A Culture for Full Employment

INTRODUCTION

The theme of this book is "A Culture for Full Employment".  In choosing that theme I had two particular points in mind.

First, no single problem in Australia today is more important than the lack of jobs.

Second, although unemployment is most commonly seen as an economic problem -- and it certainly is that -- there is also increasing focus upon the view that much of the unemployment we are seeing today throughout the industrialised world is much more than that.

Increasingly, the question is being raised whether our educational "culture" is equipping our young people with appropriate attitudes to the world of work;  whether the "instant gratification" culture of our Western societies is consonant with a world in which rising real incomes are -- as they have always been -- the product of hard and prolonged work, rather than springing magically from some economic television tube;  whether, indeed, the long-drawn-out attrition of individual incentives being delivered by the all-pervasive Welfare State may simply not be compatible with a world of rapidly changing technology, rapidly varying demands upon the work-force, and rapidly increasing global competition.

THE HUNGRY MAN AND THE TIN OPENER

My title comes from one of Michael Oakeshott's most celebrated passages.  It is from his 1951 Inaugural Lecture at the London School of Economics, and I will quote him at length to avoid any charge of inappropriate editing.

"It is all very well, it may be said, to observe in politics the activity of exploring and pursuing the intimations of a tradition of behaviour, but what light does this throw upon a political crisis such as the Norman Conquest, or the establishment of the Soviet regime in Russia?  But if we exclude a genuine cataclysm ... there is little to support the view that even the most serious political upheaval carries us outside this understanding of politics.  A tradition of behaviour is not a fixed and inflexible manner of doing things;  it is a flow of sympathy.  It may be temporarily disrupted by the incursion of a foreign influence, it may be diverted, restricted, arrested, or become dried up, and it may reveal so deep-seated an incoherence that ... a crisis appears.

"And if, in order to meet these crises, there were some steady, unchanging, independent guide to which a society might resort, it would no doubt be well advised to do so.  But no such guide exists;  we have no resources outside the fragments, the vestiges, the relics of its own tradition of behaviour which the crisis has left untouched.  For even the help we may get from the traditions of another society ... is conditional upon our being able to assimilate them to our own arrangements and our own manner of attending to our arrangements.  The hungry and helpless man is mistaken if he supposes that he overcomes the crisis by means of a tin-opener:  what saves him is somebody else's knowledge of how to cook, which he can make use of only because he himself is not entirely ignorant.  In short, political crisis ... always appears within a tradition of political activity;  and 'salvation' comes from the unimpaired resources of the tradition itself." ⁽¹⁾

The political crisis on our agenda this morning is unemployment and the culture which has produced it and sustained it.  The hunger of unemployment, which now ought to be driving us urgently to remedial action, suggests we look for both a can of baked beans and a tin-opener to make those beans accessible.  Oakeshott is telling us that we have to find the canned food, and the tin-opener, within our own culture and political traditions.

Before undertaking the search for the missing can and tin-opener we have to look at the political traditions which have produced our hunger, our unemployment, and which block our search for the means to end it.

As a result of considerable work carried out over the last 10 years or so, our unemployment-generating traditions, and their origins, are now well understood.  So much so that the Secretary to the Treasury, Mr Ted Evans, said that "Unemployment is a matter of choice." That is a statement which contains within it a great deal of confidence as well as authority.  And Mr Evans is not a man given to hyperbole, or even enthusiasm.

I will traverse some of the ground which I covered in The End of Certainty, concerning the birth of the traditions which have given us our unique system of labour market law and regulation, and the consequent unemployment with which we are grappling today.  There is one important incident in that history which powerfully illustrates Oakeshott's reference to "so deep-seated an incoherence," within a political tradition, as to produce a crisis.

This incident took place at the Melbourne Constitutional Convention of January 1898.  In 1897, at the Adelaide Convention, Higgins and Kingston had been defeated on their proposal for a Commonwealth head of power to provide for conciliation and arbitration in interstate industrial disputes.  Such a power meant, of course, a power to regulate wages and conditions of employment.  Their primary source of inspiration, as is clear from the convention debates, was the New Zealand Industrial Conciliation and Arbitration Act of 1894.  Premier Kingston of South Australia, who was, with H.B. Higgins of Victoria, a champion for a Commonwealth role in labour market regulation, claimed:

"The Premier of New Zealand, Mr Seddon, has calculated that through the efforts of the tribunals and officials appointed under legislation he has been able to carry, (the 1894 I.C.& A Act) as much as a million pounds sterling has been saved to the colony."

The vote in Adelaide was 22 to 12. ⁽²⁾  Undaunted, Higgins and Kingston tried again in Melbourne and again cited New Zealand experience to bolster their case.  Their main opponents were Sir John Downer QC, Josiah Symon QC, both from South Australia, and George Reid from New South Wales. ⁽³⁾

The conservative opposition to Higgins and Kingston (who were the 19th-century forebears of our contemporary Wets) at the constitutional conventions, was based on two inconsistent propositions.  First they argued that it was no business of government to interfere in contracts between employer and employee, or master and servant, as the law of the time described the parties.  The second argument was that if government did interfere, it should do so only at the state level, not at the commonwealth level.

This sort of inconsistency is all too common amongst lawyers who advise their client to first plead innocent, but if necessary then to tell the Court that no harm was intended.

At this point, apparently, the very conservative West Australian Premier, Sir John Forrest, a famous explorer and a giant of a man, had a sudden rush of blood to the head.  To the great surprise of Higgins and his supporters, and to the consternation, perhaps the outrage, of many of his political allies (who had assumed that the Adelaide vote would be sustained) Forrest suddenly decided to back Higgins and Kingston.  He had sufficient authority to swing enough votes and the constitutional clause we know as Section 51:35 was passed on 27 January 1898;  22 votes to 19.  It was a fateful day.

Sir John Forrest's sudden rush of blood in 1898 has since produced a mighty edifice of regulation, rent-seeking and interest.  The original 1904 Conciliation and Arbitration Act has been constantly rewritten, restructured and re-arranged, often in response to High Court decisions.  In recent times we have had the Hancock Report (1985) and then the Willis Industrial Relations Bill (1987) which was based on that Report.  This Bill was abandoned in the face of the then forthcoming 1987 election and the advertising campaign initiated by the National Farmers Federation (NFF).

In 1992 we had a Commonwealth Bill (the Cook Bill) which, amongst other things, sought to bring sub-contractors within the confines of Higgins' edifice.  That Bill was passed and is now subject to a High Court challenge.  Twelve months later we have another Bill, this time a monster of a Bill, the Brereton Bill, which will, if passed, greatly enlarge, strengthen, and provide international reinforcing for the foundations of this great edifice which H.B. Higgins first sketched out in 1897.  All of this frantic legislative endeavour, then, taking place over so many years, and all of it the consequence of Sir John Forrest's apostasy, nearly 94 years ago.

Why did Forrest suddenly decide to abandon his friends and support his opponents?  The conservative counter-attack on Higgins did leave a large crack through which Forrest could fall.  If it was proper for the State Governments to regulate wages, why shouldn't the Commonwealth have a similar power to deal with interstate disputes?  But I think there is more to it than that.  Within the conservative disposition there is a tradition of thought which is quite happy with the idea that the government should regulate, if necessary in great detail, wages and conditions of employment.  Forrest, in his apostasy, abandoned two centuries of individualism in British political thinking and activity, and returned to the traditions embodied in the Elizabethan Statute of Artificers, an Act which remained unrepealed (although generally ignored) until 1819.

Some may think that references to ideas and modes of thinking that were powerful three or four centuries or more ago are quite irrelevant to our current problems.  I think such a perspective, however, can be very helpful.  We are dealing today with a problem which is very deep seated.  Those interests and groups which desperately oppose the application of obvious remedies for unemployment are able to draw, successfully, upon ancient arguments with considerable staying power.  Mediaeval life, with its order and faith, its certainties, its balance of power between church and state, its subordination of individuality to the collective, still appeals to many contemporary minds.  The mediaeval cathedrals symbolise the power of this appeal.  We can recognise, in the Brereton Bill now passing through the Commonwealth Parliament, a contemporary model of that Elizabethan Statute, and we should draw upon the experience of that Statute to understand its consequences.

P.S. Atiyah, Professor of English Law at Oxford University, described that Statute in these words:

"The Statute of Artificers [usually called the Statute of Apprentices] was passed in 1563 and remained on the Statute Book until 1819;  the Poor Law Act of 1601 -- which provided for much else besides poor relief -- remained largely operative until the C20.  Between them, these Acts attempted 'to banish idleness, to advance husbandry and to yield to the hired person, both in times of scarcity and in times of plenty, a convenient proportion of wages'.

"They controlled entry into the class of skilled workmen by providing a compulsory seven-year apprenticeship;  they reserved the superior trades for the sons of the better off;  they assumed a universal duty to work on the part of all the able-bodied;  and empowered justices to require unemployed artificers to work in husbandry;  they required permission for a workman to transfer from one employer to another;  they severely restricted the freedom of movement of the poor by enabling a person without means to be removed, by order of the justices, to his original parish or last place of settlement;  and they empowered justices to fix wage rates for virtually all classes of workmen." ⁽⁴⁾

In Britain, by the beginning of the 18th century, the collectivist intellectual framework which supported that Statute had crumbled.  But it re-emerged in Australia at the end of the 19th century, with great vigour, just in time to catch the constitutional framers at work.

The introduction of Australia-wide protection, beginning with the first Commonwealth Tariff Act of 1902, was soon matched by the 1904 Conciliation and Arbitration Act.  Higgins was appointed to the Arbitration Court and the High Court in 1906 and brought down the Harvester judgment in 1907.  By 1914 Australia's system of labour market regulation was regarded as beyond question and above fundamental criticism by employers and employees, and by Labor and non-Labor parties alike.  The beginning of the end of that bipartisan endorsement was the Clarrie O'Shea case and the conclusion which the trade unions drew from that experience.  Following the anonymous payment of the fines, the non-payment of which had led to Clarrie O'Shea's contempt, the unions came to believe that they were, in fact, above the law.  The Brereton Bill, in large measure, realises that belief.

We have continually to remind ourselves these days that the Australian political tradition goes back far beyond 1788.  It includes, for example, Magna Carta, the English Civil War, the Glorious Revolution of 1688, and the development of a tradition of individualism which seems to have been unique to the British Isles.  In an important book, The Origins of English Individualism, the Oxford scholar Ian McFarlane traces evidence of this sturdy individualism back to the 14th century!  He cites, for example, a tradition of making wills which manifested an enduring capacity to bequeath private property wheresoever the maker of the will desired.  This was most unusual in those times.

English Collectivism, of course, did not vanish with the birth and growth of individualism.  The Elizabethan Statute of Artificers is a classic collectivist achievement.  Francis Bacon, the scholar and lawyer, who became Lord Chancellor under James I, was a defender of the royal prerogative and has been a primary source of collectivist inspiration ever since he wrote The New Atlantis, among many other works.  Bacon fought tenaciously against Edward Coke, one of the great champions and interpreters of the Common Law and defender of judicial independence.  But over the next 150 years it was Coke's influence which prevailed, and the great 18th-century jurist William Murray (Lord Mansfield) entrenched and extended the Coke tradition, particularly in his development of the law of contract.

The great outpouring of entrepreneurship and economic energy which transformed the British Isles, and was then transported to North America and to Australasia, what we call the Industrial Revolution, was Individualism's great economic triumph.  Modern society is totally dependent for its economic well-being upon the Individualist tradition that was articulated, developed and legally entrenched, by Edward Coke, William Murray and their common law successors.

But at the 1898 Constitutional Convention the collectivist tradition, which had been submerged by the triumph of British free trade and Gladstonian Liberalism, achieved an unexpected and fateful triumph.  In 1904 the Commonwealth Conciliation and Arbitration Act was passed, albeit with very great difficulty.  From then on collectivist labour market institutions grew mightily in Australia, supported by both sides of politics, and by the representatives of capital and labour.  We should not forget that the ACTU, now a partner in government, was in large measure the creation of the Menzies Governments.  Harold Holt and William McMahon cultivated, supported, smiled upon and offered patronage to Albert Monk, President of the ACTU from 1949 until 1966.  They would have loved to have knighted Albert.  All he felt he could accept, however, was a CMG.

In Australia, during the 1980s, the heirs to our Individualist tradition made an assault upon the collectivist fortress of the Industrial Relations Club.  In Dollar Sweets they used the Common Law, the Common Law being the last defence of the individual reeling under collectivist assault.  In Mudginberri, they used Section 45D of the Trade Practices Act.  Sections 45D&E, John Howard's great achievement, were statutory formulations of common law principles.  Those measures are, of course, now about to be repealed.

Our legal system, based on the law of contract, the law of property, and the law of tort, has developed entirely on the basis of the rights and obligations of individuals.  The development of company law created a corporate personality modelled on the individual, a personality which was separate from the individuals who contracted to form the company.  Trade unions became, in due course, incorporated bodies which were distinct from their members, but which in the UK, and in Queensland for many years, were granted extraordinary legal privileges such as immunity from the law of tort.  The Brereton Bill reintroduces these privileges.

Ian Webber, Chairman of the Business Council of Australia's Employee Relations Committee, attacked the Brereton Bill at his company's AGM on 9 November last.  His comments were reported the following day in The Australian under the headline:  "Webber slates labour law reform" and continued with these words:

"The Bill entrenches union involvement in the enterprise agreement process but also significantly erodes employers' capacity to withstand union blackmail through secondary boycotts.  The new provisions will, in effect, legalise strike action during the enterprise bargaining process while, at the same time, strengthen the union movement's capacity to impose secondary boycotts with relative impunity.  It was not sufficient to accept the ACTU's recipe for continued monopoly status and to abrogate responsibility for real industrial reform."

The problem faced by the trade unions is that, in our current political and economic situation, they cannot accept the validity of the most fundamental legal principles, based on individual rights and obligations, and still survive as powerful institutions.  Their power is sustained only by legal privileges and monopoly rights which are granted to no other individuals or corporate bodies in contemporary society.

This dilemma is, for them, a constant thorn in the flesh.  Let me quote some attempts that have been made to assuage the pain.

At the time when the Mudginberri dispute was at a crisis point, photographs appeared on the front page of The Australian, showing the very overweight picket line at Mudginberri, seated on steamer chairs with a pile of tinnies close at hand.  Simon Crean, then President of the ACTU, sought to reconcile this deep-seated incoherence, symbolised so graphically in the photo, with these words:

"...whilst the theory might be right, that the rights of the individual are supreme, the reality is that we have to deal with collective representative groups -- we can't operate any other way in this society.  It isn't a question of the supremacy of individual rights, it is a question as to how one collectively represents that grouping of individual rights to ensure that the outcome is in the best interests of the country as a whole, and that's what the trade union movement stands for and that is what it is committed to but it is not what Mudginberri stands for." ⁽⁵⁾

During the Mudginberri period the Hancock Committee was deliberating on the reforms of our labour market regime that it would propose to the government.  The members of that Committee were Vice Chancellor Keith Hancock as he then was, Mr George Polites, and Mr Charles Fitzgibbon.

On the rule of law and its effect on trade unionism, the Hancock Committee said the following:

"... if we ask why civil litigants accept the adjudicators' decisions [Hancock means court decisions] we find part of the answer in the ethics accepted by the disputants;  but part, too, lies in their relative weakness.  The two factors are inter-related:  the ethic of accepting decisions gains strength from the difficulty of doing otherwise."

Further on they wrote:

"... centres of power replace the powerlessness of the individual workers with collective strength.  It is a mistaken view of the pluralist society to assume that every 'subject' is equally dominated by the might of the state and its arms of enforcement." ⁽⁶⁾

Such arguments are so mediaeval in character, and so antagonistic to deeply held axioms of equality before the law, regardless of rank or wealth or power, that the articulation of them in a high-ranking government inquiry was seen as deeply embarrassing.

Collectivism, however, would not endure if it did not provide a continuing attraction, and not only for those who aspire to sit at the top of the collectivist heap.  The Individualism which produced the common law of property, contract and tort, and which thereby fuelled the Industrial Revolution and thus the contemporary world with its jumbo jets, McDonald's takeaways, compact discs, desert-crossing four-wheel drives, notebook computers, satellite imaging, and so on;  this ideal of individual moral responsibility, obligation and opportunity, is too great a burden for many to bear.  Michael Oakeshott described this predicament in these words:

"In some [people], no doubt, this inability to respond to the invitation to be an individual provoked merely resignation;  but in others it bred envy, jealousy, resentment.  And in these emotions a new disposition was generated:  the impulse to escape from the predicament by imposing it on all mankind.  The man frustrated by his failure to live up to the invitation of the times became a man disposed to assimilate the world to himself by deposing the individual and destroying the moral prestige he had acquired:  he became the militant 'anti-individual'." ⁽⁷⁾

We can all immediately think of some well known contemporary trade union leaders who fit, perfectly, Oakeshott's description.  On the other hand, what do we make of those trade union leaders whom we know and respect, or perhaps more significantly, used to know and admire but who have passed on?

In all walks of life we will find people to admire and people to be feared.  But the essential element of contemporary Australian trade unionism is that it is an institution devoted to the acquisition of more power.  From the signing of Accord Mark I, in February 1983, the ACTU has never ceased in its endeavours to persuade the Government to present legislation to Parliament which would repeal Sections 45D&E and grant immunity from the law of tort.  After 10 years of sustained effort it has now succeeded.

In an institution so completely dedicated to the acquisition of power one can confidently predict that nice guys will finish last.  Samuel Johnson's lines about Cardinal Wolsey are salutary here.

In full-blown dignity, see Wolsey stand
Law in his voice, and fortune in his hand;
To him the church, the realm, their pow'rs consign,
Through him the rays of regal bounty shine,
Turn'd by his nod the stream of honour flows,
His smile alone security bestows:
Still to new heights his restless wishes tow'r,
Claim leads to claim, and pow'r advances pow'r;
Till conquest unresisted ceas'd to please,
And rights submitted left him none to seize.

Our collectivist tradition, then, gives us power-seeking institutions and the culture of unemployment.  It arises from the great difficulty which so many people have in accepting the burdens of individuality, and therefore they look to governments to make choices on their behalf.  In accepting that burden governments and their agents, because of their necessarily very great ignorance, make very many wrong decisions.  It is impossible that it should be otherwise.

But now, as a result of Sir John Forrest's apostasy and all that followed from it, we have a million or so people locked out of the labour market, and feeling justifiably aggrieved and resentful about it.  The reason for this continuing scandal, in my view, is that those institutions which used to provide moral leadership in the community, particularly the churches, have lost their capacity for independent leadership.  They are either unable or unwilling to speak out against those powerful institutions which stand in the way of ending unemployment.  They seem disinclined to reassert the duties and obligations of individual citizenship.  As Ted Evans said with such care and precision, it is a matter of choice -- we do have to choose.

With the Brereton Bill we are choosing, deliberately, consciously, knowingly, to deter investment, to increase unemployment and to inhibit economic growth.  This Bill empowers a group of people who can cause great economic harm to their fellow citizens, in the name of industrial action, confident that the law cannot touch them.  The power which will accrue to these privileged people will be limited only by their imagination.  We are back to the Clarrie O'Shea situation.  Those with responsibility for investment decisions, whether it be for their own capital or other people's will not willingly make themselves hostage.

Faced with this crisis we must ask ourselves where is our can of beans?  Where is our tin-opener?  These things have to be found within our own traditions and our own history.

Well, we have canned beans and tin-openers aplenty.  We are heirs to the individualism that enabled and encouraged the pioneers who developed this country to leave hearth and home and travel the Great Circle route non-stop from England to the Victorian coast.  Australia is a monument to this proud tradition.  Our pioneers took upon themselves the responsibility to make that voyage, knowing it would be unlikely that they would ever be able to afford the price of a return ticket.

Nowhere is this culture of individualism more deeply embedded than in our attachment to the rule of law.  Our common law traditions are blind to collective strength and to the power of organisation.  As a society we do not accept a law that prescribes privileges or immunities for certain classes or groups.

The Brereton Bill, if it passes, will spark another constitutional clash of bitter proportions.  The use of the external affairs power, and through that the ILO conventions, drafted in Geneva by ILO bureaucrats totally unknown to us, will not endear the Commonwealth Government to the Australian people.

Political life is the continuing contest between different modes of thought and behaviour within a political tradition.  Our unemployment is the consequence of the supremacy of collectivism in our labour market arrangements for the past 90 years.  Collectivist ideals are essential in time of war.  They are important in religious life and in sport.  But they are now causing terrible distress in our economic life, because they are denying the opportunity of working to over a million Australians.  Ted Evans told us, simply, authoritatively, that it was a matter of choice.  Surely it is time to choose, and to choose rightly.

QUESTION PERIOD

KEN BAKER:  I'm interested in the concept of individualism.  When I was at university in the 1970s, individualism in one form was very strong.  It was called the "Me Decade", and yet at the same time this was a period in which many of the things we may see as the necessary basis for full employment, such as the work ethic, were under attack.  There was a lot of talk nevertheless about doing your own thing, being different, rejecting the demands of society upon the individual.  This seems to be a different sort of individualism from the one you are lauding.  Can you try and define what the difference is?

RICHARD WOOD:  Well I'm not sure about that.  When I was at university, what struck me was the enthusiasm to tear down individualism.  It really was a revolt, I suppose, against a fair bit of conventional behaviour.  Certainly the strains of unemployment were not upon us, the focus was different.  The opportunity of employment, the sense of a society that up until then knew where it was going, in Australia was very clear.  Even though it may have been in the wrong direction from time to time, it had a focus.  I suppose the Vietnam War coincided with a new generation, seeking to break out and change not so much individualism -- in the sense that they wished to escape the confines of the trade union movement that I'm putting here -- but expressing views born of a society that was not concerned about the creation of wealth, because there was an assumption of wealth-creation.  That was assumed in a very confident manner.  Up until the '60s and through to the '70s, the generation which had been through the Second World War, and had embarked upon collectivism of necessity, emerged from the Second World War confident of where it wanted to go to in a community which had been extraordinarily successful.  The following generation had neither the experience nor the tradition that had given trials and tribulations to their predecessors, and we saw a breakout that was focussed around Vietnam and Jim Cairns, and a sense that order and discipline within a structured society, moral obligations, the normal adhesive vestiges, the Oakeshott reference to traditions, should be questioned very strongly.  What I am trying to talk of here, I suppose, is encompassed in the conflict between the traditions one might see in the churches, in the 10 Commandments, for which I can find no collectivist equivalents that bind the tradition of a society.  Generally, the sorts of things that you learn on your mother's knee, you will not generally find in a collectivist framework:  they're missing.  A collectivist sentiment seeks to go counter to that, and the trade union movement I suppose is the most obvious creation of the late 19th and 20th centuries that exemplifies such incursions of power -- although I think we are seeing that in the environmentalist movement today also;  collectivism through a transfer of power in another manner.  Those who were on the streets in the '60s and '70s are now in government giving us other collectivist thought and power structures from within government.  The subject that you raised, and the question you have posed, as obviously you can see from my answer, I would need to sit down and give a great deal of thought to.  In 1967 Clarrie O'Shea and his tramways union were at the fore of the trade union movement and had enormous power, unrestrained.  I think amongst those who were first to realise the dangers of that power, quite frankly, were past elements of the ACTU themselves;  because they saw that if they didn't seek to ameliorate some of that power, they would be blamed for the consequences of all the unemployment it created.  So we have seen, even within the trade union movement, some adaption of the power structure and the collectivist thought of that era.  In this case -- the Brereton Bill -- they have sought more than they have been offered.

MARCUS L'ESTRANGE:  I work in the CES and I'm a public sector unionist, a work-place delegate but I'm speaking as a private individual.  Just as a technical point, you mention the figure of one million unemployed, but the annual ABS figures show at least two million, most likely three million, unemployed.  Having said that, what do you say to my members and myself who say that the end result of your policies would be to have wage levels as low as Bangladesh or India or somewhere like that, and that that would drive down consumer demand to such a point that you have even worse problems than at the moment.  What would you say to allay my members' views on that point?

RICHARD WOOD:  I guess the market place of the world is a very strict master, but on the other hand, there is no escape from it.  The fact of life is that Australia is in a race for life, there is no escape from it, it has no end, and we are embroiled in economic and, if you like, competitive forces which are overwhelming.  Unlike most of us here -- we are much more comfortable obviously than the people who are unemployed -- and unlike most of your members in the trade union movement, who act basically for the employed rather than the unemployed -- that is where they get their votes and their money from -- the unemployed are faced with the hurdle of getting employment.  There are natural advantages of being here that have absolutely nothing to do with Bangladesh in terms of skills, training, distance, culture, history, all sorts of things, which go towards making a clear differentiation between our situation and theirs.  But ultimately if they get smarter, and as the LDCs generally get smarter, we have to run harder.  We have to question some of the things we've done in the past and baggage that we carry.  All I can offer your members is that unless we all get smarter, we will find that we will impoverish ourselves collectively and certainly.  There is no escape.  The dilemma you pose seems a simplistic one, but the power of the market place is such that unless it is recognised, we will increasingly impoverish ourselves;  we are doing it very satisfactorily at this time.  We have a growing external debt and we are the worst-performing of all the double-A countries in the world.  We have in the last decade taken our net external debt from something like seven or eight per cent of GDP to around 44 per cent;  I don't think we've ever been able to do that before in the life of one government or one decade, it's a record.  So the flexibility that comes from having a sound financial base has almost run out, and consequently the marketplace forces are really upon us, and they will express themselves in the exchange rate, and we are seeing a lowering of our standard of living through the process, and so all your employed members are going to suffer, have been suffering, and will suffer more.  For the unemployed, they face huge hurdles of getting jobs, with the monopolistic restrictions of access to the job market that the Brereton Bill will make worse, not better.

IAN WEBBER (Mayne Nickless):  I would just like to comment on why I made the remarks I did at the Annual General Meeting of Mayne Nickless which were accurately reported in the paper and, indeed, in the press.  I had to say I was rather gratified by the quality of the reporting.  What I was hoping would happen is that I would be joined by a number of other business leaders, because I believe there is a great deal of deep concern amongst the leadership in this community.  I hoped that I would to some degree provide a catalyst.  I believe this Brereton Bill is manifestly bad law, and I think that history shows that bad law generally comes to a bad end.  If one looks at prohibition in the United States, for example, there manifestly bad law became ignored and, in fact, great evils emerged because of the nature of that law.  My own view is that there is a momentum in Australian society today towards the individualist view of industrial relations.  In my time at the Business Council I felt that there was a real commitment to the enterprise and to freeing up the system that was supported very enthusiastically in many areas in the work-force.  Let's leave aside the organisers and the ACTU and look at the rank and file.  In my own company we were successful in many areas in achieving quite remarkable agreement on the change that had to be made.  Against that background -- and I do believe that our experience is reflected in many parts of the Australian community -- is it possible that you can really reverse that trend with bad law?  In fact, are we going to find ourselves in the situation where the momentum for reform and change in the direction outlined by Hugh Morgan will be so great that it will overcome the inadequacies of what the Brereton Bill proposes?

RICHARD WOOD:  All I can say is that I would hope so.  I find it remarkable that the ACTU and some of its senior people were so perceptive in understanding that there was a change of mood within the community;  that there was a problem of impoverishment also in the community;  that they did not wish to be seen as the cause of it;  and that they sought to get hold of the agenda for movement themselves within the structure, but in a direction which they controlled.  The Brereton Bill, and some of the arrangements in that Bill, are indications of their agenda, as is the articulation that you have had from people like Kelty about the need for change in the enterprise;  he uses the right words.  On the other hand, they recognise that there is no place in the sun for them, in the form to which they have devoted their political careers, unless there is a structure of privilege which gives them tremendous support at the expense of others.  For example, the exemptions which are provided to unionists in the Brereton Bill from strike activity and immunity from tort are given only to unionists.  It is a great encouragement to say that you don't get the same immunity unless you are a member of the union, so there is a drive then to increase the numbers within the union movement, so there is a collectivist act at the same time in this legislation.  Certainly I agree with you that it's a bad law, but it's going to take one hell of a time and one hell of an effort to change it.  Even the process of challenge I think is going to be difficult.  I have a 27-page advice from Freehills about the operation of this Bill and it finishes off quite nicely by saying that "in effect what we have is that we can now condone breaches of the ordinary law of the land provided that they don't last for too long." You can keep repeating this process;  but whether the community has got the energy to roll this law out, I don't think so.  Certainly not under the present government;  you need a change of government presumably.  You would need to have quite a determination to change, and also ensure you had the support of the Senate, so it could be years before you get this change if you didn't control the Senate.  Bad law it certainly is.

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THE END OF CERTAINTY:  THE CULTURE OF THE 1990s

The Australian recently published a special colour section to commemorate the 1,000-day presidency of John Kennedy on 22 November -- the 30th anniversary of his assassination.  It seemed a natural publishing initiative, and their circulation, I am pleased to report, rose appreciably that day.  But in many ways it was unusual;  going to such lengths to commemorate the leader of another country who died 30 years ago and who had little real contact with Australia.

I am sure that most people would recall the factors which made the Kennedy presidency memorable in his time and still vivid in our time.  I don't want to discuss Kennedy's merits as a President, but I would highlight several aspects of Kennedy's political ethos which dramatise for us today just how different political leadership is in the 1990s.

First, people believed in the early 1960s that governments could solve the economic and social problems of the age;  there was a faith in government and in government's ability to produce solutions.  This reached its zenith in America in the Kennedy/Johnson years and in Australia during the early Whitlam era.

Second, in the 1960s people were prepared to believe in and follow a strong and communicative leader -- charismatic was the word -- and this belief, perhaps even this trust, reflected the hope and optimism of people.

Third, Kennedy was a war president.  The Cold War, of course.  The ethos of the time was pervaded by the war-like confrontation between democracy and communism.  Leadership was a daunting task then.  But Cold War leaders had some advantages that today's leaders don't have -- they had the focus of a permanent external enemy, a mystique of leadership that had not been penetrated by the media's obsession with private lives, the kudos from being seen to have out-nerved or out-smarted the communists and the appeal to unity and the common interest necessitated by an external threat to the essence of democracy.

Fourth, the Kennedy period, although it was not recognised at the time, was the final high tide of American hegemony.  Those leaders governed from a position of strength and this was recognised by the people.

Fifth, Keynesian stabilisation policies still continued to be successful and this post-World War I1 era was a time of steady growth, job creation and price containment.

By contrast, what do we have today?

We have an international environment where uncertainties, confusion and new issues abound.  It is a period when the magnitude of the problems seems to far outweigh the capacity of leaders to imagine, let alone execute, solutions.

Where people previously believed in government, they are now sceptical of government -- yet they have no alternative faith.  Where people previously believed in at least some political leaders, today there is cynicism, mistrust or disgust with leaders and the political system itself.  Where people previously responded to the challenge of the Cold War, they are confused and dismayed by the uncertain peace in its wake.  Finally, where people were comforted by the dominance of the West in both military and cultural terms, we are now seeing the East rise again -- Asia is an economic miracle, a new political dynamic and a growing military force.  Where people had the confidence of prosperity, they now have the recent experience of the worst recession in 60 years and the relative economic decline of many western countries.

These five fundamental changes, which I believe can be shown dramatically in the contrast between the Kennedy era and the Clinton era -- and are reflected in Australia as well -- provide the international framework for the politics of the 1990s.

I want to discuss what might be the culture of 1990s politics.

My starting point is that the 1990s are different, and will become even more different.  They won't be a repeat of the 1980s.  Anyone who fails to grasp this will be left behind.  Who would have predicted two or three years ago that Clinton, not Bush, would win the White House, or that Keating, not Hewson, would win The Lodge, or that Mabo would dominate domestic politics in 1993, or that the Soviet Union would no longer exist, or that Europe would be plunged into its worst war since 1945, or that the LDP would lose office in Japan?

Success will come to those who pick the trends.  I don't pretend to know what these trends are, but I have some speculations for the 1990s road map.

I want to begin by sketching, at the broadest level, the two great forces that are now coming into conflict, not just in Australia, but in most of the industrialised democracies.

The first force is the continued power of free market ideas, underwritten by economic and financial globalisation.  I argue that, despite the severity and length of the 1990s recession, no alternative policy paradigm has been found to reverse the direction of the 1980s.  I'm not saying there won't be policy changes;  of course there will be changes.  Many people want to see the 1980s market-oriented policies reversed completely.  What I am asserting is that the intellectual case for a new model has not really been put, let alone won.

This is quite extraordinary.  Let me illustrate the point with reference to Australia.

Despite 11 per cent unemployment and a prolonged downturn, the financial system has not been re-regulated;  the protection cuts have not been cancelled;  the declared stance of government remains that of cutting the federal deficit to the equivalent of one per cent of GDP -- that is, an on-going budget deficit is not seen as any solution to our problems;  there is strong official and political support for maintaining low inflation;  it is the orthodoxy that we must run an open competitive economy integrated into the Asia-Pacific.  I am not aware that the recession itself has produced any new or revived role for government in solving our problems.  However, we are yet to see how Mr Keating responds to the Green Paper on unemployment.  Even if we see a greater degree of government intervention to address long-term structural unemployment, it is doubtful whether this will be at the cost of fiscal policy.

Even in those areas where the Keating Government is failing, it still professes to believe in the 1980s philosophy.  For example, Laurie Brereton's new industrial law is presented as a flying wedge for new enterprise agreements, although it is nothing of the sort.  The Keating Government still formally supports more microeconomic reform, greater structural change and privatisation despite the lack of recent progress in some of these areas.

Contrary to what many people would like and what many others would assert, the recession hasn't smashed the 1980s policy mould.  There is no new design to replace the 1980s system.  To grasp this fully one needs to observe events not just in Western Europe and the United States but in China, Indonesia, India, Mexico and Eastern Europe.  In these countries deregulation, privatisation, microeconomic reform, new investment and structural change proceed apace.  What this means for Australia is that there is no going back from the new direction we charted in the 1980s.  The world simply won't permit us this luxury.

In his book The End of Certainty, published in November 1992, Paul Kelly identified the forces driving our national adjustment.  These forces will offer us no respite.  His argument was that in five areas Australia is undergoing decisive transitions, although they are occurring at different speeds.  They are:

• the replacement of White Australia with multicultural Australia;
• the shift from protection to a relatively open economy;
• the move from centralised wage fixation towards a new enterprise-based culture;
• the decline of reliance upon government to solve problems and its replacement by a greater sense of individual responsibility;  and, finally,
• the collapse of imperial benevolence, which means an acceptance of national maturity in our recognition that a great power will no longer bale Australia out.

We are responsible in both an economic and security dimension for our own destiny.

The recession has slowed the pace of some of these changes, but they still continue.  The forces propelling Australia's transition are powerful and international.  They are implicit in the operation of global markets for finance and products;  in the collapse of the Cold War security system;  in the rise of the economic power of the Asia-Pacific;  in the new world of instant communication technology.  The 1990s will see policies being adapted and altered but, so far, they have not produced a new philosophical framework to replace the 1980s paradigm.

There is, however, another great force which has emerged -- the people are in revolt.  There is a new assertion of democratic power coming from the grassroots.  More precisely, the middle class is sceptical and hostile.  Paul Keating and Bill Clinton both won their last elections through exploiting this middle-class sentiment.  The middle-class revolt is against the 1980s, against the policies and consequences of the 1980s.  You remember the 1980s -- they promised a nirvana and ended in recession.

The middle class thinks the 1980s tax cuts favoured the rich.  It thinks the sharemarket was largely manipulated by corporate crooks.  It believes that easy bank lending led to the crash;  that deregulation was too often a licence for greed.  The middle class is shrinking.  A small element at the top has broken off to become rich, but a much larger chunk has fallen off the bottom to join the underprivileged.  The middle class feels under threat at home and at work.  It is worried about employment security, income maintenance, the upheaval in the family, changing social and sexual norms, and it is fearful about the rising incidence of crime.  People are worried that they can't control their lives any more.

Hugh Mackay has captured this mood superbly. ⁽⁸⁾  In his research he has mapped the psyche of 1990s Australia and has called this the age of discontinuity and of redefinition.  Mackay says:  "The story of Australia between the early 1970s and the early 1990s is the story of a society which has been trying to cope with too much change too quickly and on too many fronts."  I can't think of a clearer warning for all those economists who believe that the national malaise demands faster economic change for the rest of this decade.

The people are shell-shocked.  Paul Keating won the last election on a campaign against the GST.  But this succeeded because the voters wanted security and feared radical change.  The public wants economic progress but it also wants social security.  People won't gamble on economic change for its own sake.  The dominant middle-class sentiment is to distrust economists and to look sceptically on politicians.  The middle class is suspicious about market forces and is hostile to the slogan of economic rationalism.  In the election John Hewson was the radical and Paul Keating depicted himself as the mainstream politician.  Keating won despite the recession because, ultimately, this middle-class sentiment broke his way.

Listen to Hugh Mackay again:

"The common cry now being heard around Australia is, 'why does everything have to change so fast?', the common complaint is that individual Australians feel as if they have lost control of their own lives and their own destiny ... growing numbers of Australians feel as if their personal identities are under threat as well.  'Who are we?' soon leads to the question 'Who am I?'."

Of course, this is tied to the loss of faith in institutions and the decline of traditional values.  The dwindling support for our mainstream institutions is manifest -- church, parliament, marriage, trade union, political party.  There is great anxiety now over gender roles, the strength of the family, financial security, moral values and cultural and race relations.

I now want to put together the two trends I have identified.  On the one hand there is globalisation which demands greater competitiveness and more economic reform.  On the other hand there is the demand from the people for more stability and security.  The upshot is a profound tension in our political system as these two forces collide.  The economic market demands one solution but the political market is demanding another.

I now wish to describe the symptoms of this tension and then canvass the broad outlines of a solution as we advance through the 1990s.

The tension is clear in most western countries, but it is particularly strong in Australia and New Zealand.  The result is the current unsettled period of relative inactivity in economic reform, of political compromise, trade-offs, the search for diversions by some leaders and a series of lost opportunities.

Political leaders are searching for a way through this gulf between the demands the economic market places on them and the contradictory pressures from the political market.  We can put two interpretations on the current situation in Australia, both of which have some validity.  The first is that we have lost our way as a nation;  that we are stranded half-way or thereabouts on the path to a new political culture;  that we have broken decisively from the past, but have lost our directional compass and our courage to keep pressing forward.  The other view, more optimistic, is that human nature being what it is, it is therefore sensible for governments to soft pedal reform after the recession;  that it is desirable to wind back the pace of change, reassure the voters and stabilise the system.  A further rationalisation here is that it was also time for corporate Australia to get its balance sheets in order -- to reduce debt, cut costs, streamline procedures and change its strategic outlook.  I think that more and more companies are viewing exports as a strategic mindset, not just as the residue from unmet local demand.  Our private sector culture is changing.  This change, to a certain extent, has been helped by the recession.  One of the legacies of the recession has been the recognition that companies need market diversification.

It is true that during 1993 both the rhetoric and the policy momentum for on-going economic reform has been conspicuously weak.  Where is the real champion of economic reform today in federal politics?  In truth, there isn't one.  I would make the point that you can't expect people to support on-going and faster economic reform when the case is not being argued on a sustained basis by political leaders.  Don't expect the people to support a cause if the cause isn't being championed.

Paul Keating's challenge is to overcome the essentially status quo platform on which he won the 1993 federal election.  The interesting and basic question for Keating's Prime Ministership is whether he will advance the cause of those economic changes which he advocated as Treasurer.  It would be a singular irony if Keating as Prime Minister were retarding the next stage of the very reforms he initiated as Treasurer.

I suspect that Keating has been somewhat intellectually disengaged from economic policy for much of this year.  His priorities have been the issues arising from the Mabo High Court judgment and the agenda in foreign and trade policy spearheaded by APEC and GATT.  I think these issues, which have occupied much of Keating's time, have been completely appropriate priorities for our Prime Minister.  However, it was also in Keating's own interests for him to steer away from the economy in 1993.

One danger for Australia is that the Labor Government may think it can rely on the gradual upswing in the world economy and the business cycle to deliver it the next election.  The problem here is that Australia may get caught short on the structural reforms needed to underwrite any sustained recovery.

As for the Federal Coalition, it remains crippled by its 1993 election defeat.  The Liberals put the case for economic change, but in a lop-sided, GST-biased and ultimately unconvincing fashion.  Their defeat was a setback for reform.  Now the Liberals are bitter at their loss, sceptical about putting their cards on the table, unsure of their beliefs and, to the extent they still back economic reform, are yet to fathom how to present the case to the voters.

At another level, Paul Keating has two choices in appealing to voters, both of which represent alternative re-election strategies.  The first is the "true believers" strategy;  he can try to resurrect the Whitlam constituency of sectional interests -- unions, artists, women, migrants, Aboriginals, Australian nationalists and public sector employees.  I don't believe such a strategy would suffice.  The "true believers" approach can briefly invigorate the Labor Party, but it can't win an election.  At a deeper level such rhetoric only conceals the basic political issue which will confront the Labor Party in the future -- how does the ALP, whose formation and success as a party has been closely associated with the old Australian Settlement, reinvent itself for the Australia of the 21st century which has left the Australian Settlement ideas far behind.

Keating's alternative election strategy is to construct a new coalition for growth in the 1990s.  I believe this is the preferable approach.  The strategy would be to fashion a coalition that supported vigorous growth policies within a framework of social justice.  This is the position Paul Kelly outlined on the last page of The End of Certainty when he said Labor's challenge was "to attempt a new synthesis between the ALP ethos and the Hawke-Keating legacy of market economics."  He went on to say that the challenge for our political leaders was to internationalise the economy within a framework of traditional Australian values of justice and equity.  This is where the issue of employment enters the picture.

We are about to enter a new phase of politics that will see the economy and employment at the centre stage of the political agenda for 1994.  The government is about to receive several far-reaching reports on the nature of unemployment and how it should respond.  My argument is that, in addressing the employment question, the government actually has an opportunity to revive support for a new 1990s growth strategy.  I would make the following points:

• From certain sections of the ALP there will be talk of well-meaning but ratbag solutions to unemployment which involve massive public spending and a pandering to sectional interests and sectional policies.  In one sense, the Brereton industrial law is a forerunner to such agitation;  it is a bill which puts the sectional interests of the union movement ahead of the national interest and therefore is bad philosophy as well as bad law.
• The principal solution to unemployment must come through growth.  Australia must save more, it must invest more and it must borrow less.  Answers that don't address the real problem are phony answers.  We should remember Ted Evans' statement that our current level of unemployment is a matter of choice, our choice.
• Higher growth means more economic change and reform.  We need a renewed commitment to economic reform which involves support for a low inflation, higher saving, low protection economy where welfare payments are seen in terms of need, not in terms of rights.
• A firm nexus needs to be established between economic growth and social compassion.  I think the community tends to see these as opposites, almost as mutually exclusive outcomes.  This is quite wrong.

Economic reformers must change the political ethos in which they operate.  If they don't, then they will fail in the 1990s.  We need a new ethos for economic growth in Australia, and this both begins and ends with the persuasive argument that economic growth and social compassion are closely linked.  Too often in the past growth and structural change have been sold the wrong way.  The emphasis has been on the means, not the ends -- cutting programs, cutting wages, cutting off people from their lives to which they have grown accustomed.  In short, growth has almost taken on an "anti-people" overtone.  All such rhetoric and thinking must now be cast aside.

• People will make sacrifices and they will respond to real leadership.  The people know Australia has deep-seated problems.  They don't expect overnight solutions, but they do want an agenda of solutions because they care about the future of their children.  They are profoundly disenchanted with the existing leaders and existing parties.  They want honesty and they want politicians who can speak clearly and directly.  The political leader who does this will be able to mobilise community opinion.
• Economic reformers will get nowhere in the 1990s if they only rekindle in the public's mind the fear of another bout of social Darwinism.  People aren't interested in society as a survival of the fittest.  The Australian people want social justice, and economic reformers need to talk and address the issues of equity and access, not just growth.  Any attack on the welfare state ethos will be disastrous -- yet people will support governments denying welfare to those who don't need it, or taking action to wind back the open-ended nature of unemployment benefits.
• The people are weary of the divisive nature of established politics.  They want leadership which tries to establish a basis for social co-operation.  People don't want their society divided and they don't want an economic underclass.

Economic reformers should be aware of the stakes involved in the coming debate about how to address levels of high unemployment.  There will be a political battle in which some people will want to cancel the gains of the 1980s.  So economic reformers must win this political fight.  The truth is that Australia can't turn around and march backwards, deny competitive pressures and try to resurrect barriers to markets.  The community will respond if politicians speak with more honesty, demonstrate political skills and get the right balance in rhetoric and policy between growth and compassion.  The leader who charts a fair way forward for Australia will prevail in the 1990s.

QUESTION PERIOD

DES MOORE:  I wish you luck in your quest for honest politicians, Richard.  I wonder whether it is right to interpret the results of all elections as concern about the pace of change and instability.  I don't have any easy answer to the question of why certain election results occurred, but I think when you move away from the federal sphere into the State sphere, you can see in this State a government continuing to implement very considerable change, continuing to have very strong support in the community -- admittedly also strong opposition.  When you look around you also, not only in the government sector but in the private sector, I believe there is increasing acceptance in the community that we have to be internationally competitive, that we have to change and that we have to go on changing.  It is actually happening, for example, as the launching of the Business Council's important study on innovation shows.  I would raise a question about the Hugh Mackay interpretation which you appear to endorse.

RICHARD WOOD:  The first point about honesty.  The public know they are being lied to and this comes out in all the research and all the surveys.  When it came to the last federal election campaign the platforms that both parties put were largely unsustainable.  The Australian wrote an editorial the day after Paul Keating called the last federal election saying that the major challenge facing the party that won would be to disengage from a large number of the policies that it was putting to the people.  The people know this and understand, of course, that politicians will not always be honest, but it is none the less my view that there is actually some electoral success in politicians these days telling the electorate some of the truths which the electorate knows to be the truths.  Secondly, in relation to the Kennett Government, that Government is a new government;  this is enormously important.  I think that new governments do have a great capacity to implement change, providing they get the mix right between economic reform and political skill.  Peter Walsh has said many times that we have a tendency in this country to re-elect a government once too often.  I think there is a lot in this, and there is no doubt at all that when it comes to the federal level, where we've got the one party that has won five elections running, its capacity to implement on-going change is substantially exhaused.  So a lot depends upon the nature of the government, whether it is a fresh government or not, and I don't think it is any surprise that the Kennett Government is doing more when it comes to economic reform than any other government in the country at the moment.  But what will it be doing if it gets into its third term?  Or its fourth term?  Regarding the Hugh Mackay thesis, I have to say that I believe his general proposition when it comes to diagnosing the psychology of the electorate is right.  And I think there are signs of this everywhere, but particularly in Australia and New Zealand.  It is seen in the success of the referendum in New Zealand, the recent election result in New Zealand, and the changes in the New Zealand cabinet.  The politicians are aware that the electorate is shell-shocked.  The politicians are, of course, trying to steer this unsteady, compromised path between, on the one hand, the demands of the economic market place and, on the other hand, the concerns of the electorate.  I think what the politicians have to try and do now -- what I am suggesting when it comes to unemployment -- is actually to find a new way of selling economic growth, and the policies needed to sell economic growth.  I believe fundamentally that this can only be done by establishing a nexus between economic growth and social compassion.  I think that if our economic reformers in the 1990s don't try and do that, then the cause of reform won't succeed.

OWEN HARRIES (Washington DC-based journal, The National Interest):  Firstly I'd like to say that I found Richard's analysis very persuasive and very powerful -- this identification of central tension between the ineluctable forces of change imposed by an international economic system, and the anxiety about stability at the social and political levels.  Within that context you identified Keating as the upholder of the status quo in the last election;  I know what you mean and I know what you are referring to.  But, of course, in one important respect he was anything but the upholder of the status quo, and that was in his advocacy of a republic, and I would like to relate that to your general analysis and the conflict you identified.  In his classic work, Political Man, Martin Lipsett, writing in the late 1950s or early '60s, made an interesting observation that of the smallish number of stable democracies in the world at that time, an inordinately large number were monarchies:  the Scandinavian countries, the Low Countries, Britain and the old Dominions, and he argued that this was no accident, that there was a causal connection between the two things.  His argument, in brief, went something like this:  "In times of rapid and violent change such as occurred throughout the western world in the late 19th and early 20th centuries, when rapid industrialisation, huge changes and upheavals in social structures, the deposing of old ruling classes, the rise of new classes, the creation of new institutions like trade unionism and so on, when all that is happening, a central institution like monarchy can be very important in offering reassurance to people that there is continuity, that a recognisable world and social order still exists, and even in reconciling the losing groups and classes to their loss by providing elements of continuity;  in this respect monarchy as a symbol had performed a very important function in rapidly-changing societies."  As someone, I know, who is committed against the republican cause yourself, and as someone who recognises this anxiety about social change in contemporary Australia, I would like your comment on Lipsett's thesis.

RICHARD WOOD:  Politically, the republic is on the backburner now.  The debate about the republic is similar to a lot of other debates we are having at the moment and it, if you like, is a cultural dimension to the transition that we are undergoing at the moment.  The community is caught between these two instincts.  On the one hand, it is aware of the changes and the need to integrate change and redefine itself and redefine the country and redefine people's own lives.  On the other hand, of course, people want to cling to their heritage, cling to their tradition, cling to what is best, and these tensions are running through a lot of the current debates.  I think you can see them in debates about the family, in debates about the republic, debates about Mabo and debates about economic change.  I am certainly committed against the republic, but what I've said about the republican issue is that I don't believe it should be inflated and elevated above its worth.  On the other hand, I don't believe it should be belittled and dismissed and have its worth dismissed either, and I think it is important to try and get the balance right.  Paul Keating has fundamentally changed the politics of the republic forever.  The issue has been put on the agenda;  I do not believe it will go away, I think that, as we go through the next few years, support for a republic will remain at a fairly high level, and sooner or later as a nation we will address this.  What I find when I talk to Liberal frontbenchers about this issue is that the Liberal Party is really divided in three:  you've got some republicans, some monarchists, and you've got a lot of liberal pragmatists, and these latter people actually say to you, "if Australia is going to become a republic, the Liberal Party will do it, we're not going to let Keating do it, Labor can't do it, only the Liberal Party can deliver the majority needed."  When you've got senior frontbench Liberals talking like that, that is "if it will happen, it will happen because of us, and we may address it some way down the track", that seems to me to be a pretty flexible and pragmatic position.  I think that in many ways the key to this debate lies on the non-Labor side of politics, and I actually think there is more movement on the non-Labor side of politics beneath the surface than appears on the surface.  When it comes to Owen's thesis, I understand the point put.  I think it is a persuasive point that the losers in society need to have symbols, need to have some sort of continuity that they can look to in order to retain their morale and their support for the common cause.  I guess I would say two things about that.  I don't believe that we have the sophistication and wit and intelligence as a country to make a successful transition to a republic.  I believe that a transition to a republic is going to endanger or threaten Australian democracy.  I don't think we have the confidence and sophistication as a country to do it if we want to.  Secondly, I think that there are all sorts of different symbols of continuity and loyalty and the monarchy doesn't have to be the only one.  I think that in this balance between reaffirming our traditional heritage and redefining our identity, what we are going to be doing is discarding some old symbols and finding new ones.  It will be a transition over a course of decades, and we'll make the transition when we are sufficiently comfortable to make it, but I certainly think that the monarchy is forever an indispensable symbol in terms of the need for that continuity and solidarity.

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EDUCATION AND ITS RELEVANCE TO
THE DEVELOPMENT OF AUSTRALIA

Education is about preparing people for a future -- a future which, on any thoughtful assessment, is a rapidly changing one.

"All who have meditated on the art of governing mankind have been convinced that the fate of empires depends on their education of youth."

This was not a quote from Bob Hawke's speeches about the "clever country".  Nor was it, as it could easily have been, from Benjamin Disraeli who made similar statements to the House of Commons last century.  Nor was it from Wilhelm Von Humboldt, the Prussian Minister of Culture and founder of the University of Berlin in 1809, which set the pattern for German university development, and in due course of the modern research university which proved to be the power house of German industrial development last century and was so successfully copied by leading American universities by the turn of the century.  Nor was it Confucius, whose mark is still apparent on Asian education attitudes and systems.  It was Aristotle who made this observation more than 300 years B.C.

Preparation for a changing future must take account, as has been eloquently pointed out by Paul Kelly in his book, of the radically changed international environment in which we operate, and of profound changes in our own society over the past 20 years, many of which are a consequence of the new international economic order.  The world has continued on its course of rapid evolution since The End of Certainty was written and if young people are to be prepared for a future which we can barely foresee, education faces profound challenges.

Regrettably, the education institutions of the English-speaking world are inherently conservative in character.  Those in the teaching professions have seemingly little interest in the world of business, and powerful education unions act as a further force resisting change.

Nonetheless, change must come, even, or especially, to our education institutions.

"Man has had time enough to forget about the sea and make a universe of a crevice in a rock.  But now you can feel the waters lift and stir;  new currents are coming in, but for those of us in universities who cannot stand the flooding of our academic boundaries and definitions, there will be terror as the mythical future becomes confused with the mythical past."

- William Irwin Thompson

MAJOR ISSUES OF CHANGE IN SOCIETY

Australian society has changed greatly since Federation.  Based on these changes, there are some imperatives we must bear in mind as we analyse what is needed from our education system:

• Australia is no longer an Anglo-Saxon society, although our traditions and institutions are primarily Anglo-Saxon;
• there is a need for foreign language education to be common or mainstream, rather than a rarity, at every stage of Australian education and training;
• there needs to be an acknowledgment of the new place for women in every path of life, so that their special talents and contributions can be effectively used;
• the Australian work-force must recognise that it must compete in an international environment;
• this has implications for industrial relations and award conditions, where these are to continue;
• escalating foreign debt cannot be allowed to continue to burgeon -- microeconomic reform in all walks of Australian society must accelerate and new knowledge-based industries develop;
• quality and excellence are the most important words in assessing output, not only of manufacturing, but also in services;
• high structural unemployment, particularly youth unemployment of greater than 10 per cent (currently 20 to 30 per cent) is not compatible with maintaining a cohesive society;
• encouraging diversity and excellence of achievement in diverse outcomes must be a central feature of good education at every level;
• knowledge has expanded rapidly:  what matters is to prepare young people to think, to develop strong intellectual skills including literacy and numeracy, to learn to access information, and to develop a commitment to, and passion for, on-going learning;
• vocational training in an industrial environment must be supported by general education, as in the German dual system, rather than following the flawed British fetish of bureaucratically-monitored standardised "skill" outcomes, taught primarily in institutions, if our work-force is to be adaptable to meet future challenges;
• we must rediscover the importance of technical education as a worthwhile outcome for a large proportion of Australian school-leavers.

The recent UNICEF report, The Progress of Nations, has found that Australia has the highest teenage suicide rate in the industrialised world with 16.4 deaths per 100,000 among 15-24 year olds. ⁽⁹⁾  The situation is urgent and education has a particularly important part to play in tackling it.  However, it must do so in the context of a new approach to employment possibilities.

We need to think constructively on new employment roles, unfettered by the rigid award structures determined by the ACTU and the IRC.  New roles must be developed in the fields of community and domestic service supported, if necessary, by the expenditure currently flowing into unemployment benefits.

We have growing numbers of elderly people in our community who need support to stay in their homes rather than being moved to institutional settings.  Young people currently in receipt of unemployment benefits could be funded at very little extra cost and modest training and supervision, and with great benefit to their local community, to make a real contribution in helping support such people in their homes, perhaps linked with environmental work for the local community also.  This would mean breaking away from current award conditions, but it would include such people again in society and give them a reason for living.  These roles might develop into new careers in child care to support career women with children, and taxation arrangements would be needed which make such employment viable.

THREE LEVELS OF EDUCATION

High-quality outcomes will only be achieved in education if there is recognition of the need to provide opportunities for young people to develop their potential to the full in whichever direction this lies.  People's potential, interests and needs vary tremendously, and our educational institutions must reflect this.

1. School Education

School curriculum has recently become a hotly debated national issue, with the Federal government and some in the business community pushing for the introduction of "National Profiles" or a national curriculum.  This follows widespread concern over the quality of school education.  I sympathise with their concerns, but the setting of standards will only improve the quality of education if these standards are high.  The advice of academics around Australia is that the Profiles, particularly the Maths, Science and English Profiles, are of an extremely poor standard.

Why is there concern over the quality of school education?

Over the past 15 to 20 years, the education community has been greatly influenced by "soft left" philosophy which saw traditional academic achievement as preserving class distinction.  The preoccupation with class, equity and equality of outcomes resulted in an homogenisation of curriculum and subject choice.

In an endeavour to achieve equality of outcomes, technical streams were rubbed out -- they were seen as maintaining the position of the lower classes.  We need to rediscover the importance of technical subjects, streaming, and encouraging schools with their own particular emphasis.  In Victoria, the Schools of the Future program, with its emphasis on decentralisation, is allowing this to happen.

A more subtle effect of this ideology was that the Australian education system, like those in other English-speaking countries, moved away from the traditions of liberal education.  The high point in the debate over the sociology of education was the publication in the US of the book Schooling in Capitalist America (1976) by Sam Bowles and Herbert Gintis.  This influential book led to a renewed commitment by the left to "undo" the liberal education curriculum with its focus on knowledge and academic skills and on character development in broad terms, seeking to replace it with an emphasis on participation without necessary evidence of academic achievement.

This ideology was embraced by many Australian educationalists.  Let me quote Bill Hannan, an influential education bureaucrat of the Kirner era:  "obviously we still have to work at dismantling the competitive academic curriculum" and "that there is something about being competitive and being academic, and no doubt something about that particular combination of practice, that can be used to keep the common people away from power and influence, away from the professions and careers ...  Something, in short, that is profoundly and maybe irretrievably undemocratic."

Positions such as these must be rejected!  New South Wales is now adopting a "back-to-basics" approach to English.  The new syllabus stipulates the teaching of grammar, spelling, reading and writing, and will be compulsory in all NSW primary schools.  We need to rediscover the commitment to real literacy and numeracy, to an understanding of the basics of science and of our culture, not only the sociology of science and the relativism of culture, if our young people are to be able to compete in a world where young Asians and those from continental Europe will have received an education of high quality.

In those countries, the teaching profession still commands great respect and attracts recruits of high ability.  By comparison, English-speaking countries fare poorly:  many of the profession's recruits are school-leavers who would be unable to gain entry to courses in science and the humanities;  the teaching profession is now heavily unionised and the task of union leadership is to protect their weaker brethren from demands beyond their capability.

If we are to address the imperatives I outlined in the beginning, and adequately prepare young people for the future, we need to raise the expectations of compulsory education.  We need a competitive academic curriculum that challenges students.  At the higher levels, students must be encouraged to pursue appropriate paths, not pressured into believing that university is the only worthwhile option.

Central to the future of education is the future of the teaching profession.  We need to attract and keep people of high ability and undo some of the damage caused by the unionisation of the profession.

2. Higher Education

The Australian higher education system has changed greatly in the past six years.  The major changes were initiated by John Dawkins who became Minister for Education in July 1987.  Key changes have included:

Abolition of the binary divide:  As was the case in Great Britain, the distinction between university, college and institute of technology was abolished.  For reasons of status, all were given the title "university".

Creation of the Unified National System:  The Government created a Unified National System, drawing all "universities" together under centralised control.  This system gave unprecedented political and bureaucratic control.  Universities now have to negotiate approval of many aspects of their activities with government on an annual basis.  Negotiations cover details of number of students to commence courses and total number of students to be enrolled.

An "Education Profile" is then approved as the basis for funding, and funding in total is approved on a forward plan covering three years.  There is some resentment at the prescriptive nature of the Education Profiles, particularly in the traditional universities, but there is strong support for the commitment by government to the secure three years of funding, which is revised with respect to the following year in the course of the negotiations.

Universities are required to submit an enormous degree of detailed information on research activity, teaching commitment, admission policies, policies in relation to equity, staffing and management as part of the conditions for funding.  There is doubt on the part of the universities as to whether the government has the capacity to use much of the data provided.  In 1994, capital funding is to be included in recurrent grants to institutions.

Establishment of NBEET:  The National Board of Employment, Education and Training was created in 1988 and includes the former Australian Research Council and Higher Education Council.  Great authority is given to the executive chairpersons who are appointed by the Minister.

Commitment to growth in higher education enrolments:  Rallying around calls for a "clever country", the government has invested heavily in higher education.  Over the past decade, Year 12 retention rates have jumped from 36 per cent to 77 per cent, and the number in the higher education system has increased by 64 per cent.  Almost half of this growth occurred in the two years 1990 and 1991.  It is presumed that an increased number of university graduates will increase productivity and economic well-being, consistent with the tenets of Human Capital Theory.

The growth in higher education has been replicated in senior school education.  In 1982, 36 per cent of school students completed Year 12, while in 1992, 77 per cent completed Year 12.

Establishment of large, multi-campus universities:  Before the creation of the Unified National System, there were 78 higher education institutions.  This included 19 universities, as well as colleges of advanced education and institutes of technology.  The average size of the institutions was 4,300.  In the creation of the new system, the 78 institutions amalgamated to become 35 universities, with an average size of 14,000.

Development of a user pays element in the form of the Higher Education Contribution Scheme.

Problems with these Reforms

• universities are now very big;
• there are no cost savings due to the rationalisation of resources;
• for reasons of status, there is pressure for all universities to conduct research and research training, regardless of the fact that some are not well-established in research;
• amalgamations have caused problems:  many universities have several campuses that may be a long way away from each other;  it is hard for people on the different campuses to have a common sense of purpose;  and staff feel greater loyalty to a local campus than to the university as a whole, so there may be pressure for universities to break up.

It is crucial that higher education systems encourage excellence and diversity.  Not all institutions can be good at everything.  The creation of the Unified National System exerted pressure for "sameness".

With the growing realisation that it is impractical to fund all universities as research universities, and with the introduction of the quality assessment process, there is an emerging pattern within the higher education system.  Clusters of different types of universities are identifiable.  These are:  research-based universities;  universities of technology;  regional/country universities;  and generalist metropolitan universities.  This diversity should be encouraged.

Problems with Growth:  Growth in the higher education sector has not provided greatly increased opportunities for school-leavers.  The Australian National Audit Office released a paper recently which found that most of the growth in higher education enrolments and participation rates has favoured post-graduate study and the proportion of places for school-leavers declined in 1991 and 1992. ⁽¹⁰⁾

Many more people are undertaking second degrees and post-graduate study.  In the last six years, the total number of higher degree students in Australia has more than doubled.  In the employment market, people with degree qualifications are doing jobs that do not need these qualifications.

Professor Peter Karmel, a former Vice-Chancellor of the Australian National University, notes:

"It is clear enough that the expansion of student numbers [in higher education] in the past few years has largely, if not wholly, been the result of a lengthening of the average period spent in higher education rather than an expansion of access."

There is an increasing number of unemployed graduates.  DEET figures show that between 1987 and 1990, full-time employment rates for graduates fell from 88 per cent to 70 per cent.  The situation in Victoria and South Australia is particularly bad. ⁽¹¹⁾

The expansion of higher education has perpetuated the myth that university education is the only worthwhile outcome of school education:  Australia now has one of the highest levels of participation in university-level education in the world, as shown in OECD and UNESCO figures, but relatively low participation in vocational training.

In Australia, vocational training is seen as a very poor second option.  Approximately 40 per cent of the relevant age cohort now go on to university (compared with about 30 per cent in Germany) and unmet demand for university places is currently estimated to be 43,000.

A recent survey of 2,000 students in Years 10 to 12 showed almost 70 per cent aspired to go to university while only 15 per cent aspired to TAFE.  About 20 per cent of current Year 12 students are repeating their final year in a desperate attempt to gain a university place. ⁽¹²⁾  Compare this with Germany, where places in the Fachhockschule, or technical schools, are filled before places in universities.

3. Vocational Education and Training

In his influential book The Competitive Advantage of Nations, Professor Michael E. Porter argues that education and training are decisive in competition between nations for economic growth and export markets.  His research indicates that nations which invest heavily in training -- such as Germany, Japan and Korea -- enjoy competitive advantages which can be traced to human resources.  Industries prosper where there is national investment in specialised education and training.

The Economic Planning Advisory Council's August report stated that there has been too much emphasis on expanding places in higher education and not enough focus on schools or work-based training.  Further development of technical training has been ignored until recently, but major reforms in training are now under way.  I welcome the national commitment to the view which is, in political terms, bipartisan;  that our most pressing need is now the rejuvenation of support for vocational training.

In August, the government established a high-profile taskforce to seek to raise the status of vocational education and training in the minds of school-leavers.  Changing attitudes within the schools will be essential if we are to attract the right sort of people into these pathways.

In November last, the Federal Government launched a $3 million campaign to encourage more school-leavers to consider TAFE as a worthwhile option.  The promotional strategy -- "Choices for Youth" -- will receive additional Federal funding of $1.1 billion to create about 217,000 new places in the sector by 1996.

International Approaches to Vocational Training:  A report by Towers Perrin, released in February of 1993, ⁽¹³⁾ is one of the few attempts to compare Australia's vocational education system with others in the world.  Towers Perrin compared Australia's vocational training systems with those in Germany, France, Hong Kong and Singapore.

A common feature of these nations is that a number of differentiated upper-secondary school education streams are available to cater for university-based education and for vocational/ technical training.  The potential of technical/vocational education is highlighted for young people at an early stage.  Vocational programs are usually of two years duration and involve practical industry-based assignments as well as classroom education.

There generally seems to be a far greater emphasis on formal on-the-job training in Australia.  The relationships between industry and the education systems vary, but there is, generally, direct dialogue that has a continuing and highly-responsive impact on course design and availability.

Vocational training in these countries has high standing, and entry into the courses is competitive.  In France, many of the Grand Ecoles committed to science and technology have a much higher standing than universities.  In Hong Kong, less than 15 per cent of students go on to Year 12, which is generally regarded as preparation for university.

In Germany, approximately 70 per cent of school-leavers choose a vocational path.  The German dual system provides both education and training.  Young people receive a general education through part-time study in a network of vocational education institutions, known as Berufschules, which they attend for two or three days a week.  The other days are spent in "training firms" which concurrently provide the training component for a part of each week to the student trainees.  The view taken in Germany is that vocational training should be as closely linked to practice as possible and should take place to a substantial degree in employment situations.

In the dual system, vocational training is a joint responsibility, and co-operation is required at every level of all involved:  employers, employees, State and education authorities.  Although no company is obliged to provide training, the costs of training are mainly borne by the training companies, which see it as in their interests to gain highly-able employees.  Their net expenditure is approximately three per cent of total national payroll.

In Japan, technical training is the responsibility of industry.  Trainees are rotated to a variety of work-place settings, thus gaining a tremendous variety of experience.  For cultural reasons, the Japanese option is probably not open to us because of differing traditions both in industry and in society.  However, there is a lot that we could learn from Germany.

Unfortunately, to this point, recent emphasis in training reforms in Australia has not gone down this path.

Competency-based Education and Training (CBET):  Many in the business community are joining the unions in calling for the vocational educational system to teach "competencies" or detailed prescriptions of skills required in the work-place, regulated by a system of tripartite committees of unions, employers and government representatives.

The Hobart Mercury ⁽¹⁴⁾ reported that the Assistant Secretary of the ACTU, Bill Mansfield, has called on the Tasmanian Government to commit the State to competencies at the meeting of Education Ministers, taking place in Hobart at that time.

While it may be appropriate for those in the business community to comment on the quality of graduates, they have little understanding of education processes.  I strongly believe that, in calling for the implementation of "competencies" in education generally, the business community is being misled by education bureaucrats.  It is mostly human resource management people and organisational officers, rather than business leaders, who are formulating the views attributed to the business community, when put forward by bodies such as the National Industry Education Forum.

Carmichael and others calling for this approach from the ACTU, have repeatedly visited Germany and seen their dual system for themselves.  It could not have escaped their notice that the success of this system rests to a considerable extent on the fact that the technical training is provided in a real work-place setting, accompanied by a substantial, relevant general education which is provided concurrently by the vocational education institutions.

The view that the existence of a statement of so-called Mayer "generic competencies", and deference to these by the education system prior to most training, will absolve the vocational training system of any need for a general education component, is a concept which is profoundly flawed, as German colleagues readily agreed in discussions in November 1993.  This is the same defect that bedevils the British approach, surely a model which we should not be seeking to replicate.

Competencies are current work-place skills which have no content in terms of knowledge.  They have their place in the management of technical training and its certification, but as such, they cannot prepare young people to be flexible and to adapt to new and ever-changing knowledge and technology, nor are they easily assessable in many situations.  Observed competencies in a work-place setting cannot test knowledge, despite claims that this can be inferred.

Outcomes in terms of skills need to be assessed in vocational training, but we need to recognise that both skills and knowledge matter.  If there is no general education input, and appropriate certification of achievement, young people will always consider vocational training a poor second cousin of the universities.

The success of technical training in countries such as Germany and Japan also lies in the fact that industry skill training is decentralised and provided in the place most competent to provide this -- in industry!  This is far more realistic than institutions attempting to replicate the industry scene, as they will never be able to keep moving to the edge of current practice with all the inevitable constraints inherent in a competitive industrial system.

The ACTU, in its corporatist approach, does not accept the need for training wages because of its concern not to erode award conditions.  This will greatly limit the extent to which smaller employers will be able to offer work-based training.  I very much hope that ANTA (Australian National Training Agency) will give close consideration to these issues.

The current Australian competencies proposal involves the centralised certification of the details, control and regulation of training.  A complex, bureaucratic structure of centrally-regulated tripartite bodies is emerging, comprised of government, union and industry nominees.  This is very different from the situation in so many successful industrialised countries where effective partnership arrangements have evolved with industry providing the principal leadership role.

The Problem of Generic Competencies:  In an endeavour to place competencies in a generalised, multi-level framework, key competencies have been emphasised, as noted above.  I believe that this approach is fundamentally flawed.

Alison Wolf has analysed the attempt made in the United Kingdom in the early 1980s to embed national reporting of core skills into vocational education.  The project was very similar to that now in place in Australia.  Wolf writes:

"The 'Core Skills' project was dogged by two fundamental problems which, we would argue, are inherent in any attempt to assess and accredit core skills in a free standing way.  They are first, the necessary impossibility of decontextualising statements about core skills with any meaning and second, the contingent, but nonetheless overwhelming impossibility of assigning levels in a consistent and comparable fashion." ⁽¹⁵⁾

The Australian experience undoubtedly confirms her findings.  Richard Sweet of the Dusseldorp Skills Forum has expressed similar views. ⁽¹⁶⁾  We should not be imposing an impossible task on both vocational and secondary education which currently faces many other challenges.

Assessment of literacy and numeracy, and some formal problem-solving can readily be handled with little modification of assessment tools already in use in Queensland, the ACT, Western Australia and about to be introduced in a similar form in Victoria in 1994.  New South Wales is also proposing formal assessment of literacy and numeracy in Years 10, 11 and 12, also to start in 1994.  Surely these approaches, which can be dependable and deal with the central features of literacy and numeracy, should be an adequate response, at least for the moment.

Numerical scores of the outcomes of such tests could be supplemented by teachers' reports on the other key competencies for the benefit of future employers, and for assessment in the National Vocational Certificate framework without the need for extensive further process of statewide and nationally consistent testing of each one of the generic Mayer key competencies, as being advocated by the National Industry Education Forum.

The Role of TAFE:  In recent days, TAFE has been threatened with the very real possibility of becoming a back-stop for unmet demand at universities.  In a system where technical training is primarily developed and assessed on the job, TAFE has a great opportunity in working closely with industry to provide the educational support for the vocational training, and to redefine which more general components of skill development might be appropriate to provide in a TAFE college setting rather than in industry.  The answer will differ, depending on whether we are looking at large or small enterprises.

This is in line with what Dr Bill Hall, Executive Director at the National Centre for Vocational Education Research Ltd, is proposing. ⁽¹⁷⁾  He writes that there should be three post-compulsory education sectors:  universities, vocational colleges, and employer-based on-the-job vocational education.

TAFE expertise would be needed to help change informal, on-the-job courses in industry (which are currently often poorly done) to formal courses, leading to qualifications.  TAFE would have a far greater capacity to relate closely to industries than do universities.

Much of the future effort in technical education, Hall claims, should be expended outside the TAFE environment.  "TAFE's industry influence could be fee-for-service and on-the-job, which is where much of our effort needs to be placed in the immediate future, rather than into re-restructuring TAFE."

In addition to the foregoing, further development of a general education capacity in TAFE may provide a much better alternative than recently-developed Year 13 programs in schools.  "Community college" courses for two-year Associate Degrees make sense for school-leavers uncertain of their career destinations, rather than yet further expansion of university places to respond to "unmet demand".

Virtually all other industrialised countries recognise the need for a less academically- demanding sector of general education than that of universities.  In Australia this has almost disappeared with the incorporation of the Advanced Education Sector into universities.

This sector needs to be one from which articulation with the universities could readily occur for late developers and from which articulation into vocational training can be offered at any stage.  Career destinations for many of these people will inevitably lie in the service sector, including the hospitality industry, where some general education is essential.  Other opportunities lie in development of new domestic service roles where similar needs will apply.

"Upon the education of the people of this country, the fate of this country depends."

Benjamin Disraeli, 1874, House of Commons

Australia is increasingly facing up to the recognition that it must compete in an international environment.  To be a productive, cohesive society, our education system must cater for, and challenge, all individuals.  Excellence in a diverse range of outcomes is the key.

QUESTION PERIOD

MICHAEL PORTER (Tasman Institute):  How do you see the role of on-the-job training and wages and barriers to doing that as part of the solution?  I go back to, say, a century ago when with free or token wages you could get a job with the Board of Works or a company as a young person, maybe over the vacation, maybe after school, maybe when you left school.  You could get a job on a very token wage -- perhaps one-twentieth of the top wage in that company -- and you would learn on-the-job, you would gain skills, you might then go on to university or college or technical education.  There was certainly no wage constraint, and as a result an awful lot of on-the-job training took place.  Research in the US has shown the enormous role of on-the-job training back over the centuries.  My question is, when you look at your nursing home example, couldn't we really see a much broader provision of services providing some on-the-job training and, combined with the removal of wage barriers, doing a lot to remove the unemployment that we currently see?

RICHARD WOOD:  One of the strong messages I am trying to push is that the reform of vocational training must include on-the-job training, and that must be recognised as part of it rather than seeking to reproduce that sort of training in TAFE institutions.  It is already happening in a number of large companies like BHP, IBM, ICI and so on.  ICI is rapidly developing further programs and indeed has argued for, and I am told, has now gained recognition that its on-the-job vocational training can be certified within the national system.  If, in fact, there is not such external recognition of on-the-job training, then people will not feel confident about going into particular jobs because it may be a dead end.  I think there is a need for recognition of that training and we have to think through how that is achieved without undue bureaucracy.  My own view is that that is one of the roles which could be usefully fulfilled by the TAFE organisations, which could be providing parallel general education.  What I am saying there is not just a voice from a remote part of the education system.  Vocational education is very similar to what Dr Bill Hall, Executive Director of the National Centre for Vocational Education Research in Adelaide, has been saying.  He says that that is where real training is provided, and we have to construct a system which recognises and includes that.  Is it enough just to leave it with employers to train as they see fit?  I took part with Bill Mansfield and Peter Laver in a meeting of the Deutsch-Australische Gesellschaft in Cologne in November 1993, and a German employer who works in this country made a comment on the very high quality of the university graduates that they get here in their research and other programs -- lower cost than German graduates at an earlier age;  the high quality of the tradesmen who have come through the Australian apprenticeship system;  but what is lacking is the vocational education preparation for the lower-level people.  It takes years to train people and educate them appropriately within an organisation if there is a constant turnover of staff, to instruct them in safety issues and the nature of what they are doing compared with Germany, where these people are available through the structured vocational training system, and that is the area where there is, from his viewpoint as an employer, a very great deficiency in Australia.  Yes, there does need to be on-the-job training, and I believe it does have to be in a semi-structured form so that people can get recognition of skills that they have gained, so that there can be an incentive for it to be accompanied by day school on a release basis or night school which can go together with that, so that there is some recognition for the young person that they have achieved something, and that they then have something to offer if they need to move to another job.  We have to find some way to package that so that it will work.  But I would say that at our meeting in Cologne, Bill Mansfield said that the ACTU is opposed to having training wages because it erodes the awards system, and that is one of our obstacles.  If we do want to get flexibility, we have got to have the capacity to take people at lower levels and lower remuneration so that we can take many more in, give them education as part of their program over two or three years, and see where they can get to thereafter.

JOHN MACLEOD (CRA Limited):  I have been looking carefully at the World Bank Study of the Asian economic miracle and, in short, the bottom line of that is:  here is a group of nations that have out-performed the world comprehensively over a 20-year period.  They have focussed fairly largely on manufacturing industry as a way to do that, but manufacturing industry taps them into fast world trade and forces international competitiveness standards on the whole of the economy.  When the economists come to look at those nations and ask "What is it that explains the out-performance?", there are two outstanding issues.  The first one we all would have guessed, namely, savings and investment;  the second one I doubt many would have guessed, education.  So-called human capital.  They say that the out-performance in Asia is because of the focus on primary and secondary school education.  This is the sort of person you need in manufacturing industry, and they have not made the mistake of putting vast resources into the tertiary part of education.  Should we be benchmarking our education facilities -- and remember we have put a lot of money and capital into the system here – against international best-practice in Asia and, secondly, have we relatively put too much of our resources in the tertiary sector?

RICHARD WOOD:  They are difficult questions.  Firstly, we must benchmark education at every level internationally.  We have had opposition from State bureaucracies as well as unions for participation in the international comparative studies since the late 1960s.  We have, I am glad to say, got agreement that we will in 1994 participate in a Science and a Mathematics international comparative study, but we have not agreed to participate in a literacy international study (that is, for schools).  We have missed out on a lot of those international comparative studies over the past 20 years because of opposition that it might look bad and so on and so forth.  We have got to benchmark.  In terms of our higher education institutions, my very firm view is that we must benchmark internationally with the best that we can identify anywhere in the world.  There is no simple answer, however, because institutions mean different things in different countries, as we have seen in the last seven years even in this country:  universities in one place are colleges in another place.  Our problem is, first of all, to recognise that our 37 institutions are not all the same, that we do have some eight research-based universities, research-based to a far greater extent than the others, that we do have some very important regional universities that are providing a very important development function in north Queensland and in many other regions, and doing it well and ought to be celebrated for doing it well.  We do have some outstanding technical universities, the old central institutes of technology that ought not to be turning to trying to copy the traditional research-based universities;  they ought to be celebrated for being universities of technology, because we need those working closely with industry in a wide range of things.  And then we also need some larger metropolitan universities, that are able to handle things perhaps on a larger scale, that ought not be trying to do everything that everybody else is doing;  maybe they can handle volume things at a great rate rather than the more specialised things.  We need that diversity, so that there is diversity for young people of different ability and different needs to choose from, and so that there is some market force operating between those, rather than just central regulation stipulating how many students will go and how much money will be given to each institution operating basically the same as each other.  Until we get that freeing up, we are not going to get very far in benchmarking ourselves with different types of institutions overseas;  all will want to say that they want to be the same as the University of Tokyo or whatever, if we just take the Asian universities.  In fact the University of Tokyo has big problems, but that is another story.  Though there are institutions that are much better resourced for research in Asia than some of our universities.  Singapore has put a lot of money into university post-graduate development, both in the national university and in its technical university, much more than we have in the last few years.  So it is not only in schooling;  but the biggest deficiency we have is in the calibre and quality of our school education, and I agree with you that it is primary education just as much as secondary education.

PETER WESTMORE (News Weekly):  You mention, as many others have, the importance of encouraging language studies in our education system, and I know that universities do give great emphasis to them, but the point I want to raise really concerns what happens to students doing foreign languages in secondary schools.  As you probably know, students from what I call Australian backgrounds studying, say, Japanese or Mandarin Chinese, have to compete at VCE level against native speakers and are marked against them.  In my opinion, this acts as an enormous discouragement from people from native Australian backgrounds studying any Asian language, in particular, although it applies also (but less importantly I would argue) with community languages from Europe.  Do you see that as a problem which needs to be addressed, to encourage students from what might be called Anglo-Saxon or native Australian backgrounds to take on Asian languages seriously at the secondary level, so that they would be able to take them on at a higher level and therefore become truly proficient in them?

RICHARD WOOD:  The short answer is yes;  it is a problem and it does have to be fixed.  The issues about language-teaching, however, are far deeper than that.  I called in on my relatives who have gone to settle in England and saw them watching, at the ages of one, three and five, a cartoon in German which they thought was hilarious.  They were talking and using the German words with great comfort, and that is the sort of thing we have got to start getting moving, not thinking of foreign language teaching as something that you start when you reach Year 10 in school.  We've got to take it all the way back, we've got to have an understanding that this is something that young people can acquire naturally if we give them the facilities to acquire it.  Videos are easily available;  this happened to be a BBC video that you can buy at the shop.  Terrific stuff, which they were tackling with great enthusiasm.  But we have not prepared teachers in anything like the numbers we need for primary education language-teaching or secondary education language-teaching.  Those are all big issues which have to be carried through.  There is a particular problem with the community languages, and in fact there have been discussions with the Board of Studies and they will be identifying people who have taken English as a Second Language, and then handling their own language results quite separately in terms of selection for higher education.  It doesn't completely solve the problem, but it is a strategy which has been used successfully in New South Wales and takes out the worst part of the problem.  They are also looking at the rating of the achievements in languages for those students compared with how they are achieving in their other studies, to find ways statistically to try and diminish the distortions which this can produce.  However, the fact of that problem is not sufficient to say that we shouldn't give incentives to people to study foreign languages, which we have done against criticism, because it matters.  Since my own university has announced that it will give bonus points for those presenting languages other than English, there has been a significant increase in students staying on with foreign languages in Years 10, 11 and 12 in this State.  They have within the university provided a new Diploma of Language Studies that can be taken by students in any discipline.  We have got to have engineers who speak Asian languages, as well as lawyers and economists, not just people studying languages in the traditional way in the Arts faculties.  Again, that is all part of the changed process they have got to work through, and I think other universities will probably follow in the like stead in the next few years.  I agree that there are problems, but we're working at them.

DAVID FORBES:  Do you think we're doing enough in our education system to train and educate managers how to run a business, and perhaps more importantly to foster a culture of entrepreneurship so that the word entrepreneur will cease being a dirty word in our current political lexicon, and so that it is actually seen to be a good thing for people to go out and start their own businesses and start employing people?

RICHARD WOOD:  I understand what you are saying and I've got a mixed answer to it.  We have seen in the last five years an enormous proliferation of MBA programs to the point where we now have something like 25 being offered in Australia.  To compare them with the top-quality MBA programs, many of them are very second-rate, yet they are peddled overseas as if they are the same as all of the top-quality ones.  It's selling Australian education short;  they are even being offered by distance education, and a degree which had higher standing is now in danger of being seriously debased.  So just making an effort and offering programs is not the answer, they have got to be good programs.  Secondly, there is an underlying problem.  We have evolved primarily from a British base in education and the culture of universities in Britain has been anti-business, and universities have kept their distance from business.  University research has tended to be for the sake of universities rather than building that bridge across to business that Germany built last century, that America has built with such success this century, or that Japan has built with such success in the last 50 years.  We have got to change that culture, and we've got to have a better understanding that the interface with industry matters greatly:  the interface with business and commerce, the interface with the world of the entrepreneur is also important.  The Business/ Higher Education Round Table is a venture which is seeking to tackle those problems and, in my view, perhaps not tackling them very effectively yet, but none the less we do have to get a much better partnership in that area.  Having said all of that, I don't believe a university is the place to teach a person how to be an entrepreneur.  University teachers won't be able to do it, they don't know how to do it.  We've got to have a better way of interfacing students in the university with the outside world whilst they're there.  They are just establishing a graduate school at the University of Melbourne to provide a collegial environment for our graduate students:  PhD students, Masters students.  Part of that is so that they will be participating in seminars with people from the community, talking about those sorts of issues, so that we do have a capacity to develop that dialogue between academia and the outside community.  They are developing programs, supported by the business community, to give some of their students in the Arts and Science faculties -- who have much less contact with an employment ethic than those in the professional faculties -- to get work experience through their summer vacations.  They have got several hundred going out to get experience of what it is to work in an office, or what it is to work in a factory or wherever, so that before they complete their generalist studies they have got some feel for the world outside the university being different from that within the university.  That is all part of trying to change the culture so that people are then more responsive and more receptive.  I don't think they'll ever really effectively teach people to be entrepreneurs, but they want to expose them to the concept as an honourable thing to be, they want to expose them to the sort of thought-world where they are challenged and understand what goes on in the world outside.

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REPORT FROM AMERICA:  THE FIGHT FOR THE CULTURE

In 1992 Bill Clinton ran for President and his campaign manager had a sign posted in their headquarters saying "It's the economy, stupid" to remind the campaign staff that the economy was the issue on which the campaign should be focussed day after day and week after week.  I think what is interesting about this sign is that, though I think it was in Clinton's interest to pretend that the issue was the economy, in fact, it wasn't really the dominant issue in 1992 and certainly is not the dominant issue by itself;  classic economic debates are not the dominant issue in American politics today.  Or, to put it differently, the conviction that their economic problems -- to say nothing of their broader social problems -- can be solved by purely economic means has, I think, evaporated in the United States, and for good reason.

If you look at the 1992 election, what is striking about it is that George Bush, an incumbent President who had presided over the successful conclusion of the Cold War, who had led the nation and its allies to a remarkable victory in the Gulf War, who had presided over a shallow recession that was not terribly disastrous and from which the nation was emerging reasonably well in 1992, and who had gotten 54 per cent of the vote in 1988, got 38 per cent of the vote in 1992.  This was the greatest drop-off in support for an incumbent President from one election to the next since Herbert Hoover between 1928 and 1932.  Of course, Hoover had a minor problem of the Great Depression;  Bush had nothing like that (admittedly, he had a three-way race with Ross Perot).  Still, to have that level of drop-off shows something happening in the society:  a discontent;  a desire for change;  a rebellion against, in this case, the incumbent, that I think is hard to explain in any purely economic terms.  The economy wasn't bad enough to cause one in four Bush voters to desert him.

The Perot phenomenon is also another example, incidentally, of what is going on in America that is hard to explain in economic terms.  Perot's candidacy was truly a remarkable thing:  no American third party candidate or independent candidate has gotten 20 per cent of the vote (Perot got 19 per cent) since Teddy Roosevelt in 1912.  Teddy Roosevelt was a former President of the United States and a very serious contender for the presidency at that time.  Perot did everything he could to discredit himself during the course of the election campaign;  nonetheless, popular discontent with politics as usual and business as usual was so strong that he was able to get about 19 million votes (19 per cent of the total).

Clinton won with 43 per cent and not a terribly impressive showing, but enough to win the three-way race;  he ran on a program of change.  What is striking, though, is that in the narrowly economic area, the changes have not been that great:  he put through his Budget, which involved tax increases on the wealthy which he did not even try to sell on economic grounds.  No one pretends in America anymore that raising top marginal tax rates is good economic policy.  The argument by Clinton and the Clinton Administration was simply that it wouldn't hurt and that it was important for reasons of fairness, which is a non-economic argument.

Otherwise, even though I personally disagree with several of Clinton's economic policies or inclinations, the fact is that when one steps back and looks at the big picture, then (unlike in Australia) on economic issues the forces of the market have utterly dominated public debate in the United States.

There is no serious attempt to roll back the acquiescence, if you will, to the forces of the market and the doctrine of lower taxes and of freeing up entrepreneurs that Ronald Reagan rode to the presidency in 1980.  Clinton got his budget through barely.  In a way it is remarkable that he had so much trouble.  This is a budget that raised taxes on the wealthy, which is usually popular, and provided spending for the working class and the middle class which is usually popular, yet I do think it is a tribute in a sense to Reaganomics -- for all it is derided, and for all some people want to claim it has been transcended -- that the popular spirit of distrust of government spending, and the popular belief in low taxes, was strong enough that Clinton had a great deal of trouble getting his own budget through a Congress that of course his party dominated.

Furthermore, you will recall that George Bush lost his election not because he stuck with Reaganomics but because he broke with Reaganomics -- and because he violated his pledge, above all, not to raise taxes.

In New Jersey, there was a Gubernatorial election just concluded last month [November 1993] where the incumbent Governor lost because he too had violated his pledge not to raise taxes -- again, even though the tax hike was mostly on the wealthy or at least the upper-middle class.  What strikes me about American politics is the extent to which Keynesianism is dead, the confidence of the 1960s that government can manage the economy effectively is dead, and for all the dabbling in industrial policy and dabbling in managed trade and dabbling in tax hikes and even dabbling in government spending programs, the conviction is awfully deep among American people that they need less spending not more, lower taxes not higher, and even less regulation not more.  I think too that the environmental movement seems to have peaked in its ability to impose regulations on business and there is a bit of a backlash there as well.

Obviously I'm over-simplifying a bit, but what strikes me again in comparison with Australia is the extent to which the forces of the market in narrowly economic terms are triumphant.  The greatest example of this recently, of course, was the vote on the North American Free Trade Agreement where Clinton, despite the opposition of the majority of his party in Congress, carried the Free Trade Agreement through.

This was a terrible defeat for the labour unions which already have suffered a lot of terrible defeats over the last 15 to 20 years.  In America labour unions now have something like 12 per cent of the American work-force unionised, and they mobilised everything they could to defeat this Free Trade Agreement with Mexico, but failed.  So I think the power of labour is not coming back up;  Clinton will do a few symbolic things for them, but tax hikes remain very unpopular and the American people are deeply sceptical of government programs and of government regulation of the economy.  Clinton's health care proposal was introduced with much fanfare and effectively packaged to appeal to America's concerns about security or insecurity about health insurance;  nonetheless the support for that has been eroding quickly as people look at it more closely and see the extent of government control and government regulation involved.

So on economic grounds I think one can say that Reaganomics remains triumphant, even if much derided and much criticised by academics and by the Clinton Administration itself.  What is striking to me -- whether one looks on the left or the right -- is the sense that their deeper problems in America are not economic problems;  that the problems that are slowing down their economy can't be solved by purely economic means;  and furthermore that the economy isn't everything, obviously, and the problems that are plaguing their society go beyond those that are afflicting the economy.

If you look at the contemporary debate, what is most striking is that there is a tonne of issues being vigorously and vociferously debated in America and most of them are not, strictly speaking, economic issues;  they are really cultural issues.  They affect economic growth and economic well-being;  but the most striking thing to me is the extent to which people now realise on both sides of the aisle that the things that affect economic growth and economic well-being are not economic policies per se.  Obviously they would all like to improve certain economic policies, but I think there is not much credibility on either left or right to argue that the fundamental problems of American society -- the problems that have an awful number of Americans upset and worried right now -- are susceptible to being solved by economic policy means.

The cultural underpinnings of their economic and social well-being are becoming increasingly evident, and the cultural problems that are at the heart, I think, of Americans' unhappiness, which is considerable, are increasingly evident.  Just a word on that unhappiness:  the most striking polling result in America in the last few years has been the consistently high number of Americans who think that the country in going in the wrong direction.

Pollsters ask the question "Do you think this country is going in the right direction or the wrong direction?" Americans traditionally have been reasonably optimistic, but in the last three or four years the majority of Americans say the country is going in the wrong direction.  In late 1991 that number hit about two-thirds of Americans, and it was at that point that some of them actually thought that George Bush's re-election was in trouble.  Even though his personal popularity was high, at the end of the day if people think the country is going in the wrong direction they are unlikely to re-elect an incumbent, especially an incumbent who seems to be a defender of the status quo and not an agent of change.

Clinton's election changed those numbers a little bit;  there was a certain surge of confidence with the new President, but the numbers quickly lapsed back to where they were a year earlier, and now again about two-thirds of Americans think the country is going in the wrong direction.  They don't think the country is going in the wrong direction fundamentally because the economy is not growing fast enough, though obviously they would like economic growth and there is some job insecurity.  But in a certain sense, given the incredible run down in defence spending which has led to a lot of displacement, and given the incredible slimming of American corporations and restructuring of American corporate life in the '80s, what is amazing is how well Americans seem to have weathered that, and how much confidence remains really in the basic economic picture, and how much disquiet there is about the basic cultural situation.  Ultimately that cultural situation affects, of course, one's economic well-being.

Let me say something about a few of the issues that are currently much debated and discussed in America -- all of them, I think, could be called cultural or social issues -- they all affect their economic well-being and their social well-being beyond that.

Crime is now the number one issue in American life.  Bill Clinton has, for a Democrat, sounded very tough on crime.  Republicans sounded even tougher.  I think they will get tougher on crime, they will build more prisons, they will lock up repeat violent offenders.  No one obviously knows what to do about the causes of crime, but people are awfully fed up with the fact that their streets are so unsafe, and that young people are killing each other at a record rate.  Ultimately you cannot have a sound economy or a sound society if crime is rampant.  I think if you were to ask Americans right now, "What ultimately is more important for our long-term economic and social well-being:  a change in tax rates or getting a hand on the crime problem?", they would say "getting a hand on the crime problem", and they would be right.  That is one instance where the culture issue or social issue is perceived to be more important for their economic future than a purely economic issue.  In the State of Virginia, where I stayed, there was a Gubernatorial election last month [November 1993] where the Republican won an overwhelming victory against the Democratic Attorney-General.  Virginia's economy is in very good shape, I think unemployment is about four per cent, it has been pretty well governed for the last 12 years (even if it has had Democrat governors), it is friendly to business, there is a lot of economic growth, yet the challenger won by 17 points because he ran on crime as his main issue:  no parole, keep people locked up for their whole terms, don't let them out early to commit more crimes.  Crime is a huge issue.

Education is also a huge issue.  Again, people correctly think that their schools are not doing a good job.  They have increased spending by 300 per cent over the last three decades on public schools, but they haven't increased educational performance by 300 per cent, they haven't increased it at all.  There is a real parents' revolt brewing against the Education establishment, and against the teachers' unions, that I think is analogous to the taxpayers' revolt of the late '70s, the revolt that Ronald Reagan really rode to office.  The taxpayers' revolt is still going strong, people don't want to pay higher taxes, but it has now spread out, if you will, into a revolt against not just high taxes but against the school system.  Parental choice of schools is an issue whose time is coming.  It's an awfully tough fight because of the political power of the teachers' unions and the Education establishment.  But even Bill Clinton as President expresses mild support for limited parental choice of schools, and Republicans are increasingly mobilising behind a much broader agenda of genuine choice of private and public schools.  Again if you ask people, "What's more important for our long-term economic and social future:  change in tax policy or monetary policy, or really fixing the education system?", I think they would say, and they would be correct, "Fixing the education system".

The "Balkanisation" of America (it's hard to put a name on it) is the third issue which is very big in America which includes a host of issues such as multiculturalism, affirmative action quotas, immigration, a sense that the country is splintering (there's no common culture, no common language, no common citizenship).  This is an issue that the political and cultural elites do not like to discuss, and they try to damp down all discussion, but it keeps emerging as a powerful issue.  Immigration is an extremely important issue, especially in States like California and Texas, and there is some danger that the legitimate concerns about illegal immigration, and about the effects of the welfare state on immigrants -- immigrants coming in and being "sucked in" to the morass of dependency by the welfare state -- could spill over to a very nasty and mean-spirited kind of nationalism.  But I think that is unlikely to happen and I think, in fact, that there can be responsible policies on immigration.  The concern that the country is breaking up into "Balkanised" parts, and the concern with that agenda -- multiculturalism, open immigration, quotas (there is a great deal of concern about considering people as part of groups, not as individuals) -- is probably more important for their long-term well-being than most narrowly-focused economic issues.

Political Reform:  In America, the great populist impulse out there is to reform the political system, not the economic system, and probably not even the education system.  The single, strongest grassroots movement in America today is the movement to set term limits for Congressmen and for State-elected officials.

This movement represents disgust at the "politics as usual", inbred, interest group-controlled politicians whom citizens perceive to be feathering their own nests and not having the courage to act for the public good and not having the honesty to address serious problems.  Term limits has been passed as an initiative in, I think, 19 States so far;  it is always opposed by the political establishment, it's opposed by the journalistic establishment, opposed by the business establishment, and it passes everywhere it is on the ballot.  It passed in New York City last November by 60 per cent to 40 per cent.

The Perot phenomenon is obviously an expression of disgust with "politics as usual".  The movement for a balanced budget amendment to the Constitution, which will be enacted if passed by Congress next year, also represents a sense that politicians cannot fix the system themselves.  They need constraints -- whether of a constitutional sort, a balanced budget amendment, or term limits -- some way to cut through the iron triangle of interest groups, politicians and bureaucrats who end up enacting policies that are in the interest of the interest groups but not in the public interest.

Term limits would do more about the deficit, which is an economic problem, than any strictly economic policy change.  Term limits would fundamentally change the consensus of politicians, and might at least break up the current nexus of interest group politics, which makes it very difficult for politicians to take the tough votes against spendthrift spending and against ever-growing government.  In any case the movement for political reform is extremely strong, and preoccupies an awful lot of American politics today.

Legal Reform:  When Dan Quayle went to the American Bar Association he unveiled his legal reform agenda and was bitterly attacked by the President of the American Bar Association and by lawyers (which was the single best thing that ever happened to Dan Quayle).  Lawyers are almost as unpopular as Congressmen in America, and deservedly so.  But litigiousness is a great problem, it is a great problem for their economy;  the percentage of GDP that is spent on the legal system has risen in the last 30 years from 1.2 per cent to 3.0 per cent.  Three per cent is not 12 per cent as in health care, but it is a lot of money, and it is purely a transaction cost -- an unnecessary transaction cost -- which doesn't really do much for the economy.  Solving the problem of litigiousness ultimately, of course, is a cultural issue, in the sense that it has to do with proliferation of rights, the avoidance of risk, a certain sense that no one should ever be held accountable for the decisions he has made if they don't work out, and the like.

Families:  I have left perhaps the most contentious issue for last.  If you asked Americans what single thing most worries them about their social and national future -- but also their economic future -- it would be the break up of the family, especially in the inner cities where that break-up has approached catastrophic proportions.

Almost 30 years ago Pat Moynihan wrote a famous paper, for which he was much reviled at the time, arguing that black illegitimacy, which at that point in 1965 was 25 per cent, was an extremely dangerous problem;  that it was bad for children, since history shows that children do not get socialised if they grow up in a situation where they don't have fathers around;  and that they were in danger of creating a permanent underclass in some of their inner cities -- which, of course, has now unfortunately happened.  They now have a black illegitimacy rate in the United States of 70 per cent:  seven out of 10 black children born last year were born out of wedlock.  The white illegitimacy rate in the US is 22 per cent, making an overall rate above a quarter.

Leaving aside one's moral judgments about this, there is a huge amount of empirical evidence that children who are born to single parents and out of wedlock do not do as well as children who are born into and brought up in intact families.  In some of their inner cities they have a critical mass of children growing up with older children as their mothers, and with no fathers, in a sort of "Lord of the Flies" situation, with the social fabric entirely rent and absent.  This is a terribly difficult situation to get a handle on.  There are limits to what any government policies can do about this, but you might say that there is a pretence to the contrary among the political class on the left.  The pretence is, "If only these people had jobs, then the family collapse wouldn't come about";  I think that has been discredited over the last couple of decades.

It is hard to believe that more government job programs would really prevent the kind of disastrous situation they have now in some of their inner cities;  it wouldn't do much to ameliorate them.  The problem isn't that there are no jobs available, it is that these people are not habituated to work, to want jobs or seek jobs or hold jobs.

On the right there has frankly been a similar mythology, which is, "If only we declared these cities enterprise zones and cut the capital gains tax rate to zero per cent, there would be a miraculous outpouring of entrepreneurship, and suddenly these cities would flourish and the problems of the mostly-black underclass would go away".  I think again that the kind of purely economist-type solutions on both left and right have been somewhat discredited;  the claims that can be made for that are not what they once were.  People have struggled hard, obviously, to figure out what policies could help in terms of family break up, both for the poor and the middle class, and there are lots of policy prescriptions around, ranging from much greater tax deductions for children from middle-class families to make it less difficult simply to bring up children and provide for them, to welfare reform proposals for the poor.

Bill Clinton, a Liberal-Democratic President, has embraced -- at least in principle -- two years limited welfare policy, where able bodied adults would be limited to two years on the welfare rolls and, in principle at least, if they have had a job opportunity and failed to take advantage of it, would be denied welfare benefits.  I believe Clinton in this and in other areas will not be able to carry through on this principle;  it is such a tough-minded, apparently mean, harsh policy that I think he'll end up watering it down in all kinds of ways.  In terms of the public debate, people are willing not just to consider this, but a Democratic presidential campaign ran on this;  it was in fact one of Clinton's key platform proposals that he claims distinguished him from previous Liberal-Democratic candidates, who had lost the presidency partly because voters thought they were so soft on welfare and welfare fraud.  The whole issue of welfare and families really leads into the more nebulous issue of values.

Dan Quayle introduced the issue of family values into the 1992 election and it went somewhat off track, as you may know.  Unfortunately he was cheerfully advised to cite Murphy Brown, the character for situation comedy, as an example of the problems of the lack of respect for and importance of fathers.  The whole issue became kind of a media circus and a big fight with Hollywood, in place of what originally started as a serious attempt to raise a serious question, namely "What are the signals Hollywood and our culture are sending young people about families and about fatherhood in particular?"  Now that they've lost the election and, I suppose, been punished, that debate has come back.  The Atlantic Monthly, a respected moderate liberal magazine, had a huge cover issue article in March of 1993 headlined "Dan Quayle was right", showing that children of single parents don't do well.  It showed that children of even middle and upper-middle class single parents do less well than if there are two parents present, and that the divorce laws should be reconsidered.  People are really talking about these kinds of social and cultural policy changes in a way that I think would have been unimaginable five or 10 years ago.

Hillary Clinton, a great high priestess of the left in America, gave an interview recently in Parade magazine where she went out of her way to proclaim that she was "conservative on values".  I think that is interesting, because it means that liberalism cannot now proclaim its superiority in the area of values;  even those on the left want to claim that somehow they are "conservative on values".

Religion, and the whole question of the role of religion in public life, has come back into respectable public discourse.  President Clinton read a book over his Summer vacation by a Yale Law professor named Stephen Carter which argues in, admittedly, a somewhat attenuated, lukewarm way, that American judicial opinion is prejudiced against religion, that they have gone way too far in extirpating any sense of religion from their schools and from their public life.  There is something a little crazy when you can't post the Ten Commandments in a classroom but you can give out condoms, which is literally the current situation in American public schools.  Even on so sensitive an issue as this, even moderate liberals like Clinton and Stephen Carter profess a kind of openness to the role of religion in their politics.

It seems to me that all these issues are extremely important.  The fact that people on both sides of the aisle are discussing them suggests that there is a widespread acceptance of the notion that these cultural issues underlie the nation's long-term economic and social performance and long-term national well-being.  There aren't simple answers to most of these issues, but I think the genuine challenge of the next decade for the left will be to reconsider some of their previous cultural allegiances and to see whether, for example, Clinton's talk about being "conservative on values" and serious welfare reform and respecting the family could be translated into policies, or whether it would run up against some of the powerful interest groups like the Democratic Party, so that he'll have to back off.  Certainly so far it is mostly talk;  he has backed off and in fact pursued, you might say, a left-wing, liberationist, multicultural, politically correct cultural agenda in practice.  The challenge for conservatives is to articulate and advance policies on these issues that really do make sense, that are not perceived as mean-spirited or simply reactionary or out of touch with the times, but that really offer some hope of at least beginning to get a handle on all these areas of American life, about which Americans are genuinely concerned.  I think they are rightfully concerned;  unless these issues are dealt with, their prospects for long-term economic growth, long-term economic well-being and long-term social well-being are not very bright.

QUESTION PERIOD

FRANK GARDINER:  As a frequent visitor to the US these last 30 years, I have been intrigued, given the known factors, by the poor black voting support for the Republican Party.  I recall periodic, promised attempts by both the Party and "Blacks for Republican Groups" to capture a much greater proportion of the black vote.  Has anything more recently changed to the benefit of the Republican Party?

RICHARD WOOD:  In the elections just completed, which were admittedly just two Gubernatorial elections and a Mayoral election in New York and a couple of other minor elections, there actually was some increase in the black vote for Republicans.  But it is very difficult to wean blacks away from their historical allegiance to the Democratic party, an allegiance which was built on the fact that the Democratic Party was behind the passage of the great civil rights bills of 1964 and 1965 and the fact that the Republic Party was on the wrong side of that issue.  But the Republican candidate in New Jersey, who won the race for Governor there, got about 22-24 per cent of the black vote;  George Allen, in Virginia, about 18-20 per cent.  I think the policy for Republicans is not to worry about trying to appeal to blacks per se;  it turns out that black Americans, just like all other Americans, are concerned about crime and concerned about welfare policy and want good schools for their kids, and I think an aggressive conservative reform agenda on welfare, on education, on crime, can appeal to blacks and for that matter Hispanics, and to other minority groups just as it does to mainstream Americans.  The problem so far is that black Americans have not been convinced that the macroeconomic policies that Ronald Reagan in particular embodied and implemented benefited them very much.  They were less concerned about the economy as a whole, although they did benefit from that too, but they were more concerned about issues like education and crime which very much concern their own communities, their own families, their own lives.  Republicans, conservatives were focused for a long time on two things:  foreign policy and defence policy, winning the Cold War, and macroeconomic policy, basically fixing the terrible mess that they inherited in 1980.  It was understandable that this was the focus.  The Cold War is obviously off the table;  macroeconomic policy to a surprising degree, while never off the table, is not on the front burner and therefore it is imperative for conservatives to come up with the ideas.  I think the ideas are there, but it is up to the conservatives to put together a more coherent and aggressive agenda on these other issues which are perceived, I think correctly, by many Americans, including black Americans, as more important right now to their well-being.

BISHOP MICHAEL CHALLEN:  I would be interested to have your comments on the translation of values into the public world, when in fact the values we need to promote seemingly are not themselves consistent with the interests of many significant persons or interest groups or the particular party program.  How do you bring about change in the face of that?

RICHARD WOOD:  If values are inconsistent with the self-interest of too many powerful people they probably don't get anywhere politically.  I think the mistake the Republicans made in 1992 was to appear to be talking about family values in an abstract or moralising way, not tying together the discussion of values to real world outcomes for people.  I think one can get a hearing for discussing values, and I think it is more appropriate for politicians to discuss values in the context of their importance to kids succeeding in the work-force, or kids getting a good education, or city streets being safe;  when one puts it in that context it is much easier to get a hearing for values and to link values to enlightened self-interest.  In a democracy one is always going to be appealing to self-interest, one tries to appeal to educated self-interest and to appeal to more enlightened self-interest.  The task over the next few years, or decades for that matter, is to show how certain sets of values, and certain mores and beliefs, are consistent with the enlightened self-interest of individuals, and of families, and of the society.

PAUL KELLY:  I want to ask you about two fundamental changes that you referred to.  When it comes to political reform, what are the prospects of term limits being imposed on the Congress and how will that transform America's political system?  Secondly, in relation to a Constitutional amendment on the balanced budget, what are the prospects of that getting up, and in what form, and what are your views on the significance of that as well?

RICHARD WOOD:  The balanced budget amendment will come up for a vote in the House of Representatives in, I think, February and, if it passes there, right afterwards in the Senate.  It is very, very close in both Houses;  if it passes in those Houses it goes to the State Legislatures where it needs to be ratified by two-thirds of the States.  I think it is possible that the balanced budget amendment will be constitutional law of the land in a few years.  What effect it will have, what kinds of loopholes it will have, how enforceable it will be, is another issue;  but I think again, enlightened opinion tends to decry or scoff at the balanced budget amendment as the mechanical solution to a problem that really needs to be solved more thoughtfully, etc, but there is a certain amount of sense in the notion that you are never going to get politicians to voluntarily rein in themselves to limit their spending.  When they are able to indulge in deficit spending, as they have discovered over the last 20 or 30 years, they can indulge in it without any apparent short-term very negative consequence and so you need some kind of mechanical rule to limit them.  So I think there is actually some chance it will pass, and I think it will have the effect of forcing tough choices;  the reason on the whole that the conservatives favour it and liberals oppose the balanced budget amendment is that the conservatives are reasonably confident that, if faced with the tough choice, voters would prefer to keep more of their own money than to have the government spend their money for them.  That is to say, right now voters are happy to have government spending that benefits them, and to have tax cuts and no tax hikes, but if forced to make a choice, I think it is quite likely that they would go for cutting government spending.  So I think the balanced budget amendment could actually have an effect on the growth of the welfare state, or even on cutting back the welfare state, including middle-class entitlements which are the main driver of the budget deficit in the United States.  Term limits are a little more complicated.  They have been passed in State after State as a matter of initiative.  Only about half the American States have the initiative process;  the other half of the States won't pass term limits because they would have to be passed by State Legislatures who don't like them.  This coming year term limits will be on the ballots in a few more States where it will pass, I believe, and then the question will be, "Will there be a really big move to go to Congress and see whether one can force Congress to pass term limits as a constitutional amendment?"  This has happened before in American history:  women's suffrage or the income tax amendment, where it was passed in several States around the country, then it hit a critical mass and became a Congressional issue, where candidates actually run for Congress on their position on term limits.  I think that could happen over the next couple of years.  There is at least a reasonable case to be made that if term limits are widely implemented, either at the State level or as a matter of national constitutional amendment, that it really fundamentally changes the dynamics of interest group welfare state politics.  If you look at American politics in particular, the way in which interest groups are powerful is by working through Congress primarily -- not through the executive branch -- and through Congressional committees which are staffed by Congressmen who get seniority and rise to the top of these committees and who establish very close relationships, financial and otherwise in terms of campaign contributions, with the relevant interest groups their committee regulates, and with the bureaucracy in the executive branch that enforces the regulations in that area.  If you have term limits, the whole seniority system starts to crumble;  the seniority system crumbles, the career incentives for politicians to esconce themselves in a certain committee and make their life out of doing favours for the interest groups that that committee regulates or deals with start to change.  So I think the whole incentive structure for politicians could change under term limits.  They'll have some test cases of this now because it has been passed in many States at the State level.  It will be interesting to see whether State governance starts to change in California, for example, when term limits kicks in in a couple of years.  Even if term limits stays as a States phenomenon, just the fact that the State Legislatures are term limited will cause them to challenge Congressmen, as they will be out of a job if they want to stay in public life and politics.  It will generally decrease the indifference to incumbency, it will increase the amount of turmoil in the system, it will increase the extent to which people take on -- that one incumbent takes on another incumbent in higher office, which tends not to happen in the United States when incumbents get re-elected.  Overwhelmingly, Ronald Reagan used to like to say that the Congress in the United States had a higher re-election rate than the public officials in Moscow, which I think was literally true -- it was 95.8 per cent.  That whole incumbency/seniority/interest group system which so dominates American politics, is threatened by term limits and also, I think, by the balanced budget amendment.  If either of those goes through, I think you could make a case that they will have fairly fundamental changes in the political system, which could lead to fairly fundamental changes in economic and social policy.  If one is concerned about the deficit, it may be that the best thing one can do is not to try to persuade people that the deficit is bad as a matter of economic policy, but try to change the consensus of the political system that leads politicians to be comfortable with a $300 billion deficit.  At least one way to change that consensus is through term limits.

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ENDNOTES

1.  Rationalism in Politics and Other Essays, Liberty Press, 1991.

2.  Official Record of the Convention Debates, Volume III.

3.  Ibid, Volume IV.

4.  The Rise and Fall of Freedom of Contract, 1979.

5.  Quoted by Paul IIoulihan in Arbitration in Contempt, Vol. 1, proceedings of the H.R. Nicholls Society.

6.  Australian Industrial Relations, Law and Systems:  Report of the Committee of Review, 1985.

7.  Morality and Politics in Modern Europe -- The Harvard Lectures, edited by Shirley Robin Letwin, 1993.

8.  Hugh Mackay, Reinventing Australia:  The mind and moods of Australia in the 1990s, Sydney:  Angus & Robertson, 1993.

9.  The Weekend Australian, 18 September 1993.

10.  The Australian Financial Review, 26 November 1993.

11.  The Age, 29 November 1993.

12.  The Herald-Sun, 29 November 1993.

13.  Commissioned by The Employment and Skills Formation Council of the National Board of Employment, Education and Training (NBEET).

14.  26 November 1993.

15.  Alison Wolf, "Assessing Core Skills:  wisdom or wild goose chase?", Cambridge Journal of Education, Vol. 21, No. 2, 1991, p. 194.

16.  The Australian, 11 August 1993.

17.  The Australian Financial Review, 13 July 1993.