Missing the Message on Mandatory Sentencing

The continuing outcry over Western Australian and Northern Territory laws on mandatory imprisonment typifies the sad state of debate about public policy in this country.  Reasoned discussion invariably takes second place to moral posturing, misinformation and a dash to the United Nations.

First there is the rhetorical overkill, as prominent people compete to make the most outlandish statements.  The Human Rights Commissioner, Chris Sidoti, always a strong performer in this arena, said that Prime Minister John Howard's statements on the issue "lump us in with the worst human rights offenders" such as China.  But this time he lost out to NSW magistrate Pat O'Shane, who has suggested that there could be "a hidden genocidal intent in the Northern Territory's mandatory sentencing laws".

Then there is the neglect of important details.  For instance, most Australian states, including Queensland, have mandatory imprisonment for people who are convicted more than twice for certain serious traffic offences, such as driving under the influence of alcohol, or dangerous driving.

However, this does not seem to upset the righteous.  Maybe this is because they think that private vehicle ownership is rather wicked, and something that should be discouraged.  Certainly, it is hard to see Opposition Leader Kim Beazley or Greens Senator Bob Brown calling for a United Nations investigation into whether Australia's traffic laws infringe international human rights conventions.

And despite claims that Johnno -- the Aboriginal youth whose suicide in a Darwin detention centre triggered the current outrage -- was killed by Northern Territory's mandatory sentencing law, Aborigines convicted of an offence are actually less likely to die in prison than outside.  The Royal Commission into Black Deaths in Custody reported that the "death rate of those Aboriginal people on non-custodial orders is approximately twice that of Aboriginal prisoners".  The commentators who condemn governments for not following through on the Royal Commission's work carefully ignore this distressing finding, thus giving the lie to their supposed concern with Aboriginal welfare.

The mandatory sentencing laws have been widely condemned by the judiciary and the legal profession.  Obviously recognising that the laws have a considerable degree of public backing, four senior judges from NSW signed a letter claiming that this "provides a disturbing insight into the practical operation of the simplistic notion that democracy is merely the majority will".  Their letter provided an even more disturbing insight into an increasingly common attitude amongst judges that it is they, rather than the people's elected representatives, who should be making the laws.

Social workers and psychologists attached to courts like to tell us that juvenile crime is a "cry for help".  Be that as it may, perhaps they and their colleagues should consider whether popular support for mandatory imprisonment might also be a "cry for help";  a sign of widespread disquiet about the ability of our legal system to strike an appropriate balance between the rights of criminals and the rights of society as a whole.

Few people still believe that large numbers of delinquents and criminals are likely to be rehabilitated in jail, despite the lip service that is given to this desirable goal.  Whether the threat of imprisonment acts as a deterrent is more complicated.  Opponents of mandatory sentencing argue that a great deal of crime is impulsive and that most individuals don't stop to weigh the cost and benefits before breaking the law.

Nevertheless, American statistics examined by the National Center for Policy Analysis indicate that as the expected punishment increases, so the amount of crime decreases.  However, this relationship does seem to apply more to adults than to juveniles, suggesting that the deterrent effect of jail may be greater with adults.

But rehabilitation and deterrence are not the only purposes of imprisonment.  Although incarceration may be expensive, locking up criminals removes them from circulation -- or as criminologists say, it "incapacitates" them.  A recent study focusing on NSW by the Australian Institute of Criminology concluded that "a sentencing policy oriented towards incapacitation of juvenile violent and property offenders would reduce the supply of juvenile violent offenders by 28 per cent, and that of property offenders by at least 46 per cent";  significant reductions indeed.

And as Michael Duffy pointed out in the Courier-Mail last month, for many people the most significant aspect of imprisonment is that of punishment -- it is a way of making criminals receive their just deserts.  The educated middle class, increasingly in thrall to dubious sociological notions about the causes of crime, take a more lenient view and revile as "rednecks" those who believe in the importance of retribution.

But there are a couple of ironies here.  The educated middle class usually thinks that traditional indigenous law should be recognised and celebrated, even though these traditional legal systems place considerable emphasis on the attainment of moral balance through retribution.

Furthermore, the "redneck" position is actually based on a more generous view of human dignity.  The "redneck" sees the criminal as a moral agent who makes a choice to break the law, and demands that he or she face the consequences of such actions.  The "caring" member of the educated middle class effectively treats the criminal as some kind of automaton, acting under the influence of social and psychological forces largely beyond individual control.

Personally, I have serious reservations about mandatory sentencing.  I certainly do not see it as a panacea, particularly for young offenders.  But if judicial discretion in sentencing is to regain the support that it should rightfully receive, the culture of the legal system needs to be changed so that it is more in line with public values.  Instead of asking the United Nations to condemn Australia, our judges and lawyers should be asking themselves what they can do to recover public trust.

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The Treaty Game

John Howard has a problem in the Northern Territory.  Does he intervene to overrule the mandatory sentencing laws of the CLP government, a law which had express support at the last election?  Hordes of southerners are urging him to.  They claim the law breaches Australia's international obligations.  Of course he doesn't need that pretext, the Territory is merely an instrument of the Commonwealth.  Western Australia though would be different.  Then he would have to play the "Treaty" game.

Appeals from Australia to the Privy Council UK were abolished in 1986.  It was a sign that Australia felt that its constitutional system was complete.  The electorate was entitled to think its internal politics were resolvable and resolved within its own borders.

The electorate was wrong.  Australia had already started to play the treaty game.  It was signing international treaties which would make it subject to dozens of external bodies.  In fact, it can now be said that Australia has a new constitution;  the United Nations charters and covenants.  The UN and the committees that police its covenants do not have the legal standing of the Privy Council, but having agreed to abide by covenants on, for example, civil and political liberties, the rights of the child, and the treatment of juveniles in custody, Australia's honour is at stake should it fail its obligations.  In short, Australia has ceded moral authority to another body.

How did this come about?  As far back as Doc Evatt's presidency of the UN in 1948/9 Australia was helping develop international instruments as a guide to lesser and recalcitrant nations.  It was being a good citizen.  Australia agreed to make periodic reports to the UN and other bodies on its performance in the implementation of these provisions, but it never failed, after all it wrote the rules.

Australia also signed many instruments aimed at promoting a safer international environment, whether in the treatment of foreign investments, trading rules or the resolution of custody battles.  The Commonwealth government, especially following the Tasmanian dams case in 1983, was using the international instruments to impose itself on the states.  Commonwealth power increased at the expense of the states, and Australian's were beneficiaries of new international rules.  It seemed a good game.

More recently political activists in and outside Australia have begun to appeal to international bodies where they have failed to promote their cause by domestic means.  The UN Human Rights Committee and the UN Human Rights Commissioner along with sundry others, like the UN World Heritage Committee have been coming, or are about to come, knocking on the door.  Whether it's mining at Kakadu, Native Title post-Wik or mandatory sentencing, there is a new game in, or rather out of, town.  The covenants Australia signed as a good citizen to guide the actions of others and to provide protections offshore are now being used by its own against its own.

The UN committees sent to investigate government actions are just that, committees, not courts.  They are not constrained by the rules of a court, even an adventurous one.  They are an elected body, a political body.  Moreover, they are subject to lobbying by governments, advocates and activists, unconstrained by an electorate.  This is a huge change to domestic politics.  Democratic politics has always been a balance of the competition for power and influence among the organised, constrained by the tolerance of the unorganised, played out under an agreed and largely immobile set of rules.

UN political committee interventions in Australia will severely constrain the Commonwealth, and increase the chances that it operates at the behest of the interest group and not in the interests of the electorate.

The rationale for this shift in the constitution of Australian politics is in the dialogue of human rights and universal values.  Its promise of greater morality is to be imposed as a universal and neutral phenomenon.  However, the arbitration of the meaning of a right will be determined elsewhere.  The very fact that there needs to be an arbitration belies the claim to universality.  Concepts like just treatment of juveniles, an indigenous right to negotiate or a preferred method of managing a World Heritage area are as contested as any other political claim.

The new morality will be very one-sided.  When it applies to the individual it will be absolute.  Actions by government in the interest of broader concerns, whether peace and safety, the protection of property or the economy will be struck down by pseudo-legal means.  Actions by government designed to advance the common good, which may have short term consequences for some individuals, like the Multi-lateral Agreement on Investment and the new round of the World Trade Organisation will be struck down by non-legal means.

Australia invited the new regime but did it realise the changes it will bring?

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Danger from Trades Hall

The push for a 36-hour week in the construction industry has nothing to do with workers having more leisure.

It is about having overtime pay kick in quicker.

In its own evidence before the Federal Court, the construction union, the giant CFMEU, said that projects were planned on an overtime basis, that workers could not, in a practical sense, refuse overtime and that six-day weeks were common.

So, the 36-hour week campaign is not about sharing work around, it's about increased pay.

Which is fine.  It is perfectly reasonable that unions or any group of workers should seek increased wages.

And there is nothing wrong with using a 36 hour week message as a smokescreen.

What is not reasonable is if the unions seek to bar other people be from making a different offer.

Modern unionism should be all about the union being a bargaining agent within the labour market.

The unions need to prove their worth to maintain membership by demonstrating that they add value, that they can persuade employers to offer better wages and conditions than the individual worker might obtain.

Old unionism, which is alive and well in many quarters of Trades Hall, sought to fix wages and to prevent any other workers offering to undercut these.  "No ticket, no start" was the familiar slogan.

This has its counterpart today with the 36-hour push being accompanied by stopping competition from contract labour.

Unions have been losing their market share for over a quarter of a century.  Only about one fifth of private sector workers are now union members.

One strategy is to use the highly unionised Victorian construction industry, a tight labour market and a possibly sympathetic Bracks Government as a means to reversing that decline.

This makes sense as there are a raft of certified agreements due to expire in June next year.

The downside of excluding competition, such as contract labour, is that a union monopoly extracts excessive wage costs.

From the construction industry, these are passed on to the taxpayer (though higher costs on public works) and the consumer (more expensive buildings and higher rents).

In contrast to construction, the continued dominance of independent contractors in house building has given us one of the lowest-cost new home industry in the world.

Numerous attempts over the years to force housing workers to unionise have failed, to the immense benefit of the home-buyer.

Across a great many industries increased productivity is seen where contracted rather than union dominated in-house workers are used.

This is why BHP could offer its workers more money if they went on individual contracts.

Those contracts allow it to do away with work practices which get in the way of productivity.

Higher productivity means lower costs per unit of production, which means BHP can pay its workers more.

Lack of competition through the closed-shop protects work practices which are drags on productivity.

Victorian Industrial Relations Minister Monica Gould has been supporting a raft of increased entitlements such as tacking on the entitlements of permanent employees to casual workers.

What she does not seem to understand is that Victoria competes with other states.

We compete for tourists, for investment money and across the range of industries.  Higher costs without higher productivity means jobs lost

It is not the 36 hour week or any other demand that spell danger.  Rather it is the creation and expansion of labour-supply monopolies and centrally-imposed conditions.

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China doesn't merit appeasement by us

Do you believe a vibrant democracy of about 20 million people on large island off the coast of Asia is worth defending?

Good, then you accept that defence of Taiwan against Chinese aggression is a worthy cause and disagree with those who urge we be "realistic" about the "inevitable" incorporation of Taiwan into the mainland (you know, as we had to be "realistic" about East Timor).

It is hard to see how Australians can take any other view than that Taiwan is worth defending.  After all, what is the difference between Taiwan and us?  That they are of Asian stock, and we are of mainly European stock?  That is hardly good enough.

That Taiwan used to be part of China?  In the 106 years since Japan occupied Taiwan in 1894, Taiwan has been ruled from the mainland only in the period 1945 to 1949, and then by the regime which still rules it.  In 1894, the Imperial Parliament in London still legislated for Australia:  a point that matters not at all for any claims London may now have on us.  Why is Beijing's claim over Taiwan any different?

There is no principled reason why a functioning democracy of 22 million people should be turned over to the control of a corrupt, one-party dictatorship which showed at Tiannimen Square in 1989 a willingness to slaughter its own people to stay in power.  As time marches on, the Chinese claim becomes more and more threadbare while Taiwan's consciousness of itself as a separate society from China becomes stronger and stronger.

We are left only with expedience:  that China is large country, a growing power, a huge market and we must therefore accept its wishes.

The problem with this "realism" is that it is mostly a tissue of fantasy.

China has a lot of people:  so does India.  Yet we do not have people madly boosting the Indian market, talking about the inevitable rise of India, how we must be realistic and accept India's claims.

In fact, according to World Bank figures, the Chinese economy is smaller than Britain's or Italy's and its per capita GNP is lower than Papua New Guinea's.  The size of the Australian economy is about 40 per cent of China's.  The failure of the Chinese state is at least as likely as its success.

Corruption is the market for official discretion.  The more official discretions, the higher the likely level of corruption.  Command economies are totally run by official discretion, so tend to become totally corrupt.

China has a command polity coupled to a pseudo-market economy.  There are no real property rights, or rule of law, just official "connections" (known as guanxi), favouritism and bribes.  The Party has no popular goodwill left:  it only has fear, inertia and the lack of any alternative.  It is unlikely to be supplanted, but the party-state could easily just collapse.  All it would take would be a major failure -- such as a severe economic downturn, a foreign humiliation -- which deprived the regime of its last reservoirs of authority.

It is not the regime's strength which threatens Taiwan, but its weakness.

The regime's aggressive posturing over Taiwan is a resort to nationalistic chauvinism, and seeking foreign success and succour, to prop up the regime's legitimacy.

Most Western businesses which invest in China lose money.  Western businesspeople can be incredibly naïve.  They see one billion people and imagine a huge market.  But only a tiny percentage of Chinese homes have a land phone connection.  As there are no property rights, and no rule of law, everything is a matter of official whim.  There is no free press or open debate to test claims, or to genuinely inform.

The risks and costs of doing business in such an environment far outweigh any likely gains -- as so many Western businesses find to their cost.

Chinese official statistics are works of fiction.  In the old Soviet Union, such statistics were known as "ceiling statistics" (because one looked at the ceiling, and invented a number).  In large sections of the economy, there are no real markets, to provide genuine information about scarcities and preferences:  just a grey sludge of bankrupt state firms, whose real assets are steadily being stolen by the party-managers and whose sea of bad debts which may yet drown the Chinese financial system.

China is not a "market" of one billion people, but a billion people trapped in a sludge of corruption and cynicism with pockets of success and conspicuous consumption.

Reversing the folly of agricultural collectivisation and permitting commercial activity did release a huge amount of energy which permitted high growth rates (from a very low base), but that burst of prosperity has spent itself, as the economy comes up against the blocks inherent in the nature of the regime.

To see the Chinese state as solid, and the Chinese market as a huge commercial opportunity, are both fantasies of Western imagination and greed wrapped in a lack of understanding and genuine insight.

But the path of being "realistic" about forcible Taiwanese incorporation into China is a far more deluded fantasy than that.

It is completely unrealistic about American attitudes and perspectives.  The American Left despises the Beijing regime because of Tibet and Tiannimen.  The American Right despises the Beijing regime as communist and because of 50 years of commitment to Taiwan:  commitment which Taiwan's evolution into a thriving democracy has both vindicated and cemented.  It is clearly the strong sentiment in the United States that reunification of Taiwan with the mainland can only occur if the Taiwanese people consent to it -- and it is highly unlikely that such consent is will be given.  Anything else but resistance to any Chinese aggression would be an abdication of America's view of itself and its place in the world.

"Realism" about Taiwan is also completely unrealistic about popular reactions.  Aggression is aggression, oppression is oppression.  The images of any Chinese attack would horrify and revolt.  "Realism" would seem pathetic and horrible, as it eventually did in Timor.

It is also completely unrealistic about how Australia would look if we preached acquiescence.  Why is Taiwanese democracy not worth defending, but ours is?  The hypocrisy would stink to high heaven:  with the potential to do us incredible damage in American eyes.

The argument that being "part of Asia" means accepting Chinese claims is as pathetic as the claim that one couldn't resist Nazi Germany if one wanted to a "good European".  On the contrary, being a good regional neighbour means saying Asians are worth defending too.  Preaching acquiescence would say that we think Asian freedom and democracy is strictly second-rate.  It would be a betrayal of democracy and a betrayal of ourselves.

Worse than that, it would be a betrayal of the people of China, and even more the people of Tibet.  We would be saying that it was OK for the Chinese regime to seek to keep itself in power by seeking foreign success as a substitute for granting its people real rights, real freedoms and a genuine say in their own future.

We would be saying that China's oppressive colonisation of Tibet is just to be accepted.  It is not an act of friendship to the Chinese people to join in the dance of delusion and pretend that fundamental changes do not have to be made in China -- changes that go beyond anything any Chinese regime has ever achieved, or even attempted -- if China really is to achieve mass prosperity.

And for Australia or any other interested party to do anything to lead China to conclude that a sudden seizure (if and when that becomes militarily possible) would be acquiesced to makes such an adventure more likely, not less.

There are very few policies which are so stupid that they are neither realistic nor moral.  The path of acquiescence about a Chinese attack on Taiwan manages to be both.  It is the most deluded, unrealistic "realism" of them all.

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Multicultural Doublethink

At least two people would have been delighted by the Prime Minister's recent call for a "comprehensive debate" about immigration.  Academics Bill Cope and Mary Kalantzis can't stand John Howard, but his call was well timed for last Tuesday's launch of their new book about immigration, multiculturalism and Australian identity:  A Place in the Sun.

Sociologically speaking, immigration is a most interesting issue.  On most other controversial questions, such as Aboriginal reconciliation or the monarchy, Australia's intelligentsia is fiercely committed to uniformity.

But immigration presents a problem.  On one hand immigrants, particularly those from non-English speaking countries, can help to undermine the Anglo-Celtic dominance that our intellectuals find so hateful.  On the other hand, however, they also worry that higher levels of immigration will have harmful environmental consequences.

And when it comes to the environment, the moral hierarchy that determines how the intelligentsia should think on any particular issue is still rather fluid.  While everyone knows that the interests of ethnics must always trump the interests of Anglos, or that gays attract far more virtue than heterosexuals, there is confusion about the relative positions of humans and other living species.

Some members of the intelligentsia think that human welfare should always be given priority over the welfare of animals and plants.  Others believe that such an attitude is shameful and dangerously "anthropocentric".  And many are just perplexed, changing their mind on the issue from one dinner party to the next.

The outcome of this uncertainty is amusing.  Thus the Greens and Australian Democrats find themselves embarrassingly close to Pauline Hanson and One Nation on immigration -- although it sometimes seems that they try to reduce their discomfort by arguing that the immigrants who should be welcomed are those who have arrived in Australia illegally.

Given all this, the approach that Dr Cope and Professor Kalantzis took when researching their book has much to commend it.  They interviewed thirty-four influential people who have taken differing positions in public discussions on immigration and national identity.

The interviews were supposed to reveal the contemporary sensibility of Australia at a time of "deep unease, uncertainty and national ambivalence".  The book discusses the experiences and consequences of immigration, relations between Aborigines and later settlers, the relationship between people and the environment, and the geographical and economic location of Australia in the world.

Such an approach has the potential to identify matters that must be clarified and resolved in any "comprehensive debate" by juxtaposing the contrasting views of articulate individuals, although Cope and Kalantzis seem too muddled and partisan to do much with their material.  Nevertheless, they do show that some prominent people hold quite unpredictable views about immigration and cultural diversity.

It is fascinating to discover, for instance, that Bob Hawke is so upset about environmentalists' opposition to immigration that he would like to line them up and shoot them.  "They are the most selfish lot of bastards", he says.  Unfortunately, Cope and Kalantzis do not ask him to explain why, as Prime Minister, the only line up that he wanted to arrange for environmentalists was one that led to political influence and government handouts.

In a small way, this exemplifies a problem that characterises both this book and other writing presented on behalf of the "multicultural industry" -- for which, their publisher's media release informs us, Cope and Kalantzis are "unofficial spokespersons".  There is a great deal of intellectual evasion and confusion in the industry, as well as a large gap between the innocuous publicly-stated objectives of multiculturalism and the actual practices of the ethnic lobbyists and their supporters.

I suspect that most Australians are heartily sick of the multicultural double think which pretends that all cultural traditions are equally worthy, with the sole exception of the mainly Anglo-Celtic derived culture of the mainstream.  And there is anger about the cavalier use of the epithet "racism" to censure any criticisms of multiculturalism.

What does "racism" mean?  Cope and Kalantzis sneer at Immigration Minister Philip Ruddock because he said that the government could not decide what "racism" is.  But as Katharine Betts pointed out in her book, The Great Divide, neither can they.  In an earlier work they wrote that one kind of racism is the belief that human cultural differences are so great "that interaction and mixing of groups is inherently harmful", but then went on to say that intermarriage was undesirable because it weakened these differences.

We all know about the stifling ethnocentrism and intolerance of pre-1960s Australia and its Hanson-inspired revival under the Howard government, for the likes of Cope and Kalantzis have been telling us about it for years.  But what about the sense of exclusiveness and ethnocentrism amongst other cultures, including those whose representatives are very active in the multicultural industry?

I think it is fair to say that many Greeks, Jews and Chinese, for instance, have been just as committed to maintaining certain kinds of ethnic or cultural boundaries as were the despised white Australians of the 1950s, if not more so.

Perhaps their experiences in the diverse and tolerant Australia that has developed in recent decades has convinced ethnic multiculturalists of the need for radical changes in their own traditions.  The word would be "assimilation".  Of course, this is a word that Cope and Kalantzis regard with horror.

But without even realising it, they fully endorse their own kind of assimilation, specifying "the non negotiable core values" that nations will have to adopt in the coming century.  Needless to say, these "non negotiable" values will cause a great deal of heartache within many ethnic communities in Australia.

The double standards and excesses of the multicultural industry have played a significant part in reducing popular support for immigration.  Those of us who believe that a sustained immigration program is vital for Australia's future prosperity should make these humbugs our prime target.

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Markets and social responsibility: The influence of the market on the work of service professions

An Address to the Institute for the Service Professions Symposium,
Edith Cowan University, 10 March 2000

ECONOMIC LIBERALISM AND THE COMMUNITY SERVICE SECTOR

THE DEMISE OF SOCIALISM AND RISE OF INDIVIDUALISM

For much of the 20th century, collectivism was the prevailing ideology in Australia and around the world.  Capitalism was believed to be fatally undermined by inefficiencies, instability, market failure and unacceptable inequalities.  Individuals were believed to be poorly informed, open to exploitation and in need of guidance.

The solution was thought to lie in governments managing the commanding heights of the economy, regulating the allocation and distribution of goods and services, and playing an ever-increasing role in the redistribution of income and wealth.  Accordingly, the size of government grew steadily in Australia from 10 per cent of GDP in 1901 to about 40 per cent of GDP in 1982 and by larger amounts in other developed countries.

About twenty years ago the worm began to turn.  Reliance on collectivism and big government began to wane and reliance on individualism and markets began to rise.

As Lord Robert Skidelsky, the author of The World After Communism, put it:

"... governments in developed and developing countries alike have been privatising their public sectors and shredding instruments of intervention and control.  The aim of economic reform is remarkably similar everywhere:  a market economy based on private ownership with accountable government limited to a relatively few functions."

The process started before the fall of communism, arguably in the world's two major opposites -- the US and China.

In the late 1970s, the Carter Administration began the process of deregulating the transport and communication industries -- two industries which proved to be crucial to driving technological change.  A little later, but in the same decade, Deng Tsu Peng [sp]officially abandoned communism and put China on the capitalist road, thereby beginning the true cultural revolution.  In the early 1980s, Thatcher in the UK, Reagan in the USA, Lange/Douglas in New Zealand and later Hawke/Keating in Australia began to transform their economies and governments.  Later in the decade Mr Gorbachev introduced perestroika and, in so doing, announced the failure of communism as a political and economic ideal.  Many Asian countries, who had either abandoned or avoided altogether the collectivist economic development nostrum, began to flourish.

In 1989, with the fall of the wall, the Russian empire collapsed and thirty per cent of the world's population began the difficult process of creating a market economy and a liberal democratic order.

The pace of change picked up and spread throughout the world during the 1990s.  Continental Europe began to move slowly but perceptibly away from many of its cherished collective policies.  This process was often lead by ostensibly socialist governments.  Indeed Europe has lead in the privatisation stakes in terms of volume and value through the 1990s.  With the creation of the European Union, barriers to trade, investment, immigration, location of business and competition are being removed across all the member states.  This process is spreading throughout eastern Europe as countries jockey for the right to enter the EU.

Most south and central American countries are in the process of abandoning their collectivist past for more liberal economic policies.

During the 1990s, the British Labour Party officially abandoned its commitment to socialism and adopted the "the third way", which in essence adopts and advances most of Lady Thatcher's policies and philosophies, albeit at a slower and politically attuned pace.  President Clinton has done the same in the US.

Even the Fabian Society -- the intellectual flag bearer of socialism in the English-speaking world during most of the 20th century -- has joined the revolution.  It now is a supporter of market systems and privatisation.

Not surprisingly, this has not been a politically popular process.  It does, after all, transfer control and resources from the political sphere to the private sphere.  People who rely on political control have lost influence.  It also undermines the way of life and the ideology of the many who believe and work in "the collective".

That fact that it has happened, that it has often been put into place by avowed socialists, and has shown no signs of being reversed or even slowing, indicates that it has some powerful forces behind it and is not a temporary aberration on the path to the ideal socialist state.

WHY THE SEACHANGE?

1. Failure and Performance

The main force for change has been the failure of big government coupled with the success of markets.

State-owned enterprises around the world have consistently failed to produce the goods.  They characteristically provide poor and costly services;  are inefficient and lack innovation.  They are prone to overmanning and "staff capture" and often have an arrogant attitude towards consumers.

Government industry planning and controls have often undermined rather than enhanced competitiveness and tend too often to pick and support declining industries rather than expanding ones.

Active macro-economic management proved to aggravate rather than abate instability.  It also lead to high inflation, rising debt and rising unemployment.

Government regulation of labour markets tended to drive a wedge between workers and employers as well as between workers and productivity growth.  The result has been low productivity, counterproductive work practices and low employment growth, particularly for low-skilled workers.

Government-provided welfare services tend to encourage dependency, to lack innovativeness and to focus on the symptoms rather than the solutions.

In contrast, economic freedom -- individual choice, competitive markets, secure property rights, free trade -- not only outperformed big government but proved to be far less prone to failure, inefficiencies and inequity than was commonly predicted.

In other words, market failure -- though real -- was not as prevalent as earlier assumed while government failure proved to be endemic.

The proof was in the pudding.  As illustrated in Figure 1, countries which adopted a more open and market-oriented policies -- called economic free policies -- achieved much higher rates of growth.  Economic freedom is also associated with greater equality of income rather then less.

Figure 1

Of course it took time for the evidence to come through and be accepted by a very sceptical public and by hostile elites.

The abject failure of communism, provided many with enough evidence to make at least tentative steps to greater economic freedom.

The performance of the US, the UK and importantly Australia during the 1990s relative to the more collectivist European nations, and relative to their own performance in the 1970s and 1980s, is enough to convince even the most sceptical.

2. Globalisation

Globalisation, which is driven in large part by a combination of technological change and the adoption of liberal market policies, has undermined governments' ability to maintain collectivist policies.

Global capital markets tend to hunt out, expose and reward success and punish poor performance.  They also tend to prefer competitive markets to political decision-making and controls.

Markets have an uncanny ability to circumvent barriers erected by governments.  They also accentuate the cost of government failure.

Of course governments still have the ability to remain in control and restrict the market.  In short, they can take the North Korean option.  But this is a Hobson's choice as the costs are too high for any democracy to withstand for ever.

3. Consumer sovereignty.

Consumers are increasing demanding choice and control and, in so doing, are driving the shift from the collective to individual choice.

Affluence, technology and markets have given consumers immense choice and control of their own life decisions.  They have also greatly reduced governments' ability to limit choice.

The level of service, choice and control provided in the market sphere has also increased the standards of performance expected of government.

Even though many babyboomers are in their hearts collectivists, they are in their actions a most individualist generation and have both driven and relished this new found freedom.  They, more than anyone else, have driven the rise of individualism.  Generation X appear to be less collectivist and more comfortable with markets than their parents but just as desirous of choice and control.

4. Limit to tax.

Around the developed world, taxes have more than trebled as a share of income over the last fifty years and are approaching their political and economic limits.

In some nations such as France, Sweden and the Netherlands, taxes now absorb around 60 per cent of GDP.  Even in the low-tax developed nations, including Australia, taxes consume over 34 per cent of GDP, which is more than double the level in place in the 1960s.

Although only in the US has there been a "tax revolt", most nations are struggling to squeeze more out of their taxpayers.  Although tax shares have not declined over the 1990s in many countries, the rate of increase has slowed dramatically and in some countries stopped altogether.

Australia is no exception.  Although many collectivists look with hope at the large gap in taxing levels between Australian and, say, Sweden, the fact is that Australian's have a lower tolerance for tax -- one much lower than the Europeans.

For proof one needs only observe the GST debate.  The GST, which is essential to retaining current tax levels and levels of government spending into the future, is deeply unpopular and could only be introduced after three tries and with a huge reduction in personal income and other taxes.

This politically-imposed limit on the size of government has been, and will remain, a key driver in the use of markets and greater individual responsibility.  It also means that efficiency and equity are closely intertwined.

5. Growth of Welfare.

Up to early 1970s Australia had what is aptly called a "workfare state".  The main focus of government was to manage and plan the development of the economy.  Its major instruments were tariffs, regulations and business enterprises.  Taxes were low and welfare spending was amongst the lowest in the OECD.

Full employment was achieved by a combination of rapid accumulation of capital -- much as the Asian countries did during the 1980s and 990s -- a buoyant world economy, massive wealth in the resource sectors and large labour-absorbing business enterprises.

In essence, the government offered people workfare, or jobs, rather than welfare.

This process was upset during the 1970s by two related forces.  First, as outlined above, the collectivist state began to fail:  growth slowed, productivity fell, competitiveness declined and unemployment grew.

During this period the Whitlam Government introduced the welfare state, with a massive increase in the range and level of entitlements.

As shown in Figure 2 as result of the increase in demand from the slowing economy and the expansion in entitlements, social transfers expanded from about 10 per cent of GDP in 1972 to 17 per cent in 1979.

Growth of this magnitude was clearly unsustainable.  The Hawke/Keating Government correctly tackled the main cause, that is the failure of the workfare state.  It also began to tackle the growth of entitlements through targeting, user charges and greater efficiency in the delivery of services.

Despite these reforms, welfare transfers continued to grow over the next two decades -- driven primary by health and welfare transfers.

Given the aging of the population, the underlying demand for health and welfare transfers will continue to grow and it will continue to drive the need for rationing and efficiency in these and other areas.

6. Decline in trust.

Another factor -- seldom discussed but nonetheless real -- that has driven the shift toward individualism is the decline in trust in institutions and authority.

Babyboomers may in their heart be collectivists but in their brains they are anarchists.  They do not trust authority, institutions or power, particular those long-established.  They have an affinity for direct action and people power.

As a result, politicians and political parties are on the nose around the world.  Big is bad.  Bureaucracies -- whether in the public or private sector -- are seen as dinosaurs.

As Ziggy Switkowski, CEO Telstra put it last week:

"Let's face it, it's not easy right now being a traditional institution, government organisation or business....we seem to be built on old-fashioned models, we seem to have legacies in terms of investments, obligations and historic processes that don't seem relevant to the modern age".

This mind-set not only undermines the power of the collective and government institutions but also augments the drive for greater individual control.

Importantly, it gave impetus to the rise in non-government organisations -- both as an alternative to government in terms of collective activity, but also as a provider of services.

In summary, the rise of individualism and markets is not just or even primarily driven by a bunch of ideological econocracts in Canberra as Professor Pusey and company would have you believe.  It is being driven by a much more complex and powerful set of forces.

There are a number of other myths about the process of change and economic reform which need to be explored if you wants to understand the process.

MYTHS ABOUT ECONOMIC REFORM.

Myth # 1 Stopping reform is an option.

It is often claimed that economic reform should be slowed or stopped because people are tired of change.

While it is true that many people are tired of change, they also want the improvements in their lives that only come with change.

Much of the change is being driven by the demands of these very same individuals:  by their demand for greater control and choice, their calls for better and more services, and by their distrust in institutions and bureaucracies.

Moreover, no government can control all changes or ensure that change occurs at some predetermined rate.  Many of these factors are beyond the control of government.  For instance, the aging of the population, with all of its demographic consequences and the communications revolution which is transforming all aspects of life, are effectively beyond the control of governments.

Myth # 2 Reformers have unlimited faith "in markets".

Economic reform does not involve slavish adherence to market forces.  Competition, deregulation and privatisation are legitimate tools in the reform armoury, and they have yielded large benefits.  But they are not ends in themselves and they are not relevant in all circumstances.

In reality, many limitations of the market are openly acknowledged by reformers.  They understand the key role played by government in supporting markets.  They also understand that the government must finance the provision of so-called public goods -- those goods that would be under-supplied by the market.  The government also has an important role in maintaining a social safety net for those in genuine need.  There is much to debate about the nature of that safety net -- about its level, whether assistance should be in the form of cash transfers or of specific services, and who should be eligible to receive them and how and by whom they should be delivered.  But the need for a state safety net is accepted by most people.

Reformers are also aware that a market economy depends crucially on a wider civil society that is strong and supportive.  Markets operate best when there is a culture of trust, honesty, respect for others, and good faith dealing.  Such a culture cannot be created overnight by government.  Where it is lacking, markets will be characterised by short-termism, fraud, fly-by-night operations and, at worst, gangster capitalism.

Ultimately and contrary to accepted wisdom, the strength of our civil society depends, not on government, but on decisions made by all of us as individuals, and as members of the groups to which we belong.  A market economy must be built from the bottom up.

Myth #3 Microeconomic reform is bean counting

Governments are always being accused of penny-pinching by some interest groups, as well as being criticised for using taxpayers' money extravagantly.  Experience suggests that the focus of attention should be less on the amounts spent and more on the performance of dysfunctional systems.

Many reforms within the public sector -- such as direct resourcing in schools or the separation of funding and provision in health -- are aimed at getting better value for the taxpayers' dollar.

Often good microeconomic reform has a positive impact on the government's budget, such as when subsidies to exporters were abolished.  But sometimes it has had the opposite fiscal effect, as when tariffs have been cut.  And it is easy to name existing statutes where the purpose of the legislators would be better served by an explicit subsidy than by regulation.

Usually the debates over microeconomic issues are not about limiting some total aggregate of money.  More often they are about who is best placed to make decisions over how much money to spend.

None of this is to deny, of course, that the aggregate level of government spending is important.  Government spending has an opportunity cost and there is a limit to people's' willingness to pay taxes.

Myth #4 Markets are without social conscience

One popular claim is that reform comes at the cost of social cohesion.

As Paul Kelly, International editor of The Australian said:

... the biggest and most dangerous myth in our current political dialogue -- [is] that economic efficiency leading to economic progress, and social inclusion leading to a more caring and tolerant society, are incompatible.  This assumption has almost become an article of faith in some quarters.  The slogan is entrenched -- if you believe in the market, you don't believe in society.  It is damaging because it is false and its consequence is to weaken economic liberalism or social inclusion or both.

And it is hard to see how delivering higher incomes to people ranks as an exercise without social conscience.  Permanently higher incomes are achieved only through increasing productivity, which is what economic reforms are mainly about.  Higher incomes enable people to consume more of those goods and services that are important to them.  Such goods and services obviously include health, education, the arts, environmental goods and all those other activities that opponents of reform typically claim are neglected under economic liberalisation.

Moreover, societies can't share what they don't produce.  By generating higher levels of national income, reforms aimed at improving the productivity of the economy provide the wherewithal to fund the access and equity objectives of governments in education, health and other key services.  We do not see world-class social services in poor, unproductive countries, no matter how "free" to the consumer those goods may be.  Richer countries also typically have cleaner environments.

WHAT IS IN STORE FOR THE COMMUNITY SERVICES SECTOR?

In aggregate, at least, the structure of the sector will change little.

As shown in Figure 3, the delivery of services has already largely been privatised and contracted-out.  Non-government organisations and for-profit organisations dominate the industry.  Together they account for 93 per cent of organisations, 79 per cent of employees and 72 per cent of expenditure.

The role of government has already been carefully dissected.  Clearly, it is focused on funding, purchasing, regulation and monitoring.

My hunch is that, in terms of further structural reform, the focus will be on contracting-out of the purchasing role.  That is, the creation of a set of case managers or agents who are funded by government to advise, coordinate and purchase services on behalf of clients.  Of course this is already being done in some areas such as employment services and it makes sense in other areas where needs change, are complex and change over time, and where there are gains to be had from coordination.  Aged care -- including health and housing -- seems to be a logical target.

In terms of process, contracting, competition and accountability are already the norm in the sector.  My hunch is that the focus of reform will continue to be one of improving existing processes, together with a shift in emphasis away from measuring and controlling input and processes to one of measuring and rewarding outcomes.

The main challenge lies with the role and functions of the NGO sector.

As shown in Figure 3, NGOs dominate in the provision of community services overall and, as shown in Figure 4, in most types of service.  However, governments still provide the lion's share of funding and determine policy, and in my view will continue to do so into the future.  As such, NGOs are increasingly become subcontractors to the state.

This has a couple of significant implications for the NGO sector and the community service sector as a whole.

First, it brings into question the independence and raison d'etre of NGOs.  If NGOs get most of their funding from governments to provide services determined by the states, then they will lose their independence because NGOs have characteristically been established not just to provide a predetermined service but to make a difference, to "do it their way".

If all they are businesses, why should they retain a non-profit status?

Second, it brings into question the ability of NGOs to continue to mobilise society.  Aside from their ingenuity, governments like to use NGOs because they are better at mobilising society, both in the form of volunteer labour and donations -- in short, they are cheaper.  However, their ability to mobilise society is to a large extent derived from their ability to make a difference.  If they are just getting paid to carry out the dictates of government, why volunteer?  And if governments are their main paymaster and are driving the activities and policies of the NGOs, why give a donation?

In summary, I think the biggest challenge facing the community sector, aside from culturally accommodating the rise of individualism and decline of the collective, is the long-overdue re-evaluatation of the role of NGOs.

In short, the task will be to ensure that civil society does not get captured by government.

The Welfare State: Beyond 2000

An Address to University Politics Society, Albert Hotel,
Thursday 7 March 2000

Understanding what has happened with welfare -- under which I include government spending on income transfers, welfare services, health and education -- is necessary in order to understand the public policy history of the last 25 years and to get some handle on what is likely to happen.

Welfare reform has followed a four-part pattern, with each part, particularly the first, overlapping with the others.

1. Expansion, particularly under the Whitlam government, though each PM adds his own extensions to the welfare system.
2. Targeting, particularly under the Hawke government
3. Contracting out
4. Mutual obligation

EXPANSION

Welfare can expand by adding new clients, increasing the level of assistance, or increasing the range of assistance provided.  The Australian welfare system has expanded in all these ways over past decades.

The greatest expansion of the welfare system, occurred under Gough Whitlam, but almost every PM has added to, or otherwise extended, the system.  Examples include (and this list is by no means exhaustive):

• Menzies (Commonwealth scholarships and State Aid to private schools)
• Gorton, (arts funding)
• Whitlam, (sole parents pension, free tertiary education)
• Fraser, (Family Income Scheme)
• Hawke, (Medicare)
• Keating, (Child care)
• Howard, (Work for the dole)

The welfare system has a natural tendency to expand for various reasons:

• it is difficult to exclude similar cases to those already included (Charles Murray);
• politicians get credit for new spending, not old spending;
• if the aim is to do good, there is always more "good" to do;
• one intervention tends to lead to another as various social equilibria are disturbed.
• it lowers the price of foolish or irrational behaviour (Coase), leading to more of such behaviour.

Welfare is difficult to fund -- the willingness to receive benefits exceeds willingness to pay for it.  It imposes compliance costs, costs in losses of economic activity, administration via both the taxes which fund it and the processes which hand it out.

(One way of looking a distortionary effects is that a tax rate sets a price:  the price of not changing your affairs to avoid tax.)

An extensive welfare system also has some tendency to lead to a more politicised and divided society, as people fight over "free" benefits.  Markets have the virtue in that they put price on benefits, effectively forcing people to share them.  Politics, on the other hand, tends to reward making the loudest claims possible.  Moreover, politics requires winning coalitions, markets don't:  they much more able to provide niche solutions.  (Sowell)

Also, markets involve consent for income;  politics transfers income coercively, making exploitation of third parties easier.

We have certainly seen signs of stress in the Australian political system from such pressures.

In the last 40 years, Australian GDP per head has about doubled, taxes per head have about tripled, but government health, education and welfare spending has gone up about fivefold per head.

Since the end of the Whitlam Government, Australian Governments have spent $111 billion more, in 1996/97 dollars, on non-capital expenditure than they have taken in revenue.  That is, assets have been sold and money borrowed to pay salaries, schools, hospitals, pensions.  Most of this "negative saving" has been done by State Governments.

In Europe, welfare spending has created levels of public debt from its "natural" operation that previously only occurred during great national disasters like war.

In Australia, the fiscal pressure from welfare expansion has been perhaps the most important single driver of public policy.  It has both fed back into welfare policy, as well as affecting other areas of public policy:  budgetary reform, privatisation, microeconomic reform.  Much of privatisation has been driven by debt pressures, while micro-economic reform has sought to make the economy more efficient, partly in order to make funding the expanding welfare state easier.

TARGETING

An obvious way to relieve fiscal pressure is to narrow the number of clients.  Done properly, this can also increase the redistributive efficiency of the system.  Targeting is also a natural approach for Australia, since we have never had universal systems on the scale of continental Europe.

The most obvious form of targeting is by asset and income testing, though it can also be done by group-specific programs.  A major problem with targeting is it can create very high effective marginal tax rates.  Another is that it can weaken the sense of "one set of rules for everyone" if one group seems to be getting "special" assistance.

CONTRACTING OUT

Once you start worrying about redistributive efficiency, it is a natural step to worry about delivery efficiency.  Trying to get as large an effect in service delivery from the money spent leads you to competitive allocation and use of low-cost providers.

Contracting out is about getting more for dollar, worrying about effectiveness.

Virtues:  able to tap into volunteer labour, flexibility of service groups free from public service rigidities, the strong ethos many such groups have.

Problems:  risk management questions (where do the risks lie?), effects on institutions of government accountability requirements (turning them into institutions like the public service), accountability and contract-management difficulties.

MUTUAL OBLIGATION

As mentioned, targeting has a major disadvantage in that can exacerbate "poverty traps", particularly by creating very high effective marginal tax rates.  These can be very expensive to fix.

Also, the issue ultimately arises about the effect of welfare provision.  An endless expansion of dependency is not an outlook governments can be expected to favour.  There are also issues about the effect of dependency itself, the effects of something for nothing (Noel Pearson's point about welfare:  hunter-gathererer and market economies are both real economies where behaviour affects your situation directly;  welfare is an unreal economy, because it doesn't.)

What mutual obligation attempts to do is get away from "something for nothing" and reconnect people to their own efforts making a difference, being important.  It is not necessarily cheaper in the short run, but if it gets people off benefits, it certainly is in the longer run.

Welfare reform in the US:  more active means of moving people into work, is ver much part of this trend.

FUTURE

Pension pressure in Europe:  debating whether solution is to cut pension rates and delay eligibility or promote employment growth.

Is it sustainable, what will happen?

We know it will change.  How it will change is less clear.  As for sustainability, the feedback effects within our society are strong enough that it is very unlikely any crunch will come.  Instead, there will be shifts to cope with emerging pressures.

Begging bowl no good for the bush

Much of the recent breast beating about the problems of the "bush" has rather suggested that governments should "do more" for the bush, particularly for the dying small towns which litter rural Australia.

Unfortunately, what is killing those small towns is better cars and roads.  Regional centres (many of which are thriving) have better shopping, so country people get in their better cars, travel along their improved roads, and bypass their local small towns.

It is the consumer preferences of country people that have the biggest single impact on the viability of small towns.  Those towns were largely created by the limitations of the transport technology of the time -- horses and bullock drays -- and they are being destroyed by the transport and communications technology of today.  Which is not to say that innovative things cannot be done with common services centres and so forth.  Even so, many small towns are beyond salvaging.

There are only two bases for sustainable prosperity.  One is the path of independence:  to provide goods and services that people wish to buy at prices they are willing to pay.  The other is to live off others by coercing or begging an income from them.

The first is the path of an independent citizenry.  The second is the path of the master, gangster or mendicant.

The last 25 years has seen a great growth in mendicancy.  Government expenditure on health, education and welfare has grown from about 11 per cent of GDP to over 20 per cent:  a surge in resources no other sector can even begin to match.  About 30 per cent of those aged 15 and over depend on transfers from government for their income.

The individual returns on this are not good, however.  At least, not for the recipients -- as is both normal and inevitable, the greatest individual returns from such expenditure have gone to the administrators of the programmes themselves.  (Canberra does rather well out of welfare expenditure).

So, from experience, mendicancy is not a basis for rural prosperity.  Nor, of course, could it be expected to be.  The rest of Australia is hardly going willingly to share enough of the income garnered from actually producing things to support small-town Australia in the life to which it might like to become accustomed.  The life of a rentier can be very pleasant, but one actually has to have the assets in the first place from which to live.  Pity is just not enough of an asset, even pity dressed up as "fairness".

Why is small town Australia different?  Why it should be particularly regarded as so special, that the rest of the country has to guarantee its prosperity?  A difficult case to make.

Particularly when there are so many already in the mendicancy queue.  Many complain about the retreat of government, yet the period since the election of Whitlam Government has seen the greatest growth in government in Australia's peace-time.

But what about de-regulation and privatisation?  Yes, indeed, what about them?  They have been mere tactical retreats in an attempt to sustain government's strategic advance.  It is perfectly true that specific markets have been de-regulated, but only in an attempt (largely successful) to increase the efficiency of said markets so that the economy can more easily sustain the ever-spiraling tax burden.  When Gough Whitlam was elected PM, 23 per cent GDP was taken in taxes:  it is now 31 per cent.  Taxes per Australian have more than doubled in real terms.  Taxes impose costs considerably beyond their apparent level -- costs in compliance, costs in all the economic activity rendered non-viable, costs in diversion of resources.  To have an increasing proportion of one's income taken in taxes is also rather more bearable if said income is rising more rapidly.  Hence an expanding government's increased interest in economic efficiency.

As for privatisation, partly that was in the same (again largely successful) search for increased economic efficiency.  But it was at least as much driven by government welfare expenditure.  Revenues may have been going up, but expenditure went up faster.  Government rates of saving collapsed and then went into negative.  Debts mounted.  Asset sales become a necessary part of the fiscal spring-cleaning.

As governments desperately look for ways to pay for the voracious fiscal monster that is the Australian welfare state they have become less and less impressed with mendicant industries and regions.  The job of industry is to produce wealth that can be taxed to pay for welfare spending, not to be a burden on other industries.

Besides, the tariff-cutting policy has been successful.  Indeed, polling shows the popular approval of Australian car makers (historically, very low) has risen steadily as the quality of their product improves under the pressure of increased competition.  It is quite clear from the long-run economic data, that trade protection is particularly damaging to small economies, as it deprives them of the benefit of economies of scale and scope in the global market (the only ones they can have access to) while their small markets more easily fall prey to exploitative monopolies and cartels.

But the would-be mendicant can always find reasons why they should be blessed with more of others' income:  so people demand new subsidies to compensate for the withdrawal of old privilege via National Competition Policy -- or else, that the privileges not be withdrawn in the first place.  Unfortunately for such hopes, there are far too many claimants in the queue already.  All those people on unemployment benefits, sole parents, disability pensions, student benefits, academics, hospitals, Medicare, child care, indigenous Australians, the arts, and so on.

Many advocates of "doing something" about small town Australia think that the rest of Australia should live on their efforts, and small town Australia should live on those efforts too.  Piggy-backing along for the ride.  Not a goer, I am afraid, not even as a generous "top up".

Nor will economic reform be abandoned.  Not only does the fiscal pressure continue, driving governments down the reform path, the reforms have been successful.  The Asian economic crises represents the first time in over a century that Australia has performed better than comparable countries in a global economic downturn.  Not only that, but Australia has managed the almost unheard of feat in a developed economy of generating a systematically increased rate of productivity growth -- such growth being the necessary basis of mass prosperity.

No wonder noted MIT economist and commentator Paul Krugman has been calling Australia "the miracle economy" and the Japanese have been sending ministerial delegations to find out how we got it right when they got it so wrong.

Then again, having about halved its net national wealth does suggest Japan needs to do some soul-searching.  Indeed, net wealth losses from the bursting of the Japanese "bubble economy" are about twice the value (adjusted for inflation) of all the property damage done to Japan by American bombing in WWII.  This time, however, far from costing the Americans, there was actually a major wealth transfer from Japan to the US as Americans bought back assets they had sold much more expensively.

Nor have the poor got poorer, nor has income inequality increased.

As the work of Professor Ann Harding from the University of Canberra shows, once one adjusts for tax, transfer and household composition changes, the average incomes of the lowest groups have gone up with little change in overall income distribution patterns.  Professor Harding found that, from 1982 to 1993/94, the income of the bottom two-tenths increased $17 and $19 a week while the income of the top tenth increased $8 per week.

Those who wish to contribute to the rural revival might consider how it could build on its strengths and improve its weaknesses.  The begging bowl is not a basis for rural prosperity.  Much better to be one of those being importuned for charity rather than doing the asking.

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Ever-Hopeful

Book Reviews

Room to Manoeuvre:  Political Aspects of Full Employment
By Paul Boreham, Geoff Dow and Martin Leet
Melbourne University Press, Melbourne 1999, 249 + xii pages, $29.95

After the 30-year period (to 1974) of low unemployment rates of less than two per cent, the last 25 years have seen Australian unemployment rates in excess of six per cent and as high as eleven per cent.  Other OECD countries also experienced higher unemployment rates from the mid-1970s, but the unemployment rate varies from country to country.  In Room to Manoeuvre the authors argue that there are no technical obstacles to restoring full employment and that the solution requires significant changes in political institutions and rejection of neo-liberal policies.

In Chapter 4, Boreham, Dow and Leet outline their policy strategy to restore full employment, and at the same time improve job security and job quality.  A significant increase in government investment expenditure would provide a Keynesian-type stimulus to aggregate employment creation.  Three major institutional changes to facilitate social-democratic corporatised decision-making are proposed to co-ordinate public and private investment, to provide for societal control over wages and profits, and to oversee labour market programmes.  The proposal is unashamedly for bigger government and more corporatised control over the decisions of the remaining capitalist market sector.

Even if the broad outline of the proposal was accepted, and many will not, the book leaves many important questions of detail unanswered.  How low is full employment -- five per cent as noted in political targets or under two per cent as was the case in the long boom?  Is the boost in public investment to be tax-financed or debt-financed?  What criteria are the national investment board to use in choosing not only public infrastructure projects but also in guiding private sector investment?  The discussion of Chapter 6 indicates that there also are many options and considerable uncertainty about details of the required new extra-parliamentary organisations to co-ordinate investment, the distribution of income and labour market activities.  In fairness, the authors are more concerned about presenting a broad strategy rather than a detailed plan, but clearly much of the devil lies in the details.

An implicit assumption behind the proposed Keynesian government expenditure boost on public infrastructure to create jobs and reduce unemployment is one of no crowding-out.  In fact, the authors argue that extra public investment crowds-in more private investment.  The proposed corporatist income-distribution institution is to restrain inflation and ensure that extra nominal expenditure becomes extra real output and employment, and the enlarged labour market programmes are to smooth away bottlenecks.  No crowding-out effects of a larger budget deficit, or of increased taxation, are allowed for via the usual macroeconomic forces of higher interest rates, a higher exchange rate, or reduced private consumption and investment.  Again, the authors presume an omniscient and benevolent government which wisely chooses investment projects, and assume that there are available good projects.  (Given that Australian governments have, since 1976/77, financed non-capital spending by borrowing or asset sales to the tune of $91 billion, this really is a triumph of hope over experience).  Further, government is assumed to have the knowledge and the ability to bring forward investment in cyclical recessions and to delay projects during cyclical booms.  Empirical support for the assumption that extra government investment in net will reduce unemployment is based on cross-OECD correlations of a strong negative association between government investment and unemployment.

Debate on the relative merits of centralised or corporatist versus decentralised or market direction of investment and of the determination of wages, profits and prices is ongoing, contentious and unresolved.  While the authors eschew statist models of the former socialist economies and refer favourably to current social-democratic models of Sweden, Norway, Austria and Luxembourg, and perhaps the 1983-87 Australian Accord, their proposal for Australia of the twenty-first century is vague.  No mention is made of performance of the highly decentralised and competitive US model with unemployment now under five per cent, and better than the rates of the 1950s and 1960s.

Room to Manoeuvre comes in six chapters.  Chapter 1 sets the scene with comments on policy objectives towards unemployment and a general conclusion that achievement of low unemployment is no longer a dominant objective when compared with competitive efficiency and low inflation driven by liberalism.  Much of Chapter 2 involves comparisons of OECD countries, and particularly using two-variable comparisons of unemployment against government expenditure, investment, labour costs, inflation, importance of manufacturing, R & D intensity, and so forth.  Australian policy as a base for the proposed strategy to reduce unemployment is found wanting because of its small government and small manufacturing sector, and it is concluded that labour costs, inflation and economy openness have no effects on unemployment.  These simple correlations raise questions of direction of causation and effects of omitted third variables, although the regression model of Chapter 5 meets the last of these methodological concerns.

Chapter 3 on "Economic Limits" presents a critique of current, neo-liberalism policies for reducing unemployment.  It is argued that policies to push undifferentiated economic growth, to use contractionary monetary policy to reduce inflation and current account deficits, to reduce labour costs, and to dismantle assistance to manufacturing are either unhelpful or actually harmful to reducing unemployment.  Most of the evidence is garnered from cross-OECD country two-variable correlations.  On the labour cost issue, for example, no reference is made to the very large number of time-series studies in many countries finding significant negative labour elasticities of demand (that is, that demand for labour falls when labour costs rise).  And, if labour costs are unimportant, why do the authors argue for centralised income policies to set wages?

Chapters 4 and 5 set out and argue for the preferred policy package to reduce unemployment.  Most of Chapter 5 returns to drawing lessons from comparative government expenditure, particularly on investment, and of corporatist versus decentralised institutions of OECD over the 1974-94 period.  Of particular interest is an ordinary-least-squares regression of unemployment rates on ten explanatory variables using panel data for 16 OECD countries and 19 years, 1974 to 1993.  (The period after the end of full employment.) Unemployment is found to fall with higher government investment, higher private investment, a larger manufacturing sector, faster economic growth, and a more corporatist wage-setting system.  For example, on a scale of 0 to 10, Australia is rated at 2 in the 1970s and at 8 during the Accord period, and this increase in corporatisation is estimated to reduce unemployment by nearly four percentage points.  This effect exceeds that estimated by most Australian studies using Australian data.

A final chapter evaluates the likely prospects and challenges of the Australian polity moved towards the recommended strategy.  From the perspective of this reviewer, the good news is that the authors anticipate considerable hurdles.

Selective Indignation

Book Reviews

Pansy:  A Life of Roy Douglas Wright
By Peter McPhee
Melbourne University Press 352 pages, $45

Civil libertarian:  is there a more depressing oxymoron in our language?  The phrase's very sound conjures up some hirsute teacher-unionist locked in a 1970s time warp, snuffling indignantly through his adenoids about Bjelke-Petersen's Queensland being a "police state".  Was it always so?  Did civil libertarians once take seriously their implied commitment to freedoms other than their own?  The career of Roy Douglas Wright (nicknamed "Pansy" for his extreme ruggedness of physique, much as redheads are nicknamed "Bluey" and giants "Tiny") might help answer such questions.  In some respects Wright, though he died only in 1990, seems to have inhabited an age now impossibly far-off.  In other respects he appears bang up-to-date.  In all respects, he clearly deserved the honour of a full-length book devoted to his life.

Born in 1907 on a farm near Ulverstone, Tasmania, Wright never lost his consciousness of origins at once unglamorous and remote.  (Manning Clark's description of the Apple Isle as "the nursery of eccentrics and outsiders, the school for training men and women in adversity" represents a presumably unique instance of Clark getting his facts right).  For a boy as intelligent as Wright clearly was, his background must have inculcated that fear which marks all gifted people from the boondocks:  the fear that he excelled merely by local standards, not by the wider world's requirements.  In fact, his apprehension on this score proved needless.  The layman writing these words is, putting it mildly, incompetent to assess the true value of Wright's career in medical science.  But his -- at times quarrelsome -- dealings with Howard Florey, Sir Macfarlane Burnet, the anatomist Sydney Sutherland, and the pathologist Peter McCallum indicate something of the stature which he obtained in his specialism.  His talents belonged, it emerges, to the fields of exposition and consolidation rather than stunningly path-breaking research.  Certainly his is not among the greatest names of modern medicine.  Yet if lacking the originality that makes world headlines, he clearly deserved his plaudits as an admirable member of the discipline's second rank.

For every Australian who could speak authoritatively of Wright's professional achievements, however, there were a hundred who knew of him as a flamboyant spokesman for political freedom.  Had he not shone in this area, he might not have attracted Melbourne University Press's attention at all.  One suspects that Peter McPhee -- whose own previous publications include studies of Revolutionary and post-Revolutionary France -- values Wright less as a scientist than as a sort of antipodean Zola, forever bubbling with indignation at overweening governments.  Wright's attitudes in this area deserve closer inquiry.

The regrettable conclusion to which at least one reader has been forced after examining Dr McPhee's account is that Wright's much-vaunted moral courage, far from being a damn-the-torpedoes enthusiasm for pulling down the mighty and exalting the meek, derived from the world-view which Cocteau cynically articulated:  "I know how far I can go too far".  To Cocteauism he added (the evidence indicates) a delusion familiar in scientific circles, and more particularly familiar in Australian scientific circles:  the belief that expertise in one technical area automatically spills over to expertise in remaking the world "nearer to our heart's desire".  He never reached the wilder shores of political foolhardiness amid which Linus Pauling so gleefully paddled.  Still, when it came to thinking at what Ortega y Gasset called "the height of our times" -- especially thinking of liberty's nature, totalitarianism's nature, and any other topic capable of drawing on his wider cognitive powers -- he scarcely earned a bare pass-mark.

Take Communism.  Wright was, as Dr McPhee shows, no Communist himself.  Apart from the fact that his talk's constant, proto-South-Park smut would have tested even the most forbearing commissar's patience, Wright lacked that cosmic envy which the true acolyte of Marx requires.  (As Li'l Abner's creator Al Capp summarised Communist doctrine:  "If you got it, I deserve it").  His favourite politician was Victoria's old-style Labor Premier John Cain Snr.  But once Menzies introduced his Communist Party Dissolution Bill in 1950 -- when Stalin already ran half of Europe, and North Korean troops would soon be sweeping across the 38th Parallel -- Wright began bellyaching about our dictatorial leadership.  Communist operatives, apparently, must in every case be given the benefit of the doubt, and in every case have their freedom's privileges preserved.  Since the idea of preserving freedom's privileges for those whose entire raison d'être is to destroy freedom makes about as much sense as the idea of preserving vegetarianism's privileges for those whose entire raison d'être is a proselytising cannibalism, Wright hardly carried intellectual conviction.  But his stance was nothing if not popular in academic circles, not least at the University of Melbourne, where he taught;  and, swept up in the crowd's enthusiasm, he could safely ignore pettifogging logic.  The world since 1917 (and above all since 1936) appears to have left Wright with the overwhelming impression that Communists were no worse than a bunch of ratbags, deserving the same gratifications as other ratbags, and possessing a distinct moral advantage in being atheists, therefore fit to chinwag with in the Senior Common Room.  After visiting Red China in 1971, he published an exercise in fellow-travelling fantasy which -- judging by Dr McPhee's allusions to it -- makes Meeting Soviet Man resemble the apogee of hard-boiled realism.  Later he called Mao the greatest leader of our time.

Wright's behaviour towards other victims, less modish than Communists, differed greatly.  Dr McPhee notes Wright's enthusiasm for defending "due process and individual rights".  Such enthusiasm failed to manifest itself when P.R. Stephensen found himself interned from 1942 to 1945 for alleged collaboration with the Japanese, despite the fact that Stephensen's captors never formally charged him with any crime whatever, or gave him a chance to defend himself.  Unlike Sir Paul Hasluck and the maverick leftist MP Maurice Blackburn, Wright remained totally silent about the denial of Stephensen's civil liberties.  Nor does the consignment of his depressive sister Phyllis to the oubliette of mental institutionalisation for three decades bespeak a sleepless vigilance on Wright's part concerning psychiatric patients' fundamental dignity.  (Then again, how many divisions did either Stephensen or Phyllis Wright have?)  Say what you will about Wright's failure to reach the highest scientific levels;  in his gifts for selective indignation, Wright shot straight to the top of the class.

Wright achieved his greatest fame defending the rights of yet another fashionable victim:  this time Sydney Sparkes Orr, dismissed in 1956 from his Hobart philosophy lectureship on charges of seducing a female student.  While Wright's self-sacrificing dedication to Orr was laudable, his forensic diligence perhaps fell short of the Perry Mason league.  He simply asked Orr whether Orr dunnit.  No, said Orr.  Thus satisfied, Wright devoted to Orr's rehabilitation time and money which he could ill spare, and to which Orr responded with furious legal action against his champion.  As Clive James observed of F.R. Leavis, so Wright found with Orr:  that the admirer's tongue had scarcely time to make contact with the beloved's boot-polish before the boot itself was firmly lodged among the admirer's teeth.

At least Wright enjoyed, unlike Orr's other loyal backer Harry Eddy, a post-Orr life of some consequence.  During the Swinging Sixties, which in Australia lasted until the early 1980s, Wright flourished anew.  Feminism, for example, had a strong -- if largely theoretical -- appeal to him.  In language worthy of Eva Cox, Wright maintained that "a proper society" would make sure all mothers were economically conscripted, "using their brains and abilities" rather than undergoing the obscene horrors of staying with their children.  (How "a proper society" could ensure this utopia -- tax-breaks?  Forced abortions?  Re-education camps? -- he never condescended to explain).  Alas, his Brave New World ebullience did not long outlive his first meeting with Germaine Greer, whom he memorably described as being even worse than the "yuppie" (his epithet) Dame Leonie Kramer.  Even granted that he was -- like most Australians with the gift of the gab -- a rhetorician rather than an empiricist, he revealed a decided inability to follow up his own pronouncements' implications.

From 1980 to his death Wright served as Melbourne University's Chancellor.  His tenure warrants attention for two characteristics above all:  his refusal to espouse in public any "due process and individual rights" for the University's -- indeed, Australia's -- greatest historian, Geoffrey Blainey;  and his ill will towards his own Vice-Chancellor David Penington.  Penington had arrived at the shocking conclusion that, if university teaching was to survive, it would have to start abandoning Alice's Wonderland and paying some slight attention to market forces.  (Adam Smith had by this time been dead for a mere 190 years.  Fast learners, these Aussies ...)  Nothing could have horrified Wright more than such reasoning.  Overseas, the Berlin Wall might have collapsed, and simple economic reality might have reduced even Sweden's nanny-state culture to a smoking ruin.  But in good old Australia, Wright's belief that the clapped-out jalopy of welfarism was the triumphal car of all human progress remained as strong as ever.

The present reviewer, who to his sorrow never met Wright, inevitably finishes Dr McPhee's account echoing the verdict Somerset Maugham is supposed to have passed on Hugh Walpole:  "easy to like, difficult to respect".  Many, not being content with liking him, loved him.  For an Australian academic he did remarkably little harm.  (Sexual predations and intellectual bullyragging à la John Anderson had no discernible counterpart in Wright's career).  The question remains, of course, why mere harmlessness should guarantee an entire working life spent cosily nuzzling the taxpayer's teat.  It does not look as if Wright even bothered to postulate this question, let alone to acquire the philosophical ammunition needed for answering it.

ABC Alienation

If anyone should be a natural defender of the ABC it is John Howard (and if that makes you laugh, that is revealing in itself).  After all, like myself, he comes from a middle-class family where ABC was part of the furniture, a respected part of life.  In the Wood household, commercial TV barely existed.  "What's on TV?" was a question which applied only to the ABC.  The first commercial series we watched with any regularity was Dynasty:  apart from that it was the ABC (mainly in its role as the local BBC relay station) all the way.  One doubts it was much different in the Howard home.  John Howard is a conservative and a traditionalist.  The ABC of the Argonauts, of quality and of quality (overwhelmingly British) TV should be one of those Australian institutions and traditions he is keen to defend.

It is a sign of the deep and longstanding problems of the ABC that many middle-class people such as the PM have become very much not fans of the ABC.  The source of John Howard's disenchantment is obvious enough.  According to The Bulletin, when in Opposition he used ask his family regarding ABC News "shall we watch Labor's home video?"  It is only a very naïve viewer who would think that the ABC has treated John Howard in a similar way to, say, Paul Keating PM.  It was always willing to have Howard on -- he has always been good on-air -- but that is not the same as being balanced:  particularly considering who is chosen for comment, what they are asked and what comments the journalists make.  Under intense scrutiny during the 1998 Federal Election campaign, the ABC's efforts (in the last three weeks of the campaign) to be balanced were so studied as to be almost painful.  One could see this was not their natural, or preferred, state of affairs (though, to be fair, the effort was successful).

My process of disenchantment with the ABC lacks the depth of bitter personal experience of John Howard.  It was international affairs and American-Soviet rivalry which led me down the path of questioning the ABC's culture and approach.  The more I learned about such matters, the more shallow and sneeringly one-sided the ABC's coverage and commentary seemed.  As I become more involved in public policy issues, I noticed the same pattern in other areas of public policy -- though you had to build up a certain depth of knowledge before the pattern of what was left out became blindingly obvious.

Recently, I was on Neil Weise's 5ADN program to talk about the Telstra-ABC deal.  The discussion quickly turned to ABC balance.  Mentioning this to a friend who also appears periodically as a commentator, he immediately laughed and said "what, you were outnumbered five-to-one?".  That was not the situation, it was just me and a woman from Friends of the ABC, but his reflexive comment bespeaks a phenomenon many of us are well experienced in.  You are invited to speak on a subject and find that the numbers are 3, 4 or 5 to one, with you the lonely voice.  You are both outnumbered and clearly labelled as an ideological fringe-dweller the ABC has deigned to allow on to show its "balance".  (Though I can report being in a two-to-one majority on Radio National recently).

Alternatively, you are put with real fringe dwellers.  Hence the experience of being on 3LO to discuss ABC balance when it was me, the presenter, the show's media academic, the national Head of ABC Radio and an anarchist.  The voices of respectability and two "nuts".

In the case of the Weise program, there was just the two of us and Neil Weise.  Except the Friend spoke first at some length, then I was introduced, we both had a couple of goes, then I was thanked and the Friend then spoke at quite some length more, commenting critically on what I had said.  She burbled on how balanced the ABC was, all the while being apparently completely unaware that she was participating in an excellent demonstration of the difference between pretend balance and the real thing.

There are issues where, to quote John Howard, there clearly is an ABC "line":  immigration (opposition is wicked), multiculturalism (ditto), indigenous issues (more money, more special arrangements), global warming (impending disaster), industrial relations (deregulation wicked), privatisation (wicked), welfare (more spending is always required, restrictions are nasty miserliness), economic rationalism (wicked) and so on.  This is not to say every ABC person always parrots every element of this, but you can tell where most of them are coming from most of the time, particularly when you look at the balance of commentators and at the documentaries run.

Unfortunately, some of the most revealing vignettes of this sort of thing cannot be made public, because the sources could be identified and would be punished -- the ABC disposes of a very large amount of patronage:  in funding, publicity and retail access.

To be sure, many of the sins of the ABC in this regard they share with the journalistic profession in Australia more broadly.  A lot of journalism is conducted, particularly from the Canberra Press Gallery, particularly on totemic issues like indigenous affairs and the Republic, as if there is only one possible correct view.  But the ABC does so more intensively than the wider profession:  and it is not a productive use of well over $500 million of taxpayers' funds a year to intensify broader journalistic sins.

One of the sillier ideas brought up to defend the ABC is that, as a public broadcaster, it is free of conflicts of interest.  As a tax-funded body, low-tax political agendas are not in its interests.  As a public sector producer, privatisation agendas are not in its interests.  As the dominant purveyor of quality broadcasting, liberalisation of the broadcasting market -- generating greater capacity for commercial exploitation of niche markets -- is not in its interests.  As an exemplar of political provision, pro-market agendas generally are not in its interests.  The ABC does not come disinterestedly to many of the central policy questions of our time.

Moreover, the obvious conflict of interest in having the government own a major media outlet is one of the biggest barriers to an accountable ABC, since we want media organisations to be independent of the Government of the day, yet such independence makes the ABC independent of its legal owner and of the only effective executive agent of its notional owners (us).

This lack of an effective owner makes the ABC very prone to staff capture.  We live in an age of status-mongering, where people use the parading of approved opinion to demonstrate their superior moral status -- which is what political correctness is all about.  A staff-captured national broadcaster is an ideal venue from which to engage in this status-seeking behaviour, which is why the ABC is so relentlessly PC.  In the words of writer and former ABC program host Robert Dessaix:

The political correctness of the ABC is extraordinary.  There's no leeway in anything to do with race or gender or politics.  There is only one attitude you can have to Aborigines, to multiculturalism and to feminism.

As Katharine Betts has explained in The Great Divide:  Immigration Politics in Australia (Duffy & Snellgrove, 1999), a style of language and approved opinions can be used to make a distinction between insiders and outsiders.  The point about being PC is being seen to be a member of the moral vanguard.  To be a member of such a vanguard, one has to be opposed to "social conservatism".  After all, opinions do not give status unless they are different from those held by some nominated group of moral cretins (e.g. that "ignorant, duped and ill-educated" No-voting majority).

Such use of opinions as status-markers is deeply inimical to free debate, since if the opinions are merely arguable they are not status markers.  And if they are status-markers, then the opinions become moral assets to be defended, so disagreement must be a sign of moral inferiority, and thus illegitimate.  Hence the term "conservative" (and particularly "social conservative") has loaded on to it implications of intellectual vacuity, moral cretinism and base self-interest.  Any anti-PC commentator is automatically labelled as "conservative".

Which brings me to David Bowman's piece in last month's Adelaide Review.  Minister Alston is a Catholic.  Prime Minister Howard is well-known for his social conservatism.  Both are associated with a broadly economically liberal, lower-tax, lower-spending, market-reform political agenda.  Can Mr Bowman really claim that there is nothing about the way the ABC goes about its activities which might reasonably explain the alienation of Alston and Howard from the ABC?  That the ABC is guiltless, it is all just the wilful malfeasance of Alston and Howard?

Market-reforming ALP figures are also likely to run foul of the ABC's preconceptions (e.g. Paul Keating Treasurer, Bob Hawke PM) but can always use social progressivism to get back into the good books (e.g. Paul Keating PM).

That ABC viewers are more likely to be Coalition than ALP voters makes the problem worse as far as the Coalition is concerned.  One Coalition figure pithily summed up the Coalition's alienation from the ABC:  "the ABC is our enemies talking to our friends".  And using taxpayers' money to do so, no less.

Any political party can fall afoul of ABC investigative reporting (ask former NSW Labor Premier Neville Wran).  But even here, the reports that don't get done are revealing.  Where is the hard-hitting program on the Hindmarsh Island concoction?  The insightful revelations of the misuse of science by Greenpeace and other environmental advocates?  The use of spurious or exaggerated health scares to promote donations and support for advocacy groups?  The frustration of accountability for education performance by unions and bureaucrats?  The vast exaggeration of civilian deaths in East Timor and Serb-held Kossovo?  Why the periodic discovery of mass graves in the former Soviet Union is a non-event?  The evidence now available of covert Soviet support for the peace movement which helps explain its one-sidedness?  All far too non-PC, or critical of the media itself.

Recently, the ABC's Independent Complaints Review Panel (notice the oxymoron, the panel is appointed by the ABC) upheld a complaint by David Bennet QC about the ABC's use of "stolen generations" in reference to the PM's statement of regret (which was about the past experience of indigenous Australians and made no specific mention of stolen generations).  According to subsequent newspaper reports, ABC staff were unhappy both at the decision and that Brian Johns had sent out a memo directing that they be more careful in the use of language.  (At this point, we remember Bertrand Russell's definition of a pedant:  a man who prefers his statements to be true).  ABC staff objected to being told to be careful in use of language (use of language for moral display unhindered by ratings being an ABC perk) and argued that it was perfectly OK because other media outlets had also used the term in the same context (such display is hardly a monopoly of the ABC):  the ABC had argued before the Panel that the link "could be made".

Indeed it could be.  The question was, should it have been?

That it was simply untrue that the statement was about the stolen generations apparently moved them not at all.  And that is what is wrong with the ABC.