Book Review: Dry: in Defence of Economic Freedom
John Hyde has been one of the principal proponents of "economic rationalism" since he was elected as the member for the seat of Moore in 1974. Although he lost his seat with the defeat of the Fraser Government in 1983 he has continued to work assiduously in favour of the elimination or reduction of tariffs and quotas, reduction in financial regulation and labour market regulation and the removal of monopoly marketing boards. Those pursuing these objectives have commonly been referred to as "Dries" and have included some members of all political parties.
Dry is a very interesting analysis by the author of the progress made by "economic rationalists" during the last two decades. He is critical of Gough Whitlam's across-the-board tariff cuts in 1973 in view of their suddenness and consequent difficulties of adjustment, but otherwise is commendatory of other politicians such as Bert Kelly and Jim Carlton who advanced the Dries’ agenda. He is critical of Malcolm Fraser, stating that Fraser's budget management was "lax"; and although Fraser promised to curb the excessive power of trade unions and reduce unemployment, during nearly all of his prime-ministership "his governments had no effective strategy". In contrast, Hyde observes that after the Hawke government took office in 1983 it took up "every major item on the dry agenda except labour market reform", and the Coalition in opposition forwent opportunities for political advantage in supporting the government's economic reforms. Hyde speaks particularly highly of Peter Walsh, the Minister of Finance, describing him as a genuine egalitarian, intelligent and intolerant of hypocrisy: "He knew that the poor lost when resources were squandered upon middle-class trendies, inefficient businesses, farmers with assets exceeding $1 million, over-manning, inefficient work practices and environmental restrictions of dubious value." He describes Hawke himself as a "superb team manager who ran Cabinet well and gave his able ministers room to reform" and as "a leader who changed public perceptions".
The importance of Dry is that it approaches debates about tariffs and regulation from an uncompromising perspective. Indeed, the author has an almost religious intensity, whereby his own objectives are correct and opponents are criticised by him for self-interest or lack of understanding. Of course, self-interest is a material factor in these matters. Manufacturers seek protection in view of cheap labour abroad, and unionists wish to maintain regulatory structures that protect them. But all these matters need to be taken into account, and arguments by self-interested persons are not necessarily incorrect.
The Dries’ agenda as put forward by the author raises many difficult questions. It may be, of course, that as some Dries maintain, that there should be no Australian tariffs or barriers at all against imports, even although other countries maintain tariffs or quotas against Australian exports. This might, for example, see the end of the Australian car industry and of many other Australian industries, since in some countries wages may be less than ten per cent of Australian wages. But it is certainly by no means clear that this nil-tariff course is necessarily appropriate. If, for example, a tariff of ten per cent made the difference between the continuation of an Australian car industry and the loss of that industry, might it not be appropriate to maintain that tariff? Not to do so might be seen to worsen unnecessarily foreign debt problems and to cause further preventable unemployment. Should not these matters be dealt with pragmatically by deciding in regard to each prospective change what will be its benefits to Australia and what its detriment?
These are difficult questions, but the central attribute of Dry is that it pursues singlemindedly the case against tariffs and regulation. For that reason it is an important book, which should be studied by those who are interested in economic matters and their practical consequences. But those who read it should bear in mind that they are hearing only one side of the case. There are respectable arguments in favour of at least limited levels of protection, although it is perhaps more difficult to find intellectually respectable arguments in favour of the regulation of the labour market. Caution in these matters is all the more appropriate since the impetus for the removal of tariffs comes largely from the United States, and it is not difficult to discern a large measure of self-interest in this. As a successful exporting nation the United States will benefit greatly in terms of its exports if tariffs and barriers in other countries are removed. However the interests of Australia are in many respects in competition with those of America.
National Observer No. 56 - Autumn 2003