Keating, reform and the difficult notion of ‘political capital’

Former prime minister Paul Keating argued governments need to use their political capital to drive reform. But this is becoming increasingly difficult in a poll-driven political climate. AAP/Paul Miller

Throughout Keating, a series of interviews that finished airing on the ABC earlier this month, the former prime minister makes reference to the notion of political capital in relation to the Labor government, Bob Hawke and himself.

Keating argued governments need to use their political capital to drive reform, rather than focusing simply on short-term popularity:

I always believed in burning up the government’s political capital, not being Mr Safe Guy, you know?

This was also central to Keating’s view of his relationship with Bob Hawke. Hawke delivered the “political capital” with four election wins, while Keating “spent” it to secure reform.

Political commentators and politicians frequently use the idea of political capital to explain why and when governments act to implement policy reform. However, the concept of political capital is highly ambiguous.

Defining political capital

In a parliamentary democracy, political capital is generally used to describe the electorate’s level of “trust” in either an individual politician or a political party.

The idea is that politicians and parties can then use this trust to instigate significant legislative reform that may be difficult for particular groups of voters, or the community as a whole. Polling data is often used as a proxy measure of political capital.

A government that has recently secured a substantial electoral victory is generally assumed to have significant political capital, especially if it is a first-term government. That political capital is then used to drive reforms and if these are successful, then the government’s political capital is renewed, making it easier to introduce further reforms.

Of course, the vast majority of legislation introduced by an Australian government passes through both houses of parliament without controversy, attracting bipartisan – or greater – levels of support.

Where political capital becomes crucial is when a government wants to introduce legislation that won’t have bipartisan support and will be politically controversial in the short-to-medium term. This is often because it will cause harm to substantial parts of the electorate.

At this point, communication with the electorate is paramount. The driver of the reform needs to be able to explain why the changes are necessary, acknowledging the difficulties that will result, while convincing the majority of the electorate that the reforms are necessary.

Political capital and Paul Keating

This is the approach that Paul Keating adopted in pushing for financial deregulation and other market reforms during his time as treasurer, and also when he was pursuing the introduction of Native Title as prime minister.

Keating’s capacity to secure significant reforms was not purely the result of his capacity to draw on accumulated political capital and to communicate effectively with the electorate.

In the case of economic reform, there was a growing sense that there were underlying structural problems with the Australian economy. The sort of measures Keating advocated were also occurring in other countries, and some legislation had bipartisan support.

Achieving these reforms was difficult. The economic reforms adversely affected significant numbers of people, at least in the short term. The introduction of the Native Title Act was also opposed by powerful interest groups who ran a fierce scare campaign. This is where politicians like Keating argue political capital comes in.

Reformist leaders draw on their political capital to ride out the initial opposition, making the case to the electorate and their parliamentary colleagues. There is a willingness to risk failure because the reforms are worthwhile. As Keating commented towards the end of the final interview:

You get one chance to do something about Native Title. You get perhaps one chance in your life to do something about a Republic. You get one chance, your chance, to build a piece of the political architecture in the Pacific. I wasn’t going to give those up.

Across party lines

The use of political capital to pursue reform is not unique to the Labor side of politics. The best example from the Howard era was the introduction of the Goods and Services Tax (GST). Many policy experts believed Australia needed to act to secure the tax base, and many other countries had also adopted a broad-base consumption tax.

However, the political costs of introducing the tax were high because of its impact on consumers and businesses, and the general unpopularity of a consumption tax. Nonetheless, then prime minister John Howard used the political capital he had accumulated to push the reforms through Parliament, which included a hostile Senate.

John Howard used the political capital he had accumulated to push the GST through parliament. AAP/Alan Porritt

Recent governments have often been criticised for refusing to adopt the sort of approach that Keating advocates. The Howard government was criticised by some free-market liberals for failing to implement major economic reforms from 2001 onwards, with the exception of the ill-fated WorkChoices policy.

The Rudd government was frequently criticised for being too poll-driven and was unfavourably compared to the Keating government by a number of commentators.

In today’s political landscape

In weighing these criticisms, the personalities of the leaders involved is certainly relevant, but so is the environment in which they were operating. Since Keating’s time in office and the early years of the Howard government, the speed and intensity of media coverage of Australian politics has significantly increased. Politics has become increasingly oriented around opinion polling and “horse race” journalism.

These developments seem to have made it more difficult for politicians to ride out the dip in popularity that can accompany long-term reform. The focus on polling in the media and within political parties means that leaders have less time than they did in the past to arrest a decline in their popularity.

This seems to be borne out by the cast of first-term political leaders in Australia – including Kevin Rudd, Ted Ballieu and Terry Mills – who have been overthrown after leading their party to electoral victory from opposition.

The degree of leadership instability this engenders also makes it more difficult for a political leader to make the case for a controversial policy reform. Instead of having the space to prosecute their case, they will often be forced to answer questions about their leadership.

None of this means that the Keating model of policy reform is dead. But it does suggest that it has become more difficult for political leaders than it was in the past.

At present, it is unclear whether any major policy reforms are on the federal government’s agenda. However, Tony Abbott’s relatively low approval ratings (for a newly elected prime minister) and less-than-stellar poll results for the Coalition so far suggest it may be politically difficult for the government to push for far-reaching and controversial reforms, even if it wanted to.

Or, as Keating himself might put it, the Abbott government has relatively little political capital to burn.