Tuesday, December 19, 1995

In search of a scheme

RESERVE funds held by WorkCover, the NSW workers compensation scheme, fell dramatically from $520 million in May 1994 to $64 million in June of this year.  In an attempt to arrest this decline, the NSW Government is rushing through Parliament a series of measures designed to reduce the costs of the scheme.

Some of these measures are aimed at cutting administration costs.  Others are designed to reduce compensation payments.  Is this the right way to go?

Recent US research has shown that a genuine workers compensation scheme can play a crucial role in improving workplace safety and in reducing labour costs.

When premiums for workers compensation insurance are related to an employer's workplace accident record, then the employer has a financial incentive to improve workplace safety.  How strong are these incentives?

Research by Duke University economists Michael Moore and Kip Viscusi in their book Compensation Mechanisms for Job Risks (Princeton University Press, 1990) shows that workplace accidents in the US would be about 30 per cent higher in the absence of compulsory workers compensation insurance, whereas occupational health and safety regulations (OH&S) appear to have reduced workplace accidents only by 2 to 4 per cent, perhaps less.

In short, workers compensation in the US is about 10 times more effective than OH&S regulations in reducing workplace accidents.

There are good reasons for the effectiveness of workers compensation.  Where insurance premiums are related to workplace accident records, all employers have direct financial incentives to discover ways of making workplaces safer.  Moreover, an employer is in a much better position than a regulator to know the kinds of safety measures that are likely to be cost-effective in his particular workplace.

And with insurance premiums dependent on accident records, employers have incentives to listen to employees views on how to improve safety.  The advantage of the insurance or "carrot approach" is that it is essentially self-enforcing.

In contrast, compliance with OH&S standards is mandatory even when it is not cost-effective.  Moreover, enforcing regulations tends to be costly and ineffective.

Here in Australia, there is a danger that measures designed to artificially hold down workers compensation insurance premiums will weaken incentives for employers to improve workplace safety.  This is especially problematic where workers compensation premiums for high-risk industries are artifically reduced by cross-subsidies from low-risk industries.

There is also a danger that regulations will reduce incentives to control fraudulent compensation claims, thereby raising costs of workers compensation schemes.

Moreover, there are reasons for believing that holding down insurance premiums does not necessarily reduce overall employment costs.  Wages are generally higher for more hazardous occupations.

These wage premiums represent compensation in advance for risking injury or death.  Because workers compensation insurance provides compensation after an accident workers demand less in advance.  In other words, wages decline because risk premiums are reduced.

Wages also tend to be reduced because improvements in workplace safety reduce the wage premiums demanded by workers.  Indeed, Moore and Viscusi show that in the US, the net effect of compulsory workers compensation has been to reduce total employment costs in non-unionised industries.

The conclusion is that measures which artificially reduce premiums may both be detrimental to workplace safety and fail to reduce overall employment costs.

These issues are complicated in Australia by other factors, such as artificially determined award rates of pay which may prevent adjustments in wage premiums for risk in response to improvement in safety.

But, such complications are just one more reason for a comprehensive and systematic overhaul of our industrial relations systems and related regulatory paraphernalia.


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Saturday, December 16, 1995

Trend figures show way

THE reporting of the November employment and unemployment figures on December 8 raises a question as to the capacity of the usual commentators to give the community an indication of the underlying picture.

Just about every analyst agreed that the monthly increase of 112,000 or 1.4 per cent in the seasonally adjusted figure for employment was "unbelievable" and that the December figure will almost certainly reverse most, if not all, of this increase.

Yet this "unbelievable" November increase was described as being "good news" for the Government and as making it most unlikely that the December quarter GDP figure will show a fall.  When the December quarter seasonally adjusted employment figures record a large fall, will this also be "good news" because the seasonally adjusted figures are "volatile" and "too much attention should not be paid to month-to-month variations"?

As far as I can see, not one commentator on the November figures even mentioned that the trend figure for unemployment increased to 8.6 per cent (from 8.5 per cent) or that the trend figure for employment increased by only 8,000 or 0.1 per cent.

In the five months since June, the trend rate of unemployment has risen from 8.3 per cent and trend employment has increased by only 33,000 or by 0.4 per cent.  At this rate, employment growth during 1995-96 will be less than 1 per cent and unemployment in the June quarter of 1996 will be around 9 per cent, compared with Government forecasts for 2.75 per cent employment growth and an unemployment rate of 8.0 per cent.  Some "good news"!

The ABS publication containing the employment and unemployment figures points out that seasonal adjustment does not remove irregular or non-seasonal influences which may occur in a month and that the seasonally adjusted figures "may not be reliable indicators of trend behaviour".  In fact, the ABS states that irregular factors unrelated to the trend, account for more than half the changes in employment and 70 per cent of the changes in the unemployment rate.

Surely, then, the trend figures deserve at least a mention?  Indeed, a mere glance at the ABS graphs comparing movements in the seasonally adjusted and trend figures suggests that the trend figures give the best underlying picture.


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Saturday, December 02, 1995

Harvesting Memories

Heritage Farming in Australia
Produced by and available from Alexander and Ann Sloane
Box 77, Yarrawonga, Vic 3730

This video consists of original film and commentary by the late Ian Sloane.  It describes farming experiences in the southern Riverina in the 1930s.  My grandfather farmer who left school in 1929 and who now lives mainly in the past found it fascinating.

In the 1930s he had a lot to learn about farming, but even more about government guidance.  In 1930 his letters were cancelled with a "Grow More Wheat" stamp.  So he did, and the price of wheat fell steadily and disastrously between sowing the wheat crop and reaping it.  This warped his belief in the wisdom of governments.

The video starts off with still pictures;  then in the 1930s Sloane bought a movie camera and started taking moving pictures of the way people actually farmed in those days.  Later he added voice descriptions explaining what they were doing and why.

He shows a team of six horses ploughing with a three-furrow mouldboard plough and says how pleasantly quiet it all was -- only a bit of rattle from the harness.  He should have mentioned the skylarks, which were wonderful.  I used a 10-horse team to pull a six-furrow stumpjump mouldboard plough.  It used to chatter a bit.  My grandfather was in love about then so his horses used to hear some romantic poetry, but they never let on.  Once you had taught the furrow horse her proper place, it wasn't hard work.

ROUGH GOING:

My grandfather had a steel-wheeled Fordson tractor similar to the one Sloane's neighbour worked.  It was rough going if the ground was hard.  He used to stop every hour to give it a spell as he had been trained to do with horses.

Sloane gives a clear picture of reaping wheat in the 1930s.  Cripes, it was really hard work -- none of this business of swanning around in air-conditioned comfort!  Sewing the bags while being savaged by flies, you slogged away to finish 200 a day for a pound in real money.  My grandfather will never forget the great day when he could afford a portable radio.  He particularly liked listening if there was a test match on.

The best part of the video is Sloane's description of expert haystack building.  My grandfather would like to be able to brag about his stacks, but they were notorious.  People said that they always seemed to lean a bit to the left.  Sloane shows an immense haystack with its thatch neatly trimmed with sheep shears and with proper galvanised iron mouse guards.  It stood there for 10 years and then opened up splendidly during the drought when it was really needed.  And I bet the Sloanes didn't ask for government help either.

So, get the video if you can.  If you are an old bloke like my grandfather it will revive many poignant memories and it will give you the chance to tell your progeny how hard you used to work in those days.  I doubt if they will be properly impressed;  more likely they will say, "Yes, the poor old chaps certainly worked hard with their hands, but what about their heads?"

The best thing Sloane's family did with his film was to put it in the tin trunk to let it mature.  Videos are a bit like diaries:  they get better as they get older.  Perhaps even my diary will mature with age.

Obsolete Feminism

The New Victorians
by Rene Denfeld
Allen & Unwin

"Conservatives are not going to align themselves with me", says Rene Denfeld.  Despite this warning from the author, conservatives will indeed find much common ground with Denfeld's The New Victorians.

The New Victorians is a response from within to that most introspective of movements, feminism.  Partly in answer to calls by "Old Guard" feminists for new young voices, 26-year-old Rene Denfeld attempts to explain feminism's lack of success in finding converts among younger women.  Like Helen Garner's controversial The First Stone, The New Victorians sends a message regarding the state of contemporary feminism that older feminists find disconcerting and disappointing.

Denfeld explores the apparent paradox that while having benefited from feminism, young women are reluctant to apply the term to themselves.  She rejects Susan Faludi's popular "backlash" theory as an explanation, laying the blame instead squarely at the feet of feminism itself.  Described by one New York reviewer as "brave", Denfeld's book predictably has drawn outraged protest from the established feminist clique.

The "New Victorians" of the title are those whom Denfeld believes represent the current status quo in American feminism.  On the evidence presented by Denfeld, the analogy is not as contradictory as it initially appears.  Nor is Denfeld anti-feminist.  While she proudly adopts the term, she is disappointed by some elements of contemporary feminism in the United States.


IRRELEVANT

Denfeld complains that "feminism has changed -- dramatically", to become on the whole a movement that is extremist and radical, and irrelevant to most young women.  Claiming that feminism has moved away from the fundamental issues of equality to embrace extreme moralising and exclusive academic theorising, Denfeld writes that "feminism has become as confining as what it pretends to combat".

This is not entirely convincing.  For while feminism, like most social movements, is an evolving being, it has always been radical and, at times, less than inclusive.  While Denfeld spends considerable time showing exactly how radical and exclusive feminism is today, there is little to back the argument that this is a relatively recent change, one unique to the 1990s.  The radical aspects of feminism that Denfeld uses to illustrate her point have largely been with the Movement since its inception, in one form or another.

One notable exception to this is the trend toward goddess worship, to which Denfeld devotes one chapter.  This is a new phenomenon, but it has little if any currency in Australia and shows little chance of gaining credibility in local, established feminist circles.

Despite these reservations, much of Denfeld's book appears to speak for the young -- and not so young -- women of my acquaintance who have expressed doubts about organised feminism's appeal and applicability to them.

But is this enough on which to base a book?  For while Denfeld makes extensive use of surveys and studies which show the rejection of feminism, her evidence of why this is occurring is much less firm.  In this regard, she relies too heavily on anecdotal evidence, with several references to the same named interviewees, and only a few brief words of thanks in the book's opening pages to "all the young women, too numerous to name here, who were willing to talk to me openly and honestly about their feelings regarding feminism" to let the reader know on what Denfeld based her conclusions.

Similarly, Denfeld's survey of contemporary feminism relies too heavily on feminism in universities.  "Young women are far more likely to encounter organised feminism by taking an introductory women's studies course, attending rallies on campuses, picking up the latest issue Ms magazine, reading newspaper accounts, and browsing in the feminist literature section of bookstores", she writes.

Unfortunately, Denfeld gives little emphasis to "reading newspaper accounts" or indeed to other aspects of popular culture's reaction to feminism, except when it proves a negative point.  Her attention to academia ignores the fact that most people, and most women, don't have a university education, and if they do, they are unlikely to have taken classes in women's studies or to have taken more than a passing interest in a "women's rally".  Perhaps Denfeld gives too much credibility to the impact of university feminists on the world beyond campus.


EXTREMISTS

Similarly, she highlights the views of extremists within feminism, such as Andrea Dworkin, claiming that Dworkin's radical offerings are commonplace on university reading lists, and are offered as mainstream feminism.  Again, Dworkin's views arguably have little currency beyond academic, philosophical or feminist circles.  While I have not surveyed women's studies courses in Australia, as Denfeld apparently has in the US, I can report that, according to the university calendar, Dworkin's work has not appeared on the Monash University women's studies reading lists in the last few years.

The crux of Denfeld's arguments is in Chapter Seven, "Repeating History:  The Feminist Descent into Victorian Morality".  In this highly detailed chapter, she draws parallels between the puritanical Victorians and their obsessive protection of women and the feminists of the 1990s.  "The movement that once stood for equality for all women", she writes, "has come to stand instead for extremist and often irrelevant academic theories and the patronising views held by an elitist group of largely privileged women".

This is manifest in the efforts of contemporary feminists to convince women that sexuality is "abnormal if not physically dangerous", and that females are "above" the "masculine" characteristics of competition, aggression, lust and strength.  Above all, the new Victorians have embraced the "Victorian declaration of difference", meaning that women, unlike men, are sensitive, nurturing, magical beings.  Denfeld identifies this as being most obvious through the rise of goddess worship, the blaming of patriarchy for all ills and the categorisation of women as victims ("the passive voice").  She labels these new directions a waste of time, damaging to feminism and irrelevant to the real issues that matter to most women.

Denfeld spends less time theorising about how exactly feminism has reached this predicament, concluding that, in essence, the potential to go off the rails was always there due to feminism's fragmentation.  The failure in the 1980s of the US Equal Rights Amendment (ERA) to pass marked another blow, which left a directional void within the movement.  New leaders and new causes sprang up to occupy this void, but they were out of touch with real women.

Denfeld also targets the conservatism of the Reagan and Bush administrations, a lack of tolerance of different views within feminism, and a reluctance among older feminists to admit that feminism has changed from the 1970s.  Above all, she claims, older feminists will not admit that being feminist is about living what you believe -- and if this is the case, then most young women are feminists whether they say it or not.

This rationale for the decline of organised feminism does not neatly transfer to the Australian context.  Most glaringly, we did not have a conservative government during most of the 1980s, nor did Australian feminists suffer the legislative setbacks that the ERA failure represented to their American counterparts.

The New Victorians is a largely retrospective book with little attention given to the ongoing issues of feminism.  These are tackled only in the book's closing pages:  childcare, birth control, abortion rights, "political parity" and sexual violence.  "Political parity", or the need for more women in government, is given a scant seventeen-and-a-half lines.  In closing, Denfeld urges us to oppose censorship and "dump women's studies programs".

The New Victorians provides a selective and, in large part, anecdotal account of the contemporary American feminist scene.  Despite a foreword by Beatrice Faust, much of it lacks direct applicability to Australia (other than in the ways I have identified in this review).  The book is largely retrospective and thus short on prescriptian or future directions.  Despite these reservations, Denfeld's words will undoubtedly strike a chord with those who are fed up with organised feminism's apparently all-consuming navel-gazing, and its lack of relevance to young women.

Timely Critique

The Killing of History
by Keith Windschuttle
Macleay Press, Sydney

Who would have thought that this book would have been written by old Windy?  Keith Windschuttle has delivered a handsomely produced hardback decrying the influence of the fashionable literary critics and social theorists on the way the discipline of history is treated in the academy.  Explicit in this critique is the finding that the mindset of a culture is at stake.  A generation will be influenced in its ability to think clearly and accurately if the rot continues, he argues.  He is amazed how history, once so intellectually respectable, is now a prey to fashionable and bizarre theories.

The appearance of this book comes as a surprise to many others besides the current reviewer.  Ten years ago, Keith Windschuttle was rather a favourite of the academic left.  His best-seller The Media, a Penguin paperback, was a staple for introductory courses at many universities, and, while, as the author cheerfully admits, it is now out of date, it is still being adopted as a text.  Windschuttle actually gave, and this is no mean feat, a clear comprehensible explication of French structuralist Marxism in his treatment of Australian media.  The media, he wrote in the preface, "should be seen as arenas of conflict between the social classes".  While one must suppose that a socialistic bent was a basic requirement, given the views of the teachers who would adopt the text, that phrase sounds like so much ritual cant today.  But times change, and a new vision is required.

Enter, in 1994, The Killing of History.  The book is interesting in the same way that this blog is interesting.  Within the academy, at least within the humanities faculties, it is rather naughty, beyond the pale.  It tends to say things which are perceived to be against the interests of those in administrative control and of those academics who see opportunities in the fashionable changes brought in by the "cultural studies" movement.  The conventional wisdom is, of course, predominantly socialistic, "liberal" in the American sense, and, while claiming to be very "Australian", slavishly copies American trends.  The current establishment, while building on the premise of finding the former verities wanting, will brook no questioning of their own key assumptions.


FASHIONABLE AND CHEAP

There is currently, in the academy, an unholy alliance of administrators and trendy academics.  The administrators are foisting "cultural studies" on the curriculum because they are fashionable and cheap, and are not dominated by fuddy-duddy professors who waste time talking about "standards".  As Windschuttle demonstrates, the cultural studies devotees appreciate the philosophical position that the traditional disciplines (in the physical sciences and the social sciences) cannot produce knowledge.  This doubtful epistemological theory is not only adopted as such, but also as a manual for action.  (Old timers will recognise agitprop when they see it).  If there is no "truth", but rather merely a cultural agreement, then why not organise some like-minded colleagues, stack the committee and change the curriculum?  Windschuttle sees them as following Kuhn (The Structure of Scientific Revolutions):

"... a bevy of sociologists have entered the field to take up what they see as one of the most enticing consequences of his position:  the idea that what is believed in science is determined by the customs and power relations prevailing within a particular scientific community".

The author says that he chose the word "killing" in the title of his book because "there was a lethal process well under way".  He chose history as he considered it "the queen of the humanities", but his argument applies equally to many disciplines, especially to sociology, anthropology, or English literature.  He finds it surprising that the post-structuralist theory of Michel Foucault is now "taken seriously enough" to be taught to graduate students in accounting at the University of New South Wales.  So surprised is he that he puts in the sentence:  "No, I am not joking".

The case studies which the author chooses to describe are international in interest, and some of them have been covered in the popular as well as the scholarly media.  For example, the European discovery of America and the Spanish conquest of Mexico, while quite apposite for Windschuttle's case, have been the topic for revisionist historians, scholars, journalists and political activists for well over a decade.  The fuss culminated in a media blitz with Columbus's 500th anniversary, and may be a little stale now.

Of more direct interest to Australians may be the coverage of the exploration of the Pacific and the mutiny on the Bounty.  The various motion pictures about the Bounty are described in a classic "media studies" or "cultural studies" (small letters) style.  "This tale of class conflict, of tyranny versus just cause, remained the basis of the 1935 Hollywood clash between Charles Laughton's Bligh and Clark Gable's Christian.  By 1962, the movie reflected a reassessment by historians that it was Christian who was both better bred and better mannered and that Bligh was an uncouth, opportunistic upstart from the lower orders".  This film (with Marlon Brando and Trevor Howard) had a sub-text of humane and liberal values against the dictates of profit.  By 1984, Anthony Hopkins's Bligh to Mel Gibson's Christian had homosexual attraction as that sub-text.  But we could never know presumably, as, if we disown the empirical or realist account of history, then each accounting is as valid as any other because all are merely cultural projections of their times.

Perhaps the most interesting case study for Australian readers is the recounting of the European settlement in Australia, including British exploration, the convict system and relations with Aborigines.  This is important for so many of our current national decisions depend on the acceptance of dominant myths for legislation and practice.  There is not much point in defending one's stake in a nation if one believes it is founded on a fraud.

The history of mental asylums and the penal policy in Europe will hold no surprises for those familiar with the theories of Michel Foucault, but will enlighten every other reader.  The other topics seem to cover the ground of a doctoral seminar on modern theories of philosophy, politics and communication, and include one current example:  the fall of Communism in 1989.

The book was published by Macleay Press in Sydney, was printed in Australia and is well presented.  One can expect some attention from overseas.  Perhaps one of the clubs may pick it up, as its topic is international.  Whether or not it finds a market here will probably be determined by the author's reading of the temper of the times.  The conservative conquest of Congress, the Gingrich phenomenon, may have some ripple effect in Australia.  In the meantime, we are on the cultural periphery, and cultural events occur in a time lag.  Right now, the book will be appreciated as confirmation of what you suspected but hadn't the time or the energy to find out.  Windschuttle has done his homework.  You will enjoy the book.  You may be appalled at what you read.  But ignorance isn't really bliss.  It is better to be knowledgeable.  That is, unless you think that truth is not an absolute concept, that knowledge can never produce certainty.  Then you had better rely on the authority of Nietzsche, Heidegger, Foucault, Derrida, Barthes, Levi-Strauss, Benjamin, Bakhtin, Baudrillard, Deleuze, et al and you will be welcome in the academy.

Monday, November 27, 1995

Clouds in the Economic Sunshine

Vol. 7, No. 6

SUMMARY

The perception of only "five minutes of economic sunshine" since the 1990-91 recession has considerable validity:

  • The recovery is one of the slowest and nowhere near the longest.  Growth per capita has been only slightly faster than in countries which bottomed around the same time.  Moreover, while the unemployment rate came down faster than in most other countries, it started higher and now seems "stuck" at around 8.5 per cent.  Further, the "blow-out" in the current account deficit until recently, and the recent upward movement in wage and price inflation, suggest limits to growth.
  • During the recovery, real interest rates increased to a peak (8.7 per cent) which, on past experience, is likely to inhibit growth for the immediate future.  Indeed, rates are likely to remain at levels that add to the discouragement to investment coming from profitability that is now declining before having even recovered to pre-recession rates.  Business investment has recently recovered strongly, but from an all-time low base and to only about its historical average level.  Remarkably, there has been no net domestic saving during the recovery and, while labour productivity has grown strongly, it is unclear that any structural improvement has occurred.
  • The quite marked slow-down, starting in mid-1994, suggests growth well below the rate needed to reduce unemployment to 5 per cent by 2000.  Growth in 1995-96 may turn out to be 3 per cent or even less, compared with the Budget forecast of 3.75 per cent, and the need for 4-4.5 per cent.
  • An important cause of the slow-down is the perception that the Government would repeat the policy mistakes of the 1980s.  This and the experience of the 1980s have created an increased aversion to risk-taking.

To reduce the clouds, budgetary and monetary policies need to be set in a medium-term framework that provides much more confidence that such policies will improve savings and inflation and, hence, economic growth.

Above all, Governments (and others) need to foster a culture that encourages entrepreneurship and profit rather than focusing on income distribution.  The failure to deal adequately with union opposition to economic reform is a major concern.

Five big clouds -- outmoded industrial relations, high real interest rates, low savings, inadequate profitability, and taxation that is excessive and misdirected -- need to be lifted.  Claims that reforms would have adverse social or other consequences, are misleading or inaccurate -- or both.


INTRODUCTION

There has been much discussion of Opposition Leader John Howard's thesis that, since the recession of the early 1990s, Australians have experienced only "five minutes of economic sunshine" before the economy has again started to slow.  The Government has strongly rejected the thesis that clouds have appeared, arguing that the slowing is in line with policy intentions and is needed to ensure that economic activity is kept at "sustainable" levels. (1)  Indeed, following the release of the June quarter national accounts figures, Prime Minister Paul Keating suggested that "we have got the economy where we want it", and Reserve Bank Governor Bernie Fraser told a Parliamentary Committee on 19 October that "I think we're in better shape than we've ever been".  The Government has also rejected suggestions that recent trends indicate that the 1995-96 growth in gross domestic product (GDP(A)) is likely to be significantly below the Budget forecast of 3.75 per cent, or that unemployment in the June quarter of 1996 will be above the Budget forecast of 8 per cent. (2)

Notwithstanding the Government's rejection of the "five minutes of economic sunshine" thesis, however, it is widely perceived as having considerable validity.  Many have difficulty in understanding how the economy could be portrayed as being in such good shape when it has slowed to significantly lower rates of growth than the Government itself acknowledges are necessary to keep reducing unemployment from existing high rates to its 5 per cent target by 2000.  The slow-down in economic growth which has undeniably occurred since mid-1994, the "blow-out" in the current account deficit to levels reached in the late 1980s, the continued high rate of unemployment, and the tightening of monetary and (to a very minor extent) budgetary policies have all added to a level of uncertainty and insecurity already heightened by the experience of the 1980s, the recession of the early 1990s, and the more competitive environment in which both businesses and their employees now operate.  This uncertainty has been further increased in recent times by the Prime Minister's decision to conduct a "phoney" election campaign, which means that the adverse economic effects normally produced by election campaigns will occur over an extended period.

The purpose of this paper is to assess the perception that clouds are indeed blocking the sunshine, by reviewing the economic recovery since the recession troughed in mid-1991, and by examining the factors which have contributed to the slow-down since mid-1994.  It also includes an assessment of the economic outlook on the basis of the Government's existing economic policies, together with suggestions as to how the clouds could be lifted. (3)


THE RECOVERY

The Government's claim that the sixteen consecutive quarters of economic growth to the June quarter of 1995 is Australia's "best result in 24 years" is highly misleading.  In particular:

  • the recovery has not been the longest period of consecutive growth.  Using trend estimates of growth in GDP (the appropriate measure), the longest period is 33 quarters in the late 1960s and early 1970s;
  • the recovery has, since the bottom in the June quarter of 1991, been the slowest of any -- except for the two weak recoveries following the enormous Government-induced real wages increase in mid-1974 (and, in terms of growth between growth-cycle peaks identified by the ABS, (4) has been the slowest, averaging only 2.5 per cent per annum between 1988-89 and 1994-95);

    Table 1:  The Sunny Periods

    TroughPeakNo. of
    quarters
    Average
    growth per
    quarter (%)
    Jun 1961Sep 1965171.45
    Dec 1965Mar 1974331.28
    Jun 1974Mar 1977110.73
    Sep 1977Mar 1982180.84
    Mar 1983Dec 1985111.41
    Mar 1986Mar 1990160.97
    Jun 1991Jun 199516 so far0.86

    Source:  ABS, National Accounts (various).

  • while Australia has been experiencing one of the fastest growth rates, if not the fastest, amongst OECD countries, growth rates in per capita terms (which provide a more accurate indication of what is happening to relative living standards), heavily qualify this picture.  In particular, the gap between Australia's per capita growth rate since the economy bottomed in mid-1991 and that of other Anglo-Saxon countries (where activity troughed at about the same time) is much narrower than the gap between overall growth rates.  And while our per capita growth rate since mid-1991 has been significantly higher than the average for OECD countries, that is mainly due to the later troughs in activity in other non-Anglo-Saxon OECD countries and to the extended recession in Japan.  In recent quarters, our per capita growth rate has moved back towards the OECD average.  Over the longer haul, the average rate of growth in Australia's per capita GDP has been about the same or only fractionally above that for the average of OECD countries and for the US;
  • while Australia's faster growth in population also means that we have had a faster growth in employment than the OECD average and than the great majority of OECD countries, a more effective test of labour market performance is whether the faster growth in the working-age population is being absorbed into the workforce.  Although Australia's unemployment rate since its peak in the December quarter of 1992 has dropped more quickly than the OECD average, Australia started from a position of having the second-highest rate in the OECD, and its unemployment rate is still well above the OECD average. Recent indications suggest that unemployment may have "bottomed" around the relatively high rate of 8.5 per cent.  Moreover, OECD analysis suggests that Australia's NAIRU (5) has increased over recent years -- a damning indictment of the operation of the labour market;

    Table 2:  Unemployment Rate (Seasonally adj) (1)

    AustUSUKNZOECD
    Major 7
    Total
    OECD
    4th Q 199211.27.210.410.2    6.97.3    
    Aug 19958.35.68.76.3 (2)6.67.4    
    per cent change-25.9-22.3-16.3-38.2    -4.3+1.4 (3)

    (1) OECD standardised unemployment rates.

    (2) June 1995 figure.

    (3) Note that the OECD average rate peaked in the March quarter of 1994 at 8.0 per cent and has since declined to 7.4 per cent.

    Source:  OECD, Main Economic Indicators.

  • the recovery resulted in a "blow-out" in the current account deficit up to the middle of 1995 which suggested that Australia remains far too susceptible to the risk of external debt "crises" and is still only able to avoid such "crises" by slowing growth to below rates at which unemployment will be reduced;
  • it also led to the recent upward movement in "underlying" inflation to over 3 per cent per annum from recession-induced lows, and an intimation by Reserve Bank Governor Fraser that it may go a "lot higher".  This gives rise to similar concerns about speed limits to growth in a context where real interest rates rose, by December 1994, to levels (8.7 per cent) likely on past experience to produce a quite marked slow-down about a year later;

    Table 3:  The Clouded Periods

    TroughPeakNo. of
    quarters
    Average
    growth per
    quarter (%)
    Dec 1960Jun 19612-0.82  
    Sep 1965Dec 19651-0.13  
    Mar 1974Jun 19741-0.32  
    Mar 1977Sep 19772-0.06  
    Mar 1982Mar 19834-0.88 *
    Dec 1985Mar 19861-0.06  
    Mar 1990Jun 19915-0.33  

    Note:  * Deepest recession

    Source:  ABS, National Accounts (various).

  • the recovery follows the longest period of recession experienced by Australia in the post-World War II period and the second "deepest";
  • corporate profitability did improve (measured by net rates of return on capital) but not back to even pre-recession, let alone pre-1974-75, rates;
  • the recovery eventually produced a strong increase in business investment starting about two years ago, but from an all-time low base which has left it still only around its past average of about 11 per cent of GDP in a context where business investment plans now appear to be being scaled back;
  • it involved no domestic saving over the whole recovery period once allowance is made for depreciation and inflation;
  • it also produced a strong growth in labour productivity, but has left it unclear if that reflects any structural improvement, particularly as productivity growth now appears to be slowing sharply.

Indeed, there is now clear evidence of a quite marked slow-down in the recovery, starting in mid-1994.  Even if there were to be the mild rebound predicted by some analysts, (6) GDP growth seems likely to fall short of the Budget forecast of 3.75 per cent.  It would not be surprising if it turned out to be 3 per cent or even lower, and if unemployment in the June quarter of 1996 were significantly above the 8 per cent Government forecast.

Such an outcome would warrant a "B minus" mark, especially when measured against the growth rate of 4-4.5 per cent acknowledged by the Government itself as necessary to achieve 5 per cent unemployment by 2000.  Taken together with the points made in the preceding paragraphs, such a poor growth performance would substantially validate the perception of only five minutes of economic sunshine.

Table 4:  Trends In Key Economic Drivers

Private
Consumption
(Trend)
Dwelling
Expenditure
(Trend)
Business
Investment
(Trend)
Domestic
Final
Demand
(Trend)
Exports
(Trend)
GDP(A)
(Trend)
TotalNon-Farm
percent change on previous quarter (annualised)
June 19945.315.231.58.16.06.57.5
Sept 19945.19.629.66.22.04.76.1
Dec 19944.9-4.211.44.40.63.04.4
Mar 19954.1-13.6-0.23.50.92.63.1
June 19953.0-17.4-3.92.10.22.11.7
Forecast (four quarters
to June Q 1996} (1)
3.75-11142.75113.753.5

(1) Note that these Budget forecasts are for the increase over the June quarter in 1995, not the increase over the previous quarter as the other figures show.

Sources:  ABS, National Accounts, June Quarter 1995;  Budget Paper No. 1, 1995-1996.


THE CLOUDS OF UNCERTAINTY

An important cause of the recent slowdown -- which commenced about the same time as the tightening in monetary and (to a lesser extent) budgetary policy (whose effects are generally assumed to be lagged by up to a year or more) -- was an ongoing and widespread perception that the Government could repeat the policy mistakes of the 1980s.  The experience of the 1980s, and the recession at the end of them, created a greater aversion to risk-taking on the part of both businesses and (to a lesser extent) consumers.  This produced what economists might describe as a "rational expectations" reaction, with many businesses and consumers taking precautionary action to ensure that they did not become over-committed.  If the Government had taken early action to acknowledge that much of the problem of the 1980s had reflected inept economic policies, and if it had set out a much more coherent medium-term policy framework designed to reduce the risk of repeating that experience, expectations may have been different.  In fact, the blow-out in the current account deficit up to mid-1995, and the sharp increase in real interest rates during 1994, reinforced the perception of a risky economic climate.

The belated and very minor tightening in fiscal policy in the 1995-96 Budget, and the "pre-emptive" tightening of monetary policy in the last half of 1994, may have alleviated this perception to some extent.  However, both budgetary and monetary policies are still seriously inadequate.  They also need to be set much more convincingly into a medium-term framework that itself provides much more confidence that they will improve Australia's performance in regard to both savings and inflation and, hence, economic growth.

While the microeconomic reforms of the 1980s should have resulted in a structural improvement in productivity, the statistical evidence to date is not encouraging.  It should not be overlooked that, even if improved growth potential has been created, that may not bear fruit if the Government's approach to macroeconomic policy, and to providing an economic "climate" conducive to investment and profit-making, continues to make businesses and consumers unduly averse to risk-taking.  The most important need, little recognised in most discussions about the economy, is to create a culture that encourages genuine entrepreneurship and profit in the mutual interests of labour and capital.

Australia is a long way from having such a culture, with opposition to such reforms by various interest groups being a major inhibiting factor which neither major political party appears able to handle particularly well.  This is particularly true of groups which focus more on the possible effect of reforms on the inequality of income than on the likely increases in total income and employment.  The biggest obstacle to economic reform, however, is the trade union movement, which seeks to protect existing workers from competition from their unemployed fellows.  The present Government, while claiming mostly spurious benefits from an Accord which excludes those who are the main source of capital and employment, appears to be particularly inept at handling its close relationship with unions -- and the Opposition seems unduly scared of tackling the problem, notwithstanding the dwindling number of trade union members and what appears to be the widespread community support for action to reduce union power.


THE INDUSTRIAL RELATIONS CLOUD

There is little or no basis to most of the claimed benefits from the Accords.  There is considerable evidence to suggest that they have had significant adverse effects in encouraging the inappropriate macroeconomic policies that ultimately created Australia's external debt problem, and in inhibiting productivity growth.  During the main period of the Accord in the 1980s, Australian businesses faced higher increases in labour costs than in the major seven OECD countries.  That is, other major OECD countries, which also have strong trade union movements, kept inflation and labour costs down to much lower rates without an Accord.  In fact, it was only the recession and high unemployment of the early 1990s that brought the growth in Australian labour costs down to rates that were internationally competitive.  Under the 1980s Accords, international competitiveness continued to be maintained -- but only through a depreciating exchange rate, which reflects a decline in relative living standards.

In the current economic environment, and with appropriate monetary policy objectives that make it clearer than the present monetary policy that there is an unequivocal commitment to maintaining low inflation, there is no reason to maintain an Accord -- and good reason to be rid of it.  No other country has judged such an arrangement to be required or likely to be beneficial.

While growth in productivity has occurred during the Accords, except for the period since the economy bottomed in mid-1991, Australia's labour productivity growth has been slower than the OECD average and generally slower than in periods prior to the Accord. (7)  Moreover, this relatively poor growth performance has occurred despite the fact that there is widespread acceptance that productivity levels are considerably below international best practice, implying that there is considerable scope to lift productivity, possibly by as much as 25 per cent.

The higher growth in labour productivity since the economy bottomed in mid-1991 does raise the possibility that there has been a structural improvement in productivity.  At least part of that higher growth, however, may be merely cyclical.  The most recent trends in labour productivity suggest that the rate of growth may already be declining.

The Government's latest changes to the industrial relations system purported to encourage the negotiation of employer-employee agreements at the enterprise level.  But union opposition to this approach "forced" the Government to impose a complex system of requirements on such negotiations, including compliance with an ongoing system of awards by arbitral authorities, and to "tighten" the regulation of employment conditions generally.  The new arrangements, in fact, significantly inhibit the negotiation of such agreements and the efficient operation of the labour market.  The OECD's 1995 Survey noted that "the new legislation still remains very complex and highly prescriptive" and raised "the question as to whether awards are best suited to perform a safety-net function".  It might be added that the so-called "community standards" which the Government purports to be protecting are far from universally agreed, let alone universally applied.

There is, in fact, little basis to the claims that further deregulation of the labour market would undermine "community standards" and have undesirable social consequences.  On the contrary, to the extent that the present award system results in the payment of higher wages than is justified by productivity performance, it will maintain higher unemployment than is necessary.  Further, if an increase in inequality of incomes were to occur as a result of labour market deregulation, and if that were judged to be inappropriate, (8) it could be off-set through the social security system, just as the present Government has been offsetting (albeit inefficiently) the increased inequality that has occurred during the period of the Accords.

Comparisons with developments in income inequality in the US are misleading and, in some regards, inaccurate.  They take no account of likely differences in the quality of US labour at low income levels and discount too readily the benefits of lower unemployment levels.


THE INTEREST RATE CLOUD

Based on the measure used by the ABS as one of the indicators in its Composite Leading Indicator, real interest rates (that is, nominal rates less inflation) have doubled from a low of just under 3 per cent in the September quarter of 1993 to an estimated 6 per cent in the September quarter of 1995.  While the 6 per cent figure is below the peak of 8.7 per cent reached in the December quarter of 1994, such a high level of real interest rates discourages capital expenditure by businesses as well as some expenditures, especially on housing and consumer durables, by individuals.  Following each of the two previous occasions on which real interest rates exceeded 8 per cent during the 1980s, there was a marked slowdown in economic activity about a year after.

It remains to be seen whether the increase in real interest rates to 8.7 per cent in the December quarter of 1994 actually results in a fall in quarterly GDP(A).  Given that there is a time lag before it takes effect, however, there seems little doubt that that increase is now reinforcing the slowing which has been in evidence since the middle of 1994.

Australia's high level of real interest rates reflects a number of factors:  the past record of successive governments in running a higher rate of inflation than the OECD average;  the blow-out in Australia's foreign debt during the 1980s;  the perceived inadequacy of the present inflation objectives of monetary policy;  and the perceived potential for political interference/influence in determining changes in monetary policy settings.  To the extent that the past is influencing the present, there is an even greater need to establish a much more credible approach by setting the maintenance of low inflation as the sole objective of monetary policy.  This can be done by prescribing the limits of inflation objectives much more tightly than at present and by clearly giving the Reserve Bank the sole responsibility for the operation of monetary policy to achieve the inflation objective set by Government.  As the 1995 OECD Survey of Australia points out, "progress to date in building monetary policy credibility could be eroded if underlying inflation were to exceed the authorities' objective for more than a brief period".  In this context, the recent increase in "underlying" inflation to over 3 per cent per annum, together with Reserve Bank Governor Fraser's statement that it could go a "lot higher", is a cause for serious concern and is likely to keep real interest rates too high.


THE SAVINGS CLOUD

While the current account deficit "bottomed" in the March quarter of 1992 at 2.9 per cent of GDP, the recovery in demand quickly brought it back above 3 per cent of GDP -- the level which Reserve Bank Governor Fraser has described as "sustainable". (9)  By the June quarter of 1994 it had reached 4 per cent of GDP.  This was undoubtedly one of the factors in the decision to implement the first, "pre-emptive", tightening of monetary policy in August 1994, when official cash rates were increased from 4.75 per cent to 5.5 per cent.  The further increase in the current account deficit (reaching an average of 5.6 per cent of GDP in each of the last two quarters of 1994) also almost certainly influenced the two subsequent 1 per cent increases in official rates to the current level of 7.5 per cent.

It now appears that the current account deficit has, at least for the moment, peaked in the June quarter of 1995.  It did so, however, at no less than 6.6 per cent of GDP -- that is, above the peak of 6.0 per cent of GDP reached in the June quarter of 1989 which preceded the monetary policy "crunch" in late 1989.  Moreover, the foreshadowed revision to the $27 billion (6 per cent of GDP) forecast for the deficit for 1995-96 would still leave it at around $22 billion or 4.5 per cent of GDP.

While the immediate risk of another external debt crisis has passed, that appears mainly to be a result of the marked slowing in the economy.  The question remains as to what happens when activity picks up again.  In short, the experience of the recovery since mid-1991 suggests that Australia remains far too susceptible to the risk of an external crisis.

The increase in the current account deficit to unsustainable levels during the recovery reflects an increase in the draw on foreign savings to finance investment in Australia.  The main concern in regard to this increased draw on foreign savings is that it has been accompanied by (and essentially derives from) a reduction in the rate of domestic saving.  The accompanying graph, which uses the ANZ measure of domestic saving, (10) shows not only a downward trend in such saving (interrupted briefly in the late 1980s), but also the virtual collapse in net national saving since the early 1990s.  In fact in the June quarter of 1995, Australia dissaved for the first time outside of a sharp recession.

Chart 1:  Australian Domestic Savings *

Source:  ANZ Savings Report (Access Economics).

Note:  For explanation of method of calculation, see footnote 9.


The virtual collapse in net national savings since the early 1990s is a serious cause for concern, since there is a need to lift domestic investment to achieve sustainable higher growth rates and to reduce the current account deficit to levels which would reduce Australia's exposure to the risk of a foreign debt "crisis".  This concern was highlighted in the recent article in The Economist which identified Australia as a possible "next Mexico" and concluded that "the causes of its current account deficit are bad".  The Government, with apparent reluctance, very slightly tightened budgetary policy in the 1995-96 Budget, to allow the Commonwealth to make a positive contribution to national saving.  The projected contribution is too small, however, and is in any event based on estimates whose credibility is subject to a serious -- and growing -- question mark.  The Government needs to give a much firmer and more convincing commitment to making a substantial positive contribution to saving through the Budget.

The Government's scheme to lift net private sector saving through additional compulsory superannuation contributions also implies a smaller estimated net addition to national saving than appears to be required, even if the Government's estimates are accepted.  But, given that the tax and social security systems provide a significant disincentive to saving, these estimates also have a strong element of doubt.  There is the further important issue as to the appropriateness of the Government compelling people to save in order to offset the disincentive effects on saving which flow from its own tax and social security policies.  At the very least, the latter should be addressed first.


THE PROFITS CLOUD

Australia's stock of capital (net) is estimated to have increased by less than 2 per cent per annum over recent years.  Given that, then unless business investment (in particular) is increased to considerably higher levels, there are serious doubts as to whether the overall rate of economic growth can be lifted on a sustainable basis.  The strong increase in 1994-95 and the forecast strong increase for the current year (which now seems likely to be lower than the Budget time forecast of a 13 per cent increase), would still leave such investment at only about its historical average.

This is hardly surprising:  the acknowledged strong increases in corporate profits over the past three years still appear to leave corporate profitability (measured by the net rate of return on capital) below levels reached in the late 1980s and well below pre-1974-75 levels.  The recent downturn in (nominal) corporate profits suggests that profitability is now falling.  Yet against the background of the relatively depressed levels experienced in a good deal of the period since 1974-75, there is an evident need for an extended period of higher profitability.

ABS data on company profits do show strong real increases in each of the three most recent years.  However, the real increase of 20.9 per cent between 1988-89 -- the peak before the recession -- and 1994-95 (the apparent peak in this cycle), averages only a very modest 3.1 per cent per annum.  Moreover, there will be little, if any, growth in profits in 1995-96.  In fact, the quarterly trend figures for (nominal) company profits before income tax have been falling since September 1994.

Large falls in 1989-91, and the falling trend over the past year, highlight the high risk which businesses (and investors) face -- primarily as a result of the failure of macroeconomic management to keep the economy on a more stable growth path.  Nobody expects Governments to smooth away the business cycle entirely.  But the sort of mismanagement that occurred during the 1980s clearly exaggerated the cycle and has added a risk premium to business investment in Australia.

Chart 2:  Business Investment *

Source:  ABS, National Accounts.

Note:  Investment in non-dwelling construction and plant and equipment by the private sector.  Includes purchases of assets from the public sector.


There is also a need for other measures to encourage entrepreneurship and profits by extending and speeding up microeconomic reforms which would reduce business costs, increase productivity, and help close the gap between Australian and international best practice.  The reforms undertaken to date are clearly a mixed bag, as indicated by the Bureau of Industry Economics' International Benchmarking Report for 1995.  That report confirms that, while the performance gap between Australia and overseas countries has been narrowed in some industries and on some measures, it generally remains large and has widened in other industries and on other measures.

Chart 3:  Private Corporate Trading Enterprises
Net Rate of Return (Annual)

Source:  Capital stock figures are from ABS,
Australian National Accounts:  Capital Stock (Cat. No. 5221.0).

* Estimate

Note:  The net rate of return is

(corporate gross operating surplus - corporate depreciation) x 100.
           (corporate business investment capital stock)


THE TAX CLOUDS

The Government argues that there is no case for reducing the level of taxation in Australia, given that Australia already has one of the smallest government sectors in the OECD and the second-lowest tax burden amongst OECD countries.  That burden is still significantly inhibiting economic activity in Australia, however, through the disincentive effects of additional taxation, or the so-called "deadweight losses", which tend to increase proportionately with increases in rates of taxation.

Apart from high deadweight losses from existing levels of taxation, there are also high tax-compliance costs.  Estimates by Dr Jeff Pope of the Curtin Business School suggest that the cost of complying with taxation requirements amounted to $8 billion in 1990-91, just over 12 per cent of all taxes collected.  The highest compliance cost was estimated to be for company tax (23 per cent of tax collected).

The high costs of existing taxation levels are inadequately recognised, partly because of the perception that Australia is a low-taxed country.  But a country only qualifies as being low-tax if it can be shown that government expenditure should not, and could not, be reduced.  That is clearly not the case with Commonwealth own-purpose expenditures, particularly in regard to social security and associated forms of assistance, which have increased by nearly 2 per cent of GDP since Labor assumed office in 1982-83.

Table 5:  Commonwealth Own-Purpose Outlays
increase from 1982-83 to 1994-95

percentage points of GDP
Social Security/ Welfare1.17
Health0.84
Education0.40
Labour/Employment0.38
Other-0.89
Total1.90

Source:  Department of Finance.


Had these increases in outlays not occurred, Commonwealth taxation could have been about $9 billion less in 1994-95 -- a real cut.  But not only has the Commonwealth not cut its own taxation:  it adopted a policy of solving its budgetary problems by cutting assistance to the States, resulting in an increase of 1.3 per cent of GDP in the burden of the mostly inefficient taxes which the States levy.

The projections in the 1995-96 Budget for a current account surplus of about 0.5 per cent of GDP in 1998-99, rely primarily on reducing outlays relative to GDP and assume no tax cuts of any size over the whole period to 1998-99, notwithstanding the "bracket creep" that will occur over the period (11) and the fact that the last income tax cuts were in 1993-94.  Indeed, tax as a proportion of GDP is actually projected to increase from 24.2 per cent of GDP in 1995-96 to 24.5 per cent of GDP in 1998-99, at which level it would be 0.5 per cent higher than when Labor gained office in 1982-83.  Moreover, the Commonwealth Government does not have a good record of sticking to its forward expenditure estimates.  Indeed, within 5 months of delivering the Budget, Treasurer Willis had already conceded a $917 million net addition to the expenditure estimates for 1995-96.

Personal income tax is projected to bear the brunt of the projected increase between now and 1998-99.  While "cuts" have been made in personal income tax since the Government came into office in 1982-83, the burden of that tax is in fact projected to be the same in 1998-99 as in 1982-83.  That is, the "cuts" will have done no more than eliminate the effects of bracket creep over the whole period since 1982-83 and will not have been real cuts.  Moreover, while the Superannuation Guarantee Charge is technically not a tax, the (compulsory) increase which will occur in that levy has effects similar to a tax increase.

The existing system, by which taxation is levied primarily on income rather than expenditure, is also having longer-term adverse effects on growth.  A review of the tax system should give serious attention to proposals for a flat-rate tax which now appears to have considerable bipartisan support in the United States.  Making such a tax the main source of government revenue could not only significantly increase the incentive to earn additional income, thereby adding to employment and living standards generally, but would also result in a major reduction in the large compliance costs which the existing system imposes.


CLEARING THE CLOUDS

The reality is that "the fundamentals" still fall a long way short of the levels needed to sustain economic growth at a pace that reduces unemployment and stabilises foreign debt.  Until there is greater recognition of the need for a cultural change, the general economic climate will remain clouded.  Moreover, the prospects of achieving growth rates sufficient to improve Australia's relative international performance on a sustained basis, and reduce unemployment even to the Government's 5 per cent target by 2000, will remain dim.  Yet the potential is enormous.  As a resource-rich country with a relatively highly-skilled work force and political stability, the opportunities for investment and economic growth are almost unlimited -- if the economic environment is right. (12)  But major improvements are needed in the macroeconomic policy framework, and the clouds that prevent the sunshine getting through in a number of particular areas must also be lifted.


ENDNOTES

1.  "Sustainable" in this context evidently refers to the widely agreed need to maintain inflation at a low rate and to keep the current account deficit to levels that significantly reduce the risk of an external "crisis".

2.  See the interview with Treasurer Willis on Channel 7's "Face to Face", 19 November 1995.

3.  This paper summarises the assessment.  Supporting analysis is provided in a separate, more detailed, paper which is available on request.

4.  In its analysis of growth in productivity (ABS Cat. No. 5234.0)

5.  The rate of unemployment before inflation starts to accelerate.

6.  The effect of ABS methodology in calculating the contribution of the farm sector to GDP is likely to add about 0.2 percentage points to the GDP(A) trend growth estimate for the September quarter even though the main contribution occurs later.

7.  Some argue that the wage "restraint" that occurred during the Accord period led to some substitution of labour for capital, thus reducing labour productivity growth.  However, this does not sit easily with the fact that wages growth was faster in Australia than in our major trading partners.

8.  There is, in fact, no agreement on what constitutes a socially appropriate distribution of income.  Also, the inadequate measurement of changes in income distribution simply assumes that people are in the same income group that they were in, say, 15 years ago, which is obviously not the case in many instances.

9.  The implication that a 3 per cent average is sustainable implies, of course, that the deficit needs to operate below 3 per cent of GDP for a time.

10.  The ANZ measure estimates saving on a net rather than a gross basis, that is, it allows for depreciation of the existing capital stock.  It also adjusts for the effects of inflation on saving.

11.  The Treasury has supplied estimates to the Senate Economics Legislation Committee showing that by 1998-99 tax revenue will be at least $5 billion higher as a result of bracket creep over the four years to 1998-99.  (As the estimates are for each individual year only, they understate the total revenue effect).

12.  Access Economics Investment Monitor, for example, currently lists $135 billion of investment projects which, if committed, would involve a major surge in business investment, currently running at around $50 billion per annum.

Tuesday, November 21, 1995

That disappearing "surplus"

Events have shown how much the Treasurer, Mr Willis, gilded the lily in his Budget speech, writes RICHARD WOOD.

LATE on the afternoon of Thursday, October 26, the Secretary to the Commonwealth Minister for Transport, Mr O'Keefe, introduced legislation to obtain Parliament's approval to appropriate additional money to meet "essential and unavoidable" expenditures additional to those already appropriated in the 1995-96 Commonwealth Budget brought down in May.  Puzzled as to why the Minister for Finance had not introduced this legislation, I have been able to establish no more than that "he disappeared at the last minute".

Little wonder that Mr Beazley did not face the music given that the legislation seeks to spend an additional $1,416 million in 1995-96 within just five months of the Budget.

True, this additional spending is partly offset by savings of $499 million, but the net addition of $917 million is still large.  What is more, the new spending decisions appear to virtually wipe out the net reductions in outlays of $750 million provided for in the 1995-96 Budget, so that the Government's decisions may now actually add to spending in 1995-96.

Moreover, no explanation was given in Mr O'Keefe's speech as to why the additional spending could not be entirely offset by savings elsewhere, which is the standard requirement of the Finance Department.  Given that the Commonwealth now spends over $130,000 million a year, such savings could surely have been found.

The Government's decision to indulge in additional net spending of $917 million is all the more remarkable when it is recalled that the Treasurer, Mr Willis, went to great trouble to ensure that he could present estimates in May that showed an overall Budget surplus of $718 million.  He went to so much trouble, indeed, that he cut the normal reserve for contingencies from $350 million in 1994-95 to a mere $85 million in the current year.  Now, with the blow-out in spending, Mr Willis has grossly inadequate reserves to meet the additional spending.

As a result the Budget surplus has well and truly disappeared, although Mr O'Keefe's speech did not acknowledge that.  In fact, on top of the net additional spending of $917 million, the Government has lost $215 million as a result of agreeing not to proceed with the wholesale sales tax on building materials.  Indeed, not all of the tax measures announced in the Budget have passed the Senate and other revenue "losses" cannot be ruled out.

Also, the decision to increase AIDC's capital rather than privatise it, will cost the Government over a net $200 million compared with estimates.  Total receipts from asset sales could be significantly lower than the estimate of $5,350 million.  In addition, with the economy now almost certain to grow by less than the 3.75 per cent forecast, revenue will likely be lower and other expenditure, such as unemployment benefits, higher.

All up, it would not be surprising to find that latest estimates revealed that the Budget is now headed for a $1,000 million deficit instead of a $718 million surplus.  Unfortunately, no official estimates are available and it will be particularly interesting to see whether the Government dodges the publication of mid-year revisions to estimates, as it did last year.  Moreover, the election campaign proper has not yet started.  One recent report suggested that Mr Keating is working on a proposal to promise an extension of existing family benefits to those in middle income groups who presently miss out.  Such proposals could easily add another $1,000 million or so to Commonwealth spending in a complete year.  How significant is this "blow-out" in the Commonwealth Budget?  In his Budget speech Mr Willis said that the Budget's "one principal objective" was to "provide for the continued expansion of the Australian economy ... by tackling the major constraint on growth:  the long-term decline of our savings".  Mr Willis identified a two-part plan to improve savings, the first part of which was to increase public savings through bringing the Budget into surplus three years earlier than previously forecast.

The trouble is that Mr Willis gilded the lily right from the start.  The Budget's contribution to saving depends not on the overall surplus but on its deficit or surplus on current transactions.  The original 1995-96 estimates in fact provided for a general government deficit on current account of $3,807 million (0.8 per cent of GDP), that is, a draw on saving not a contribution to it.  This draw onsaving may now be around $5,500 million (about 1.2 per cent of GDP) even before the election campaign starts.

Thus, while the Commonwealth's draw on savings in 1995-96 will still be less than last year's, with the additional spending and possible revenue shortfall the difference is now likely to be quite small.  (Last year the Commonwealth general government current account deficit was about 2.3 per cent of GDP).  This underlines the point I have made at Budget time that the change in budgetary policy is considerably less than the impression being given by the published Budget figures, which implied a reduction in the overall deficit equal to 2.8 per cent of GDP.

More generally, this "blow-out" significantly detracts from the credibility of the Government's forward estimates beyond 1995-96.  Those estimates provided for an annual current account curplus of around 0.5 per cent of GDP.  That was always too small a contribution to saving by the Commonwealth.  But what price now on there being any contribution at all?


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Thursday, November 16, 1995

Links with the jobless

DR CONNOLLY of DEET claims (AFR, November 9) that the existing level of wage dispersion did not stop Australian employment from growing faster than in some OECD countries between 1983 and 1993.  While acknowledging the difficulty of establishing a link between unemployment and active labour market programs (ALMPs) -- because of "the many other factors influencing unemployment" -- he also claims (rather inconsistently) the OECD has presented international evidence that such programs do reduce unemployment.

In fact, Dr Connolly's analysis needs heavily qualification:

  • 1983 was the "bottom" for employment in Australia but not in most other OECD countries.
  • 1993 was the bottom for employment in most OECD countries but not in Australia.
  • Apart from those more favourable start and end points, Australia's faster growth in employment also reflected its faster growth in population (and workforce).
  • A more effective test of labour market performance is how well Australia's faster growth in working-age population has been absorbed into the workforce.  Australia's (OECD standardised) unemployment rate increased between 1983 and 1993 from 9.9 per cent to 10.8 per cent while the OECD average rate fell from 8.5 per cent to 7.9 per cent.  Moreover, the 1995 OECD Survey of Australia suggested that our NAIRU increased from 6.6 per cent in 1987 to 7.4 per cent in 1994 -- a damning indictment of the over-regulation of the labour market.
  • Those EC countries which have been most involved in labor market programs also experienced an increase in unemployment between 1983 and 1993, hardly a good recommendation.
  • The OECD's Employment Outlook is produced by a section of the OECD that is generally sympathetic towards the use of ALMPs.

Of course, insufficient wage dispersion is not the only factor holding unemployment up in Australia.

There is also a whole raft of unnecessary regulations and union restrictive practices.  Even so, to the extent that the present award system is resulting in the payment of some higher wages than is justified by productivity performance, that is maintaining higher unemployment than is necessary.  The fact that CRA is reportedly prepared to pay a large amount a year per employee to move its employees out of the system indicates its cost.


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Saturday, November 04, 1995

Income tax division

Prime Minister Keating has rejected the idea of a State income tax on the ground that this could lead to the States "tearing away with their own-purpose spending".  However, this is exactly what the Commonwealth Government has been doing.  Commonwealth Budget own-purpose outlays are estimated in 1995-96 to be 18.6 per cent of GDP, more than 1.5 per cent of GDP higher than when Labor assumed office in 1982-83.  That is equivalent to an increase in such spending of about $7.3 billion in 1995-96 prices.

Moreover, the 1982-83 level of own-purpose outlays was clearly excessive, as Mr Keating himself has previously acknowledged.  If Commonwealth own-purpose outlays were pruned back to more reasonable 1977-78 levels, they would now be $14 million to $15 billion lower.

In short, the PM's argument might be more convincing if he could show that the Commonwealth had exercised restraint with its own outlays, and with its deficits.  The latter have, of course, been a major contributor to Australia's external debt problem.

Mr Keating's suggestion that the Commonwealth needs complete control over income tax to operate national economic policy is equally misleading.  In fact, as he would well know from advice from his own Treasury, the Commonwealth could operate national economic policy with access to only a proportion of income tax.  This is supported by the fact that, over the past 15 years, the proportion of Commonwealth income tax to GDP has fluctuated only between 11.8 per cent and 14.4 per cent of GDP even though this has been a period of exceptional changes in fiscal and taxation policy.  If the Commonwealth had access to say, 50 per cent of present income tax collections that would be more than adequate for economic management purposes, even assuming (which I do not) that tax changes should be used to manipulate short-term changes in demand.


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Friday, November 03, 1995

A Stitch in Time:  Repairing the Social Fabric

THE ROLE OF GOVERNMENT

I have been asked to discuss with you how to help a political movement coalesce around an idea, drawing on the experience in America.  There is, in America and in many parts of the world today, an emerging consensus for the restoration of civil society.  It sets before historians a difficult task, for in many ways it does not bear the slightest resemblance to the template of modern history.  It is not the brain-child of a great man, nor is there a primary manifesto, nor even a slogan, to assert its message.  There is no alignment of powerful interests promoting it either publicly or behind the scenes.  All the same, it is at hand, and it may well be the driving force of the next century.

I am no prophet but I will tell you what I see happening in America and what I think its implications may be.  I will do my best, however, to avoid even the slightest appearance that I am trying to suggest to you what it may mean for Australia.

In that regard let me position myself a bit.  In preparing for my trip to America, I did some reading to get up to speed on current affairs in that country -- perhaps to see if many of the same debates that are going on in America are also going on here.  I recall opening an issue of the Review and thinking they must be engaged, as we Australians are, in a serious debate over capital punishment, for I saw a chart entitled "Use of the Guillotine 1980/1993".  The chart indicated 1992 was a high point for this practice and, according to the data, I surmised that some 255 heads had been chopped off in that year.  Now I may be conservative, but even so, it struck me that there are more efficient, and certainly less messy, instruments of public policy available today.

I was beginning to think that America was even more different from Australia than I had supposed.  Then, when I saw that "guillotine" referred to a deft legislative procedure for bulldozing laws through the legislature, of course I revised my opinion.  Perhaps the U.S. is more like Australia than I had first supposed.

1 am aware, of course, that being "more like the U.S." is hardly at the top of every Australian's wish list, so you will be glad to know that I will make no assumptions on that point.  Whereas we sometimes affectionately refer to them as "The Yanks" and they, that is those Yanks, have concluded that the central government in their country is too powerful and that the citizen is not powerful enough.

The national election of 1994 in America was a quiet, deliberate, temperate rebellion against the overarching idea of government in most of the twentieth century.  Writing in the New Yorker of 23 January 1995, essayist Michael Kelly summed up nicely the heart of this idea and I quote:

that for the sake of America's social, economic and moral well-being, the country must be led by a wise, powerful central authority, an activist federal government that would serve as a combination national social engineer and national policeman.  The government does for the citizens, towns, cities and States what they are too weak, poor, benighted or corrupt to do for themselves.  For more than half a century, this view of government has informed the actions of Congress and of Presidents, and it has been the core of the Democratic Party philosophy.

Do not believe the pundits and the partisan interpreters of the 1994 elections who cannot bear to face its implications.  They say that Americans were caught up in an anti-incumbent fever.  But the voters did not go to the polls to throw out incumbents;  they went to throw out Democrats.  How many incumbent Senators, or Congressmen, or Governors from the Republican Party were thrown out?  Not a single one.

Nor did Americans, as one TV commentator infamously put it, "throw a tantrum" like so many "two-year olds".  If the people are intemperate and immature, as he argued, democracy is dead.

To the contrary, in the United States the democratic process is showing very promising signs of life.  Last November, Americans, without parades and waving flags, without a rallying cry, without any of the trappings of an epochal event, went to the polls and literally swept from office the political party that has been, for much of this century, the embodiment in America of the "national idea".

The progressive project to construct within America's borders a great national community which would summon Americans away from selfish interests and parochial allegiances, toward a commitment to an overarching national purpose -- this national idea -- emerged at the turn of the century, in response to what appeared to be dramatic and permanent changes in the way Americans had traditionally conducted their everyday civic lives.

Prior to the ascendancy of the progressive welfare state, at the turn of the century, American life had been organised around what historian Robert Wiebe has described as "island communities".  Citizens were closely bound one to another, by strong families, tightly-knit neighbourhoods, and active voluntary and fraternal groups.  The citizens' churches and voluntary groups reflected and reinforced their moral and cultural virtues and imparted these to their children, surrounding them with a familiar, breathable moral atmosphere.  Through small, local, "human-scale" associations, Americans not only achieved a sense of belonging and connectedness, they also tackled the full range of social and human problems that today have largely become the province of government.  Voluntary social welfare associations ministered to the vulnerable according to the tenets of compassion and charity implicit in the community's shared virtues.  The citizens' schools were run in accordance with those virtues, and with extensive citizen involvement.  Critical public decisions were made in township meetings, ward conclaves, or other small, face-to-face gatherings in which the individual's voice was as important as his vote, perhaps even more important.

This, of course, is the America celebrated and immortalised by Alexis de Tocqueville in Democracy in America.  "Americans of all ages, all stations in life, and all types of dispositions are forever forming associations".  He noted this because this was how virtually every significant public problem was to be solved.  Nor was this an accident of history.  Tocqueville understood it was the concrete result of the careful design of the founding fathers of the United States.

This decentralised, civically vital way of life, however, was doomed, in the view of the progressive theorists like Walter Lippman and John Dewey, and public figures like Theodore Roosevelt and to some extent, Woodrow Wilson, who saw irresistible forces of modernity that would sweep away the boundaries that had historically contained and preserved the island communities.  Communication and transportation technologies, huge industries, big cities and massive immigration had, in their view, rendered small government unsustainable.

Populists argued to preserve or restore the ethos of the small town, but progressives, who won the argument, saw in its demise the dawn of a new and higher form of community:  the national community.  The essential instrument of this new order would be a powerful and active national government.

Decades before it was elevated to electoral hegemony by Franklin Roosevelt and the New Deal, the progressive vision of Big Government was set out tellingly in 1909 by Herbert Croly's The Promise of American Life.  In his famous formulation, the Jeffersonian values of "community of feeling and ease ... of communication" could now be established within the nation as a whole, using the Hamiltonian instrument of the vigorous central government.  Through regulatory measures, central government could tame those great and disruptive concentrations of private wealth, the corporations, turning them into "economic agents of the whole community".  The government would also become "expressly responsible for an improved distribution of wealth" and would begin to alleviate, through the progressive income tax and social welfare programmes, the inequalities of wealth that might imperil the sense of national oneness.  A vigorous programme of "Americanisation" would serve to integrate diverse immigrant populations into a single, coherent people.  "Scientific management" and other new developments in the social sciences explained to government elites how enlightened, bureaucratic administration could bring order to the chaotic masses.

The national idea, in Croly's words, would see a "subordination of the individual to the demand of a dominant and constructive national purpose".  A citizen would begin to "think first of the State and next of himself", and "individuals of all kinds will find their most edifying individual opportunities in serving their country".  Indeed, America would come to be bound together by "a religion of human brotherhood", which can be realised "only through the loving-kindness which individuals feel ... particularly to their fellow countrymen".

The national community would inevitably raise the Presidency to a new level of eminence, for, as Woodrow Wilson pointed out, the President possessed "the only national voice" in American public affairs.  And in the First World War progressives would discover the awesome capacity of war to nurture public spiritedness and national oneness.  John Dewey would speak appreciatively afterward of the "social possibilities of war".  Liberalism would never forget this lesson and, in times of peace, its causes would be packaged as "the moral equivalent of war".

Seen in the kindest light, the progressives, more enthused than Enlightenment philosophes by the infinite potential of applied reason, sincerely believed that fine minds and university departments devoted to the study of the social sciences would bring into being a valid and capable expertise in the diagnosis and treatment of social disorders.  But their benign and benighted aspirations can hardly justify the bold contempt they held for the common citizen.  John Dewey urged broad public education in the social sciences so that citizens would learn, in Timothy Kaufman Osborn's formulation, "the radical insufficiency of the maxims of everyday conduct", as well as that the roots of most problematic situations do not lie within the jurisdiction of the locality and hence that their commonsense analyses of those situations are unreliable.  The good citizen now accepted his "inescapable dependence upon those trained in the expert methods of the social sciences" and graciously backed out of public affairs in deference to the social science experts, who alone knew how to manage the complexity of modern public life.

These cruel dismissals of the lower classes mark the influence of Social Darwinism on the thinking of elites, in America and around the world, at the turn of the century.  It was, after all, that philosophy which originated the notion that society can, and indeed must, be studied scientifically.  Applied to individuals, it recommended eugenics;  applied to society, it recommended the centralisation and professionalisation of politics.  "Governmental betterment" reforms reduced the influence of local interests with at-large, city-wide systems of voting and representation.  Similar "reforms" ensured that local schools were removed from the influence of everyday citizens organised around religious or ethnic values.  Reformers were particularly anxious to drive religious expression and teachings out of the schools, for it was the progressive conviction that traditional sectarian religion was but a benighted retrograde system of myths -- virtually a poison that must be purged from common consciousness in order to establish the undisputed hegemony of the social sciences.  Indeed, many of the progressives understood the new sciences to be a secular evolution from or substitute for religion:  a realisation of the kingdom on Earth, or, to recall Croly's term, a "religion of human brotherhood".

The triumph of progressive structural reform would mean, in essence, that citizen involvement in public affairs had been reduced from active, face-to-face public problem-solving on a daily basis, to passively casting a ballot for a handful of offices every other year or so.  That ballot would be aggregated with vast numbers of other solitary votes into a mandate for an elite corps of professional experts, who were now to conduct the real business of public life.

While it continued to be implemented wherever its elites held influence in the 1920s, the progressive project's most spectacular advancement was the establishment of Franklin D. Roosevelt's New Deal.  In taking responsibility for -- that is, control of -- the economy, Roosevelt had shifted to the national government powers that would in time be applied to any and all problems that politicians might gain votes by promising to solve.

From that time, until this past November, the party that had come to rule with Franklin Roosevelt had held America hostage, not so much to the "national idea" itself as to the power they had accumulated to achieve it.  The progressive vision had begun to fade, as many visions do, after it was most fully realised in Lyndon Johnson's aptly named The Great Society.  The centrepiece of the Great Society was, of course, the "war on poverty".  "War evokes co-operation ... [and a] sense of brotherhood and unity", Johnson explained, in an appeal that is somewhat ironic given the intense opposition his policies in Vietnam were later to receive.  Disaffection with the national idea was not based at first on the fact that it did not work -- that would come later -- but on its denial of aspirations for authentic community.  New left radicals saw the pin-striped suits the bureaucrats were wearing and accused them of "corporate liberalism", calling for a "participatory democracy".  The communitarian strain of radical leftist thought would ultimately be overwhelmed by its companion doctrine of personal liberation in uninhibited self-expression which would go on to play havoc with our civic institutions and virtues.

(Interestingly enough, the Democratic Party, in the wake of the rise of the '60s counterculture, deftly wedded its economic statism to individual license in the moral and cultural spheres.)  The Black Power movement called on Blacks to "create their own sense of community and togetherness".  And from the other end of the political spectrum, the so-called "hard hats", mainly ethnic Catholic workers, whose city neighbourhoods were pockets of resistance to the excesses of modernity, saw that the national government had launched a massive assault -- through cold, bureaucratic edict or even colder judicial fiat -- against the traditionalist prerogatives of locality and neighbourhood to define and preserve their own ways of life.  Suddenly, they could neither pray in their neighbourhood schools, nor indeed count on sending their own children to the neighbourhood school because of compulsory busing, nor ban from the community forms of expression or sexual conduct considered offensive, nor define the conditions under which abortion might be proper, nor even enforce the most rudimentary forms of civil order under the police power.

It is an often overlooked fact that, after 1964, no one would again win the Presidency by boasting grandly about building a great national community, a great society, a great national idea in America.  No one would again call proudly and forthrightly for a shift of power to Washington and away from local organic networks.  Indeed, every President from 1968 to the present has placed at the centre of his agenda the denunciation of centralised bureaucratic government, along with promises to slash its size and power, and to reinvigorate states, small communities and civil society's intermediate associations.

What explains an erosion of the idea of national community so severe that even the Democratic Party itself now hesitates to speak up for it?  The project to create, at the level of the nation, a sense of mutuality and oneness that appears readily and naturally only at the level of the family or the local community, was, and could only be, futile.  For a period, in times of crisis, when the threat to the nation is sufficiently obvious, the American people will pull together as one.  But as they do so, they will not be forming a national community to protect ... a national community.  The America they love is not an abstraction, it is people they know and places they feel at home and a way of life in which moral virtue is present.  That is what they will defend, and when it is safe, they will return to it.

Viewed in this larger perspective, it is now perhaps easier to understand the tsunami of 8 November 1994.  For the seventh time in a quarter of a century, the American people in 1992 had elected the Presidential candidate, styled as a New Democrat, who had persuaded them that he was the most sincere about reversing the growth of government.  (All three candidates, incidentally, had earnestly made that claim.)  And for the seventh time, early deeds, such as proposing government absorption of the health care industry quickly gave lie to the words, and informed the American people that, once again, they had been fooled and misled by empty rhetoric.

In 1993, Americans were presented with a proposal for free health care provided by the government.  They didn't want it.  It wasn't the free health care they objected to, it was the "provided by government" part.  In 1994, in a mid-term election on Tuesday the 8th November, without parades, without a rallying cry, without a warning, the American people went to the polls and literally threw out the people, the party and the politics that had been running their country, uninterrupted, since 1932.

The project that led to these stunning events does not strictly conform to the topic of rallying around an idea, because so much of its success had to do with exposing the inequities of bad ideas rather than espousing the virtues of good ones.  After all, the best ideas for politics don't come to us directly from manifestos, they come from our nature baptised by its better angels.  The project then is to recognise and remove the obstacles to good ideas and, in the fashion of good government, get out of the way.

As an Australian associated with neo-conservatism, who has seen the lot of conservative political thought go from near zero to national endorsement in three decades, give or take a few years, the question of the role of ideas in politics is critical.  This is particularly important when you hope to include businessmen in a coalition.  The first lesson:  Ideas have consequences, a much repeated phrase, but true.  It's often the businessmen who seem to be the only people in the world who do not know this.  The business community has a proper respect for facts, it seeks them everywhere and wants to base all of its decisions on them.  But ideas and images which can vary remarkably from facts are the driving force of politics, of law, of education, and of the media through which the general public is informed.  Advocates of bad ideas must be active in politics and media because their ideas are not supported by facts and need to be supported by political power.  Therefore if they would be free, advocates of good ideas must also be active in politics and media, if only to oppose bad ideas.  Facts are, of course, absolutely indispensable, but we must understand that they do not speak for themselves.  I should add that if facts could speak for themselves it's a damn good bet they wouldn't have anything to say about post-structuralism, or deconstructionism or existential phenomenology, but that's beside the point.

Second lesson:  To beat a horse, you need a horse.  To pose ideas you must have ideas.  The problem for us of course is that it is a more difficult task to draft abstractions that conform to reality, than to draft abstractions, as the left does, that conform to abstractions.  Convenient terms like neo-conservatism are formulated to locate an idea within an on-going political conversation in which, at the time and in the place, it will be understood.  More durable terms, like Michael Novak's very fortunate "Democratic Capitalism", are crafted to reassert fundamental principles, in this case by highlighting the unity of two expressions of the idea.  For example, I am now frequently using the term "New Citizenship", it expresses the return of responsibility and authority from government to intermediate institutions in which one is not a drone in the hive of the almighty State, nor an equally alienated individualist forever defending his personal sovereignty against all comers, but is a citizen of influence in his own life.  Whether the "New Citizenship" becomes an entry in future encyclopedias, is not the point, it is an entry in the current debate in America, a refinement, within the context of that debate -- an idea.

So to get back to the topic I was asked to address, if the opposition has ideas and agendas, we must have ideas and agendas.  If they have scholars and experts, we must have scholars and experts.  If they have magazines and other media outlets, we need them as well.  During the 1970s, a network of think-tanks began to form in Washington, publishing books and journals, issuing reports, holding conferences and giving the media a name and telephone number to call for a conservative commentary.  Many of them realised that the American university was hopelessly corrupt and saw the need for serious scholarship outside of the academic intellectual establishment.  Before the think-tanks, an intellectual who was not in step with the herd was invisible, and had no future.  Ideas that were not sanctioned by left-wing elites began to gain some circulation.  Books and magazines that might have been read covertly in the early 70s were, by the end of that decade, shamelessly displayed on desks and coffee tables.  More recently, the phenomenon of talk radio has emerged with extremely popular national and local call-in radio programmes through which a conservative is often expressing an outraged vox populi and is given a forum denied to it by the large media establishment.  In America they saw that once the intellectual hegemony of the left was contested, the left was required to make arguments instead of unchallenged assertions.

When there are competing sets of ideas to choose among in the public debate, issues take on a defining role.  Americans today are up in arms about a reformulated gasoline, designed through a cooperative effort of government and industry.  This is a product intended to solve certain environmental crises, real or imagined.  The Americans hate this reformulated gasoline.  Five years ago I would have expected them to blame industry, today I am not surprised that they are blaming the government.  In an issue very close to their heart, the harm done to innocent children by the miserable performance of American education, they are nearing the point where that too is being blamed, as it should be, on the government.

Defining issues are the substance of the now famous contract with America that the Speaker of the House, Newt Gingrich, designed -- a ten-part pledge taken by Republican candidates for the House of Representatives in 1994.  It was a master stroke, an act of genius and leadership and a singularly wise implementation of the horse race metaphor.  It was not an ideological manifesto, but a list of ten proposals responding to issues that had been developed in the post-Reagan American policy debate, including term limits, a balanced budget, a line item veto, and so on.  All of them, in one way or another, an attack on the imperial national government and a repudiation of the ideas that had been the basis of the Democratic Party's regime.

I hope I've made the point that Newt Gingrich's ascendancy and the conservative electoral triumph of 1994 owe a great deal to the wisdom and hard work that preceded them, but I do not want in any way to diminish his contribution.  Indeed I will turn to Newt Gingrich as the consummate example for my concluding point:  he's a winner.  Before he became their leader, Republicans in Congress had accepted the role of being the number two party.  They had also accepted terms of debate that implicitly acknowledged the supremacy of left ideas and programmes.  They apologised for conservative policy preferences and believed the best they could do in Congress was beg for a scrap of moderation in liberal legislation.  Newt Gingrich never did this.  He challenged liberal policies with conservative policies, he believed that if the Republican Party took the people's side in the national debate they would eventually become the people's party.  Simply stated, the third lesson:  Don't apologise for being right.


MORAL EDUCATION AND THE FAMILY

Twelve days ago, with a Brisbane youth group, I attended a very lively and instructive weekend conference in Melbourne for about 200 young people.  Only a few hours before talks were due to finish, the conference organiser asked unregistered members of the audience please to pay for their attendance so that future events of similarly high quality could take place.

The night before, because some 25 people had showed up for a social gathering and dinner unannounced, she had had to race out for food for which she hadn't been reimbursed.  On Sunday, after staff responsible for registration had left the tables guarding the entrance, a new horde -- including adults -- had taken unbooked advantage of mid-morning talks and lunch.  Many of the offenders, apparently, had done the same thing the year before.

If inconsiderateness of this type were an endangered species, I would probably not have begun my talk this morning by referring to it.  But attempts to secure free lunches, as we're all aware, occur these days with uncommon regularity.  Not just the young people we know intimately, but many adult acquaintances of ours, fail to ask themselves the essential question, "What do I owe people who organise activities from which I expect to derive personal profit?"

The mind-set which prevents this question from being asked, and which springs from a self-centredness verging on solipsism, is vividly rendered in a brilliant movie which, ironically, I first saw on video two days before I left for my Melbourne weekend:  Robert Altman's Short Cuts.  This film, set in Los Angeles, provides the finest, and also the most frightening, view of modernity I have yet seen.  Like other recent movies which are almost as good -- Muriel's Wedding, Once Were Warriors, Forrest Gump -- it has a lot to say about family life.  But its underlying theme is faithlessness.

In Altman's movie, form and content are inseparable.  Throughout the film, short cuts reminiscent of the filming techniques of countless TV programmes move us, in staccato fashion, from one scenario to another -- not because Altman is trying to appeal to youngsters with short attention spans, like the makers of Sesame Street, but because rapid temporal and spatial shifts have immediate cultural meaning.  All of us, Altman implies with unsparing wit, have concentration problems;  and all of us fail to see connections crying out to be seen.  As a second viewing makes abundantly clear, apparently random juxtapositions of frames in the movie are not random at all.

Robert Altman's large point, underlined by his own visual short cuts, is that most of us do not look long and hard enough at anything.  Cutting corners is a way of life for us:  not simply because we're easily distracted or endlessly preoccupied, or because fast-forward is our preferred mode, or because we actually like microwaved dinners better than baked ones, but because the pace of our lives -- not just technological advance itself -- is much too rapid to be manageable.  What requires careful notice passes us by or overtakes us before we know it.

Short Cuts contains many haunting scenes.  At a busy hospital, a father who hasn't seen his adult son for many years suddenly turns up, blurts out to him facts about his life which have been plaguing him for years, but finds that he is talking to a stranger who is much too absorbed in his own serious problems to take an interest in his.  A lone boy, ignoring the fact that the living room of his home has been completely wrecked and is overloaded with broken objects, makes a beeline for the television set after a weekend away with his mendacious mother and one of her two lovers.

A talented jazz singer whose band rehearsal is interrupted by her equally talented daughter, a cellist, reacts with such callous matter-of-factness to the news brought to her of the death of their neighbour's young son that the young woman flees from her mother's cafe, devastated.  A waitress who treats an injured child with helpless, but unmistakable, concern rationalises with her own daughter about the sexual abuse endured by her years before at the hands of the drunken de facto who is still living in the family caravan.

In view of the menacing consequences of the torpor dramatised in these sequences and in others, it is not surprising that many of the characters in Short Cuts spend countless hours drinking.  Nor is it surprising that an equal number explode without warning in response to everyday threats to their usual routines.  Although Altman doesn't allude directly to the most highly publicised disorder suffered by school children at the moment, A.D.D., he shows that attention deficits which have their sources in familial neglect, and which demand but don't receive proper scrutiny, are a commonplace of modernity.

If we were Forrest Gump, we wouldn't sit on a bench at a bus stop or perch on a stump all day, slowly psyching ourselves up for a visit with a person dear to us, reflecting on the past, or waiting for a child to arrive home at the end of a school day.  Like Altman's men and women, we have forgotten the meaning of T.S. Eliot's well-known term "the still point".  We don't know what contemplation is.  We memorise nothing except TV ads:  it takes too long.  We receive our opinions cooked:  in five-minute interviews on Derryn Hinch and Ray Martin or rapid-fire bursts on radio talk shows.

In a letter published in a recent issue of Quadrant, Marlene Goldsmith -- a member of the New South Wales Legislative Council for whom I have a lot of time -- remarks that she found Short Cuts too unbearable to see through to the end.  Her reason for feeling this way makes perfect sense to me, even though what I did myself in response to the shocks generated by the film was to see it twice.  Because I took things in the second time that had earlier been too quick for me, I found at least some redeeming features in characters who would otherwise be very easy to write off completely.

This may sound odd, but unlike Marlene Goldsmith, I was comforted, not dismayed, by the fact that Altman portrays a world which is almost devoid of hope.  What cheered me was his metaphysical realism:  his unerring sense of the emotional blindness underlying our whole way of life.  If enough people were to react to the everyday events depicted in the film with "fear and trembling" -- as Quadrant's editor, Robert Manne, says in the previous issue of the magazine that he did -- we could witness significant cultural change instead of being blown off the planet or slowly poisoned by noise and pesticides.

It's impossible to watch Altman's characters without being implicated in their failures.  The more likeable adults in the film know moments of alertness, generosity and courage, and some of their acts are competent, helpful, and even beautiful;  but at critical junctures all of them display an unconscious indifference to others which is frightening in its ordinariness.  The casual treachery to spouses, children, friends, and lovers which relentlessly follows from their bad moods, their habitual procrastination or inertia, and their perpetual fogginess simply can't be written off as remote from our own lives.

* * *

Last year, when I spoke about moral education and the family at an international conference on family life, one of the things that I did was contrast a quaint best-seller popular in the 1850s, Charlotte M. Yonge's The Daisy Chain, with a 1970s novel commonly taught in schools and twice filmed:  S.E. Hinton's The Outsiders.

There isn't time for me to read you the passages from both novels which I read then, but I am going to offer some generalisations about differences between these two books which bear a family resemblance to ideas explored in Robert Altman's film.  As well as making observations about the nature and the implications of changes in family practice over the last century and a half, I'll be offering suggestions about what can be done to restore a measure of sanity to the contemporary scene.

The Daisy Chain, besides being a study of family life, is the portrait of an age long gone.  In it, the ten children in the May family who are the object of Charlotte Yonge's sustained attention are united by the devotion of their parents to each other and to them, and by their love for one another.  After their mother dies suddenly in a freak carriage accident -- caused, I can't help remarking, by speed and inattention -- they continue to depend for sustenance on what she has given them, and on shared family activity, especially good talk.  Their conversation is not simply about the daily round.  They converse about large moral issues which spring from it, and which require considered scrutiny:  for example, the effect of ambition on the course of our lives, or the nature of service to others.

In the fiction written by Charlotte Yonge's contemporaries and their immediate successors, the need in children for moral instruction of the kind offered regularly in The Daisy Chain by Mr and Mrs May is unmistakable.  But this need is largely unmet.  What's clear from what is spoken about as missing in, for example, Dickens' Hard Times, Jane Austen's Persuasion, George Eliot's The Mill on the Floss, and Henry James's What Maisie Knew, is that when weak parental witness is compounded by the absence, in the home, of sound, habitual, direct teaching about good and evil, children suffer very deeply.

In the best modern fiction, as in films like Short Cuts, disintegration takes many forms, but it has in common a number of key features.  In the home, its chief signals are little or no family conversation about morally important issues and no dialogue -- as there was a century ago -- lamenting its absence.  In novel after novel, we meet youngsters who have nobody or, at best, only one adult capable of providing sound moral teaching -- which, of course, is what is meant by the term "a crisis in authority".

S.E. Hinton's The Outsiders, which is about two teenage gangs, and which is taught in huge numbers of Australian government and non-government schools, beautifully exemplifies a trend now pervading the English-speaking world.  In it, "home" is the city streets.  The immediate object of life is survival:  getting others before they get you.  Loyalty is confined to gang members.  Barriers which prevent people from making any real contact are present everywhere.  Joy and harmony are virtually unheard of.  Everybody's favourite tune is "Johnny One-not".

As in Altman's film, reflection is a luxury:  under ordinary conditions, there is no time for it.  Teenagers are too busy seeking excitement or running from trouble to stay put.  Long-range goals do not exist, and there are no adults who possess moral authority.  The young cannot begin to live wisely -- not simply because it is so hard for all human beings to want what they should and to exercise appropriate will-power to achieve it, but because no grown-ups in The Outsiders are capable of imparting knowledge about what ought to be loved.

Charlotte Yonge -- in contrast, only 140 years earlier -- knew not just that mind and heart must be trained, and trained together;  but she knew something about how essential training of the mind and the will is undertaken.  In The Daisy Chain, home is The Home.  Values are imparted by the family, especially the mother, and reinforced by trusted adults and children at church and at school.  Even when justice is violated in these three bedrock institutions, rebellion against people who have abused their authority is discouraged.  Fortitude is urged.

In Yonge's world, children and adults together muse about how serious temptations should be tackled.  Most (not all) of their discussions get somewhere -- chiefly because both parents provide knowledgeable instruction in ordinary circumstances and in crises.  The environment in which such instruction is offered is safe and secure.  Thus, even though errors -- some, quite serious -- are made by family members, growth takes place.  Small wins are slowly transformed into significant change for the better, and ruin is shown to be avoidable.

The reason for this encouraging state of affairs is not simply that short fuses do not disfigure Yonge's entire world.  It is that religion is a powerful teacher in the lives of her characters, just as it was in her own.  Unlike her better-known colleagues and successors, Charlotte Yonge regularly prayed, attended church, and allowed herself time for serious reflection;  and she wrote in the light of faith.  So although some of her major characters neglect their real obligations, succumb to worldly temptations, and close their eyes to the needs of others as disastrously as do most of the adults in Short Cuts, others fare very much better.

A fact rarely mentioned in this era of political correctness is that religious faith, put into practice through good works, confers unmistakable benefits.  The chief one is peace of mind:  a commodity as blatantly absent from the stressed-out universe of Short Cuts as it is from S.E. Hinton's fiction.  In the art of Charlotte Yonge and her spiritual descendants -- one of whom is Eric Roth, who wrote the screenplay for Forrest Gump -- it is clear that although nobody is exempt from suffering, people who are taught to keep faith with others are immeasurably happier, and much more likeable, than those who aren't.

Of course it isn't easy to be faithful to our best selves or to those around us.  Yonge is not the first writer to show how difficult it is, nor is she the best one.  But her depiction of family life, like Shakespeare's in the comedies and the romances, has the virtue of portraying characters who are not defeated by life, and who sometimes display heroic virtue.  In the history of the adult novel, this is unusual.

For most of its short life -- scarcely more than two centuries in all -- the novel has been what James McAuley termed an individualistic "bourgeois" art from.  The common good, particularly in its communal forms, has not been its central concern.  And even in its treatment of individual fortunes, its structure has encouraged a focus on relatively small change -- not on the revelations which engender major spiritual transformation.  The essential subject of religious literature – salvation -- has not preoccupied the great run of novelists.  Indeed, lately, novels for adults and adolescents have been oppressively nihilistic.

* * *

In case mention of these features of literary history strikes you as tangential to the topic I'm supposed to be discussing, namely, moral education and the family, let me assure you that it's not.  Modern fiction, like older narrative literature and modern film, is an essential means of instruction for the young:  a preserver of timeless continuities and a potential force for renewal which we cannot afford to do without.  Its spiritual content is not a matter to be lightly tossed over, ignored, or obscured.

Stories are the most powerful means of shaping character known in civilised society.  That's the reason the May family discusses Bible stories in their free time.  It's also the reason for the enormous, and of course justifiable, popularity of the lives of the saints.  All of us like listening to tales with strong plots, even if they're recounted by old, somewhat garrulous, friends.  At the video shop where I borrowed Short Cuts, the young girl at the desk answered a question I put to her about Philadelphia by saying, "Yes, you'll like this.  Most people do.  It tells a great story".

It just happens that the usual modern vehicles for telling stories about home and hearth lack the power of narrative modes widely admired in an earlier day -- for example, myths, legends, fables, epics, and "long" poems.  These modes are rich in imagery;  and, often, they depict the marvellous and the miraculous.  Children respond very strongly to them.  Adults, these days, don't -- probably because they are not accorded a prominent place in even the better book shops, or reviewed in weekend newspapers, or taught in popular university English courses;  so adults don't regularly experience them.

Novelists writing for adults haven't sufficiently appreciated what Mother Teresa would call "little miracles" to allow them their rightful place.  And because the novel is a relatively recent literary invention, powerfully influenced -- as all art is -- by the spirit of its day, it hasn't had very fertile soil in which to thrive.  Even during the Victorian age, many strong-minded people dismissed its content as frivolous, as certain latter-day purists who haven't been to the movies in years dismiss film.

This is not to suggest that character formation depends entirely on our immediate response to the promise, "I will thee a tale unfold".  There is obviously a great deal else, besides story-telling, that all of us can do for children and youth so that they are compelled to reflect more fully on private morality.

Direct, clear, systematic instruction in the virtues, in the manner recommended in, for example, David Isaacs' Character Building or Esther Joos Esteban's Education in Values, is certainly called for.  William Bennett's Book of the Virtues, which includes discursive as well as imaginative prose, has graphically demonstrated, through its sales, our contemporary hunger for such instruction.  All of us, not just the young, need role models whose histories transcend this time, this place.  Recently, at Pierre Ryckman's splendid Latham Lecture, I found one such model in Confucius.

Playing team sports, going camping or bicycle riding, listening to music with decent words, attending shows and exhibits, or watching movies and videos and talking afterwards about their content -- though not necessarily straight away -- are additional, near-effortless ways of communicating with the young about significant matters.  Activities of this kind are also, of course, a fine means of sharing experiences with young people which they themselves clearly want to have.

American philosophy professor Christina Hoff Sommers argued recently that university students often emerge from the latest recommended remedy for anomie -- courses in Practical Ethics -- thinking that there is no right and wrong:  only good and bad arguments.  One counter to this view, as she rightly suggests, is instruction in moral philosophy, starting with Plato and Aristotle.  Plato's more dramatic dialogues -- for example, The Crito and The Apology -- and Aristotle's Ethics are indispensable guides to the good life:  not least, because they demonstrate something about the kind of person to be, and how to become that person.  In the hands of good teachers, what's more, they have immediate intellectual appeal.

In making these broad suggestions about moral education, I don't want to leave you with the impression that the forms of insanity rife in today's world can be met entirely by rational means.  The power of faith and trust -- virtues recommended not just by Robert Altman and Charlotte Yonge, but by many of the other artists and teachers to whom I've referred today in passing -- depends on the recognition that reason can take us only so far.  But unless we are conscious of how far that is, we won't ever know the meaning of the phrase "stay the distance".


HISTORICAL ORIGINS OF AUSTRALIA'S VALUES

Let me begin by welcoming the 1994 Report of the Civics Expert Croup entitled Whereas the people:  Civics and Citizenship Education.  The Group consisted of Professor Stuart Macintyre, Ernest Scott Professor of History in the University of Melbourne, Dr Ken Boston, Director-General of the New South Wales Department of School Education, and Ms Susan Pascoe, Co-ordinating Chairperson (Policy) of the Catholic Education Office in Melbourne.  Their Report is a big improvement on comparable official publications of recent years.  It considered that "effective civics and citizenship education" should encompass among other things "the basic liberal democratic values that sustain our system of government and enrich its operation". (1)  The Report added that

Australia is fortunate in the dense network of civic associations and civic involvement that provide the basis of civil society.  The rule of law, rights of free association, free speech and the other freedoms that protect civil society are a vital component of the civil sphere. (2)

and

As we approach the centenary of the Commonwealth, Australians are able to look back on a remarkably successful record of democratic self-government.  The public institutions created in the closing years of the last century have proved flexible and resilient.  The outcomes of the democratic process enjoy popular acceptance -- in contrast to the experience of most other countries, we have seldom experienced a challenge to the legitimacy of our civic order or resorted to violence.  The political process has operated peacefully.  A broad measure of freedoms has been maintained and extended.  The rule of law operates.  There is a high level of toleration and acceptance. (3)

My only demur is that the institutions which have served Australia so well were not created at the end of the nineteenth century, but were only adapted then.  They were an inheritance from the political culture of the colonising peoples of Great Britain and Ireland.

The Group advanced some of the criticisms now common of nineteenth-century Australia:

Those who established Australian citizenship a hundred years ago took as the basis of such a framework of values, a White Australia of British descent and imperial loyalty where men would be breadwinners and women would be dependants. (4)

They quoted, too, comments made to them by Senator Nick Bolkus, Minister for Immigration and Ethnic Affairs:

Civics education should ... identify the progressive development of our inclusive, tolerant, democratic society which, as it has matured over the last hundred years, has been successfully transformed from a comparatively monocultural society to a rich and harmonious multicultural society. (5)

The Group and Senator Bolkus insufficiently appreciated two points of fundamental importance.  The first is that in conditions of civil society it is comparatively easy to extend political rights to groups hitherto unenfranchised, but it is very difficult to create a liberal-constitutional order in totalitarian regimes, or closed societies, to use Popper's expression, in which there is very little social interaction independent of governmental control. (6)  Secondly, a century ago it was mainly people of British descent, together with a few other peoples of Western Europe, who had experience of a framework of liberal-democratic values, constitutionalism and the rule of law.  Although Australia in 1900 was largely monocultural, that culture was pluralist and flexible.  It included many diverse elements, such as the distinctive culture of the German communities of South Australia.  Ongoing tensions between Irish Catholic values and the Protestant traditions of the British Isles were a major formative influence on Australian values.  Australia's political structure could accommodate a variety of races or ethnicities, as well as diverse religious and political adherents, provided that they accepted the rule of law and the liberal-democratic order.  In 1900, the Australian Labor Party and the Australian Workers Union were at the forefront of the White Australia policy largely because they feared that the large-scale entry of Chinese, Pacific Islanders and other non-Europeans would rapidly undermine a relatively new society with a small population.  Chinese miners, although mainly industrious and law-abiding, remained in separate groups under the control of a boss and knew nothing of the rights which Australians took for granted.  China, Japan and other Asian states were, of course, even more hostile to immigration and foreign influence than were the Australian colonists.  In 1995, the liberal-democratic values prized by the Civics Expert Group are not widespread in what is now often called "our region" and completely absent in most of it.  The successful assimilation of recent Asian immigrants, many of whom were already accustomed to British or other European influences, does not demonstrate that Australian colonists a century ago were foolish or wicked.  Nonetheless, exclusion on purely racial grounds underestimated the capacity of the mainstream tradition derived by Australia from Britain to incorporate new groups.


THE DENIGRATION OF THE AUSTRALIAN PAST

The balanced tone of the report of the Civics Expert Group contrasts sharply with the denigration of the Australian past which became politically correct during the last two decades.  On 8 December 1941, John Curtin responded to the entry of Japan into the Second World War with these words:

We here, in this spacious land where, for more than 150 years, peace and security have prevailed, are now called upon to meet the external aggressor. ... We Australians have imperishable traditions.  We shall maintain them.  We shall vindicate them.

In 1995, young people in schools and universities are told little of any "imperishable traditions", but much about evils allegedly committed by racist, sexist and environmentally-insensitive white invaders.  Leading publishers have been active in trashing the Australian past.  Penguin Australia and McPhee Gribble, for example, jointly published in 1988 to celebrate the centenary, Verity Burgmann and Jenny Lee's Constructing a Culture:  A People's History of Australia.  All the essays in that book enlarged upon the introductory words of the editors:  "Held up against the millennia of Aboriginal experience, the last 200 years seem but a brief, nasty interlude". (7)  In the Year 11 Australian Studies course for South Australian secondary schools, devised when Ken Boston was Director-General of Education, the main event in Australia's past is the dispossession of the Aborigines. (8)  Recommended contemporary topics are "the Land Rights claims of a particular group of Aboriginal people", but not the property laws that affect other citizens, and "people from non-English speaking backgrounds", but not those from English-speaking backgrounds.  Special attention is directed to Australia's "position on the Asian rim", but not to Australia's position as an outpost of European civilisation with very little in common, politically and culturally, with the Asian rim.  To be sure, it would be wrong to encourage mindless triumphalism, but it is at least as bad to propagate so negative and false a picture.


AUSTRALIAN VALUES A CENTURY AGO

Most Australians a century ago wanted to preserve their traditions, which were essentially British and Irish.  Even the most radical thinkers doubted that the short Australian past had yet acquired significance or interest.  A.J. Stephens, literary editor of The Bulletin, lamented:

In Australia, we have no temples, no ashes worth the name.  We have still to make the history and create the legendary associations which are such a powerful binding force in national life.  The Murray to Australians is still only a geographical label, but think what the Thames means to an Englishman! ... Think of Westminster Abbey ... of how [Nelson's] sailors were nerved by the signal "England expects ..."!  What a mass of record and tradition, of song and story, of memorable life and love and death, presses behind that England!  "Australia" is meaningless by comparison, lacking the inspiration of the past. (9)

Sir John Hay, President of the Legislative Council of New South Wales, asserted (17 March 1880), "However much they might be interested in the history of Australia, yet no one would think that the history of Australia was a thing likely to afford any particular improvement of the mind".  John Anderson Hartley, Director of Education in South Australia, rote in 1885:

The demand is sometimes made that we should teach specially Australian history, because we live in Australia.  To me this seems to be a mistake.  In the first place our adopted country is very largely in the happy position of "having no history";  and further it would be a great pity that we should lose our association with the glorious past of England.  After all, we are citizens of the Greater Britain, and the memories of the defeat of the Armada, or the taking of Quebec, should stir our pulses much more than the gallant deeds of the defenders of the Ballarat Stockade.  I do not forget that the records of Australian exploration are bright with stories of patient endurance and self-sacrifice, but these would find an appropriate place in connection with the geography of the country. (10)

However, Australian history gradually came to possess greater interest, with explorers and "pioneers" as its highlights.  It was considered less controversial than earlier British and European history, which many educators feared would fire sectarian disputes.  Far from there being a strong push in Australian schools to inculcate nationalism or imperialism through history teaching, there was considerable resistance to having any history taught at all.  The Senior Inspector of the Victorian Board of Education, A.B. Orlebar, argued in 1864 that, although "English history is particularly important to our youth", he was "obliged to report against its introduction into our schools as an infringement of the hours of secular instruction ... I have examined school histories of England, and I do not know one to which either the Roman Catholic or the Episcopalian or the Presbyterian parent could not justly object". (11)  Nonetheless, in 1884, history was introduced as a distinct subject in Victorian government schools, in order to "familiarise the scholars with the prominent facts of British and Australian history, give them an intelligent conception of the constitution under which they live and foster a wholesome taste for reading".  There were similar developments in the other colonies.

A school newspaper, the Children's Hour, founded by Hartley in Adelaide in 1889, illustrated mainstream values.  It included South Australian material from writers such as the radical feminist Catherine Helen Spence, but its central message was that the children of South Australia should have "pride in their membership of the greatest race the world has ever seen", as well as love their "homeland of South Australia". (12)  Such sentiments seemed highly nationalistic to some recent commentators, but their ideological intensity was mild compared with that of most late-nineteenth-century nation states (and most contemporary states, including all of Australia's Asian neighbours).  One critic, Simon Firth, (13) cited Stephen Henry Smith, Director of Education in New South Wales, as an example of chauvinism, but Smith's school histories celebrated the whig-liberal pantheon of opponents of absolutism and personal rule, and social reformers such as Shaftesbury, Peel, Cross and Florence Nightingale.  He did not try to cover up blemishes in the English past.  Students throughout learned not only of English (or British) victories, but successful invasions of Britain from the Romans to the Normans, as well as defeats by Robert Bruce and Joan of Arc, and were taught to admire many who had defeated them.

The explicit moral values of Australian schools a century ago were akin to those of the "civil religion" of the American common school, to use Robert Bellah's expression. (14)  Although doctrinal religious teaching was excluded from government schools during ordinary school hours, the moral code was firmly rooted in traditional Christian values.  The sociologist Willard Waller began in the 1930s the debunking of American common schools as "museums of virtue" controlled by "despotism poised in perilous equilibrium", (15) but it took several decades before they became instead laboratories of vice.  In Australia, radical historians now claim that compulsory schooling based upon the values of civil religion "amounted to a concerted attack on working class culture", and "an assault on the work patterns, habits, customs and attitudes -- the culture of working people", because it aimed "to eradicate many aspects of the children's behaviour and replace them by new ones -- a different mode of timekeeping, dress, speech and morality". (16)  Ian Davey and Pavla Miller rejoice that in South Australia "working class" children expressed open resistance to the regimen imposed on them by persistent disobedience and, even more graphically, by attempts to burn the schools down or at least vandalise the buildings and made schools into "arenas of class conflict in both senses of the term".  However, despite this heroic student resistance movement, the schools of Australia exerted a positive influence.  From the 1860s to the 1960s, crime rates among juveniles fell during each decade, despite the strains of two World Wars, and the Depression of the 1930s.  Catherine Helen Spence, Australia's leading nineteenth-century woman thinker and author of a school textbook entitled The Laws under which We Live, declared towards the end of a long life, "I have lived through a glorious age of progress.  Born in 'the wonderful century', I have watched the growth of the movement for the uplifting of the masses".  Overall, the "civil religion" conveyed to students that there were permanent moral values which were accepted by ordinary decent people everywhere.

The Civics Expert Group noted the importance given to exemplary lessons on honesty, industriousness, punctuality and patriotism and the emphasis on duties to parents, relations, friends and oneself.  The Group dissociated itself from historians who "have often characterised -- almost caricatured -- early civics courses as jingoistic exercises in the service of middle-class prejudices". (17)  Attention was drawn to the 1922 New South Wales syllabus committee, which recommended that history should be "free from national egotism" and should aim "to broaden the outlook of the pupils, and to encourage respect for the point of view of other races than our own".


SUGGESTIONS FOR CURRICULUM CONTENT

The Civics Expert Group cited some very wise words from David Malouf:

Can I suggest some aspects of our form of government that we take for granted but which are very rare?  The first is that we actually believe in government;  believe that a government can be fairly elected and, once there, will act in our interest, whether or not we actually voted for the government in power.  Most people in the world do not trust their rulers, whether elected or not.  Their distrust is blood-deep and based on bloody experience.  We might also ask our young people to study our system of government and the law, comparing them with the way things are managed elsewhere ... A study of the development of our system of government, of course, will involve our students with the study of a good deal of English history;  and we ought not to be afraid of that.  It will not hurt young Australians to discover that much of what is best in our system we did not make ourselves. (18)

I end this paper with a few suggestions on suitable historical content for an understanding of Australian values.  They are divided into three parts:  the overall Western context, the mainly British, and the mainly Australian.


a. The Western inheritance

  1. Christianity

    It is impossible to understand the development of Australia without understanding the religious beliefs shared by most of the colonists.  When not ignored completely in Australian schools today, beliefs shared by Christians are neglected in favour of matters on which they disagreed.  Fundamental to the thought of most Australian colonists, like all earlier Christians, was that human beings partake of the divine and yet are constantly tempted towards wrong-doing.  The doctrine of original sin discouraged millenarian extravagance, but belief in redemption guarded against despair at human wickedness.  Christianity was available to all people, irrespective of race, class and status, gender, or past conduct.  It was a universalistic creed.

  2. Openness

    It was in Western Europe that successful civil or open societies emerged.  This owed something to the mediaeval conflict between Empire and Papacy.  The failure of either to subdue the other ensured that religious dissenters often found places of refuge from charges of heresy.  Political divisions also aided the survival of the mediaeval universities, in which Christian theology interacted with Greek philosophy and science.  Many religious leaders, such as St Bernard of Clairvaux, were convinced that pagan knowledge could only lead to the damnation of Christian souls, and would gladly have snuffed out the universities.  In Islam, an intellectual movement more brilliant in its day than anything in Christendom, epitomised in the names of Avicenna (Ibn Sina) and Averroes (Ibn Rushd), was crushed by obscurantists who argued as did St Bernard.  As a result, the Renaissance and the emergence of modern science took place in Europe and not in Islamic lands.  These took place in Western and not Eastern Europe, partly because priestly celibacy in the Catholic West forced the Church to extend educational opportunity widely, in order to recruit a new generation to conduct the sacraments.  This was vital in stimulating social mobility, but was not envisaged by Pope Gregory VII (Hildebrand) when in the eleventh century he succeeded in outlawing marriage for the Roman clergy.

  3. The spirit of inquiry

    Some Christians, such as the Jesuits in China in the seventeenth century, who were attacked in Rome for their syncretism, took an interest in alien cultures, even if only to be able to proselytise more effectively;  but it is from the Classical Greek strand in western thought that the comparative perspective and the spirit of inquiry mainly arose.  Herodotus, "the father of history" was fascinated by cultures very different from his own.  His example was followed at the height of Roman power by Julius Caesar, Tacitus and others.  Western Europeans, with the British very prominent, extended this tradition.  They explored the relationships between the language systems and other cultural attributes of peoples in every continent, rediscovered Ancient Egypt when Arabs and their Turkish rulers had no interest in the Pyramids or their contents, and showed that Sanskrit was an "Indo-European" language and wrote its first modern dictionary.  They told the Aborigines of Australia something pleasing to them, that their ancestors had been here for many thousands of years, and something less pleasing, that those ancestors were themselves immigrants from the north.  They produced dictionaries and books in Aboriginal languages.  Bernard Lewis pointed out that

    The other great civilisations known to history have all, without exception, seen themselves as self-sufficient, and rewarded the outsider, and even the sub-culture or low status insider, with contempt, as barbarians, Gentiles, untouchables, unbelievers, foreign devils, and other more intimate, less formal terms of opprobrium. ... By contrast, the special combination of unconstrained curiosity concerning the other, and unforced respect for his otherness, remains a distinctive feature of Western and Westernised cultures, and is still regarded with bafflement and anger by those who neither share nor understand it. (19)
  4. Universalism

    The comparative, or critical, standpoint, made the leading British and other European thinkers far less ethnocentric than earlier human generations.  It created a capacity to criticise one's own society, as well as others, from the standpoint of universal values.  Slavery, for example, was a feature of almost every society after the development of agriculture, which enabled slaves to be put to work at a profit for the first time.  Serfdom in mediaeval Europe was less oppressive than slavery in pre-Columbian America or Africa, but during nearly three centuries of the triangular slave trade between West Africa, the Americas and Western Europe, including Britain, the worst features of several systems of slavery were combined.  However, it was in Western Europe, with Britain and France in the lead, that first the slave trade and then slavery itself were denounced and then abolished.  As Bernard Lewis put it, "Western technology made slavery unnecessary.  Western ideas made it intolerable". (20)  Like every other prima facie good, the critical spirit can go astray.  In its extreme antinomian form it created the counter-culture that reviles the faults of our open societies, but accepts with complaisance far worse faults in closed societies.  Despite the warning of Matthew xxiii, the adversarial intelligentsia continues ever more avidly to strain at gnats and swallow camels.


b. The British inheritance

  1. Parliamentary government

    England was, by the seventeenth century, exceptional among the states of Western Europe in retaining a functional parliamentary system.  Elsewhere, mediaeval States-Generals and Parliaments became associated with feudal discord and civil strife and were suppressed by absolutist monarchs, supported by peasants and townspeople seeking peace in their time.  Fortunately, as it turned out, Henry VIII allied himself with parliament when he broke with Rome, so that both monarchy and parliament emerged stronger at the end of the English Reformation.  During the seventeenth century, civil wars in the British Isles appeared to confirm the judgement that parliamentary institutions created internal strife and that political liberty and national power were incompatible.  During the eighteenth and nineteenth centuries, however, first Britain and then the United States of America proved that liberty and power could be combined, and several European states began to emulate their ways.  This was a critical leap forward in human history and one yet to be made in many countries.

  2. Religious toleration

    The failure, after the Reformation, of Catholics or Protestants to crush each other helped to create wider toleration in Western Europe, first in the form of cuius regio, eius religio (whose realm, his religion), which enabled different faiths to co-exist, if only on opposite sides of frontiers.  Toleration was regarded by Catholics, Lutherans and Calvinists alike as a painful temporary expedient before it was elevated as a valued principle.  During the Civil Wars of the 1640s in Britain, none of the combatants at first intended to tolerate the religion of the other.  Charles I and Archbishop Laud on one side, and the Puritan leadership of the Parliament on the other, believed equally in a single national church based on pure doctrinal truth.  Religious, and with it political, tolerance again emerged largely because no one was capable of establishing uniformity.  The overthrow of James II was another example of "the fortunate fall".  There were massive difficulties in developing new structures to replace those of divine hereditary monarchy, but the follies of James made it a task that had to be tackled urgently.  The basis of limited, constitutional monarchy was made possible by a monarch unwilling to be limited constitutionally.  There was also serendipity in the great expansion of wealth and world power that coincided with the Glorious Revolution of 1688.  If, in the early eighteenth century, most English people had been poorer than in the past, they might have supported the Jacobite rebellions of 1715 and 1745.

  3. Individualism

    The concept of the individual as a rational autonomous agent owes something to the Christian idea of the soul and the accountability of each person directly to God, and something to the idea of the inquiring mind in Greek philosophy.  However, it was not until the age of Locke and Hume in Britain that the idea fully matured that the legitimacy of government was based on the free consent of individuals.  This revolution in political thought was made easier by the fact that the English had already been for several centuries the most individualistic people in Europe, and thus in the world.  More English men and women left their home areas to seek work, married outside their parishes of birth, and sold land to start up life again elsewhere, than in any other country.  This also made it relatively easy for the English to go overseas as colonist. (21)  Yet this idea of the mobile individual also depended on the existence of uniform rules and laws, first within England itself and then in its colonies.  Individualism and the common law were symbiotic, not antagonistic.


c. Australian content

  1. The convict era

    Study of the English penal system and Australian convictism illustrates the central paradox of freedom:  we would like unbounded freedom for our own actions but fear the unbounded freedom of others.  Linked to this paradox are problems concerning the balance between justice and mercy and of quis custodes ipsos custodiet:  who will police the police?  By the end of the eighteenth century, England had a very harsh penal code, but policing bordered on the non-existent, and the jury system and writ of habeas corpus provided better safeguards for legal defence than were found elsewhere.  Convictism made full extension of English legal and constitutional practice impossible in Australia, but early colonial courts followed English precedents as closely as they could.  Convicts could only be charged with crimes known to English law and on indictment following strict judicial requirements.  In early colonial times, most law enforcers were convicts.  Convicts could petition the Governor, could give evidence in court against masters to whom they had been assigned, and could not be physically punished by them.  These conditions were very different from those of slavery.  Nearly all the convicts, including many with life sentences, gained their freedom.  Some became wealthy and prominent in colonial life.  Many convicts showed a dual attachment to their new country and the old country that transmitted its laws and culture. (22)  This was the case even before transportation was ended and internal self-government achieved.  By 1820, the main worry in Westminster about New South Wales was that convict conditions were so easy that the deterrent effect of transportation had been undermined.  Australian convicts had, at least potentially, greater legal and political rights than had the law-abiding in most parts of the world.  No revolution was needed to enable them to advance to full citizenship and political autonomy. (23)

  2. The Aborigines

    Aborigines were not citizens for over a century after British colonisation began in 1788.  Enabling Aborigines to understand the laws and conventions that underpinned the new civil society, so that they could share the rights and burdens or citizenship, was no easy matter, irrespective of the intentions of colonial governors and officials in Australia, or Parliament and public opinion in Britain.  By the end of the nineteenth century, few Aborigines could look back on their contacts with white society with any joy.  Yet, painful as the process had usually been, there were great potential gains for Aborigines in the new Australia.  The very consciousness of Aboriginality, the sense of sharing a common cultural heritage, only arose from experience of contact.  Aborigines had never known that they lived on a great island continent and had possessed no common language.  By 1900, probably a majority of Aborigines could communicate with each other in English.  Culturally, by 1900, if they saw them as relevant to their needs and wished to make use of them, Aborigines had access to facilities for education and health not only more abundant than those in traditional Aboriginal societies, but more extensive than those available to many Europeans in the eighteenth century.  Incorporation into the new Australia opened up, too, a far wider range of material goods than those which attracted many Aborigines to enter white settlements voluntarily in earlier years.  Aborigines and other Australians faced very difficult choices between assimilationist and separatist policies, but it was the open society that made the choice possible.

  3. One nation for one continent

    Although the several Australian colonies had no formal relationship with each other except through Great Britain, and although the continental land mass was only slowly explored and settled by them, the new Australians had no doubt that they would create a single nation, based on British institutions, which would occupy the whole continent.  Very early in the piece William Charles Wentworth foresaw

    ... Australasia float, with flag unfurled,
    A new Britannia in another world.

    The republican Joseph Furphy described his greatest novel, Such is Life, as:  "scene, Riverina and Northern Vic;  temper, democratic, bias, offensively Australian", but the traditions and values closest to his heart were derived from English literature and British history and, beyond them, from the lands of the Bible and the classical Mediterranean.  Furphy and most of the radicals of his time wanted to build a united and independent Australia on foundations developed during generations of open political debate in Britain.

    In 1890, Henry Parkes urged delegates to the Australasian Federation convention in Melbourne:

    Make yourselves a united people, appear before the world as one, and the dream of going "home" would die away.  We should create an Australian home ... We should have "home" within our own shores;  "home" with all the lofty ideals for the mere socially ambitious.  We should have avenues of employment for the most gifted among our sons, and there would be no object of ambition superior to what could be presented to them on the spot which gave them birth. (24)

    Yet, combined with Parkes's call for "one nation, one destiny", was his planting of an English oak as a symbol of ongoing attachment to Britain.  He believed that "the crimson thread of kinship" would continue to link Australia's destiny to that of Britain, as well as unite Australia.  Shared values derived from Britain were the basis on which the colonies formed the federal Australian Commonwealth.

A century onwards, Australia is racially highly diverse.  Their own crimson threads of kinship are rightly valued by most Australians of every origin.  The present Commonwealth Government generally encourages this sentiment among minority ethnic groups, but dismisses as un-Australian the historically more important ties with Britain.  There is no doubt that the attachment to Britain of a century ago, proved in sacrifice in 1914 and 1939, is now much weaker.  Yet, if any serious challenge should arise to Australia's security and freedom, our main hope will lie in the adherence of Australians to shared values by which they wish to live and for which they would, if necessary, give their lives.  Those shared values can only be those on which the new Australia was created during the nineteenth century.  Those values have proved highly extendable and sufficiently durable and attractive to bring to our shores hundreds of thousands from less fortunate lands.  I hope that the report of the Civics Expert Group is a sign that our own great cultural and political inheritance will no longer be belittled in high places, but cherished and safeguarded as it so richly deserves.


VALUES AND JUDGEMENTS:  CREATING
SOCIAL INCENTIVES FOR GOOD BEHAVIOUR

A DISCOURSE OF VIRTUE

It is with some trepidation that, as an Australian, I address an American readership on so sensitive a question as that taken up below.  In fact, I know little about the social and cultural affairs now facing the United States.  But I have spent the better part of the last decade grappling with issues of this kind in Australia.  Through this effort, I have reached certain conclusions which I believe may have broader significance.  I offer them here, for your consideration, in the hope that I may contribute something of value to your own still evolving debate on politics and culture.

As I am a not social scientist, I confess to being pessimistic that social science can ultimately contribute much to the resolution of the profound social ills of poverty, despair and decay evident in America's core central cities.  This is not to disparage the often ingenious efforts that social scientists employ to fathom the intricacies of human behaviour.  Still, I question whether real change in the lives of real people, depends much at all on answers to the kinds of questions that social scientists pose.

Why this scepticism?  Because modern social science speaks a language of cause and effect -- "If we design this programme, then they will respond in that way".  Yet I am now convinced that the core social problems of our time require for their solution a language of values -- "We should do this;  they ought to do that;  decent people must strive to live in a certain way".  This is the language of the pulpit, not the conference room.  In the discourse of the "policy wonk", who speaks fluent "conference-ese", there is no place for language like this.

Yet, we know that our most serious social problems are connected with dysfunctional behaviours adopted by young people in our various communities.  As a number of critics have emphasised recently, there is a relationship between the behavioural problems of the poor, and the cultural crisis affecting the middle and upper classes in America, as evidenced by rising divorce rates, the spread of venereal disease, the problems of our education system, increases in teen suicide, alcohol and drug abuse, our problems in international competitiveness, our flight from responsibility into various therapies which stress our victimhood, and so forth.

At issue here is our capacity as a moral and political community to engage in an effective discourse about values and ways of living, and to convey normative judgements which arise out of that discourse.  I am dubious about the ability of modern political rhetoric to rise to the challenge which such a "discourse of virtue" poses to public figures.  Consider the collective guffaw with which much influential opinion received the promotion of "family values" in the last American presidential campaign.  This was not just partisanship;  it was a contemptuous rejection of the very idea of a public discourse which might judge how we should organise our family lives.

This is an interesting situation, for judgement is not unknown in our public discourses.  National campaigns have, indeed, been waged, aimed at some aspects of behaviour, with positive results.  Smoking is the obvious example, successfully inveighed against over the last generation, with both public and private efforts.  Our national consciousness of environmental issues has been raised in recent decades, in part through the use of public rhetoric and exhortation which has had a powerful normative aspect to it.  One only need read Vice-President Al Gore's book, Earth in the Balance, to see that.  But efforts at public exhortation about sexuality, marriage, fatherhood, and child-bearing are far more contentious because, unlike in these other areas, such efforts cut against the ideological grain of the great "liberation" movements which have swept through our society in past decades.  Even some conservative Republican presidential candidates are reluctant to engage in public rhetoric with a direct moral message.  This should tell us something about the limits of politics as a means of addressing profound questions of value.


THE LIMITS OF ECONOMIC DETERMINISM

Another reason to be sceptical about the utility of social science is that its fundamental behavioural assumptions begin from a materialist viewpoint.  Economic or biological factors are supposed ultimately to underlie all behavioural problems, even behaviours involving sexuality, marriage, child-bearing and parenting which reflect people's basic understandings of what gives meaning to their lives.  The view is that these behavioural problems can be cured from without, that government can change these behaviours, that if you can just get the incentives right, then everything will be fine.  This reflects a philosophy of mechanistic determinism, wherein the mysteries of human motivation are supposedly susceptible to calculated intervention, if only the government were sufficiently committed to try.

Yet there is another view, illustrated by the carpenter from Galilee who reminded his tempter, "Man does not live by bread alone, but by every word that proceedeth out of the mouth of God."  And to the biological determinist, whom Christ does not address directly in the Gospels, one readily imagines He would say something like, "God is not finished with us when he deals us our genetic hand."  But such an emphasis cuts against the modern sensibility.

Deterministic views of social disorder lend themselves easily to the favoured lines of partisan argument about social policy.  Those who favour expanded government can argue that we either pay now for social "investment" programmes, or pay later, for welfare or prisons.  Those who want the federal budget to shrink can cite the worsening conditions of the ghetto in the face of the growth in social spending over the last generation as evidence that Lyndon Johnson's "Great Society" failed.  Those who seek a middle way can split the difference by talking about the receipt of benefits needing to be accompanied by an acceptance of responsibility on the part of the poor, though the government must provide services which help the poor to accept their responsibilities and so on.  We are all familiar with this language.

These debates are sterile and superficial.  They fail to engage questions of personal morality.  They fail to talk about character and values.  They do not invoke any moral leadership in the public sphere.  The view seems to be that in a pluralistic society such discussions from public officials are inappropriate.

I am reminded here of a distinction introduced by the economist Albert Hirschman between tastes -- defined as individual preferences about which we do not argue (for example, whether we like apples or pears), and values -- defined as preferences over which we do argue, both with ourselves and with others.  We do not, for example, treat a preference for discrimination against blacks or women as a taste to be accommodated.  Rather, we attempt to persuade, cajole, or compel our fellows to make "progress" in such areas, and we insist that our educational institutions instil in our young the "proper" views concerning them.  Values, in other words, are personal preferences so central to our collective lives that as a political community we cannot properly be neutral about them.  As Hirschman has noted:  "A principal purpose of publicly proclaimed laws and regulations is to stigmatise antisocial behaviour and thereby to influence citizens' values and behaviour codes."

Consider that we do not teach in our schools the comparative virtues of alternative ways of living.  We give only muted public voice to the judgements that it is wrong to be sexually promiscuous, to be indolent and without discipline, to be disrespectful of legitimate authority, or to be unreliable or untruthful or unfaithful.  We no longer teach values, but offer "clarification" of the values that the children are supposed to have somehow inculcated in them without any instruction.  We elevate process ("How does one discover his or her own values?") over substance ("What is it that a decent person should embrace?").  The advocacy of a particular conception of virtuous living has virtually vanished from American public discourse.  Who will say that young people should abstain from sexual intimacy until their relationships have been consecrated by marriage?  These are, in this present age, not matters for public discourse.

Most Americans believe that one-and-a-half million abortions a year constitutes a profound moral problem for our society.  Yet, the public discourse on this issue is dominated by the question of a woman's right to choose, not the moral content of her choice.  Nearly all of us would prefer, on moral as well as pragmatic grounds, that our 15-year-olds not be sexually active.  But to take this stance in the face of an epidemic of sexually transmitted disease invites ridicule from the highest officials.  Government, it would appear, should confine itself to dealing with the consequences of these moral lapses, rather than taking on the issue of morality directly.

Now, I am not one for tilting at windmills.  The emergence of morally authoritative public leadership seems unlikely at this late date.  We shall have to look to the private agencies of moral and cultural development, in particular communities, to take on the burden of promoting positive behavioural change.  In every community there are such agencies which seek to shape the ways in which individuals conceive of their duties to themselves, of their obligations to each other, and of their responsibilities before God.  The family and the church are primary among these.

These are the natural sources of legitimate moral teaching, which must be restored if the behavioural problems which afflict American society are to be overcome.  Such a restoration obviously cannot be the object of programmatic intervention by public agencies.  Rather, it must be led from within the communities in question, by the moral and spiritual leaders of those communities.


VALUES, POLICY AND THE STATE

Let me talk now, for a few moments, about the role of the state.  Public policy is more than the implementation of technical solutions to the problems of governance.  It is also a powerful symbolic mechanism through which are communicated the values and beliefs of a people.  As well-known conservative columnist and writer, George Will, has famously put it:  "Statecraft is Soulcraft."  The means-end calculation of the social scientist or policy analyst is insufficient to provide a full account of what government does.  Crucial also is the expressive content of government actions.  The actions taken by the US Congress in the next months regarding welfare reform will represent a powerful expression about the duties and obligations of citizens, and about the standards of conduct expected from individuals.  These messages will both shape and reflect the values of the citizenry.

It is now widely accepted that placing upon welfare recipients the obligation to engage in activities which limit their dependence is necessary and legitimate public policy.  Far from being punitive, as some liberal critics of this proposal allege, the imposition of such an obligation represents a keeping of faith with a social accord of mutual expectation.  The key point to recognise is that the state cannot escape the necessity to communicate some moral message by the actions it takes, even if only by default.  The failure to impose obligations on recipients is also an action, which signals what is valued in society.

The audience for these normative messages is not limited to the set of people directly affected, but extends to the entire population.  Indeed, sustaining political support for public provision to the needy requires the maintenance of some compatibility between the values expressed through the policy, and the beliefs broadly held by the public.  The conduct of public policy also communicates something to the citizenry at large about the moral standing of those persons directly reached by policy.  In the case of welfare, structuring assistance so that it leads to the eventual attainment of self-sufficiency by recipients actually shows respect for the subjects of state action, and enhances the dignity of these persons.  By holding up a common standard of behaviour to all citizens we evidence our confidence that those who may now need our assistance are capable of becoming self-reliant.  This avoids the situation in which "we" who are capable of responsible conduct and of generosity, deign to provide for "them" who, by virtue of their dependency, are rendered objects of our concern, but are not treated as responsible moral agents.  The notion that to treat the poor with dignity one must withdraw all constraint on the recipient, and simply hand over the benefit unencumbered, is in fact a contradiction.  The absence of an enforced expectation that those in need will, in due course, join the self-supporting, concedes that the needy are incapable of actions regarded as minimally expected of ordinary citizens -- hardly a dignified posture.


THE IMPORTANCE OF CIVIL SOCIETY

Thus, in addition to providing direct economic incentives (via the tax code and through the design of programmes providing financial benefits), the state sets the moral background within which civil society operates.  But it is the civil sector of families, community organisations, churches and various private philanthropic undertakings which must do the real work of promulgating and instilling values.  The role of the state, while important in matters of public communication, is ultimately quite limited in matters of transforming the values of individual persons.

One source of this limitation is the fact that encouraging "good behaviour" intrinsically requires that discriminations be made among persons based on assessments that are difficult, legally and politically, for public agencies to make.  Having distinguished between right and wrong in public rhetoric, it becomes necessary in the concrete, ambiguous circumstances of everyday life to discern the extent to which particular individuals have risen to, or fallen short of, our expectations.  That is, promoting virtue requires that standards be set and communicated, and that judgements be made as to whether those standards have been met.  The making of such judgements requires knowledge about individual circumstances, and the drawing of distinctions between individual cases, which may exceed the capacity of public institutions.  Because citizens have due-process rights which cannot be fully abrogated, public judgements must be made in a manner which can be defended after the fact, and which carry a high burden of proof as to their legitimacy.  Families and churches are not constrained to the same degree.

Consider the difficulty of a state-sponsored agent making the judgement as to whether a welfare recipient has put forward adequate effort to prepare for and find a job.  The information available for this decision is generally limited to the observations of a social worker, and the self-report of the welfare recipient concerning her activities, together with a check on whether job interviews previously arranged have been pursued, etc.  Beyond this, very little information can be brought to bear.  Action to limit the assistance due to a belief that the recipient was not trying hard enough might not stand up to subsequent judicial review.  (Indeed, such actions might not be carried out by state employees who believed the obligations thereby imposed were not appropriate.)  But, of course, families and communal groups providing help to the same individual would base their continued assistance, in part, upon just such information.  They would discriminate more finely than a state-sponsored agent ever could between the subtle differences in behaviour among individuals which constitute the real content of morality and virtue.

This point is especially critical when behavioural distinctions may have a disparate impact by race, and where charges of racial discrimination could arise.  Anticipating these charges, public agents may withdraw from the degree of scrutiny of individual behaviour which produced the racially disparate outcome.  The fact is that the instruments available to public agents for the shaping of character are coarse and relatively indiscriminate, in comparison with the kinds of distinctions and judgements which people make in their private social lives all the time.  Moreover, the ways in which a public agent can sanction individuals' dysfunctional behaviour -- withholding financial benefits primarily -- may not be as compelling as the threat of social ostracism and peer disapproval which is readily available in private associations.  The purpose of these observations is to caution against an overly optimistic assessment of the power of legislation to reverse the regrettable trends in the social behaviours of citizens.

It is also the case that state action is encumbered by the plurality of views as to what constitutes appropriate values in our society.  The public morality reflected in state action is necessarily a "thin" conception of virtue, weak enough to accommodate the underlying diversity of value commitments amongst the various sectors of our society.  This contrasts sharply with the "thick" conceptions of virtue characteristic of the moral communities in which we are embedded in private life.  The conflict over sex education illustrates this point.  Introducing into the public schools in any large city a curriculum of sex education that teaches the preferability of two-parent families might be resisted by educators who would cite the great number of their students from single-parent backgrounds.  Yet it is arguable that these are the students most in need of hearing the authoritative expression of such value judgements.  Of course, the same would not be true of sex instruction undertaken in a parochial school context.

My general proposition is that civil society and the state provide complementary inputs into the production of virtuous citizens.  Legislators should look for ways to encourage virtue by encouraging the development and expansion of those private, voluntary associations within which the real work of character development is best done.  Mutually-concerned persons who trust one another enough to be able to exchange criticism constructively, establish codes of personal conduct, and enforce social sanctions against what is judged as undesirable behaviour, can create and enforce communal norms which are beyond the capacity of the state to promulgate effectively.  The coercive resources of the state, though great, are not especially subtle.


CONCERNING THE BLACK COMMUNITY

Finally, I would like to discuss these ideas in relation to social problems affecting the black community in the United States.  I want to consider just how the moral-ethical sensibilities of black Americans took root in the experience of slavery.  My central point is easily stated:  Enslaved persons were driven by brute circumstance to create among themselves a culture with spiritual and moral depth of truly heroic proportions.  They simply had no choice.  The brutality of the assault they endured -- upon their persons, their relations one with another, and their sense of dignity and self-respect -- was such that either they would be completely destroyed as moral beings, or they would find a way, through faith, to transcend their condition.  As Alan Keyes has puts it in his recent book, Masters of the Dream:  "In effect, [the slaves] secured themselves against the depredations of a system devised to destroy their self-respect by storing their sense of personal worth in a form that made it hard to damage and hard to steal away."  Enslaved persons had to learn to transcend their material condition, or they would have been destroyed.  That "man does not live by bread alone" was for them more than a theoretical proposition;  grasping the truth of that proposition was their key to survival.

The Africans brought to America in bondage came to embrace the Christian faith, and to find in it the means of their moral salvation.  A wealth of historical, theological and cultural scholarship amply documents this claim.  It is also supported by the surviving primary accounts, and the spirituals and "sorrow songs" of the slaves themselves.  This Christian faith, and the relationship with God to which it gave rise, was fundamental to preserving a sense of worth and dignity among enslaved persons.  Again quoting Keyes, it permitted them "to feel that they existed in and for themselves, rather than through their relationship with the enslavers".  Faith allowed those held permanently in bondage to avoid being consumed by their hatred, their despair, or their fear.

These moral and spiritual values, forged in what Herbert Storing once called "the school of slavery", proved to be profoundly significant in the post-slavery development of black Americans.  It was the emphasis on hard work, education, and decent living characteristic of the first generations of blacks after emancipation which made possible their considerable progress.  A spirit of self-help, rooted in a deep-seated sense of self-respect, was widely embraced among blacks of all ideological persuasions, well into this century.  They did what they did -- educating their children, acquiring land, founding communal institutions, and struggling for equal rights -- not in reaction to or for the approval of whites, but out of an internal conviction of their own worth and capacities.  Even acts of black protest and expressions of grievance against whites were, ultimately, reflections of this inner sense of dignity.  The crowning achievements of the civil rights movement -- its non-violent method and its successful effort at public moral suasion -- can be seen as the projection into American politics of a set of spiritual values which had been evolving among blacks for over a century.

It is, therefore, with a sense of deep remorse that I must recount how, in the last generation, this ethos of self-reliance, moral rectitude and unapologetic Christian piety has lost its place of primacy among black political, spiritual and intellectual leaders.  They have, indeed, fallen upon rather hard times.  The ideological presuppositions of current black American political advocacy seems a world apart from the historic ethos which I just mentioned.  Some leaders, in civil rights organisations and the halls of Congress, are wedded to a conception of the black condition, and a method of appealing to the rest of the polity, which undermines the dignity of their people.  They seek, it would seem, to make blacks into the conscience of America, even at the price of their souls.  Though it mocks the idea of freedom to hold that, as free men and women, blacks ought nevertheless to leave the determination of the normative framework of their communal life to the vicissitudes of government policy, this is precisely what has been done.  The rhetoric is:  "It costs more to keep a young black man in jail for a year than it does to send him to Yale for a year" -- as if the difference between him being in jail or at Yale is a matter of the size of some bureaucrat's budget, rather than the behaviour of the young man himself, and of those charged with his guidance and care.

What a historic abdication of responsibility is this posture among contemporary black political leadership, considering the blood that has been shed, the sacrifices that have been made, and the determination, commitment and dedication that have been shown by blacks of previous generations.  While black youngsters in the ghettos murder each other, poison their bodies and their minds with drugs and promiscuous sex, and ignore their responsibilities to their children, their community and their nation, there is no place in the political lexicon of black leaders for talk of values, morality and virtue.  If they can quote the Bible's book of Amos in public, as Martin Luther King, Jr., famously did -- "Let judgment run down as waters, and righteousness as a mighty stream" -- then why not also the passage in First Corinthians concerning sexual immorality, in which Paul states:  "Do you not know that your body is the temple of the Holy Spirit, who is in you, whom you have received from God.  You are not your own, you were bought with a price.  Therefore, honour God with your body."  Which of these biblical injunctions is more relevant to the contemporary behavioural crisis afflicting black America?

Today's black leaders have become ever-ready "doom sayers", alert to exploit their people's suffering by offering it up to more or less sympathetic whites as justification for incremental monetary transfers.  But this posture ignores the great existential challenge facing black America today.  The challenge is that of taking control of our own futures by exerting the requisite moral leadership, making the sacrifices of time and resources, and building the needed institutions so that black social and economic development may be advanced.  No matter how windy the debate becomes among white liberals and conservatives as to what should be done in the public sphere, meeting this self-creating challenge ultimately depends upon black action.  It is to desecrate the memory of their enslaved ancestors to hold that, as free men and women, blacks ought nonetheless passively to wait for white Americans, of whatever political persuasion, to come to the rescue.  A people who languish in dependency, while the means through which they might work toward their own advancement exist, have surrendered their claim to dignity, and to the respect of their fellow citizens.  If they are to be a truly free people, they must accept responsibility for their fate, even when it does not lie wholly in their hands.

This is a point of genuine spiritual truth, but it is also a practical point with deep political implications.  The fact is that promoting virtuous behaviour amongst the black American poor is essential to achieving the political goals of more inclusive social policy and expanded opportunity for this population.  Whites do not need to be shown how to fear black youths in the cities, which is implicitly the view of advocates who threaten "long hot summers" if jobs programmes and affirmative action are not expanded.  Instead, whites must be taught how to respect and how to love these youngsters.  An effective, persuasive black leadership must project the image of a disciplined, respectable black demeanour.  That such comportment is not inconsistent with protest for redress of grievance is a great legacy of the civil rights movement.  But more than that disciplined protest is required.  Discipline, orderliness and virtue in every aspect of life will contribute to creating an aura of respectability and worth.  Such an aura is a valuable political asset, and the natural by-product of living one's life in a dignified, civilised manner.

Because racial oppression tangibly diminishes its victims, in their own eyes and in the eyes of others, the construction of new public identities and the simultaneous promotion of self-respect are crucial tasks facing those burdened with a history of oppression.  Without this there can be no genuine recovery from past victimisation.  A leading civil rights advocate teaches young blacks the exhortation:  "I am somebody."  True enough.  But the next and crucial question is "Just who are you?"  The black youngster should be prepared to respond:  "Because I am somebody I will not accept unequal rights.  Because I am somebody, I will waste no opportunity to better myself.  Because I am somebody, I will respect my body by not polluting it with drugs or promiscuous sex.  Because I am somebody -- in my home, in my community, in my nation -- I will comport myself responsibly, I will be accountable, I will be available to serve others as well as myself".  It is the doing of these fine things, not the saying of fine words, which proves that here is somebody to be reckoned with.

That is, whether or not the youngster is "somebody" has little to do with the colour of his skin, and everything to do with the content of his character.  This inner-city youngster is not on his own in his struggle to live a more virtuous, more righteous life.  None of us is.  God is our co-pilot in this, as in all of life's journeys.  As Paul wrote to the Corinthians:  "No temptation has seized you except what is common to man;  but God is faithful, He will not allow you to be tempted beyond your ability, but when you are tempted He will provide a way out so that you can bear it."  Let us tell the youngster about this good news, so he will look for that way out.


CITIZENSHIP:  ITS MEANING, PRIVILEGES AND OBLIGATIONS

I will talk only about citizenship in Australia.  I will talk only about citizenship in democracies.  In contrast, in a dictatorship or strong-armed government, a citizen has different rights and duties.

First, I offer a few thoughts about democracy.  I believe that democracy is far and away the best form of government.  I do not think it is necessarily the best for every nation.  Democracy might not, at first, be appropriate for a nation that has a low standard of living, a high level of illiteracy, grave administrative problems and powerful and plundering neighbours.  Nonetheless, I greatly respect that post-War western tradition of trying to set up infant democracies in infant nations.  It's a way of saying to them that "you deserve nothing but the best for the start of your journey as a nation".

At the same time, democracy is not an easy system of government.  We claim it is easily operated.  If it was easy, if it was instantly superior to rival forms of government, it would have had a much longer history.

Democracy is really a creation of the last 200 years -- I apologise to any Athenians present.

In Australia, there is complacency about democracy and therefore about citizenship.  Democracy is seen as surpassing any rival system;  but there is a chance, maybe a 33 per cent chance, that in 200 years' time democracy will be only a minor system of government, or a quaint fossil.  Of course there is also a chance that democracy will be world-wide and universal.

The strongest military power in the world, the United States, is a democracy, and that has helped to spread democratic seeds even on stony ground.  The day might come when the strongest military power in the world is not a democracy.  I'm not being pessimistic, just pondering.

Democracy seems easy-going and laid-back, but is actually demanding.  It requires a sense of civic responsibility in a substantial minority of its citizens.  Democracy requires, as far as we know, certain shared values.  It requires a willingness to debate.  And it requires a common language for that debate.

Initially, and I stand open to correction, democracy rose more in the prosperous nations, and by its ability to harness talent, helped to increase the prosperity of those nations.  Faced with less prosperity, democracy loses a lot of support.  Democracy, in the early 1930s, when the world depression was hovering, was brittle.  There will be other times when democracy is unable to deliver the miracles too often expected of it.  The danger to democracy in many other countries might come from economic conditions, from international or civil wars, from environmental threats or even from world government.

I believe, incidentally, that the first attempt at world government will be made within the next two hundred years and will probably fail.  But there will be other attempts.

As an institution, democracy tends to promise more than it can fulfil.  Put another way, democratic leaders are a little inclined to favour the painless solutions because they're the solutions that we, the electors, demand.

At times democracies have placed the very institution of democracy in peril by neglecting their own defences.  To make your defences stronger is sometimes painful.  Germany offers us a lesson.  Germany in the 1930s had perhaps less than one tenth of the natural resources and maybe one tenth of the population of the many-sided alliance that had defeated it in 1918.  And yet Hitler hit that democratic alliance for six in the first phase of the Second World War.  Why?  Because the democratic nations, the winners in 1918, were not prepared to make sacrifices to counter Hitler when he was about to re-arm or busily re-arming.

Australia was in that half-hearted number.  We don't like to say so, but one of the reasons why so many Australians were captured by the Japanese in 1941 and 1942 was that their own nation had ill-equipped them for war.  And therefore they were easily captured.  Public opinion as well as political opinion played a large part in a decision that meant that many Australians were ill-prepared for war.

Australia is one of the world's oldest continuous democracies.  Long may it flourish.  I doubt, however, whether democracy is quite as vigorous as it was.  I offer the view that democracy was healthier in Australia 40 or 60 years ago than it is today.  Moreover, the decline in democracy, if it has happened, has aroused virtually no comment.  I'm not speaking of a terminal illness, but an illness that should be diagnosed.

Even in Australia, in this relatively ancient democratic stronghold, there is a tendency to take democracy for granted.  There is a tendency to misuse it, to demand too much of it, to take it for granted in the consoling belief that it is a Titanic and unsinkable.  Every system of government is sinkable and liable to be replaced.  I point to a few icebergs large and small, now visible in Australia.

A sense of citizenship is vital in a democracy.  The citizens are the final judges in the political process.  Unfortunately in Australia, citizenship is largely the responsibility of the Department of Immigration, and that Department is largely the lobby for recent immigrants and those of their relatives who hope to arrive soon.  That Department is really a pocket borough with no concept of Australia as a whole and its needs.

In my view, Australia's notion of citizenship is a disgrace.  We, more than probably any country in the world, throw away our citizenship.  Anybody can become a citizen with ridiculous ease.  Applicants for citizenship have to live here or claim to live here for only two years, and one of those years can be spent overseas.

They need to know no more than a few words of English.  If they are over 50, they need to know no English.  They can also maintain their allegiance to a foreign power while an Australian citizen.

The prostitution of Australian citizenship took place under Mr Hawke.  To read the Parliamentary Debates is to look in vain for any governmental idea of what is in the interests of Australia as a whole.  In 1984, in the parliamentary debate which led to the watering down of our citizenship, Mr Peter Staples summed up the views of many of his colleagues.  If, he said, migrants want early citizenship, what right do we have to deny it.  I think a nation has every right to deny citizenship to those who know nothing about the nation they have just entered.  As for the question of English, one Senator insisted that to demand an English prerequisite in a migrant would be in-built discrimination.  She did not seem to realise the Parliament holds all its sessions in English.

Without that in-built discrimination, without a common language or, say, two common languages, we are reduced to the level of monkeys:  even monkeys probably have a common language.  This kind of nonsense is sometimes applauded in the serious dailies, which do not seem to realise that their very circulation depends on the same inbuilt discrimination, the same common language.

I offer a second comment.  Not only do we demean citizenship by thrusting it on newcomers.  We also demean democracy by compelling newcomers to vote.  They might know little about Australia and have no previous experience of democracy.  But they are compelled to display that ignorance by voting.  Compulsory voting, I remind you, was introduced by the Federal Parliament by a conservative government in the mid-1920s when English was almost universally spoken in Australia.

I don't believe that if voluntary voting were reintroduced, it would necessarily serve one political party for any length of time.  But at least it would proclaim the truth that democracy should rest on common sense.  The keystone of democracy is that every voter has to accept some responsibility for the nation's well being.  The keystone of democracy is that every voter can be an assessor of the government's recent record.  Compulsory voting, mindless voting, challenges that principle.  Democracy is taken too lightly by the notion of compulsory voting.

I offer another piece of evidence that democracy in Australia is not quite as healthy as it should be.  There is a strong view, reinforced by a section of the media based in Canberra, that certain topics are too dangerous to be handed to the people for decision at election time.  Immigration is one topic.  Again and again, newspaper editors and others insist that there must be a bipartisan approach, and that the major political parties must follow the same policy -- providing it is a policy they approve of.  We hear, again and again, that the Australian people themselves can't be trusted to vote on immigration.  Nearly every Immigration Minister in the last twelve years has followed this line of argument.

Aboriginal affairs is another topic not to be entrusted to the people.  The press joined with Mr Keating in wiping it from the agenda at the last Federal election.  And of course the Native Title Bill was deliberately introduced to Parliament without any chance of members of the public seeing that Bill, and a strong attempt was made to push it through as quickly as possible.  It's too important an issue for Aborigines and all other Australians to be rushed through Parliament.  It will remain a smouldering topic in Australia for many years to come.

If there are certain issues that can't be discussed in a democracy -- and numerous intellectuals and the serious daily newspapers sometimes enforce that taboo -- then our moral and intellectual guardians are really showing some disdain for democracy.  In intellectual circles in Australia, especially in the social sciences and humanities, there is an ambiguous attitude toward democracy.  That attitude is increasingly powerful in education.

I draw your attention to another straw floating in the wind:  the role of taxation in democracy.  As an aside, I used to be able to fill in my own tax returns, just as I think the great majority of Australians could.  Indeed, in the late 1950s, one could even read the Tax Act, then a small document, and even lodge an appeal, unaided.  Now, of course, like three-quarters of Australians, I need a tax agent.  The system is so complicated that only a tax expert understands it:  or as many privately say, even they do not understand it.

I submit that taxation is at the core of the political process.  In the 1770s, North Americans revolted against British rule, because they said they were victims enduring taxation without representation.  In short, they had virtually no say in the taxes they paid.  We have moved a short distance toward that stage.  Remember, one of the reasons why Dr Hewson lost the last election was that he tried to transform the tax system, but the great majority of voters didn't even know what the existing system was.

I think it is important that citizens, or a sizeable number of citizens, should know roughly how the tax system operates.  Indeed they probably should know more about the tax system than they know about the machinery of government, the Parliaments, the courts and so on.

When the Civics Expert Group did their task last year, their brief would have entitled them to look at taxation as one of those areas of government which are befuddling the average citizen.  But they didn't look at taxation.

Historically, taxation disputes have played a big part in testing the legitimacy of governments.  George Washington knew that.  So did Peter Lalor.  The Eureka Stockade of Ballarat was largely a dispute about taxation or what the government did in return for its htaxes.  In the eighteenth and nineteenth centuries, when the trend in certain parts of the world was towards the dispersal of political power, tax revolts often had democratic results.  The opposite can happen.  I'm generalising and not referring specifically to Australia.

One final point.  More than ever before, those in power speak frequently about the rights of minorities and rarely about the rights of the majority.  There will always be a tension between the rights of the majority and the rights of minorities.  But I find it strange that the rights of the majority are so often challenged and so rarely defined.

Democracy depends on its citizens receiving basic rights.  These include reasonable freedom of expression, a say in the government of the nation, the right to a fair trial, freedom of religion, and also some of the near-rights, which will vary from generation to generation.  But democracy equally depends on citizens accepting responsibilities.  In the last ten years our civic and political leaders, far more than in the past, have emphasised civic rights much more than civic duties and civic responsibilities.  I think we are the first generation of Australians to be assured, again and again, that we can all increase our rights without any increase in our responsibilities or duties.  This is almost the formula of the charlatan.

Democracy, if it is to continue over a long period, depends as much on the shouldering of obligations as on the claiming of rights.  For that reason it is a difficult as well as an impressive system of government.

Only a stone's throw from here is one of the most notable Parliament Houses in the world.  It should, along with the Parliament House in Adelaide, be famous, because ultimately when the history of democracy is written, the institution of democracy in South Australia and Victoria in the mid-1850s will be classed as landmarks in world history.  When you consider the conditions under which democracy was established in Australia in the mid-1850s, you can only applaud those early voters and those early legislators.  Most of the legislators had no experience of any kind of government, not even municipal government, and you can only applaud the way they set about the difficult task.  They had their failures, they had their disappointments, but they set up the nucleus of a system of government which we still have and which we still prize.

Since all those who are interested in politics, or nearly all those who are interested in politics, are partisan to some degree, it's vital that from time to time we set aside our partisanship and ask ourselves not simply what will promote the political views which we individually believe in, but what will promote that democratic system which will enable those views, if sensible, to prevail.



ENDNOTES

1.  Civics Expert Group, Whereas the people:  Civics and Citizenship Education, Canberra, AGPS, 1994, page 7.

2Ibid., page 16.

3Ibid., page 13.

4Ibid., page 14.

5Ibid., page 15.

6.  See E. Gellner, Conditions of Liberty:  Civil Society and its Rivals, New York, Allen Lane, Penguin Press, 1994, and a review of it:  K. Minogue, "Necessary Imperfections" in The National Interest, Winter, 1994-95, pages 83-8.

7.  V. Burgmann and J. Lee, Constructing a Culture:  A People's History of Australia, Fitzroy, Victoria, Penguin Australia and McPhee Gribble, 1988, pages xiv-xv.

8.  Senior Secondary Assessment Board of South Australia, Australian Studies, Extended Subject Framework, Adelaide:  Peacock Publications, 1991.

9The Bulletin, 9 December 1899.

10.  Cited in E. Kwan, Making "Good Australians":  the Work of Three South Australian Educators, University of Adelaide, unpublished M.A. Thesis, 1981, page 28.

11.  A.R. Trethewey, "The Rise and Fall of History in the Victorian State Primary School:  a Study of Response to Changing Social Purposes" in Australian Journal of Education, X11 (3), 1968, 266.

12Children's Hour, July 1897, page 103.

13.  See, for example, S.G. Firth, "Social Values in the New South Wales Primary School 1880-1914" in R.J.W. Selleck (ed.), Melbourne Studies in Education, Melbourne, Melbourne University Press, 1970.

14.  R.N. Bellah, The Broken Contract:  American Civil Religion in a Time of Trial, New York, Seabury Press, 1975.

15.  W. Waller, The sociology of teaching, New York, Wiley, 1932.

16.  I. Davey and P. Miller, "Forced to Resist:  The Working Class and the Imposition of Schooling" in Radical Education Dossier, 16, 1981, pages 35, 34.

17.  Civics Expert Group, op. cit., 1994, page 30.

18Ibid., page 25.

19.  B. Lewis, "Eurocentrism Revisited" in Commentary, December 1994, page 51.

20Ibid., page 50.

21.  See Alan McFarland, The Origins of English Individualism, London, Blackwell, 1978.

22.  This division of political loyalty was achieved easily among most Australians of British origin but less so among those of Irish and Roman Catholic extraction.  See Geoffrey Partington, The Australian Nation:  Its British and Irish Roots, Melbourne, Australian Scholarly Press, 1994.

23.  See J.B. Hirst, Convict Society And Its Enemies, Sydney, Allen and Unwin, 1983.

24.  C.M.H. Clark (ed.), Select documents in Australian History 1851-1900, London, Angus and Robertson, 1977, pages 475-6.