Labor Party as the only solution to the crisis. The ALP presented itself as the only party that could bring the unions into line. The ALP slogan in that election was “Bringing Australia Together.” It was a message for the electorate, who wanted a solution to rolling economic crises, and also for the bosses and the ruling class. To them, it said that the only way forward was through the Accord.

In some ways, people read into the Accord what they wanted. Some radical unions thought it was a piece of propaganda, never to be fully implemented. Others thought that it was going to implement socialism through the state, which seems farcical from today’s standpoint. Some on the far left pointed out the pitfalls of social contracts. They were proved right in large part.

I think the CPA’s officials were motivated by genuine concern for working people. Yes, their support for the Accord was based on a mistaken belief about the nature of the state and in whose interest it acts. After all, the state has its own interest: to ensure stable accumulation. We cannot win over the state to advancing the interests of the working class. As Marx makes clear in his early writings, the state is (and must be) a capitalist institution.

BK

For a couple of decades, there was little discussion of the nature of the state and what it means for socialists seeking a more democratic society. Perhaps this has begun to change. Antonio Gramsci’s specific insight, about the “enwrapment” (involucro in Italian) of civil society by the state, is a thread that runs through your book. Why is this a useful approach?

EH

Thinking about the implementation of neoliberalism, especially when it’s done consensually, is not just a matter of academic historical interest. It speaks to the conditions of labor and the labor movement today. It also informs new state restructuring efforts, including those being demanded by the Left, like a Green New Deal or a jobs guarantee. At their core, these are calls for the state to make massive, significant changes to the political economy.

The Left is not accustomed to understanding the nature of the state, how it relates to the atomized and collective interests in civil society, or how the state maintains hegemony. This is why Gramsci’s notion of the integral state is helpful.

His idea is that political society acts as a container, enwrapping civil society, as Peter Thomas puts it, in order to manage and transform the interests that exist in civil society. It’s important to examine how this enwrapment helps the state manage crisis, particularly where there are demands for social change.

There are other examples. Feminist and women’s radical organizing in Australia in the 1970s is a classic case. Those radical efforts were incorporated into the state relatively quickly, through new funding and the creation of new roles inside the state. Over time, the radicalism of 1970s feminism was softened and smoothed over. It’s not that activists gave up on the desires of their movement entirely; rather, those desires were converted.

With the Accord, you can see enwrapment in action. The union leaders gave up so much, just to win a seat at the table and be more firmly integrated into political society. Thanks to the “no further claims” component of the Accord, they gave up the right to take industrial action over almost everything. In return, workers were promised fixed minimum wage increases.

But without shop-floor bargaining over wages, delegate structures were absolutely decimated. Those structures were necessary for organizing the capacity of workers, and they had been built up over previous decades. This is how the Accord disorganized and atomized the working class.

BK

When you read How Labour Built Neoliberalism, the extent to which the trade union movement tied its own hands behind its back is shocking. Perhaps it seemed strategic in 1982–83. But thirteen years later, when John Howard is elected, so much damage had been done.

EH

Leo Panitch’s work on the social contract in the UK in the 1970s, under a Labour government, is useful to think about. In the model that Panitch develops, the state initially incorporated unions and held down wages. But at the same time, the constraints of incorporation forced workplace militants to push back, which ended up destroying the basis for a social contract.

As I argue in the book, and as others have argued about the UK, this process tilled the soil for Thatcher. In Australia, that pushback did not happen, and so the social contract did not collapse. The result is that the overall incorporation and disorganization of the unions is far more profound here.

BK

A small number of unions said, “No, this is not acceptable. We want a decent pay rise.” How did the ACTU keep them from breaking the Accord?

EH

For the ACTU, one of the key things was to isolate those small groups of workers who pushed back, preventing them from generalizing their disputes or building effective solidarity. Wages in a few workplaces — particularly ones with very low-paid workers, such as in meatworks and confectionery — had declined by over 10 percent under the Fraser government’s wage freezes. Early after the Accord’s adoption, they tried to recoup some of that by going on strike. The ACTU failed to organize effective solidarity, opening the way for new-right individuals and organizations to take civil action against those unions, virtually bankrupting them.

The ACTU also isolated unions who broke the Accord, most famously the Builders Labourers’ Federation (BLF) and the pilots. The BLF had been accused of corruption. But that is not why, in the end, the ACTU deemed it politically necessary to isolate and deregister that union. Rather, it was because they threatened to go outside the Accord and make further claims, as did the pilots.

BK

There was a very strong ideological push. Workers who didn’t adhere to the Accord were accused of being greedy and irresponsible. In a sense, especially in the early period, the Accord was seen as a sacred project.

EH

That’s right. Fifty percent of Australian workers were union members at that point. Today, only about 13 percent of the workforce is unionized. So, you have to understand that the left union officials’ decision to back the Accord, particularly in the metalworkers’ union, was critical.

The AMWU was the largest and strongest union in the country. It was traditionally at the radical edge of the labor movement, so much so that the metalworkers’ wage had been the pacesetter for the entire country. Their wage gains flowed through to the rest of the economy, helping less well-organized and lower-paid workers.

AMWU officials led the ideological fight to win workers to the Accord. They printed and distributed leaflets in massive numbers and held workplace meetings. That’s a lot of pressure. In the end, the few unions that opposed the Accord were small and isolated.

And you’re right to say people were accused of being greedy. The metalworkers would say, “Well we’re taking the cuts, and we’re tightening our belts so everybody has to.” This was particularly the case with the pilots’ dispute — the argument was: “Why do these well-paid white-collar workers deserve pay rises when we’re all in this together?”

The ACTU really played on that in this pilots’ dispute. That dispute is the second time in Australian history that troops were sent in to strike break [after the 1949 coal miners’ strike]. In both cases, it was a Labor government who sent in the troops. This speaks volumes about the way that the ALP approaches unions and labor demands when in power.

BK

As well as suppressing militant unions and wages, the Hawke–Keating Labor government privatized government-owned businesses and put “the market” at the center of public life by floating the Australian dollar, deregulating merchant banks, and creating a stock-market-driven superannuation system. These are neoliberal measures. Yet the mainstream account of the Accord suggests that the Accord was an alternative to neoliberalism. How do you explain this blind spot from trade union officials and academics?

EH

Some people are entirely invested in it because they argued for it at the time. Many people who participated in processes around the Accord now write academic work praising it.

The other thing to remember is that prior to the Accord, the last time the ALP had been in government was under Gough Whitlam. His government found itself in the middle of an economic crisis. Since then, the Right has always accused Labor of being poor financial managers who can’t be trusted to run the country’s finances.

The Hawke–Keating period, on the other hand, is held up as one of the most successful periods of economic restructuring. The ALP relies on the success of that period to argue publicly that it is fit for government. That creates a problem for trade union leaders. They don’t want to disagree with this argument publicly, even if they think the Accord was a massive setback for the labor movement. Even people who were critical of the Accord feel compelled to say nothing in public or even to defend it.

And anyway, within the trade union bureaucracies and the Labor Party, lots of people have a neoliberal orientation. They back it outright.

BK

The constraints of the Accord were so great that in 1991, the Labor government, under pressure from some of these key trade unions, introduced a version of enterprise bargaining.

EH

The constraints of the Accord started to upset groups of workers, including in the metals union. For political and practical reasons, the ALP and ACTU didn’t want to get rid of the Accord. But they also wanted to prevent pressure from building up inside the labor movement. So they sought to open the valve a little by allowing productivity gains and a range of other improvements that came out in dribs and drabs.

Over time, enterprise bargaining was introduced. It was then accelerated [after 1996] by the conservative Howard government. The historical record is clear on this: the unions demanded enterprise bargaining and, as a consequence, an end to centralized wage-fixing. This was the death of the solidarity mechanism I mentioned before, in which metalworkers’ wages set the pace, lifting up wages across the economy.

Under enterprise bargaining, poorer workers were left with a shell of the old award system and with lower wages. The only floor under that is the minimum wage.

BK

When the COVID-19 shock began, there was some talk of a new Accord, to integrate the union movement into the recovery plan. Why would the ACTU want to build a new Accord?

EH

It was bizarre for the prime minister to suggest a new accord because there was no upward pressure on wages. I figure the unions backed the idea because they want a seat at the table with the conservative government. After all, they seem unwilling or unable to lead any revival of union militancy.

One of the internal contradictions of the Accord is that it was so successful in disorganizing the labor movement, that it removed the possibility of doing the same thing again. Because there’s no capacity in the trade unions, a new accord would be just a piece of paper. Similarly, the Labor Party no longer has the social base to implement this sort of reform. And anyway, the Liberal Party doesn’t need the union movement — most of the work to limit their power has already been done.

BK

Given your understanding of the origins of the problems that face the labor movement today, how do you think unions can rebuild? Are there any flowers blooming in the working-class movement landscape in Australia?

EH

I’m often asked this question. It’s not about rebuilding unions to where they were. There were problems with the unions in the past. They were very white and very male. Today, things are different. The workforces that are most highly unionized now are skewed by gender toward women.

BK

Your typical union member is a young middle-aged woman in the care or education sectors.

EH

Absolutely. Unions in those sectors have also been doing some of the best work. Readers of Jacobin in Australia will know that the United Workers’ Union (UWU), the recent amalgamation of the National Union of Workers and United Voice, has been doing some of the most innovative and serious work over the last few years. It’s a union that covers everyone from migrant farmworkers to care workers in home care to cleaners to workers in manufacturing and warehouses.

Only recently, workers at Spotless laundry in Victoria were told to keep working when there had been a positive case of COVID-19 in the workplace. They refused, and the bosses tried to force the unionized workers to go back to work. Eventually, the workers won through their action.

Stories like this are emerging all over the world. Even in the midst of the pandemic, the bottom line is more important to many bosses than workers’ health and safety. The UWU is taking its lead from its members, particularly those newer migrants and other low-paid workers. Their experiences show what needs to be done to better build workers’ organizations.