Remembering Fred Argy – Reflecting on Inequality in Australia

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By Dr Lynne Reeder and Paul Barratt AOPortrait of Fred Argy

One of Australia’s most well-respected economists, Fred Argy argued that economic policy existed to serve the hopes, aspirations and values of society; that economic strategy should contribute to the achievement of social, environmental and quality of life goals.  Fred died in January 2018, and on this, the first anniversary of his death, it is timely to reflect on his contribution and sustained relevance to economic thought in Australia.

Fred served as Secretary to the Inquiry on the Australian Financial System (Campbell Inquiry) in 1979-81, was Ambassador to the OECD (1983-5) Deputy Secretary (Labour Economics) of the Department of Employment and Industrial Relations (1985-86) and Director of the Office of the Economic Planning Advisory Commission (1986-91).

After retiring from the Public Service in 1991, he served as a member of the Commonwealth Grants Commission (1991-96) and led the Committee for Economic Development of Australia’s (CEDA) project – A Long Term Economic Strategy for Australia.

The CEDA strategy, released in 1995, described an optimal economic scenario for achieving a rise in living standards, full employment, and economic stability. Then in 2004, Fred investigated the implications of his liberal economic approach in his book – Where To From Here? – in which he argued that the changes of the past 20 years had left Australia’s longstanding commitment to egalitarianism under threat.  While Fred always accepted the need for greater economic efficiency and that, for most of the time, markets do the best job of allocating resources, he also understood the real value of recognising that whilst our wants are infinite, our resources are finite. He was critical of those who tried to solve economic problems by assuming that away, and by basing policy on the conjecture that we can all be rich forever.

Rather, Fred challenged Australians to share our wealth more fairly by taking the hard decisions in setting our policy priorities. And his concern about the then high levels of “structural” unemployment, the unequal distribution of employment opportunities, and stagnant wage growth are still relevant.

Indeed, the labor market issues that Fred identified in 1993 remain key social, political and economic issues. To name a few: the increasing numbers of working-age people who are “inactive” (the hidden unemployed); the greater unevenness in new job opportunities by skill, age and location; the more unequal distribution of average hours worked; the increased proportion of part-time and casual jobs relative to full-time jobs, the increase in perceived job insecurity; and the explosion in executive salaries.

However, while many of the underlying issues have remained the same, their magnitude certainly has not.  For example, in 1983, executive salaries were around 41 times as much as employee salaries; in 1993 that percentage was around 80 times more, and in 2018 CEO salaries can be well over 350 times more than employee salaries.

In addition, the notion that it is sufficient that the poorest Australians have enjoyed a substantial improvement in real income, and that, in absolute terms, the poor are much better able to afford the necessities of life, also remains current.

As Board Directors of Australia21, which with The Australia Institute, has just released the report ‘A Fair Go for All Australians’, the authors know that these issues stubbornly remain on today’s economic and political agenda.

Similar to Fred Argy’s writings, this new report has also concluded that inequality is increasing in Australia, and that the benefits of economic growth are going disproportionately to the already rich, while equality of opportunity is under growing threat. And, as in A Long Term Economic Strategy for Australia, the recent findings contained in A Fair Go for All Australians state that raising inequality requires action via multiple levers, specifically aimed at restoring fairness for all Australians.

While some level of inequality of wealth, income and opportunity will always be with us, excessive inequality can be a drag on growth. The current level will go on increasing, however, unless there is a significant change in policy direction to the major structural difficulties that people in our society are facing. And the Australia21/Australia Institute report also notes that there are strong social justice grounds for acting to mitigate inequality, including: the benefit of investing in people through all levels of education; improved access to health care; public housing and a decent living standard for those who find themselves unemployed. Elimination of tax benefits like the capital gains tax discount, uncapped negative gearing against personal income, and effective action on multinational tax avoidance could provide the wherewithal to tackle the problem.

In addition to the economic growth and social justice considerations, something that has changed in recent times is the new understanding coming from the sciences that underpin mind awareness. From the work of Australia21’s Mindful Futures Network, it is clear that these also have a contribution to make to these debates, showing as they do, that inequality poses a danger to community wellbeing, health, and social stability. If we agree that every human being has the right to a life that meets the basic needs of shelter, food, employment and education, then we need to ask what policy frameworks can most effectively address these equity outcomes.

Neuroscience and psychology, two of the mind awareness sciences, tell us the motivations we bring to the challenging policy issue of inequality are important because motivations organise our motives, emotions and thoughts. If we bring a market mindset to inequality we find that the market is ill-equipped to provide for the young, the old, the sick, and all others whose skills and labour are not valued enough for them to earn a decent living.

While humans will always compete for resources, when they also dissociate from, or are indifferent to the suffering caused by resource allocation, then that is a problem. These mind aware sciences are finding that in order to ‘see’ those in suffering, we need higher levels of emotional intelligence to overcome the cognitive bias and negative stereotyping often imposed on those, who on a daily basis, experience the stressful effects of very low incomes.

Fred Argy cared deeply about Australia, and until a stroke robbed him of the ability to concentrate, he continued to write about the importance of economic policy as a lever to attain a quality of life for all Australians. He concluded ‘..that to maintain universal services on equity grounds is a political judgement about values’, and this remains a challenge today.

In honouring the wonderful contribution that Fred Argy made to Australia’s economic policy landscape, we need to again ask his question: How will political values drive economic and social policy in Australia in 2019?

Full report of A Fair Go for All Australians at: http://australia21.org.au/wp-content/uploads/2018/11/J3253-Full-F-A-fair-go-for-all-Australians-Report_v6.pdf.pdf

 

Australia21 - Dr Lynne ReederDr Lynne Reeder

Dr Lynne Reeder is a Director of Australia21, and Founder of the Mindful Futures Network. She is an Adjunct Research Fellow at Federation University Australia, where she investigates the science of compassion and empathy. She assisted Fred Argy on CEDA’s Long Term Economic Strategy for Australia, and wrote a chapter on Quality of Life in Australia in the published volume CEDA Information Paper No 36, A Long Term Economic Strategy for Australia, Volume Three.

 

Paul Barratt AO

Paul Barratt AO is Chair of Australia21 and a Fellow of the Australian Institute of Company Directors.  He is an Adjunct Professor at the University of New England, and is Chair of the UNE Foundation. Paul is a former Secretary of the Federal Departments of Primary Industries and Energy & Defence. As the former Executive Director of the Business Council of Australia, he was closely involved with CEDA and has written for some of its publications. He is a key contributor to the report A Fair Go For All Australians.



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