The warning signs were there, we just ignored them

Updated

There has been a real and growing chasm in the distribution of wealth in recent years and the backlash is showing up at the polls in the form of protest votes directed against the established order, writes Ian Verrender.

The surprise is that, for most people, it came as a surprise.

The warning signs, after all, have been evident for at least three years.

On the home front, there have been shock election results in Victoria and particularly Queensland, where Campbell Newman elected by a landslide was unceremoniously dumped after just one term.

Just a week ago, the United Kingdom stunned the world with its decision to jettison its membership of the European Union; a move that has the potential to force the break-up of the United Kingdom.

And most worrying of all, Donald Trump - a bouffanted buffoon masquerading as a reality television star - could well become the next leader of the free world.

Just like the UK in the wake of the exit vote, the Liberal Party could well tear itself apart. After Saturday's showing, Malcolm Turnbull now will be forced to fight for his place as Leader of the Liberal Party. The recriminations have already begun. The knives have been unsheathed.

Had his predecessor remained in the job, at least there would be no hung parliament. For the Liberals would have been annihilated.

Despite all the bonhomie and backslapping at ALP headquarters on Saturday, Labor had a dismal showing. Its primary vote came in around a mere 35 per cent, marginally up from the catastrophic plunge that saw it swept from power three years ago, which was its lowest on record.

The only reason it appeared to have put up a fight was that preferences distributed by minor parties boosted is performance.

In fact, the real winners from the 2016 election were independents and fringe parties, including the likes of Pauline Hanson.

A revolution is sweeping across the developed world, as an increasingly disillusioned lower and middle class find themselves threatened and disenfranchised by the economic forces unleashed by the rise of technology and an increasingly global economy.

It is being driven by a real and growing chasm in the distribution of wealth and the backlash, initially at least, is showing up at the polls in the form of protest votes directed against the established order.

The old divide between left and right has begun to blur, allegiances are dissolving and the political establishment, which for years turned a blind eye to the growing undercurrent of resentment, now faces its very own moment of truth.

The past four decades have witnessed a dramatic decline in job security across the Western world as lower skilled and lesser paid jobs have shifted to developing countries.

Full time employment has been replaced by contract or even part time work. And in the past few years, even in Australia, underemployment has become a source of concern.

The business lobby, meanwhile, continues to run a vocal campaign for the abolition of penalty rates and reduced working conditions.

Back in the 1980s, Peter Drucker, a doyen of management theorists, argued that when chief executive salaries exceeded 20 times average weekly earnings within a firm, it could be bad for morale. At the time he was voicing his concerns, the US differential was pushing the boundaries of 40:1. Now, it has blown out to as much as 335:1.

When everyone's wealth is on the rise, few tend to concern themselves with wealth gaps. But in times such as these, when wages are stagnant, the widening gap becomes ever more apparent, and Drucker's concerns about morale begin to boil over into revolt.

From an economic perspective, the weekend result is nothing short of a disaster. Neither major party enunciated the threats facing the Australian economy during the next decade.

Neither acknowledged the storm clouds gathering over the global economy, with concerns about China, Europe and perhaps even the US. Only the Prime Minister alluded to it, late in the campaign, in an effort to garner support. As a strategy, it clearly failed.

While the ALP led on the policy front, neither had a cohesive plan to restructure the economy to shore up its finances. Instead, both parties resorted to the kind of cheap theatrics of which the electorate has grown tired.

The Coalition ran a scare campaign about negative gearing reform. In the final days of the campaign it predicted "chaos" if the ALP were returned to power. It's become almost a tradition, following on from previous scare campaigns around carbon pricing and the mining tax.

Labor learnt well. In the final week, it launched its very own scare campaign about the dismantling of Medicare.

If anything was to blame for the loss of support for the Government, it was the idea that a cut to the corporate tax rate somehow would be the panacea for all our economic ills despite the enormous loss of revenue that would have to be made up either through higher taxes elsewhere or reduced spending.

It was a policy lambasted by a majority of economists, many of whom pointed out that a large slice of any accrued benefits from the cuts would flow to foreign investors.

That didn't deter the cream of local business leaders to fire up the idea of corporate tax cuts as an election winner.

As the straight talking Commission of Audit chief Tony Shepherd told Elysse Morgan on ABC's The Business on Friday: "I think what people fail to understand is that business is the economy."

That's where he and his contemporaries have it muddled. Business is vital to the economy. But it is not the economy. Consumption also is vital. And there are three factors of production; land, labour and capital. Not just capital.

That lack of balance, the loss of focus, the unequal share of the spoils gradually has turned from annoyance to anger. It is starting to cost politicians and it now will play havoc and come back to haunt business leaders.

Will they get their tax cuts? Maybe. Will there be a Royal Commission into banks? Possibly. Will negative gearing be wound back? Perhaps. Will wealthy retirees be forced to pay a miniscule amount of tax on their earnings? Almost certainly.

A possible hung Parliament and a hostile Senate. Has there ever been a more exciting time to be an Australian?

Ian Verrender is the ABC's business editor and writes a weekly column for The Drum.

Topics: government-and-politics, federal-government, business-economics-and-finance, federal-election

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