No Tea-Party frenzy: Why Australia escaped U.S-made downturn

The old saying: "When American sneezes, we catch a cold." Now, Australians are thankful that they escaped the Great Recession's virus through wiser banking and a more robust public sector.
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A ferry stop in Brisbane, Australia, where the economy has stayed strong, in part because of robust public services like a river ferry.

The old saying: "When American sneezes, we catch a cold." Now, Australians are thankful that they escaped the Great Recession's virus through wiser banking and a more robust public sector.

In Australia, as in Canada, they have a wry bit of proverbial wisdom that goes, "When the U.S. sneezes we catch a cold." In other words, the economies are so linked and the US economy so dominant, that a sneeze in the bigger one will set off a real sickness in the smaller one.

But a strange thing has happened, while the U.S. has experienced a kind of devastating viral pneumonia, a.k.a. the Great Recession, Australia (where I am at present) has actually fared much better than the U.S. The economy here remains strong, unemployment is around 5 percent, and the banking and financial industry is healthy.

Why the difference? Why did our way-more-than-a-sneeze downturn not give Australia (and Canada) comparable or worse fits?

As I have talked with Australians, there seem to be two reasons given for Australia's relative economic health and ability to resist the virus of our Great Recession. One has to do with more conservative banking and financial practices. The other with a more robust public sector.

With some few and limited exceptions, Australia's banking and financial industry did not venture into the world of sub-prime mortgage loans and packaged derivatives. They stayed the more traditional route. A full 10 percent of the purchase price was required as the down payment on a home mortgage.

Moreover, the banks continued to examine real income figures for mortgage applicants, assuring themselves and their clients that their income would allow them to make their mortgage payments. Not rocket science, just old-fashioned banking (the kind that Kerry Killinger and WAMU decided was passé.) That was one factor in the capacity of Australia to resist our infection.

While the U.S., beginning, in the 1980s went ga-ga for banking deregulation, and the idea that "the government is the problem," Australia didn't. The idea of govenment oversight of the financial services industry still seemed like a good thing here, as in Canada, where few if any banks have failed.

The other factor is that Australia (and Canada) didn't drink the Kool-Aid of anti-government, slash-the-public-sector privatization as always to be preferred in the way that the U.S. has. Again, beginning in the 1980s and carrying on for 30 years now, this has been the received wisdom for Republicans and Democrats in the United States alike. For some reason, the idea that there is a proper sector for public funding and a role for government seemed to persist here in Australia.

Kieran Davies, chief economist, Royal Bank of Scotland discusses the performance of the domestic economy and the short-term outlook.

So, health care has long been a government responsibility. Everyone I've talked to seems to regard that as normal and effective. It relieves employers of a huge burden. Moreover, public funding for higher education is the norm, resulting in an affordable university system. A third sign of a balance of the public and private sectors is a robust public transportation system. Trains, boats and buses are all effective parts of the overall public transportation system. Again, all of this seems to be accepted and regarded as normal. In Brisbane, the "City Cat" ferries ply the Brisbane River, taking students to school and commuters to work, as well as providing a nice experience for tourists. Seattle could learn something from this small fleet of water bound buses. Imagine such a fleet running from Renton to Alki?

One doesn't hear, in Australia, the frenzied calls for "less government." I'm sure people here aren't anymore thrilled than we are to pay their taxes, but they do seem to see that taxes fund valuable services that make society work better for everyone. A fourth element of a funded-public sector we've noticed is that there are no admission charges for national parks, of which there are many, nor are there admission charges for museums and like. This means that the ordinary person is probably much more likely to avail herself or himself of such cultural amenities and of a shared civic sector, which is seen as a shared birthright of all citizens and not something that only those with money get to enjoy. In the U.S., almost all such civil sector institutions have become subject to user or admission fees.

The market, it turns out, isn't all-wise, all-knowing, all-competent (note the way market enthusiasts have imputed divine qualities to the market).

True, the federal budget is a matter of concern and debate here, as elsewhere. But the debate is a civil and seeming reasonable one. No apoplectic Tea-Parteriers that I've seen. The federal budget, currently facing a deficit, is projected to be running at a surplus in three years, and unemployment is expected to fall to 4 percent.

While traveling, I've read the recent book-length essay of historian Tony Judt, Ill Fares the Land. Judt makes the case that it has been the wholesale embrace in the U.S. and the United Kingdom of the rhetoric and reality of privatization and deregulation that accounts for our present economic meltdown and cultural decline. It's a matter of balance, says Judt. The market, it turns out, isn't all-wise, all-knowing, all-competent (note the way market enthusiasts have imputed divine qualities to the market). Left to itself the market, like most anything else that isn't checked and balanced, will consume even its own children.

Can the U.S. learn from Australia and Canada the virtues of such balance between the public and private sectors? Maybe it is true, after all, that there are some things that can't be done best, or even well, as for-profit ventures. Perhaps we are all better off when there is a civil society that we share, regardless of our income level, and in which we are together emotionally and philosophically invested? Such seems to be a lesson from Down Under.


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About the Authors & Contributors

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Anthony B. Robinson

Anthony B. Robinson was the Senior Minister of Plymouth Church in downtown Seattle from 1990 to 2004. He was also a member of the Plymouth Housing Group Board. After living for many years in southeast Seattle, he moved recently to Ballard.