MARK TEXTOR: Look after the middle class and democracy will take care of itself

Keep them fed. Keep them happy. Picture: Crytek

One of the most common criticisms of John Howard’s prime ministership, from both the left and the right, concerns what is commonly referred to as “middle class welfare”.

Firstly, as someone who was John Howard’s pollster and advisor for over a decade I can admit that, whilst it was never labeled as such, there was an unspoken preference towards what some describe as “middle class welfare”.

Secondly, I’m proud of it. Building and maintaining a strong middle class should be one of the central goals of a centre-right (or centre-left) government.

My view may not be a fashionable one to hold today.

Whether it was the more generous facets of the family tax benefit, the baby bonus, or the first home-owners grant, the received wisdom of left wing and many right-wing critics in politics, academia and the media was that Howard got it wrong.

There was too much money given to too many for too long, leaving governments in a position whereby they can’t take away payments to a middle class that has become accustomed to handouts.

Supposed “middle class welfare” can otherwise be described as policies that build and support the most populous, hardest working and most economically important segment of our population.

Obviously, the government’s generosity is dependent on the state of the budget. Fortunately for John Howard, he and Peter Costello were pretty good at building budget surpluses allowing them to help Australians out while fueling the economy.

The other side of growing and supporting the middle class is the stability and sanity it provides to the political system.

Critics of the Howard government who scratch their heads and obsess over his electoral success seem to ignore (wilfully or otherwise) the ongoing economic benefits he provided in economic management and policy directed at the middle class.

The growth of the middle and the political benefits it provides a centrist-government are not mutually exclusive. If the bulk of people are, as Howard famously put it, “comfortable and relaxed”, so too will be the government (to varying degrees) that provides it.

It has become axiomatic to lay the rise of populist candidates on the right and left in the last United States election on the decline of the American middle class.

Electoral systems change the political equation

Both Donald Trump and Bernie Sanders pointed to the death of the American middle class at the hands of a political and corporate elite who were the only ones profiting from an economy of legitimised crony capitalism.

Putting aside the merits of their arguments (and there are many), the rise of the populist candidates from the right and left in not just the US, but the UK and Europe too, can be pegged to a hollowing out of their middle classes.

According to recent Pew Research Center data, the American middle class, the driver of economic growth since the 1950s, has been declining since the 1970s, with only 50% of Americans now considered middle class. This is down from 61% in 1971.

Given the wage range for a household of three people was between $48,347 and $125,609 to classify as middle class (the disparity due to living costs in different states), that’s a pretty significant drop.

Moreover, the highest increases since 1971 have been in both lower middle and upper middle brackets, growing to 20% and 9% respectively.

Australia’s middle class decline has not been as dramatic in recent years compared to the United States, although growth in the last four years in middle class brackets (lower middle $48,000 to upper middle $125,000) has only been roughly the same as inflation at 2% (on ABS 2014 figures).

Lowest wage earners’ average income has actually risen 5% between 2011 and 2014 to $22,600, with the highest wage earners growing the most at 11% to an average income of $260,000 (ABS reference).

But despite some hyperbolic commentary following the US election, there is nothing inevitable about the “Trump effect” taking hold in Australia.

When you have a political system that relies on motivation to vote (or demotivation to not vote) you’re more susceptible to political extremes for political motivation.

If a society becomes increasingly fragmented along class lines, the popular vote is going to reflect that. But in the American system, you don’t need a majority to achieve the election of a populist candidate like Donald Trump.

Trump won a presidential election with a just around 25% of eligible voters. In Australia, you need 50% plus. Whilst Reagan was right when he said of political base: “Always dance with the girl that brang you”, Australia’s compulsory voting makes holding the true center important as well, because you have to own the middle as well as the base to win.

The corollary of this is that a growing and supported middle class also limits the capacity of political extremism to take root.

John Howard understood this when he talked of striking a balance between American-style liberalism and European “paternalism” in his Australia Day address in 2006.

“There is much in American society which I admire, but I have long held the view that the absence of an effective safety net in that country means that too many needy citizens fall by the wayside,” he said.

“That is not the path that Australia will tread. Nor do we want the burdens of nanny state paternalism that now weigh down many economies in Europe.”

I’d contend that the “middle class” is the demographic glue holding together potentially fragmenting democracies. We must protect that bond.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.