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What’s Wrong with the Right
A Social Democratic Response to the Neo-Liberals at Home
and the Neo-Conservatives Abroad
An Address to the Centre for Independent Studies
By Kevin Rudd MP
Shadow Minister for Foreign Affairs, Trade
and International Security
Sydney
16 November 2006
Precisely 30 years ago, in November 1976, the Centre for Independent Studies published a set
of three lectures by Professor Friedrich Hayek.
This publication followed Hayek’s month-long lecture tour of Australia in OctoberNovember that year, which had about it all the trappings of a Royal Tour - meetings with
Prime Minister Fraser, Deputy Prime Minister Anthony, Queensland Premier BjelkePetersen, Chief Justice Barwick, Secretary of the Treasury Stone, the Reserve Bank Governor,
numerous captains of industry, as well as the leading lights of the academy.
Notwithstanding the title of the lecture series “Social Justice, Socialism and Democracy”,
Professor Hayek’s published itinerary did not seem to be exactly awash with the actual
subject matter of his series – the political left. I presume this was because Hayek had
concluded 30 years before that we were the problem – not the solution. A pity because maybe
we could both have learned by looking beyond the entrenched stereotypes of the time: in
Hayek’s case that the centre-left was somehow still wedded to the state socialism, planning
and ownership of a quarter of a century before; in our case, that Hayek had nothing useful to
say about the operation of the market. Well I’m sure, in the collective absence of the left,
Hayek’s meeting with Joh Bjelke-Petersen would instead have been a truly Scottish
Enlightenment experience for the Anglo-Austrian nobel laureate.
For the record, when Hayek visited my own university, the Australian National University,
on that tour, I neither attended nor protested. Young Labor had not yet consigned me to the
road to serfdom. More importantly, Hayek’s ANU lecture was on 19 October that year: Mao
had just died, the Gang of Four were being purged and the end of the Cultural Revolution
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was in sight, heralding the beginning of something new for the Middle Kingdom. We first
year Sinologues were therefore otherwise intellectually engaged with a revolution of a
different type.
No quarter was given in Hayek’s systematic assault on the left during his Australian tour. It
was consistent with what he had written previously since the publication of the Road to
Serfdom in 1944. His first lecture was confrontingly entitled: “The Atavism of Social Justice”.1
Hayek’s opening sentence and salvo was as follows:
“To discover the means of what is called ‘social justice’ has been one of my many chief
preoccupations for more than ten years. I have failed in this endeavour – or, rather, have
reached the conclusion that, with reference to a society of free men, the phrase has no meaning
whatsoever.”2
Here Hayek echoes his broader polemic of the same year entitled: “The Mirage of Social
Justice”3 where he compares the widespread belief in social justice to the former “universal
belief in witches or the philosopher’s stone”.4 Hayek’s polemic against the left was an
axiomatic component of his advocacy of a radical, neo-liberal alternative – one which argued
the absolute centrality of the market; a role for the state as a protector of that market but little
else besides; and apocalyptic warnings that any political interference with the integrity (even
‘sanctity’) of the market would place the entire national project on the “slippery slope” to
totalitarianism.
Over the intervening 30 years, Hayek has had a profound effect on the politics, public policy
and even foreign policy of much of the collective West. In 1976, Margaret Thatcher was still
Leader of the Opposition and Hayekian neo-liberalism was a minority intellectual sect. By
the time Thatcher left office in 1991, Hayekian thought had become British public policy
orthodoxy. Through Milton Friedman, the Hayekian project was further entrenched in
Reagan’s America. Hayek and the intellectual system he represents also moved from the
margins to the mainstream of the Australian academy and bureaucracy – both in the manner
in which intellectual and public policy questions are framed and in the substance of the
answers given.
My purpose tonight is to state that the time has come to reflect on the impact of the Hayekian
economic revolution on Australian politics, society and the environment – together with
Australian engagement with the international order. Specifically I want to re-examine three
things:

First, Hayek’s core philosophical claims on the role of an unfettered market and the
regulatory state;
Friedrich Hayek, “Social Justice, Socialism and Democracy”, The Atavism of Social Justice (Centre for Independent
Studies: Occasional Paper No 2, 1979)
2
Hayek, Atavism, 3.
3
Friedrich Hayek, “The Mirage of Social Justice”, Law, Legislation and Liberty: Volume 2. (Chicago: University of
Chicago Press, 1978)
4
Hayek, Law Vol II, xii.
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
Second, how Social Democrats respond to Hayekian market fundamentalism with a
coherent narrative – retaining support for market disciplines while not jettisoning a
commitment to social justice; and

Third, how market fundamentalism has split the political right down the middle along
the traditional fault lines of conservatives versus liberals and how this in turn
provides Labor with fresh political and policy opportunities for the future.
Tensions within the right have come to the surface in a number of policy areas in recent
times, including the impact of industrial relations changes on the family; the failure to
respond effectively to global climate change; as well as the abject failure of the American and
Australian neo-cons over Iraq.
All three of these topics nonetheless go to the heart of a major philosophical divide within the
political right – between conservatives on the one hand and radicals on the other.
Furthermore, in the most relevant and recent touchstone debates on industrial relations,
global warming and Iraq, the radicals have won and won consistently.
But, as the market fundamentalists have prevailed with Workchoices and Kyoto and the neocons with Iraq, Australians are feeling decidedly uneasy that, free of Senate restraint, John
Howard’s political project has gone a bridge too far. This therefore presents a rich policy and
political opportunity for Australian social democrats to restore the balance and once again
reclaim the centre ground.
Hayek’s Neo-Liberalism
It is important to state clearly the essential elements of the Hayekian orthodoxy. Hayek’s
political philosophy is premised on a stark view of human nature that social democrats find
confronting. In his Australian lecture, “The Atavism of Social Justice”, Hayek argues that the
altruistic feelings human beings had for one another in small tribes in primal society are
rendered redundant by the impersonal demands imposed on human beings in more complex
societies through prices determined in the market. Hayek states:
“When I pass from the morals of the hunting band in which man spent most of his history, to
the morals which made possible the market order of the open society, I am jumping over a long
intermediate stage…From it date those codifications of ethics which became embodied in the
teachings of the mono-theistic religions”.5
Hayek’s utilitarian view of religion (confirmed elsewhere in his writings) may shock some
who have become religious handmaidens to the neo-liberal agenda. Hayek states explicitly
that “general altruism, however, is a meaningless conception. Nobody can effectively care for
other people as such; the responsibilities we assume must always be particular”.6 And if that
was not sufficiently clear, Hayek elsewhere states that the retention of primitive altruistic
values impedes market efficiency:
5
Hayek, Atavism, 7-8 .
Friedrich Hayek, The Constitution of Liberty (London: Routledge & Kegan Paul, 1960), 78-79.
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“As an example, continued obedience to the command to treat all men as neighbours would
have prevented the growth of an extended order (i.e. societies within markets). For those now
living within (this) order, they gain from not treating one another as neighbours but by
applying in their interactions the rules of the extended (i.e. market) order…instead of the rules
of solidarity and altruism”.7
Hayek argues that human beings’ altruism is a hangover from their primitive tribal
experience, reinforced by religion, and must be purged if we are to optimise our individual
liberty through rational self-centred participation in the market. He concedes this is difficult
because “…it is more probable that many of the moral feelings they acquired have not
merely been culturally transmitted by teaching or imitation, but have become innate or
genetically determined”.8
Hayek does not believe we should be passive about such outdated moral codes. Enter Hayek
the unrepentant social engineer:
“Rational behaviour is not a premise of economic theory, though it is often presented as such.
The basic contention of theory is rather that competition will make it necessary for people to act
rationally in order to maintain themselves. Competition is as much a method for breeding
certain types of mind as anything else…”9
In other words, Hayek sees the market not just as a natural expression of a pre-existing selfinterested human nature – but as a mechanism for actually developing the “selfish gene” and
liberating it from outdated moral constraints focussed on the wellbeing of others. For fear
that anyone accuses me of overstating this absolute dichotomy in Hayekian thought, Hayek
states with clarion clarity in “The Atavism of Social Justice”:
“These are kinds of obligations which are essential to the cohesion of a small group, but which
are irreconcilable with the order, the productivity, and the peace of a great society of free
men.”10
Here is a critical difference with Adam Smith, from whom social democrats in part draw
their inspiration. Smith concluded that human beings were, in their nature, both selfregarding and other-regarding and that political economy should reflect both these concerns.
Hayek also recognises the existence of both natures but concludes one is primitive, the other
modern; that the primitive must yield to the modern; and that part of the purpose of the
market is to re-engineer primitive altruism out of the human condition altogether. I would
suggest that Christian enthusiasts for the neo-liberal agenda should reflect carefully on
where Professor Hayek may be taking them on this count.
Having established the values parameters within which Hayek’s paradigm is constructed,
the centrepiece of his intellectual system operates around the idea of the market as an
internally regulated system that maximises individual liberty. Hayek argues that the market
creates a “spontaneous order” whose “equilibrium is set up from within”. Hayek expressly
7
Friedrich Hayek, The Fatal Conceit: Errors of Socialism (London: Routledge, 1988)
Hayek, Atavism, 5
9
Friedrich Hayek, “The Political Order of a Free People”, Law, Legislation and Liberty Volume III (London: Routledge &
Kegan Paul, 1973)
10
Hayek, Atavism, 13.
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refers to the market as “a game” – specifically the game of “catallaxy” (taken from the Greek
word “to barter”) – and argues that like any game “it is a contest played according to rules
and decided by superior skill, strength or good fortune.”11 Critically, Hayek concludes that
“the game” is the only determinant of a just allocation of resources – as opposed to any other
external governmental invention. In other words, “justice” can only be validly determined by
the market.
Hayek goes further. Not only is it the market that determines the fairness of the outcome for
each player, Hayek argues that it is immaterial whether players have unequal opportunities
to participate in the game in the first place: “It is not a valid objection to such a game…that
the initial prospects for different individuals, although they are all improved by playing that
game, are very far from being the same.”12
In other words, social justice, whether it is taken maximally to mean equality of outcome, or
more minimalistically to mean equality of opportunity, has absolutely no place in the
Hayekian scheme. The latter in particular is of great significance to social democrats, who
reject equality of outcome but embrace equality of opportunity as a valid expression of
equity. The only “equality” in which Hayek is interested is what he describes as “equality
before the law” (i.e. the rules of the game) which he elsewhere interprets narrowly as the
criminal law, the law of contract and laws for maintaining the integrity of the market. When,
therefore, I describe Hayek’s neo-liberalism as market fundamentalism, I do so with these
explicit considerations in mind.
Hayek’s Road to Serfdom contains his analysis of how states fail to protect the market, thereby
reducing the realisation of liberty for their citizens, and imperilling the same citizens with the
certain destination of totalitarianism. In Hayek’s moral universe, socialism in all its forms is
the principal threat to liberty because, however well-intentioned a social justice intervention
in the market might be, the “spontaneous, self-generating order” of the market is damaged
and, as a result, liberty is impaired. This is Hayek’s doctrine of the slippery slope: “…if one
starts unsystematically to interfere with the spontaneous order there is no practicable halting
point and…it is therefore necessary to choose between alternative systems”.13 Or put more
colourfully in the same text: “If you do not mend your principles, you will go to the devil.”14
The principal function of government in all of this is to establish, defend and maintain the
market. In this sense, Hayek’s market, unlike Smith’s, should be detached from politics. In
many respects, it is conceived of as being above politics (as Hayek’s later and extraordinary
ruminations on democracy demonstrate). In Hayek’s “spontaneous, self-generating order”
that is the market, he concludes that “the particular function of government is somewhat like
a maintenance squad of a factory…” – i.e. protecting the market, but little else besides.15
So what does Hayek exclude from the market domain? Hayek, like Smith, does concede the
existence of public goods – but offers no definition of their proper scope other than to say
“there are certain goods which are necessary to a society and cannot be provided by the
11
Hayek, Atavism, 7.
Hayek, Atavism, 11.
13
Friedrich Hayek, “Rules and Order”, Law, Legislation and Liberty Volume I (Chicago: University of Chicago Press,
1973): 58.
14
Hayek, Law Vol I, 58.
15
Hayek, Law Vol I, 47.
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market”.16 Smith’s list of public goods includes education. Hayek’s does not. This exclusion is
consistent with Hayek’s hostility to equality of opportunity as noted above and represents
another critical distinction for social democrats between Smith’s tradition and Hayek’s
tradition of the market economy. On welfare, Hayek does concede as a public good a
minimum provision of food, clothing and shelter for the destitute.
A much more complex exclusion from Hayek’s spontaneous, self-generating market-based
order is the family. Hayek makes a clear-cut distinction between the morality that governs all
external relationships (ie the market and the market alone) and the family (where there are
undefined “natural” ties). Hayek’s conceptual problem is that he cannot simply decree that
one order of relationships be quarantined from the impersonal disciplines and dislocations of
the market. Hayek recognises the critical contributions that family life makes to the wider
society:
“Among the greatest assets which a society can use…are the different moral, intellectual and
material gifts parents can pass on to their children – and often will acquire, create or preserve
only in order to be able to pass on to their children.”17
But Hayek fails to answer why these values are any less primitive than the general altruism
towards the wider tribal group that he seeks to expunge through the social engineering
processes unleashed by the market. It appears, therefore, to be little more than an ex-cathedra
pronouncement, driven by an entirely understandable personal and political necessity, but
utterly incapable of execution. As I have stated elsewhere, an unrestrained market is an
unsentimental force that is capable of sweeping away all that impedes its progress – and that
includes the commodification and marginalisation of all human relationships, including
family relations. This fundamental contradiction of the Hayekian system is also of profound
interest to social democrats – particularly in the context of the debate on the future of the
industrial relations system.
A final problem in the Hayekian order is the problem of the political order in general and
democracy in particular. Hayek’s third essay in his 1976 Australian Lecture Series, delivered
to the Institute of Public Affairs in Sydney, is entitled “Whither Democracy?” A shocking
element of Hayek’s overall schema is that liberty is guaranteed more by the market than by
democracy itself. Hayek states:
“I must confess to preferring non-democratic government under the law to unlimited (and
therefore essentially lawless) democratic government.”18
Hayek argues that the critical law in question is that which protects the integrity of the
market. And the problem with an unlimited legislature, uninhibited by convention or
constitution, is that “it is bound to become egalitarian” which brings into immediate focus
“the fundamental immorality of all egalitarianism”.19 In Hayek’s view, that “immorality” lies
in the predisposition of democratic legislatures to distort the market by favouring one group
over another.
16
Hayek, Constitution, 223.
Hayek, Atavism, 11.
18
Friedrich Hayek, “Wither Democracy?” Social Justice, Socialism and Democracy, (Centre for Independent Studies:
Occasional Paper No 2, 1979): 35.
19
Hayek, Social Justice, 39.
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17
Hayek’s solution is to create two legislatures – one for administration, the other for
legislation that affects the operation of the market. Hayek further recommends extraordinary
qualifications for the type of person who could be elected to the latter body and to render it
“immune from any pressure of special interests” so that “any special or discriminating order
it issued would be invalid”.20 Obviously Professor Hayek had not been specifically briefed on
the credo of the Australian Country (later National) Party when he met Deputy Prime
Minister Anthony in 1976.
A Social Democratic Critique of Hayek
Social democrats have a range of objections to the market fundamentalism of the Hayekian
system – a system which represents a radical departure from the schema expounded by
Adam Smith two centuries before in the Wealth of Nations and the Theory of Moral Sentiments.
Hayek in general seeks to silence the “market-tempering” devices alive in Smith, as well as
the ultimate political constraints expressed in the theories of representative democracy that
we find in Locke and Mill. Hayek is in every sense, therefore, a radical – but a radical
nonetheless whose philosophical system continues to drive much of the intellectual and
policy software of the Howard Government, together with the bureaucracy that serves it.
Social democrats identify at least seven sets of problems with Hayek’s overarching schema.
First, social democrats reject Hayek’s a priori assertion that altruism is a primitive value
which can and should be purged from human consciousness. Social democrats accept the
Smithian view that human beings are equally self-regarding and other-regarding and, as
noted above, both should be reflected in a social democratic political economy. To the selfregarding values of liberty, security and prosperity should be added other-regarding values
of equity, solidarity and sustainability. Properly constructed, these latter values are also
market-enhancing rather than market-detracting. Furthermore, this spread of values
embraces social democratic concepts of both negative and positive liberty – not just the
absence of coercion of the individual but equally creating the opportunity for the individual
to participate fully in economic, social and political life.
Second, social democrats do not share Hayek’s belief that the only fair allocation of resources
is what is determined by the “the game” of the market as driven by a random cocktail of
strength, skill and luck. Social democrats (consistent with Catholic social teaching) a priori
believe that all human beings possess an equal and intrinsic dignity and therefore a value
beyond that which a market may apportion to them.
Third, social democrats do not accept the mutual incompatibility of liberty and equity as
argued in the Hayekian market order. If by equity we mean equality of opportunity rather
than equality of outcome, equity does no violence to market competition. Furthermore, if
education and training become the engine room for equity in the social democratic project,
this investment in human capital will enhance market performance by enhancing total factor
productivity.
20
Hayek, Social Justice, 42.
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Fourth, social democrats, consistent with Smith’s more expansive definition of public goods,
argue that education, health and the environment fall properly within the definition of that
which markets will, of themselves, fail to provide effectively. The manner in which these
public goods are delivered is a separate matter. A cocktail of private and public delivery
modes may be appropriate, depending on the relative cost-effectiveness in the physical
delivery of the public goods in question.
Fifth, social democrats do not accept that critical family, community and broader social
relationships can be insulated from the market simply through philosophical decree. Social
democrats also believe that these human relationships are critical incubators of social capital
– without which market performance is impeded and human life often becomes meaningless.
For these reasons, families deserve higher legal and institutional protections (particularly in
the labour market) than Hayek is prepared to countenance.
Sixth, Hayek’s technocratic concept of politics is unsustainable. The idea that markets should
be kept free from the discretionary, political domain is fanciful. The task of politics is to craft
constituencies through policy leadership capable of delivering long-term market-friendly
reform – reform tempered by social responsibility. Hawke and Keating did this for 13 years.
Howard has done little by comparison. But the proposed Hayekian cop-out, which would
place the defence of the market beyond politics and leave it in the hands of a glorious council
of the great and the good, is completely off the planet.
Finally, tempering the market with the interventions outlined above within the categories of
market failure, public goods and the preservation of social capital do not place social
democrats on Hayek’s “slippery slope” heading towards totalitarianism. In fact, on this
argument, Hayek is already hoist with his own petard. It will be recalled that Hayek had
already accepted the concept of minimal welfare. In a famous exchange with Keynes in June
1944, just after the publication of the Road to Serfdom, Keynes wrote to Hayek in the following
terms:
"You admit ... that it is a question of knowing where to draw the line. You agree that the line
has to be drawn somewhere, and that the logical extreme is not possible. But you give us no
guidance whatsoever as to where to draw it… As soon as you admit that the extreme is not
possible ... you are, on your own argument done for, since you are trying to persuade us that so
soon as one moves an inch in the planned direction you are necessarily launched on the
slippery path which will lead you in due course over the precipice."21
Hayek appears never to have replied. Hayek’s writings in 1944 and later deliberately conflate
market-enhancing forms of social democracy on the one hand with state socialism, state
planning and mandatory state ownership on the other. There is no empirical evidence of a
slippery slope between the limited market interventions of a social democracy and the
totalitarian destination that lies ahead for all on the centre-left – according to the full-blown
Hayekian apocalypse. In fact, the post-war trend embodied within the centre-left across
western countries has been almost entirely in the reverse direction – with Attleean forms of
socialism yielding to the Blairite enabling state that is characteristic of much of modern social
democracy.
21
Quoted in Lord Robert Skidelsky, The Road to Serfdom Revisited. Manhattan Institute. Hayek Lecture. 14 June 2006.
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Furthermore, Hayek remains oblivious to the fact that social democrats are ultimately shaped
by Smith (among others) rather than Marx. Social democrats have always respected and
accepted the creativity, the efficiency and the wealth-generating capacity of markets. But
social democrats, unlike Hayek’s neo-liberals, have never been blinded by free market
fundamentalism. Social democrats, by contrast, have always recognised a positive role for
the state in performing functions the market cannot – and in preventing market capitalism
from tearing itself apart through the destructive social and political forces it is capable of
unleashing from time to time. Economic history is replete with examples of Hayek’s
“spontaneous, self-regulating order” not working as well as it might, with the resulting
requirement that governments (often social democratic ones) are required to rescue
capitalism from itself.
For these reasons, social democrats maintain a robust support for the market economy – but
one shaped by the tradition of Smith, Keynes and Samuelson, rather than Hayek, Friedman
and the fundamentalists. We also maintain that social justice is an essential component of the
social democratic project – both as an investment in positive liberty for all and,
consequentially, as an investment in human capital capable of enhancing the market
economy. For Labor, this provides a rich policy terrain for the future within the framework of
a distinctive, coherent, social democratic narrative about Australia’s future – one which
credibly embraces the dual themes of a strong economy and a fair society and one which
therefore, in the eyes of the Australian people, restores the balance.
Divisions within the Right
Hayek’s world view is not only challenged by social democrats. It is also challenged by many
within the centre-right including both conservatives and social (or “small l”) liberals. I have
documented this split within the right in the November 2006 edition of The Monthly in an
essay entitled “Howard’s Brutopia”. I do not intend to traverse those arguments in detail
again here.
Hayek’s attack on conservatism is explicitly documented in his 1960 chapter entitled “Why I
am not a Conservative”. 22 Hayek says the only common plank between liberals and
conservatives was a common opposition to fascism and communism. Take that away,
however, and there is little by way of a common program. Hayek accuses conservatives of
being constrained by ill-defined, sentimental “tradition” while having no fundamental
commitment to the central organising principle of the market:
“…they lack the faith in the spontaneous forces of adjustment which makes the liberal accept
changes without apprehension…it is indeed part of the liberal attitude to assume that,
especially in the economic field, the self-regulating forces of the market will somehow bring
about the required adjustments to new conditions, although no-one can foretell how they will
do this in a particular instance”.23
Against Hayek’s measure, Robert Gordon Menzies was an abject failure for his broad
embrace of both old fashioned, high Tory conservatism as well as a classical liberalism
22
Hayek, Constitution
Hayek, Constitution
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considerably less doctrinaire than the Hayekian variant. Menzies’ boast near the end of his
long prime ministership was scarcely the stuff of Hayekian zealotry. Menzies said:
“We have greatly aided social justice, we have shown that industrial progress is not to be based
on the poverty or despair of those who cannot compete. After fourteen consecutive years …we
can point to …achievements in industrial justice and peace, in social services, in a growingly
successful attack upon poverty in widely distributed rising standards of housing and living
generally that can be matched by very few counties in the world.”24
Commenting on the competition within the Liberal Party for the Menzian legacy, Petro
Georgiou, a “small l” liberal, has argued recently:
“…Menzies’ legacy has been distorted by some who have attacked the concept of social justice
he constantly advanced…Menzies’ philosophical legacy was that Australian liberalism is a
broad church. Within that church are two fundamental arches. Under one arch reside the
market, free enterprise, opportunity and incentive. Under the other arch shelter stability,
security, social justice and equity. The cornerstone of the arches is the state. The state supports
a free market society at the same time as it upholds its obligation to the weak, the sick and the
unfortunate”.25
Georgiou goes on to concede the obvious – that the moderate stream, the social justice
stream, of the Liberal Party has now become virtually extinct. Menzies spoke of social justice.
Georgiou speaks of social justice. When has John Howard ever spoken of social justice? It is
simply not part of his Hayekian intellectual architecture – and John Howard is the
intellectual creature of Friedrich Hayek.
These divisions are not simply internal to the Liberal Party. They are rife between the
National Party and the Liberal Party. Between Family First and both the Liberals and the
Nationals. As well as between the independents and all of the above. The dividing line
within the right is clear and irreconcilable: it is between Hayekian market fundamentalism
and those on the right who are seeking to protect families, rural communities or community
life in general from the ruthless, impersonal logic of an unconstrained market. Of these
various fault-lines, the most significant by far is the family – a major battleground for the
2007 election given the prospective impact of the Workchoices legislation on Australian
family life.
Divisions within the right are now greater than at any time since the debilitating divisions of
the late 1980s and early 1990s. The critical factor is however that these divisions are not
simply the product of isolated, idiosyncratic disagreements but rather the product of a longterm structural cleavage within the right on how to deal with the free market
fundamentalism of Friedrich Hayek. Once again, these divisions provide rich opportunities
for Labor.
The Question of the Family, Family Life and Family Values
24
Petro Georgiou. 2006. Address to the Murray Hill Society of the University of Adelaide, October 4 2006.
Ibid
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A key dilemma within Hayek’s neo-liberal system is the role of the family. Hayek concedes
that the family is a unique vehicle through which “moral, intellectual and material gifts” can
be passed from parents to their children. Hayek’s challenge is threefold. First, what “moral”
gift is useful for our children given the amorality of the market order where rational selfinterest alone is to prevail? Second, as noted above, what separates the moral worth of family
relationships from the other “atavistic” relationships of the primitive group that Hayek
argues we should be rid of because they impede the market? Third, and most critically, what
system does Hayek construct to prevent family values being cannibalized by market values
through the inexorable processes of commodification?
Hayek’s solution to the latter challenge is simply to declare that the family and the market
belong to different “orders” – a private order for the family and the “extended” order of the
“open society” or “great society” of the market. But this is formalistic nonsense given that
Hayek’s fundamental concern is individual liberty and the same individuals who are
participants in family life are active in the market. Is it seriously contended that behaviours
in one sphere do not affect behaviours in the other? As David McKnight has noted:
“Hayek recognized this paradoxical inconsistency and proposed that we must simply learn ‘to
live simultaneously within different kinds of orders according to different rules’ – those of the
market and that of the family. We must be ruthlessly self-interested in the market and sweetly
caring in the family, greedy at work, selfless at home.”26
In Australia, changes in labour market laws and practice are increasingly rendering it
impossible to separate these two domains – to the extent that they ever were separable.
Barbara Pocock’s recent study entitled The Labour Market Ate My Babies seeks to analyse the
impact of what she describes as the “re-commodification” 27 of labour in Australia on the
quality and sustainability of family life. Through comprehensive qualitative analysis, Pocock
surveys the impact of the hours now worked by parents on the relational health of young
people. The rapid commodification of care (both for children, the aged and the infirm) is
creating new behaviours that are weakening family and other social relationships.
The driver of these changes is time: longer working hours; less predictable working hours
(thereby reducing the capacity to plan family and community activities); more ‘anti-social’
hours worked; less flexibility from work for emergency family care; and overall an
environment where bargaining rights in the workplace for family-friendly work time are
reduced for many workers. For example:




26
The number of Australian employees working overtime has increased from 33.6 per
cent in 1997 to 37.3 per cent in 2003;
The number of employees working excessive hours (i.e. 50 hours per week) has
increased from 15 per cent in 1979 to 20 per cent in 2000;
Employees working unsociable hours (i.e. 7pm to 7am or weekends) has increased
from 56 per cent to 64 per cent in 2000; and
45 per cent of women now work part-time, making Australia the international
standout case in the developed world.28
David McKnight, Beyond Left and Right ( Sydney: Allen and Unwin, 2005), 72.
Pocock, Barbara. The Labour Market Ate My Babies: Work, Children and a Sustainable Future. (Sydney: The Federation
Press: 2006) 5.
28
Pocock, 54-56.
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27
Keith Windschuttle has argued that, while all this may be occurring, it does not matter
because greater economic prosperity has been the consequence and a range of family-related
data taken over the last decade indicates all is well with the world. I do not dispute the data
he has deployed for his argument. But I note, at the same time, that he has not chosen to
deploy data such as that contained in research by the National Centre for Epidemiology and
Population Health at the Australian National University on the measurable impact on child
welfare arising from unsocial working hours by parents. I also note that the rapidly
escalating rate of childhood obesity is omitted, despite the impact of fast-food in a time-poor
environment for stressed working families.29 In particular, I note that none of the data
Windschuttle refers to is capable of capturing the impact of the most radical changes to
Australia’s labour laws we’ve seen in a century that only came into being in March 2006. I
would therefore strongly caution Windschuttle against any premature declaration of victory
as the accelerating process of change in the Australian workplace has barely begun. In the
meantime, I would be interested in Windschuttle’s repudiation of the alarming qualitative
survey data contained in Pocock’s September 2006 study.
The other critique from Windschuttle is that the analysis on which I have relied is driven by
radical, left-wing feminism. I think Windschuttle needs to widen his circle of friends and
enemies. Windschuttle should read for example (from a demonstrably non-left perspective)
works such as Anne Mannes’s Motherhood – How Should We Care For Our Children where she
points to “the colonization of our life world by the values of the market” including parents
who now find themselves speed reading bed-time stories to their children, the
“McDonaldsization” of childhood and the industrialisation of childcare. Deep social changes,
such as the commodification of care, are under way as a direct product of the neo-liberal
economic project which Windschuttle apparently unquestioningly champions. The open
question is: where and when will its full costs be manifest and who will bear them?
The dilemma for the political right is that, in John Howard’s Australia, it’s not supposed to
be like that. The white picket fence and all it stands for is supposed to be enhanced, not
undermined, by Hayek’s economic revolution. And, for a political party that trumpets family
values, the impact of the quality and quantity of time that families have together as a direct
consequence of Howard’s industrial relations revolution is now a matter of great personal
and therefore political importance.
Climate Change and Market Failure
A second area where the government’s neo-liberal orthodoxy has failed to deliver an
effective policy response to date is climate change. Hayek’s writings exhibit total confidence
about the absence of environmental impediments to growth and assume that if ever any
arose, the market’s spontaneous, self-regulating mechanism would take effect. In Hayek’s
final work The Fatal Conceit – The Errors of Socialism published in 1988, he states:
“In any case, there is no danger whatsoever that, in any foreseeable future with which we are
concerned, the population of the world as a whole will outgrow its raw material resources, and
29
Australian Bureau of Statistics. National Health Survey: Summary of Results. 2004-05, ABS 4364.0
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every reason to assume that inherent forces will stop such a process long before that could
happen.”30
So confident was Hayek of the market mechanism, he proclaimed in the same text that “… it
will perhaps not be long before even Antarctica will enable thousands of miners to earn an ample
livelihood.”31
This approach contrasts directly with the recently released Stern Review on the Economics of
Climate Change commissioned by the British Government. Stern concludes that:
“Climate change is a public good: those who fail to pay for it cannot be excluded from enjoying
its benefits… markets do not automatically provide the right type and quantity of public goods,
because in the absence of public policy, there are limited or no returns to private investors for
doing so… Thus, climate change is an example of market failure involving externalities and
public goods… All in all it must be regarded as market failure on the greatest scale the world
has ever seen.”32
Here we face a clash of two conceptual systems: Hayek believing the market will rectify of its
own accord; Stern arguing public goods and market failure. Furthermore, these different
philosophical conceptualisations have dictated radically different policy responses: neoliberal Australia and America embracing an almost exclusively market-based response (in
the form of the Asia-Pacific Partnership or AP6); Stern arguing that “human induced climate
change is an externality, one that is not ‘corrected’ through any institution or market, unless policy
intervenes.”33
A core policy objective under the latter approach (and reflected under the terms of the
existing Kyoto Protocol) is the establishment of emissions targets for mitigating greenhouse
gases – the central cause of climate change. Once targets are determined by public policy
decision, it is then possible to deploy market mechanisms within the framework of an
emissions trading scheme to reward financially the better and punish the worst greenhouse
gas emitters. Such a scheme is not possible, however, unless governments act both to
establish a target and then to establish and regulate the market that will give effect to that
target. Countries that ratify Kyoto and accept the national emissions targets agreed within
that regime, are also then entitled through the Clean Redevelopment Mechanism, to give
effect to their greenhouse gas emissions targets by investing in emission reduction projects in
developing countries. At present Australia is effectively excluded from this market because
we are not within that regime as one of only two developed countries not to ratify Kyoto.
A second greenhouse gas mitigation measure involves greater investment in research and
development in relevant new technologies. This is in part embraced by the AP6 proposal. But
the yawning chasm between Kyoto and AP6 is that Kyoto’s explicit public policy objective is
“the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would
prevent dangerous anthropogenic interference with the climate system” – an objective
outlined in Article 2 of the UN Framework Convention on Climate Change. It is given effect
30
Hayek, Fatal, 125.
Hayek, Fatal, 45.
32
Nicholas Stern, Stern Review on the economics of climate change (London: Government of the United Kingdom, 2006):
25.
33
Stern Review, 24.
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31
by the binding national obligations entered into under Annex 1 in which states agree to limit
greenhouse gas emissions by a specific amount within the first commitment period (2008 –
2012).
By contrast, the AP6 Charter has no such binding targets, only non-binding aspirational
greenhouse “gas intensity targets” (as opposed to absolute emission targets); and seeks only
to encourage technology investment and transfer within the sector. On a public policy
question as critical as global warming, the hold of the Hayekian neo-liberal model, under
which the market is held to be ultimately self-regulating, is clear for all to see.
Foreign Policy, the Neo-Conservatives and Iraq
If Friedreich Hayek’s neo-liberalism casts a long shadow over the Howard Government’s
approach to both industrial relations and climate change, the same can also be said about the
neo-conservatives and their influence over the recent direction of Australian foreign policy.
Neo-liberalism within domestic policy and neo-conservativism within foreign policy make
strange ideological bedfellows. This is not just a challenge of terminology and taxonomy. It is
also a challenge which derives from radically different approaches to what might be
described as ‘social engineering’ by the state. As noted above, Hayekian neo-liberals are
notoriously sceptical, critical and dismissive of efforts by the state to construct anything more
elaborate than a domestic, market-based order. In contrast, the neo-conservatives have
exhibited great optimism about what a unipolar state (that is, the United States) can achieve
by unilateral military and political intervention in the political order. Within the ranks of the
Republican Administration, therefore, we have seen these conflicting tendencies at work:
characteristic Republican pessimism about the prospects of social engineering on the home
front; uncharacteristic Republican optimism (at least at the outset of Iraq) about the prospect
of radical social engineering on the international front.
Beyond the heady world of think tanks, neo-conservativism was given its first formal
articulation as a national security doctrine for the United States in the National Security
Strategy of the United States of America released in September 2002. As Owen Harries, former
editor of The National Interest and more recently of the CIS, stated in his 2003 Boyer Lectures:
“This document… is without a doubt, the most important statement about American foreign
policy, not just since the terrorist attack, and not just since the end of the Cold War, but since
the enunciation of the Truman Doctrine in 1947 for it spelled out how the United States
intends to use its hegemonic power.”34
Harries’ second Boyer Lecture, entitled Taking on Utopia eloquently outlines the four key
elements of what has become a revolutionary document in the evolution of US national
security policy.
First, it is a strategy that seeks to assert American values, not just interests. It states that it will
“use this moment of opportunity to extend the benefits of freedom across the globe… and will actively
work to bring the hope of democracy, development, free markets and free trade to every corner of the
Owen Harries. “Taking on Utopia”, ABC Boyer Lectures, 23 November 2003: 3.
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world”. This strategy commits the United States to creating a balance of power that enables
“all nations and all societies to choose for themselves the rewards and challenges of political and
economic liberty”. As Harries noted, American power was to become the instrument by which
Fukuyama’s End of History (that is, liberal democracy and liberal capitalism) was to be
realised across the world.
Second, the 2002 US National Security Strategy is unequivocal in its assertion that US military
power will be used as a core instrument in the creation of this new order.
Third, the 2002 US National Security Strategy represents the formal abandonment of
deterrence, after 55 years as the core American strategic doctrine for dealing with America’s
enemies. In its place, America would pursue a doctrine of pre-emptive, and where necessary
preventative, war.
Fourth, this was a unilateral strategy. It was not developed conjointly with allies. And, where
necessary, it will be implemented unilaterally.
Of these four principles, the most controversial element of this strategy was unilateral preemption and a preparedness to bring about democratic regime change as a result of preemption. This approach was based on the logic that the international behaviour of states was
driven in large part by the domestic character of those states, in which case any effective
strategy aimed at changing the behaviour of such states might well require the removal of
the regime itself. Liberal democracies, it was argued, rather than authoritarian dictatorships,
were less likely to create national security problems for the United States. They were also, it
was argued, less likely to provide safe havens for terrorists. Furthermore, the expansion of
democracy, albeit by force of arms, had the added benefit of being for the betterment of all
mankind as democracy was man’s natural state. For these reasons, the Bush Doctrine has
been variously described as ‘muscular Wilsonianism’, ‘Wilsonianism on steroids’, or simply
‘Wilsonianism with boots on’.
The Bush Doctrine, as articulated in the 2002 US National Security Strategy, is anchored in
these dual principles of military pre-emption and democratic enlargement. It represents a
radical departure from the US foreign policy mainstream. Previous Republican
administrations have tended to be ‘realist’, whereby the United States was primarily
concerned with the preservation of strategic stability with a balance of power, without any
excessive regard for the internal affairs of other states. Previous Democratic administrations
tended to be a combination of both realist and liberal-internationalist, with a pre-disposition
to use multilateral machinery wherever possible to resolve political and economic disputes.
Not only was neo-conservatism a radical departure for the US foreign policy establishment, it
was an even greater radical departure for the Australian foreign policy establishment. Let’s
be absolutely clear-cut on this: the neo-conservative foreign policy agenda developed in the
United States was not forced on Australia. Prime Minister Howard and Foreign Minister
Downer willingly embraced it. Then they willingly applied it when it came to the decision to
invade Iraq. They embraced it as fully consenting adults and, in so doing, made one of the
most reckless decisions in the history of post-war Australian foreign policy.
There is already a substantial literature in the United States as to why neo-conservatism has
failed. The most public case of neo-conservative apostasy so far has been that of Francis
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Fukuyama. Fukuyama’s 2006 book After the Neo-Cons is in part a post-facto rationalisation of
his earlier advocacy of the project and in part his mea culpa. There are a number of core
reasons why the neo-conservative project has collapsed. The first goes to the heart of preemptive and preventative war. The justification for such wars lies in irrefutable evidence of
imminent or likely attack. As demonstrated by the Iraqi debacle over stockpiles of chemical
and biological weapons and the claimed resuscitation of Iraq’s nuclear program,
accumulating irrefutable evidence, notwithstanding the formidable national security assets at
the disposal of the Untied States, is a difficult task.
Second there is the question of legitimacy. In part this rests on the UN Charter, the UN
Security Council and the broader fabric of international law. In part, it rests on the collective
position of US allies. The fact that neither the US nor the UK could get the UN Security
Council or NATO on board with the invasion of Iraq created a legitimacy problem from the
outset. A failure to implement international legal obligations under the Geneva Convention
for the proper protection of the civilian population of Iraq and prisoners of war after the
invasion compounded the coalition’s legitimacy deficit.
Third, the proposition that democracy can be delivered through the barrel of a gun flies in
the face of centuries of political history. Fukuyama’s recantation challenges the universality
of the American experience in general and the particular belief “that democracy was the default
regime to which societies would revert once dictatorships were removed”.35 Fukuyama’s summary
of the American democratic dilemma is eloquent:
“Toqueville says that the march of equality is providential and that democracy
lies at
everyone’s future. But there is a great difference between his assertion of a broad, centurieslong historical trend towards democracy and a belief that a stable democracy can be established
at any place and any time.”36
Even more remote is the prospect that the armed removal of an authoritarian regime, its
forcible replacement by an ostensibly democratic regime and then, by some invisible hand or
democratic domino theory, to succeed in rolling out the democracy project across the wider
Middle East in its wake.
A final factor in the failure of neo-conservativism in Iraq has been a conspicuous failure of
nation-building. The literature on the absence of post-invasion planning for Iraq is already
immense. The disjuncture between the United States as a formidable war-fighting machine
on the one hand and its systemic incapacity to plan for the peace on the other, is now well
documented. Bob Woodward’s most recent book State of Denial illustrates this point with the
reported exchange between former Defence Secretary Rumsfeld and the first United States
post-war civilian administrator of Iraq, General Jay Garner.37 Only a few weeks before the
war was to begin, Garner was worried about the amount of money he would need for the
reconstruction.38 Garner went to see Rumsfeld with options for the reconstruction of Iraq,
saying that it would cost billions of dollars. According to Bob Woodward, Rumsfeld said
"Well, if you think we're spending any of our money on that, you're wrong… we're not doing that.
35
Francis Fukuyama, After the Neo-Cons: America at the Cross-Roads. (London: Profile Books: 2006): 31.
Ibid.
37
Bob Woodward, State of Denial. (New York: Simon and Schuster: 2006)
38
Peter Hartcher, “Proud in his bullet-proof best”. Sydney Morning Herald: 10 November 2006.
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They're going to spend their money rebuilding their country." In other words, "we only do
demolitions. We don't do nation-building”.39
What relevance, if any, does Hayekian neo-liberalism have to the neo-conservative agenda
on foreign policy – notwithstanding their radically different perspectives on state-driven
social engineering? This is a complex question. To some extent, the explicit championing of
political and economic liberty as a cardinal principle of the 2002 US National Security Strategy
is not without relevance. Similarly, Hayek’s generally recognised contempt for large parts of
the post-war international architecture – including the UN – would not have placed neoliberals in defence of Iraqi sovereignty. Furthermore, Hayek was also explicitly critical of the
realism of EH Carr, the founder of the modern discipline of international relations theory, in
his famous attack in the concluding chapter of the Road to Serfdom. Hayek’s combined
contempt, therefore, for both liberal institutionalism on the one hand and 20th century
realism on the other, may well have made him an ideal candidate for the neo-cons overall
foreign policy project. Hayek died, however, at about the time that the current neoconservative wave was getting underway in the early 1990s. And despite my reservations
about Hayek on many scores, I still find it difficult to see Hayek embracing armed regime
change with any particular enthusiasm.
The key remaining question concerning American and Australia neo-conservatism is how it
came about that Australia embraced this enterprise in the first place. Once again, it’s
worthwhile to return to Owen Harries’ Boyer Lectures. The last of these 2003 Lectures was
entitled Punching Above Our Weight in which Harries traces the three dominant traditions of
Australian foreign policy – the Menzies realist tradition; the Evatt liberal-internationalist
tradition and what he describes as the ‘Spender/Casey/Keating’ tradition of Asian
regionalism.
On this score, Harries’ foreign policy schema is similar to our own. The Federal Platform of
the Australian Labor Party states that Labor foreign policy is based on three pillars: our
alliance with the United States; our membership of the United Nations; and our policy of
comprehensive engagement with Asia. We have argued that, in Australia’s geo-strategic
circumstances, together with our broader international obligations, an appropriate foreign
policy for Australia is one which is drawn from all three pillars.
Harries, in his Boyer Lecture, arrives at a similar conclusion. He states that:
“concentrating these three traditions (that is realism, liberal internationalism and
regionalism), the question is not which one of them is right or the right one for Australia to
adopt in perpetuity, but what balance or mix of them is appropriate at any given time, as
circumstances, and the priorities of our interests, change.”40
The problem for Australia was that the neo-conservative enterprise in general and the Iraq
expedition in particular represented such a radical departure, not just from the American
foreign policy tradition, but from our own as well. Harries’ opposition to neo-conservativism
and the Iraq war was stated explicitly in that Boyer Lecture at a time when it was not entirely
39
Ibid.
Owen Harries, “Punching Above our Weight”. The Boyer Lectures. 21 December 2003
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fashionable to do so. His reasons are well argued and consistent with his lifelong ‘realist’
tradition as a foreign policy analyst and, from time to time, practitioner.
Labor also opposed the Iraq war for a range of reasons. Some overlapped with Harries.
Others did not. Labor posed realist questions about the likely impact of the invasion of Iraq
on the global terrorist threat. On that score, our concerns were vindicated. But Labor also
raised other questions about the international legality and legitimacy of violating the
provisions of the UN Charter. In Evatt’s tradition, we have deep concerns, from a national
interest perspective, about being party to a precedent that says the unilateral violation of the
territorial integrity of another state is now an accepted norm in international behaviour. In a
continuing age of Pax Americana, it may be fine and dandy, particularly for US allies. But if
Pax Americana passes away during the first half of the current century, we may rue the day
when we violated the rules of the current international order, thereby setting precedents for
others. I am entirely conscious of the emerging international legal doctrine on the
Responsibility to Protect. But the invasion of Iraq in March of 2003 was neither conceived nor
defended under the rubric of any doctrine of international humanitarian intervention.
The implications for Australia of having participated in this folly have been significant. We
now find ourselves indefinitely in Iraq without a mission statement. We have now become a
greater terrorist target than would otherwise have been the case. And our Prime Minister has
traduced our foreign policy into becoming a Kabuki play of key lines and themes: ‘stay the
course’ or ‘cut and run’.
In the battle for ideas on foreign policy, the Government has been found wanting because of
its all-too-ready acceptance of a doctrine of global military pre-emption and armed
democratic enlargement. For the Australian people, neo-conservatism and Iraq have been a
radical experiment which has put Australia’s national interests at unnecessary risk. There is
therefore, I believe, an appetite across the country to restore the balance and to return to the
mainstream traditions of Australian foreign policy. This means a return to the three pillars of
our foreign policy – the US alliance, our membership of the UN and a continued policy of
comprehensive engagement with Asia. America remains an overwhelming force for good in
the world and we intend to work closely with America in the future in pursuit of our
common interests within the Asia Pacific region.
These traditions – the three pillars of Australian foreign policy - have served us well in the
past. They are traditions which will continue to serve us well in the future.
Conclusion
It is often the habit of those on the political right to quote George Orwell to those on the
political left – as a seer from within our own camp on the dangers of an all-powerful state
which the right believe to be so beloved by all within the left.
In a little known review of two publications back in April 1944, George Orwell wrote:
"Taken together, these two books give grounds for dismay. The first of them is an eloquent
defence of laissez-faire capitalism; the other is an even more vehement denunciation of it. They
cover to some extent the same ground, they frequently quote the same authorities, and they
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even start out with the same premise, since each of them assumes that Western civilization
depends on the sanctity of the individual. Yet each writer is convinced that the other’s policy
leads directly to slavery, and the alarming thing is that they may both be right.”41
The first of the books was of course Hayek’s Road to Serfdom; the second, long forgotten, by K.
Zillacus, entitled The Mirror of the Past. Interestingly, Orwell went on to say of Hayek:
“In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said
too often - at any rate, it is not being said nearly often enough - that collectivism is not
inherently democratic…But he does not see, or will not admit, that a return to ‘free’
competition means for the great mass of people a tyranny probably worse, because more
irresponsible, than that of the State.”42
Orwell overstates the case against Hayek. But I believe the centre of gravity of Australian
politics has always had about it a deep scepticism about fundamentalist ideologies of either
the right or the left. Australians are concerned about the impact of market fundamentalism
(as articulated through John Howard’s industrial relations revolution) on Australian family
life – in part their living standards, in part their working conditions, but in large measure the
ability of families to spend sufficient time together. Australians are also concerned about the
Howard Government’s failure to identify climate change earlier as a classic case of market
failure and the critical need, therefore, for government intervention in defence of a universal
public good. Similarly, Australians are deeply concerned about the cost and implications of
blindly following the neo-conservative, foreign policy folly that has been the invasion and
occupation of Iraq.
All three are critical touchstones in the battle for ideas that ultimately shape Australian
public policy. All three also represent radical departures from the Australian political
mainstream. All three are seen as a bridge too far by the Australian people. Which is why the
season is ripe in Australian politics to restore the balance and reclaim the centre ground.
George Orwell. “The Road to Serfdom by F.A. Hayek, The Mirror of the Past by K. Zilliacus”. Observer, 9 April 1944.
Ibid
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41
42