Kevin Rudd never does anything without good reason, if for no other reason than he’s too busy. So when he sat down at the end of last year to nut out an article for The Monthly magazine on the financial crisis, he would have done so with some very explicit goals.

One was likely to have been part of his “middle power diplomacy” strategy, which is really about establishing the Rudd brand on the global stage. By offering his own take on the crisis, and its ideological implications, Rudd can elevate himself to the position of a sort of philosopher-in-residence among world leaders — especially the new types like Obama and Sarkozy. There’s no harm in this, and when Rudd becomes UN Secretary-General in 2018, he’ll doubtless have a fine CV of such efforts.

Another would have been, by telling the story of the crisis, to in turn tell the story of how his Government is dealing with it, and the basis on which it is doing so, to counter the impression that they are randomly throwing money at the oncoming wave of economic doom.

But most of all it’s an exercise in domestic politics, aimed at discrediting, even demonising, the Liberal Party as allies of those who caused the crisis, by painting the Liberals as anti-Government and deregulatory. Rudd is deadly serious about this and devoted to achieving it. He has an entire communications strategy devoted to painting his political opponents as dogged adherents of laissez faire economics, content to do nothing about the crisis.

This isn’t wedge politics. Rudd isn’t interested in dividing his opponents, or splitting them from their natural constituency. This is the politics of illegitimacy. Rudd wants to drive the Liberals from the field entirely, rendering them irrelevant, by convincing Australians that only the ALP has the wherewithal to tackle the crisis.

Even if it doesn’t work, it will at least engage Malcolm Turnbull on another front, diverting him from his own strategy of trying to develop the case that the Government has bungled the crisis.

Rudd makes a number of monumental errors and outrageous simplifications in his article. But they’re entirely deliberate, part of his simple narrative of an economic philosophy run amok. Simple and simplistic. The article is almost fairy tale-like in its simplicity. Evil Austrian economists reanimated the corpse of laissez faire economics and the parties of the Right sent it raging across the developed world, Franken-Hayek’s monster destroying governmental protections and social capital as it went. And now the monster has brought the whole world crashing down.

Toward the end, Rudd even links “neo-liberalism”, as he insists on calling it, with neo-conservativism, a similar monster that, in a Bride of Frankenstein-like sequel, wreaked havoc on international relations. 

There’s some inconvenient facts that contradict the story. The United States might have become the intellectual home of neo-liberalism but it was never the policy home. The US, except during the administration of that devoted Third Wayer Bill Clinton, ran monumental budget deficits. It has been a hallmark of Republican Administrations from Reagan onwards to cut taxes but not bother cutting spending. No small government for Americans, thanks — and certainly not in the military sector.

Nor did successive US Administrations give up protectionism. The US agricultural sector remains heavily subsidised. So if not the US, then where? Not the UK, home of socialised medicine which survived the Thatcher years entirely intact, part of the EU and its obsession with agricultural protectionism. Where else? Japan? Nope. Germany? Definitely not. The SE Asian economies? No way.

Maybe New Zealand, although Helen Clark spent much of the last decade reversing the excesses of the Nationals and her Labour predecessors.

Australia fits the bill, however. And here’s where the story gets complicated. It was Labor that first pursued neoliberalism, or the Washington Consensus, or the Golden Straitjacket, or however it is styled, in Australia. Labor floated the dollar, pursued budget surpluses, worked to keep wages down, sold assets, dismantled protectionism and deregulated labour markets. The Liberals fixed up the fiscal laxity of the Keating years before succumbing to their own, finished the privatisations begun by Labor, brought in a GST and went overboard on IR reform.

From that little list, who has the better claim to be called neoliberals?

It gets more complicated still. Peter Costello and Malcolm Turnbull have fired back at Rudd by claiming the Coalition was responsible for Australia’s well-regulated financial sector. Well, they’re partly responsible — the Hawke and Keating Governments were as well. But the model they’ve pursued doesn’t fit the social democrat/neoliberal framework at all.

Both parties have allowed a banking oligopoly, free from the threat of foreign takeover, that preserves the fiction of competition while allowing anticompetitive behaviour and systematic gouging of businesses and households. The Rudd Government’s close cooperation with the major banks over the last six months is merely a more explicit model of the intrinsically corporatist nature of Labor and Liberals’ approach to regulating the bulk of Australia’s financial system.

The regulatory failure in the US, the failure that allowed the systematic and massive lending of money to people who could never pay it back, which one would have thought was the very antithesis of capitalism, was a failure of the US political system, not of an ideology. Rudd himself notes that Glass-Steagall was repealed (under Clinton!) following a $300m lobbying effort.

That sums up a great deal of how Washington works, between lobbyists, congressmen and woman and senators, administration officials and the money that traffics back and forth amongst them all, whether it be via pork barrelling, donations, third party-purchased airtime or fees for service. The failure of financial regulation is matched by failures in US food regulation, in US environmental regulation, in industrial regulation — in fact wherever lots of money can secure a favourable outcome for industry.

That’s not neo-anything. It’s traditionally called corruption, at least until it becomes system-wide and then it’s “the way things work.”

Last year conservatives desperately tried to blame Democratic presidents for the financial crisis, claiming it was a soft-hearted desire to encourage home ownership amongst the poor that was really behind the sub-prime crisis. This rubbish was demolished in the New York Times just before Christmas, with a detailed and explicit account of how the Bush Administration fervently pushed the same goal of home ownership, and wilfully ignored considerable evidence of a looming problem — as a result of the same systemic political corruption.

In contrast, Rudd is offering yet another version of the “Third Way”, one of the most overused and meaningless political clichés of recent decades. What is advertised as the “Third Way” is simply another name for what the ALP itself pursued in the 1980s — liberal economic reform, coupled with investment in social fabric and government services. The Third Way is really about walking and chewing gum at the same time.

Governments occupy different points on the ideological spectrum, but the Howard Government did not differ markedly from its predecessor in any key economic areas except IR. It took reforms further in a number of areas, but in essence it completed the unfinished business of the Hawke-Keating years. It also invested in health, through Medicare, and regional development, which was originally a preoccupation of the Whitlam Government. And it was by no means committed to small government. If the Howard Government was more neoliberal than its predecessor, it wasn’t by much.

The Rudd narrative fails to acknowledge any of these facts — or more correctly isn’t interested in them. This isn’t history, or even the first draft of history, but propaganda — propaganda aimed directly at the Rudd’s current political opponents.