Labor’s populist election narrative fails to placate business – at its peril

Labor’s strategy is to portray Bill Shorten as a caring politician, in contrast to an out-of-touch Malcolm Turnbull. AAP/Mick Tsikas

Reports key business organisations are entering the election fray, with agendas that reinforce the government’s positions on budget restraint, industrial relations and company tax cuts, should ring alarm bells for Labor.

Some Labor MPs will remember the mining industry’s highly effective campaign against the Rudd government’s mining tax. This accords with a very long history of sections of business successfully campaigning against Labor policies they disagree with, including during the Whitlam and Chifley governments.

Labor has often tended to win elections when at least some sections of business have decided the conservative side of government was not governing competently and switched their support – at least temporarily. This was the case initially with the Curtin, Whitlam and Hawke governments.

Kevin Rudd’s 2007 statements that he was a “fiscal conservative” who would modernise the Australian economy by providing high-speed broadband and facilitating engagement with Asia were not just designed to appeal to the electorate. They were also made to reassure business.

Labor has normally won office by promoting what I have termed “social harmony” ideology: the party has suggested the interests of a healthy private sector and workers are interlinked. Labor governments have often underestimated the degree to which there can be a conflict of interest between labour and capital, particularly in terms of ensuring both equity and private profitability.

Nonetheless, such perspectives also acknowledge a key dilemma social democratic governments face. Business does have significant structural power in a capitalist economy. Private enterprise’s profitability and confidence do influence business investment, with significant implications for employment, economic growth and voters’ financial wellbeing.

Labor’s business case

So far in the 2016 election campaign, Labor has made relatively few statements about how its agenda will benefit private enterprise. Instead, it has focused on attacking Prime Minister Malcolm Turnbull for supporting the big end of town against the interests of working- and middle-class voters.

Labor’s strategy is to depict Turnbull as seriously out of touch with ordinary voters while portraying its leader, Bill Shorten, as a caring politician who will support health, education, jobs growth, good pay and conditions, and a strong welfare safety net.

It argues there is a growing inequality in Australian society it would seek to tackle in government – but that a re-elected Turnbull government would worsen the situation.

However, Labor has a new version of its social harmony ideology – one it has rarely deployed in the campaign so far. As Shorten has said previously:

… we think that the best way to have sustainable economic growth in Australia is to have fair distribution of income. We’ve got to ensure that we have inclusive growth. Inequality – and it’s at a 75-year high – is a handbrake on economic growth.

That argument was backed up in a 138-page Labor report that quotes the International Monetary Fund, the OECD and Nobel Prize-winning economist Joseph Stiglitz to support its case that increasing inequality dampens economic growth.

One of the report’s arguments is that increasing economic inequality lowers people’s ability to consume. In other words, reduced consumption lessens private businesses’ ability to sell their products.

Shorten has also argued that funding education well to develop a skilled workforce is essential for Australia’s economic growth. And providing adequate funding for Medicare increases employees’ health and participation in the labour force.

Labor is implying that greater income equality, along with properly subsidised education and health services, can have benefits for the private sector as well as the general population. That position underlay Shorten’s assertions about the relationship between economic growth and fairness in Sunday’s leaders’ debate. However, Labor has not been spelling out the benefits for the private sector as effectively and explicitly as it could have.

The potential costs of neglecting business

Such points seem to have been largely lost so far in the election campaign. Labor has continued to focus on attacking Turnbull’s support for the top end of town.

Turnbull has responded by accusing Labor of “setting themselves up for some kind of class war” and engaging in “the politics of envy”.

Turnbull argues Labor is not only being economically irresponsible in regard to its funding promises but that the real key to economic growth is to encourage enterprise and entrepreneurship, including by providing substantial company tax cuts.

Labor strategists may believe a greater emphasis on the positive implications of its equality policies for private enterprise would undercut its populist attacks on Turnbull. Undoubtedly, Labor also genuinely disagrees with Turnbull’s generous concessions to business and high-income earners.

In the past Labor has paid more attention to arguing explicitly that its policies would fortuitously benefit both ordinary citizens and major, socially responsible sectors of business.

That “social harmony” ideology underpinned both Labor’s attempts to neutralise business criticism and reassure voters the party could effectively manage a capitalist economy in which private sector investment plays such a powerful role.

Multiple factors, including in individual electorates, determine election outcomes. The role of business in election campaigns is only one of those. But history suggests Labor should be more concerned than it currently appears to be about the effects of its populist rhetoric in mobilising opposition from business.