No cure until ABC admits there's a problem

If you want a perfect display of what is wrong with the internal culture of the ABC, one cannot go past Quentin Dempster's latest book Death Struggle.

The book, by a former staff-elected ABC Board Member, manifests, with an amazing self-righteousness, a complete refusal to acknowledge, let alone engage with, critics and their criticisms.

The principle of the book is simple:  the ABC never has a case to answer.  Apart from bad management action such as the Whitlam Lecture broadcast of 1997 or creeping commercialisation, the ABC is never the problem, only its critics.  It utilises a standard progressivist tactic:  simply refuse to acknowledge as legitimate the concerns or questions which those who differ might have.  With Dempster, as with other defenders of the ABC (such as Errol Simper and David Bowman) the question, "is there something systematically wrong with the ABC's product?" is a non-question.  There is no question of ABC bias, only the malice of those offended by the noble righteousness with which the ABC goes about its business.

An obvious example of this "white-out" approach is provided in Dempster's discussion of the controversy over the ABC's 1998 federal election coverage.  The widely-covered release of my weekly studies of the prime time news election coverage of the ABC and the commercial free-to-air networks is simply not mentioned.  Yet the ABC put great efforts into trying to either stop media coverage of the releases or discredit them.  Journalists were rung up and pressured into querying sponsorship and critiquing the methodology.  Media Watch weighed with ludicrous claims of statements being "buried" in one-page press releases and made absolutely spurious inferences about (trivial) funding from a Liberal-associated trust (many of our sponsors also donate to the ALP, so what?) utterly unconnected to the media monitoring activities.

None of the commercial channels in any way attempted to suppress or discredit what the IPA was doing.  Only the ABC attempted to close down debate by ad hominen attacks.  (For the record, we found Channel Ten had the most pro-ALP coverage, though there was a remarkable shift in ABC behaviour from being the most pro-ALP to being balanced following various public embarrassments juxtaposed with the first release of our findings).  Similarly, the Bell report commissioned by the ABC into its coverage of the 1998 Waterfront dispute is mentioned:  the IPA analysis of the same dispute which found, among other things, that Bell had not even counted soundbites accurately, is not.

Early on in Death Struggle, Dempster is outraged that then ABC Managing Director Hill agreed to provide tapes of ABC News during the 1993 election for analysis by a University media department in a study sponsored by a wide range of business organisations.  The question of why business organisations might have been driven to taking this extraordinary step never seems to enter his head.

And the ABC is fully accountable, but any outside body attempting to examine its record is an attack on its independence.

On Monday 22 January, the UN Intergovernmental Panel on Climate Change released its latest report on global warming.  The coverage of this in the 7.30 Report of Tuesday 23 January reported this as if it was beyond reproach and all critics of global warming should now cease and desist.  At the BBC website, the coverage was utterly different, with equal billing given to a series of senior scientists who strongly criticise the findings on scientific grounds (no Virginia, serious, human-induced global warming with major negative effects is not a done scientific deal).  The BBC engaged in journalism, the ABC in propaganda.

Yes, the rest of the Australian media is prone to similar sins, but it is not a useful expenditure of taxpayers' funds to have the ABC intensify wider journalistic sins.  Unfortunately, the ABC has the cues of credibility without the substance of it.  When Professor Heningham of Queensland University surveyed journalists, he found they rated 7.30 Report, ABC News and Four Corners as the most pro-Labor media outlets.

It is very revealing that the ABC of the Triangle (Sydney-Melbourne-Canberra:  rural ABC and the ABC in, for example, Perth are somewhat different beasts) has consistently refused to do the obvious -- appoint a couple of presenters to prominent slots that the non-progressivist critics of the ALP would be comfortable with.  This would disarm critics at a stroke.  There is no commercial media empire in Australia that does not have more diversity of opinion expressed from within its ranks than the triangle ABC which, in the words of Andrew Bolt of the Herald-Sun talking of 3LO in Melbourne, has in its on-air staff the full range of opinion -- from red to pink.

After all, broadening the ABC's support base is common sense.  Why do they not do it?  Because to admit the credibility of alternative viewpoints is to undermine the use by the baby-boomer collective which is the functional owner of the ABC of progressivist positions as moral assets.

A prime reason why they are so attached to the ABC is precisely because it is not a broad church in that sense, because it flatters their self-conceit that all morally and intellectually serious people agree with them.  The ABC would have far less value to them if admitted the genuineness of other positions, if critics of the progressivist ascendancy were allowed on as more than occasional "guest enemies" to show the progressivists' own magnanimity.  Which is why they would apparently prefer that the ABC go under through the death of a thousand cuts and creeping commercialisation that Dempster so rails against than it become a genuine national broadcaster, representing the breadth of national opinion, or even of intellectual opinion.

Who are the intellectuals who get showcased by the ABC?  David Suzuki, John Ralston Saul, Noam Chomsky and, for old times' sake, John Kenneth Galbraith.  You don't have to be an ideologue to notice a bit of a pattern (apart from an appalling cultural cringe towards North Americans, some of whom get more exposure in Australia thanks to the ABC than they do at home).  You have to go back over two decades and The Blainey View for a serious example of our "national" (sic) broadcaster showcasing a non-progressivist intellectual.  Given the resurgence in conservative and classical liberal thought over the last 25 years, this is a ludicrous dereliction of duty.

People from the "right-wing" such as myself and the unavoidables, like Geoffey Blainey, are allowed on periodically as, in Blainey's felicitous phrase, "the guest enemy".  Otherwise, they are definitely not part of the ABC's normal service.

Many of the defenders of the ABC -- the David Bowman's, Errol Simper's and Peter Mannings' -- are perfectly happy with this pattern.  Progressivists do see their views as fully represented on the ABC, and, to the extent they notice the exclusion of classical liberal and conservative views, don't think it is a problem.  They like the ABC being a hostile environment for conservative and classical-liberal views, which is why the elementary strategy of broadening the support base by becoming a genuinely national broadcaster is not suggested, even though it is a blindlingly obvious move.

But only obvious, of course, if you think that liberal-conservative views are a legitimate part of the national debate.

The 1988 series The True Believers, the ABC's last major Australian political drama, provides an excellent example of what is wrong with the ABC.  Here was a golden opportunity to produce a great series, a mirror to ourselves, which would garner support across the political spectrum.

Instead we got one riddled with historical errors and which was, in Robert Manne's words, "almost comically biased", publicly denounced by a range of participants in the events portrayed or by their families.  Once again, taxpayer's money was effectively thieved, and the proper role of the ABC betrayed, so that ABC staff could indulge in undergraduate political preening.  And this propaganda passing as history has been foisted on school children since.

It is interesting how contradictory are the arguments, depending on circumstances, which are mounted to defend the ABC.  We are either told that left views are not represented in the commercial media (which is patently false, and an extremely arrogant attitude to public broadcasting) or that there is no problem with bias on the ABC (also patently false, and a sign, if believed, of an extremely insular attitude, of really believing that all people of intelligence and moral sensitivity believe in the same thing one does).

For the ABC, it is a matter of now or never.  If the ABC cannot be reformed, if its internal culture cannot be broadened, if the attitude displayed in Quentin Dempster self-serving and self-indulgent Death Struggle remains indicative of the core of the ABC, then clearly reforming it from within will have proved to be a dead-end.  The only alternative left will be abolishing it, for the good of broadcasting and the health of public debate generally.

Cult of a Leader

Two of the most striking female personalities of the second half of the twentieth century were Jackie Onassis and Diana, Princess of Wales.  Jackie O and Di:  we all feel we have a strong sense of who they were.

Can you remember a single thing either of them ever said?

As American commentator Camille Paglia has pointed out, the two of them were, in effect, silent screen stars.  They conveyed a sense of themselves by how they dressed, how they acted, how they looked, how they registered emotion.  But not by what they said.

In many ways, they are perfect examples of the power of the visual image in the TV age.  They anointed themselves as Queens for the TV age.

People talk about celebrity leadership, but that is not quite right.  Celebrities are not leaders.  They are a focus for public fantasies but, beyond that, stand for nothing but themselves, which is why so many of them lead such vain and trivial lives.

What modern leaders do, however, is use the techniques of being a celebrity as tools of leadership.  They still need words, but they use them less than in the past and visual techniques more.

The most complete example of that is Ronald Reagan, former actor, former President of the United States.  He was a great user of all the techniques of communication:  the look, the gesture, the occasion, the word, the tone of voice, the striking phrase.  And he was surrounded by people who worked with his understanding of those techniques.

A much-repeated story tells of American Public Broadcasting System reporter Lesley Stahl who put together what she thought was a devastating critique of Reagan's Presidency.  After it aired, a senior Reagan staffer rang her up and thanked her for the documentary.

But, the baffled reporter said, the documentary was very hostile.  Oh, was the reply, that was just the narration, no-one remembers that and the pictures were great.

Clinton, newly retired US President and a much less substantial figure (in all senses:  what phrases of his will linger apart from "I did not inhale" and "I did not have sex with that woman"?) was equally skilled in the celebrity techniques of visual leadership.

No more so than when, having been elected as a centrist new Democrat, he promptly tried to nationalise a sixth of the US economy (with his wife Hilary Rodham Clinton's abortive health care "reform"), was punished by a Republican take-over of Congress in the 1994 mid-term elections and, with startlingly fancy footwork, remade himself as a centrist, "triangulating" against both the Republicans and the Democrats in Congress.

What is particularly striking in his case is that the American public were able to distinguish between Clinton as President (who they felt had done a good job) and Clinton as person (who they came to have little time for -- and even less now:  by contrast, Reagan's reputation continues to rise).

Leadership through celebrity techniques pertains to the leadership, rather than the person.

Reagan's last great political act -- releasing the letter announcing his degenerative Alzheimers' two days before the 1994 congressional elections -- was a final statement of brilliantly timed use of celebrity techniques.

What can one say about a man who uses the official diagnosis of his own senility as a political weapon?  Except express one's awe at such use of personal tragedy to activate powerful political sentiment.

Sporting leadership remains something done within shouting distance of one's players.  So leadership there has not changed in its essentials because of the advent of the visual age, though the packaging of sporting figures as celebrity figures certainly has.

The quasi-leadership role commentators sought to impose on Australian sprinter Cathy Freeman was quite unreasonable.  The grace with which she dealt with it says much about her, the unreasonableness of the demand says much about the modern media.

Advocacy groups seek to reach people through TV, but focus on issues and organisation brand-name rather than personal leadership.

Union leadership also seeks to reach people through TV -- most obviously in the sophisticated use of media by the Maritime Union of Australia leadership during the waterfront dispute.  But their current focus on public campaigning is a reaction to decline and weakness, not an expression of strength.

The advent of such campaigning in Australia will, however, as it has done in the US, impose new demands on business leaders.

But political leadership remains the form of leadership most transformed by the demands of a visual age.  Queenslanders have just seem two great case-studies in such leadership in a visual age.

First was Premier Peter Beattie.  He did just about everything right.  He understands the first rule of scandal -- the real killer is the cover-up.  So the rorts affair was dealt with by public inquiry, public punishment and public acknowledgment of wrongdoing.

His whole visual persona is of comfortable ordinariness.  He looks perfectly comfortable being slightly ridiculous holding a piglet, floating with sharks or whatever.  Any amusement is shared with him, not against him.

In an age of spin and evasion, he is excellent at the public mea culpa.

He is very effective at dealing with questions, he looks comfortable with them.  His ability to give sparkling answers helps ensure he may be comfortable, but he is far from dull.  In fact, decent, approachable comfort is the unifying theme of his public persona.

Which, in the circumstances, was just what the electorate wanted.

The contrast with a divided alternative who couldn't even organise a photo opportunity properly could not have been greater.

The other great example of visual leadership is Pauline Hanson.  Pauline would not have got to first base if, under constant pressure from journalists and commentators who use cultural issues to parade their own virtue, mainstream liberal-conservative politicians had not caved in and vacated from seriously contesting issues such as immigration and indigenous affairs.

Hence various forms of "separate development" are treated in mainstream public debate as the only acceptable policies for indigenous affairs.  The only way one can vote for colour-blind public policy in this country is to vote for One Nation -- note the name.  This is what gives Pauline Hanson the key basis of her support (a fact for which the Liberal and National Parties have no one to blame but their own incompetence at cultural politics).

Those stifled, indeed vilified, sentiments give her an audience.  Leadership has to have substance to sustain it.  But the ludicrously over-the-top vilification of Pauline Hanson has provided her with a starring role in a grand public drama.

In a pre-packaged age Hanson speaks her mind.  She can be clumsy, awkward, inarticulate, visibly nervous.  But that just makes her seem more authentically a voice of stifled, ordinary people.

The sheer courage she has displayed has been one of the more remarkable features of their whole saga.  Indeed, she has displayed far more courage than the ravening herd of elite commentators who have screamed at her so as to shore up their own public displays of conspicuous virtue.

She has also displayed a capacity to learn on the job, something people can also identify with and admire.  The recent use of dresses as fashion statements is perfectly in synch with the use of celebrity techniques in a visual age.  It is something that those two aristocrats, Jackie and Di, understood completely.

The leadership celebrity techniques in a visual age are demotic:  as open to a fish-and-chip shop owner as an American Queen of Camelot or an English People's Princess.

Does the shift from overwhelming reliance on words to far more reliance on visual image somehow debase political leadership and political processes?  I see no particular evidence for it.

Polling does show that people identify less closely with particular political parties than in the past:  but it also shows that they are more likely to be able to pick differences between parties and more likely to follow political events.

The best book on campaigning, Samuel Popkin's The Reasoning Voter, brings out the underlying rationality in the use by voters of the information cues modern campaigning gives them.

They remember past behaviour, they judge words against actions, they infer from character to behaviour.  And there is nothing irrational in the recent election results.

In many ways, governments are far more accountable now than they have ever been in Australian history -- which is why there are no incumbent Governments, State or Federal, who were in power 10 years ago.  (The Northern Territory remains a place where they do things differently).

There is a problem with the moral vanity of journalists and commentators narrowing the range of public debate, but the One Nation phenomena is providing a (somewhat hair-raising) corrective to that.  More to the point, the power of the visual is a reality cannot be changed in a democratic polity.  Politicians must adapt to it or fail.

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Who's Sorry Now?

The truth really matters.  There is a whole world of difference between government or church officials who forcibly remove an Aboriginal child from a caring family, and officials who accept responsibility to look after a child who has been abandoned or otherwise given up by its parents.

Unfortunately, in the four years since the release of the Bringing Them Home report on the "stolen generations", many prominent people have done everything possible to obscure this crucial distinction.  Australians have been told time and again that up to 100,000 Aboriginal children were "stolen" from their families so they could be assimilated and lose their cultural identity, and these figures have been blithely repeated by news media around the world.

The reputation of many people who were dedicated to assisting Aborigines has been maligned.  Instead of being given their due as decent and humane individuals who often made considerable sacrifices to do what they thought was right, they have been portrayed as being complicit in a form of "genocide".

Much of the blame for this disgraceful situation must be placed squarely on the Human Rights and Equal Opportunity Commission, whose then president, Sir Ronald Wilson, was the main author of Bringing Them Home.

Rather than making the careful distinctions that were essential for investigating a controversial and painful issue, the report lumped everything together -- from cases where children really were stolen, to those where Aboriginal children in remote locations were sent off to boarding schools by parents who saw the benefits of a Western education.

Suggesting, oh so patronisingly, that in the latter cases parents would almost invariably have been subjected to "duress" from white officials, Bringing Them Home used the term "forcible removal" to cover all the cases it considered, supposedly for "ease of reference".  This is a bit like discussing an enormous range of offences from littering to murder, and referring to all of them as "violent crime".

But from the start it should have been obvious that, whatever their motives, those who have been misrepresenting the "stolen generations" issue were playing a particularly dangerous game.  If they really want Australians to reflect on the many wrongs that have been inflicted on Aborigines since European settlement, it is essential to offer only accounts of the past that are scrupulously honest, accounts that cannot be challenged or dismissed.

But the temptation for moral posturing and political brow-beating on Aboriginal issues overcame good sense long ago.  As bits and pieces of the truth about the "stolen generations" have emerged, first in court cases, and now in yesterday's Courier-Mail story about Dr Lowitja O'Donoghue, many Australians are probably thinking that it is all a con, just like the "secret women's business" of Hindmarsh Island.

This would be unfortunate.  Although the numbers are far less than those claimed, there can be no doubt that at various times and places over the past century, some Aboriginal children were wrongly taken from families who were both willing and able to care for them.  And even where neglect or mistreatment gave authorities no alternative but to place an Aboriginal child in foster care or an institution, some removed children suffered serious abuses, including acts that were criminal even by the standards of the day.

Nevertheless, perhaps it is time to bring closure to this whole sorry issue.  The Human Rights Commission and the "stolen generations" industry should apologise to all Australians, Aboriginal and non-Aboriginal, for the enormous damage their misrepresentations have caused.

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There is still time to get it right

The lure of Pauline need not spell the ruin of the Howard Government or of economic reform.  There is still time and scope for the Coalition to craft an agenda, which is consistent with its basic philosophy, differentiates it from the Labor Party and the parties of the Left and yet addresses the many valid concerns of voters attracted by One Nation and rural Independents.

The task is not to adopt One Nation or it leaders, but to claim its ground and drive a wedge between it and the other parties.

The first step is to stop the demonising of One Nation and Pauline Hanson.  She may be a spiteful, ignorant populist but so are a large number of other politicians, commentators and so-called experts.  She is less spiteful than either Philip Adams or Bob Ellis, is no more ignorant of economic issue than Robert Manne and is no more populist than Bob Brown or Bob Katter.

More importantly, by demonising One Nation, one is alienating between 10 and 40 per cent of many rural electorates.  These people are not racists, fools or second-rate citizens.

The Howard Government must, in addition, realise that One Nation voters cannot be simply bought.  Richard Court tried and failed.  Over the last six years, the Court Government, under the skilful guidance of Hendy Cowan, undertook a huge rural spending spree aimed at buying the One Nation vote.  The result was a landslide loss to an extremely urban-centric ALP on the back of One Nation preferences.  The Howard Government has already pumped money into the bush without many thanks.

The fact is, One Nation's appeal is primarily cultural, not economic.  Its economic policies, with one major exception, are identical to those of the Greens and the Democrats.  As such, One Nation provides nothing unique on the economic front.  Surely, if people are primarily interested in stopping globalisation and economic reform, they would vote for one of those culturally kosher parties.

The one exception is tax and spending.  One Nation is a small-tax, low-spending party (for budget sector spending), whereas the other parties of the periphery are high-tax and big spenders.  This is not surprising as One Nation harks back to an era -- before Whitlam -- when Australia had the second-lowest level of taxation and budget sector spending in the OECD.  Surely, a Coalition government should feel comfortable in coveting this ground.

Clearly, Hanson's appeal comes mainly from her gutsy defence of conservative social values.  She may be inarticulate, simplistic and just plain wrong, but at least she is willing to stand up to the urban elite and express the values of rural people.

What would such a agenda include?

The Howard Government should jettison its tax-and-spend policies and champion small government.  It has put in place a GST which is sucking up more money than ever expected.  Its much heralded income tax cuts did no more than give back a little bracket creep.  And it has jacked up taxes on petrol, booze and smokes under the guise of tax reform.

As a result, the tax take measured as a share of GDP is the highest in history and, despite large increases in spending, the government has built-up a large surplus.  Rather than squander these surpluses on pork barrelling, it should give it back to taxpayers in the form of income tax cuts and lower petrol excises.

The Coalition should renew its commitment to reducing red tape.  It has allowed the ATO to design the BAS statement as a fishing exercise and to chase the shadow economy into every niche and cranny of the economy.

It should eliminate the BAS statement, recognise that the shadow economy will always be with us as long as the top marginal tax rate exceeds 50 per cent and put the ATO on a tight leash.

It should become the champion of national sovereignty.  Australians are rightly concerned over the continual erosion of national sovereignty by the secretive signing of international treaties.  This process has unnecessarily transferred many vital decision-making process to unaccountable and undemocratic foreign groups.

This tendency can be tamed with a constitutional amendment at the next federal election requiring Senate ratification by a majority of two-thirds of all treaties before they have any standing in Australian law.

It should become the champion of colour-blind government.  There has been an excessive tendency to provide government assistance on the basis of race, ethnicity, sex and age rather than need.  The Government should begin the task of winding this back and a good place to start would be ATSIC.

This organisation is neither representative of indigenous people, nor is it effective in addressing their needs or reconciling differences between Australians.  If this is too hot for the Liberals, the Nationals should grab it with both hands.

The Howard Government should address the structural problems of Telstra.  Years ago, when Telstra was being corporatised and readied for sale, it should have been split up, with its monopoly element -- the local loop -- separated from the rest which would then be opened to competition.  This split was, however, blocked by the then Telecommunication Minister Kim Beazley to placate the unions.

As a result, we have the ACCC micro-managing Telstra and the telecommunications industry and the only potential competitor in the local loop -- Optus -- is about to exit the game.  The solution is clear.  Do it now;  separate the local loop and sell the rest.

Many other initiatives are ripe for consideration, including the Business Council proposals aimed at slowing the flight of businesses offshore;  introducing laws that require compensation for loss of property rights, particularly for environmental purposes;  and easing restriction on immigration while limiting their access to welfare further.

In short, the Coalition should treat the setbacks in WA and Queensland as a wake-up call to go back to its basic philosophy and craft a new conservative-liberal coalition committed to open markets and a tolerant national culture.

If George W. Bush can do it in the United States, surely John Howard can do it here.

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A Chance to Revisit the Dream, Not the Nightmare

Bill Clinton's last days in office were an unintended gift to George W. Bush.  The outgoing President made it so much easier for the new President to establish his moral authority, despite the controversy surrounding his election.  In a final spasm of the reckless self-indulgence that blighted his presidency, Clinton made off with White House furniture and china, and granted outrageous pardons to lawbreakers under the most questionable of circumstances.

Even Mr Clinton's mates were appalled.  Last Sunday the New York Times, a bastion of left-liberal thinking, editorialised about the "national need to come to grips with the wreckage, both civic and legal, left by former President Clinton".  These were exactly the sentiments that Clinton's opponents had been expressing for years, to the scorn of the liberal elites.

Clinton is a child of the 1960s, and he embodies the excesses of that turbulent decade.  His neglect of propriety and restraint, and his indifference to the consequences of his actions brought him undone;  as they did to many other baby-boomers who also thought they could extend their adolescence into middle age.

Of course, George W. Bush is a baby-boomer too.  And in the past, he also led a dissolute life, although he reformed himself before taking public office.

But the new President's take on the cultural revolution of the sixties is quite different to that of his predecessor.  One of the most important influences on his philosophy of "compassionate conservatism" is a book by social critic Myron Magnet, called The Dream and the Nightmare:  The Sixties Legacy to the Underclass, which Bush read soon after it was published in 1993.

Magnet pointed out that the cultural revolution of the 1960s was essentially a creation of the privileged and educated -- the "haves" as he called them -- who hoped to achieve two related kinds of liberation.

The first was the honourable goal of political liberation for the "have nots", the poor and the black.  It was guided by worthy democratic ideals, the realisation that poverty and racial discrimination still disfigured American society, which would have to become more open and inclusive.

The second was a personal liberation.  The "haves" wanted to free themselves from what they saw as the shackles of middle-class values relating to the family, work, and the gratification of desire.  To them, mainstream American culture was repressive, hypocritical and destructive, underpinning an unjust society which oppressed its own citizens and those of the Third World.

These notions did not remain confined to the counterculture, but spread into the mainstream, particularly as the young radicals grew up and took positions in the universities, the media, and other opinion forming institutions.

Magnet argued that the union of political and personal liberations had a terrible effect, especially on those it was most supposed to help.  Instead of empowering the "have nots", it played a major part in creating a large urban underclass.

By constantly emphasising that the poor were victims, the "haves" made it ever less likely that the disadvantaged would take responsibility for improving their own lives.  The remade culture of the "haves" denigrated the very values that would assist the "have nots" economically and socially -- the "bourgeois virtues" of deferred gratification, hard work, sobriety, and the like.

Furthermore, the new culture permitted -- and even encouraged -- behaviour that "when poor people practice it, will imprison them inextricably in poverty".  Scions of the upper middle class could experiment with alternative life styles or dabble in delinquency, confident that when it all ended in tears, a network of family and friends would pull them back up.  Yet when ghetto girls in their early teens got pregnant, or got hooked on crack cocaine, there would be no such help.

Magnet gave a delicious twist to the bleating refrain "it is all our fault".  "Yes it is", he was saying, "but not in the way you pretend".  The devastation was largely caused by "elite, mainstream culture, which underwent a series of convulsions that left it communicating to the poor exactly the wrong message and the most self-destructive values".

But because their commitment to social justice gives them their sense of self-worth and moral superiority, the left-liberal "haves" refuse to acknowledge the wreckage that has resulted from their failed programs for liberation.  To them, Magnet's account is anathema.

So while Bush's endorsement of the role of The Dream and the Nightmare in crystallising his own thinking has brought the book to a much wider audience, it has also brought opprobrium from the "progressives".  As one commentator put it, Magnet is a "cultural hawk" and an "atavistic adviser" who harked back to a "bygone Victorian age", when "the poor knew their place".

Neither Magnet's analysis nor Bush's interpretation of it can be portrayed as a plan by economic rationalists to strip the state down to bare essentials, absolving it from all obligations to the poor and the marginalised.  They are not Thatcherites, claiming that "there is no such thing as society".

Bush acknowledges that government "has great responsibilities for public safety and public health, for civil rights and common schools".  But these responsibilities mean directing assistance so as to encourage people to take charge of their own lives, and facilitating a sense of civic participation in the nation as a whole.

As he made clear in his inauguration speech, Mr Bush will use the prestige of a revitalised presidency to stress four virtues -- "civility, courage, compassion and character".  A bracing antidote to the greed and sleaze of the Clinton years.

Submission to the ACCC Inquiry into Telecommunications Price Controls

Submission

We understand that the Commission is soon to report to the Government on telecommunications price controls and that the deadline for submissions has passed.  However, given the smallness of the window for submissions, the intervention of the holiday period and the importance of the subject, we request that the Commission take the following short submission into account in its final deliberations.

GENERAL

Price controls ought always to be a measure of last resort and maintained for as short a time period as possible.  Their distorting and inequitable effects are well known and their long-term existence is an admission of policy failure.  It was intended that these controls be removed expeditiously and that they should be structured and administered to achieve that end.

What we now have is not just 'belt and braces' but two price belts (retail price caps and sub caps) and two sets of competition braces (Parts 111A/1V of the Trade Practices Act and Parts X1B and X1C of the Act, including wholesale price control).  We have suggested elsewhere that we could dispense with one set of braces (Parts X1B and X1C) without any loss of trouser support.  We think that we could also get rid of the two belts (the retail price caps and sub caps) without serious adverse effects and with some significant benefits.

A regime where all the major wholesale prices are controlled as well as 75 per cent of the retail prices seems to denote a certain timidity and an associated unwillingness to allow market forces to operate at any level.

Having said this, we commend the draft recommendations of the Commission to remove at least part of one belt.

MONOPOLY

Much of the Commission's reasoning in support of retaining the bulk of the price controls is that a Telstra monopoly continues to exist;  or, more precisely 'monopoly characteristics' continue to exist.  In turn this rests on the presumed persistence of some natural monopoly characteristics.

Natural monopolies are hard to find and there is a respectable argument that none exist.  In this case, the liberalisation of the market, technological advances and normal entrepreneurial activity by large and small competitors has, in a few years, substantially narrowed what was once thought to be unassailable market dominance by the incumbent.  Competitors have entered the higher return areas first.  This process continues.

The only real and enduring monopolies are those conferred by governments.  These have a long and dishonourable tradition from the salt monopolies granted by medieval monarchs to the industrial monopolies enjoyed by government-owned enterprises in coal and transport in the 20th century.  Even these tended to collapse eventually under the weight of their inefficiency.

There is a degree to which the current persistence of monopoly in telecommunications in Australia can be attributed to government interference.  The imposition of low returns for certain services discourages entry.  If it is correct that the setting of unrealistic access and retail prices prevents entry then we may have a government-perpetuated monopoly in, for example, the local loop (albeit imposed on an unwilling monopolist).

Certainly, the unwillingness of Cable and Wireless/Optus to offer local connections on a scale commensurate with their network seems to support the thesis.  Indeed, much of the attention the Commission devoted to protecting the CWO pay television interests several years ago was ultimately focussed on the need to give CWO the opportunity to roll out its cable network to the bulk of homes so as to compete directly with Telstra in the much more important telecommunications market.  CWO has been given a lot of protection by the ACCC and could have been expected to enter the local connection market much more vigorously.

The Commission's paper, in discussing the monopoly characteristics appears to mix causes, symptoms and results.  Brand name and incumbency are not natural monopoly characteristics as they are not permanent.  Nor are dominance and pricing independence, which simply constitute a state of affairs, which may or may not persist and, in this case, is seen to be eroding.  Concentration measures are less relevant when a market is opening up as rapidly as this.  Even declaration of services by the Commission is only a judgement at a certain point in time.

Equally, a large market share does not preclude highly developed competition and contestability.  This would be 'effective competition'.  We need to bear in mind that the size of many of the competitors relative to the incumbent and the speed and diversity of technological change implies a capacity to exploit commercial opportunity in a way not historically characteristic of this sector.  Nevertheless, we will not ultimately arrive at perfect competition;  we need to consider the tolerable degree of imperfection.

We believe that the monopoly elements of this market are breaking down rapidly.  Competition both over the wires and through other modes is both actual and potential for all of the services covered by the retail price controls.

The existence of the Part IIIA access provisions would be sufficient to encourage or require good behaviour on the part of the incumbent.  In persisting with numerous controls the Government runs the risk of itself perpetuating bottlenecks and the elements of monopoly they bring about.

INSTRUMENTS AND OBJECTIVES

The assertion that removal of most of the current price controls would not lead to the unbridled play of monopoly power by Telstra does not dispose of the matter.  The price and other controls are part of a hopelessly confused matrix of policy objectives and instruments and monopoly is only one of the concerns.

The Commission states that low-income groups and rural areas are a principal focus of this review.  These are equity concerns (broadly speaking) rather than concerns with monopoly/efficiency.  Moreover, the price controls of various kinds on local calls, line rentals and for low spend consumers have little to do with the exercise of monopoly power although they do incorporate efficiency requirements over time.

The result of the application of this mixture of disparate instruments (caps) is what would be expected.  They conflict.  The individual and overall result is something of a lottery.  Some of the adverse consequences are:

• There are efficiency losses from lower than cost prices for access and for some services.
• This gives rise to distorted investment (the whole community suffers the loss) and massive cross subsidies (paid by users of other services, many of whom may not be well off).
• Poor people in the metropolitan areas subsidise the services of well-off people in the non-metropolitan areas.
• Struggling business users of services subsidise wealthy residential users.
• Poor, intensive users of services subsidise wealthy, light users (who have access to business lines).

The equity results of the use of the controls are as uncertain as the efficiency results.

All in all, this is not good policy.

And when we take into account that many of the reductions in prices in recent years would have occurred anyway under the pressure of competition, these controls begin to look redundant and perverse.  The efficiency of these controls in achieving their stated aims is very much open to question.

We believe it is time to progress to a simpler regime.  In particular we agree with the thrust of the Commission's thinking that the equity concerns are poorly addressed by the differential pricing of services.  These concerns are better and more transparently met through the tax and transfer system.

Incidentally we do not agree that industry funding is the right way to go.  The less wealthy would still be contributing to cross subsidies through charges for the services they use.  The only purpose served would be the rather contemptible one of hiding this implicit form of taxation from public and parliamentary scrutiny.

THE COMMISSION'S RECOMMENDATIONS

The Commission's recommendation to remove most of the sub caps is therefore welcome in that it removes a series of distortions without much affecting overall equity.  We agree that it should benefit regional and intensive users.

But we believe that the Commission is being too timid in freeing the market as this sector matures.

We would argue that all of the sub caps could go, including the 22 cent local call.  Under the access provisions, competitors to the incumbent are already offering lower local call prices.  Removal of the controls might also encourage investment in new facilities in the regions.

We would also argue that the broad price controls be removed, not just the controls on charges for leased lines and mobile other than fixed to mobile calls, as recommended by the Commission.  We believe that there will be sufficient competition to continue to generate price reductions in line with costs, although we do think it is a leap of faith to assume that productivity in this sector will continue to proceed at current rates.  The need for such a bold ex ante assumption illustrates one of the major weaknesses of the control regime.

Furthermore, the difficulty with partial change to a set of controls is that the prices and cross-subsidies are created and adapted as a set.  STD and IDD markets appear to be very competitive with returns in both declining dramatically in the last 3 years.  Even fixed to mobile services do not appear to justify price control.  But removal of these services from the bundle leaves nothing left with which to subsidise local calls and line rentals.  This need for cross subsidy almost necessitates the conclusion on the (non) competitiveness of mobile, STD and IDD services.

At the very least, removal of the two elements proposed by the Commission suggests a need to look closely at the CPI minus figure again as they presumably reduce the cross subsidy pool.

We also need to consider the dynamic of a very fast changing sector.  Further competition is developing and will develop well within the time frame allowed for the next phase of control envisaged by the Commission.  The controls would retard this.

CONCLUSION

If we were to stand back and consider what sort of new regime we would put in place now if no regulation currently existed, we do not believe that we would install the complex and restrictive apparatus that would remain if the Commission's draft recommendations were accepted.  They are likely to perpetuate the bottlenecks they are supposed to remove.

We continue to believe that this sector, including its consumers, would be best served with much lighter-handed regulation through the general competition provisions of the Trade Practices Act.  As the Commission states, there is 'at best overlap and at worst conflict' between the control regimes.

Much of the price control is directed at equity concerns which are more fairly dealt with through the tax and transfer system.

Accordingly, we would favour the complete abandonment of the price caps including the 22 cent local call and the local call parity.  Extensive controls at the wholesale level would persist.

Rebalancing could not take place instantaneously and some transition period would be required.  We suggest that effort of this kind, directed to planning and implementing the end of controls, would be more fruitful than administering their continuance for an indefinite period.

Lessons from the California Energy Crisis

The energy crisis in California should ring alarm bells in Australia, though not for the reason commonly suggested.

California -- a state of 34 million people and the centre of the new high-tech world -- has been racked by black-outs, rising electricity prices, and bankruptcy amongst energy generators and wholesalers over the last year.  This has resulted in the State Government putting into place emergency rationing, bailing-out bankrupt distributors and contemplating entering the electricity business.

The critics, both in the US and Australia, have been quick to blame the crisis on privatisation and deregulation.  Privatisation, however, has played no part in the crisis as the Californian electricity industry has always been in private hands.  Deregulation is also not the cause.  The crisis would have arisen under the old regulatory system.  Moreover, the political micro-management of California's utility companies can hardly be called deregulation without twisting the meaning of the word beyond recognition.

The underlying problem in Californian is faulty regulation.

First and foremost, there has, effectively, been a ban on the construction of new generation capacity.  Over the past two decades California regulators have blocked new construction, arguing that renewable energy would pick up the slack, that "negawatts" -- activist jargon for subsidised energy conservation -- was preferable to "megawatts," that minimising new emissions was more important than generating new electricity and that the BANANA army ("Build-Absolutely-Nothing-Anywhere-Near-Anybody") must be heard.

During the 1990s, electricity demand in California grew by 12 percent, while supply grew by 1 percent.  It is a simple fact;  you cannot go on obstructing the building of new capacity for years on end in a growing economy without eventually experiencing black-outs.

The same ideology is beginning to prevail in Victoria, as witnessed by the impediments put in the way of the proposed electricity transmission line from Tasmania to Victoria.

Second, the wholesale cost of electricity in California has skyrocketed thanks to the regulatory bias in favour of so-called "clean" energy.  Virtually all additional capacity over the last two decades in California has been in renewable and gas-fired power stations.  As a result, the State is inordinately dependent on these two high-cost sources of fuel.  This dependence was made much worse by the explosion in the natural gas price -- up by 600 per cent -- since November last year.

Again, one can see the signs of a growing policy bias -- no mater the cost -- in favour of so-called "clean" energy.

Third, the Californian government prevents wholesalers from passing costs on to consumers.  The Californian regulators have mandated a maximum retail price of 6.5 cents per kilowatt hour, irrespective of the underlying cost.  As a result, generators have had no incentive to build new plant and, with the rise in natural gas prices, electricity wholesalers and generators have been haemorrhaging red ink.  Additionally, consumers have had no incentive, or even recognition of the need, to conserve electricity or build new plant.

Thankfully, Australian governments, as part of the national electricity market, are moving away from fixed retail prices to market-determined rates.

The California energy crisis has lessons for Australia, but it is important we learn the right ones, otherwise we may hasten down them same path as they.

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Illusions of Tribal Culture

At first glance, it seems terribly contradictory.  The good folk who get so worked up about corporal punishment in schools are often the very persons who sing the praises of Aboriginal customary law, under which delinquents were speared in the leg.

It is the same story with many other practices.  People who are contemptuous of the prerogative of governments and corporations to withhold secrets from the public are usually very keen to ensure that tribal "secret business" is kept hidden from outsiders.  And those who exhort Christian churches to ordain women priests seem quite unfazed about the strong gender restrictions on religious advancement common in indigenous societies.

But these responses appear inconsistent only if we assume that the individuals expressing them are primarily concerned with equity and human rights.  In fact, their motivation frequently lies elsewhere, in the resentment that many educated members of the middle class feel towards their own society, and their corresponding idealisation of cultures that seem to offer an antithesis to all their frustrations about the modern world.

These kinds of attitudes have a very long history.  In the first century AD, authors such as Tacitus and Seneca held up the simple virtues of the Germanic tribes as a reproach to the degeneracy of contemporary Roman life.  And as the Australian anthropologist Roger Sandall waggishly suggests, the invention of the wheel in ancient Mesopotamia was probably soon followed by loud calls "for reinstating the holy pedestrianism of the past".

Westview Press in the United States has just published Sandall's book, "The Culture Cult", an incisive collection of essays on "romantic primitivism" and "the unending revolt of the civilised against civilisation".  Though witty and learned, the book is unlikely to find much favour in university anthropology departments, which it characterises, with some justification, as refuges for people who prefer shamanism to science.

Unlike the majority of contemporary anthropologists, Sandall is strongly opposed to cultural relativism, the doctrine that although cultures may differ widely, they are all equally valid frameworks for human living.  (In practice, many of his colleagues, as well as other members of the intelligentsia, cleave to a modified form of the doctrine, in which one culture -- that of the West -- is somewhat inferior to all others).

In uncompromising terms, he asserts that there is "a Big Ditch" between the tribal and modern worlds.  The current fashion of pretending that we can "mix 'n match", indiscriminately blending appealing aspects of tribalism and modernity, is a dangerous illusion.

Indeed, many of the most appealing elements of indigenous cultures have little to do with the reality of tribal life, either now or in the past.  Rather, the "wise ecologists", "mystical sages" and "pacifist saints" from which we supposedly have so much to learn are essentially projections of our own fantasies, the outcome of what Sandall -- with the cartoon epic Pocahontas in mind -- calls "Disneyfication".

The Disneyfied portrait of tribal life can only be sustained by selectively editing the anthropological record, leaving out all the excesses, or always blaming them on contact with Europeans.  Unfortunately, many contemporary anthropologists go along with this deception, pretending that brutal oppression or endemic violence or cannibalism rarely existed in the tribal world.

Anthropologists who seriously challenge this rosy picture often suffer the wrath of their colleagues.  When the Australian anthropologist Derek Freeman showed that Margaret Mead's account of free love and communal bliss in Samoa was a fiction, the American Anthropological Association organised an extraordinary program of denunciation against him.  A similar campaign is currently being waged against one of America's most famous anthropologists, Napoleon Chagnon, whose portrayals of Amazonian Indians as ferocious warriors has deeply upset those who believe in the harmony of tribal societies.

Of course, it could be argued that the practitioners of tribal customs were long regarded with contempt by Westerners, and that the current enthusiasm for their ways goes some way towards redressing the balance.  If it were simply a matter of restoring lost self-esteem to peoples whose dignity was unjustly derided, there would be little cause for complaint.  Certainly, the formerly widespread belief that indigenous peoples were intellectually inferior and incapable of mastering Western knowledge is completely false.

But as Sandall argues, illusions about tribal cultures can cause real damage to indigenous people themselves.  They are being conned into thinking that they can retreat from a thorough-going embrace of the modern world, and still attain a long and healthy life, prosperity, civil rights and all the other benefits of modernity that they desire.

Unfortunately, rule by elders or chiefs, non-market economies and collective property ownership, and beliefs in a world governed by mystical and magical forces seldom lead to the culturally rich and harmonious Gardens of Eden of popular imagination.  As Sandall unsentimentally puts it, "if you want to live a full life and die in your bed, then civilisation -- not romantic ethnicity -- deserves your thoughtful vote".

To the sensibilities of the contemporary intelligentsia, this is outrageous.  But it would have seemed unexceptional to the Aborigines who struggled for equality in the days when it was denied them, to men like William Cooper or John Patten.

And little more than a quarter of a century ago, the late Charles Perkins penned words that could have come from Sandall himself, writing that traditional Aboriginal culture "is in some ways incompatible with western society.  The two just really can't go together".  What Aboriginal leader would dare say this now, unless with the proviso that it is Western society that should be rejected?

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A Fine Year for the Self-indulgent Whine

If you want a perfect display of what is wrong with the internal culture of the ABC, one cannot go past Quentin Dempster's latest book Death Struggle.

The book, by a former staff-elected ABC Board Member, manifests, with an amazing self-righteousness, a complete refusal to acknowledge, let alone engage with, critics and their criticisms.  We are well into the land of opinions as moral assets which only moral cretins and fools disagree with -- so no conversation with them is required.

The principle of the book is simple:  the ABC never has a case to answer.  Apart from bad management action such as the Whitlam Lecture broadcast of 1997 or creeping commercialisation, the ABC is never the problem, only its critics.  It utilises a standard progressivist tactic:  simply refuse to acknowledge as legitimate the concerns or questions which those who differ might have.  With Dempster, as with other defenders of the ABC (such as Errol Simper and David Bowman) the question, "is there something systematically wrong with the ABC's product?" is a non-question.  There is no question of ABC bias, only the malice of those offended by the noble righteousness with which the ABC goes about its business.

An obvious example of this "white-out" approach is provided in Dempster's discussion of the controversy over the ABC's 1998 federal election coverage.  My widely-covered release of weekly studies of the prime time news election coverage of the ABC and the commercial free-to-air networks is simply not mentioned.  Yet the ABC put great efforts into trying to either stop media coverage of the releases or discredit them.  Journalists were rung up and pressured into querying sponsorship and critiquing the methodology.  Media Watch weighed with ludicrous claims of statements being "buried" in one-page press releases and made absolutely spurious inferences about (trivial) funding from a Liberal-associated trust (many of our sponsors also donate to the ALP, so what?) utterly unconnected to the media monitoring activities.

None of the commercial channels in any way attempted to suppress or discredit what I was doing.  Only the ABC attempted to close down debate by ad hominen attacks.  (For the record, we found Channel Ten had the most pro-ALP coverage, though there was a remarkable shift in ABC behaviour from being the most pro-ALP to being balanced following various public embarrassments juxtaposed with the first release of our findings).  Similarly, the Bell report commissioned by the ABC into its coverage of the 1998 Waterfront dispute is mentioned:  my analysis of the same dispute which found, among other things, that Bell had not even counted soundbites accurately, is not.

Early on in Death Struggle, Dempster is outraged that then ABC Managing Director Hill agreed to provide tapes of ABC News during the 1993 election for analysis by a University media department in a study sponsored by a wide range of business organisations.  The question of why business organisations might have been driven to taking this extraordinary step never seems to enter his head.  The problem is never the ABC, only its critics.

And the ABC is fully accountable, but any outside body attempting to examine its record is an attack on its independence.  The self-serving unctuousness is risible.

But this self-serving unctuousness is precisely what is wrong with the ABC.  On Monday 22 January, the UN Intergovernmental Panel on Climate Change released its latest report on global warming.  The coverage of this in the 7.30 Report of Tuesday 23 January reported this as if it was beyond reproach and all critics of global warming should now cease and desist.  At the BBC website, the coverage was utterly different, with equal billing given to a series of senior scientists who strongly criticise the findings on scientific grounds (no Virginia, serious, human-induced global warming with major negative effects is not a done scientific deal).  The BBC engaged in journalism, the ABC in propaganda -- no doubt so that the various ABC journalists could display their environmentalist virtue.  As Allen Consulting recently estimated that full implementation of the Kyoto agreement on greenhouse gas production would cut Australia's GDP by about 1.9% a year (over $140 billion over a decade), the feeding of global warming hysteria through moral vanity substituting propaganda for journalism could be enough on its own to make the ABC's contribution to Australian national welfare a net negative.

Yes, the rest of the Australian media is prone to similar sins, but it is not a useful expenditure of taxpayers' funds to have the ABC intensify wider journalistic sins.  Unfortunately, the ABC has the cues of credibility without the substance of it.  When Professor Heningham of Queensland University surveyed journalists, he found they rated 7.30 Report, ABC News and Four Corners as the most pro-Labor media outlets.

It is very revealing that the ABC of the Triangle (Sydney-Melbourne-Canberra:  rural ABC and the ABC in, for example, Perth are somewhat different beasts) has consistently refused to do the obvious -- appoint a couple of presenters to prominent slots that the non-progressivist critics of the ALP would be comfortable with.  This would disarm critics at a stroke.  There is no commercial media empire in Australia that does not have more diversity of opinion expressed from within its ranks than the Triangle ABC which, in the words of Andrew Bolt of the Herald-Sun talking of 3LO in Melbourne, has in its on-air staff the full range of opinion -- from red to pink.

After all, broadening the ABC's support base is just elementary sense.  Why do they not do that?  Because to admit the credibility of alternative viewpoints is to undermine the use by the baby-boomer collective which is the functional owner of the ABC of progressivist positions as moral assets.  A prime reason why they are so attached to the ABC is precisely because it is not a broad church in that sense, because it flatters their self-conceit that all morally and intellectually serious people agree with them.  The ABC would have far less value to them if admitted the genuineness of other positions, if critics of the progressivist ascendancy were allowed on as more than occasional "guest enemies" to show the progressivists' own magnanimity.  Which is why they would apparently prefer that the ABC go under through the death of a thousand cuts and creeping commercialisation that Dempster so rails against than it become a genuine national broadcaster, representing the breadth of national opinion, or even of intellectual opinion.  (And given that Dempster cheerfully boasts about how audience involvement with the ABC has never been greater, clearly there was a lot of fat to cut).

Who are the intellectuals who get showcased by the ABC?  David Suzuki, John Ralston Saul, Noam Chomsky and, for old times' sake, John Kenneth Galbraith.  You don't have to be an ideologue to notice a bit of a pattern (apart from an appalling cultural cringe towards North Americans, some of whom get more exposure in Australia thanks to the ABC than they do at home).  You have to go back over two decades and The Blainey View for a serious example of our "national" (sic) broadcaster showcasing a non-progressivist intellectual.  Given the resurgence in conservative and classical liberal thought over the last 25 years, this is a ludicrous dereliction of duty by our allegedly national broadcaster.

One reason why those who have conservative, classical liberal or other non-progressivist views have such a beef with the ABC is precisely because it is supposed to be a national broadcaster.  People from the "right-wing" such as myself and the unavoidables, like Geoffey Blainey, are allowed on periodically as, in Blainey's felicitous phrase, "the guest enemy" and are supposed to feel grateful for the privilege.  Otherwise, they are definitely not part of the ABC's normal service.  Such ghettoisation is a statement that they are not a fully legitimate part of the national debate and national culture.  And with their taxes too.  Of course this breeds resentment.

And many of the defenders of the ABC -- the David Bowman's, Errol Simper's and Peter Mannings' -- are perfectly happy with this pattern.  Progressivists do see their views as fully represented on the ABC, and, to the extent they notice the exclusion of classical liberal and conservative views, don't think it is a problem.  They like the ABC being a hostile environment for conservative and classical-liberal views, which is why the elementary strategy of broadening the support base by becoming a genuinely national broadcaster is not suggested, even though it is a blindlingly obvious move.  But only, of course, it is obvious only if you think that liberal-conservative views are a fully legitimate part of the national debate.

The 1988 series The True Believers, the ABC's last major Australian political drama, provides an excellent example of what is wrong with the ABC.  Here was a golden opportunity to produce a great series, a mirror to ourselves, which would garner support across the political spectrum.  Instead we got one riddled with historical errors and which was, in Robert Manne's words, "almost comically biased", publicly denounced by a range of participants in the events portrayed or by their families.  Once again, taxpayer's money was effectively thieved, and the proper role of the ABC betrayed, so that ABC staff could indulge in undergraduate political preening.  And this propaganda passing as history has been foisted on school children since.

It is interesting how contradictory are the arguments, depending on circumstances, which are mounted to defend the ABC.  We are either told that left views are not represented in the commercial media (which is patently false, and an extremely arrogant attitude to public broadcasting) or that there is no problem with bias on the ABC (also patently false, and a sign, if believed, of an extremely insular attitude, of really believing that all people of intelligence and moral sensitivity believe in the same thing one does).

For the ABC, it is a matter of now or never.  If the ABC cannot be reformed, if its internal culture cannot be broadened, if the attitude displayed in Quentin Dempster self-serving and self-indulgent Death Struggle remains indicative of the core of the ABC, then clearly reforming it from within will have proved to be a dead-end.  The only alternative left will be abolishing it, for the good of broadcasting and the health of public debate generally.

Food processing industry looking good

Amongst all the doom and gloom in rural Australia the food processing industry shines brightly.

As detailed in the State of the Country series in the Herald Sun this week, rural Australia, more specifically small, inland communities based on broad-acre agriculture are falling behind the rest of the country in almost every economic and social indicator.  Although this is not a new trend, the pace of the decline has arguable accelerated in recent years and for many rural communities the decline has been going on for so long it almost time to turn out the lights.

Couple this with increasing utterances of the big r-word here and aboard, the men and women on the land have a right to be a bit depressed.  After all, recessions usually hit commodity prices extra-ordinarily hard.  Moreover, commodity prices and farmers generally benefited little for the boom economy of recent years.

Trends in the food processing industry should, however, cheer them up.

Food processing is Australia's largest manufacturing sector with turnover of $47 billion and employing 165,000 people nation-wide and over 45,000 in Victoria.  It has also been one of the country's perennial under performers with low levels of productivity and poor export performance.  The industry has gone through radical changes over the last ten years including reductions in tariffs and other forms of government support, increased foreign ownership, rationalisation of plant and increased focus on exports.  It has also been effected by increased competition from abroad and globalisation of brands and sourcing of product.

The process of change while painful for some has been very promising to date.

Since 1991 turnover in the processed food industry has increased by just over 35 per cent;  exports have grown by over 70 per cent;  and employment has expanded by 15 per cent.  Victoria -- which has the largest concentration of food processing operations -- has been the main beneficiary amongst the states from the industry's reconstruction.

Importantly the rural and regional Australia has benefited more than metro areas.

Between the 1986 and 1996 census the number of people employed in food manufacturing increased by 51 per cent in non-metro, inland regions and by 4 per cent in remote regions.  In some regions such as the Murray River, growth in food processing has maintained the absolute number of people employed despite declining employment in farm and transport services.  Food processing industries have also helped rural areas by creating larger markets and sometimes new markets and higher prices for farm products.

Wine has been the stellar performer with a 28 per cent increase in the number of wineries and a doubling of exports in the three years between 1996 and 1999.  Milk, ice cream, biscuits, soft drinks, poultry and seafood processing have also shown double digit growth.

The food manufacturing industry, however, has plenty of work left to do.  Many areas of the industry still lag behind the international competition in terms of labour productivity and scale of production.  And unless these issues are addressed the industry could go into retreat with the exist of some global producers.

Nonetheless, the record of the industry to date offers a way forward for hard pressed rural folk.

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Submission to the Productivity Commission Review of Telecommunications Competition Policy

Submission

RE ADDITIONAL TERMS OF REFERENCE ARISING FROM THE
BESLEY INQUIRY INTO REGIONAL TELECOMMUNICATIONS

We would like to make some comments on the additional items under reference.

We should say, at the outset that we did not find that the Besley Report much advanced the state of knowledge or the solutions for telecommunications in regional areas.  It rehearsed a range of highly predictable complaints about deficiencies of service and then suggested that further forms of government intervention be considered to palliate the problems.

In general, we should expect both variations in service and in take up of services (sometimes hard to separate) across Australia.  We cannot expect to completely equalise these two matters across the whole nation.  It is a worthwhile objective to provide telecommunications access and the offer of diverse services to as many Australians as is feasible and to accept some cross-subsidisation as part of that.  But this cannot be at any cost.  The USO is already extremely broad and expensive.  We would argue against further incremental creep in the USO in what will be a vain attempt to stifle all complaints.  It will simply create new sets of complainants at the margin.

There is a point at which policy makers and governments have to draw a line on the demands made by one sector of the population or another for treatment that the market does not afford.  In this case we have a sector of the population pressing continually for compensation for their own locational decisions and achieving substantial offsets in this process.  We do not believe all these offsets have been fully measured.  At some point, fairness to the rest of society, which supplies those offsets, has to come into play.

Equally important, in a free society such as ours, is the principle that, so far as possible, people accept and internalise the costs and benefits of the personal economic and social decisions that they make.

If we accept the opposite principle of unlimited compensation for perceived inequity then we are contemplating a very different social and economic structure, one in which wealth transfers through government interventions become the rule and the fruits of individual enterprise and effort are increasingly appropriated.

We are also contemplating a stagnant society, as it is the concurrent existence of individual inequalities and opportunities that provides the dynamic for change and progress.  Regional policies the world over have always carried the risk of simply staving off the inevitable decline of one area/industry or another.

REGIONAL COMPETITION

We find the concept of regional competition policies quite bizarre.  However, unfortunately, this is not an entirely fanciful proposition.  We would draw the attention of the Commission to the interventions of the Government and the ACCC at the local level in the downstream petroleum market, which introduced substantial rigidities without having any apparent beneficial effect in lowering the overall level of prices or curbing the substantial fluctuations or regional variations in prices.

For example, we are not aware that the exclusion some years ago of major oil companies from bidding for a site in Canberra in favour of a new entrant has had any effect on the price which Canberrans pay for their petrol.

The ACCC also regularly prosecutes cases of local collusion by suppliers in products such as concrete and petrol where more distant supply is not practicable.

Regional competition policies therefore can already be applied if the ACCC defines the relevant market sufficiently narrowly, which it has not been reluctant to do.  If no distinct market can be identified, even under the restrictive ACCC test, then there seems little point in creating yet another overlapping and artificial category.  Appointing a Regional Competition Commissioner to deal specifically with such matters seems to us a waste of public money and likely to create yet another layer of intervention and potential rigidity in the telecommunications market.

More specifically, there are obviously bottleneck facilities in the regions by virtue of the fact that, despite all the interventions by government to encourage competition, it has not been worthwhile any operator duplicating the Telstra local loop.  Nor will it be while the main feature of that loop is that it gives rise to more obligations than profits.

The use of newly released wireless bandwidth may, in time, provide an alternative local network to the more densely populated parts of the regions but, in all areas, this will be dependent on the generation of profit.  The threat of declaration of such new technologies would be likely to be sufficient to guarantee their abortion.  Access holidays are not a solution.  They are always grace and favour acts of government and, as such, not to be regarded as binding, especially if they give rise to profits.

PAY TELEVISION

Exclusivity of programming is integral to television broadcasting, including pay television.  This is particularly the case with the important television products such as movies and live sport.  Exclusivity ensures that the broadcaster attracts sufficient viewers to generate subscriptions or advertising revenue.

The Australian pay TV market currently has several features relevant to the issues raised by the Commission:

• No pay TV operator is yet making any profit and total subscriber numbers are growing relatively slowly.
• We have cable, satellite and microwave delivery systems owned by different operators.
• Much of regional Australia is reached by microwave and most by satellite transmissions.
• The important programming is held mainly by Foxtel and OptusVision but is franchised out, particularly to regional operator Austar.
• The movie programming is mostly held by the Hollywood studios which are few in number, often negotiate as a bloc, favour exclusivity for the certainty of revenue it gives them and treat Australia as a small, residual market (which it is).
• The studios are extremely protective of their product and when and where it is shown as they make much of their profit from the geographical and temporal segmentation of its release.
• Pay TV movie product competes with the cinemas, video and, eventually, free-to-air television.
• Sports product is fiercely competed for by free-to-air stations, which have substantial government protection under the anti-siphoning rules.
• Sporting organizations now derive much of their revenue from the sale of exclusive television rights.  It is doubtful that Australia could have staged the 2000 Olympics without exclusivity.
• Free-to-air broadcasters still dominate Australian television viewing and have just been granted new competitive protections by the Government.  Contrary to the judgement of the ACCC, they are part of the same market as pay TV.
• The Australian pay TV market is small and geographically self-contained and likely to remain so.

Given the international nature of much programming it is therefore doubtful, in practice that a non-exclusivity law could operate successfully in Australia.

It is worth recalling that the pay TV market in Australia started out with an entirely new operator, Galaxy, but the limited size of the market, the high cost of product, licences, facilities and marketing together with strong competition and regulatory restrictions forced Galaxy out of business within four years.  Two of the few competitive advantages it had were an exclusive programming deal with four Hollywood studios and exclusive access to the sports programming of Liberty.

The experience of the US does not seem entirely relevant to the Australian market.  Its history and market are different.

For decades, pay TV in the US was a pattern of local and regional cable monopolies, which had a virtual licence to print money.  This has begun to change with the introduction of digital satellite television and some other wireless broadcasters.  The US market, which is probably 20 times the size of ours overall and many times more in pay TV (with more than 60 % penetration and more than 50% of the television market), can sustain many operators and facilities profitably.

In contrast, we mandated digital satellite television from the beginning of pay TV and also had cable and wireless transmission available.  We have diverse facilities but not enough market to support diverse ownership.

Exclusive programming enables subscriber networks to be established.  Without the guarantee of exclusivity it is doubtful that we would have national pay TV at all in Australia, let alone any competition.  It would simply be too risky.  We wonder whether those complaining about the current situation simply want to substitute their own local exclusivity for that which now exists or to cherry pick the product now held exclusively by others.  Debate over the public interest in these circumstances, as suggested by the ACCC, would take place in a context of complete commercial uncertainty.

The proposal to prohibit exclusivity for areas not in the operator's service area seems unworkable.  How else does an operator establish or extend its service area?  Similarly, sub-licensing in unserved areas is no different from the sort of wholesaling that takes place in many industries.  Why should this be of concern, especially if it facilitates competition?  Galaxy's ability to extend into new service areas and to franchise and to on-sell its exclusive programming to Foxtel, Austar and East Coast Television, helped it to compete and survive far more effectively and longer than would have been the case under the regime proposed by the ACCC.  It also enabled the smaller franchisees to acquire wholesale product exclusive to their own regions.  The ACCC proposal would be no more than establishing a second licensing layer in the regions

Attempts to introduce such prohibitions now would dramatically affect the value of the businesses in this industry and would also affect the free-to-air stations, which would be seen to be the next in line.  It would be far better for the government to refrain from interfering in private contracting and competition (eg anti-siphoning) than to dream up new ways to micro-manage competition.  The fact is, this is a very imperfect market and attempts to create partial perfection may weaken rather than strengthen competition.

In short, we suggest that this is an area where less rather than more intervention would be beneficial to competition.

Cash for Certificates a Question of Degrees

Are Federal government funding policies forcing our universities to act like fly-by-night car salesmen?

Over the past fortnight the media have carried reports about an Australia Institute survey of nearly 1,000 academics, which found that some universities are giving full fee-paying students the kid gloves treatment.  Stories of academics being pressured to "dumb down" courses, reduce entry requirements, and pass incompetent students suggest that universities have jettisoned their standards for the extra cash that the full fee-payers bring.

Although the survey has yet to be published, opposition parties eagerly seized on the issue to attack the Howard Government's funding cuts and its support for the commercialisation of tertiary education.  Labor and Democrats politicians intend to refer the claims to the Senate's planned higher education inquiry, so we can expect further sensational accounts of government-induced misdeeds in the universities as this election year rolls on.

Allegations that universities are lowering standards for full fee-paying students are not new.  Nor are they confined to Australia.  Similar complaints have been made about universities in Britain and America, including claims that students who can barely speak English are being admitted to Ph.D. programs, where they pay graduates to "help" them write the assignments and theses that win them their degrees.

And six months ago a national business magazine published a lengthy article called "degrees for sale", which warned that some Australian universities were putting short-term funding requirements ahead of their long-term interests in maintaining academic excellence.  While the article focused mainly on post-graduate coursework degrees in economics and business, there was nothing to suggest that the problem was confined to these fields.

Nevertheless, I think that a little scepticism about the motives behind the current outcry is warranted.  For the problem of shoddy degrees did not begin under the present government, which at least has taken some initial steps to address the situation, through the introduction last year of the Australian Universities Quality Agency and the voluntary Graduate Skills Assessment test.  The latter will allow student performance in four crucial general skills to be compared across different universities and courses.

I spent many years teaching in a number of universities, covering the period when tertiary education was free, as well as when students were required to pay tuition fees.  I encountered a disturbingly wide range of views and practices regarding the maintenance of appropriate standards, to the extent that work which would be failed by one person might be awarded an honours grade by another.

But the overall culture and structure of incentives tended to favour a lenient approach in which standards were gradually, though inexorably, driven down.  Indeed, gloom about what universities were allowing some students to get away with played an important part in my decision to leave academia.

In some cases, ideological reasons led colleagues to pass almost everyone, as they were committed to the phoney egalitarianism that is so prevalent in university social science and humanities departments.  And as well as being "dumbed down", their courses were also being "politicised sideways", invariably to the left.

These "progressive" colleagues did not accept that ultimately their actions would do most damage to students from underprivileged backgrounds, for as academic qualifications became devalued, considerations such as family and old school networks would come to the fore.

In other cases, opportunism was the main motive.  Trendy courses with lax standards tended to attract larger numbers of students than those with demanding requirements, and more students usually meant increased staff and resources -- or at least made staff reductions less likely.

At one university, when I complained that the assessment in a major course was becoming a joke, the professor said he didn't care about ordinary undergraduates.  They were just necessary to maintain the numbers and keep the university administration happy.  The only students he was concerned about were those doing honours, who might go on to do post-graduate work and become anthropologists themselves -- and who, though he wouldn't admit it, would sit admiringly at his feet.

And some of my colleagues simply did not have the fortitude to resist the combination of threats, excuses and blandishments that we would encounter from students disappointed with their grades.  (A Papua New Guinean student once warned me, in vain, that he would use sorcery against me if I did not give him an "A").

This situation appears to have got much worse in the years since I left academia.  Writing in a southern newspaper a few days ago, Associate Professor Alison Elliott, from the University of Western Sydney, identified a number of ways in which students manage to get failing grades overturned, including one which I never experienced -- visits from students' lawyers.

I suspect that many academics are vulnerable to demands from disgruntled students because of a sense of insecurity and guilt about their own abilities as teachers.  Few possess appropriate teaching qualifications, and in any case, the reward structure in universities strongly favours those who develop a reputation for research, rather than for teaching.  Certainly, there are always some academics who take their pedagogical duties very seriously, but this is usually in spite of the incentives, rather than because of them.

So, while I have little doubt that some full fee-paying students are obtaining qualifications they do not deserve, the quality control problem is much more complex and deeply-rooted.  Even if governments were to pump billions into tertiary education and make all courses free again, universities would still be conferring some degrees that are not worth the paper they are printed on.

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Inquiry Into the Definition of Charities and Related Organisations

Submission

EXECUTIVE SUMMARY

• Charities and related organisations provide important social benefits to the Australian community.
• They are a part of a much larger system of transfers to the disadvantaged and less well off.
• Their definition is value based and should reflect a broad Australian consensus.
• The Inquiry into definitions cannot be divorced from their intended uses.
• The definitions should be tight and watertight.
• They should include both the nature and purpose of the organisations.
• Their activities should fall exclusively within the definition and otherwise not qualify.
• Charities should be narrowly defined with a strong emphasis on direct relief action.
• Their core definition should be simply stated with supporting elaboration.
• Religious organisations are virtually self-defining and should be considered for exclusion.
• Community service organisations should be included under the heading of charities.
• The ATO should have the responsibility to supervise the application of the definitions.
• A new statutory definition is necessary.

CHARITIES AND RELATED ORGANISATIONS IN CONTEXT

Although the statistics for this sector are not comprehensive and its boundaries are unclear, its importance to Australian society is undoubted.

According to the 1999 report of the Australian Institute of Health and Welfare, non-government community service organisations dispose of some $6.4 billion, which they receive mainly from government ($3 billon), households ($2 billion) and fundraising ($1 billion).

In 2000/01 their activities will be supported by a significant proportion of the $400 million of tax expenditures available to not-for-profit organisations.

Almost half a million people work in the sector, a very substantial figure even in relation to a total workforce of 9.6 million.

These raw facts do not give an adequate impression of the range quality and volume of services provided by the sector as a whole.  While there are questions about the value of some of the activities of the sector, the provision of poverty and crisis relief, aged services and education facilities give direct benefits to a large segment of the population that might otherwise not receive them.

This effort should be set in the context of the broader system of transfers of income and wealth in Australia and the direct provision of services to the less well off through government (which are paid for by the taxpaying public) and other entities.

These include:

• the steeply progressive Australian income tax system, which begins to appropriate almost one half of marginal income at a level less than twice, average weekly earnings.  This both "levels down" most incomes and provides the wherewithal to effect transfers to the less well off;
• the social security and welfare payments made through Australian governments (including grants to the sector), estimated at $69.7 billion in 2000/01.  These cover a wide variety of circumstances including unemployment, age, youth, childhood, disability, carer responsibilities, housing, injury, ethnicity, aboriginality, single motherhood, regions, emergency and many others;
• significant elements of government expenditure on health ($38.1 billion), education ($32.3 billion), housing and community amenities ($8 billion) and a proportion of the spending on general public services ($19.5 billion);
• total tax expenditures of $19.7 billion, of which two-thirds falls under the heading Social Security and Welfare;
• an unmeasured range of discounts available to those with pensioner cards of various kinds including cheap travel and access to other goods and services;  and
• direct individual and corporate sponsorship of activities and facilities such as hospitals, local events, blood, environmental upgrades, scholarships etc.

Even allowing for some overlap and churn this is a truly massive array of intra-society transfers.

It is worth setting down these figures not only to put the sector into perspective but also as a corrective to the regular criticism by some politicians, charities and journalists of the charitable contributions of the Australian public and the corporate sector.  Our governments, which jointly appropriate well over a third of national income in a way that dramatically redistributes most individual and corporate incomes, are poorly placed to criticise the considerable charitable efforts of individuals and corporations.

Australia is a society in which huge income transfers take place with little credit given to those from whom they are made.  More recognition of this sacrifice might help to explain and diminish the "donor fatigue" that many charitable, religious and community service organisations are facing.

SOME CONCEPTUAL POINTS

There has been discussion of the reasons for the existence of charitable and related organisations;  particularly those engaged in social welfare activities.  Such organisations have a very long history, often commencing with religious bodies and incidental to their spiritual mission.  It is sometimes suggested that their genesis lies in the failure of the market and the government to provide directly for unmet needs.  Attribution of failure to one mechanism or another and the consequent assignment of blame ignore the history and miss the point.  Rather the respective sectors should be seen as having distinct and valid tasks.

There is overlap.  Both government and charities draw resources from the private sector.  There is extensive government intervention for what can be described as charitable purposes and the private sector makes a major charitable effort.  But not the government nor the market nor any other mechanism, individually or jointly, is capable of meeting all needs, even all "basic needs" which are both enormous and ever expanding as our society grows more prosperous and the definition of needs expands.  Our definition of poverty would seem like affluence to most of the world's population and for most of history.  Even so, social welfare cannot be subsidised indefinitely much less some of the other activities undertaken by charities.

This relates to another point, whether the charities are the product of altruistic impulses or whether self interest plays some part.  No doubt the organisations provide the vehicle for individuals to exercise their own preferences in terms of employment and vocation.  How one looks at this is in part determined by personal values.  But it is not irrelevant to the definition of such bodies.  This should reflect some broader community summation of their place in and value to society.  We maintain that the summation is likely to be more favourable to those activities, which are closer to the older versions of charity with direct relief of distress rather than some more modern variants with their emphasis on words rather than action.

The Committee has indicated that the Inquiry will not provide comment on the taxation or legislative and administrative treatment of the charitable and related organisations.  Its work will be restricted to definition.

It is possible though difficult to describe the main characteristics of these bodies and thus define them.  It is difficult because the definition is partly subjective and therefore potentially so wide as to become meaningless in practice.  Moreover it is not possible to provide a value-free definition.  The exercise must be at least partially normative rather than simply objective.  The task of the Committee is therefore complex.  Even if they ignore their own inclinations they will be reflecting the values of others.

THE MATTER OF PRIVILEGE

The foregoing has a practical implication for the Inquiry.  The impetus for the Inquiry does not arise purely from a wish for greater knowledge of these bodies and clarity in their definition.  It stems from the facts that they undertake functions which governments see as useful to the community and, consequent upon this, they have the privilege of direct government grants, numerous and substantial tax concessions and licences to raise funds from the public.

In many cases the existing definitions determine the level and nature of the privileges enjoyed.  These privileges are not available to other sectors of the community and are largely paid for by them.

Therefore, these are not simply definitions of themselves but definitions with a purpose.

This freights the exercise with much greater significance than is immediately apparent.  This is not merely an exercise in semantics.  Its outcome may affect the fortunes of many organisations and individuals.  While the Committee must avoid comment on the structure of these privileges, it cannot ignore their existence, which gives such point to the debate on definition.

There are implications of this.

First, the Government is specifically and apparently primarily seeking advice on definition from organisations in the sector.  It is essential to have such advice as it draws on the combined experience and expertise of the practitioners themselves.  But we must recognise the massive conflict of interest here.  Many organisations are heavily dependent on government favours and are continuously seeking more government support as essential to their work and even their continued existence.  The ongoing struggle for wider GST exemptions illustrates the continuity of this pressure.  Although there will be diverse views from the sector, it can be expected that there will be a strong tendency towards definitions of extended ambit to comprehend a larger number of organisations and activities within the existing circle of privilege.

Until now the definition has been largely in the hands of the courts interpreting the common law.  In this process the definition has embraced a steadily increasing number of organisations over decades of cases.  This Inquiry opens the way for a more or less constrained set of definitions, which makes self-definition inappropriate.

This then leads to a second counterpoint that the Inquiry ought to give at least equal weight to the advice it receives from people outside the sector.  They bear the cost of the privileges granted by government to some of which they may strongly object.  In our system of government, the general public can only infrequently express its views directly on identifiable expenditure policies.  Furthermore, to the degree that definition determines the level of support for different types of organisation then there is a case for the public to have a say in that level.  If, as is the case, this is a sector that has not been much studied, there is an even stronger case for a more open debate.

This is linked to a third question, whether the sector and its clients exist and draw on the public purse by right.  Jesus said, "The poor ye always have with you", but did not comment on their rights.  It has been argued that the sector ought not to be regarded as within the tax net in the first place.  It does not seem either sensible or logical to allow segments of the population the right to relocate outside the tax system on the basis of their own judgement.  The corollary of this is to regard the direct grants as received by right, a process already well underway in the lobbying for multi-year subventions from government budgets.

In a way this is no more than an aspect of underlying cultural shifts in Western societies towards diminished personal responsibility and the treatment of social security payments as a right without any balancing responsibility.  The efforts of this Commonwealth government to confine such payments to those entitled to them and to establish a principle of mutual obligation at the level of the individual are laudable.  We contend that neither the organisations nor their clients have a right to financial privileges;  rather they are granted by the population at large through governments.

Finally, the reason for the privilege is that the organisations serve the public interest.  This is the key to all the definitions, which we discuss below.  In serving the public interest they are able to act more flexibly and creatively than governments and derive part of their unique value there from.  However, there is a tension, sharpened by their financial privileges, between their independence and the requirement for some sort of public scrutiny and accountability.  This accountability is important in the formulation of definitions as it signifies the quality of the activity.  Special status can too easily lead to abuse and loss of public support.  Henry VIII's dissolution of the monasteries was made easier by their abuse of their privileged status in wealth and before the law.

DEFINITION

Definition of the organisations comprehended in the Inquiry is complicated by their differing nature and activities.

LOOSE OR TIGHT

Consistent with our thinking above, we would argue for relatively tight and watertight definitions for each of the three categories where this can be achieved.  Generally accepted definitions of charity etc may well be broad and divergent but the definitions arising from this inquiry will have a purpose and should be clearly circumscribed by the function they are intended to describe.  Loose definitions will widen the application of financial privileges, which ought to be confined to cases, which would stand comparison with other priorities in public expenditure.

Nor should we accept that there are classes of individuals or organisations, which are, by right, outside the normal obligations of society.  We would prefer the definition to be limited to organisations that provide direct relief for poverty, sickness or like distress -- in other words, the traditionally accepted meaning of charity, which is direct giving to those in need.  This is similar to the definition of public benefit institution used by the Australian Tax Office.  Such a definition would have the merits of confining privileges to organisations that most clearly and directly provide public benefit.  They would be easier to administer, as the test would be fairly simple.

It follows that we would prefer the definition to be the only test and that there be no list of special cases that do not fit the definition, as is now the practice.  Such a list is not only unfair in the broad but gives rise to personal favouritism by Ministers, which is no more than a form of corruption.

NATURE OR PURPOSE

The question has been asked whether the definition should rest on the nature or purpose of the organisation.  This seems like a non-question.  For the definition to be effective it should cover both nature and purpose.

To take purpose;  if this is not consistent with the underlying intent of the definition then the organisation should not qualify.  If it has some other purpose but, for example, undertakes charitable work, then it should change its purpose.  Otherwise, given the almost inevitable weakness of the monitoring of the privileged institutions, it will be too easy for them to change course and cease charitable activities without any internal check.  Moreover one might accommodate all sorts of activities which turn out to be largely charitable, such as the Darwin to Alice Springs railway, but are clearly not charities in the accepted sense.

Likewise, the nature or behaviour of the organisation must be inherent in the definition or we will accommodate the Pharisees who loudly profess but don't act.  For example, if its purpose is religious but its activities are primarily commercial or the provision of a fleet of Rolls Royce's for its leader then a definition that rested solely on purpose would be insufficient to disqualify it.

In short, the definition should rest on both what the organisation purports to be and what it actually is which, in turn, must reflect what it does.

This raises other questions.

An organisation may do many things, some qualifying and some not.  We would argue that, to satisfy the definition, an organisation should be wholly engaged in the activity that defines the charity, religion or community service organisation.  The focus is then on the qualifying activity rather than the organisation.  It overcomes the potential problem of gradual change of the complexion of an organisation.  It should not be impossible for multi-purpose organisations to arrange division of their activities to limit any privileges to those activities that qualify.  Ancillary commercial, social, or recreational activities would therefore need to be hived off.

THE WORDING OF THE DEFINITION

It will be apparent that the definitions, to have practical value, cannot consist of a few simple words although the general intent may be expressed in this way.  There will need to be some supporting material, which both elaborates and restricts the definition.  Drawing on case law, this is what the ATO has done in TR1999/D21 for charities but that is a very lengthy document.

1. Charities.  The Oxford Dictionary supplies a good starting point and perhaps a core definition.  Any diffidence at using an English definition ought to be dispelled when we appreciate the basic definition for tax purposes has been the Statute of Elizabeth 1601.  The definition reads "Giving voluntarily to those in need".  This combines a number of useful features.  "Giving" implies a direct act of beneficence rather than a wider set of activities that provide benefits indirectly.  We believe that unless there is a strong link to direct relief action then the definition will become so vague as to admit a wide class of organisations whose purposes and activities would be only loosely targeted at the common good.  This should not preclude the provision of benefits from one organisation through another that provides them direct.  Nor would it preclude benefits such as direct advice or counselling to those in distress.  The term "voluntarily" indicates activities undertaken mainly by private entities and excludes anything done under statutory obligation.  It also implies an element of self-sacrifice.  "To those in need" defines the recipient group as those who cannot help themselves.  Ideally, it would exclude those that can but won't.  It also implies universality so that the benefits cannot be confined to individuals of the donor's choice.

   Such a definition is close to that of the public benefit institution used in determining the deductibility of gifts.  It focuses on the relief of distress arising from poverty, sickness, and age or like direct needs.  It also makes it easier to ensure that the benefits of the organisation go to the intended recipients rather than to the donors or administrators.  The risks of this not happening were starkly illustrated recently by the behaviour of certain office holders in the Olympic movement who appeared to treat it as a private club both before and during the Games.

   The definition would exclude a wide range of organisations currently regarded as charitable under the common law.  For example, environmental, cultural, sporting, education or research bodies and many peak groups would cease to be defined as charities.  This would have the advantage of removing anomalies whereby, for example, arts societies have status and cinema clubs do not and some environmental bodies appear to have a preferred status over others.  If this course were thought to be too drastic then this non-charitable group of not-for-profit entities could perhaps be classified in a separate heading with income tax exemption but no more.

   Elaboration of the definition should certainly require proper and regular accountability of organisations or the definition would become meaningless.

   Other criteria might cover requirements for not-for-profit, apolitical/non-lobbying, payout rates and the quality of outputs and management.  This would exclude a number of what are, in reality, political action groups falling under environmental and ethical and other headings.

2. Religious Organisations.  In the past it has been accepted that a religion will attempt to convey a profound spiritual message and will involve observances and practices.  This ought to be sufficient to suggest the wording for a simple definition.

   It will be apparent that this approach will make it difficult to exclude from this category almost any self-professed group.  The retreat of the established and other major churches, the entry of other faiths with substantial followings in the immigrant communities, the proliferation of new faiths or variants of the old, the general decline in religious observance together with the strong anti-discrimination laws all reinforce the trend towards religious free-for-all.

   The difficulty of placing meaningful limits on access to the defined category and the increasing secularism of Australian society make a strong case for looking closely at the question whether this is a category that can be meaningfully defined or has any special need either for definition or the privileges that go with it.  Its purely religious purposes and activities are quite dissimilar to those of a charitable kind and it would be interesting to know what is the level of support for them in the community at large and whether that support extended to continuation of their privileged status.

3. Community Service Not-for-profit Organisations.  Given the discussion above we doubt whether this category has continuing relevance, as we would define charities in a way that comprehended all the organisations that ought to have special status.  The nature and purpose of the community service organisation would then determine its status vis a vis the definition.

More generally, if there is to be modification of the definitions from their present courts-based and rather confused state then there seems little alternative to a new statutory definition.  Without this the courts will continue to apply the common law definition in cases that come before them.

INSTITUTIONAL ARRANGEMENTS FOR APPLYING THE DEFINITIONS

Until now, given the privileged tax status of this sector, much of the work of supervising the definitions administratively has rested on the ATO with the guidance of the case law.  Other government agencies have borrowed the definitions for the purpose of determining entitlement to grants.  At the State level attempts have been made to apply their own definitions.

It is essential that a definition that confers privileges not available generally be properly and tightly supervised.  It is desirable that there be some consistency in the definitions.

Employing the ATO to supervise does have several advantages:

• Focus in one agency ensures greater consistency of treatment of individual organisations although there is some criticism even of the ATO in this respect.
• The ATO is experienced in dealing with exemptions and generally takes a hardheaded approach to sloppy or dodgy claims.  It can thus also be effective in declassifying an organisation.
• The ATO is used to dealing with annual returns and applying tests to purpose and to levels and nature of activity.

The alternative would be to set up a separate supervisory body such as exists in the United Kingdom.  This would have the advantage of a special purpose agency with powers to research and perhaps licence organisations for both tax and other purposes.  It might promote greater national consistency, which is highly desirable on equity grounds;  although it is doubtful that the States would cede any of the powers they wield to favour particular institutions at the State level.  There are some disadvantages:

• The cost of setting up such an agency would undoubtedly exceed that of the equivalent resources applied in the ATO.
• It would be more subject to political jobbery and special pleading.  In present circumstances, appointments to such offices are often on the basis of political allegiance, which increases the exertion of influence and the risk of special favours.
• This also increases the potential for regular turnover of office holders with the risk of inconsistency and general weakening of the definition.

CONCLUSION

We believe that the accumulation of centuries of statute and cases and the growing financial privileges attaching to the defined categories has led to a wide extension of the definitions.  The Inquiry represents a unique opportunity to produce a more robust and focussed definition of these entities.  We believe that this should be based upon those organisations that provide direct relief to those in distress.

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REFERENCES

1. Australia's Welfare Services and Assistance 1999 -- The Australian Institute of Health and Welfare.
2. Tax Expenditures Statement 1997-98 -- The Commonwealth Treasury.
3. Charitable Organisations in Australia -- Report No. 45 -- Industry Commission 16 June 1995.
4. Budget Strategy and Outlook -- 2000-01 -- Budget Paper No. 1 -- The Commonwealth Treasurer.
5. Government Financial Estimates -- 2000-01 -- Australian Bureau of Statistics.
6. Draft Taxation Ruling -- TR1999/D21 -- Income tax and fringe benefits tax:  charities -- The Australian Tax Office.