Political effects on business in the 21st century

The following overview from the pen of Phil Ruthven, Chairman of IBISWorld, provides a very useful backdrop for anticipating the likely evolution of political forces over the next decade and beyond.  Is your business ready to adapt accordingly?

[Old political ideologies are now irrelevant to voters, but do our major parties understand the new dialectic and are they fashioning themselves and their policies accordingly?

Each age of economic and social progress brings competing politics, ideologies and dialectics into play. In the Agrarian Age up to the late 1700s, it was the privileged classes (including monarchs) versus the oppressed (free citizens and serfs). In the Industrial Age, it was the capitalists versus the socialists. And now, in the New Age, which began in the mid-1960s, it is rationalism versus humanism as the diagram suggests.

Rationalism has been in the ascendancy initially (with a lingering dose of socialism and deficit spending) via the Whitlam and Hawke-Keating governments in the post-1970s; and more clearly with the Howard-Costello regime from 1996 to 2007.

The humanists, too, are in the ascendancy in the form of the Greens and the now-departed Democrats – mainly in the Senate – but now with a seat in the House of Representatives as well. The Greens’ detailed manifesto is mostly irrational, but their main message on the environment is gathering followers.

Neither major party, however, has found a workable blend of rationalism (the most part) and humanism (enough to win elections) going into the second decade of this century.

Rationalism means using facts, logic, reason and the head for policies and decisions. Humanism means using feelings, judgements, bias (often unconscious) and the heart for policies and decisions. In an increasingly educated society – due to higher participation in tertiary education and our digitised world of data, news and knowledge – it could be expected that rational decision-making would triumph more often than irrational decision-making. The days of garlic over the doorpost, burning witches and assuming the sun revolves around the Earth are surely gone.

Well not quite. Ignorance is still rampant in our increasingly complex world, especially in matters of economics, finance, science and technology and tolerance (racial, religious, ethnic, class and more). The heart, or the gut, is still formidable across many issues; and society is extremely vulnerable to spin, which has been taken to an art form over recent years. Indeed it may take decades before we get an accurate history of the global financial crisis period and what saved Australia!

The two charts below put Australia’s current political dilemma into perspective: minority government in both the houses of parliament for the first time in a hundred years or more. We’ve not been there before in federal politics, at least not since the two-party pattern emerged by the end of the first decade after federation in 1901. The first two parliaments consisted of protectionists and free traders, before the Coalition (Liberal, then Liberal and Country). The Labor party (ALP) was in power for 30% of the past 110 years (35% in post-WWII years and 22% back to federation). In 2010, the ALP holds 72, plus 3 Independents, plus 1 Green, while Liberal/Nationals hold 72, plus 2 Independents.

And while independents have been a feature of both houses on-and-off for 110 years, the presence of minority parties is more a feature of the New Age after 1965. Yes, the DLP emerged in 1955, but as a split from the ALP. The Australian Democrats in 1977 became the first New Age party, with humanist rather than capitalist or socialist leanings. The Australian Greens came later, in 1992, and that party is clearly in the humanism camp.

Interestingly, both major parties have adopted bits of rationalism and/or humanism over recent decades. It would be difficult for any party to win many back-to-back elections based on just one philosophy. The risk of going broke under humanism is extremely high, precluding such a party adherent staying in power for long – in much the same way as parties with a socialism philosophy ruling for a minority of the years in the Industrial Age.

Indeed, in Australia the ALP ruled for just 22% of the years leading up to the end of the Industrial Age in 1964. It would be very unlikely that a humanist party would rule for even that little a time during the New Age, which is due to end around the middle of this century.

However, we are flesh and blood as they say, and our heart does rule over our head often. For this reason, a purely rationalist party could not expect to rule indefinitely, as the Howard government showed in 2007; the leader losing his own seat as well as the party losing government. When people get angry, they let the government know at the ballot box. We have seen good governments thrown out for the perceived arrogance of a leader, regardless of a party’s ideology: witness Goss, Greiner and Kennett at the state level, and Keating and Howard at the federal level.

Of course, complacency, sheer incompetence, scandals and corruption are reasons for dismissing governments; and yet the electorate’s tolerance of these things seem at times to be extraordinarily high as we have seen in New South Wales in this decade. Excessive rationalism or arrogance rate higher than bad governance, it would appear. Unbridled humanism could perhaps survive for a number of years, just as wastrel ALP state governments survived in Victoria and South Australia in the 1980s. But not indefinitely.

All of this leads to the nation’s current dilemma.

In 2010, neither party is really clear about what it stands for and what it holds up to the populace as a coherent, believable and likeable set of policies and standards. It is doubtful that either party understands that the old dialectic of capitalism versus socialism is dead; that the new one is rationalism versus humanism; and that a successful party must project a (changing) balance of these two philosophies but with an emphasis always on rational policies and decisions.

This problem is in no small way due to the roots of both the Coalition and the ALP. The ALP has the clearest background: a fairer go for the workers of the nations and a share of the growing wealth. To some extent this admirable objective has been tainted by envy, hate, power cliques with occasional thuggery and corruption (perhaps more so at state than federal levels).

That there is now only 16% unionised workers among the nation’s 11.3 million-person workforce, means that the ALP has had to find another platform of beneficiaries, which it suggests it has: the whole nation. But big business and SMEs feel excluded, not trusted, and easy targets for a party still with (perceived) ‘socialist’ ambitions.

The Coalition on the other hand has a chequered history of many different interests. Borne out of opposing philosophies (protectionists versus free traders) coming together to form the first ‘liberal’ party shortly after federation, it has used discretion as much as valour in its evolution. It has managed to survive and rule for 70% of the past 110 years of national government. It has passed through a number of iterations including the Nationalist Party and the United Australia Party before settling down to a convenient – as distinct from always-harmonious – working relationship with the National Party (previously Country Party).

But it has worked in a nation that is basically conservative at heart, constantly reinforced by new waves of migrants coming to a freer and more prosperous country that they want to keep that way. Don’t rock the boat too much.

Nevertheless, the world is changing fast in the New Age and new century. It is becoming borderless, more informed (and faster), less religious while still spiritual, nervous of constant change. And anxious. They want strong leadership and they want to believe in what that leader stands for. The electorate wants good, rational policies that are explained more fully than they now get from politicians – or the tabloid and electronic media for that matter. And they want soul: genuine caring as well as a fair measure of self-reliance without encouraging indolence. They want to feel safe. And a prosperous economy and full-employment are not negotiable items either.

The emerging Greens appear incapable of compromise in key areas. Wanting carbon reduction while wanting to ban nuclear power and uranium mining is arguably zealotry if not nihilism. Yet that party is the front-running humanist party, left by default with that mantle by the major parties that cannot yet convince the population they care as much, but with better and more rational policies.

Both major parties need to do some real soul-searching to redefine their raison d’être to help themselves, as well as to earn the trust of the nation as we enter the second decade of this fast-changing, exciting, turbulent, probably very prosperous, yet often scary, century. They have to understand the new dialectic, and they have to get the balance right to survive. The ALP is the only party to have survived since federation; however, without renewal, it cannot assume that will continue through a second century. The Coalition has metamorphosed enough times to be giddy, but it is experienced at changing itself. It has no choice but to keep doing just that.

Forget the old capitalism versus socialism fight: it is now well and truly resolved with the obvious compromises of higher taxes and safety nets balanced by a healthy and prosperous private sector business environment agreed necessary by both sides even if not to the same extent. It is now rationalism and humanism, looking for the right mix to satisfy the mind and the heart of the population.

To the victor go the spoils.]

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