Reasons Not to Vote One Nation

In my opinion Queenslanders can find excellent reasons for not voting for One Nation (Hansonite) candidates but they do not include South American style chaos associated with a hung parliament.  Queensland has had a minority Government since the Mundingburra by-election.  Whether another one will be the best or worst of governments will depend on the usual things such as the quality of the cabinet.

That is not to say that One Nation's MPs would encourage better government.  To the extent that Pauline Hanson's opinions reflect those of One Nation, her party believes in much the same whacky economics and xenophobic trade and immigration policies as do the Greens and Democrats.  Possibly because she once ran a fish shop, she better accepts budgetary arithmetic than they do.

However, minor parties cannot force their nonsense upon the State unless whichever of Mr. Borbidge's and Mr. Beaty's lot is in Opposition join them in espousing it.  It is true that Labor and the Coalition have far from blameless records when in Opposition sucking up to self-serving minorities such as those that hate toll-ways or defend union privileges.  It is also true that they have sometimes got stuck with past undertakings on coming to government -- hence the quip "Save us from the promises politicians keep!".  Big damage has been done, however, only when, like Keating in 1993, they win an election that they don't expect to win or, like Whitlam in 1972, through inexperience of office they have come to believe their own rhetoric.  Neither situation applies to Queensland.

A minority government in Queensland would find itself in much the same position as any government that does not command a majority in an Upper House elsewhere.  The consequent check and balance is frustrating for the Government but not always regrettable for the public.  What is more, I submit that fear of infection will make the Coalition and certainly Labor more careful about hopping into bed with One Nation than with the Greens and Democrats.  When they do so they will insist on the protection of an explanation the public will wear.  It may even be truthful.

So much for policy.  What about the supply bills and confidence motions that can be used to bring governments down?  One Nation candidates won't ever do better than in the coming poll and I don't for a minute believe the its MPs would fall on their swords by forcing another election.

That leaves only the ephemeral stuff -- the political culture and leadership of public opinion -- to worry about.  It is not, however, unimportant.  It would indeed be unfortunate if Queenslanders were, by recording a lot of votes for One Nation, to send a message that racism was an appreciable determinant of Australian attitudes.  It would be doubly unfortunate because Hanson at least among One Nation luminaries is not a racist.  She is the creature of a prolonged and disgraceful media beat up without which she would by now be very small fry.  Nevertheless, that the ABC and some less attractive ethnic lobbies will wilfully or otherwise misinterpret votes for One Nation as racism, is a reason for not casting them -- albeit an unfair one.  I wouldn't know about the added charge that some fairly unpleasant characters have infiltrated One Nation but it is probably true because they get into every party including the majors.

Incidentally, the current test of racial tolerance is to be found in attitudes to increasing substantially the intake of refugees from Indonesia.  At small, maybe no cost to ourselves, we could avert much misery.

If the reaction of the media and one half of the hate brigade were all there was to fear from voting One Nation, then voting One Nation might still be a useful way of venting one's frustration with the major parties.  There is, however, a more important reason.

It is that Hanson, who is paid enough to inform herself, espouses a mindless form of populism that Australians have largely grown out of.  For instance, she calls for controls on foreign investment without acknowledging that by banning some capital flows she increases the attractiveness of others by forcing down the dollar or that since the capital account surplus is just the other side of the current deficit serious domestic discipline is needed to affect meaningful change.  She would have the government levy high tariffs on imports without acknowledging that by so doing she raises prices, reduces living standards and taxes exports.  Her protectionism no doubt appeals to many Victorians but it would be especially damaging to a State such as Queensland which is more dependent on exports.  She advocates industry policy without asking what the cost of displacing the resources might be or where the government might find the wisdom to identify the winners that entrepreneurs miss.  In spite of the many studies showing that it does not, she encourages the popular misconception that immigration takes Australian jobs.  She is xenophobic.

Her opinion and that of the potential One Nation MPs can count for little directly and would not matter if there were not people such as Simon Crean in the Labor Party and John Moore in the Coalition who will be influenced by the number of votes cast for a xenophobic party.  And the Prime Minister and Leader of the Opposition have shown that they are not beyond a little economic xenophobia, pandering to vested interests or political corruption -- in the final analysis the three are hard to distinguish.  It would be a grave pity, especially for Queensland, if their tendencies were encouraged.

Finally, guns are an issue.  I agree that banning automatic weapons will have no appreciable effect on accidental death or murder, that the money should have been better spent and that the Commonwealth has committed a minor intrusion upon civil liberty.  But surely there are more important issues to determine one's vote.

ADVERTISEMENT

Closed Market Will Not Save Indonesia

The Asian crisis, particularly the continuing problems in Indonesia, have fuelled predictable claims that globalisation and open capital markets are villains in the piece.  These claims, such as those by David Ray (Less Openness Offers A Way Out, Opinion 22/5), typically misconstrue the nature of the capital markets in the afflicted countries, the reasons for corruption and the causes of events.

Indonesia did not have open capital markets and a floating exchange rate.  It had a "dirty" peg -- the rupiah was only allowed to move in a narrow range -- with tight controls over banking and direction of funds to favoured firms and industries, often on the basis of out-and-out corruption.

Why did this corruption flourish?  Precisely because of official controls.  Give officials discretionary powers with little effective oversight or accountability and corruption flourishes.  The solution is two-fold -- eliminate the discretionary powers and create democratic accountability.

Yes, there were large amounts of short-term capital.  But that was a consequence of official policy.  As prominent monetary economist, Sir Alan Walters, pointed out, during his visit to Melbourne as my guest, pegged exchange rates backed only by official decree and limited reserves invite people to restrict their investments into a country to short-term capital -- in order to minimise exposure to the inevitable devaluation.

So official policies were to blame twice over.  First, they encouraged investment to be of a short-term, highly liquid, nature.  Second, the existence of widespread, and unaccountable, official discretions generated massive corruption and encouraged investment in terms of political guarantees, rather than genuine commercial soundness.

Those, like Dr Ray, who argue for controlled capital markets are, in fact, arguing for the very arrangements which generated the corruption in the first place, and will continue to do so.

What Indonesia needs is open and transparent markets and political processes.  Democracy and freedom, in other words.  Not new forms of official discretions to be hawked in the market place of corruption.

ADVERTISEMENT

Do Not Interfere in the CD Market

Letter to the Editor:

Dear Sir,

The Australian Competition and Consumer Commission's Trevor Lee and Jill Walker are incorrect in claiming benefits would follow from taking the right of CD producers to charge different prices in different markets.  They maintain that the segmenting of markets merely brings excessive profits.

Such profits are only possible if the supply of CD's is monopolised.  In fact the CD supply market is intensely competitive.  There are half a dozen major world producer/marketers and dozens of smaller suppliers.  In those circumstances any "rents" from price differentiation must fall to the suppliers of the scarce goods:  namely the artists.  The artist has a unique product and is faced by many possible processors and marketers of that talent.  Why should he or she be prevented from seeking the best return for these creative efforts?

In addition to reducing income for successful artists, constraining the conditions of supply to prevent price discrimination reduces opportunities for new artists.  A CD producer has a great many options in promoting new acts and would lose money in nineteen out of twenty cases.  If producers are impeded from seeking to maximise revenue from their products, they will be more cautious in offering opportunities for new performers.  Price reductions from intervening in market processes may bring a short term gain to consumers but will mean a future loss in diversity of output.

Mr Lee and Dr Walker claim that the majors who undertake the price differentiation rarely discover the new talent but take over artists once they have been nurtured by smaller firms.  Even if this were correct, it would add no weight to the case for requiring the same price to be charged in all markets.  The fact of this price differentiation allows smaller companies to negotiate a higher transfer fee to compensate the incubating smaller firms and encourage them to seek out new artists to meet consumer needs.

It should be up to the parties involved to determine their marketing strategy, not to impose a one-price-fits-all approach.

ADVERTISEMENT

Independent Research Would Help Bias Debate

Senator Alston, the Minister for Communications, claims the Australian Broadcasting Corporation has been biased in dealing with the waterfront dispute and other controversial matters.  The ABC and its friends say it is balanced and responsible.  Who is right?

Personally, I am with Alston on this issue, although when he also said that "most of the time the ABC is an institution of which all Australians can feel justifiably proud" I thought he was being fainthearted.  Certainly, I believe there was a time when such sentiments were appropriate.  But that was long ago.

I could cite much anecdotal evidence to support my case, including conversations with ABC staff who privately admit that the culture in sections of the organisation is hostile to anything that might be identified with the Liberal or National parties.

Nevertheless, I cannot rule out the possibility that maybe I only focus on and remember incidents which confirm my negative impressions.  Perhaps others could produce different anecdotal evidence which would suggest that whatever the views of its employees, the ABC is generally meeting its statutory obligation to provide accurate and impartial news and information.

Furthermore, according to a survey the organisation commissioned last year, nearly 4 out of 5 people interviewed think the ABC is "balanced and even-handed in politics", and a massive 95 per cent think it does a good job of providing "reliable and accurate" news and current affairs programs.  (The latter figure seems too similar to the percentages who supposedly voted for the Communist party in the former Soviet-controlled regimes of Eastern Europe.  I can't help wondering whether those interviewed were chosen on a truly random basis, and whether they actually listen to the ABC.)

Is there any way Senator Alston and I could demonstrate to our fellow citizens that our doubts about the ABC's impartiality are justified?  Conversely, is there anything the ABC could use to show us curmudgeons that our suspicions have no foundation?

Focusing on a single program, or even a couple, is not enough.  The ABC's editorial policies state that balance between the major relevant viewpoints on important issues "may not always be reached within a single program or news bulletin, but will be achieved within a reasonable period".  This is legitimate -- even with the best will in the world, it is not always possible to ensure that one side's arguments on an issue are followed immediately by those of their opponents.

The Canadians have an organisation that provides the kind of hard evidence necessary to make informed claims about media balance and accuracy.  In 1987 the Fraser Institute, a privately-funded educational and research organisation, established the National Media Archive.

The NMA videotapes the key news programs from two major English-speaking television networks, the CBC -- the Canadian equivalent of our ABC -- and the commercial CTV, and transcribes them to a computer package that allows full searches of program content.  NMA researchers, as well as members of the public, can then analyse these transcriptions, together with the programs from which they were taken, to assess how the different networks handled a given issue over a period of time.  Occasionally, newspaper and radio treatment of an important matter is also examined.

The NMA uses a method known as "content analysis".  Researchers identify the relevant news stories, and break them down into a number of statements.  These statements are then coded in terms of various aspects, such as their origin -- a reporter, an interested party, or an expert commentator;  whether they express favourable, unfavourable or neutral attitudes;  and so on.

Some coding will depend on the issue under investigation.  For instance, an analysis of stories about immigration might code statements according to whether they dealt with human interest, social impacts such as race relations and population growth, or economic impacts such as employment and investment.

Because a certain amount of interpretation is involved in some aspects of coding, the NMA goes to considerable lengths to ensure objectivity.  Its research staff are hired from a wide range of political and educational backgrounds, ranging from marxists to right-wing libertarians, and those working on individual investigations usually represent opposing points of view.

During each project consistency in coding is regularly tested, and disagreements are discussed until consensus is reached.  After the coding has been completed, the results are statistically analysed by computer, allowing precise figures to be produced about the nature of the news coverage.

In one study, for instance, the NMA found both the CBC and CTV news presented almost three times as many statements about the negative social effects of immigration than about the positive effects.  Another study showed that the attention given to the five official parties in the Canadian Parliament after last year's election did not reflect the number of seats they held.  Both networks virtually ignored the Bloc Québécois, and the commercial network gave much more attention to the Progressive Conservatives than their parliamentary standing seemed to warrant.

Nevertheless, the NMA is not without vocal opponents, who accuse it of everything from failing to recognise the limitations of content analysis, to running a hidden ideological agenda.  (Its parent body, the Fraser Institute, favours market solutions to public policy problems over government intervention).

But the NMA depends on widespread confidence in its integrity and rigour.  Its activities are guided by a board of respected academics and journalists.  It readily provides information to anyone who wants details of the methods used in individual investigations, and has refined its procedures in response to constructive criticisms.

Certainly, producing figures to show that one side of an issue has been treated less favourably than the other does not in itself prove that media bias is at work.  There may well be other reasons.  But such figures provide an essential starting point, demonstrating that there is at least a case which needs to be answered.  Our debates about the media would be a lot more productive if we had an independent and credible organisation like the National Media Archives.

US Health Plan a Model

Strange as it may sound, Australia should look to the US for tips on reform of the health system.

Clearly the US health system has attributes that no-one would want to see in Australia, including large numbers of people without adequate health cover and crippling malpractice insurance costs.  It has also suffered for years with run-away health costs.

Since the early 1990s, however, there has been a revolution in US health care which has not only contained the growth in health cost but resulted in a better allocation of health services.

In 1990, virtually all Americans with health insurance were insured under "unmanaged" fee-for-service schemes.  Under this system, a person went to a health provider of her choosing, the provider determined the level of service and the price, and the insurer paid the bill.  There was no incentive to economise.  As a result, medical costs soared and employers struggled to pay their workers' insurance bills.

The fee-for-service system still prevails in Australia.  Here, however, governments regulate prices, provide many services and limit the flow of funds to the industry.  Although these restrictions have helped to limit some of the excesses of the American system, our health system does, nonetheless, suffer from excessive costs and overuse.

In the last seven years, managed care or health-maintenance organisations (HMOs) have virtually taken over the health system in the US.  Today 85% of workers with insurance are insured through a HMO.  Of the remainder, most are in schemes that contain elements of managed care and only 3% of insured Americans remain in fee-for-services schemes.

The reason for the revolution is clear -- HMOs provide huge savings in a variety of ways.

First, HMOs bulk-buy services on behalf of their members, which gives them the bargaining power needed to squeeze discounts from their suppliers -- doctors, drug firms or hospitals.  Second, they negotiate fixed-price contracts with health providers and thereby limit the unnecessary tests and the number of operations and days spent in hospital.  Third, they make far better use of information technology to co-ordinate service for patients, discover which treatments work and which treatments are most cost-effective.

The growth in managed care has resulted in health-care premiums actually falling in real terms over the last seven years and has generated savings in excess of $24 billion per year.

On the available evidence HMOs have not only saved a fortune but haves done so while maintaining, and in some areas enhancing, the standard of care.

Significantly, HMOs have proven to be better at preventive care.  Because HMOs generally provide a comprehensive health coverage at a fixed price for long periods, they have a strong incentive to keep people healthy and out of surgery.  As a result, female HMO members are 40% more likely to be screened for breast cancer, and 95% of children in HMOs are inoculated against major childhood diseases.

Despite, or rather because of, these benefits, HMOs are very unpopular with doctors.  Indeed to doctors -- in the US and Australia -- they are the devil incarnate.

To a great extent this stems from the fact that HMOs have, for the first time, introduced a degree of rationing into the US health system.  More importantly, they constrain the power of providers to determine demand and costs at will.

Similar changes will need to made in Australia if we are to continue to provide the level of care we expect and deserve.

ADVERTISEMENT

Borbridge Budget Puts Leftovers to Good Use

It's official, the magic pudding does exist -- in Queensland.

Last Wednesday, the Borbridge Governments brought down a Budget that did it all -- spending was up sharply, taxes were cut, the budget was balanced and debt slashed.

What's the secret?  A huge inheritance built on years of sound fiscal management.

The Borbridge Government inherited the best possible financial position.  The books were in surplus by over $1 billion.  The State not only had the lowest level of debt of any government in Australia but it was debt free.  It was also the only Government in Australia -- and probably in the western world -- whose public sector superannuation liabilities were fully funded.  On top of this, Queensland had the lowest level of expenditure of any state, a tax take 20% below the level of other states and the most efficient set of public trading enterprises.

This inheritance gave the Borbridge Government, when it came to power in 1995, about a $2 billion head start over the Court Government -- even after adjusting for population differences.

Over the last three years the Borbridge Government has used and abused but not totally squandered its inheritance.

The inheritance has allowed the Queensland Government in 1998 -- an election year -- to boost capital spending by a whopping 14% and to a record level of $4.8 billion and to expand recurrent spending by 8.8%.  Although Mr Court was hardly miserly in his last Budget, he only managed expand total spending by 6%.

It has also allowed the Queensland Government to cut taxes by $56 million in a full year;  at a time when taxes are going up in WA.  Indeed the Queensland Government cut many of the very same taxes, such as stamp duties on conveyancing and insurance, and motor vehicle registration fees, that were raised in the last WA Budget.  As a result these cuts and those in previous years, an average home now costs $5000 less and a new family size car costs $500 less in the Sunshine State than in WA.

Borbridge's inheritance was so large, that despite his generosity, he still managed to produce a real surplus of around $500 million, fully fund the States super liabilities and cut debt in his 1998 Budget.

Things are not all sunshine in Queensland.  The Asia meltdown is expected to hit the State economy and its finances hard.  Moreover the inheritance has been serious run down and the public sector reform is faltering.

Nonetheless, the Borbridge Government and its successor will continue to benefit from years of sound financial management.  And because of it are better able to weather storms -- where economic or political in origin.

ADVERTISEMENT

Taxpayer Slugged in Big Spending Spree

Today's budget was a modern rendition of a traditional tax-and-spend budget.

Spending is forecast to grow across the board with few signs of real restraint.  Recurrent spending, excluding interest and super payments, is planned to grow by nearly 7.4 per cent -- which is high by any standard.

The traditional priority areas of government spending -- health, education, police, welfare and infrastructure -- get special treatment.  Health spending is expected to grow by 3.0 per cent after adjusting for inflation.  Given that the Commonwealth has cut health grants to the states in real terms, this amounts to a large increase in state spending.  Outlays on education, police and welfare are also forecast to grow at rates far in excess of inflation and population growth.

Infrastructure -- as was the case prior to the early 1980s -- is the real focus of this budget, with infrastructure spending by budget sector agencies expected to grow by 24 per cent.

To finance this spending spree, the Government has once again raised taxes and charges.  As a result of the higher stamp duties and vehicle licence fees announced in the budget, tax revenue is set to grow by nearly 7 per cent next year.  The higher charges for water and public transport, announced before the budget, will also contribute to a 17.5 per cent increase in dividends paid by government business enterprises.

In other words, the Court Government has once again decided to spend and tax rather than reduce taxes.  The Government does not have a revenue problem:  State tax receipts have grown by over 55 per cent over the last seven years, even after adjusting for inflation and population growth.  The Government has an expenditure problem.

The Budget does have a number of modern, redeeming features.

First, the Budget papers have, for the first time, been framed using modern accounting practices, including accrual accounting, statements of assets and liabilities, consolidated accounts and forward estimates.  This means that for the first time the public and Parliament will have a good handle on the true costs of government decisions and a more accurate picture of the State's bottomline.

Second, the Budget flags the introduction of fiscal responsibility legislation which, if adhered to, will go a long way to keep this and future governments "on the straight and narrow".

Third, the Budget properly incorporates the benefits from privatisation, especially from the sale of the Dampier-to-Bunbury gas pipeline.  This sale alone will benefit the Budget in the form of lower interest payments, lower super pay-outs and funding of capital works -- all to the tune of $700 million over the next four years.

Fourth, the Budget maintains the commitment to balanced budgets and reducing debt.

Is the budget responsible?

Clearly, some increase in infrastructure was required as was an increase in health spending.  However, there was no indication that efficiencies are being pursued in low priority areas.  Moreover, some of capital initiatives, such as the so-called Communications Pipeline, are of very dubious value.

The Budget is balanced -- although only just.  Moreover, by some measures the budget will actual go into deficit for the next three years.  State debt may decline but only with additional privatisation.

The main flaw of this Budget lies in its treatment of taxpayers.  Taxpayers, not only do not share in benefits of growth and privatisation, but are hit harder with particularly destructive taxes.

ADVERTISEMENT

Don't Blame the Innocent

People who are grieving can make very silly and damaging comments.  Perhaps this explains the speech given in State Parliament at the end of last month by the Labor member for Cook, Steve Bredhauer.

Reacting to the loss of a close friend, a 42 year-old Aboriginal woman who was one of the political leaders of the Wik tribe, Mr Bredhauer said her death from "ignorance, fear and loathing" should be on the conscience of every Australian.  Each and every one of his parliamentary colleagues had also contributed to his friend's death.  And all Australians who had distorted the truth about native title, or who had sought to make political capital out of injustice and misery were guilty of complicity as well.

But it was not lies about native title, or the "ignorance, fear and loathing" of non-Aboriginal Australians that killed Mr Bredhauer's friend.  She died from internal injuries which resulted from a bashing she received in a domestic incident, and the police have already charged an Aboriginal man with her murder.

Of course, Mr Bredhauer did not take the step that his statements would logically require, and ask the police to charge himself and all his colleagues -- let alone the other 18 million of us -- as accessories.

However upset Mr Bredhauer may have been at the time, his emotional outburst certainly looks as though it was an attempt to make political capital out of a tragic and needless death.  He was promoting a political view of the causes of Aboriginal disadvantage and misery that is widely held by people on the left of the Labor Party, as well as by many Australian Democrats, church people and academics.

It is a very destructive view.  By implying that other Australians should somehow be held accountable for actions that are solely the responsibility of particular individuals, it helps to perpetuate the very misery that it purports to condemn.

On the one hand ludicrous claims about collective responsibility make it that much easier for non-Aboriginal Australians to throw up their hands in despair and disgust, and tune out at the very mention of Aboriginal problems.

On the other hand such claims provide easy alibis for those Aborigines who are unwilling to make the effort to take control over their own lives.  They can blame their misfortunes on everyone but themselves, and even feel that by doing so they are expressing the broader political interests of Aboriginal people by increasing white Australians' sense of shame and guilt.

To adapt W.S.  Gilbert's pithy observation in The Gondoliers, "when everyone is somebodee, then no one's anybody" -- when everyone is made responsible for something, then no one is responsible at all.

If a person distorts the truth about native title -- something that is just as common among Mr Bredhauer's political mates as it is amongst some of his opponents -- that person is guilty of being dishonest, nothing more.  Aborigines who see or hear these distortions may become angry, but this doesn't entitle them to abandon their self-control and lash out at their families or neighbours.

I am frequently angered by the falsehoods about Aboriginal issues which are peddled by organisations such as the Aboriginal and Torres Strait Islander Commission and the Human Rights and Equal Opportunity Commission, but no-one in my household has ever suffered violence as a result.  And none of my friends or acquaintances seem to think that such restraint makes me an especially admirable or remarkable person.

The Bredhauers of the world have a standard response to all this, and it has become a constant refrain in our public life.  They argue that it is impossible to understand the breakdown, despair and all the other problems that plague many Aboriginal settlements without considering the history of dispossession, humiliation and bureaucratic control that Aborigines have endured.  It is easy for comfortable members of the middle class to condemn violence and other crimes, but they do not suffer the poverty and frustration that is the lot of many Aborigines.

In general terms, they do have a point.  It is foolish to pretend that the present can be explained without reference to the past.  And there can be little doubt that certain kinds of social and cultural conditions encourage high levels of destructive behaviour.  (Although the Bredhauers seem to think that the harmful social and cultural conditions always derive from non-Aboriginal prejudice and other external sources.  They are very reluctant to accept that internal corruption or inappropriate cultural traditions might also be a problem.)

Nevertheless, historical or cultural explanations for broad patterns of social behaviour can never be excuses for the actions of individuals.  Humans can overcome even the most horrifying circumstances, retaining their dignity, integrity and humour in the face of terrible oppression and discrimination.

There are many Aborigines -- and others -- who are deeply offended by suggestions that the prejudice and worse that they or their families and forebears have suffered excuses them from behaving in a morally responsible manner.  They see such suggestions as a great way of diminishing and disempowering people, and of keeping them under the thumb of the officials and bureaucrats who would interfere in their lives.

But the closing thoughts should belong to Mr Bredhauer.  In his speech he also stated "every time we fail to stand up for what we know is right and to speak out against those who persistently fail every test of human decency in relation to Aborigines and Torres Strait Islanders, then we too have contributed to not one, but many deaths".

The most basic test of human decency is the willingness to treat all other people with dignity.  This means accepting them as free and morally responsible individuals, and not as the involuntary victims of external forces who are incapable of making their own choices about right and wrong.  Comrade Bredhauer is in danger of being hoist with his own petard.

ADVERTISEMENT

Onus on Leaders to Probe Cosy Tax, Gambling Link

Mr Kennett should get real and support the Productivity Commission's inquiry into the nation's gambling industry.

There is justifiably wide spread unease in the community at the growth and proliferation of gambling.

The concern springs in large part from the pace of change.  Nationally the gambling industry has more than doubled in real terms in this decade alone with turnover growing from $33 billion in 1989-90 to $80 billion in 1996-97.  Victoria has experienced the most rapid growth with gambling turnover expanding in real terms from $3.8 billion in 1989-90 to $26 billion in 1996-97 or by 650%.

Concern also emanates from the new forms of gaming and significantly increase it accessibility of gaming facilities in recent years.  Since 1982 14 casino have opened their doors in Australia with the largest being the Crown Casino.  Electronic gaming machines (EGM) have spread to clubs and pubs in all states except WA.  Again these changes have been most pronounced in Victoria.

The angst over gambling is being vigorously fanned by people intrinsically opposed to gambling.  However, neither the Commission or the average punter is going to be persuaded by wowsers or social engineers.

Gambling is a widely accepted and high valued past-time with around 80% of the Victorian adult population gambling to some extent during the year.  Victorians have responded positively to the recent changes with 49% of Victorian visiting the Crown Casino last year and with EGM quickly becoming the favoured type of gaming.

Surveys show that the vast majority of gamblers are thought to act responsibly and gamble for social or recreational purposes.

The concerns is validly focused on problem gamblers and their families and in particularly the impact greater accessibility to the new forms of gaming -- EGM and casinos -- on them.

The fact is our understanding of problem gambling issues is rudimentary.  The issue is not restricted to Victoria but is a national one.  Hence the utility of national inquiry.

There are other issues -- in addition to problem gamblers -- that need to be examined.

Most pertinently the heavy level of taxation imposed by state governments on the industry.  State government now collect around $3.4 billion in taxes from gambling -- which is about double the revenue collected at beginning of the decade and which represent about 10% of total state tax revenue.  The Victorian Government not only collects more gambling taxes per capita but is more reliant on gambling taxes.

The simple fact is that gambling taxes are not only excessive but regressive -- falling more heavily on low income people.  Moreover, the push for tax revenue has lead the states to create gaming monopolies which further increase the cost of gambling and to actively promote gambling.

Of course, the States are not primarily to blame for excessive reliance on gambling revenue.  The Commonwealth -- with its refusal to continence tax reform and regular cuts to state grants -- is the prime culprit.

For this reason Mr Costello is trying to quarantine the inquiry into gambling from tax reform and state-federal relations.  However, he has Buckley's chance of succeeding.  Tax reform and problem gambling are inextricable linked.

Try as it will, the Commission simple will not be able to avoid the tax issue.

ADVERTISEMENT

Locally Grown, Not Centrally Engineered

Social Capital:  The Individual, Civil Society and the State
by Andrew Norton, Mark Latham, Gary Sturgess, Martin Stewart-Weeks
Centre for Independent Studies, 1997, 413 pages, $14.95

What do democratic societies need if they are to survive and prosper?

One common answer emphasises the economy:  high rates of growth, being internationally competitive and full employment are all seen as important indicators of a healthy and robust society.

Since the late 1970s, governments around the world have measured their success in this way.  Reducing debt, stimulating economic growth and adjusting to the imperatives of a global financial market have been the priorities for national leaders, both Left and Right.

Increasingly, though, many have come to realise that man does not live by bread alone.  Equally as important as the economic debate is the question of the social bonds that hold communities together.

US President Clinton, in his 1995 State of the Union address, talked about "a new social compact" and the need for Americans to stop relying on government to solve their problems.  Instead of being dependent on top-down authority, Clinton stressed the need for community action.

UK Prime Minister Blair, in his address to the Labour Party annual conference last year, also asked citizens to rediscover such civic virtues as responsibility and obligation.  New Labour was not about centralised control, it was about empowering the community and giving individuals the opportunity to act together for the common good.

In Australia, Prime Minister Howard is also talking the language of mutual obligation and trust.  In a recent speech to the Australian Institute of Company Directors, the Prime Minister argued that a strong economy was dependent on such habits as "honesty, trust, self-reliance, cooperation [and] civility".

In fact, the Prime Minister's statement that "economic policy is central, but it is not an end in itself, only a means to an end" clearly signals that debates about national policy will increasingly focus on the health of civil society as well as the state of the economy.

The recent launch of Social Capital by the Sydney-based Centre for Independent Studies (CIS) is further evidence that policy debates will increasingly focus on social imperatives as well as economic.  The book contains a number of essays exploring the nature and significance of social capital and its relevance to Australia.

The term "social capital", made popular by the American academic Robert Putnam, refers to those stocks of social trust, norms and networks which people draw upon to solve common problems.  Such networks occupy the space between the individual and government and, according to the CIS publication, are an important indicator of the health of democratic societies.

Whether it be the local bowling club, the Country Women's Association or a community self-help group, by working in such groups individuals develop the ability to work collaboratively for the good of all.  Qualities like trust, co-operation and reciprocity are also developed;  the very values on which democracy depends.

As noted by one of the contributors to the CIS book, Martin Stewart-Weeks, social capital is also vitally important for the successful operation of free-market economies.  Markets operate best where there is a high degree of trust, openness and honesty and where individuals work on the assumption that agreements entered into will be honoured.

Ironically, at the very times that there is widespread agreement about the benefits of social capital, research suggests that it is on the decline.  Whether because of television, the growth of government and the welfare state or the breakdown of the family, the conclusion is that fewer people are involved in community groups and voluntary organisations.

The adverse consequences of declining social capital are many.  The American academic Francis Fukuyama, in his book Trust:  The Social Virtues and the Creation of Prosperity, refers to high rates of crime and juvenile delinquency.  Robert Putnam also refers to a lack of trust and argues that young people, in particular, are adversely affected.

As outlined in Mark Latham's essay in the CIS publication, ways to bolster social capital are difficult to find.  Contrary to the arguments normally accepted by the old guard of the Labor Party, the Federal Member for Werriwa argues that governments cannot create social capital by "top-down" action.

In the same way that the Right's belief in the invisible hand of the market is misplaced, Latham argues that the Left's commitment to government intervention is also wrong.  In areas like welfare, increased government assistance promotes a dependency mentality where individuals and communities lose the ability to take control of their own lives.

Ever since Paul Keating's remark about the "banana republic", much of the policy debate in Australia has centred on matters economic.  More recently, the debate has included the questions of the health of the society at large and what sort of civic community we want after the year 2000.  The CIS publication provides a valuable introduction to this debate and, as such, should be widely read.

Am I my brother's keeper?

A Political Dilemma:  an incident at Redcliffe 1994.

On a bright and sunny day, I walked from an office to buy a pie for lunch.  As I walked by the local pub I observed two women in their mid-to-late twenties leaving the pub.  One called out to a friend, a mother of similar age, and crossing the road with a young girl in hand.  "How you goin?", to which the friend replied in a very loud voice, "The boyfriend's pissed off, but it's okay, I'm fucking the ex!".

I was shocked, and saddened and concerned.  Why so shocked ...?  The language was not new to me, the circumstances were not new to me, I am no prude.  There was a link between me and the mother, above and beyond the concerns of observing poor behaviour from an adult, especially in front of a child.  I am a taxpayer and she was a beneficiary.

Reflect for a moment on the myriad implications of that relationship.  Did the taxpayer have a right to pass judgement on the behaviour of the beneficiary?  Did her behaviour make her undeserving of the assistance?  What are her rights to receive that assistance?  What are the taxpayer's rights to expect a "good result" from that same assistance?  What would constitute a good result?

Am I revisiting a debate that was settled at least by the time of the Beveridge Report in Britain 1942, or the Report of the Joint Committee on Social Security 1940-1943 in Australia?

"The plan is not one for giving to everyone something for nothing and without trouble, or something that will free the recipients from their personal responsibilities.  The plan is to secure income for subsistence on condition of service and contribution."

Beveridge, W. Social Insurance and Allied Services, para. 455.

Yes, I am revisiting the debate because there are a number of matters that have not been settled, or at least not to the satisfaction of this observer.  Both the Coalition government and the Labor opposition have begun to use the language, and presumably this reflects their reasoning, of mutual obligation in their discussion of unemployment benefits.

Of the two broad approaches to welfare, the "social contract" and "citizenship rights", the parties view appears much closer to the idea of a contract, than the more favoured "citizenship" theory that now appears to support much of the current debate on the welfare state.

In very rough terms the basis of the contract in the welfare state may be two-fold.  First, an acknowledgment that each of us derive some benefits through the social sphere, which creates an obligation to both "put back in" and "draw from" the common stock.  Second, a risk minimisation strategy, "there but for the grace of God go I", which does not create an obligation on the individual to put in, indeed it requires some consent, but is good insurance against the possibility of falling into poor circumstances.

In the citizenship view, one's right to be aided or to have certain life chances protected is derived from membership of the society per se and not from prior hypothetical or actual agreements or contracts.  You have not chosen to enter society, you have not given consent.  The basis of the citizenship theory is that social outcomes are no-one's fault, which is in sharp contrast with a strict contract approach which argues that there is no obligation unless there is a deliberate wrong.

It is reasonable of a Labor party person to argue that the contract approach should recognise that the source of some wrongs are social and not able to be sheeted home to an individual.  It is also reasonable to argue that the citizenship theorists should recognise the costs of no-one bearing any responsibility other than at the societal level.

Keeping these goalposts in view, what are rights to welfare actually rights to?  What set of rights is required to "confer, protect and guarantee the status of persons as full members of society?"  As if that is not a difficult enough question, one could ask, what obligations are there on each member of society?  Does each citizen have a duty to maintain her/him self as an independent member of society?  I cannot escape this uncomfortable relationship, this feeling that "I am my brother's keeper".

Well, if I am then I am entitled to ask the following sorts of questions:

Is the Welfare State sowing the seeds of its own destruction?

Has it created attitudes, or do attitudes now abound, which make its operation less useful, or even harmful?  For example, it can be argued that the poor are victims of circumstances, and the government has a duty to remedy their problem.  But even in circumstances not entirely of their own making people are personally responsible for their actions.  What are the implications for policy?

If poverty is the result of external forces, and these are unjust, the "victim" is entitled to compensation.  However, does not this send two messages, that the victim is incapable of solving his own problems, and provides a rationale for group hatred and demands for political discrimination?

Welfare rights are resource rights.  They demand that political power be used to take the earnings or savings of one group for transfer to another.  Such rights can divide the community into warring factions, and undermine the consensus and consent necessary to operate the system.

To some extent there are assumptions creeping into the welfare state that I doubt have any broad support in the electorate.  There are no innate rights to other people's resources, they require consent and consent entails making judgements about the receiver of the resources , and I think that is another reason why I was uneasy at Redcliffe that fateful day, and ever since. ...

ADVERTISEMENT

Deregulation and Increased Contracting Out Opportunities

Address to IBC Conference on Contracting Out Utility Services,
Melbourne, 30 April 1998

OUTSOURCING AS A GENERAL TREND

The original and still most important factor in outsourcing is cost saving pure and simple.  The rule of thumb used by former head of the Victorian Premiers Department, Elizabeth Proust, was that outsourcing saves about 20% of labour costs.  Various painstaking studies have shown the outcome to range between the negative and 50% plus savings -- topical in this respect is the present wharves dispute where savings at the top end of this range are confidently expected.

These labour cost savings are as a result of several factors:

• much of the labour resource is not needed all the time and the people involved can effectively handle more than one job
• by giving the contractee flexibility, it offers much greater scope for the discovery of more cost effective ways of doing things;  piecework and other incentive systems attempt to do the same thing but contracting out where the contractee is replaceable by someone who is cheaper offers the ultimate means of discovering and capitalising on cost savings in many situations
• outsourcing avoids the on-costs which are often hidden but always present
• it allows greater flexibility of labour use, particularly where job tasks have been ossified in closely defined descriptions sometimes referred to by union leaders as "hard won rights"
• in some heavily unionised industries like the ports, the coal mines the pre Robe River dispute iron ore mines, the ambulance service and elements of the electricity supply industry, it allows management to re-assume control of the process of production
• it circumvents the heavy penalty payments employers are obliged to make when they wish to restructure workforces or downsize with inevitable redundancies.

Contracting out has always been a feature of manufacturing and service industries.  Often it has taken the form of vast numbers of sub-contractors.  Such methods, used by the Japanese transformed the motor industry from the previous archetype where steel and leather went in the factory at one end and a finished car rolled off the other.

A further variant, franchising has proven immensely successful in galvanising the self interest of a quasi employee and turning him or her into a self motivated entrepreneur who seeksout economies in achieving customer satisfaction.

A long standing example has been the UK retailer Marks and Spencer.  Renowned for the high quality of its brand, Marks has all production undertaken by suppliers.  It employs a very strict control system to ensure quality.  The major US sports shoe firms have followed suit in this respect.  This leaves them vulnerable to political pressures from among others the First Lady who rage against low wages being paid in developing countries.

THE ELECTRICITY INDUSTRY

The industry comprises not only the production and distribution elements but ancillary functions in servicing it.  In terms of staff it has been considerably downsized over recent years -- in Victoria from 25,000 to less than 10,000;  in South Australia from 8,000 to 3,500 with comparable reductions in other jurisdictions.  At the same time its reliability has been considerably enhanced.

In the power stations, for example availability to run has been increased from 70-80 per cent in Victoria and New South Wales to over 90 per cent, a level that approaches world best practice.  Victoria's brown coal stations have demonstrated, especially since privatisation, how operations can be efficiently conducted with low quality fuel.  Queensland and some of the New South Wales stations have achieved very high efficiency levels with their integrated mines using variable quality coal.

Similarly, the distribution businesses have been streamlined by new management techniques and much closer customer orientation has been developed out of the market system being introduced.

Victoria is the most advanced in terms of privatisation.  Under the Kirner and Kennett Governments, the manning at the power stations was reduced from 12,000 to 3,000.  At the same time availability to run, the best proxy for reliability, was increased from something like 70% to 90%.  Since privatisation, direct employees have been further reduced to under 2,000 and availability has also been lifted a couple of notches.

In distribution, numbers were reduced from about 14,000 in the bad old days to rather less than this at privatisation.  Since then numbers have been further reduced and are rather less than half their pre-reform levels.  One CBD distributor now employs only 40% of the staff it employed at the time of its sale, prior to which numbers had already been reduced.  Its rule of thumb has been that the employment saving has yielded a 30% cost saving with about 70% of the jobs being essentially outsourced.  Another Victorian business has outsourced much of its maintenance to an electrical contractor and made comparable savings.

As with generation, the measures of reliability, notwithstanding misinformation published in the Age, especially by Kenneth Davidson, have generally improved.  These measures are monitored by the Office of the Regulator-General and show outages to be lower than under the old SECV.  In this respect, the power disruptions in Queensland and Auckland have often been erroneously attributed to privatisation.  In neither case was one share of the businesses concerned owned by a private investor.

RESTRUCTURING PRIOR TO PRIVATISATION

In Victoria, and to a lesser extent NSW and Queensland, restructuring was implemented so that the businesses provided plenty of competition.  There is always the temptation of Treasurers to restructure in ways that leave major elements of the previous monolithic businesses intact and thereby obtain a higher price.  Of course, for the most part such a higher price is extracted on the basis of some monopoly power on the part of the incumbent.  With this comes some increased costs to customers and a blunting of the incentive to seek out cost savings and better ways of meeting customer needs.

As discussed, the restructuring process also went a considerable distance towards rationalising staffing levels.  This has been less the case in NSW, especially among the distribution businesses.  In the case of the largest, energyAustralia, the reaction of the State Government appointed board to the downsizing and outsourcing proposals of the CEO was to fire the CEO.  The board itself was later replaced by the Government.

COMMONLY OUTSOURCED FUNCTIONS

In general the outsourcing trend has been in full swing for about the past six years.  Like most other firms, electricity distribution businesses started by contracting out activities on the periphery of their core business.  Among the first such candidates were workshops, civil engineering and construction activity.  These have been followed by undergrounding, meter installation, public lighting and in some cases line workers.

Most of the power stations have outsourced maintenance, catering, cleaning and security functions.  Some of these have been brought back in, in some cases -- for instance procurement.  Most of the power station outsourcing took place prior to privatisations and efficiency gains have been made since then by paring down on excess staffing and better management generally.

For the power stations a major driving force for cost cutting generally and outsourcing in particular was the coming national electricity market where the Victorian generators estimated they needed to cut at least 35% of direct costs if they were to be competitive with NSW and Queensland.  The generation business reflected all the poor symptoms of union control:  restrictive work practices, over-manning, poor performance leading to major outages all stemming from an ingrained antipathy towards management.

In the case of maintenance, considerable pre-conditioning was necessary.  The first step was to establish a profit centre.  Some early successes in outsourcing, included Siemens taking over the electrical workshops in 1991 and Linfox taking over transport and stores at the same time followed by a consortium taking over part of the coal cutting business.  These early outsourcings presented a demonstaration effect.  Although the unions fought to retain existing staffing levels, the gains were plain to see and the Kennett Government was particularly ill-disposed to union featherbedding.  The contracting out of maintenance entailed 2,200 jobs with about 1,000 of those displaced finding work with the contractors.

Many assets with a specialised role, like milling and boring machines for turbo-generator overhauls were not sold but leased out to the new contractor.  Such a move carries some risk that the new contractor will stint on maintenance of an asset he does not own.  This carries particular risks where the contractor feels he won't win the next round of contracts.  Although not followed in the SECV case, a strategy for combating this is to have an independent appraisal of the value of the asset pre-contracting and a further appraisal at the end of the contract with an agreement for payment where the asset has depreciated beyond an agreed point.

As with many other businesses, there are fears that the "emaciated corporation" will just become a bundle of contracts that nobody in the corporation itself is capable of overseeing properly.  Keeping core competencies and contracting skills is essential but the concept of core competencies is often elusive.  Western Mining, for example, outsources all its work at two of its biggest mines.  The Victorian Government outsourced its policy functions in the privatisation of the electricity industry.  Envestra in South Australia represents a business with substantially no employees.  However, it bought the assets of its leading shareholder, Boral and outsourced the operations back to Boral.

THE FURTHER STAGES OF OUTSOURCING
IN THE ELECTRICITY INDUSTRY

While other States are also embarking on the sort of processes that the Victorian industry pioneered, we have not yet reached the end of outsourcing.  In fact there is unlikely ever to be an end.  What is likely is that the internal/external sourcing decisions will ebb and flow as needs change.  Already in this respect some elements of power station maintenance have been brought back into the generators.

In some respects the distribution businesses are like property management companies, which have very few staff and simply call on known services to perform maintenance.  For existing lines, it is possible to envisage virtually all direct staff being outsourced.  For new extension, distribution businesses resemble construction businesses like Leightons or Grollo.  Again these firms have very few direct employees.

Other changes with regard to outsourcing will occur as a result of the electricity business evolving into a market, from the much discussed multi-utility and as a result of technology changes.

These stages of outsourcing are likely to involve competitively forced divestment of functions and those brought about by consolidation of utility functions.

COMPETITIVELY FORCED OUTSOURCING

Traditionally, the distributors of electricity have also been the retailers.  With successive bands of customers being opened to competition, we have seen an intensive marketing struggle.  To date, this has largely been between the existing rival retailer/distributor business.  This may change.

Already in Australia, with the smaller businesses constituting the 160 MWh per year tranche (roughly one fifth of the total load) we are seeing aggregators like Lincolne Scott searching out loads that match each other in profile and offering better deals.  With the 750MWh per year customers (typically the supermarkets) another firm, Essential, brought together a large body of users and succeeded in negotiating even more favourable terms than the tender process had offered.  In the US these aggregators appear to be making considerable headway.  New Energy Ventures in California claims to have signed up 5,000 mw or 10% of the State's load.

Load profiling that aggregators pursue undermines cross subsidies and leads to cherry picking.  Both of these outcomes tend to make the market more competitive.  They are made even more effective with accurate time of day metering.  It seems inevitable that meter costs will fall dramatically.  Those gaining the steadier load customers have a cost advantage that will be shared.  Those losing them have a considerable cost disadvantage.

Many aggregators act as business agents for particular groups.  They arrange not only the best prices but also service.  Much of the approach rests on buying scale -- thus Enron supplies gas to many McDonald franchises, Duke supplies many banks.

Aside from cost savings, advantages are likely to be

• simplified billing
• easier invoicing
• improved information manipulation

Marketers can assist users in analysing their use and seeking economies by comparing this against benchmarks.

Beyond this tentative trend to aggregators getting into the act, there are real likelihoods that the future retailers to households will be supermarkets, banks and other institutions.  These are skilled at handling large numbers of transactions, at obtaining goods and services at competitive prices and conveniently situated for bill paying.

CONVERGENCE

Water, electricity, gas and telecommunications have all been called "flowing-content businesses".  All require seemless delivery.  Once the conduit is in place, the delivered product can only rise above the pure commodity by the seller adding valuable features.  Switching by smaller consumers is presently, in the UK gas trials, spurred purely by price.  The same is true of the switching from host retailers that has been observed in NSW and Victoria with the larger customers.

But with integrated businesses, another dimension, convenience, is added.

Growing affluence brings a premium on quality.  Consumers will pay for things that liberate their time.  Telecommunications is the key.  The telecommunications industry operates in digital and cyberspace.  This means that mass customisation is cheap it means cheap metering and billing that is an integral part of marketing.  In addition, the ducts and wires that water, gas and electricity businesses control offer pathways for telecommunications.  And one particular feature, which may still turn out to be a mirage, is the possibility of selling electricity and other products with a service that, for example, allows remote lighting and heating controls.

The integrated bill will be one feature forcing convergence.  It offers customers a single payment, offers marketers information to target other offerings, gives a one stop shop.  Co branding is an aspect of this and it is significant that Solaris in Victoria is now simply AGL.  Other Victorian distributors and their overseas shareholders are examining gas assets to be sole in Victoria later this year and several are seeking alliances with telecommunications businesses.  EnergyOne which is franchised by the majority owners of United also seeks to offer an integrated system.

Integration offers both economies in the customer liaison, billing and liaison fields but also offers opportunities to build up better profiles of customers to match their needs more effectively.  A great spur is the single bill.

Metering itself is an area already being outsourced.  Whether or not we see integrated utility services, with smart meters that can be read remotely, the economics is certain to force the meter reading of all utility services to be done by one concern -- either it will be outsourced to an independent or one of the host retailers will perform the tasks for the others.

SUMMARY

We are currently seeing a massive boost to outsourcing as the privatised and competitive market is forcing electricity businesses to cut costs to remain competitive.  The high prices paid for assets in Victoria and with the gas pipelines in South Australia and Western Australia are adding impetus to this process.

Much remains to be done even within conventional outsourcing.  But technology and marketing innovations are likely to bring new frontiers for outsourcing.  These will be driven by a combination of factors including:

• the need to avoid taking on in-house employees with the contingent costs this imposes on flexibility
• opportunities to make savings through sharing common facilities like call centres, maintenance and customer liaison
• sharing of transmission/distribution lines
• opportunities to offer improved services like a single bill
• the possibility of offering an integrated package of goods, especially where gas and electricity are concerned
• combining the use of telecommunications with energy services in ways that are not yet known