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 May 2006

                              Exposing the left’s strange economic hyper-rationalism

‘Bourgeois bohemians’ is how American writer David Brooks describes the new elite “of highly educated folk who have one foot in the bohemian world of creativity and another in the bourgeois realm of ambition and worldly success”. According to Brooks, “the 1960s unleashed wild liberationist forces into American society, but that antinomianism has merged with the enterprising ethos we associate with the 1980s”. This fusion was slow to develop in Australia, but it has arrived with a vengeance. Just observe who is now paying lip-service to economics in social policy debates - the furthest reaches of the progressive left.

On a range of issues like urban development, greenhouse gas emissions and child care, progressives are adapting economic arguments to their preferred social outcomes, with strange results.

Creative cities, social wastelands

Take the latest fad on urban policy. The environmental strand of progressive thinking clearly dominates urban planning, but the identity group or “diversity” strand also has claims, largely due to the work of Richard Florida. In The Rise of the Creative Class (published in Australia by Pluto Press), Florida argued that comparative advantage lies in the extent to which modern economies produce people “whose function is to create meaningful new forms”, the so-called ’creative class‘ (a parallel notion to that of Brooks).

Cities and the Creative Class, Florida’s subsequent book, focused on the implications for civic officials and urban planners. To succeed in the ultra-competitive global, high-tech economy, urban regions must strive to nurture environments that satisfy the fickle demands of creative professionals. This agenda is sharply distinguished from other regional growth theories. “I came to see my perspective”, says Florida, “the creative capital theory, as distinct from the human capital theory. From my perspective, creative people power regional economic growth and these people prefer places that are innovative, diverse, and tolerant”. Accordingly, he developed a series of measures to predict success in the high-tech economy, including the Gay Index, the Bohemian Index, the Melting Pot Index and the Coolness Index. The political subtext, of course, is that identity group agendas - insofar as they relate to the creative class - will gain acceptance on the pretext of economic necessity.

Florida has no use for ‘social capital’ theory, or the idea that “regional economic growth is associated with tight-knit communities where people and firms form and share strong ties”. To the contrary, “where strong ties among people were once important, weak ties are now more effective”. In Florida’s ruthless vision, the social consequences for disadvantaged communities, what he generically calls ‘the working class’, such as unemployment, crime, welfare dependency and family breakdown are simply the price of economic progress. Why? “High-tech regions scored below average on almost every measure of social capital”, writes Florida. This can only be described, in Australian parlance, as a most radical form of 'economic rationalism'.

Florida‘s economic claims have been challenged by American writers like Joel Kotkin and Steven Malanga, but it isn’t clear whether his admirers in the Australian labour movement appreciate the extreme dimensions of his thinking. One admirer, Mary Delahunty, arts minister in the Victorian Labor Government, endorsed Florida’s theories in her speech to the Australian Fabian Society, Creative Cities. She acclaimed him as “one of the world’s leading thinkers on this subject”. Some on the contemporary left are so absorbed by identity group politics that socio-economic disadvantage hardly rates.

Green dollars, not blue-collars

The debate on greenhouse gas emissions is similarly blinkered. Some environmentalists are content to support the Kyoto Protocol and other carbon abatement regimes on their understanding of the climate science. Others, perhaps sensing that the science is not sufficient, also hold out hopes of glittering economic prizes. Opposition environment spokesman, Anthony Albanese, belongs to the second category. According to him, Kyoto “provides for a global carbon trading system that will be worth billions in Europe alone”, and “our companies and economy will be disadvantaged if we exclude ourselves from carbon markets…”

These claims mean little unless the costs of joining Kyoto (or unilateral measures) are added to the equation. An ABARE paper on the impacts of Kyoto projected that GDP in developed countries (excluding US and Canada) would fall by 0.11 per cent or $US32 billion by 2015, and the recent Allen Consulting-CSIRO report states that GDP would fall by 6 per cent by 2050 if desirable emission reductions were achieved by then. Assume for the moment that the windfalls promised by Mr Albanese will materialise. Losses of the magnitude estimated in these two reports will, at least, cancel out any gains from the carbon trading system, so it is pointless to cite economic grounds in support of abatement measures. The more likely prospect, however, is that the losses will exceed any gains from carbon trading by a substantial margin.

In that case, trumpeting the prospect of commercial winners - not just environmental benefits - smacks of a belief system that values profits far more than social equity, since the losers will include vulnerable working communities. Such a belief system is not usually associated with leaders of the progressive left. From this perspective, Mr Albanese’s position resembles a most extreme school of 'economic rationalism'.

Child care, ready or not

Another case is the bottomless pit of child care. Most progressives support an unrestricted child care system, driven by the view that gender equality will only exist when workforce participation rates for males and females converge. This agenda starts with the premise that new mothers want or need to rush back to work. Alternative premises are dismissed as outdated or condescending. The child care chorus is blind to the possibility, however, that it is engaged in a self-fulfilling prophecy. Focusing resources and tax concessions on work-contingent services like child care crowds out other options.

Yet there are grounds to dispute the starting premise. In February the ABS released a survey on barriers and incentives to labour force participation which attracted intense media attention. Many reports asserted, incorrectly, that the ABS found child care to be the leading barrier to workforce aspirations of around 250,000 women. According to the ABS, of around 817,300 people who were available for a job or more hours, 22 per cent (179,806) nominated “child care, pregnancy or home duties” as the reason they weren't seeking them. That category is not broken down into its constituent parts. The headlines were generated by this being the largest category, but the importance of child care appears to be limited.

This would be consistent with a paper presented to the Australian Society of Labour Economists last year, which concluded that the cost of child care has little impact on married women’s decisions with respect to work. Whether they are aware of the disturbing neurobiological evidence, or whether they feel it instinctively, the truth is that many Australians continue to harbour reservations about child care.

To brush all of this aside in the cause of gender equality is one thing, however misconceived. To do so in the interests of economic gain is another. But that is precisely what some of our progressive policy-makers are doing. In response to the ABS survey, shadow minister for work and family, Tanya Plibersek, declared “the lack of affordable child care is harming the Australian economy“ (incidentally, she also cites the inaccurate 250,000 figure). Recourse to economic arguments, in this context, turns progressive thinking on its head and, again, merges with an extreme version of 'economic rationalism'. The national economy is elevated above social relations, and not just any social relation, the most intimate relationship of all - that between mother and child.

These are strange days indeed for the progressive left. Perhaps the last word should go to Brooks, who, speaking for ‘bourgeois bohemians’, wrote: “Some days I look around and I think we have been able to achieve these reconciliations only by making ourselves more superficial, by simply ignoring the deeper thoughts and highest ideals that would torture us if we actually stopped to measure ourselves according to them”.

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