Originally published by Cuffelinks
We’re so familiar with hearing Australia referred to as the Lucky Country that it often comes as a surprise to learn that Donald Horne, who coined the phrase in his 1964 book of the same name, meant it as a criticism. The opening sentence of his final chapter gives the book its name.
“Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders … so lack curiosity about the events that surround them that they are often taken by surprise.”
It was meant to be a damning account of the Australian political class, who Horne believed were bereft of original thinking and ideas at a time when, he believed, great economic and technological changes were taking place in other countries. Rather, instead of being innovative, Australians had been lucky, inheriting from the British a system of democracy and rule of law, alongside the wealth an entire continent of natural resources had to offer. He worried that Australia did not deserve its luck and that, unless it lifted its game, its good run would not last.
The start of superannuation
Today the phrase is almost a badge of national pride, used to describe everything from our lifestyle to our prosperity. Its modern meaning underpins a ‘she’ll be right’ positivity that Australians are famous for, a complete contrast to the message Horne was trying to deliver. (That his phrase was so misused was a source of great frustration for him: “I have had to sit through the most appalling rubbish as successive generations misapplied this phrase.”).
Horne was a committed republican, well before there was any real republican movement in Australia. Much of his criticism of Australia stemmed from these views, and his belief that Australia still looked to the UK for political ideas and leadership. His follow up book, “Death of the Lucky Country”, published in 1976, continued this theme.
If Australia was still looking to the UK for leadership in the 1970’s, the wry among us might note that the country clearly needed better glasses. In 1976, sinking under unsustainable budget deficits and runaway inflation, the UK needed to be rescued by the International Monetary Fund, in what was the Fund’s largest ever bailout.
Far from importing the militant unionism which engulfed British society in the 1970s and led to power rationing and a three-day work week, when the Union (Labor) party returned to power in Australia in 1983, it embarked upon some of the most forward-thinking reforms any developed country had seen. One of these, the Superannuation Guarantee reforms of 1992, addressed the future social-care funding crisis that all western countries were facing with their aging populations.
From humble beginnings to wealth
Today, Australia is a far wealthier county than not just the UK, but also all the other nations Horne had in mind in his writings. That wealth, in the wonderfully Australian egalitarian model, is also far more equally spread than in any of those countries too. According to the annual Credit Suisse (SIX:CSGN) Global Wealth Report 2017, wealth per capita in Australia today is second only to that of Switzerland. (Given Switzerland’s position as a wealth manager to the world, we can comfortably remove it from our analysis on the basis that much of this wealth does not belong to the Swiss people as much as to Swiss ‘tax residents’). Average wealth per capita in Australia in 2017 was US$402,603. This is 97% higher than Germany, 53% higher than France, 45% higher than the UK, and 4% higher than the USA.
Far more impressive than these absolute wealth numbers is how well this wealth has been shared. The most common measure of inequality in economics is called the Gini coefficient. On a scale from 0 to 1, the Gini coefficient measures how unevenly wealth is spread across society. A coefficient of zero equates to all members of society having the same amount of wealth, while a coefficient of one equates to one individual owning all the wealth.
Under this measure, among large wealthy countries, Australia is second only to Japan in its wealth equality, with a Gini coefficient of 0.65 compared to Japan at 0.61. However, while Japan may be marginally more equal, this is considerably overshadowed by the fact that Australian average wealth per person is 79% higher.
Excluding Japan from the analysis the remaining results are striking. European nations like Germany, France, and Sweden, supposed paragons of social equality, have Gini coefficients of 0.79, 0.70, and 0.83 respectively. Whilst more capitalist leaning economic models such as the UK and the USA, have coefficients of 0.74 and 0.86. Australia also comfortably leads the few remaining socialist countries of the world. China, Venezuela, Vietnam and Laos have Gini coefficients of 0.79, 0.94, 0.75, and 0.85 respectively.
And where has all this wealth come from? Undeniably Australia’s natural resources laid a tremendous foundation. But too often this simple observation overshadows the bigger picture. The reliance on natural resource industries has been as much a curse as a blessing, tying large parts of the economy to a searing cycle of boom and bust. Australia was also not the only country rich in natural resources that began its life with British institutions. Much of Africa wears that crown, as do Canada, New Zealand, and India (Gini coefficients of 0.74, 0.72, and 0.83 respectively, wealth per person 36%, 16%, and 99% lower respectively).
In fact, the country that invented Wi-Fi, Google (NASDAQ:GOOGL) Maps and the ultrasound machine can call itself the clever county as much as the lucky country. Today one of Australia’s biggest export industries is education. As a percentage of GDP, Australia generates more revenue from exporting education to the world (1.2%) than both the USA (0.2%), and the UK (0.5%), despite these latter two countries’ famous universities. Australia attracts the best and brightest from around the world, many of whom, after studying, stay to call Australia home.
Wealth on its own is of little use if you don’t hang around to spend it. Here Australia continues to excel: average Australian life expectancy at 83 years is the fourth highest in the world (behind, in order, Japan, Switzerland, and Singapore). Today the Australian health care system is, like so many Australian institutions, the envy of the world. The Washington-based Commonwealth Fund recently ranked health outcomes under the Australian system as the best in the world, despite Australia spending less on healthcare as a % of GDP than all the other countries in its study.
Making your own luck
After 26 years of uninterrupted economic growth, the absolute size of the Australian economy at US$1.3 trillion (population 24 million) is now comparable to that of Russia (population 144 million), a nuclear power which occupies a permanent seat on the United Nations Security Council. Australians have a better quality of life than the Dolce Vita Italians (where youth unemployment is 35%, and debt to GDP is 133%) and better social mobility than the famously egalitarian French (a country which hasn’t run a balanced budget for 44 years). As a nation, we have created more wealth per person than the cold-hearted capitalist machine of the USA (an economic model which sees 14% of the population living in poverty) yet spread it more evenly than communist China.
A generation on, the fact that Horne’s critical tagline of Australia has been co-opted by the nation will be no great surprise to the red-headed among us called Blue. Dry humour runs deep within the ‘ordinary people’ Horne felt needed a new, more radical, society, as does another defining Australian trait: self-deprecation. There is no doubt that a little over a century ago Australia started its innings on a batting-friendly wicket, but luck isn’t what has put all the runs on the board. Whilst it perhaps has not been to Horne’s taste, Australia’s world-beating prosperity has been built on intelligent incrementalism, not revolution. A modest society that has quietly set about getting the job done.
Miles Staude is Portfolio Manager at the Global Value Fund (ASX:GVF), which he manages from London.