The Labour Party in Britain shies instinctively from replacing a leader — such as Michael Foot, Neil Kinnock or Gordon Brown — who has scant prospect of winning a general election. Its sister party in Australia does things less sentimentally. Despite having won a sweeping election victory in 2007, Kevin Rudd was ousted yesterday as Prime Minister by his own party. Julia Gillard, Mr Rudd’s Welsh-born successor, is now Australia’s first female Prime Minister.
The brutal efficiency of Mr Rudd’s overthrow shows a party hungry for government and thus turning on a leader who had lost authority. The Australian Labor Party (ALP) acted swiftly to preserve its position by ridding itself of an unpopular leader, in the way that the British Left ought to have done after 2007 but did not. The wider issue, which is important in the election for Labour leader in the UK as well as to Australian policy, is the extent to which a party of the moderate Left will come to terms with the limits of government.
Mr Rudd enjoyed strong approval ratings as late as this year. His Government responded capably to the financial crisis and recession. Committed to Australia’s contribution to the war in Afghanistan, Mr Rudd projected competence and moderation. Yet his poll ratings suddenly collapsed. One reason was the blow to his authority when, having advocated a carbon-emissions trading scheme to combat climate change, he suddenly abandoned it in the face of opposition in the Senate, Australia’s Upper House. Still more damaging was his adoption of a crass measure of economic populism: a supertax on the profits of mining companies.
Mr Rudd maintained that prolonged strength in commodity prices had enriched the mining companies but that the Federal Government had not received a fair share of the profits. It was a perverse argument. The resources boom enabled Australia to accumulate budget surpluses. Unlike the UK, Australia thus entered the recession with the scope to ease fiscal policy sharply without prompting concerns about the sustainability of the resulting deficit. Mr Rudd, therefore, singled out for discriminatory treatment an industrial sector whose buoyant corporate tax receipts had supported Australians’ standard of living.
The tax failed to recognise the cyclical character of mining companies’ profits, threatened the returns to shareholders and compromised Australia’s image as a place where companies can do business free from arbitrary political interference. If a company fears that the fruits of its investment may be expropriated by government, then it will defer or scale back its investment programme — which is how the mining companies responded.
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There was no election for the party leadership yesterday; Ms Gillard had secured the support of her colleagues, and Mr Rudd recognised that his time was gone. The ALP will hope that Ms Gillard, a polished parliamentary performer, will prove electable in a way that Mr Rudd had ceased to be.
But the issues involved are wider than the personalities alone. There is a longstanding division on the centre-Left between those who accept the market economy as an efficient means of wealth creation, and those who regard the generation of profits as intrinsically unjust. Mr Rudd surprisingly failed to observe that distinction. Populist attacks on the corporate sector are always bad economics; fortunately, they are bad politics too.