Clothing Industry Has Been Stitched Up

Five years ago in Melbourne and Sydney there was a flourishing second hand trade in industrial sewing machines with each reconditioned device worth around $5000.  There are now several derelict warehouses containing hundreds of un-saleable machines-testimony to the near defunct state of the Australian clothing manufacturing industry.

Usually tariff reductions are blamed for the collapse of the clothing industry but this excuse hides a more devastating public policy process that has stalled the capacity of the industry to restructure and find a new future in a tariff-free world.

But something has happened to the clothing sector is creeping up on other industries as diverse as car manufacturing and call centres, and is targeted to happen to the labour hire industry and could strike any industry.

In NSW and Victoria, the clothing manufacturing industry has had legislation applied to it that effectively controls the price of products through every level of the manufacturing chain.  NSW enacted the Ethical Clothing Trades Act 2002 and Victoria introduced the Outworker (Improved Protection) Act 2003.

These acts enshrine a system of legislated price fixing which destroys the capacity of a market to operate within the manufacturing process and kills the ability of the industry to creatively experiment and respond to competitive pressures.

Clothing manufacturing functions like manufacturing in most industries.  Rather than production being exclusively conducted by monolithic companies, the manufacturing process normally involves chains of cascading contracts.  Companies and people specialise in aspects of production and trade their goods and services using normal commercial contracts.

In clothing, designers create the ideas.  A shirt or skirt could have 10 independent businesses making different parts of the item.  In information technology, dozens of different people can independently design the components of a program.  Call centers operate through networks of contracted specialist providers.  The essence of labour hire is that recruitment, human resources, payroll and other labour-related functions are undertaken through contract chains using elements of several possible models.

This idea of market mechanisms being used to create products and services is a standard feature of a functioning economy.  The common link is that all processes require freedom of commercial contract tied to the prevention of price fixing.

What has been different in the clothing manufacturing sector is that the cascading contract process has been subject to a long and intensive campaign of demonisation.  Anti-industry activists have claimed that there is something sinister about the way cascading contracts operate in clothing manufacturing.

The NSW and Victorian response was to pass legislation that requires every level of the contract chain, from retailer through each clothing manufacturer, to be liable for the labour rates applied to small businesses at the end of the contract chain.  Because a shirt is no more than a piece of cloth with multiple inputs of labour at every level, the law effectively fixes the price of clothing through the contract chain.

Where labour rates are normally and correctly addressed through industrial relations legislation, in the clothing sector industrial relations objectives are being controlled through commercial contract regulation.  In Victoria and NSW, where 90 percent of the industry operates the governments have established policing bureaucracies to oversee the legislation.

The outcome is a system of state forced price fixing through the manufacturing chain.  The legislation operates via a voluntary code of practice, which in NSW is triggered to become mandatory this year.  However the voluntary code is not benign because bureaucrat and activist enforcers, ensure that manufacturers suffer brand damage if not in compliance.

The outcome is that any process of contract clothing manufacturing now involves reference to a massive state imposed rule book governing everything from the price to be paid for a button to be sewn, to the cost of folding a shirt into a presentation box.  Nothing happens without bureaucratic approval which means that nothing happens.

The solution for Australian manufactures has been to become importers.  The outcome is that where, under declining tariff protection the Australian industry could have spent its energy looking for creative new local solutions, instead the entrepreneurial spirit has been crushed and jobs killed.

This, first of its kind legislation required and received Australian Consumer and Competition Commission approval and is promoted by the union movement as a priority model for other industries.

ADVERTISEMENT

The Great Land Grab

If drought, fire and pestilence were not enough, the man on the land is now facing a larger threat -- a run-away bureaucracy attempting to nationalise his land.

Not satisfied with locking away an ever-increasing proportion of the nation's land in national parks, governments have turned their attention to private land.  They have passed a plethora of overlapping and inconsistent regulations, administered by a multitude of government bodies, to regulate native vegetation.  The net effect of this has been the nationalisation of sizeable proportion of farms.

Take the example of Jim Hoggett, who runs a small cattle and goat farm in central NSW.  As documented in a recent submission to the Productivity Commission, he faces a gauntlet of no fewer than 26 separate pieces of legislation and 10 different government bodies governing the use of native vegetation on his property.  Moreover, the legislation is vague, inconsistent, subject to frequent changes and wide ranging.  The government regulators have immense power, limited resources and little knowledge of, or concern with, the commercial use of the land.

Despite being logged repeatedly over the years, the timbered areas which account for over half the property, including regrowth forest, trees in pastures and cropped areas, and trees along the creek, have all been quarantined from commercial use.  These trees are not unique, indeed there is a national park nearby which contains thousands of hectares of them.

The Hoggetts are also required to make a detailed inventory of the native flora and fauna on the property, develop a native vegetation management plan, submit the plan to multiple agencies for approval, submit to regular inspection and are legally liable for damage done to any native vegetation on their property.  In short, they have been turned into unpaid national park rangers.

The Hoggetts conservatively estimate the cost of the native vegetation legislation to be $35,000 per year in outgoings and forgone income.  This is a sizeable proportion of the potential farm income and is not fully tax deductible.

The Hoggetts, being keen conservationists, would like to plant more native vegetation on the more marginal pastures.  However, because this would result in the land being excised from commercial use, they have decided not to do so.

One of the most perverse aspects of these regulations is that they discriminate against the farmers who have done most to preserve native vegetation.  For example, the Hoggetts' neighbour is little affected by the native vegetation laws because he long ago eliminated most native vegetation on his property and has prevented it from regenerating.  Since the law only focuses on preserving remnants, his farm has nothing to preserve or protect, nor is he interested in doing so.

While the Hoggetts' farm is in NSW, Victorian farmers face a similar morass of laws and regulators with a similar result.

Australia's farmers, thorough voluntary processes, such as Landcare, have led the world in regenerating native vegetation.  They are now getting punished for their efforts and their land is being stolen.

This time, Hanrahan's lament, "We'll all be rooned, before the year is out" is on the mark;  not through drought, fire and pestilence, but through needless legislation.

ADVERTISEMENT

Received Evidence for Deterioration in Water Quality in the River Murray

Address to Water Forum No. 2,
Canberra, 25 July 2003

"Facts do not cease to exist because they are ignored."

Aldous Huxley

INTRODUCTION

It is rare for both sides of federal politics to agree.  Both the Government and Opposition agree that saving the River Murray is a national priority.  Both the Government and Opposition have canvassed the possibility of taking water from irrigators to increase environmental flows -- in the case of the Opposition, 1,500 gigalitres.

Why such drastic action?  The river is apparently very sick.  What is wrong with it?  According to the Wentworth Group, ^[1] The Economist magazine, ^[2] and everyone in Ticky Fullerton's book Watershed, including Ticky Fullerton, ^[3] a major problem is deteriorating water quality, in particular a worsening salinity problem.

The CSIRO website includes the statement, "... look at Australia's largest and most developed river system, the Murray-Darling Basin, shows the nature of the problem we face.  Salt levels are rising in almost all of the Basin's rivers and now exceed WHO guidelines for drinking water in many areas.  Business as usual is not an option.  If we do nothing, the salinity of the Lower River Murray -- where Adelaide pumps out its drinking water -- will eventually rise to exceed WHO guidelines."

But the facts do not support these claims of deteriorating water quality.

Key water quality indicators include turbidity (a measure of sediment load), nitrogen and phosphorus (nutrient levels) and electrical conductivity (saltiness).  According to the Australian Water Resources Assessment 2000 we spend $142-$168 million each year on water quality monitoring.  So let us consider the water quality data for key sites in the River Murray.

SALINITY LEVELS

While Ticky Fullerton's 354-page book laments deteriorating water quality, no water quality data are provided.  There were no data to accompany the very powerful statement on the CSIRO website.  There is no current information on water quality trends for key sites on the CSIRO or Murray Darling Basin Commission (MDBC) websites.

Daily readings for salinity from 1938 are available on request from the MDBC for Morgan, South Australia.  Morgan is the key indicator locality for water quality in the Murray Darling Basin.  Morgan is just upstream of the pipeline off-takes for Adelaide's water supply.  Its use as an indicator site emphasizes the relative importance of river salinity impacts on all water users in the system.

The yearly averages for salinity measured in EC units for Morgan are plotted in Figure 1.  Current salinity levels at Morgan are equivalent to pre-World War 2 levels!

Figure 1

A plot of salinity levels for just the last 20 years suggests salinity levels are dropping at this key indicator site, Figure 2.  Water quality is improving!

The MDBC provided me with more information for other sites.  There is no deterioration in salinity levels at Swan Hill or Yarrawonga, Figure 2.

Figure 2

The CSIRO website reads, "Salt levels are rising in almost all of the Basin's rivers and now exceed WHO guidelines for drinking water in many areas ... If we do nothing, the salinity of the Lower River Murray -- where Adelaide pumps out its drinking water -- will eventually rise to exceed WHO guidelines."

WHO guideline levels are 800 ECs.  Salinity levels are not approaching 800 ECs at key sites in NSW and Victoria.  Salinity levels are not increasing at key sites in NSW and Victoria.  Salinity levels are dropping at the key site in the Murray Darling Basin, Morgan.  Salinity levels are high in the lower reaches of the river and only exceed WHO guide levels near the river mouth as you might expect, Figure 3.  Someone is misleading the Australian public!

Figure 3

I queried my findings directly with the MDBC.  In response, Dr Pradeep Sharma, Senior Modelling Engineer, replied, "Thanks to major investments in the salinity mitigation works undertaken in the Murray Darling Basin over the last decade, I would like to concur with the conclusion that average salinity in the River Murray has in effect improved during the last decade."

TURBIDITY

Turbidity is a measure of the suspended sediment load.  Turbidity levels generally rise with increased discharge (eg. increased rainfall).  Australia's inland river systems are considered to be naturally relatively turbid.

Since European settlement the most significant change to water quality in many inland river systems is thought to be an increased sediment input from the early years of land clearing and the introduction of sheep, cattle and rabbits.  As a result of improved management practices over recent decades, erosion is likely to have stabilized or reduced to pre-European levels. ^[4]

According to plots from data sourced directly from the MDBC, turbidity levels (NTU) at both Morgan and Swan Hill appear to be relatively stable (Figure 4).  Turbidity has been measured at both sites since 1978.  Average yearly turbidity levels have not increased over this period.

Figure 4

Mean daily turbidity levels at Morgan exceeded 400 nephelometric turbidity units (NTU) in July 1983 (Figure 5).  The relatively high turbidity levels during the second half of 1983 contributed to the high yearly average in 1983 (Figure 4).  The high levels may have been a consequence of drought-breaking rains carrying higher than usual sediment loads because of increased erosion from reduced vegetation cover as a consequence of the drought in the early 1980s.

Figure 5

During years of low mean turbidity, mean daily values for both Morgan and Swan Hill are typically in the 20-40 NTU range (Figure 6).

Figure 6

NITROGEN AND PHOSPHORUS

It is generally believed that algal blooms in inland rivers are due to elevated nutrient levels, particularly phosphorus.  While it was thought that the major sources of these nutrients was agricultural fertilisers, sewerage treatment plants and feedlots, the most recent and relevant report on the MDBC website suggested that a large proportion of the phosphorus may come from natural sources -- in particular, basalt-derived soil. ^[5]

Whatever the origin of the phosphorus, a plot of yearly average phosphorus levels (mg/l) for key sites in the middle and lower basin show levels have been stable since data were first collected in 1978, Figure 7 (data sourced directly from the MDBC).

Figure 7

High nitrate levels can be an indication of excess runoff from agricultural fertilisers.  Nitrate levels also appear to be stable for key sites, at least since levels were first measured by the MDBC in 1978, Figure 8.

Figure 8

IN CONCLUSION

On 16 July 2003, The Australian newspaper published some hard data showing actual water quality trends for the Murray River.  The article began with the claim that salinity levels in the Murray River have been halved since 1982.  However, the graph showing declining salt levels at Morgan did not accord with the title of the story, "Murray salinity tipped to rise".  The journalist, Richard Sproull, was quoting from Matthew Kendall of the Murray Darling Basin Commission who was apparently quoting from a 1999 drainage strategy report when he said that he was expecting salinity levels to rise.  According to the reports on the website, this has been the prediction since at least 1998 and it has been consistently proven wrong.  Perhaps the computer models need an overhaul?  Salinity levels at Morgan are now at pre-World War II levels.

We have spent billions of dollars over the last two decades on environmental programmes;  it should not be surprising that the condition of our rivers is improving.

Large quantities of salt have always entered the Murray River from seepage of saline groundwater.  The largest increases are usually noticed during low flow periods, for example during drought.  Given the current extended drought across the basin the low salt reading at Morgan is even more remarkable.  Why isn't this good news story being reported?

On the basis of the received evidence, instead of revering our expert environmentalists and vilifying our farming communities, we could take a lead from Bob Carter who, in his letter to the Editor of The Australian on 17 July 2003 in response to the story of 16, wrote, "That Murray River water quality is continuously improving, as shown by a halving of salinity content at Morgan since 1982, is about the best environmental news that Australians could have wished for.  It is also a tribute to the many land owners and managers who have modified their land use practices towards just such an end.  A better treatment for such good news would have been a full front-page article with the banner headline 'Murray River Saved' ".

Should a single Murray irrigator lose water allocation on the basis of the misinformation currently being promulgated by high-profile scientists from our most respected research institution, it will be a travesty of justice.

To quote Greg Easterbrook, "the Western World today is on the verge of the greatest ecological renewal that humankind has known;  perhaps the greatest that the Earth has known.  Environmentalists deserve the credit for this remarkable turn of events.  Yet our political and cultural institutions continue to read from a script of instant doomsday.  Environmentalists, who are surely on the right side of history, are increasingly on the wrong side of the present, risking their credibility by proclaiming emergencies that do not exist."

But I would go further, and suggest we have institutional failure of the highest order when both sides of politics eagerly sign up to a myth promulgated by our most respected research institution, the CSIRO.

---

ENDNOTES

1.  The preamble to the Wentworth Group's seminar document a Blueprint for a Living Continent begins with the statement, "Salinity and deteriorating water quality are seriously affecting the sustainability of Australia's agricultural production, the conservation of biological diversity and the viability of our infrastructure and regional communities."

2.  An article in The Economist on 12th July 2003 began, "The depleted Murray's salt levels are rising, leaving Adelaide, one of Australia's biggest cities, facing a big problem:  its water supply will be undrinkable in 20 years unless a way can be found to restore the river to health."

3.  For example, page 66 of Watershed:  "So just how serious is the plight of the Murray-Darling?  Doug Shears, arguably Australia's most powerful agri-businessman and head of Berri Ltd, says it couldn't be more so.  "If the deterioration over the next 20 years is anything like the last, the Murray will be unusable for anything let alone agriculture." The problem is twofold.  There isn't enough water in the system and what is left is rapidly getting brinier and brinier."

4.  Rivers as Ecological Systems:  The Murray Darling Basin.  Murray Darling Basin Commission, 2001.  pg 48.

5.  The Darling River:  Algal Growth and the Cycling and Sources of Nutrients.  R.L. Oliver, B.T. Hart, J. Olley, M. Grace, C. Rees and G. Caitcheon.  MDBC Project M386.  1999.

The Green Movement: Time to Get Serious

An address to the Victorian Farmers Federation 24th Annual Conference,
Melbourne, 22-23 July, 2003

History is replete with examples of societies allowing narrowly based interest groups to latch onto a valid issue, to present a distorted prognosis that eventually become mainstream, and in the process do great harm not only to society at large, but to the initial issue.

Society has allowed these groups to claim, and to be given the status of "representatives" of the environment on a false basis.

This process has unfolded in the Western world over the last thirty years with respect to the environment.  Activists, often with a hatred of commerce and modernity, have captured the institutions, the prognosis and the communication of environmental issues.

Many of their initial campaigns were valid and have had significant and positive impacts, for example, the move to clean waterways through the treatment of effluent.

Conservation of the environment is a growing mainstream value.  As people become wealthier and more easily satisfy the necessities of life, they naturally seek more aspirational values, such as preserving the environment.

Despite the validity of the earlier environmental actions, and the fact that environmentalism has become a mainstream value, far too few Green groups have changed.  Instead, too many remain radical, seeking to exploit environmental concerns as a means of revolutionising society and controlling commerce.  Too many have become watermelons.

Despite being fundamentally at odds with the broader interests of society, the deep Greens have gained significant influence and are doing great damage to the environment, to society and to civil society.

For evidence one need look no further than the three million hectares of forest burnt this last summer in Eastern Australia.  There is no doubt that the accumulative influence of the Greens -- closing down state forests, stopping logging of native forests, creating additional national parks, reducing controlled burning, closing access roads -- contributed greatly to this disaster.  They have now shifted their focus from forestry to farming, and are busily spinning their destructive web.

How did it get this way?

Well, society has failed to impose accepted standards of representativeness, and deep Greens have exploited our tolerance.  Society has allowed these groups to claim, and to be given the status of "representatives" of the environment on a false basis.

Greenpeace regularly makes such claims, and it is given this status in the media, the bureaucracy, with advisory bodies and in the community.  Yet Greenpeace Australia has a membership of just 51 people -- that is, only 51 people have a direct say in the policies of the organisation.  While Greenpeace welcomes donations, the activists that "own" it keep tight control over its policies and values.  WWF has a similar structure.  The Australian Conservation Foundation (ACF) is a much more open and democratic organisation, due to its conservative roots.  However, it has, over the years, become dominated by deep Green activists.

Green groups eschew institutional democracy, because democracy is slow and tedious in decision-making, forces compromise and trade-offs, and limits the power of extremists.  The ability of Green groups to be undemocratic gives them a great advantage in their dealings with democratic organisations such as VFF and our political parties.

Our society gives standing to institutions and people because they bring specialised knowledge and skills to bear on an issue.  Most Green groups have no such expertise other than political advocacy.  Few undertake research and few have scientific expertise.  For example, when Greenpeace recently employed three biotechnology campaigners -- the job description made no reference to knowledge of the science or technology, or even to the industries affected, but rather to experience in campaigning.  WWF's lead campaigner to protect the Great Barrier Reef against sugarcane farmers has a degree in opera.  The ACF's chief water campaigner has an arts degree.  And we regular see Peter Garrett -- a rock singer with a law degree -- lecturing against biotechnology.

The Green groups' sole expertise lies with political action and communication -- they are, in effect, Saatchi and Saatchi with a cause.

Yet we have allowed the spin merchants to present themselves as experts, summarising the "received" research on biotechnology, diagnosing the state of the Murray River and lecturing farmers on improving farm management.  We have allowed the spin to masquerade as science.  As outlined in detail by Bjorn Lomborg in his book The Sceptical Environmentalist, this has not only led to a gross perversion of policy priorities, but it is starting to pollute the pursuit of science itself.

We can only preserve the environment, improve our farming sector and continue to make a living on the land with rigorous, robust science.  For evidence, one need look no further than the latest big environmental campaign, the campaign to save the mighty Murray from you, the farmers.

Over the last four weeks there have been four TV "docu-dramas" about the Murray.  All had the same message, the same sources and the same actors.  My fellow panellist today, Tim Fisher of the ACF, was one of the main actors.  The ACF claims that

The mighty Murray is in crisis, and this poses a real threat to water supplies, tourism, fishing industries, regional economies and plant and animal life.

One of the main indicators was the closing of the mighty Murray mouth.  ACF states

The mouth of the Murray River closed recently for only the second time in the last 8000 years.

Well, CSIRO is on record as predicting that in a one-in-a-hundred-year drought, such we are now experiencing, the river would be dry at Albury.

But there is no need for projection.  All one would need to do is talk to a few established families on the river, such as Doug McDonald of Murrabit, who can provide conclusive evidence that the river has not always flowed steadily to the sea.

The McDonald family crosses the mighty Murray, December 1914

Another alleged indicator of the River's decline is rising salinity.

Salinity is the new sign of Satan.  While rising salinity is the chant heard from every urban barbecue in Kew, its existence in the Murray (up to the SA border) is based on spin rather than science.

Salinity Levels at Morgan

Salinity levels at Morgan in SA have not shown any upward trend since 1938 and if anything they have declined since 1982.  Indeed the MDBC admitted to this in a recent interview reported in The Australian.

Turbidity Levels, 1978-2002
(Yearly averages based on available daily means)

Another ACF claim is that the river is becoming polluted with sediment and agricultural pollutants.  Again, the evidence on suspended solids does not back up the claims.

What does the ACF recommend?  Well at least the extraction of 1,500 gigalitres, or 20 per cent of irrigators' maximum water take.  This, they say, will only deliver a "moderate" probability of restoring the river to health.  This is code for the first tranche of extraction.

As with their diagnosis of the river's ailments, their diagnosis of its cure is not supported by the evidence.  Two separate scientific panels have examined the issues on behalf of the MDBC and both concluded that "there is limited information upon which to make quantitative links between hydrology and the ecological health of the river and floodplain".

On its Website, the ACF expresses no concern or consideration for the impact its policies will have on communities and on the families of irrigators.  While they proudly advocate a precautionary approach to the environment, they express no caution with respect to the economy and the community.

What is the basis for the ACF claims?  Clearly, it is not the science, nor is it the interests of farmers.  I suspect it is a belief in the inevitable destructiveness of commerce and modernity and that the ends justify their means.

One thing is clear:  the farming community must confront the Green movement.  The Greens are developing a "victim versus villain" scenario, where they play the role of saviour.  In the latest version of this drama, farmers are the villains and the victim is Mother Nature.  They, the Greens, are going to save the environment from you, the farmers.  Already, according to the Ethical Investor magazine, farming is now our country's most environmentally destructive industry.

In short, the focus of the Green movement has shifted from forests and mining to agriculture.  It is not just the Murray River, however.  They have a comprehensive set of campaigns against the sector including,

• Biotechnology;
• Land management;
• Native vegetation;
• Biodiversity;
• Pesticides;  and
• Salinity.

The Greens have convinced large sections of the public that you -- the farmers -- are the villains raping mother-earth.

They have direct links with the fast-growing, urban-based Green parties which offer the intoxicating option to voters of being radical, but without the responsibility.  They have sway over the mainstream parties.  Simon Crean, for example, recently committed to the ACF demand of removing 20 per cent of irrigators' water.

The Greens have become ensconced in positions of influence in the bureaucracy, research institutes, advisory bodies, and regulatory agencies, and are getting paid to do it.

These organisations have become wealthy, sometimes in the extreme.  In Australia, Greenpeace, WWF and ACF alone have a combined annual revenue in excess of $30 million.  On a global scale, the combined budgets of the Greenpeace and WWF networks exceeds $1 billion.  An increasing proportion of their funding is coming from governments, corporations, international agencies and private foundations.  This means that they are even more independent of the community.

Worse, they have seduced the media and our children into believing that they are the true spokesmen for the bush.

What to do?

Develop links with real environmental groups, preferably those made up of people who understand, and who come from, the land.  Environmentalists and farmers are natural allies.  Indeed, farmers are natural environmentalists.  Many environmental groups seek to preserve the environment through modern agriculture.  These groups are often small and under funded and in the business of doing practical things rather than politics.  They get shouted out by the watermelons.  They should be fostered and supported.

When a group comes foreword demanding to be "community stakeholders", make sure that they are.  That is, require institutional democracy for the community.  This is particularly important for the many advisory boards through which government polices now impact on the agricultural sector.

Demand transparency in their dealings with corporations, with governments and, most importantly, with political parties.  Green NGOs increasingly offer political services of a non-kosher type to institutions in exchange for money and influence.

Much of their funding is coming from overseas.  For example, the funding for WWF's anti-sugarcane campaign was funded fully by US sources, particularly the World Bank and large multinational corporations.  These funders' interests lie not in saving the GBR but in securing friendly voices in the NGO movement.

If groups claim expertise, ensure they have it.  Most importantly, when they lie or distort, treat them like pariahs.  Enforce a "no lie" rule.

Be vigilant and counter them all.  Support the VFF and other groups to respond to every lie, every distortion, every campaign, and every lobbying effort.

Defend your property rights and reclaim the science.

NGOs Must Become More Accountable

A recent study by the London-based One World Trust of the accountability of international organisations, multinational corporations and non-government organisations found that Rio Tinto and Glaxo SmithKline were more accountable than NGOs such as World Wildlife Fund, Oxfam and Care.  Ironically, finishing at the top of the table was the International Committee of the Red Cross.

In Australia the Red Cross in its Bali appeal did what every other charity does.  It saw a good cause and launched an appeal around it.

Usually people just give money and trust the charity to do the right thing, an easy assumption to make with the Red Cross, as it is one of the best-run charities.  Only this time people asked where the money went and were unhappy about the answers they received.

It highlighted a central problem in the charitable sector a disconnect between how charities spend their money and why people give them money.  In Australia, the relationship between donors and charities can best be described as don't ask, don't tell.

But how has it come to this?  First and foremost, non-profit organisations lack shareholders and aggressive external stakeholders demanding transparency and efficiency.  They do not have stockbrokers and analysts expertly combing through their books.

They are governed by non-profit disclosure and fund-raising laws at a state level, but these are vague and not enforced.  The task of setting standards of behaviour and disclosure is left up to organisational insiders the board, staff and active members.  In short, no one is looking critically from the outside.  This has bred laxity, poor standards and abuse.

If a business raises funds from the public, it must provide a prospectus detailing purpose, performance targets and proposed allocation of funds.  Failure to comply with this prospectus usually means prosecution by the Australian Securities and Investments Commission.

Many charities do not even provide the basic data required by law.  For example, a recent survey of 89 NSW charities, carried out by a research organisation, Givewell, found that 37 per cent did not disclose the cost of fund-raising, including administration and marketing costs.

Another recent review of 22 not-for-profit organisations undertaken by the Institute of Chartered Accountants found:  limited reporting of objectives;  the majority failed to explain their organisational structure and decision-making processes;  inadequate disclosure of relationship with other groups;  limited use of statistical performance information;  failure to disclose investment policies;  inadequate disclosure of grant-making activities;  and inadequate disclosure of risk management approaches.

Organisations included in this survey were at the top end of the industry and included Care, WWF, World Vision and the MS Society, with a combined annual income of more than $550 million.

Treasurer Peter Costello recently addressed the theme of trust in the charitable sector.  Costello noted that charities would have to do better if they wanted to keep the public trust.  Inefficiency is corrosive of trust.  And trust is the currency of the charitable sector.

Costello perceptively homed in on the area holding back the promotion of social capital the declining levels of trust in the institutions which foster it, such as the churches and charities.

The problem for some charities in rebuilding the public's trust is that this trust has been built on myths, specifically that the sector is run by small, indigenous organisations managed by volunteers.

While many groups conform to this stereotype, the reality is that a large share of the charitable dollar is taken by Australian branch offices, or franchises, of large multinational charities like Care, World Vision, Greenpeace, WWF and Oxfam.

Charity is big business.  A Johns Hopkins University study of the charitable sector in 22 countries estimates their combined annual expenditure was $US1 trillion ($1.54 trillion).  Whether the sector likes it or not, it will have to reform if it is to survive and regain the public's trust.  Otherwise, many other charities will find out for themselves what the Red Cross discovered:  when you wear a halo and sprout wings, you hit the ground harder when you fall, because you have further to fall.

ADVERTISEMENT

WA Gets Its Share of Canberra Pie

Since Federation, the States have blamed the Commonwealth for their every budgetary woe.  Dr Gallop is at it again, blaming the Commonwealth's stinginess for the recent rises in State taxes.

Is there anything to the Premier's recent claim or is it just another attempted ball pass?

As with all things related to money and taxes, the answer is complicated, but it is mostly "no".  While the system by which Commonwealth grants are allocated to the States is rigged against Western Australia and other wealthy States, the WA Government is not being starved of revenue by the Commonwealth.

In the last State budget, the Government announced large increases in stamp duties on house conveyancing and insurance policies over the next four years.  These came on top of tax increases in each of the Gallop Government's two previous budgets.  These tax increases under the Gallop Government have increased tax receipts by around $400 million -- equivalent to 11 per cent of the State's total tax receipts -- and have pushed WA into the ranks of the higher taxing States.

The Government's official excuse for the tax hikes is the "projected low growth in Commonwealth grants to Western Australia (0.9% in 2003-04) which make up 40 per cent of Western Australia's revenue".

This however gives a distorted indication of the Commonwealth's contribution to the State's revenue.  The Commonwealth provides three basic types of grants;  general purpose grants, tied grants and competition policy payments.

General purpose grants, which make up 60 per cent of the Commonwealth Grants to the States, are given with no strings attached and can be used for any purpose.  These grants are expected to increase by 3.3 per cent in 2003-04 in WA.  While the level of growth is not high, it at least keeps up with inflation, population growth and growth in the Commonwealth's revenue.  Additional grants are made to the States for on-passing to local government, universities and others agencies.

The tied grants, as the name implies, are tied to specific purposes or transactions.  While tied grants in aggregate are forecast to decline in 2003-2004 by around 1 per cent, these cuts are not of the Commonwealth's making, nor necessarily to the State's detriment.  The main reason for the decline in tied grants is the forecast reduction in royalties collected from the North West Shelf Project by the Commonwealth and reimbursed in full to the States.  These royalties are expected to decline by $100 million as a result of the higher Aussie dollar, not Commonwealth parsimony.  There are also a range of projects funded by tied grants, such as the additional First Home Owners Scheme, that have been completed and for which no more spending is required by the States.

Indeed, the Commonwealth has actually been quite generous with the large grants tied to the WA Government's own key priority areas.  Grants for public schools, public hospitals, and home and community care are scheduled to increase by 5.8 per cent, 5.4 per cent and 8.8 per cent respectively.

Competition policy payments are scheduled to remain at last year's level as long as the State Government meets agreed reform benchmarks.  However, the Gallop Government's failure to do so to date, particularly in respect of trading hours, puts at risk these payments valued at $58.5 million.

While the Commonwealth is not duding the States, Western Australian does have a valid complaint regarding the sharing of Commonwealth funding amongst the States.  Untied grants, which have grown as a share of total State revenue -- as result of the GST and the removal of seven State taxes -- are allocated on a basis akin to welfare.  That is, the grants are allocated according to need and disability rather than growth and revenue-raising capacity.  As a result, slow-growing States such as Tasmania and South Australia get a larger and growing share of the Commonwealth pie, and wealthy and fast-growing States such as WA and Victoria get less.  Tasmania, for example, gets $1.75 dollars in grants for each $1 its citizens pay in Commonwealth taxes.  In contrast, WA gets back only 98 cents for each $1 paid to the Commonwealth.  While WA's disadvantage is not large now, it is getting worse.

The problem is not just one of fairness, it also affects growth.  The system compensates Tasmania and other States and Territories for actions that undermine growth.  On the other hand, it directs money away from States such as WA, which are growing and which need funds to invest in the infrastructure that underpins that growth.

The system really has outlived its usefulness and needs to be changed.  The problem is getting agreement on a replacement.  The Victorian, NSW and WA Governments (the States that lose from the system) recently funded an inquiry into the system in search of reform.  This, however, achieved little as the beneficiary States refused to co-operate and the Commonwealth Government decided to leave the issue up to the States.

The task is to get Commonwealth leadership on the issue.  I suspect this will only come when the States agree to critically examine not just the sharing of the pie amongst themselves, but also how to ensure greater transparency and value for money for the funds they do receive from the Commonwealth.

ADVERTISEMENT

Who are Charity Donations Really Helping?

At a recent lunch held by Anglicare, Treasurer Peter Costello delivered a sobering message to churches and charities.  That they had to lift their game if they were to retain the public's trust.

The Treasurer's remarks about the churches centered on their shameful handling of sexual abuse issues.  Costello's comments on charities were a reference to the controversy surrounding the venerable Red Cross and the millions it raised for the victims of the terrorist bombing in Bali.

The reasons for this are understandable.  When the story broke in the media, some $6.6 million or 46% of the funds raised were either being spent on projects not related to the victims or held back with the potential to be spent on other projects.  At that time only 54% or $7.7 million had gone directly to the victims of the Bali bombing.

In Red Cross' defence it has to be said that most of the money diverted to "other" projects was spent on worthy projects -- such as research for "spray on skin" for burn victims.  The funds were definitely not squandered on junkets, political activism, talk-fests, or excessive fundraising which is so prevalent in the foreign aid industry.

Nevertheless, the reaction of donors, the media, the public and politicians was savage.  There was a widespread belief that more should have gone directly to the victims.  This was predictable.  The tragedy struck home personally to many Australians.  The Red Cross' Bali Appeal offered a means of combating the sense of powerlessness that many Australians felt after the appeal.

The Red Cross's woes were increased tenfold by way it handled the scrutiny;  namely a lack of candour and openness.

What went wrong?  In short, the lack of transparency that masks the entire charity sector finally caught-up with the Red Cross.

When foreign aid NGOs, like the Red Cross, see a crisis or humanitarian disaster overseas and use the imagery as packaging for a fundraising appeal.

The Bali Appeal differed crucially from appeals in Afghanistan, Iraq, Ethiopia and countless others mounted by aid NGOs.  This time, the victims and beneficiaries were not people in a far off developing world nation;  they were Australians who were aware of how much had been raised and how much they were getting and most importantly, had access to the media.

The point has to be made that if the Red Cross has problems, which is by all measures, one of the most open and best governed charities in this country, the situation elsewhere in the industry is surely grim.

What was the most striking part of the controversy was the absence of groups like Caritas, Care, Plan, Save the Children, World Vision and Oxfam Community Aid Abroad from the debate.  None of these organisations, or the prominent public figures associated with them neither defended nor criticised the Red Cross' handling of the matter.

Disclosure standards in the non-profit sector are poor particularly relative to those applied to business and government.  If for example, business raise funds from the public, they must provide a prospectus detailing purpose, performance targets and proposed allocation of funds.  Failure to comply with this prospectus will usually mean prosecution by regulators.

They also must report to investors on regular basis against the prospectus.  Non-profits almost never do so;  indeed the Red Cross has provided more detail on their Bali Appeal, albeit belatedly, than any recent fundraising drive.  And the salient information only started appearing on the web site after the media started asking questions.  Most charities provide detail in advance and no follow-up detail on their fundraising activities.  In fact, most charities only provide promotional material about themselves none of which is objective or detailed.

Many charities do not even provide the basic data for the public to make informed decisions about charitable giving.  For example, it was recently reported a survey of 112 Victorian charities found that 57 per cent did not disclose the cost of fund-raising including administration and marketing costs.

The controversy over the Bali Appeal has for once asked people to question where the money goes when they give to good causes?  It is a question that people should be asking more often.

Into the Fast Lane

The Australian automotive industry needs to pick up its game on industrial relations if it is to survive and justify continued taxpayer support.

The car industry has come a long way over the last twenty years.  It not only produces a world class product but has carved out a niche for itself in the tough world car industry.

There is no scope, however, for resting on it laurels.  The external environment is harsh.  The car industry world-wide has over-capacity in the vicinity of 25 per cent.  The Australian dollar has appreciated by around 30 per cent against the US dollar over the last eighteen months, with many pundits forecasting further appreciation over the next year.

The Government has also announced reductions, albeit slight, in the level of assistance to the industry.  Despite these reductions, the industry remains heavily subsidised at about $2,800 per locally produced car.  There is therefore no scope for additional support from Government.  Indeed there is strong need for the industry to justify its current level of taxpayer support.

This harsh climate means that the local industry must pick-up its game, particularly on the industrial relations front, if it is going to continue to thrive and even survive.

Over the last decade the industry has moved from industry-wide system to one based on enterprise bargaining agreements or EBA's.  The shift was designed to help erode the "them vs us mentality" that historically plagued the industry as well as to give workers an incentive to accept and gain from productivity improvements and to provide management with a greater capacity to manage and compete.

My recent study of the car industry found that the shift to EBAs is not working adequately.  The study, which examined 47 EBAs amongst the four large vehicle manufacturer and 43 components manufacturers, found that only four agreements allowed for increased capacity to manage.  Twenty three, or just less than half of the EBA's examined, yielded significant reductions in the managerial capacity.  Crucially, Toyota and Holden, two of the large manufactures, had respectively, the most and the third most restrictive EBAs.

One of the key needs of the industry is flexibility to respond quickly and efficiently to change in demand and workforce requirements.  Yet some 80 per cent of the EBAs studied restricted or eliminated the capacity of firms to use other than full-time collectively organised permanent employees.  These included prohibitions on the use of casuals, labour hire, contractors or individual agreements.

Consultative committee structures, which significantly reduced the decision-making capacity of management, were found in fully one-third of agreements.  These cover crucial decision-making processes including changes to production requirements, rostering, and occupational health and safety.  Some of the biggest names in the industry including Ford, Holden, Mitsubishi, Bridgestone and Toyota had particularly restrictive committee processes.

The clear conclusion of the study was that the move to enterprise bargaining in the car industry was, in general, reducing rather than as enhancing the capacity of the industry to compete.  This auger poorly, not only for the future of the industry, but for the billions of dollars invested annually in the industry by Australian taxpayers.

ADVERTISEMENT

To Join Interest with Duty

An Address delivered at a Dialogue,
Harnessing the Self-Interest of the Private Sector to Serve Public Ends
10 July 2003

1. "TO JOIN INTEREST WITH DUTY"

Around the same time as the Pitt administration in England decided that it would deal with its prison overcrowding by sending large numbers of convicts to Botany Bay, the political philosopher Jeremy Bentham came up with an alternative solution.

Bentham proposed that a prison be constructed in London using the very latest technology.  It would be commissioned by central government and managed by a private contractor.  The father of Utilitarianism named his imagined prison "Panopticon" and he recommended that Jeremy Bentham himself be appointed as its operator.

At the end of the eighteenth century, contracting (or "farming" as it was then known) was under increasing attack from those who argued that a strong centralised state would be fairer and more efficient.  Indeed, the Utilitarians themselves were arch-centralisers.

But as a classical political economist, Bentham argued that well-written and well-enforced contracts could be used to align the self-interest of the private sector with the public interest -- "to join interest with duty, and that by the strongest cement that can be found."

Two hundred years later, contracting has made a strong return.  Public private partnerships are now being actively pursued in much of the English-speaking world and in a number of countries in Europe and Asia as well.

And once again, among those who are ideologically opposed to private provision and among those concerned with ensuring high quality public services, the question is being asked:  Are private companies capable of having a public service ethos?

There are serious difficulties with using case studies, but since so much of this debate is conducted at an anecdotal level, I begin by responding with three recent examples.  I then list what I take to be some of the underlying concerns with the involvement of profit-making firms in the delivery of public services.

Although public private partnerships are a relatively recent innovation, there is a rich history of privately provided public services and I provide a brief account of some "public service companies", suggesting that we are not without precedents in this course of inquiry.  I conclude by asking what reasons private firms might have for seeking to do public good.

2. CAN PRIVATE COMPANIES HAVE A PUBLIC SERVICE ETHOS?

September 11:  Following the deaths of 343 firemen and 21 police officers in the World Trade Center on September 11, there was an upsurge in public sentiment.  Firemen became firefighters, Norman Rockwell figurines of firefighters appeared in shops across America, and three New York firefighters were photographed raising an American flag at Ground Zero in an image that echoed the 1945 flag-raising on Iwo Jima.

A week after 9/11, the general secretary of the First Division Association (a public service union in the UK) drew upon this courage and self-sacrifice in the debate over public private partnerships:

The public service ethos is hard to define, but easy to spot.  In the USA in the aftermath of the terrorist attacks, it was emergency workers that the country turned to, not just for their practical help, but for their selfless and tireless courage which was an inspiration for all.

True.  But what of the eight paramedics who also died in the World Trade Center that day?  Three of them were volunteers who happened to be nearby.  Three were from charitable hospitals or medical centres.  Two were from private, for-profit ambulance services that were among the first on the scene.

In fact, at 9.00 am -- fourteen minutes after AA Flight 11 hit the first tower and three minutes before UA Flight 175 hit the second tower -- 17 voluntary and private units and 19 municipal units were on their way to the scene.  Two hours later 55 municipal units and 42 voluntary and private units had been deployed.

There is no evidence that the private sector was lacking a public service ethos on 9/11.  (The larger number of fatalities among firefighters was a function of their role as first-responders and does not reflect a greater sense of public service than police officers or paramedics.)

SARS -- More recently, Hong Kong hospitals have been at the forefront of the battle with SARS, with 282 deaths in that country at the latest count.  Of the 1,746 people who were infected, 385 (or more than one in five) were hospital workers.

Serco has nearly 500 support staff working in four Hong Kong hospitals, who were positioned at the front line of the fight against SARS, moving patients, cleaning wards and converting normal wards into isolation units.

Subsequent interviews with our staff reveal that they were scared, particularly in the early days when information about the disease was limited and hospital instructions were confused.  But with only one exception, our staff put on their N95 masks and went about their duties.

There is no sign that these brave people were lacking a public service ethos just because they were employed by a private sector company.

Bentham's "sincere mourner":  Being a good utilitarian, Jeremy Bentham proposed that he should be penalised for non-performance in the management of "Panopticon", including a £100 fine for each death in custody (a huge sum in those days):

Make my contractor's allowance large enough, and you need not doubt of his fondness of these his adopted children:  of whom whosoever may chance while under his wing to depart this vale of tears, will be sure to leave one sincere mourner at least.

I have always thought this to be a clever line, but in the past month whilst undertaking detailed research on privately managed prisons in the UK, I have come across a real-world example of Bentham's "sincere mourner".

In one of the PFI prisons which has suffered significant financial penalties as a result of underperformance, the leading financier, a major British bank, has appointed monitors to prepare quarterly reports on operational performance.  The consultants report to the bank's corporate finance division about self-harm and suicide intervention, anti-bullying strategies and the purposeful activity regime.

The corporate finance division of a City bank is worrying about self-harm and anti-bullying strategies in prisons.  Who is going to tell me that the profit motive cannot be harnessed to serve the public interest?

3. TRUST IN PUBLIC SERVICES

So what are the concerns with private sector involvement in the delivery of public services?  By and large, the problem is not efficiency or effectiveness but public trust.  This is an extraordinarily complicated subject and not one that can be explored fully here, so let me simplify it massively by reducing it to three issues:

3.1 PEOPLE VERSUS SYSTEMS

The first of these arises from the natural tendency of human beings to recognise and identify with other human beings.  People are inclined to trust other people in preference to institutions or systems.  And they are more inclined to trust people who work with people (doctors and nurses) than people who work with systems (managers and bureaucrats).

As a result, individual public service workers are usually more trusted than the institutions for which they work -- in the UK, doctors are trusted much more than the National Health System, judges and police officers more than the criminal justice system.  And in the age-old struggle between front-line professionals and their line managers, the public tends to side with the professionals.

This preference for people over systems is probably very old, but over the past fifty years, right throughout the Western world, there has been a marked deterioration of trust in large-scale institutions and (in some countries) an increase in trust for other people.

This is not to say that systems don't matter.  To the contrary, in a modern society they are extraordinarily important and the vast majority of the service improvements over the past few decades have come from systemic reform rather than from hiring more people and training them better.

But it is not difficult to see how you could construct a campaign around this dichotomy.  In the United Kingdom, when public sector unions have been attacking private provision using the public service ethos, they do not speak out on behalf of public sector managers and back office workers.  They speak of teachers, nurses and firefighters -- front-line professionals engaged in delivering core public services.

And when they attack the private management companies, they make no mention of paramedics risking their lives at the World Trade Center or hospital workers coping with SARS.  They speak of big business and well-paid company executives -- back office workers who are mostly engaged in the reform of systems.

3.2 PERFORMANCE VERSUS MOTIVES

The public generally believes that the private sector is more efficient than the public sector.  By and large, they don't need to be convinced that -- where performance can be measured -- the private sector delivers better outcomes than government, particularly when it is exposed to competition.

But in many public services, judgements about performance are difficult for ordinary folk to make, since outcomes are complex, contingent or inherently conflictual.  How do we know whether our fire services are delivering value for money when an event like 9/11 only comes along once in a lifetime?

In these circumstances, the public tends to rely more on the motives of people and organisations rather than measured performance.  Monsanto may be highly effective in developing genetically-modified foods, but since it is virtually impossible for me to understand the long-term consequences, I am inclined to place much greater reliance upon their motives.  So I ask myself:  if Monsanto had to choose between corporate profits and the environmental impacts of genetically-modified soy beans, would they be on my side?

3.3 PUBLIC ACCOUNTABILITY

There is also a very close association between accountability and trust.  At the most basic level, the public sector is seen as being more transparent and more open to external scrutiny.  But government is also subject to a complex system of checks and balances which relies upon the self-interest of competing people and institutions to prevent abuses of power and to force issues into the open.

Public services are also thought to be more accountable because they simplify an otherwise complex world and, in some cases, provide us with agents to negotiate with the system on our behalf.  And finally, public services are seen as part of a wider democratic system which increases the likelihood that service providers will reflect the values of the diverse range of citizen/users.

We do understand that public service professionals are also motivated by self-interest.  In the UK, they have just had protracted disputes involving firefighters and hospital consultants where the naked self-interest of these two groups has been evident to all.  But we are also satisfied that longstanding accountability arrangements and a professional service ethos will generally keep the self-interest of these people in check.

It may be true that competition and contracting result in greater transparency and more effective checks and balances, but these accountability mechanisms have not been tested often enough for the public to be convinced that that is so.

4. THE PUBLIC SERVICE COMPANIES

And yet 24 year-old paramedics sacrifice their lives at the World Trade Center, and Hong Kong hospital workers quietly go about their jobs in the middle of a SARS epidemic.  Clearly some private sector companies (and their employees) are capable of having a public service ethos.  But anecdotes are not enough.

Nor is it enough for the opponents of private provision to rely on a handful

of examples where private sector companies have failed to pursue the public interest.  I could easily counter with my own examples where self-interest has triumphed over public interest within the public sector.  (You might recall that I am the person who created the NSW Independent Commission Against Corruption.)

The real question is whether it is possible to create conditions under which private sector providers will pursue the public good in the normal course of business.  Public private partnerships are such a recent phenomenon that one might conclude there are not enough case studies to undertake such an inquiry.  But there is a long history of what might be called "public service companies" throughout the Western world (and the English-speaking world in particular) from which lessons might be learned.  Time does not permit me to do more than mention some of these in passing:

Settlement companies:  Joint stock corporations were widely used in governing the British Empire, starting with the East India Company which from 1834 until 1858 had no business other that of public administration.  Many of the early settlements in North America -- Virginia, Plymouth, Massachusetts, Connecticut and Hudson's Bay -- were corporate colonies, while others were proprietary in nature.  And at the close of the nineteenth century, southern Africa, east Africa, the Niger and parts of Borneo were at different times administered by joint stock corporations under parliamentary supervision.  Within the United States, joint stock corporations were often used for the settlement and governance of new communities and in the governance of the larger wagon trains.

Company towns:  These experiences contributed to a rich British and North American tradition of proprietary towns and suburbs -- well-to-do urban communities (Leicester Square in London and Gramercy Park in New York), nineteenth century company towns (Bournville and Saltair in England and Pullman in North America), and the garden cities of early twentieth century England (Letchworth and Welwyn).  Since World War Two, we have seen a spectacular growth in the number of private communities (gated and ungated), particularly in the United States (with Reston, Virginia having a population of more than 60,000).

Infrastructure companies:  Throughout Britain and in parts of Europe and North America, private firms played the leading role in the development of urban gas and water, street lighting and lighthouses, roads and bridges, canals and waterways, railways and tramways, telegraphs and telephones.

In both Britain and the United States, it was soon evident that the vast majority of turnpikes would not return a profit and yet local business leaders continued to invest.  One nineteenth-century American judge said of the turnpike corporations that "though the ownership is private, the use is public".

The first public railway in the world -- privately owned but public in the sense of taking passengers for a fee -- was the Stockton and Darlington Railway in northern England.  The motto of the Stockton and Darlington was "periculum privatum, utilitas publica" ("at private risk for public service").

Public services:  It is harder to summarise the diverse range of public services that have been delivered by profit-making enterprises over the years or by non-profit organisations established by groups of profit-making firms.  But one can mention naval defence, policing patrols and criminal detection, fire-fighting and ambulance services, prison management, tax collection, road management and municipal services.

I would not want to defend all of these public service companies as representing best practice.  (Nor, for that matter, would I wish to defend all of the institutions used in governing nineteenth century England and Australia.)  We must study each of these examples in its historical and cultural context and seek to learn the lessons for today.

Few of us would now seek to defend British Imperialism  and yet in the middle of the nineteenth century, the East India Company was widely regarded as setting new benchmarks in public administration.  The term "civil service" is taken from the East India Company as are a number of the fundamental principles of the Northcote-Trevelyan model of public administration, such as merit selection.

5. WHY DO PRIVATE COMPANIES DO PUBLIC GOOD?

So what are the circumstances under which private companies will do public good?  Well, as it turns out, the notion that self-interest can be made to serve the public interest is not such an unfamiliar concept after all.

This was Adam Smith's great insight -- that when markets work well, self-interested individuals will serve the good of the wider community without ever intending to do so.  Of course, there are market failures but even among the most cynical, there is recognition that society as a whole profited from the self-interest of entrepreneurs such as Thomas Edison and John McAdam.

We are also familiar with this concept in government.  After all, the checks and balances of the Westminster system do not depend on a wide dissemination of the higher virtues, but merely on the self-interest of competing ministries, competing political parties and, in federal systems, competing governments.  Out of this contest and challenge comes greater transparency and a greater responsiveness to the rich variety of interests in society.

So what are the conditions under which the self-interest of the private sector can be harnessed to serve the public good?

A. MARKETS

• When the public interest largely coincides with the interests of the consumer or service user

  When the interests of the consumer or service user are dominant, then the wider public interest can be largely addressed through taxation and regulation.  The public does worry about the profit-motive even in market transactions, but in the UK, research has consistently shown that some private organisations (such as Halifax Building Society and Marks & Spencer) command higher levels of public trust than many governmental agencies.  One only needs to recall the response of Johnson & Johnson and the Australian biscuit-maker, Arnotts, to product adulteration crises, to appreciate the impact that corporate brand and reputation can have in aligning shareholder interest and consumer interest.

• When there is large-scale risk or investment in technological innovation

  There has also been much less concern about private sector involvement in the delivery of public services when bold technological innovations are being made and where these public service companies are prepared to accept high levels of risk.

  That is the reason why the private sector has played such an important role in the development of new infrastructure.  Today, we are inclined to take reliable street lighting and urban water supplies for granted, but in seventeenth century London, these were frontiers of technological innovation.

  I well remember the first private toll bridge that I encountered in modern Britain -- a bridge over the River Wye (in eastern Wales) that was owned and operated by the same family from the late eighteenth century through until the 1970s.  One might conclude that that was a fairly safe investment, until one realises that the first two bridges the family built were swept away by floods.

  Much the same was true of the settlement companies of the British Empire -- in the early years, the risk of failure was immense, so high that governments were unprepared to commit the taxpayer's resources (and their own political capital).

B. COMMUNITIES

• When the "public" consists of a small enough community to capture the benefits of investment indirectly

  In some cases, the "public" in question is a relatively small community and investors are able to capture sufficient returns through local economic growth.  This is the reason why local landowners, merchants and manufacturers were prepared to invest in turnpikes and railways, and urban gas and water supplies, particularly in the early years.

  It is also the reason why ship-owners invested in lighthouses, insurance companies set up their own fire brigades, and the West India merchants established their own police force.

• When free-riders can be excluded and costs can be recovered for public goods

  It has often been argued that local public services must be financed out of general taxation because of the problem of free-riding.  And yet there is a rich history of company towns and private neighbourhoods where remoteness (as in the case of mining towns), the capacity to exclude (as in gated communities) or the imposition of rental charges by a residual property owner have enabled communities to overcome these this problem.

  It is debatable whether the Business Improvement Districts of North America are a form of sub-local government or a kind of private self-governance financed by a surcharge on property taxes.  This illustrates the difficulty that we often encounter with public service companies -- the general public has difficulty knowing whether they are public or private.

C. CONTRACT

• When self interest happens to coincide with the public interest

  In some cases, the self-interest of a public service company just happens to coincide with the wider public interest.

  One of the best explanations as to why the management companies have had such a major positive impact on the "decency agenda" in UK prisons, is that it was in their commercial interest.  As it turns out, it is less expensive to treat prisoners decently.

  Let me give one simple example -- in the privately managed prisons, prisoners are given the keys to their own cell.  This increased the prisoners' sense of self-worth -- their privacy and security -- but it also brought down costs since officers did not have to spend as much time locking and unlocking cells.

  This alignment of public duty and private interest is perhaps serendipitous, but it has been such a significant factor in the introduction of the "decency agenda" in HM Prison Service and for that reason, that I do not believe that it should be ignored.

• When performance incentives work

  Performance incentives are what Jeremy Bentham was talking about when he wrote of joining interest with duty.  Through a well-written and well-managed contract, government can align the public interest very closely with my private interest.  The reason why the corporate finance division of a City bank is acutely interested in the welfare of prisoners hundreds of miles away is that there are serious financial consequences if their clients fail to measure up.

  I am aware of what the economic literature says about the difficulty of writing effective performance regimes for complex services.  But in my view, it is time that Oliver Williamson got out of his office and caught up with what has actually been happening with public private partnerships in the UK over the past decade or more.

• When there is commercial value in having a reputation for public service

  A company's stock market valuation consists of the sum of its book value and its goodwill (or reputation).  Public service companies tend to have little by way of tangible assets, so that to a very large extent, the value of the company is determined by its reputation.  If it were to compromise that reputation, the company would fail to win new contracts or renew existing ones and the capital markets would quickly discount the value of its shares.

  Reputation is particularly important in public sector markets, where there are often repeat plays with the same customer.  Game theory tells us that it is in those circumstances that players will be most inclined to take a long-term view.

  Governments need to pay greater attention to the incentivising effects of corporate reputation and how that can be used to improve the quality of public services.

• When employees are motivated by a professional ethos

  One of the mistakes that critics often make is to assume that front-line workers engaged by the private sector are strongly motivated in their day-to-day activities by concerns about profit and loss.

  A couple of years ago, the Institute for Public Policy Research (a centre-left think-tank in the UK), conducted qualitative research with a number of front-line workers in public and private hospitals, in an attempt to get a better understanding of the public service ethos.

  Nurses employed in private hospitals were deeply offended at the suggestion that they behaved differently because they were not working for the NHS -- "You nurse exactly the same in the private sector";  "To me the patients were patients, that's it.  You nurse them all the same";  "It doesn't matter where we work now -- a nurse is a nurse.  You're a caring professional."

  It is this sense of public service and professionalism that motivates the nurse in a private hospital (or in a privately-managed public hospital).  Quality private sector managers understand this and seek to harness that ethos to deliver better services.

  The self-sacrifice of private paramedics at the World Trade Center and the dedication of our hospital workers in Hong Kong during the SARS epidemic come from this same sense of professionalism.

6. CONCLUSION

One of the many reasons why governments have turned to the private sector over the centuries is "plausible deniability" -- government can take the credit, but if anything goes wrong then the private sector can wear the blame.  One can think of it as a form of political risk transfer.

This is certainly one of the reasons why British governments, from Elizabethan times down to the early nineteenth century, relied on privateers to supplement the Royal Navy in times of war.  It explains, in part, why the Crown relied on chartered companies to undertake overseas trade and settlement until the late nineteenth century.

Socially responsible public service companies are tired of being used by governments in this way.  In particular, they are tired of participating in lowest price tenders, where the second half of the cost reductions can only come through cutting terms and conditions.  They are sick and tired of being forced into competitions of this kind through government procurement processes and then being criticised by government for not having a public service ethos.

There is little doubt that profit-making firms are capable of having a public service ethos.  And there appear to be a number of conditions under which the self-interest of the private sector can be harnessed to serve the public interest.

But in order to capture these benefits, governments must step away from a narrow procurement agenda and look to the much more interesting challenge of building a diverse ecology of socially-responsible public service providers.  In the UK, the Blair government has signalled that it is ready to take up this challenge.

Contractors have right to be independent

Twenty-eight percent of the Australian private sector workforce have jobs but are not employed.  They work as self employed independent contractors.  This work reality, which has emerged in the last 20 years and is common overseas, has shaken and confused tax law, labour law, social regulators and business institutions across the globe.

The general institutional reaction has been to regard independent contracting as a threat.  Tax administrators perceive challenges to their tax collecting powers.  Social welfare designers see threats to welfare systems.  Labour regulators conclude that non-employees have no protection.  Unions see a threat to their power base and employers have difficulty understanding how businesses can operate without employee command and control.  Political parties aren't sure how to react.

All these perceptions came to a head at the recent International Labour Organisation (ILO) Conference in Geneva.  The ILO is the peak world labour institution and is a division of the United Nations with an annual budget of $US480 million ($A770 million).

The ILO's core activity is the creation of international labour standards, which are statements of principle but which member countries are encouraged to ratify and apply to their respective labour laws.

The standards are created though a consensus-driven process involving government, union and employer representatives.

Since 1996 the ILO has been struggling with the issue of independent contractors and has twice failed to achieve an understanding.

The June 2003 conference considered the issue under the heading of "Scope of Employment", but in reality promoted an agenda to give labour regulators the ability to selectively ban independent contracting under the controversial dependent contractor thesis.

The international union representatives pushed the view that there exist independent contractors who because they have only one client must be "dependent" contractors and therefore must be exploited and are therefore really employees.  On the other side, the international employer group said the issue was about the integrity of the commercial contract because it is work under the commercial contract that identifies independent contractors.

In the middle, governments were disjointed.  The German government talked about the need to prevent unfair competition.  The European Union tried to push a united pro-regulation voice but had internal dissent.  The US said the argument was new to them and the Government of Guatemala wanted to regulate everything.

Most developing countries said they have trouble regulating anything and need technical and resource assistance.  The Australian government stood as a lonely voice arguing that workers should have the right to choose whether they wish to be employees or independent contractors.

Perhaps the Australian government was more aware of the issues that other nations because Australia had a huge debate over independent contractors when the tax system was reformed in 2000 (the Ralph Reforms) and largely resolved the issue to create tax equity with employees.

Queensland introduced legislation that declared contractors were employees but the president of the state's Industrial Relations System has declared the legislation a failure.  NSW and Victoria toyed with Queensland style legislation but have dropped the idea.

The ILO debate reflected much of the Australian experience.  In reality contractors are paid for performance.  They are not employees.  They are running businesses with all the associated risks and expenses.  Even if the idea of "exploitable" dependent contractors seems reasonable, when one digs deeper the issue is to do with the defence of free markets.  The commercial contract is the core legal underpinning of free markets and if commercial contracts are capable of being regulated like labour contracts then price fixing, competition destruction and exploitation of consumers become real possibilities.

The final ILO statement, backed by unions, employers and governments made a commitment to support genuine commercial contracts and genuine independent contracting.  They agreed that sham or disguised employment should be stopped.  The ILO is to create a labour standard reflecting this outcome.

Now that the peak world labour institution has reached this conclusion, the use of the dependent contractor argument as a vehicle to extend the reach of labour regulation into commercial contracts can be seen as the dangerous sham it always was.  Further, in making itself relevant to emerging social realities, the ILO has made a historic defence of the right of workers to be independent contractors if they wish.

ADVERTISEMENT

Property Rights and the Great Barrier Reef

An Address to the Mackay Rural Production Society,
3rd July 2003

INTRODUCTION

Thank you for the opportunity to speak this evening at the Mackay Rural Production Society's Annual General Meeting on the topic of "Property Rights and the Great Barrier Reef".

What do Property Rights and the Great Barrier Reef have in common?

The legitimate property rights of primary producers are currently being eroded on the basis the Great Barrier Reef is under threat from land based agriculture.

If the Great Barrier Reef, this natural wonder and Australian icon, is under threat from farmers, then perhaps farmers should be more heavily regulated.  They should pay more for their water, they should be forced to revegetate riparian areas, and herbicides (in particular diuron) should be banned.

However, I will put it to you tonight that the Great Barrier is not under threat from agriculture.  Rather the restrictions being proposed by government under the Reef Plan are, at least in part, a consequence of a clever environmental campaign that was launched on World Environment Day in June 2001.

This very successful campaign, orchestrated by the WWF, resulted in a Labour party election commitment to save the Great Barrier Reef (GBR).  It is now Queensland government policy that the GBR is in trouble and that we need a Reef Plan to protect it from agriculture.

WHAT ARE PROPERTY RIGHTS?

The study of "property rights" is most usually the concern of economists.  Economist and keynote speaker at the April Property Rights forum in Cairns, Professor Wolfgang Kasper has written that,

Property ownership is not simply the possession of a valuable asset ... Ownership of an asset -- land, machinery, some valuable knowledge, or your body, time and talents -- gives you an undefinable, open-ended bundle of rights, which are respected by others in society, at least most of the time.

... You can draw diverse benefits from it.  Property, for example land, has always given you the right to many uses, and you or others may discover new ones:  to till the land, to mine the minerals, to have the right of way, the rights to hunt, to collect timber, berries, and rain water, to let visitors run around, and so on.  Normally, people make use of these rights under voluntary contracts that put a specific right at the disposal of others for a payment.

... One important benefit of property rights is that they can serve as a surety for a mortgage or loan.  The value of these individual property rights -- whether already discovered or as yet unused -- gives savers with spare capital or the banks the confidence that their loan is secure.

... Secure property title also encourages resourceful property owners to realise new ideas in the hope that others will find the innovations useful enough to make them profitable.

Private property has been protected from opportunistic rulers since the times of the Magna Carta.  It was recognised in 1215 that every individual in the nation is protected in the free enjoyment of his life, his liberty, and his property.

... with the growing politicisation of economic life, we now observe a creeping erosion of individual property rights through regulations without compensation.  This spells danger for the time-tested and singularly successful capitalist system.  Freedom, future prosperity, justice and social harmony are at stake.

Indeed it is generally recognised by economists that secure property rights underpin wealth generation.  The principal tenant of a new bestseller by Peruvian Hernando de Soto The Mystery of Capital -- Why Capitalism Triumphs in the West and Fails Everywhere Else suggests that only the west has managed to give its citizens secure property rights.  As a consequence, today five-sixths of mankind still live in poverty.

In a just society, property rights can be interfered with (including potentially regulated away), if harm to others and the environment is proven beyond reasonable doubt.  However, the burden of proof should always be with the intending regulator and rules of evidence should be applied.

Can harm to the Great Barrier Reef be proven beyond reasonable doubt?  What is the evidence?

EVIDENCE PROVIDED TO THE REEF PROTECTION TASKFORCE

I started this evening with the contention that the restrictions proposed under the new Reef Plan are a consequence of the WWF Reef Campaign launched in June 2001.  What evidence was provided in June 2001 by WWF?

WWF is really just a multinational, public relations firm that specialises in scaring the hell and money out of people -- so it is perhaps not surprising that their report that launched their campaign contained no actual evidence for damage to the reef from agriculture.  I was surprised at the extent that our apparently naïve journalists ran with the report.  The Daily Mercury here in Mackay on 6th June 2001 had the headline, "Cane land pollution hitting reef hard", with text that lamented the slow death of the Great Barrier Reef from sediment and nutrients pouring out of our rivers ... and pesticides from cane lands;  all the time quoting the WWF report.

The introduction to the WWF report had a list of key findings, including that the Fitzroy River, "dumps more sediment into the Reef than any other River".  This key finding omitted to mention that the Fitzroy, by coincidence also drains the largest GBR catchment.

Perhaps it was what can only be described as WWF's "salute to dump trucks" that really captured the media's imagination.  The radio reports at that time, were quoting everything in dump truck equivalent.  Cane growing is a large industry so the amount of fertiliser used by the industry made for a lot of dump trucks equivalent -- the impression was that instead of applying the fertiliser to the cane, growers were dumping it on the GBR.

The report appealed to science for authority.  It continually referred to, "there is a scientific consensus that ..." and the "scientific experts say ... 28 million tonnes of sediment flow into the Reef in an average year -- that's equivalent to 3.5 million dump trucks emptying their load of soil into the Reef."

I have done a quick calculation, and given that there are approximately 37,525,000 hectares in GBR catchments, this is equivalent to 1.3 tonnes of sediment per hectare per year.  This is a very low figure;  by comparison natural loses of 2-3 tonnes per hectare per year occurred in undisturbed North Queensland rainforests.  But doesn't 3.5 million dump trucks sound impressive!

I have already said that WWF is really a PR firm, expert at scaring the hell and money and out of people.  The campaign generated about 7,000 new members for WWF.

The Queensland Government took the allegations very seriously.  They established a Reef Protection Taskforce and it was this Taskforce that was to oversee the writing of the Reef Plan.

I ended up a member of the Taskforce, representing Queensland Canegrowers Organisation.

I consider myself a real environmentalist.  If there is a problem, let us not lament the number of dump trucks equivalent, let us fix it.  Let us define the size and magnitude of the problem, the location, and then let us get on with fixing the problem.

So, I made the mistake as a Taskforce member of insisting that the problems be defined -- I wanted the detail.  Deteriorating water quality was, and continues to be a central issue.  So I suggested that the government put the water quality data on the table for scrutiny.

This suggestion did not please most other members of the Taskforce -- who repeatedly accused me of being in denial.

I am reminded of Norman Davies', who in his book Europe -- A History writes, "To be most effective, propaganda needs the help of censorship.  Within a sealed informational arena, it can mobilise all means of communication and press its claims to maximum advantage.  Propaganda is the antithesis of all honest education and information."

Could this explain why no-one was keen that the data be put on the table?

The CSIRO representative did eventually list the published papers that were purported to support the other central allegation (in addition to declining water quality) -- that there is actual damage to inshore reefs from agricultural runoff.

He listed 6 papers including the Norm Duke study of mangrove dieback in Mackay -- as examples of damage to the GBR.  Mangroves, as an inshore reef?  A rather long bow to draw.

But I am a scientist by training, and inquisitive at heart.  I enjoy ferreting about for information.  So I re-read Dr Norm Duke's report, all the time trying to reconcile it as an example of damage to inshore GBR reefs.  I also read the other five listed papers.

Purported evidence for localised deterioration on individual
nearshore reefs from land-based sources of pollution

Reference	Issue	Comment
Duke et al., 2001	Mangrove dieback in the Mackay region	No evidence provided to support the hypothesis that diuron was the mostly likely cause of the dieback
Haynes et al., 2000	Diuron detected in seagrass tissue at 4 of 16 sites and in intertidal sediment at 3 of 16 sites	Entire live plants were sampled, no evidence provided for an impact on the seagrass from the diuron
Udy et al., 1999	Increase in area of seagrass at Green Island since the 1950s as a result of increased nutrient availability	No evidence provided to support hypothesis that increase in seagrass due to agricultural runoff
van Woesik & Done 1997	Wide reefs can be assumed to have maintained favourable environmental conditions for reef growth through the past 5500 years while narrow or poorly developed reefs have experienced unfavourable conditions	Provides a method for identifying human-induced impacts, but did not identify any such impacts
van Woesik et al., 1999	Reef communities appear to lack an ability to accrete carbonates at 2 of 7 sites in the Whitsundays	Makes assertions about impacts from agriculture but does not provide evidence or scientific argument to substantiate the assertions
Wachenfeld 1995	At 4 of 14 locations markedly less hard coral on the reef flats, at least 1 of these locations has been badly impacted by recent cyclones	Concludes, "photographs ... throw doubt on the proposition that the GBR is subject to broad scale decline."

The "mangrove dieback from diuron" story has received so much publicity in this Mackay region, that I understand it is now an accepted fact that diuron killed the mangroves.

Yet, to me it is unclear why Dr Duke hypothesised that diuron was the cause of the dieback.  Only four of 21 potential sites were tested for diuron.  Traces of diuron were found in the sediment at all four sites.  This included the control site at which there was no mangrove dieback.  In other words, diuron was found at one site where there was no mangrove dieback as well as at three sites where there was mangrove dieback.  No evidence was presented to indicate that the levels of diuron at any of the sites were herbicidal.

Interestingly, a year earlier, in a recreational fishing magazine, Sunfish Newsletter, Dr Duke was quoted as having prepared an initial report with the following observations as to possible causes for the dieback:

• Encroachment on tidal lands and associated freshwater wetlands by reclamation works associated with urban and industrial expansion and construction of access corridors for road and rail traffic using levee embankments with apparently limited drainage,
• A nearby relatively large sewerage treatment facility, and
• A large rubbish disposal facility nearby.

Interestingly, the second Duke report that hypothesis diuron as a cause was released just a few weeks after the WWF report.  And interestingly, the WWF report refers to new colonies of mangroves in the Hinchinbrook and Johnstone regions as indicators of declining water quality.  There is no consistency in the arguments.

Perhaps the most outrageous claim is that of the CSIRO representative on the Reef Taskforce, claiming the Wachenfeld 1995 study as proving an impact from agriculture on the reef, when the paper actually concludes the exact opposite.  Had the CSIRO representative actually read the papers that he said provided the best evidence?

PESTICIDE IN DUGONGS

In part due to my recalcitrance on the taskforce, it was eventually shut down.  The Beattie government subsequently formed a science panel.  The science panel was to be chaired by none other than the QDPI chief scientist, Dr Joe Baker.

You might remember there was a huge amount of publicity in late January this year associated with the release of the Baker report titled, "Report on the study of land-sourced pollutants and their impacts on water quality in and adjacent to the Great Barrier Reef" and associated draft reef protection plan.

In the media release associated with release of the report and draft plan, the Premier said,

"Now the report is in, work on the Great Barrier Reef Water Quality Protection Plan will continue without arguments about whether land activities harm the Reef.  The report is the adjudicator's decision, and is based on the best available science.'

Obviously the Premier has a lot of confidence in the report compiled by his Chief Scientist, Dr Joe Baker.  The report actually provided no new information, but there was an additional allegation -- that elevated concentrations of fat-soluble pesticide residue had been found in dugongs.

Since publication of the book Silent Spring by Rachel Carson in 1962, there has been concern that pesticides can bio-accumulate in the fat tissue of animals.  Prior to 1987, organochlorine pesticides (for example, Dieldrin, BHC, DDT) were used in Great Barrier Reef catchments, including for sugar cane production.  These chemicals have since been banned due to global concerns about their persistence in the environment and capacity to bio-accumulate.

The specific allegation of pesticide in dugongs was first made in August 1998 in a media release by Senate Green's candidate Drew Hutton.  About one week before his media release a senior officer with the Great Barrier Reef Marine Park Authority (GBRMPA) phoned me with the news that a soon-to-be-published research study had found that elevated levels of pesticide residue, most likely from cane farming, were accumulating in the fat tissue of dugongs.  Media headlines followed, including Pesticide in reef creatures and Cane burning link with dioxin in dugong.

I obtained a copy of the study and found it was primarily an analysis of the type and quantity of dioxins found in the fat tissue of dugong carcasses that had been killed in fishing nets.  Dioxins are a group of organochlorine compounds commonly associated with industrial waste incineration.  The research paper made reference to a different study that had analysed the dioxins found in soils under sugarcane cultivation and commented that the cane-land soils and dugong fat samples both had elevated levels of the same type of dioxins.

Concerned by this news, I contacted a dioxin expert at the University of Queensland.  Dr Brian Stanmore informed me that the type of dioxin considered by the GBRMPA to be elevated in the dugongs was common and the least toxic of all dioxins.  Furthermore Dr Stanmore indicated that the level of dioxins found in the dugongs was less than the national average in people in the United States.  Comment was made that, "it looks like the dugong is better off than we are".  At this time I actually asked to be sampled for dioxin myself -- but they said I was too skinny to enable a good sample.

The GBRMPA study clearly stated, "All (dugong) carcasses were in good condition at the time of sampling.  All animal deaths were confirmed or suspected (fishing) net drowning."  However, instead of focusing on net fishing practices, the GBRMPA subsequently provided funding for a full investigation by the National Research Centre for Environmental Toxicology (NRCET) into the likely origin of the dioxin considered to be at elevated levels in the dugong carcasses including possible links with sugarcane production.

Two years latter, the NRCET investigation concluded that the dioxin of concern to the GBRMPA was common in soils along the entire Queensland coastline, including in regions beyond sugarcane cultivation.  Analyses of dated marine sediment cores indicated that the chemical has been present prior to European settlement in Queensland.  In other words, the dioxin is a naturally occurring organochlorine and not a pesticide residue.  There are, apparently, many naturally occurring non-toxic dioxins.

In late November 2002, I received a copy of the draft summary of the Baker report -- the report subsequently described by the Premier as the best available science.  I noticed the allegation of elevated concentrations of fat-soluble pesticide in dugongs.  I emailed Dr Baker querying this and other allegations in the draft summary.  Dr Baker replied that he would consult with the Science Panel and get back to me.  Dr Baker did not get back to me.  The report was published two months latter without any changes to the summary.

The reef pesticide research is well documented and should be understood by members of the Science Panel.  In fact, a member of the Science Panel communicated the findings from the NRCET investigation to me in September 2001.  Why, then, was the allegation of pesticide in dugongs included in the original summary report?  Why was the allegation not corrected after I brought the error to Dr Baker's attention in December 2002?

DETERIORATING WATER QUALITY

So much for this evidence of an impact on the reef or reef creatures;  but then the real threat to the GBR is deteriorating water quality?  We need a reef plan because we have deteriorating water quality?  Remember the WWF Report launched in June 2001, sediment and nutrients pouring out of our rivers.

Key water quality indicators include turbidity (a measure of sediment load), total nitrogen (nutrient level) and electrical conductivity (saltiness).  Australian State governments have measured and recorded these indicators for our major river systems for many decades with the information held in large databases.  These values should be regularly compared against national guidelines that have been developed for drinking water, aquatic ecology and irrigation.  According to the Australian Water Resources Assessment 2000 we spend $142-$168 million each year on water quality monitoring.

Trends with respect to water quality could be easily established by plotting the values for the indicators (e.g. turbidity) for particular sites (e.g. Pioneer River) over time (e.g. 1988-1998).  If water quality is deteriorating then the graph will generally resemble an improving sugar price graph.  That is, the plot will show an increase over time.

It was in 1999 that I first requested information on water quality for rivers in Great Barrier Reef (GBR) catchments.  The information was not easy to access but I persisted and eventually succeeded in getting some of this information published as a limited edition government water quality report for 8 key indicators at 18 sites in 12 catchments for two five year periods.  This report (Water quality report for catchments containing sugar cane in Queensland, 1st May 1995 -- 30th April 2000) presents the best available data on water quality in GBR catchments for recent years.  The graphs show there are seasonal trends for some indicators for some catchments but no long-term trend of improvement or deterioration.

The Queensland Government should have made this information generally available on a Website.

Instead Premier Beattie in both January and May 2003 declared that water quality was deteriorating to the extent that there has been "a fourfold increase in sediments and nutrients discharge (from agriculture) into the reef waters over the past 15 years".

This is consistent with the WWF assertion that sediment and nutrient loads are "pouring out of our rivers".  However, I have been unable to establish the basis for the Premier's assertion and this information is difficult to reconcile given the significant improvements in on-farm environmental management including the adoption of precision farming and minimum tillage techniques over the last 15 years in GBR catchments.

The message from government and WWF with respect to deteriorating water quality in GBR catchments appears to be pure propaganda.  Interestingly, my inquiries to government regarding the assertion that there has been a 4-fold increase in 15 years have been met with the allegation that I am "in denial".

Even the recent 415 page Productivity Commission Research Report, Industries, Land Use and Water Quality in the Great Barrier Reef Catchment contains much rhetoric about deteriorating water quality but incredibly, absolutely no water quality trend data.  When the first draft of the report was released for public comment I asked one of the Melbourne based Productivity Commission research officers why the Queensland Government's water quality trend data was not included in the report.  He replied that "the data is not useful".  Information that contradicts the position of the propaganda is certainly not useful information.

Are our corals just not growing so well?  Is something indeed wrong?  On the evidence, the answer must be no.  The published work from the Australian Institute of Marine Science indicates that there was a statistically significant 4% increase in coral growth during the 20th Century.  And not just on the outer reef.  The inner, middle and outer reef system all did well last century.

How is it that we are being so badly duped?  Well the propaganda, the repetition of the simple messages that water quality is deteriorating, is happening around the world.  Let us consider the River Murray, another of Australia's great icons.

I recently searched for water quality data for the Murray River, in particular graphs with trend lines that showed the deterioration in water quality as repeatedly reported in the media over the last year.

The Murray Darling Basin Commission Website is huge, but after several hours of searching I could find no graphs showing trends for turbidity (sediment loads) or total nitrogen (nutrient levels) for any localities.

I did download a report on the Salinity and Drainage Strategy -- Ten Years On, 1999.  The report that was published in 1999 shows recorded salinity levels at Morgan in South Australia from 1920 to 1999.  Morgan is a key locality just upstream of the pipeline off takes for Adelaide's water supply and its use as an indicator site emphasises the relative importance of river salinity impacts on all water users in the system.

The trend line for recorded levels (presumably seasonal or yearly averages) shows that an increase in salinity levels in the late 1970s was followed by a drop in salinity levels from the late 1980s through to publication of the report in 1999.  The improvement is attributed to salt interception schemes developed as part of the 10-year drainage strategy.  The preamble to the report clearly states, "The (Salinity and Drainage) Strategy has achieved a net reduction in River Murray salinity without jeopardising the undertakings of land protection works, new irrigation and water resource developments in three States".

Interestingly, the same graph then shows the trend line sharply increasing post-1999, i.e., the prediction is that salinity levels will increase post the Drainage Strategy.  The report does not explain which model was used to generate this prediction of deteriorating water quality.  It simply comments, "in future the increase in river salinity is expected to be mainly due to increased salt contribution from dryland areas and pre-strategy irrigation development".  Why would salinity levels increase given that the interception schemes will stay in place and additional programs to further improve water quality will be brought on line?

It is now nearly 5 years since the Drainage Strategy was published.  The prediction of deteriorating water quality has not been realised.  Following an email request to the Murray Darling Basin Commission (MDBC), I recently received average yearly values for salinity at Morgan.  I plotted these values for the last 20 years.  From this graph it is clear that the trend of reducing salinity levels has continued.  Water quality is improving at Morgan.  It is not what I read in the Weekend Australian!

The trend of improving water quality at Morgan is even more remarkable when you consider that the Basin is still in drought -- during low flow events salt concentrations normally increase.

The extent of the improvement, and extent to which the MDBC model's prediction are plain wrong, is evident when the daily average for the last six months (389 EC Units) is plotted with the prediction.  Why isn't this good news story being reported?

At which sites has there been deterioration in water quality along the Murray River?  Ticky Fullerton's acclaimed book Watershed laments deteriorating water quality in the Murray, but provides no water quality data to support the rhetoric.  Early in May 2003 I received the new CSIRO Land and Water Corporate Profile with a letter from John Williams (a member of the Wentworth group).  On the Website mentioned in the letter it states, "Salt levels are rising in almost all of the (Murray Darling) Basin's rivers".  But again there is no accompanying data to support this simple message.

Again, I am reminded of Norman Davies and how to be most effective, "propaganda needs the help of censorship".  Could this explain why the above mentioned texts, reports and Websites that are purported to concern themselves with water quality, fail to present basic up-to-date information on water quality;  is it that the real science, the real data, does not support the key message -- the propaganda?

ENVIRONMENTAL FUNDAMENTALISM

Madelaine Albright, President Clinton's Secretary of State, said in about 1998 that the environment will be the religion of the 21st Century -- and her prediction is proving correct.

Environmental fundamentalism is not about science.  However, environmental fundamentalists appeal to science for authority to give the ideology some standing.

Environmental Fundamentalism is really a social movement.

It seems not yet to have been written about in any detail, but in my assessment it assumes that the natural environment is in some sort of natural equilibrium.  This is really quite an absurd view of the world and a view that is intolerant of natural change.  For example, the ideology can't cope when a flood event destroys mangroves at the mouth of the Mackay River -- it has to blame farmers.  In the same way it blames farmers when the mouth of the River Murray runs dry during a one in a hundred year drought.

The ideology subscribes to the notions that human disturbance of the environment is always harmful;  that development should only be allowed if it has a neutral or positive impact on environmental values;  and that the "rights" of the community to preserve elements of the environment subsume other rights that individuals may hold.

Environmental fundamentalism is driving policies that are eroding your property rights through variously increasingly the regulatory burden (Fisheries Act, Reef Plan), increasing the cost of production (water charges and COAG), restricting access to resource use (Vegetation Management Act) and generally increasing uncertainly.  Uncertainty is not good for investment or business.

I have recently pondered the extent to which Australians -- farmers, journalists, businessmen -- seem to expect facts and figures in the commodity report, from super fund managers, from economists, but not, it seems from leading environmentalists.  Most people seem to completely believe what environmental scientists say -- believe their testimonial without asking for basic supporting information -- become entranced by the repetition of the simple message.

The now defunct US Institute for Propaganda Analysis (1937-1945) suggested that when we are presented with testimonials we can ask ourselves the following question:  what does the idea amount to on its own merits, without the benefit of the testimonial?

And I would add, what does the idea amount to when it is checked against the facts and figures?  For example, just perhaps, at this point in our history, both high performing super funds and sites with deteriorating water quality are the exception rather than the rule.  And just perhaps, the Great Barrier Reef is doing just fine.

Thank you.