It is not what the lawyer tells me I may do;
but what humanity, reason and justice, tell me I ought to doEdmund Burke
To all who aspire to hold or influence political office
ACKNOWLEDGEMENTS
My most fundamental debt is to those people who educated me in the fundamentals of freedom beginning with my father and progressing to the late Bert Kelly and all those alongside whom I have the honour of labouring in the Good Fight.
More specifically I am indebted to many people who assisted me with assembling the material for this story and to others who at considerable inconvenience to themselves dealt appropriately with my faulty understandings, egregious omissions, bad argument and bad English. First among these is Professor Wolfgang Kasper whose criticisms unearthed errors of fact, emphasis and argument. I am also indebted to Dr Hal Colebatch, David Trebeck and Professor Geoffrey Bolton. I am indebted to Faith who has put up with a year of "the book" dominating my life and floor space in our home. She further has an ear that identifies the pretentious!
Chapter 3, although tempered by my experience of Bert Kelly who was my mentor and friend, draws heavily on the unpublished work of Shaun Kenaelly who studied Bert's life and his contribution to public policy in great detail. Keneally's unfinished account is in the possession of Mr Ray Evans of Melbourne. I recommend it to any serious student of the events and their times. He will be rewarded also by some beautifully written passages.
The remaining errors and ill-chosen omissions, and my necessarily incomplete appreciation of some of the unfolding events are, of course, entirely my own doing.
FOREWORD
In the late 1990s a former Labor Caucus colleague described Richard Wood to me as a "fascist". Finding a more egregious error would require a long hard search.
The defining attribute of a fascist economy is the Corporate State in which economic power is transferred from markets to government/industry collectives. Though Mussolini's Italy was the purest Corporate State it was borrowed by Hitler's Germany and in a milder degree by quite a few Western democracies, including Australia.
Fascist regimes are invariably authoritarian, the media is an organ of the State and dissent is suppressed, often by State sanctioned violence.
Anyone who reads this book will understand how absurd, on both economic and ideological grounds, it is to label Wood a fascist.
This book however is a record of a 20 year struggle by "the Dries" to curb the Australian version of a Corporate State, i.e. monopoly marketing boards, quotas, financial regulation, tariffs, and labour market regulation. Dries were driven by twin beliefs that an open economy would enhance economic output, efficiency and, equally important, that a corporate state which rewards rent seekers and bludgers is socially and morally pernicious. There was ample evidence to support both.
The Dries comprised about 10 Federal MPs, mostly backbench Liberals advised by a few key people outside Parliament and inspired by the Modest Member Bert Kelly.
Predictably the National Party led by Doug Anthony was an impediment to policy reform as, equally predictably, was Malcolm Fraser. In regard to the latter, Wood cites two examples of the type of duplicity which former Attorney General Tom Hughes exposed at Sir John Gorton's funeral.
The work the Dries had put in made little policy progress while the collectivist/mercantilist Fraser Government remained in power. When it lost the election, they then observed and applauded the 1980s Labor Government implement much of the Dry agenda.
Peter Walsh
Perth
July 2002
INTRODUCTION
Much of the world is still horrible but during the final quarter of the 20th Century life spans greatly increased almost everywhere especially in the once-poor countries of East Asia. The economic order that achieved these momentous gains is now threatened by "anti-globalisation".
We began the new millennium with blessings close to home. Australians were enjoying sustained economic growth of 3 to 4%. Real wages had increased by 3.8% a year since 1995-96. (1) Inflation was around 2%. Unemployment had been reduced from around 11% to fewer than 7% although much "hidden unemployment" had to be conceded. We had escaped the so-called "Asian melt-down" almost without the need to notice it. We had a budget surplus of 2% of GDP but less than two years later we found ourselves worrying about how to finance a military contribution to the fight against terrorism or, far worse, a war.
These benefits were associated with the partial reversal of a long downward trend in Australia's relative living standards. When compared with other rich countries -- all of Western Europe, the US, Canada, Australia, New Zealand and Japan -- Australia's per capita GDP, expressed as the percentage of these, declined from 132.3 in 1950 to 99.9 in 1975 where my story begins. They declined further to 88.6 in the 1992 recession but since then rose to 95.5 by 1999. (2) The improvement had not been brought about by a favourable shift in our terms of trade -- the ratio of the prices at which we import and export. Between 1990 and 2000 these had moved against us by about 7%.
Other countries at other times had done much better -- post war Germany and Japan and the Asian Tigers despite their recent difficulties, for instance. It was, nonetheless, a remarkable turnaround. It did not occur by chance but was caused by a period of exceptionally good government from 1983 tailing off in quality during the 1990s.
Federal politicians that had once led the charge for economic freedom and generously supported a reforming Labor Government returned some way towards bad old ways. They squandered much of the budget surplus that they may need to finance international conflict. They extended the tariff protection of the motor and textile clothing and footwear industries. They subsidised enterprises that could not raise their capital at market prices, for instance, a Queensland magnesium mine and the Darwin to Alice Springs Railway. They needlessly put money into the housing industry after the industry's downturn had passed. Following upon what was admittedly a frustrating time in the Senate, they ceased trying to reform the labour market. They used the foreign investment powers to prevent the commercial take over of the petroleum gas producer Woodside. Trying to out-Hanson Hanson, they imposed costly requirements on Telstra that we all pay for. They maintained the wheat export monopoly. In all these things and more they behaved as though the privileges they granted were acts of their own benevolence rather than employment of powers and moneys held in trust. I contend that our children will pay for these inefficiencies that always attend privilege. In short, they have partly reverted to the bad habits of the Fraser years.
My thesis is that our changed fortunes did not arrive by chance and that the gains could all too easily be squandered.
During the final quarter of the Century most of the world experienced a struggle between liberalism and socialism. In almost every country, socialism gave ground and the more extreme forms of it were discredited. But nowhere has liberalism yet swept away the habits of three generations of increasing collectivism. It is now threatened by the pursuit of causes rather than philosophies and it remains the case that everywhere Government is bigger and the area of private action left to individuals smaller than at the beginning of the 20th century. Nevertheless, although the journey to liberalism is far from over and is beset by aimless meandering, much has been gained.
This is an account of how attitudes and public policies were changed in Australia. It recounts the journey during the last quarter of the 20th Century of an ideal concerning the proper conduct of public policy -- its travails, considerable successes and partial setback. Many people played parts in the drama. The unfolding story tells what an ill-defined but, nevertheless, identifiable group, that I call "the Dries", believed, learned, did and failed to do. It shows that argument, properly used in a liberal democratic society, can bring changes by legitimate, peaceable means, and that "the good fight" is worth the effort.
CHAPTER 1
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood ... Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves to some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
John Maynard Keynes in the final paragraph of The General Theory.
During the 1990s our economy exhibited resilience that a decade before would have been unthinkable. Hundreds of thousands escaped unemployment and we gained wealth to devote to public or private ends that would not have been possible, had not both major political parties been true to a political ideal.
The ideal is as old as representative Government, but politicians have too often paid it only lip service. Its champions are today, often pejoratively, referred to as "economic rationalists", but had been known simply as "Dries". They owe their origins to the excesses of the Whitlam years and obdurate refusal of Fraser's Governments to address all too apparent injustices and inefficiencies. In the several political "shoot outs" over these injustices and inefficiencies they wear the white hats, but their individual roles are transient ones in an account of the fortunes of the ideal itself.
It calls for smaller but stronger Government that concentrates on protecting the "institutions" by which individuals may play out their own lives co-operating and competing voluntarily. The habit of following rules of conduct is quite different from the knowledge that one's actions will have certain outcomes. The ideal is thus not an end but a way by which an optimistically viewed future may be discovered. At least to date, it is followed most in those nations to which people choose to migrate.
A TROJAN HORSE
Nobody who has experienced the influence of Karl Marx should deny the potential of ideals. Some ideals acquire convenient brand names such as liberalism, socialism, fascism, communism, corporatism etc. but these are not as reliable a guide to quality as are Big Mac or Coca Cola. Some are claimed by their polar opponents and stood upon their heads. This has been the fate of "liberalism" so that I now must refer to "classical liberalism". The defining characteristics of "dry" and the preferred adjective of its opponents', "economic rationalist", have not (yet) been either negated or expanded to the point where particularity is lost. Thus, when we use either term, people can have a very fair idea of what we are on about. Further, although Dries are by no means of one mind on everything, they are not (yet) so factionalised that distinctions equivalent to Trotskyist and Stalinist are needed to make sense of their campaigns.
Most ideals pass barely noticed into oblivion and even the most influential may be ignored or derided for as much as a century. For the first three quarters of the 20th Century, classical liberal philosophers and economists even of the standing of Adam Smith, Ludwig von Mises, Friederich von Hayek, Karl Popper and Milton Friedman were seen in intellectual circles as Canute-like figures futilely admonishing the inevitable. The publications of the fledgling think tanks of the 1960s and 1970s were dismissed as amusing intellectual games. The arguments of Bert Kelly, the Federal Member for Wakefield, were dismissed as quaint but irrelevant. Before the late 1970s the collectivist tide flowed strongly. Classical liberals everywhere were portrayed as naive, derided or ignored, and starved of academic recognition.
However, just as a few warriors inside a deceptively-simple trophy once breached the walls of Troy, an apparently trivial minority with a deceptively-simple ideal helped to bring down the Berlin Wall and the Soviet Empire. In the West, however, no barricades were manned and no speeches were made standing atop military hardware. Organisation and persistence was, however, required and consistently correct forecasts wore the opposition down.
Those who organised and persisted were members of an informal group who in Australia became known as "the Dries". Originally "dry" meant merely not "wet", a public-school term meaning feeble or timid. The essence of dryness is still the willingness to face unpleasant facts and the ardour to take action. However, "Dries" have become associated with particular interpretations of the facts and prescriptions of the necessary actions and may also be identified by the beliefs that they share and proselytise.
A short account of where I am coming from is only fair to the reader. While still at school, I was an unsophisticated democratic capitalist. That is hardly surprising. My father was a successful farmer, a capitalist. He believed he had borne arms to preserve democracy. He had a reasonably sophisticated view of history, and both my parents had much of the Protestant work-ethic and that middle-class morality that includes acceptance of obligation to the wider community. We were mindful of the roots of the successful Australian community and we discussed these occasionally. We feared communism as we had feared fascism and for much the same reasons. We believed that democracy is the least bad form of Government and market capitalism the only effective way of creating wealth. We distrusted socialism both because we believed it would not produce wealth and because it necessarily meant the concentration of authority. I had read Mein Kampf before I left school and I read the Communist Manifesto not long afterwards. My father had campaigned against bank nationalisation.
Like most others in the 1990s, I thought that Keynesian demand management could insure that the world never experienced another depression. I did not then seriously question organisations such as the Arbitration Commission and the Australian Wheat Board. They had seemed a fact of life. My acceptance of them and other collectivist hopes was eroded quietly by experience. Although there are as many ways to dryness as there are Dries, I believe my experience was reasonably common.
A small number of Dries -- very few in Australia although more numerous in North America -- were once socialists with strong social consciences and high hopes of building a world with less injustice and poverty. Known in North America as neo-conservatives, their paths to dryness were more arduous than mine. They were, it has been said, "mugged by reality". They cast aside beliefs by the bucketful, but not their intention to contribute to a better society. They were to be found in the vanguard of many struggles.
The brave men and women who fought for freedom behind the iron curtain and in Latin America have basically the same world view. However, they have been sources of inspiration more than instruction in western nations. A political struggle waged without the protection of the fundamental civil rights is very different from that experienced by Australians. The ideas and the tactics that brought about the public policy revolution in Australia were nearly all developed within western nations -- most notably Great Britain and the United States.
How these ideals were sown and cultivated by a minuscule band of mostly happy warriors is a tale worth the telling, but first we must identify the ideals themselves. They have roots that can be traced down to at least the Levellers in the 1640s.
WHAT'S IN A NAME?
Before there were "Dries" there were "Wets". Margaret Thatcher does not admit in The Downing Street Years to having christened them, but she probably did. Wets were, she wrote, Cabinet members who "opposed budget cuts in Cabinet and in the indecent obscurity of leaks to The Guardian". Australian Dries sometimes liked to describe themselves simply as people who faced reality but they had beliefs that identified them. The Dries that concern me all had another, for my purposes defining, characteristic: although many were not politicians, they were all political activists trying to change public policy.
In The End of Certainty, Paul Kelly has these things to say about them: (3)
- they "were given various labels -- classical liberals, economic libertarians, the free market lobby, or Dries".
- they, "like all successful reformers, were zealots with a touch of naivety".
- they "were indigenous in their attitude and international in their outlook".
- they took "as high priests of their doctrine the eighteenth century philosopher and economist Adam Smith; the Austrian theorist Friedrich Hayek, and the American economist Milton Friedman. ... From Adam Smith the Dries seized the idea that both parties who freely enter an economic exchange can benefit and that a high correlation exists between individual interest and public interest. From Friedman they took the notion that the failure of contemporary economics derived from the excessive role of the state. From Hayek they began to realise that they were not conservatives who merely sought to resist the socialist expansion of state power, but they were liberals who sought a different direction -- who sought to liberate the individual from state controls, directions and solutions. This was a political tradition which throughout Australian history had been particularly weak. Of course, not all Dries embraced all three notions."
Although Kelly's treatment of the Dries is sympathetic, these observations merit some embellishment.
He is right to accuse the Dries of zealotry. They refused to accept that others did not attach the same importance to our cause and were quick to claim the high moral ground, stressing equality of opportunity, security, justice, social harmony and national and international peace. Many people, therefore, found them tedious. The charge that they were naive is, on balance, also a fair one, but the parliamentary Dries were never so naive that they expected easy victories. I once remarked to Peter Shack, the Federal MP for Tangney, that even if they were able to delay by five years the date at which Australia got into serious trouble their efforts would not have been in vain. Although he protested that I was too pessimistic, those present accepted the tenor of my remark. Further, the Dries in Parliament were always conscious of being but a modest battalion in "the good fight" (4) -- providing a parliamentary dimension to a struggle waged by Treasury and Reserve Bank officials, the Tariff Board/Industries Assistance Commission, several academics and a few businessmen such as Hugh Morgan of Western Mining. Of course, their use of expressions such as "the good fight" marked them as zealots, some said "self-opinionated zealots", but as initially they were but a tiny minority facing more than some ridicule, some morale-preserving Tom-Foolery was excusable.
Inasmuch as Dries drew heavily on experience overseas and favoured what has since become known as globalisation, they were international in outlook. However, most Australian Dries had little faith in extra¬national organisations such as the United Nations. Entry into the European Union divided Britain's Dries.
As Kelly observes, not all Dries embraced the essence of all three of Adam Smith, Milton Friedman and Friedrich Hayek, but the more prominent parliamentary Dries of the 1970s, did. Striving for consistency, in search of authority and rhetoric to support their policy positions and for the sheer enjoyment of it, they learned much of the sources of their philosophy from books, colleagues, officials and academics, but they did so as they went along. It is probable, however, that all of them had before they started read and appreciated Hayek's short paper, Why I am not a Conservative, his book The Road to Serfdom, and Mill's On Liberty.
OPTIMISTIC MORALISM
Dries believe that successful social interaction, not least that part of it referred to as "the economy", depends utterly on adherence to codes of behaviour that ought to be regarded as good, that personal behaviour and community mores may be improved, and that by improving them the course of history may be improved. These codes include both the "internal institutions" preventing lying, cheating, shirking, negligence and indiscipline that evolve within society and are enforced spontaneously, and Government-imposed law. Dries are thus far removed from moral relativism! Many here owed much to Michael Novak, who in 1982 published his influential The Spirit of Democratic Capitalism. Although by no means all Dries shared Novak's religious conviction, he articulated with telling clarity most fundamental ideas identifying Dries.
Of all the systems of political economy which have shaped our history, none has so revolutionised ordinary expectations of human life -- lengthened life span, made the elimination of poverty and famine thinkable, enlarged the range of human choice -- [as has] democratic capitalism. ...
What do I mean by "democratic capitalism"? I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is pluralistic and, in the largest sense, liberal. ... [P]olitical democracy is compatible in practice only with a market economy. In turn both systems nourish and are best nourished by a pluralistic liberal culture.
... these impulses ... aimed (1) to limit the power of the state, in defence against tyranny and stagnation; and (2) to liberate the energies of individuals and independently organised communities. ... economic liberties without political liberties are inherently unstable ... the state that does not recognise limits to its power in the economic sphere inevitably destroys liberties in the political sphere.
Democratic polities depend upon the reality of economic growth.
... liberty requires social mobility. While statistical differences between strata necessarily remain, individuals must be free to rise from one level to another.
Without certain moral and cultural presumptions about the nature of individuals and their communities, about liberty and sin, about the changeability of history, about work and savings, about self-restraint and cooperation, neither democracy nor capitalism can be made to work. (5)
OF IDEAS AND INTERESTS
For a while much conventional wisdom had it that the ideological struggle that had raged between liberalism and collectivism ended in liberal victory in 1989 with the fall of the Berlin wall. However, in Australia, except in a few universities, it had ended well before then. Collectivism was practiced, maybe more than ever, but its defence was conducted by people with interests in the status quo rather than in an ideal and they used the language of efficiency rather than that of class conflict. Therefore, Dries only rarely and then rather ritualistically participated in the Battle Royal of ideologies. Instead, they undertook the more mundane task of skirmishing with vested interests and the Governments that did their bidding.
Dries' opponents also professed liberty, equality and fraternity -- who today dare not? -- but tended to be selective in their application. The interests Dries opposed were tribal and slaves to xenophobic distrust of not just foreigners but of other industries, cultures, social classes, States and so on. Labour expected to be ripped off by capital and vice versa, the bush by the city and vice versa, the outlying States by the triangle of Melbourne, Sydney, Canberra, the customer by the producer, everyone by the middleman, and the uneducated by the educated. The list could be a long one, with prejudice tending to coincide strongly with interest.
Those who sought Governments' favours and the politicians who granted them could not, however, admit to demanding privileges by which the few gained advantage over the many. Therefore, they tortured logic to explain why particular privileges served public ends. Tariffs, tax breaks, regulations, occupational licences etc were defended by minimising their costs and asserting often spurious community benefits. Dries attacked the tortured logic.
They usually did so at some disadvantage. Established interests use their dominance to drown the voices of their critics. When the dominance is made secure by statutory monopoly, the economic rents were often turned to financing campaigns to ensure the continuance of the relevant statute. Telecom, Australia Post, the Australian Wheat Board and the Australian Wool Corporation each used the rents screwed from customers or producers who had nowhere else to go to mount campaigns to justify the laws that ensured that customers or producers had nowhere else to go.
In asserting the dominance of ideas, Lord Keynes, writing in the 1930s, had thus discounted organised incumbent vested interests too heavily. Perhaps the last quarter of the century was a less ideological time because by then ideals competed to influence public policy not only with each other but also with interests, while incompatible interests competed with each other.
AT THE CORE OF DRY BELIEF
Nevertheless, not bound by common interests, the opinions that Dries shared identified them. They could not have been an entity without a philosophy, but their beliefs proscribed the powers needed to create designer Utopias.
Keynes' "practical men", who believed themselves to be quite exempt from any intellectual influences, were, however, unimpressed by their humility. They so often accused them of blind adherence to ideology that they thought they found the accusation easier than argument. Although they denied that their beliefs were blind, they had faith in their cause. Had any of them been there, they would have smiled smugly when Margaret Thatcher asked disdainfully whether So-and-So was "one of us". Theirs was the Good Fight! They had doubts aplenty about individual policies but about the worth of their cause, few.
Although most of them would happily have admitted to being creatures of the Scottish Enlightenment in the intellectual tradition of Hume and Smith, only a few of them thought deeply about the subtleties of philosophy. Without caring, or in my case knowing, what John Locke had said about the matter, they accorded moral status to individuals and it followed from that that people were entitled to choice but could not escape the consequences of their choices. Following Locke, albeit often unknowingly, they saw "civil society" as a community of self-motivated, free citizens -- members of a spontaneous non-political order. That most of them did not study their philosophy's sources did not, however, imply that their beliefs were half-baked.
They were sufficient to impose considerable consistency upon them. For instance, by the criterion of equal status in law, apartheid, ethnic subsidies and industry protection were all unsatisfactory. And, among ends that almost nobody disputed, their worldview established priorities. Faced with the recurring trade-off between security and freedom, they drew a line nearer to freedom than did many people.
Their prime concern was with the misuse of public authority. I recall an amusing passage of arms at the State Council of the West Australian Liberal Party when, during one of many tedious debates on "States Rights", Senator Reg Withers asserted that States don't have rights: only people have rights. Although his intention was no doubt to bait Sir Charles Court, Withers set me off on chain of reasoning that affected my subsequent behaviour.
Dries were classically liberal in their belief that the powers of the Crown, Parliaments and Courts are held in trust, the terms of which require the powers to be exercised only on behalf of the public who are of one class -¬that is, privilege is abhorrent. The authority of the Crown, Parliament and judges is not only derived but also strictly limited by law and custom. Dries were not to be found among those clamouring for "flexibility" in either law making or administration. Indeed they particularly disliked law-making judges who departed far from precedent.
I believe most Dries think that Pitt the Elder and Lord Acton made very fair points when they warned of the corrupting tendencies of power. For that reason too, they wished to see it constrained and dispersed. Therefore, during the 1980s and 1990s when they were often frustrated by the Senate, the federal system and the courts, they were seldom heard railing against the checks and balances. A time when the political tide ran in the opposite direction was too easily recalled.
The defining feature of Government is the lawful use of force and they did not question Hobbes' observation that without effective authority "the life of man [would be] solitary, poor, nasty, brutish and short". They fought what they thought was the misuse of authority but they were not anarchists. It is the case, unfortunately, that even democratic politicians too easily travel from the correct opinion that they can use power for the common good, to the belief that in their hands it will be so used, to the assumption that their own positions of power are in the public's interest, to preserving and extending their own powers and tenures by avoiding due process.
What is more, order has many sources beside Government. Embracing all, there is that sense of right and wrong that, until the word was made unfashionable, they called morality. There is also sympathy for the circumstances of other people that they used to call charity or simply kindness. Without these virtues, families would be impossible, commerce would be impossible, sport would be impossible, Government would be impossible and social living would be impossible. Indeed life would be bloody impossible. There are also the written and unwritten rules of various markets; the written laws of cricket; the rules of courtship and so on and on. These have evolved by trial and rejection of error and are not easily rewritten. Nor is Government the only mediating organisation. There are families, friendships, schools and universities, clubs and associations, trade unions and companies, to name only some others.
Weak Governments are slaves to demands for discriminatory legislation. When they make favourites or meddle in matters best left to the "soft" rules of civil society the statutes lose respect. It is true that Dries have more confidence in the efficacy of rules that people obey from conscience or because they do not wish to forfeit respect or market opportunities than have many people, but Dries do want the state to uphold the rules it makes. They urge Governments to restrict their legislating enthusiasms to their protective roles and to matters where certainty can be offered. They expect law that is fair and their bitterest arguments have been with Governments that have favoured some Australians at the expense of others.
Of course, none of this is original. When in 1991 or 1992 my attention was drawn to the extent that the Parliamentary Dries' program followed that of the Levellers' in the 1640s I had thought hardly at all about my considerable debt to long-dead Dries. Others who were better read than I was may have known in whose footsteps we trod but I seldom did. I think our instruction came mostly from modern writers and from observing hypocrisy in action.
Friederich Hayek was perhaps the most important to us of these modern writers. He saw societies as organic entities, in the sense that they have the means of their development within themselves. They evolve and, given present knowledge and ability to marshal data and ideas, cannot be reproduced. For the time being at least, they are beyond the wit of man to understand in all their complexity. To believe otherwise is "The Fatal Conceit", the title of Hayek's final book. They are in this respect like ecosystems, which no one can design or create.
Like ecosystems even in their relatively undisturbed state, some are more successful than others, offering their participants lives that are less brutish and short. Like ecosystems, they are in fact not fragile but remarkably resilient. Nevertheless, they can, also like ecosystems, by upsetting the balances, be reduced to relatively unsatisfactory conditions, as in Bosnia and Chechnya.
Like ecosystems, they can, with judicious management, be preserved from destabilising forces. They can be improved, but only at the margin. Following Popper, Dries believe that social engineering, to have a reasonable hope of success and to be safe, must be piecemeal, with each piece tested by experience. A successful society must be willing and able to abandon what does not work. Moreover, the criticism that Dries undermine those traditions that function well does not square with their support for institutions of proven worth such families, parliaments and markets.
NOT UTOPIAN
Dries do not, therefore, have a vision of the ideal society. Indeed they disparage "coercive utopians", the constructivist rationalists who think they can impose a pattern upon the organisation of a whole economy, like engineers working from a blueprint. Man's attempts to design Utopias have a poor record -- none of the unlamented socialist states, Nazi Germany, revolutionary France, Sparta, the Paraguayan experiment and the Communist states, for examples, provided their people with the sorts of societies to which we would wish to migrate.
Dries point to trends and examples to reinforce their arguments but concede that the future is unknowable and the possibility of error undeniable. It has proved singularly difficult to sell the ability to retreat from error as a political ideal. Yet it is among the most important!
Unlike the societies of all of the Utopian ideologies, the societies that have tended to offer their citizens lives that are least brutish and short are those where the Government is a humble one, leaving alone what can be left alone, avoiding favouritism and intervening only on the basis of equality before the law.
History teaches that people given authority over other people tend to become tyrants even when they are well intentioned. The Dries' world-view does not include men and women of such superior understanding, morality and wisdom (particularly not themselves) that can be trusted to identify -- let alone to run -- the ideal society. Their formulae therefore tend to limit rather than to direct the employment of power and to make fewest demands on the assumption of superior understanding.
In most things the Dries were liberals. Liberalism differs fundamentally from its alternatives in that it does not depend upon a metaphysical construct of the good society. Reality is what exists rather than some "form" or "essence" that is not necessarily observable. (6) Thus the Dries' evaluations tend necessarily to be empirical, whereas thinking in some other schools tends to be deductive from postulates often treated as truths. At bottom, all they were saying was that the best society is likely to be what free and equal people make of it. Painting no vision of Utopia, dry philosophy may be more difficult to employ inspirationally than one that promises more, but it offers the advantage that it is not dangerous and has a proven track record.
NOT LIBERTARIAN
Although most, perhaps all, Dries have affinities with people who claim to be "libertarians" (a term that has lost precision), few would not have the Government maintain a welfare safety net or deny it the powers to administer one. For instance, although many (I think most) opposed the Australia Card (7) it was not the cause celebre for them that it was for many people. Their opposition arose at least as much from fear of how Governments might employ such a database as from objection to the promulgation of people's private affairs. They knew that after military defeat or otherwise the Australia Card and its associated database could be employed for ethnic cleansing, but so could Tax Office, Medicare and passport records. Knowledge about other people's affairs, although sometimes distasteful, is not of itself dangerous. Information is not, as some say it is, power, but it does allow power to be used purposefully. It is concentrated power itself that is dangerous and to which Dries more or less uniformly object. Similarly, there was no identifiable dry position on gun control. The balance of public benefits and disbenefits was unclear to them.
Although Dries believe it is morally indefensible for majorities needlessly to impose their opinions on minorities, they differ from libertarian purists also in their acceptance of laws that restrict liberty but which they believe have sufficient other justification. They accept food-safety and work-safety laws because, such is the high cost of each individual acquainting himself with the condition of food and workplaces, some law is practical.
Dries tend to be economic liberals and social conservatives but they divide on laws regulating drugs, alcohol, prostitution and much else to do with personal morality and prudence. These are not, therefore, issues that can be used to define the wet/dry divide. Those Dries who oppose laws regulating private behaviour that has little by way of social consequences are not, however, libertines: they believe in moral restraint. So do most serious libertarians -- liberty is not license.
The laws that most offend Dries tend to be those that restrict important civil liberties, particularly those restricting gainful employment, but not all Dries defend all personal liberties, even some that I think important.
ECONOMIC RATIONALISTS
Warm and fuzzy people and cold and calculating people defending privileges often accuse Dries of being economic rationalists who they say believe that material well-being is all that there is to life and that people are always rational in its pursuit. They demolish a straw house: I can recall no dry who believed either fallacy.
Economic rationalism is a confusing term but one that is in such common usage in Australia, that I dare not, as I would prefer, put it to one side. It is a particularly odd tag for mainstream Dries whose interests are not solely economic and whose practice tends to be empirical rather than rationalist. Dries do not give dominant authority to reason when determining courses of action. That is, in that sense, they are not rationalists. On the contrary, they argue that society is so complex that it cannot be comprehended, let alone regulated in ways that will produce beneficial outcomes for most of its members. They argue that this is the case even when those doing the regulating are well disposed to the interests of the multitude, which often they are not.
They tend to follow Hayek (8) and the Austrian economic school generally that is sceptical about the whole notion of equilibrium and the economic modelling based upon it. As Dries see the world, the problem for a society regulated in detail by reason is thus not merely the insoluble one of finding guardians of the guardians. There are also the impossible difficulties of supplying the guardians with necessary information about the preferences, aptitudes and physical resources of millions of people with which to make rational choices, of discovering new information and of finding guardians who can analyse even as much data as they do possess.
Establishing averages and trends among people, who possess individual rights, resources, aptitudes and hopes, won't do. It is not reasonable to prescribe and proscribe needlessly and in detail for collectives -- society, the union movement, employers etc -- as though these were homogeneous.
It is not that most Dries find no place whatever for economic modelling which can assist in answering various "what if" questions. Rather some Dries warn against the assumptions -- sometimes made by their brethren -¬that equilibrium represents the real world and that averages, or even averages of margins, represent individual instances. The Treasury, Reserve Bank and Productivity Commission all employ staff who try valiantly to represent the ever-changing world in digital terms. In international parlance these are the economic rationalists but not in Australia where sociologists and other new agers who, without being specific, have, in practice' defined economic rationalism to encompass anybody who recognises the problem of scarcity.
In 1993, three university students, Chris James, Chris Jones and Andrew Norton edited A Defence of Economic Rationalism. It brought 26 so-called economic rationalists, from an ex-Secretary to the Treasury to a Minister of the Uniting Church, between one set of covers. I wrote a foreword directed to its Australian usage. I said:
[Economic rationalists'] most apparent unifying theme is opposition to privilege. Economic rationalism is about facing up to things: such things as that no one within or outside Australia owes us, individually and as a nation, any favours; that special privileges for one group means deprivation for another; that conventional economics is crucial for national health. It involves facing up to past errors. If only the Old Wool Corporation had accepted that raising prices increased production and decreased demand, if only the textile and car industries had had to face international competition, if only enterprises could now negotiate their own working arrangements, and so on, we would not be in the present mess. (9)
Although dry prescriptions have been championed disproportionately by economists, and dry issues have been disproportionately economic, only the foolish and the disingenuous pretend that the dry ideal draws its sustenance from supply and demand curves. The book Australia at the Crossroads, written by five Australian classical liberals (four of whom were economists) was important to the development of dry ideas in Australia and is discussed later. To emphasise the point, its authors employed the following quotation:
The force that drives the image of the future is only in part rational and intellectual; in much larger part it is emotional, aesthetic and spiritual. The appeal of the image lies in its picture of a radically different world in other time. It is above all the spiritual nature of the ideals embodied in an image of the future that gives them power. ... The primary forces in history are not propelled by a system of production, nor by industrial or military might, but rather by the underlying ideas, ideals, values and norms that manage to achieve mass appeal ... (10)
Professor Ian Harper, writing for the Centre for Independent Studies, (11) distinguished economic rationalism from laissez-faire economics and from materialism:
Economic rationalism is not the proposition that unfettered market forces should be the sole determinant of resource allocation in an economy. This is laissez faire economics. Allowing market forces alone [within an appropriate legal framework to define and enforce property rights] to guide resource allocation can also be rational but not always. It is well known that the free market fails to allocate resources efficiently in certain well-defined circumstances such as, for example, when there is a monopoly seller. In such circumstances, laissez faire may be decidedly irrational.
Confusion of economic rationalism with laissez faire economics is common, especially amongst those critical of the drift of recent economic policy. ... In a paper produced by one official church justice organisation, for instance, it said of economic rationalism:
This kind of thinking often assumes that individuals should be given complete freedom to pursue their own material wellbeing, as everybody is responsible for events and outcomes in their own lives. It also regards the freedom of the market as sacrosanct, minimising society's role in regulating it, and taxation's function in redistributing wealth and meeting welfare needs. (Secretariat of the Bishops' Committee 1992:) (12)
The proper target of the Secretariat's ire is laissez faire economics with its emphasis on the free market and minimal Government intervention -- not economic rationalism.
As will been seen from later discussion of the policies they actually recommended, Dries were not advocating laissez faire economics. In practice, as the Dries concerned themselves with practical improvements to current Government policy, questions that might involve the choice of laissez faire barely arose. The issues for Dries were always whether market failure or Government failure presented the bigger problems in particular cases.
Harper goes on to discuss the charge that material matters, ignoring the spiritual, aesthetic, communal, psychological and moral, dominate economic rationalists:
Rationalist economics ... is concerned narrowly, indeed exclusively, with the material dimensions of a policy problem. This is the proper scope of the discipline. But economic rationalism nowhere advocates that only the material dimensions of a problem are relevant to its satisfactory solution. Concentrating on the narrowly economic dimensions of an issue makes good economics but bad public policy. This seems such an obvious point to make that economists simply take it for granted.
It is clearly irrational to argue that all that matters for the welfare of human beings is the satisfaction of their material wants. Evidence, let alone logic, suggests strongly to the contrary. Satisfaction of material wants is not an antidote for loneliness, low self-esteem or anomie. Economic rationalists do not claim that material well-being is sufficient for human fulfilment in this life. ...
The focus on material welfare circumscribes the scope of economics. Economic rationalism, by construction, ignores non-material dimensions of human welfare. ... Investigation of such matters is left to philosophy, theology, cosmology and the like.
The people who are the focus of this account pursued values such as freedom, security, justice, equity and liveable environment irrespective of the contribution of these to material welfare. Hence the need for a word, such as "dry".
Michael Pusey criticises economic rationalists for sharing orthodoxy. They do. Treasury, the Reserve Bank, the Productivity Commission, the International Monetary Fund, the World Bank, the OECD, the Bank of International Settlements and most trained economists advocate policies with only modest differences. Dries are very much within the economic mainstream. They argue that Governments that ignore experts who more or less agree are not innovative but irresponsible.
PROPERTY
Human rights or civil liberties discussed in terms of negative rights ("freedom from" rather than "freedom to") influenced dry thinking and were employed in dry rhetoric. Dries were, however, more careful than many to avoid declaring the existence of rights without specifying upon whom or what the attendant obligations fell.
Even the fundamental civil liberties -- freedom of person, property, speech, ideas and association -- are qualified in all societies. They are, however, cautionary signposts warning against dangerous policy and Dries employed them to that end. There is no better statement of them, even today, than the Déclaration des Droits de l'Homme et du Citoyon adopted by the self-styled National Assembly in Paris on 26 August 1789. Words alone, however, guarantee nothing. Their codification failed to prevent the subsequent horrors of the French revolution just as their excellent expression in the Constitution of the USSR failed to prevent political murder on a scale even greater than the French revolution.
In Australia, where the rights of freedom of person, speech, ideas and association are mostly respected, Dries find themselves most often in conflict with the authorities over the right to enjoy property. Dries also, particularly in the 1990s, defended the right of free speech and free association.
The Déclaration des Droits de l'Homme et du Citoyon declares:
Property being an inviolable and sacred right, no one may be deprived of it except as required by evident and legally ascertained public necessity, and on condition of previous just compensation.
Few Dries believe that property is "inviolable and sacred" but they accept the rest of what the Déclaration had to say on the subject. They accept without reservation the less grandiloquent United Nations' Universal Declaration of Human Rights version:
No one shall be arbitrarily deprived of his property.
Property rights were not invented but evolved over a long time by trial and error. Property is, perhaps, best understood as a limited bundle of rights. A farmer, for instance, may hold rights to cultivate, treat with herbicide, graze, build homes upon, mortgage, sell etc a defined area of land. He may not in Western Australia, however, sub-divide, lay claim to the minerals, or build a nuclear power plant upon it. The principal modern problem is not the outright expropriation of the whole property but the excision of individual rights by regulation.
Private property is a necessary condition of market exchange and thereby of the means by which high-valued outputs are derived from low-valued inputs. When properly respected and protected, it is also the means by which capital is mobilised for the productive activity that first in Western Europe, then North America and most recently South and East Asia, lifted hundreds of millions of people from poverty. 12
The Australian Constitution restricts the Commonwealth Government from taking private property except on just terms, but the States are not so constrained and the takings clause has not always been applied by the courts to the taking of part of the value by restricting uses of property. In the names of planning, environmental amenity and industry regulation, Governments sometimes expropriate individual private property rights without compensating owners. For instance, in some States no compensation is contemplated where farmers are denied the right to clear their land, a practice that most punishes those who have preserved most native vegetation. Other examples abound, affecting, as well as farmers, city and rural dwellers, miners, fishermen and foresters and many others. In other circumstances, such as when existing building rights are taken under town planning schemes, compensation is routinely paid.
Of course, property owners should not expect windfall gains from, say, changes to land zoning laws conferring new rights. They should pay for these.
Dries defend the principle that savings will not be expropriated except by taxes that apply with equal (or rationally graduated) force to everybody. It follows that the Crown may compel owners of private property rights to part with them but not without paying full and prompt compensation.
The free enterprise market system depends utterly upon security of tenure. Faced with the risk that a Government may change the rules adversely, potential investors demand higher returns to compensate for the "sovereign risk". Thus projects that would be undertaken in countries where owners' rights are secure may not be viable where they are not.
Private property also has a political and ethical dimension. To a significant degree it stands between people and an overweening state. The several rights mark a private domain -- an area from which the state is excluded. Rulers resent private property because it is from within that domain that resistance to the state -- in the courts and ballot boxes or by revolution -- can most easily be organised and financed. And, at least since Magna Carta, the rights have been defended. At the extreme, people who are not permitted to own the fruits of their own labour are, in effect, slaves. Without secure private property rights the liberal, democratic, capitalist society is impossible because there is then no possibility of voluntary exchange, no market prices and no objective measure of value.
Remakably, in Australia, labour market laws take from the most basic property, that which a person has in his own labour. The 17th Century moral philosopher, John Locke, wrote, "... every person has a property in his own person. This, nobody has any right to but himself. The labour of his body and the work of his hands, we may say, are properly his." His argument is the basis of our objection to slavery and to conscription. What is more, property in one's own person is most important to those people who have nothing else to exchange but the work of their hands. The industrial awards and picket lines that deny people the right to sell the property they have in their own labour are surely affronts to civil liberty.
DISCRIMINATION
Dries tend to have little faith in laws banning private acts of racial and sexual discrimination or in those mandating positive discrimination that of course always discriminates against the excluded parties. The opposition of some of them to anti- and positive-discrimination legislation has caused them to be characterised as racist and sexist. The characterisation is unfair.
Dries opposed anti-discrimination legislation that was unrealistic in its objectives and which curtailed the private right of choice. Private citizens are not in the same position of trust with comprehensive powers to coerce as are Governments and, therefore, should be permitted to discriminate in circumstances where Governments may not. They are controlled by competition. Laws intended to improve the bargaining positions of women and minorities by restricting the hiring and trading choices of individuals merely replaced the discrimination of one who may discriminate with the discrimination of a body that ought not. Anomalies are thereby created that cause resentment.
Dries accept the strong evidence of many circumstances in many countries that:
The non-discriminatory protection of economic freedom is ... important for the economically weak, the young, and the low-income earners; those not born with silver spoons in their mouths. [These] do not have the resources to lobby Governments against infringements of their life opportunities. (13)
Positive discrimination under Australian multiculturalism policy makes the same mistake that the South Africans made with apartheid. To object to Australia's form of multiculturalism is not to imply that cultural diversity is valueless -- on the contrary Dries value it. The objection is that the Government has with subsidies created favoured classes of people that include many who are not poor or otherwise, on balance, disadvantaged and who, as we all would, use the favour to gain further advantages. There is no dry objection to the Government addressing individuals' language difficulties or other disadvantages. Multiculturalism illustrates an important principle, but it is not by any means an isolated example of multi-Australianism. Many laws needlessly discriminate, reserving occupations to licensed (rather than merely certified) individuals or members of associations or unions and subsidising some occupations, lifestyles and places of residency while taxing others. Some of this discrimination may be justified if it reduces transaction costs, such as the laws that favour some types of corporate structure over others; or corrects economic failure, such as subsidising those forms of research that yield knowledge that must in its nature be in the public domain. However, most is not. The right to discriminate is the civil liberty of choice and usually belongs in the private domain.
THE ECONOMIC ROLE OF GOVERNMENT AND ITS LIMITS
Dries have often said of themselves that they oppose "big Government". It is not, however, an easily quantified term. The percentage of aggregate demand that passed through the Commonwealth, State and Local Government budgets was 18.5% in 1950-51, 21.4% in 1970-71 and over 40% in 1996. These are, however, but partial measures of the extent of Government. If, before the Hawke-Keating trade reforms, the "tax" then paid by consumers to protected producers were included with other taxes to assess the size of Australian Government, we would say that Government occupied about 50% rather than about 40% of the economy. We would, moreover, still be saying nothing about occupational licensing, building codes, statutory monopolies or restriction of personal behaviour. Despite these difficulties, long before the dry revolution began there was more than sufficient evidence that relative living standards had fallen in countries where Governments had attempted to control their economies in greatest detail. North and South Korea, and East and West Germany offered extreme contrasts: Western Europe and the United States, and the Canadian and US examples offered contrasts that were less so.
And we also knew that where Governments did not guarantee even life, liberty and property, absolute living standards became so low that famine was endemic, as in several countries in sub-Saharan Africa. Life was, as Hobbes predicted, nasty and short. Dries were faced with distinguishing between appropriate and inappropriate Government, especially in the economic sphere.
Dries were not intellectual mavericks; they rarely departed from orthodoxy. They did not try to overturn economic theory but often found themselves in opposition to people who denied such fundamental economic principles as opportunity cost and comparative advantage. Even more fundamentally, they accepted arithmetic even though politicians right up to Cabinet level sometimes found it too irksome. They chose their data from conventional sources such as the Australian Bureau of Statistics and when other considerations were more or less equal they accepted opinion emanating from official sources with good track records, such as Treasury and the Reserve Bank. The Parliamentary Dries therefore tended to back, say, Treasury on the occasions that they learned of differences of opinion between it and Cabinet, but rarely did not support the Cabinet when it was faced with opposition from businesses, unions and their more populist backbench colleagues.
Parliamentary Dries and those outside the Parliament, however, often found themselves, particularly before 1983, in fairly lonely opposition to Government in disputes over economic freedom. Action by collective agreement is limited to measures supported by established opinions. That is, it can choose between already¬recognised possibilities, but is hopelessly poor at discovering new possibilities. Markets, in contrast, allow novelties to be tested. For this reason, even more than their ability to allocate given resources efficiently among known ends and their ability to avoid political corruption (of which more below), other things being equal, Dries prefer voluntary market exchange to regulation. Markets are by far the most effective discovery mechanism for human wants and resources.
Other things are not, however, always equal and in practice the choice that Dries most often make is between markets that they know are imperfect and regulations that they also know or suspect are even more imperfect. Serious market imperfections provide sufficient reason for imperfect Governments to intervene. Governments should, for instance, ration common property, such as wild fish stocks, and finance the provision of true public goods, such as defence and streetlights. Anyone who did not accept the limits of markets would not meet the most basic test of dryness, namely, willingness to face facts. The failures that most earned the Dries' wrath were those that Governments themselves caused -- Government failure.
Even where Governments should intervene, however, Dries prefer as much room for competition as the circumstances will allow. The Government-financed services are often most efficiently provided when Governments contract competitive providers. Further, public goods, like private goods, should yield benefits that exceed their costs and Dries have often questioned expenditures such as those required to build the new and permanent Parliament House in Canberra.
History offers ample reasons for these dry approaches. The miraculous economic recoveries of post-war Germany, Japan and Italy followed "bonfires of regulations". In contrast, post-war Britain attempted to set up an almost all-embracing system of state control and entered an "Age of Austerity", the "Attlee -- Churchill Terror". In an extreme irony of role reversals, the victorious British condemned themselves to grey, rationed lives, to lousy education, to resentful hopelessness; while beaten, ruined, occupied West Germany, where Government and many associated institutions were utterly discredited, staged an economic miracle. It was only as German regulation reasserted itself that that the miracle slowed, and when Britain experienced Thatcher that British living standards started to catch up.
In the early 1950s Australia had been among the richest nations on earth. By the late 1970s, it was some 20% below European living standards. We had experienced high levels of regulation of trade, labour, transport and agriculture and high levels of public ownership of utilities offering services from wheat handling to electricity generation. Government had played a major role in the provision of education, health care and transport. In every sector the state instrumentalities enjoyed protection from competition, in many cases outright monopoly. Economic theory encouraged the expectation that such circumstances would be associated with excessive costs, poor productivity, poor economic growth and capture by organised workers but, had not theory been so conspicuously borne out by events, then there would never have been the need for a dry campaign.
A wealth of experience from all over the world suggests that imperfect markets usually cater to human wants better than do imperfect regulations. Dries, nevertheless, contend merely that on average, at the margin, most people will be better served by more voluntarism and less coercion. They go further only in claiming that the potential gains are large.
Markets fail when the cost of discovery, transfer, contract enforcement and debt collection -- the transaction cost -- exceeds the potential shared benefits. Before replacing markets with their own dictates, however, Governments should explore what they might do to minimise transaction costs by making the relevant property rights clear, enforceable and transactable; by removing unnecessary regulatory inhibitions; cutting compliance costs; and assisting to police contracts by the provision of a low-cost and efficient legal system.
Transaction costs may also sometimes be reduced by imposing standards that save everyone the costs of repeated inquiry; by taxing to finance public goods or near public goods; and by outlawing anti-competitive behaviour. The companies' code and various safety laws are examples of the first; defence of the second; and trade practices law of the third. These measures enhance trust but where a Government should start and stop regulating to make markets work better is not always clear and, no doubt for that reason, Dries have tended to steer clear of genuine public goods, genuine prudential issues and trade practices law. Their attention has been occupied with matters less readily disputed.
Regulations are unfair if they do not apply equally to everybody. They should be simple lest the compliance costs become worse than the market failure they seek to correct. They should be enforceable or avoidance will be common. They should be certain and stable or people will suffer loss unjustly, either from the punitive provisions of the law or from lost rights. These considerations are well known but they do not prevent politicians from imposing unwise regulations and then imposing more unwise regulations to correct the unforeseen effects of the first.
Dries who are criticised for their faith in markets marvel at the faith that others have in politicians and civil servants. What is not achieved voluntarily is done by command, of which the only legitimate source is the Government by processes that are costly to enforce and monitor. And Government too is fallible.
DRIES AND THE NEW CLASS
Dries have had generally unhappy relationships with what Katherine Betts, a sociologist at Swinburn University of Technology, called "the cosmopolitan new class". She defined these as "those who work in the knowledge industries, and who dominate universities, the media, public policy, education and the arts" and who hold values that conflict with those of the majority of Australians. (14)
Dries do not hold that lifestyles or whole cultures are equally good. Some culturally-endowed habits have undoubtedly enabled the people who practice them to enjoy lives that are longer, more comfortable, apparently happier and more likely to be appreciated by those about them, than have others. The new class, however, has tended to belittle institutions such personal thrift, responsibility, fidelity and effort. It has denigrated families. These are the very institutions upon which Dries believe social order depends. It also tends to defend some privileges, such as subsidies for the arts and child care for wealthy parents that Dries feel are unfair to those forced to pay for them.
It would indeed be surprising if any culture were so superior that its adherents had nothing to learn from any other or one so inferior that it had nothing to teach. Cultural isolationism is therefore as stupid as it is objectionable. We have, however, some people asserting not just the worth to be found in all cultures but talking of cultural traits as though they are of equal worth. These are often the same people who, ignoring their own inconsistency, favour policies such as Australian content rules for TV and the "protection" of Aborigines from European influences. All cultures develop as they come in contact with other cultures and to deny any Australian the right to choose his beliefs and customs is arrogant paternalism.
Like Voltaire, Dries may disapprove of what you say but will defend your right to say it. (Not "to the death", however!) They, therefore, have fallen out mightily with the new class over political correctness. Gratuitous insult is objectionable but, if opinion is to progress and there is to be any limit upon the arrogance of governing elites, people must be able to express opinions that other people believe to be wrong.
Dries are as offended as anybody by people who employ race in disparagement but people who have not had their powers of observation destroyed at a university will never believe that the several races are equal in their average abilities. (15) However, if following Locke we respect individuals, what is the relevance of averages? Even if we feel no obligation to individual people as people -- as we should -- racial categories are so variable that so little can be learned about an individual's abilities or virtues by reference to them that the uses to which they can legitimately be put are very limited. The case for racial tolerance is unassailable but to base it upon a fallacy is to give the bigots an unnecessary advantage. Similar observations apply to differences of sex and social class.
The cosmopolitan new class, more pejoratively the "chattering class", does not like us!
THE SOCIAL WELFARE SYSTEM
Who would not want every Australian, especially every Australian child, to enjoy a decent minimum living standard? Voters charge their Governments with ensuring that they at least have access to one. However, as the last quarter century progressed, the failures of the welfare state became increasingly evident. To pretend that it was functioning well or only needed more money was dripping wet, but Dries' most commonly employed criteria, justice and efficiency, were insufficient to asses welfare policy. Those who fall by life's wayside should be picked up even when they are the architects of their own miseries, not because that is the efficient thing to do (which it may be) or just thing to do but because to do so is decent. The Government is, of course, not necessarily the most efficient instrument to do the picking up. The 1980s were well advanced before Dries had access to much relevant analysis and even by 2000 this could not advise them with certainty approaching that of economic theory. It is, however, the human condition to work with the tools to hand.
The welfare of the common man in every known society has varied most with the economy. Nevertheless, even in the strongest economies people do fall by the wayside. Australians want an effective redistributional welfare system and Dries share that goal. The task is to make it effective: to keep the system of production on which the welfare effort is dependent healthy, and to implement the welfare system that best helps those most in need.
Welfare payments change incentives and no good comes of pretending that they do not. The number of people drawing sickness benefit doubled during the seventies. The number drawing single parents' benefit trebled during the eighties. Taxation reduces incentives to produce, diverts effort to tax avoidance, has a high compliance cost and has a not inconsiderable administration cost. Access to welfare reduces incentives to produce and to save among at least the more well to do.
The growth of second- and third-generation welfare dependency and the high incidence of anti-social and self-destructive behaviour among a growing welfare-dependent underclass concerned Dries increasingly. The welfare system was plainly not achieving its intended outcomes and, arguably, it was increasing the very problems it was intended to alleviate. Toward 2000, Dries, by then better equipped with data and theory, tried to address the cultural causes of welfare dependency -- to find ways of giving help without undermining the institutions upon which social living depends.
ENVIRONMENTALISM
Nobody says development should be not be sustainable. The disputes that bring Dries into conflict with some Green activists are about how environmental sustainability should be achieved when environmental goals must be traded off against other ends such as freedom, prosperity and security. Differences are exacerbated by Dries' suspicions that environmentalism has been co-opted as a stalking horse for a new coercive collectivism that has nothing to do with environmental conservatism.
In most circumstances democratic capitalism and private ownership are good for the environment. People look after what they own -- compare private homes with public housing estates; compare Switzerland with what was the Soviet bloc. Only the economically-strong capitalist nations have been able to afford to preserve and improve their physical environments. Greens, however, tend to disparage private ownership and capitalism. Dries' quarrel with the so-called Deep Greens is not with their professed goal but with their hypocrisy.
What is more, apocalyptic forecasts that have failed to eventuate discredit a good cause. One such forecast should, given its high standing, make the point. During Jimmy Carter's last year in office he commissioned a Government report, Global 2000. It predicted many calamities such as real oil prices rising by 150% from 1975 to 2000, that is, to US$80-$100 a barrel. Today they are under US$30 a barrel. It predicted more hunger with a "100% real increase in food prices by 2000". In fact, world food production per capita has risen by roughly 25% since the mid-1970s and real food prices have fallen by about 50%.
The prominent environmental doomsayer Paul Ehrlich told British biologists in 1970:
If I were a gambler, I would take even money that England will not exist in the year 2000.
This inspired the economist, Julian Simon, to issue a challenge:
This is a public offer to stake $10,000 in separate transactions of $1,000 or $100 each, on my belief that the cost of non-Government-controlled raw materials (including grain and oil) will not rise in the long run. If you will pay me the current market price of $1000 or $100 worth of any standard mineral or other extractive product you name, and specify any date more than a year away, I will contract to pay you the then market price of the material.
Ehrlich accepted the offer nominating $200 each of copper, nickel, tin, chromium and tungsten (only $1,000 in all) for ten years hence. In October 1990 he posted Simon a cheque for $576.07. The economist was right and Erhlich who spoke for many of the science lobby wrong! Scientists who are not prepared to get across even basic economics don't deserve to be taken seriously on many of the issues about which they declaim most loudly.
Doomsayers have not, like the boy who cried, "Wolf!" sought mere attention but have sought the powers that only crises can justify. The fates of Jews, Huguenots, alleged Communists and others testify to the potential misuse of scaremongering. When faced with dire predictions, Dries, therefore, tend to be not only sceptical but also fearful of the political use to which the alleged crises might be put.
Few Dries are qualified to distinguish between good and bad science. In the case of the global warming forecast, they have been content to estimate the economic costs of various proposals, to note that scientists are not of one mind as to whether the world is getting much warmer and to wonder aloud whether a warmer world is a good or a bad thing.
Dries are tired of nonsensical premises and the unexplained trend breaks. They are tired of the preservation, repair and enhancement of the physical environment being presented as an end that overrides all other ends. The physical environment is important but so too are rising living standards with full employment; preservation, repair and enhancement of the social and political environments; and national security. These are ends that will inevitably and rightly be traded off against environmental goals, but traded off against, not over¬ridden by. Excessive debt may well do our children more injury than excessive logging. When attempting to avoid both, some trade off may be required. Then again it may not, but the issue cannot be settled a priori.
People should not get away with exaggerating "in a good cause". Scare-mongering about environmental or for that matter economic dangers serves only to cause necessary trade off to be sub-optimal and discredits genuine concerns. There is in every case a means as well as a level of environmental protection that will best serve the interests of future generations.
POLITICAL CORRUPTION
The most serious problem with power is not, as Hayek taught us, that no one could assemble the information needed to use it wisely, but rather, as Acton and Pitt taught us, that it corrupts. During the 1980s Australians experienced a level of public scandal far exceeding that to which they were accustomed. Dries were faced with defining authority's misuse.
The ex Marxist, Jean-François Revel, discussed political corruption in these terms:
In a civilised efficiently alert democracy, you have to be a fool to commit the major felonies punishable by the law: breach of trust, peculation, embezzlement, influence peddling. So in order to gauge the extent of corruption in our own kinds of liberal society, we need to look beyond the classic offences.
Being "corrupt" means somehow misapplying political or administrative power, whether directly or indirectly, outside its proper sphere, for one's own financial or material advantage or in order to distribute the gains among one's friends, colleagues, relations, or supporters. When a minister grants a subvention to an association of dubious utility, even when he observes all the rules in doing so, he is committing an abuse, especially if it turns out that the beneficiaries of the subvention are his personal or political friends. A subvention of a million Francs, for example, is the equivalent of a year's profits for a thriving business. Multiplied by some thousands of instances (and by sums mostly very much greater), this act amounts to a levy imposed on the labours of the producers, in favour of the occupants of the power structure. The further the system extends, the heavier the hidden tax on production and the less profit and employment. Even if legal appearances are saved in these transactions, it may be assumed that democracy is not. The national inheritance is diverted into private or partisan uses, causing a pernicious drain on the general economy. No doubt the good Minister who performs this little service for his henchmen has no sense of being dishonest -- and that is the most serious thing about it. ... the greater the role of the State the more numerous the opportunities for corruption. (16)
Revel goes well beyond brown-paper bags full of $100 notes. The company director who trades his company's shares to the detriment of other shareholders is undoubtedly corrupt, but the same director who knowingly uses misinformation or an unwarranted dividend to achieve re-election does more damage to his organisation. So it is with political corruption. Minor peculation is not the problem. Most politicians are, if not too honest, then too smart for that. The real problems arise from misuse of otherwise legitimate powers.
Authority may be employed legitimately only on behalf of the people from whom it is derived. However, its legitimate employment (not necessarily its judicious or efficient employment) goes beyond the production of public goods to include private goods such as pensions. It seems that, although used for private ends, the powers sometimes derive legitimacy from public knowledge and majority approval. If a politician speaks frankly about his actions, that is, he eschews "spin", then he is probably not acting corruptly.
That test is, however, difficult to apply and proper use of public authority is limited by due process -- ends cannot justify means. Governments must, for instance, govern by pre-existing law, duly enacted and duly enforced. Government by wink, nod and handshake is corrupt Government and executive discretion is bad Government, even when the ends are worthy.
In politics, as in business, however, by no means every strand of due process is codified. The Minister who deceives Parliament by deliberate and significant omission is hardly observing those processes that most people think are due. Protestations by Ministers that they "did nothing unlawful" or are "innocent until proven guilty" should not be accepted as defences against mere demotion. The parallel with company directors and executives facing dismissal for poor judgement is obvious. To require Ministers to stand down because they own a few shares in a company doing business with their Department but to approve a Minister who directs benefits to a marginal seat is hypocritical.
As much as when he receives a cash bribe, a politician receives "material advantage" when he receives votes, enjoys a quiet life, or avoids dishonour. It is difficult to distinguish between buying votes and relaying voters' preferences, and the democratic system is for good reason designed to reduce the distance that leaders may depart from voters' preferences. Nevertheless, politicians ought to be constrained by the obligation to govern only by rules that apply even-handedly to everybody. Favouritism that is of the very nature of commerce, where customers and staff are protected by their ability to walk away, in politics, where citizens cannot walk away, is corruption.
The public's best insurance against misuse of authority is timely knowledge of what is actually being done. Taxpayers, however, sometimes find themselves financing the smoke screens that keep them misinformed. Matters of national security aside, Governments should have no secrets from their own citizens. Yet, for political advantage, the principle is continually honoured in the breach and there is no likelihood that that will cease to be the case. Nevertheless, some discipline may be imposed and to favour parliamentary committee systems, question times, independent auditors-general, a press that is free to sometimes behave irresponsibly, independent judiciaries and so on is, therefore, dry.
All civilisations have much the same codes that protect life, limb, property, truth, trust, contract, children, the sick and elderly, and they all oblige the citizen to defend the society. The observance of these moral rules allows people who do not know each other to combine, to cooperate and to raise successive generations of civilised citizens. Dries appreciate that it is because of these more than the law that bridges are built, penicillin was discovered, and living standards have reached unprecedented levels. But, in the liberal tradition, they tend to question the Government's ability to define let alone enforce truthfulness, courage, generosity and prudence and they question the wisdom of offering people a surrogate for personal moral responsibility. They suspect that increasing regulation actually opens opportunities for the unscrupulous to gain unfair advantages. What is legal is not necessarily moral, but these days moral judgement is often suspended by people taking advantage of legal loopholes.
Australia should be a nation of equal citizens. That is not quite to say that Governments should treat everybody equally. Governments favour the old (pensions), the sick (hospital funding), the poor (unemployment benefits) and the young (taxpayer-funded education). These policies could be wrong, but Governments feel no need to invent phoney justifications for them. I suggest this is because in their non-exclusion they fall well short of distributing gains among friends, colleagues, relations, or supporters. That is not, however, the case where favours are granted to particular industries (tariffs, import quotas and subsidies), professions (occupational licenses and closed shops), races and cultures (ethnic funding) and geographic regions (tariffs again, redistributive federalism via the Grants Commission and infrastructure allocated by weird notions of priority).
If a politician of my acquaintance has accepted a personal bribe, it has not come to my ears. Australian politicians sometimes "sell" privileges for campaign support in cash and kind but neither is that form of corruption a major problem. The systemic rottenness is caused by exchanges of privileges first for the blocks of votes that many political lobbies can deliver and second for freedom from the politically-damaging lies that will be heaped upon the Government if it refuses the privilege. Governments can buy-off vested interests whenever those Australians who must bear the cost (such as purchasers of cars and clothing) are too dispersed to run a counter campaign. And they do. So it is that Australian politicians break their trust with all Australians and, employing the term reasonably, Australian politics is corrupted.
The market is the consumers' democracy. However, because they are many and dispersed they cannot organise as readily as can producers giving rise to a "supplier bias". That concentrated interests can so readily prevail over dispersed interests is the bane of democratic politics. They prevail because only they have enough at stake to let the one issue influence their vote or cover the cost of mounting a political campaign. Only an example can make the point adequately. Consider the relatively straightforward instance of a tariff such as that on textiles. It may transfer $1 billion per year from 17 million consumers to, say, 100,000 producers organised in 100 companies. Each consumer has $59 per year at stake; each family about $200; each worker $10,000 and each company $10 million. It is relatively simple for the unions and employers to organise to make life difficult for a Government. Enforced transfers such as are made via tariffs involve dead-weight losses that any Government mindful of national living standards would wish to avoid, but only the concentrated interests can deny it votes. It is impossible for the consumers to do so. The whole unsatisfactory process is explained by "public choice theory". From about the mid-to-late 1970s Dries were convinced that this offered a powerful explanation of bad Government, but had it not been possible to appeal to "public interest" there would have been no point in a dry campaign and, indeed, the nation would be ungovernable.
Governments are corrupted whenever they are ruled by private rather than public interests.
IN SUMMARY
The parliamentary Dries, and those in the civil service, commerce and universities, despite their categorical preference for a train of thinking that can be traced at least as far back as Locke, are not just theorists and idealists. They are for the most part men and women of affairs pursuing better Government by the means available to them. They concern themselves with politically and administratively achievable steps in a process that, if it has an end, is one that cannot be foreseen. The cloistered academic social theorist, although he might be informing and inspiring Dries, is not normally referred to as "a Dry". Dries might enjoy deep and meaningful debates about Hayek's inability to define the limits of the state and try to unravel countless prisoner's dilemmas over the odd glass of red but those are not the habits that define them. Yet without the guidance of a philosophy they would not be Dries.
A capitalist economy will not deliver prosperity nor a society opportunity, security and justice unless basic institutional underpinnings are maintained. A captive or over-extended Government is not a strong one. The Government advocated by Dries would be more limited than that to which we are accustomed. Sticking to its essential protective functions, it would find it easier to adhere to principles that avoided "corruption" as I have defined that. It would be able to say "no" to vested interests.
Concentrating on procedural justice it would not grant privileges such as industry protection. It would respect tried and proven institutions such as private property rights, independent courts, the parliament, the federal structure and families. It would offer Government welfare to those who are least able to provide for themselves but expect others to provide for themselves and their families. That is, it would combat absolute poverty. It would not intrude unduly upon people's private domains. It would face inconvenient facts.
Dries may be identified by their efforts to bring impartiality to law making and administration by Governments and Parliaments that is comparable with the impartiality that the courts bring to the law's interpretation. They, however, advocate a way not a destination.
ENDNOTES
1. Parnham et al, Distribution of the Economic Gains of the 1990s, Productivity Commission, 2000, Box 3, p xxiii.
2. I am indebted to Ian Castles, the former Commonwealth Statistician, for these calculations which appear in the Appendix in greater detail.
3. Paul Kelly, The End of Certainty, Allen & Unwin, 1992, p34 and following
4. The expression was one used frequently by Austin Holmes, head of the research department at the Reserve Bank.
5. Michael Novak, The Spirit of Democratic Capitalism, Simon & Schuster Inc. 1982, the Introduction.
6. Political philosophers trace two broad traditions of political theory back to the metaphysics of Plato and alternatively to 'natural law' of the Stoic school of Greek philosophy through Roman law and Christian tradition.
7. A proposal to require Australians to carry identification to aid Government administration of welfare, tax and immigration law.
8. Freidrich Hayek, The Constitution of Liberty, Chicago University Press, 1960, pp 59-61
9. James, Jones and Norton editors, A Defence of Economic Rationalism, Allen & Unwin, 1993
10. Kasper et al, Australia at the Crossroads, Harcourt Brace Jovanovich Group, 1980, p89
11. Ian Harper, Economic Rationalism: The Economist's View of the World from Economics and Ethics: The Dispute and the Dialogue, CIS Occasional Papers 71, 1999.
12. Hernado de Soto, The Mystery of Capital, Bantam Press, 2000
13. W Kasper, Building Prosperity, CIS, 2000, p 106
14. Katherine Betts, People and Place, vol 7, no 4
15. See Richard Herrnstein and Charles Murray, The Bell Curve, Free Press, 1994 and think of heavy-weight boxers and weight lifters. I await the person who chooses to quote part of this paragraph/sentence out of context.
16. Jean Francois Revel, Encounter, March 1987
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