- Rudd has been the architect of his own problems
I have been a strong critic of Kevin Rudd for more than two years now, complaining about his focus on spin over substance, talk over action and gimmicks over real reform, among other things. In October of last year I wrote that:
It could be that like the Carr government in New South Wales, federal Labor will keep getting re-elected while the lack of real policies only later become devastatingly clear after some years.
That prediction would appear to have been wrong. Since then, Kevin Rudd’s popularity has plummeted. Last year, a Labor victory at the next federal election seemed assured. Now there’s even talk of Rudd being rolled by his own party before the election.
The fall
The fall from grace has been dramatic. In the space of a few months, Rudd has gone from the most popular Prime Minister in Newspoll history to an outright liability to Labor’s chances at re-election. Rudd the hero has become Rudd the zero.
Were there any warning signs that this would happen? Yes and no. about six months ago I recall reading that Rudd was viewed as “superficial” in focus groups after failing to deliver on his commitment to fix the health system or organise a hospitals takeover. But the polls were still sky high for Rudd, so it appeared as though the Australian people were once again giving him a free pass. Even Tony Abbott’s feisty performance in the health debate did little to lower the Prime Minister in the eyes of viewers.
Since then, there has been the insulation fiasco, which resulted in Rudd’s Beattie-style ‘mea culpa’, as well as the Building Education Revolution rip-offs, an issue which is yet to be fully dealt with. Both of these issues have led to voters questioning the government’s competence.
But the event which seemed to crystallise doubts about Rudd was the backdown on an emissions trading scheme. Rather than negotiate with the Greens or call a double dissolution over what Rudd described as “the greatest moral issue of our time”, the Prime Minister instead quietly put action on climate change in the too hard basket.
To me, it wasn’t the backdown itself but the context in which it occurred that really damaged Rudd. Voters truly upset by the backdown would tend to support the Greens, resulting in no change to the two party preferred vote. Rather, the ETS about face arguably exposed Rudd as a politician with little or no conviction, after his overblown rhetoric on the issue and his inaction and backflips on other issues. It was the final straw.
The Royal Super Profits Tax
The Royal Super Profits Tax (RSPT) has since become the latest PR disaster for the government, and another one that it has brought upon itself.
One can imagine that the ‘gang of four’ initially saw RSPT as the perfect plan that would solve a lot of problems. Rudd’s love of big government and big spending inevitably means that higher taxes must follow. But to increase income tax would be electoral poison, particularly since Labor matched the Coalition’s proposed tax cuts at the last election. Increasing other taxes which are paid directly by ‘working families’ would be similarly unpopular. But presumably, too few would care if big mining companies would have to pay a lot more tax.
Furthermore, the expected outcry from the miners would give Rudd a public fight to prove that he can stand his ground on behalf of middle income earners and show some ticker against furious but rich mining executives. Like the standoffs with elements of the trade union movement in 2007, this sort of conflict would help Rudd gain some credibility which he had lost over the ETS.
And against claims that the tax is bad for the economy, Rudd could point to the fact that the tax had been recommended by Treasury Secretary Ken Henry, thus also boosting the government’s economic credentials. It would have appeared to be a foolproof plan.
But what the gang of four didn’t anticipate was how skilfully the miners would prosecute their case. Whilst Rudd and his Treasurer Wayne Swan framed their argument in terms of fat greedy and rich mining executives versus working families who deserve “their fair share”, the miners have linked their prosperity to jobs, superannuation and the economy generally. The mining industry’s ads have been far more effective than the government’s, which fail to address why the miners should pay a 40 percent mega-tax and as well as concerns that the tax will weaken the industry.
As Friedrich von Hayek observed in The Road To Serfdom, governments have a big disadvantage compared to markets because government knowledge is inevitably limited, whilst the market is a unique mechanism which is able to efficiently use the knowledge possessed by every individual to decide how resources should be used within an economy. It follows that governments cannot know the full impact of any policy they implement. As I have previously noted, Rudd has a lot to learn from Hayek.
One way in which governments can overcome their inherent lack of knowledge is to consult numerous stakeholders before making a major decision. In contrast, the Rudd Government kept the contents of the Henry Review secret for months, before suddenly announcing their new big tax on the mining industry. If the government had listened before deciding, they would have heard good arguments concerning the rate of the tax, the drawbacks of having a threshold at which the tax kicks in, why a uniform rate for all parts of the industry is problematic etc etc. From good processes usually follow good policies.
Instead of such prudence however, the government has been caught out by its failure to consult, leading to the Prime Minister playing catch-up by talking to mining executives after it has announced its decision. Since the tax formed the backbone of the government’s projected return to surplus in four year’s time, the Prime Minister is unwilling to negotiate on the rate of the tax nor the threshold at which it applies. This difficult political situation could have been avoided if the government had consulted first and decided afterwoods.
Even if the government had ended up making a decision which the miners did not like, at least the government would be able to say that it had consulted and listened to the miners beforehand. Furthermore, many of the tax’s more controversial elements would have been altered, thus reducing the severity of any outcry that followed.
What we instead have is a standoff between the miners and the government which will likely persist until election day and which only side can win. As other commentators have noted, such a situation would never have occurred under the Hawke Government, which often consulted and hence erred less.
Outlook
The problem for a spin-driven PM is that once the voters realise he’s all about spin over sincerity, voters stop listening to him. That point appears to have been reached. No matter what Rudd does now, voters seem to not care, having already made up their minds about him. A similar thing occurred to John Howard and Paul Keating in their final years of office.
Whilst Rudd and his advisers have focussed on winning the day to day soundbite battles since the day he assumed office, swinging voters don’t record or keep a track of which side of politics won the spin wars on the most number of days during the last term. Instead, they probably evaluate the government’s performance overall and compare it to how they think the Opposition would do before casting their ballot. And as time has gone by, they have started to notice how little the government has achieved since it won office. Indeed, were it not for the unpopular WorkChoices, it is likely that many voters would now admit that they erred at the last election by voting for Kevin Rudd.
The irony is that Rudd only has himself to blame. It is he who has exercised unprecedented control over his government, so he has to take personal responsibility for all of its big mistakes. The fact that a gang of four makes all of the big decisions with minimal input from the caucus or the wider community is absurd, and helps explain why the government has made so many mistakes. A more inclusive process focussed more on good policy than short term politics would have prevented many of the blunders.
Like most economic illiterates, Kevin Rudd is an advocate for bigger and more interventionist government. The biggest irony of all is that the Rudd Government’s numerous shortcomings have greatly discredited the Prime Minister’s own economic cause.
From the above, it follows that it is no surprise that members of the government are contemplating dumping Rudd. Only a change of leader will make substantial alterations to the tax politically feasible. Furthermore, it would enable the government to divorce itself from Rudd’s spin-driven style of leadership, which the voters are clearly sick of.
It will be interesting to see if and when Labor pulls the trigger on Rudd’s Prime Ministership.
