The Magic Pudding is finished

In his great Australian classic of liberalism, Liberty and Liberalism, Bruce Smith put forward two principles that are still relevant some one hundred and twenty years later. The first was that while capitalism may at times be cruel and harsh, the alternative was much worse. The second was that the current generation should not put into practice any proposal which will benefit itself while placing a burden on future generations.

Smith was writing during the first flush of government activism in Australia. In response to the demands of electors, governments were spending money to satisfy the desires of particular interests at the expense of what Smith perceived to be the common good. And of course it was always possible to meet those desires by passing the costs onto those not yet born in the form of debt. Smith hoped that over time his fellow citizens would be educated into realising the foolishness of such selfish short term policies.

The idea that governments should spend freely for their constituents, and institute bad policies such as Protection, made many Australians in the twentieth century consider government to be essentially a giant honey pot for their benefit. This attitude is best summed up by Norman Lindsay’s book The Magic Pudding. The more that one eats the more that there is to eat.

W K Hancock wrote in 1930 that Australia could afford such attitudes and bad policies because it was a relatively rich country with a small population. By the 1980s, however, it was apparent that the country could no longer afford such behaviour.

This was the root cause of the period of reform begun by the Hawke Labor government in 1983. The days of the magic pudding were over. Australians had to be disciplined about their behaviour and their expectations of government. For some twenty five years Australians have been slowly learning the lesson of restraint and the practice of doing things for themselves.

Now the current government is seeking to undo all that good work. It wants to re-institute the reign of the magic pudding and to convince Australians that when there is a problem the role of government is to throw money at it.

Consider Smith’s two principles. Yes, it is true that capitalism can at times be harsh and cruel. There will be winners and losers. But overall the public benefits from the competition that capitalism engenders. Mr Rudd condemns the greed of those who helped to cause the current recession. But he of all people should know that there is no human agency, especially no government, which can eradicate greed from the crooked timber of humanity.

We must live with the imperfections of capitalism because the alternative is much, much worse. Just look at the failed socialist experiments of the twentieth century. In Australia, after decades of government policy designed to make the country less capitalist, a Labor government was forced in 1983 to institute reforms that would make it more capitalist.

The second principle is even more important. There may be good arguments for a financial stimulus package, but the government should do no more than is absolutely necessary. If, as Mr Rudd believes, the cause of the present situation is the greed of the current generation then that generation should also bear the costs of that greed. It is not fair to make the next generation pay for the current one.

The scenario is even worse when one considers the enormous potential costs that will face the next generation as the baby boomers become old, sick and expensive. The real problem facing any government at the current point of time is to devise policies that will enable the country to afford what can only be a very expensive future.

Giving handouts like slices of pudding for short term political advantage would hardly seem to be the appropriate means of providing for the future of the country. We have had twenty five years of sensible policies from both sides of politics. These have placed Australia in a good position to deal with the problems of the future.

To return to the bad old days of The Magic Pudding is to risk the very real achievements of reform in Australia. It could mean that the next generation will find themselves back at square one.

Gregory Melleuish is associate professor of history and politics at the University of Wollongong.

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