BOOK REVIEW: Globalisation tale tells part of the story

Australia has been mostly spared the rising popular discontent with globalisation.

In years past, the grand bargain at the heart of Australian society – for fairness, tolerance and opportunity – has ensured that our economic and social progress has proceeded in harmony. Australians' support for free trade, foreign investment and migration are among the highest in the world, in striking contrast with our developed country peers and helping to drive our record-equalling 26 years of economic growth.

Trade has made us richer, more vital and dynamic, just as it did for Ancient Rome, the old cities of the Silk Road, or mercantilist Venice. And thanks to a highly-targeted social welfare system, the spoils have been distributed with an eye to social cohesion.   

A few years ago The Economist lauded Australia the "next Golden State" and praised Australia as a model nation. Both major political parties, the key economic institutions (including Treasury and the Reserve Bank) and many major companies strongly support an open Australia.

But there's no guarantee Australia will continue to avoid a popular backlash against globalisation.

Just twelve months ago, many believed that because the winners of globalisation far outnumbered the losers, there was an electoral cap on popular discontent.

That myth has been exploded.

Like the US, UK and Europe, Australia too faces growing income disparity. Housing affordability is a challenge, together with low intergenerational mobility, declining education standards, inadequate retirement savings, and lingering tensions around multiculturalism. Our infrastructure has failed to keep pace with growing population. Anger and distrust of institutions is mounting.

How do we inoculate the country against a backslide into economic nationalism?

Andrew Leigh, the Shadow Assistant Treasurer, has entered this hotly contested debate as a tribune for Australian openness. In a recent book, Choosing Openness, Mr Leigh, a Harvard-trained economist and former professor of economics, identifies four forces explaining the backlash against globalisation.

First, and most obviously, inequality, which has recently widened as top incomes have soared. Second, the pace of new technology, which has seen the automation of old industrial jobs and the spawning of social media in which conspiracy thrives. Third, political entrepreneurship, in which the likes of Donald Trump, Marine Le Pen and others have manipulated public discontent. And finally, the shrinkage of centrist political parties, which we might characterise with Matthew Arnold as the "melancholy, long, withdrawing roar/retreating to the breath of the night wind".

Mr Leigh turns his mind to what Australia might do to resist such trends.

He wants to see more trade, more foreign investment, more migration, more competition, more innovation. He understands that free markets, enterprise and hard work are the paths to individual and national improvement. He knows that trade has benefited low income earners and that migration is at the heart of the Australian story. But he also sees that we'll blow apart our national prosperity if the fruits are not shared more equally. He lists a set of sensible policy proposals to make sure that few Australians are left in the shadows, including raising educational productivity and tying the skilled migration intake to labour market needs.

Mr Leigh's assessment is sure to win the hearts and minds of Treasury officials, Reserve Bank boffins, and commercial bankers like myself. He will have reminded every policy wonk why we support an open Australia. There's merit in making that case – but I’m not sure it properly addresses the full issue.

For mine, Mr Leigh skates over the "deep story" of our times. He sees the surface story presented in the economic and social data, and responds with policy tweaking, but misses the substrate psychology I think drives much of the global anger and mistrust.  

My own take is that popular anger owes as much to a technocratic managerial class as to unfair distribution or the automation of manufacturing. We have established a new Brahmin class, which is disconnected from, and often patronising toward, fellow citizens. Mr Trump's supporters were not the poorest in the US, but they nearly all shared an intense loathing for the "establishment" which they viewed as entitled and conceited. Mr Trump's incendiary leadership was balm to this group.   

Responding to this challenge requires good policy, to be sure. But it will require much more than a few hosannas for openness.

For those of us in politics, government and business, the key task is to rebuild public trust through authentic leadership. On one level this is a facile statement, but it also strikes me as fundamental. Ultimately leadership is about sacrificial service which demonstrates humility and a concern for the community which surpasses your own.

That's what our technocratic society has lost – the idea that leadership is an honour because of the sacrifice it requires. That's the sort of leadership that can restore trust and give the country the clean air we'll need to keep Australia open.

Macgregor Duncan and Andrew Leigh co-wrote Imagining Australia: Ideas For Our Future (Allen & Unwin, 2004) and have previously collaborated on opinion pieces for Australian newspapers. The views expressed in this Westpac Wire article are those of the author and do not necessarily represent those of the Westpac Group.