Bridge Too Far for Politicians to Reconcile

In the South Australian town of Goolwa earlier this month, I took part in the nation's first "politically incorrect" walk for reconciliation.  It hadn't actually been planned as a reconciliation event, but it was transformed into one by an Aboriginal activist unhappy with the craven behaviour of the state's Liberal Party government.

I had travelled to Goolwa for the opening of the controversial bridge linking the town with Hindmarsh Island in the lower Murray.  The bridge has long been opposed by a coalition of ferry drivers, environmentalists, and wealthy holiday-home owners who wanted to keep the island largely to themselves.

In the mid-1990s, they had the shrewd idea of recruiting Ngarrindjeri Aborigines to support their cause.  Soon a small group of Ngarrindjeri began to claim that the bridge would desecrate their "secret women's business", although another group of Ngarrindjeri, the so-called "dissident women", came forward to ridicule these claims.

In response, the state government set up a Royal Commission to investigate the competing accounts.  The findings were unequivocal -- the whole "women's business" story was simply a fabrication designed to prevent the bridge from being built.

Although no-one has refuted the evidence and arguments that the Royal Commission presented to support its findings, some Ngarrindjeri and whites still pretend that the "secret women's business" is genuine.  They have mounted a series of unsuccessful court cases against the bridge, including one based on the ludicrous claim that it would constitute genocide against the Ngarrindjeri.

The anti-bridge Ngarrindjeri are now trying to obtain funds to set up a toll ferry service linking Hindmarsh Island with the town of Clayton, 12 km from Goolwa, which would bring even more visitors to the island.  They have obviously forgotten that initially they said they opposed the bridge because it would bring increased traffic, and so cause further disturbance to an island of supposedly immense cultural significance.

Despite all this, the anti-bridge Ngarrindjeri are still treated with great respect in many quarters, including sections of academia, the churches, and the ABC.  So, given the Liberal Party's unenviable track record of wilting in the face of opposition from the posturing classes, few were surprised that South Australian government ministers were reluctant to be involved with the opening of the bridge.

Premier John Olson did not even attend, despite many urgings to do so.  Transport Minister Diana Laidlaw, who might normally be expected to do the honours at such an opening, said she didn't want her name on any plaque on the bridge, thus becoming probably the first politician in Australian history to refuse to be associated with a major public works project.

So the task fell to the local member and Minister for Human Services Dean Brown, who had established the Royal Commission in 1995, before being deposed as South Australia's premier.  His speech was extraordinary, even for a fainthearted politician.

Mr Brown gave recognition to the anti-bridge Ngarrindjeri who were protesting nearby under a banner proclaiming "genocide".  He went on to identify and thank many people who had helped to bring about the completion of the bridge.  But he pointedly omitted the two parties without whom the bridge would never have been built.

Mr Brown declined to acknowledge either the developers, Tom and Wendy Chapman, who persevered despite all the forces of "political correctness" lined up against them;  or the Ngarrindjeri "dissident women" sitting in front of him, who blew the whistle on the bogus "women's business" claims.

This was all too much for Allan "Chirpy" Campbell, a Ngarrindjeri whose family claims to be the traditional owners of Hindmarsh Island.  Mr Campbell is probably best described as an agitator.  In the mid-1980s he went to Libya to request funds from Colonel Gadaffi as part of a delegation led by the Aboriginal separatist Michael Mansell, and he has had a long involvement in the Aboriginal deaths in custody campaign.

The organisers had made no plans for Mr Campbell to speak, although he and his family supported the bridge's construction.  But confronted with a burly and forceful Aborigine dressed in what was supposed to be a traditional cloak -- though cut from an old blanket, and sporting the Aboriginal flag -- they did not have the stomach to resist.

Chirpy has a reputation for being a bit of a loose cannon, and some of the Ngarrindjeri in the audience were nervous about what he might say.  But their anxieties were unfounded, for he redeemed an event that otherwise would have been a testament to bad faith.  The former black separatist said the things that should have been said by the white politicians.

He pointed out that the "secret women's business" had been fabricated by a white, and asked people to applaud the honesty and courage of Dorothy Wilson, Dulcie Wilson, and the other Ngarrindjeri "dissident women" in the audience.  He also thanked the Chapmans for helping Ngarrindjeri tell the real truth about their history and culture.

Mr Campbell went on to say that the Hindmarsh Island bridge was a powerful symbol of reconciliation, and he condemned the failure of state and national reconciliation organisations to get behind the opening.  So he declared that the bridge crossing which was about to get under way would be a walk for reconciliation.

Around 7,000 individuals, both Ngarrindjeri and non-Aboriginal Australians, joined him in a fine spirit of camaraderie;  an impressive number for a small town.  The only unhappy people were the little group of anti-bridge protestors mouthing inanities in the adjoining park, and the politicians whose gutlessness had been revealed to all.

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The Coalition's Cultural Incompetence

Part of the problem for the Coalition is that its cultural opponents are shameless liars.  It is a lie that there was a "stolen children" genocide, it is a lie that poverty is increasing, it is a lie that income distribution is (after taxes and transfers) becoming more unequal, it is a lie that most people are worse off, it is a lie that government is shrinking, it is a lie that the welfare state is shrinking, it is a lie that opposing Native Title or special programs for indigenous Australians is a mark of racism, it is a lie that opposition to multiculturalism or immigration is proof of racism, it is a lie that human-induced global warming with major negative consequences is settled science ...

But the Coalition gets swamped in such lies because it fails miserably to develop its own intellectual and cultural resources.

Their opponents get away with such lies because public debate is so dominated by the self-serving moral vanity posturing of the progressivist ascendancy.

Yet, after five years in office federally, the Coalition has done nothing to seriously contest the dominance of cultural institutions by its opponents.

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Forget the economy, it's about the culture, stupid

Whether in government (Western Australia) or in Opposition (Queensland), the Coalition is being punished.  It faces the prospect of One Nation splintering the liberal-conservative vote in such a way that it will not only lose the next federal election, but be kept out of power for a long period.

If this happens, it will have no-one but itself to blame.  It will be the just reward for its sustained incompetence at cultural politics.

In Queensland, One Nation made it appear that the only plausible majority Government was the ALP.  So, in the Queensland tradition, swinging voters voted for stability.  Conservative voters voted to punish Opposition Parties for not sticking up for them effectively.

The One Nation persistence is not primarily about people being worse off.  The best data on income distribution we have shows that, under economic reform, incomes have increased across the spectrum, with those at the bottom having the highest rates of increase.  It was not simply about globalisation or about national competition policy or about failing to spend money on the bush.

Pauline Hanson herself did not gain prominence by talking about economic issues, but about cultural ones, about issues of national identity.  Issues such as crime, immigration, indigenous issues.  The issues where the gap between media opinion and public opinion is widest.

And this is where the Coalition is reaping the rewards of its sustained incompetence in cultural politics.  Over the years, it has made no serious attempt to build up its intellectual resources in these areas.  When in power, it has no serious network of people to appoint to cultural institutions.  Consequently, it has, with few exceptions, no strategy for dealing with cultural issues apart from pallid acquiescence in the fads and fashions of the progressivist ascendancy.

It is not that the Coalition has to have a single view.  On the contrary, a broad church approach is precisely what is required.  But it had to be willing and able to effectively articulate the range of concerns of its social base.  By treating large areas of cultural and social policy as effectively "no-go" areas it left them open for someone to come in and articulate concerns that were not being addressed.  Which is what Hanson did.

The Coalition's federal margin is so narrow (a 0.8 per cent swing would see it lose office) that the smallest swing experienced by any Federal Government since 1966 (0.9%) would be sufficient to tip it out.  But its margin is so narrow because of the cultural revolt on its own turf in 1998 where One Nation got one million votes.

The vote for One Nation represents a scream for attention by people who feel they are not being listened to.  Yet the approved response (refusing to swap preferences with One Nation candidates) effectively says that these preferences are unclean and will not be accepted -- thereby shouting at these that they will not be listened to.  Ostracism is not a basis for dialogue.

The demand by people who would never listen to anything John Howard says that he should have shouted Hanson down is really an attempt to maintain the legitimacy of shouting people down -- and shutting out of public debate lots of people including those who think like, well, Howard.

The real nightmare for the Coalition is that a mutually reinforcing situation will be set up.  The progressivist intelligentsia screams at Pauline and One Nation, raising the sneering at the concerns of those who think differently to a new pitch, aiding the One Nation vote.  This puts the Labor in power, and Labor then uses its resources, and those of the State, to reinforce the progressivist ascendancy to keep the cycle going.

The National Party may be in terminal difficulty (with the possible exception of Queensland).  From the 1920s to the mid 1980s it had about 15 per cent of the seats in the House of Representatives, but now has about 10 per cent.

The Country-cum-National Party was created and lived as a protest against economic exclusion and exploitation by urban interests.  Perhaps it can be re-born as a protest against cultural exclusion and exploitation by urban interests.  After all, the major moral vanity issues of environment and indigenous affairs operate on the basis of urban posturing imposing costs on rural Australia.  The urban greenies and reconciliation posturers get the moral vanity, the bush gets the devastated industries.

The National Party should not campaign against economic reform -- unless I was prepared to campaign against the welfare state.  It should start advocating such things as capital punishment, pride in Australia, the same set of rules for all (in particular, no Treaty), welfare reform, firm crime policy, compensation for compromised property rights.  It should denounce urban posturers who make country Australia pay for their preening indulgences.

The other big mistake the Coalition parties have made is that they have become high-tax parties.  Under Howard, Australians pay more taxes per head than they have before.  The net effect of bigger government is to tax the social base of the Coalition Parties to pay funds to the social and activist base of the Labor Party.  It is stupid of the Coalition to play this game.  It should be attempting to reverse it -- by smaller government.

Part of the problem for the Coalition is that its cultural opponents are shameless liars.  Today's shameless untruths include:  that there was a "stolen children" genocide, that poverty is increasing, that income distribution is (after taxes and transfers) becoming more unequal, that most people are worse off, that government is shrinking, that the welfare state is shrinking, that opposing Native Title or special programs for indigenous Australians is a mark of racism, that opposition to multiculturalism or immigration is proof of racism.

The Coalition gets swamped in such shameless untruth because it fails miserably to develop its own intellectual and cultural resources.  Their opponents get away with such lies because public debate is so dominated by the self-serving moral vanity of the progressivist ascendancy.  Yet, after five years in office federally, the Coalition has done nothing to seriously contest the dominance of cultural institutions by its opponents.

Mainstream liberal-conservative politicians have responded to the unreal moral vanity of the media rather than the values, concerns and experience of its own social base.  What have Coalition Governments actually delivered since 1992 except fiscal rectitude?  When Queensland National Party leader Rob Borbidge says that voters are not listening to the major conservative parties, the real question is, why should they?  Those parties have become part of the problem.

The Coalition is in serious trouble, trouble which started at the height of a long economic boom.  And it is all its own fault.  It's the culture stupid.

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Subtle Bias to Polling Groups

A fortnight ago, nearly 350 people, supposedly chosen at random to reflect the nation as a whole, spent a weekend at Old Parliament House in Canberra to consider the future of reconciliation.  These "representative Australians", as they were called, discussed the issues among themselves in small working groups, and attended plenary sessions where panels of politicians and experts responded to prepared questions.

Before the weekend, the participants were asked whether governments should apologise to Aborigines.  45 per cent agreed and 48 per cent disagreed.  After their deliberations, they were polled again.  This time the support for an apology was overwhelming, with 69 per cent in favour, 19 per cent against, and the rest undecided.

Backers of the exercise, which is known as "deliberative polling", claim that this kind of change represents "the conclusions the public would reach, if people had a good opportunity to become more informed".  The ABC, which televised some of the proceedings, was delighted with the outcome, and The Australian's Mike Steketee wrote that it was pity Pauline Hanson hadn't been there to see how ordinary Australians respond when they are properly informed.

But sceptics argue that deliberative polls are just a subtle form of indoctrination, intended to strengthen political positions favoured by the cultural elites.  Having participated in one of the panels, and spoken to a few of the "representative Australians" after the weekend, I support the sceptics.

Deliberative polls are the idea of University of Texas Professor James Fishkin, and were devised largely in response to a major weakness with conventional opinion polling.

Over the years researchers have found that because many people don't like admitting they are ignorant about the issues to which they are responding, they offer random answers, or answers which they think will impress the interviewer.  In a number of classic studies, individuals offered seemingly decisive opinions about legislation and ethnic groups that did not even exist.

Professor Fishkin worked to develop techniques to provide citizens with the opportunity to come to an educated opinion on particular topics.  To date, nearly twenty deliberative polls have been held in various countries, including one in Australia dealing with the issue of a republic.

This was staged shortly before the 1999 referendum, and it produced an outcome strikingly different from the referendum itself, with nearly three-quarters of the participants supporting the "yes" position.  Results from other countries also show a marked tendency for participants in deliberative polls to move towards positions favoured by the posturing classes.

Of course, if such polls are to have any credibility, impartiality is crucial.  The "representative Australians" attending the reconciliation deliberations were certainly led to believe that the briefing paper they were given beforehand was carefully balanced, and that all relevant points of view would be propounded over the weekend.

But while Issues Deliberation Australia, the organisers of the weekend, were no doubt sincere in their desire to offer an even-handed presentation, I don't think they were successful.  Perhaps the problem lay in their inability to understand the complexities of Aboriginal issues, and the extent to which years of sanctimonious browbeating have truncated proper debate on these matters.

When I was first asked to become involved, both as a panellist and to review the written material, I was hesitant.  I suspected that I was being invited merely to give the illusion of balance to an event whose main purpose was to show that no decent human being could hold views on reconciliation contrary to those of ATSIC and the Australian Democrats.

My suspicions increased when I saw a list of the others being invited to address the gathering, and a draft of the briefing paper.  Neither showed evidence of balance, nor held any promise that the "representative Australians" would be taken much beyond feel-good moralising to a consideration of the tough questions and trade-offs involved in the key issues of reconciliation.

On the other hand, Dr Pamela Ryan, managing director of Issues Deliberation Australia, responded gracefully to my criticisms.  She said that she welcomed suggestions for other panellists, and for ways of improving the briefing document.

I gave her the names of a number of articulate Aborigines who question the value or direction of the reconciliation process, or the conventional stance on an apology.  But there were no dissidents in the final line-up of Aboriginal panellists in the plenary sessions.  I have since discovered that two of the Aborigines I suggested were not even contacted.  Another two heard nothing further after preliminary discussions, although one of them made it very clear that she wished to become involved.

And although the discussion of some issues in the final version of the briefing paper was less tendentious than in the draft, it was still a document that could be embraced by most "black armband" historians.  There was no indication, for example, that Bringing Them Home, the report on the "stolen generations" that first triggered the clamour for a national apology, is a document whose credibility is increasingly under serious challenge.

In this regard, it is unfortunate that the Lowitja O'Donoghue story did not break a week earlier.  At the very least it would have led to questions that were simply not raised during the deliberative poll.

But so long as no-one takes the results of the poll seriously, there may be some benefits from the weekend's proceedings.  They gave Aboriginal and non-Aboriginal Australians from all over the country an opportunity to meet with each other and form new friendships.  And that is what reconciliation should be all about.

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Keating's dopey tax plan

Letter to the Editor:

Paul Keating accused me of being dopey on tax reform ("Dopey Right wakes up on tax", AFR, February 28).  Well, who really is the dope on tax?

I have long been a champion of tax reform and lower taxes, and still am.  I was not, as claimed by the father of One Nation, a champion of the GST.  I argued for a State-based retail sales tax (RST) set at a rate which allowed a reduction in grants to the States, and therefore cuts to income tax rates, and the elimination of a raft of State taxes.

Importantly a RST would allow the forces of interstate competition to limit the overall tax take, improve the accountability of the States and reduce red tape.

When my proposal was rejected and a GST proposed, I did reluctantly support a tax switch where a broadly based GST replaced the wholesales sales tax plus a raft of State taxes and reduced income tax rates including the top marginal rate.  When it became clear that the package would not be delivered, thanks to the Democrats and ALP, I publicly and repeatedly urged the Government to abandon its bastard child.

As for Paul Keating, since failing to get his own GST up in 1985, he has lacked the fortitude for tax reform even though the proverbial drover's dog knew it was needed.  Instead, he took the easy route of relying on taxation by stealth through bracket creep and hidden indirect taxes.  If we had continued with the Keating's tax approach and high spending policies, the tax take would be higher, tax officials more intrusive and families on average weekly earning would now be paying a marginal tax rate of over 50 per cent.

Howard's GST may be flawed, but Keating's alternative is just plain dopey.

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The Rewards of Cultural Incompetence

How do you spell "One Nation Party"?  P-L-D, because it's the DLP in reverse.  Whether in Government (WA) or in Opposition (Queensland) the Coalition is being punished.

The Coalition faces the prospect of One Nation splintering the liberal-conservative vote in such a way that it will not only lose the next federal election, but be kept out of power for a long period of time -- in the same way that the splintering of the Labor vote via the DLP did much to keep the ALP out of power from 1955 to 1972.

If this happens, it will have no one but itself to blame.  It will be the just reward for its sustained incompetence at cultural politics.

In Queensland, the effect of One Nation was to make it appear that the only plausible majority Government was the ALP.  So, in the Queensland tradition, swinging voters voted for stability.  Conservative voters voted to punish Opposition Parties which have not been sticking up for them effectively.

The One Nation persistence is not primarily about people being worse off.  The best hard data on income distribution we have -- the work by Professor Ann Harding at University of Canberra -- shows that during the period of economic reform, incomes have increased across the spectrum, with those at the bottom having the highest rates of increase.

It was not simply about globalisation -- rural WA lives off exporting.  It was not about national competition policy -- the Court Government had not touched the marketing boards (apart from dairy de-regulation which affected only about 400 farmers, who were substantially compensated anyway).  It was not about failing to spend money on the bush -- the Court Government had insulated rural WA from spending cuts and had been spending on the bush, with former Deputy Premier and National Party Leader Hendy Cowan handing out the pork.

Pauline Hanson herself is not really about economic issues.  She has nothing to say on them which is not already being said by the Democrats, Greens, left of the ALP, humanities and social science academics and the ABC.  She did not gain prominence by talking about economic issues, but about cultural ones, about issues of national identity.  Issues such as crime, immigration, indigenous issues.  The issues where the gap between media opinion and public opinion is widest.

And this is where the Coalition is reaping the rewards of its sustained incompetence in cultural politics.  Over the years, it has made no serious attempt to build up its intellectual resources in these areas.  When in power, it has no serious network of people to appoint to cultural institutions.  Consequently, it has, with a few honourable exceptions (Tony Abbott being the most prominent) no strategy for dealing with cultural issues apart from pallid acquiescence in the fads and fashions of the progressivist ascendancy, passive negativism (no, I won't say sorry) or silence.

It is not that the Coalition has to have a single view.  On the contrary, a broad church approach is precisely what is required.  But it had to be willing and able to effectively articulate the range of concerns of its social base.  By treating large areas of cultural and social policy as effectively "no-go" areas (reinforced by being burnt by its own incompetence when it did so venture -- for example, Asian immigration) it left them open for someone to come in and articulate concerns that were not being addressed.  Which is what Pauline Hanson did.

The Coalition's federal margin is so narrow (a 0.8% swing would see it lose office), that the smallest swing experienced by any Federal Government since 1966 (0.9%) would be sufficient to tip it out -- and only in 1993 was there not a swing against the incumbent Government.  But its margin is so narrow because of the cultural revolt on its own turf in 1998 where One Nation got 1 million votes despite its leader being clearly revealed, by her ludicrous "easy tax" policy, as a dill.

It is widely acknowledged that the vote for One Nation represents a scream for attention by people who feel they are not being listened to.  Yet the approved response is to say that the preferences of people who vote for One Nation, people whose votes the Coalition has been seeking for years, are unclean and will not be accepted -- thereby shouting at them that they will not be listened to.  The only response to such insulting Coalition arrogance is the obvious one -- OK, that's a done deal.

Ostracism is not a basis for dialogue.

As for the danger of a loss of urban votes from such preference deals;  first, product differentiation is an advantage one is supposed to be able to get from being a Coalition (while weakness and indecision are never attractive).  Second, it has been Coalition acquiescence in "no-go" areas and in large slabs of opinion being beyond the pale which has allowed such a mentality to take root.  So Coalition incompetence at cultural politics means it is now placed in an impossible dilemma.

The demand by people who would never listen to anything John Howard says that he should have shouted Hanson down is really an attempt to maintain the legitimacy of shouting people down -- and shutting out of public debate lots of people including those who think like, well, John Howard.

The real nightmare for the Coalition is that a mutually reinforcing situation will be set up.  The progressivist intelligentsia screams at Pauline and One Nation, raising the sneering at the concerns of those who think differently to a new pitch, aiding the One Nation vote.  This puts the ALP in, which then uses its resources, and those of the State, to reinforce the progressivist ascendancy to keep the cycle going.  Telling the progressivist ascendancy that its moral vanity sneering is feeding One Nation would be no deterrent -- keeping the Coalition out of power is fine by it.  And One Nation provides such a perfect foil for its own posturing and preening about its moral superiority.

The National Party may be in terminal difficulty (with the possible exception of Queensland).  It was created out of a revolt by rural exporters against their exploitation by the Deakin system of wage arbitration and trade protection.  From the 1920s to the mid 1980s it had about 15% of the seats in the House of Representatives.  Since the mid 1980s, it has declined to about 10%.  This is precisely the period when the replacement of the Deakin system got underway in earnest.  Population shifts have not helped, but the real story has been the steady replacement of National Party MPs by Liberal MPs (and, latterly, rural independents).

The Country-come-National Party was created and lived as a protest against economic exclusion and exploitation by urban interests.  Perhaps it can be re-born as a protest against cultural exclusion and exploitation by urban interests.  After all, the major moral vanity issues of environment and indigenous affairs operate on the basis of urban posturing imposing costs on rural Australia.  The urban greenies and reconciliation posturers get the moral vanity, the bush gets the devastated industries -- forest towns demolished, development projects blocked, rural property rights compromised.  (And their guns taken away on the insulting implication they are all potential Martin Bryants).

If I was the National Party I would not campaign against economic reform -- unless prepared to campaign against the welfare state in a fundamental way (since it is the increasing revenue demands of the growing welfare state which fundamentally drives economic reform).  I would start advocating such things as capital punishment, pride in Australia, the same set of rules for all (in particular, no Treaty), welfare reform, firm crime policy, compensation for compromised property rights.  I would denounce urban posturers who make country Australia pay for their preening indulgences.  I would not tolerate the idea of "no-go" areas in public debate.  In fact I would seek them out.

The other big mistake the Coalition parties have made is that they have become high-tax parties.  They would prefer to spend taxpayer's money themselves than hand it back to its constituents (another sign of being out of touch).  Of course inflation spikes caused by public policy (the GST) should be taken out of petrol excise indexing (which betrayed the original Fightback! deal of GST for lower petrol prices).  Under Howard, Australians pay more taxes per head than ever before in history.  The way the modern state works, the net effect of bigger government is to tax the social base of the Coalition Parties to pay funds to the social and activist base of the Labor Party.  It is very stupid of the Coalition to play this game.  It should be attempting to reverse it in the only way it can be reversed -- by smaller government.

Part of the problem for the Coalition is that its cultural opponents are shameless liars.  It is a lie that there was a "stolen children" genocide, it is a lie that poverty is increasing, it is a lie that income distribution is (after taxes and transfers) becoming more unequal, it is a lie that most people are worse off, it is a lie that government is shrinking, it is a lie that the welfare state is shrinking, it is a lie that opposing Native Title or special programs for indigenous Australians is a mark of racism, it is a lie that opposition to multiculturalism or immigration is proof of racism, it is a lie that human-induced global warming with major negative consequences is settled science, just as the secret women's business was a lie.  But the Coalition gets swamped in such lies because it fails miserably to develop its own intellectual and cultural resources.  Their opponents get away with such lies because public debate is so dominated by the self-serving moral vanity posturing of the progressivist ascendancy.  Yet, after five years in office federally, the Coalition has done nothing to seriously contest the dominance of cultural institutions by its opponents.

Mainstream liberal-conservative politicians have responded to the unreal moral vanity of the media rather than the values, concerns and experience of its own social base.  What have Coalition Governments actually delivered since 1992 except fiscal rectitude?  When Queensland National Party Leader Rob Borbidge says that voters are not listening to the major conservative parties, why should they?  Those parties have become part of the unreal game, they have become part of the problem.

In the midst of an economic boom, the Coalition is in serious trouble.  And it is all its own fault.  It's the culture stupid.

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Rational Exasperation

Exasperating Calculators:  The Rage over Economic Rationalism and the Campaign against Australian Economists
William Coleman and Alf Hagger
[Macleay Press]

As a veteran of the debate over economic reform and "economic rationalism" I can testify that the single most exasperating factor is the serial indifference of the critics of reform to facts, logic and evidence.  No statement about what economic rationalists allegedly believe, or what economic reform has meant, appears to be too outrageous, or too fallacious, for some opponent of "economic rationalism" to fail to proclaim it.

Now two Tasmanian economists, William Coleman and Alf Hagger, have put fingers to keyboards and produced Exasperating Calculators, a savage exposure of the indifference to truth, the cavalier use of evidence, the lack of any genuine forensic analysis identifying reformers and what they said and did, and the substitution of propaganda for scholarship by critics of economic rationalism (whom the authors label "Economic Irrationalists") which have so disfigured Australian public debate over the last decade.

Most of the main villains are properly pilloried.  Michael Pusey, whose mendacious, turgid book Economic Rationalism in Canberra:  A Nation-Building State Changes Its Mind kicked off the entire frenzy in 1991, gets an entire chapter to himself.  The authors expose his indifference to factual accuracy, his failure to provide any definition of "economic rationalism", the thing he was allegedly critiquing in the above book (and the nonsensical nature of the definition he did eventually offer) and the propagandistic nature of his purposes.

The authors are equally good on Robert Manne, who, in their words, combines a studied pose of wisdom with an ingenuous candour about his ignorance.

They demolish his myth-making about Imperial Germany, his serial factual errors, often of a most gross kind.  Of Manne the observer can only remark on the slightness of everything Manne has written on Economic Rationalism.  He seems to have done little of anything like research.

They move on to skewer John Carroll (for whom "manufacturing is something of a economic sacred site") for similar myth-making.  Thus [Carroll] describes Imperial Germany as the "most powerful economy in the world" (Carroll 1992, p.13).  This is a gross falsehood by any ordinary meaning of economic power.  What strange history has Carroll been reading?

Hugh Stretton is showed to be similarly guilty of serial factual error:  within the circle of Economic Irrationalists, Stretton is the undisputed master of the utterly mysterious and absolutely unaccountable factual claim.  We cannot resist quoting an earlier appraisal of Stretton's commentary on economic policy:  "Mistaken premises, false conclusions:  it is impossible to list them all".  (Castles, 1986, p.37).

And so they go on, demolishing tin god after tin god, showing again and again that their alleged concern for the good of Australia does not lead them to do elementary things like getting their facts right.  Peter Self, Eva Cox, John Langmore and John Quiggin, Paul Smyth and Bettina Cass, James Richardson, Gregory Clark, J.M. Hobson, B.A. Santamaria, Clive Hamilton, H.C. Coombs, Fred Argy, Russell Matthews, all get sections to themselves, with their failings coldly and brutally exposed.

The authors are severe on the failure of the profession to defend itself against what has often been an attack on economists and economic per se (noting the collapse in enrolments in economics) and make it clear that there is no reason to expect this abusive calumny to stop of its own accord.

The only real beef I have with this excellent book is that Stuart Macintyre is not in it.  The chapter of his 1999 Concise History of Australia on the economic reform period is rife with the sins the authors expose, particularly gross indifference to factual accuracy and a definition of economic rationalism so fallacious that it covers not a single important player in Australian public policy.

But this a niggle to be set against fine achievement.  The authors are to be commended for their labours.  Anyone genuinely interested in the quality of public debate and the future of Australian should buy and read this book.

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Casting the Demons Out

Book Reviews

Exasperating Calculators
by William Coleman and Alf Hagger
Macleay Press, Paddington, NSW 336 pages

Exasperating Calculators is a rigorous rebuttal of those who demonise economic rationalism -- a critique of the critics.  When even our Prime Minister turns from economic rationalist to bush populist;  when the economically irrationalist Pauline Hanson can poll 10 per cent in WA and 20 per cent in the Queensland seats that One Nation contested;  when enrolments in high school economics classes fall from 44,000 in 1991 to a mere 24,000 in 1996 something fundamental is afoot.  During the past 15 years, many people who enjoyed economic privileges have lost them.  Coleman and Hagger contend that Michael Pusey, Robert Manne, John Carroll, Clive Hamilton, Hugh Stretton and others (including Malcolm Fraser) gave them an intellectual justification for their disappointment which they turned to wrath.  "Economic rationalism" offered every victim of adversity something to hate.

Pusey coined the term "economic rationalism" in Economic Rationalism in Canberra:  a Nation-Building State Changes Its Mind.  With considerable help from the ABC, it spread like wildfire, not just among the social sciences, but among the lay public.  It has, however, so far defied agreed definition.  Pusey, we are told, despite its being the topic of his book, did not offer one.  At the risk of adding to the confusion, I'll propose my own:

Economic rationalists contend that governments should develop the institutions that make markets work better, avoid unnecessary substitution of their own judgements for those of buyers and sellers, and govern without favour.

Coleman and Hagger make clear that neither they nor other economic rationalists believe that economics (rational or otherwise) says all there is to be said about government, let alone about life.  I agree.

Economics, however, said a lot before the event about the sort of economy that we in fact experienced during the 1990s.  The reforms against which the economic irrationalists rail were undertaken by the Hawke Government with the support of the Howard and Hewson Oppositions because economic theory predicted that those policies would best raise productivity and living standards, lower inflation and unemployment, and give us the capacity to weather events such as the Asian "crisis".  Exasperating Calculators is particularly scathing of logical fallacies and I am reluctant to commit the post hoc ergo propter hoc fallacy.  Nevertheless, although the long boom of the 1990s could be chance, it could also be that the overwhelming majority of economists in Treasury, the Reserve Bank, the Productivity Commission and the universities were right.

Exasperating Calculators is mostly an attack on the enemy.  It is mostly armour in the economists' anti-missile defence system, destroying the destroyers.  It does, however, also spell out for the umpteenth time the role for governments in preserving market institutions and correcting market failures.  Unlike "Star Wars" it scores a lot of direct hits, many of them by simply stating a claim made by, say, Pusey or Manne followed by the facts from the most obvious reputable source, such as the Australian Bureau of Statistics.  The kindest thing that can be said about most of the falsehoods is that they are disgracefully sloppy.  (For some not atypical examples, see the extract reproduced on the following page).

Years back, John Carroll wrote something which, if accurate, overturned the principle of comparative advantage.  I had words with Robert Manne over whether Carroll was obliged to publish in a manner that facilitated assessment and challenge.  I am, therefore, particularly delighted that Coleman and Hagger also believe that academics should submit to the rigours of academia.  They land some particularly destructive direct hits on the use that Pusey made of an undergraduate survey which purports to show that Canberra's Senior Executive Service officers are rightwing and nearly all economic rationalists.  It will be interesting to see if Dr Pusey publishes a rebuttal.

The irrationalists look back with nostalgia to the days when Australia was run by nation-builders such as Nugget Coombs and Sir John Crawford from the Department of Post-war Reconstruction.  In 1973, however, Coombs led the Task Force on Government Spending that reported to the Whitlam Government.  He marshalled economic arguments to identify unjustified subsidies, rural rorts, and various regressive forms of featherbedding of which Graham Samuel's National Competition Policy might be proud.  Was Coombs the first economic rationalist?

Coleman and Hagger at times feign a value-free objectivity that is not quite real.  They are classical liberals -- and it shows.  For instance, they take Coombs apart for likening the intelligentsia to lords of the manor with a duty to care for others.  Such a charge, they contend, "means power over others and righteous use of such power requires virtue that we do not find in the human race, educated or not.  We have more faith in uneducated freedom than in a tertiary educated power".  The authors not only value common humanity, they trust it, and therefore can be described only as "liberal".

The major parties in Canberra are falling over themselves to adopt the populism of One Nation and the Greens.  Coleman and Hagger do not ask whether a political party can win votes by catch-up politics, that is, by demonstrating that it will not lead.  At one level their book is a cri de coeur to economists to ensure that conventional economic prescriptions that have apparently worked well are not defeated by unchallenged nonsense.  The lay reader, however, will have no difficulty with the text.  He/she will not be turned into an economist, but may take some satisfaction from no longer being misled by what patently ain't so.

---

Extracts from Exasperating Calculators on the Moral Manne

We see in the Economic Irrationalists no great respect for factual accuracy, but rather an indolent mistreatment of factual particulars which would be almost unthinkable in, say, a Productivity Commission paper.  Robert Manne is an example.

A favoured theme of Manne (and other Economic Irrationalists) is that protectionism was the foundation of the "age of growth" of many economies.

Claim: Imperial Germany was the most successful industrial economy in the four decades before World War 1 (Manne 1992a, page 51).

Fact: The USA was easily the most successful economy in the four decades before World War I.  Elsewhere we find a weaker Manne advancing a weaker contention:

Claim: Imperial Germany was the most successful industrial European economy in the four decades before World War 1 (Manne 1992b, page 55).

Fact: Imperial Germany was not the most successful European economy, by any ordinary measure.  Sweden grew significantly faster, and the UK had higher per capita income than Germany in 1910.

Claim: Protectionism and interventionism have played a part in the history of every (Manne's emphasis) economic miracle in East Asia (Manne 1992a, page 51).

Fact: Hong Kong the original tiger, is more unregulated than any Economic Rationalist could dream of.  This fact is just so well known we marvel at the indomitable ignorance betrayed by Manne's italics.

Manne considers that the experience of the UK conclusively refutes the success of Economic Rationalism.  His method of argument is an array of factual claims.  Several of these claims are false or misleading.

Claim: Manufacturing output rose a "pitiful" 6 per cent between 1979 and 1990, compared with 46 per cent between 1961 and 1974 (Manne 1993b, page 57).

Fact: Manufacturing output rose by about 10 per cent between 1979 and 1990, not 6 per cent (Economic Trends.  Annual Supplement, 1994, Central Statistical Office, page 173).  In any case, why compare 1979-90 with 1961-74?  If we are considering the eleven years 1979-90, why not compare them with the preceding eleven years, the period 1968-79?  If we make this comparison, we find that manufacturing output rose by 10.  1 per cent in the eleven years previous to Thatcher, and 10.4 per cent during the Thatcher years (Economic Trends.  Annual Supplement, 1994, Central Statistical Office, page 173).

The observer can only remark on the slightness of everything Manne has written on Economic Rationalism.  He seems to have done little of anything like research.  By his own account he does not esteem research in economic and social matters.  At the very notion he has thrown this flip, cynical riposte:  "Research and ye shall find!  (Manne 1993a)

The essential character of Manne's writing on Economic Rationalism is rhetorical declamation.  Facts are there just to decorate;  judgements are to intimidate ("bizarre", "breathtaking", "mad", "extraordinary").  And, as of most rhetorical controversialising, the whole point, and test of achievement, is to execute some verbal perdition of the object of loathing.  This is not "debate".

Reproduced, with the permission of the authors, from Exasperating Calculators, pages 80, 81 and 90.  Details of all references cited may be found in the original.

Unfair Privileges: The Fair Employment Trade Union Rescue and Revival Bill and how it will damage Victoria

EXECUTIVE SUMMARY

The Bracks Government, under the guise of supposedly defending low-paid workers, is proposing new industrial relations laws which will put onerous burdens on small business, damage business generally, drive investment from the State and discourage employment.

The so-called Fair Employment Bill, to cover working employees not under Federal awards, is actually a program to shore up unions, deserted by a third of their members since 1990, by giving them legislative privileges.

The Bill sets up a whole new industrial relations apparatus, costly to employers, which would seriously subvert the law of contract and almost certainly cost jobs.

This coercive Bill would give unions wide powers to enter workplaces.  It sets up a tribunal whose orders could override contracts, even rewrite contracts.

Any contract not under federal jurisdiction would be covered.

The following facts reveal the true purpose of the Bill:

• About 560,000 employees not under Federal awards are covered by Schedule IA of the Workplace Relations Act.  And that Schedule delivers higher average wages than Federal awards.
• Labor tried to rush the Bill through with no parliamentary committee examination.
• Unions have tried to resist employers taking higher wages in return for conditions that the employees would rather "cash out".  In this, the unions have failed.
• Union membership in Victoria has collapsed from almost 720,000 in 1990 to fewer than 460,000 now.
• With no State industrial tribunal, the Trades Hall Council has become largely irrelevant.

So the Bill is designed to try and resuscitate the ailing union movement on which Labor relies for funding and personnel.

Industrial Relations Minister, Monica Gould, has said that the Bill (after revision) mirrors the Federal Workplace Relations Act.  So business is entitled to ask:  why bother with this State Bill?

Anyone running a business in Victoria, or thinking of doing or so, should oppose this Bill, whether it affects them directly or not.  It would affect businesses they are likely to deal with, raising costs and risks, and discouraging investment,

It certainly will not help those working people likely to lose jobs.

The Government should drop the Bill or, failing that, the Parliament should reject it in its entirety.

UNFAIR PRIVILEGES

THE STORY SO FAR ...

In 1992, the newly-elected Kennett Government passed industrial relations reform legislation which created major new opportunities for workers to escape from the cost burdens imposed on them by State workplace regulation -- burdens which had helped Victorian unemployment rates rise from below to above the national average even before the recession of the early 1990s.  The Kennett legislation was predicated on the election of a Coalition Federal Government in 1993.  When the Keating Government was re-elected, the Victorian Act became a dead letter.

Subsequently, in 1996, the Kennett Government referred most of its industrial relations powers to the Commonwealth Government.  The State industrial relations tribunals were abolished -- saving Victorian taxpayers millions of dollars a year -- and those Victorian employees not covered by federal awards were placed under Schedule IA of the Workplace Relations Act.

The Bracks Government came to power in October 1999 with an industrial relations policy which included a commitment to if necessary, re-establish a State industrial tribunal and independent umpire with State common rule awards.  In April 2000, Victorian Industrial Relations Minister Monica Gould announced the establishment of the Industrial Relations Taskforce to review regulation of the Victorian industrial relations system.

The Taskforce was chaired by Professor Ron McCallum from the University of Sydney Law School.  Its report, released in August 2000, contained 106 recommendations plus supporting statistical and analytical work from the Australian Centre for Industrial Relations Research and Training (ACIRRT), also at Sydney University Professor McCallum had previously argued, in his 1997 Whitlam Lecture (available on the ACTU Website) that the fall in union membership had been a result of labour market liberalisation and that the labour market needed to be re-regulated if the union movement was to revive.  The Taskforce recommended creation of a Fair Employment Act which would include establishment of a Fair Employment Tribunal;  set a range of working conditions in legislation;  and widen the definition of "employee" and "employer" so as to ensure wide coverage for the new regulatory system.

The Fair Employment Bill was introduced into the Legislative Assembly on 25 October 2000.  In its original form, the Bill set up a Fair Employment Tribunal, gave union officials wide powers of entry to workplaces (including private homes) and defined "employee", "employment" and "employer" so widely that any contract for services not directly about transfer of land or under the aegis of Federal jurisdiction would be covered by the proposed law.  It was accompanied by a strong campaign from government, union, church leaders and other public figures, that the Bill should be passed as quickly as possible, preferably without debate.  (Generating a wave of moral indignation is a well-established technique for paying off special interests).  It was passed by the Legislative Assembly and introduced into the Legislative Council on 16 November.  The Opposition majority in the Legislative Council has deferred consideration until mid-March 2001.

The lack of a Government majority in the Legislative Council, and strong opposition from business, rural and other interests, has led the Government to offer a range of amendments.  A Bill which was so urgent it needed to be passed immediately has since become an ambit claim open to negotiation.

The failure of the Bracks Government to follow elementary procedures of accountability in the introduction of this legislation is noteworthy, particularly given how strongly the Labor Party campaigned on the issue of accountability while in Opposition.  There has been no attempt, for example, to use the Committee structure of Parliament to consider, for instance, the implications of the Bill for the Victorian economy.

THE PUBLIC JUSTIFICATIONS FOR THE BILL

The public justification for the Fair Employment Bill was set out by Professor McCallum in an interview on 3LO on 7 July 2000 with Terry Lane:

you've got 30% of the Victorian workforce, the bottom 30%, who aren't receiving community standards.  They're receiving less minimum terms and conditions of employment than other employees throughout Australia.

As the Professor went on to complain, beyond the minimums set out in the Workplace Relations Act for Schedule IA employees (all those Victorian employees not covered by federal awards),

it's up to the employer and employee to determine.  Moreover, there is no agency which can go into bat on their behalf and prosecute employers who breach the law.

The particular benefit which has been picked on as the rallying cry for Victorian re-regulation has been bereavement leave.  Thus the Professor stated,

These Schedule IA employees ... don't even get bereavement leave or personal carers' leave.

He goes on to admit that no employer would actually deny a person the right to go to their mother's funeral but, the problem is,

there's no right that an employee has.  The aim was to ensure those on Schedule IA aren't the sort of lumpen proletariat second-class citizens in Victoria.

Statements by others in defence of the Bill have all been variations on the themes set out by Professor McCallum in this interview.

The Bill sets up a wide range of prosecutable offences.  As can be seen from the summary of provisions, this is a Bill which goes way beyond the circumstances of low-paid workers.

Summary of Provisions:  Fair Employment Bill

§§	Provision in Original Bill	Change (if any)
4	Defines an employee for Chapter 3 of the Bill (workplace grievances and related matters) as including a person engaged to perform work under a contract for services
	Defines an employer for Chapter 3 of the Bill (workplace grievances and related matters) as including those for whom services are contracted
5	Defines as an employee any person who is in a partnership larger than three	Dropped
	Defines outworkers as employees
6	Gives Tribunal power to declare persons to be employees	Restricted to natural persons who apply in writing
	Restricts right to make applications to Minister, to recognised organisation or peak body
7	Declares those in receipt of labour hire services to be an employer of individual providing services
8	Defines as outworker to include clerical workers working from home
15-44	Defines a series of minimum conditions (including paid bereavement leave)
45	Establishes a legislative right to long service leave
49	Provides very extensive definiton of "one employer" for long service leave
51	Provides very extensive definiton of "continuous service"
53	Provides additional consideration for long service leave for casuals
71-73	Regulates termination of employment
74-76	Gives Tribunals wide power to vary regulated conditions
74	Restricts applications to Minister, to recognised organisation or peak body or (by leave) employer or employee
77-88	Gives Tribunal wide powers to make industry sector orders
77	Voids any contract provisions which are less man those of an industry sector order
78	Restricts applications to Minister, to recognised organisation or peak body or (by leave) employer or employee
89-95	Regulates employee remuneration
93	Makes the principal contractor liable for remuneration payable to employees of a subcontractor	Has been announced will be restricted to outworkers
101	Establishes a broad definition of a workplace greivance
107	Gives Tribunal broad powers to resolve such grievances
108	Gives Tribunal power to rewrite contracts deemed unfair	Has been announced will be restricted to owner- drivers, security guards, childcare workers and cleaners
109	Gives Tribunal partial power to override Fair Trading Act for contracts deemed unfair
110	Provides six year limit for former employees to bring a workplace grievance action
114	Gives Tribunal wide ambit for conciliation and mediation services
155	Gives Tribunal wide investigative powers
225-9	Grants extensive powers of entry, etc to registered organisations (such as unions] including into private homes	Reduced to those under Workplace Relations Act

INCONVENIENT FACTS

The second volume of the McCallum Report is entitled Statistical Research on the Victorian Labour Market.  Its primary author is Ian Watson from ACIRRT.

According to that study:

• about two-thirds (1.1 million) of Victorian employees are covered by Federal awards and about one-third (561,000) are under Schedule IA.

Schedule IA:

• covers 54% of Victorian workplaces;
• 94% of workplaces covered have 9 or fewer employees.

Compared to federal awards, Schedule IA

• provides higher average wages;  and
• provides higher average earnings for every skill category except labourers.

Moreover, according to the ACIRRT study, Schedule IA employees are, compared to those under Federal awards:

• more likely to be employed full-time and less likely to be casual;  and
• more likely to be metropolitan and less likely to be from a non-English speaking background.

Much has been made of the number of low-paid workers under Schedule IA, but, depending on how one draws the line, there are either as many or almost as many low-paid workers under federal awards as there are under Schedule IA, while Schedule IA employees are proportionately more likely to be in the higher wage brackets than federal award employees.

The report also sets out the degree to which particular benefits are available to Schedule IA employees -- higher pay for overtime to 41% of Schedule IA employees, penalty rates for working weekends to 24%, shift allowances to 6%, and annual leave loadings to 35%.  It makes no comparison with the actual availability of such benefits to employees under federal awards, simply saying such benefits are "standard".  But as a crucial question is whether standards set by regulation are actually adhered to, this is hardly adequate.

The complaint is made even weaker since the report shows there is no difference in coverage of benefits between New South Wales and Victorian employees.  The Report makes much of the fact that Victorian benefits used to be comparatively higher:  but so was Victorian unemployment.  (Victoria's unemployment rate has recently returned to the national average from having been considerably greater).

• Employers were equally likely to rate Federal awards and Schedule IA as fair to their employees (81% for both) and almost equally likely to rate it as fair to their organization (70% for federal coverage, 66% for Schedule I A).

This is not a picture of a system doing dramatically worse than Federal award coverage.  In fact, on average, it was doing better.  The McCallum Report is a case of people so apparently ideologically blinkered they cannot even see what is obvious from their own data.

Moreover, the higher wage rates but apparently lower levels of benefits for Schedule IA employees suggests that such benefits have been "cashed out".  Where employees and employers deal directly, it is in the interests of both parties to have the remuneration as simple as practicable, to minimise administrative costs.  Where one or both deal through agents, it is in the agents' interests to separate out remuneration into as many different "bits" as possible.  That increases the needs for the administrative services of such agents and enables agents, such as union officials, to "laud" their achievement in getting (or frustrating) the latest "bit".

The reality is that all the costs of labour -- whether they be leave entitlements, payroll tax, PAYE tax, long service leave, superannuation payments or workers compensation -- are borne by the worker regardless of who signs the cheque.  Employers, be they in small or large businesses, make decisions on hiring new employees or contractors on the basis of the difference between the total cost of hiring, and the estimated contribution the new worker will make to the business.  This is so regardless of how the costs of the new employee or contractor are distributed.

Bereavement leave is just another parcelling out of the income available to workers -- in this case, by an arrangement which "pools" the benefit (that is, some workers will receive it, others won't, but employers will have to incorporate the cost in what they offer any worker).  Adding extra costs raises the threshold below which a job will not be offered.

That Schedule IA provides lower average rates for labourers is also a point in its favour, given that unemployment tends to be concentrated among the least skilled.  A higher premium for skill also encourages skill-acquisition.

The Report's own data also shows there is little difference between the proportion of low-wage employees in New South Wales and Victoria:

• 10.5% of Victorian employees are on less than $10 per hour, compared to 7.8% of New South Wales employees and 8.7% nationally;
• For labourers, the proportions are even closer:  15.0% for Victoria, 14.6% for New South Wales and 14.7% nationally.

The Report strains mightily to identify "problem" areas, but its own data show that back in 1989 Victoria also had a higher proportion of low-wage employees.  It also makes no attempt to identify possible reasons for the patterns it notes (for example, many of its results are consistent with a particularly competitive Victorian restaurant market).

Victoria was economically successful during its experience of a less regulated labour market.  From 1993-94 to 1998-99, it had the highest growth of any State in final demand, in housing investment, in housing prices and the largest drop in the unemployment rate.  From August 1993 to August 1999, Victoria had the second-highest increase in its employment/population ratio of any State, both for the State as a whole and for non-metropolitan areas.  Only Queensland did better (and, for State capitals, only Sydney did better than Melbourne).  Yet the Bracks Government is proceeding with this Bill.

WHY THIS PATH?

There is nothing in either the foregoing data, the Report, or the claimed justifications for action which compels the setting up of a State Tribunal and associated regulatory system.  It is entirely open for applications to be made to the Australian Industrial Relations Commission to change rates or benefits under the Schedule.  The Small Claims Tribunal can deal with claims of breaches of contract.  It is open to Victoria to arrange with the Commonwealth to fund, directly or indirectly, greater resources to enforce the law.  Besides, this is an area where unions should be able to offer their services to employees.  It is even open to the Victorian Government to subsidise specific low-income earners if it wishes.

Clearly, however, the public justifications, and the use of the "Fair Employment" terminology, make it a great deal easier to "sell" the Bill by appealing to the moral vanity of commentators and to the concern for fairness in the general community.  (Use of the words "fair" and "fairness" by politicians and legislators should be treated with great scepticism, as vested interests seeking to preserve or enhance their privileges are likely to be lurking behind them.)

Critics of the Bill can, and have been, castigated for being against "fair employment" and in favour of "exploitation".  Such propagandist claims should not, however, be mistaken for the real purpose of the Bill.

That the public justifications for the Fair Employment Bill are not its real purpose can be seen in the provisions of the original Bill, most obviously in its provision (since deleted) that any member of a partnership greater in number than three will be deemed to be an employee.  Clearly, this has absolutely nothing to do with low-paid rural labourers or outworkers, that is, the groups frequently nominated as requiring legislative assistance, particularly as Victorian labourers are as likely to be earning under $10 per hour as New South Wales labourers or those across the nation.

It does make more sense, however, if the purpose was to set up an industrial relations regulatory net so broad that no mode of participation in the workforce would allow people to escape from it.  But why would one want to do that?

THE REAL GAME

To have membership of Victorian unions fall from almost 720,000 in 1990 to less than 460,000 now must be a deeply shocking experience for union officials (and a major concern for a Labor Party still dependant on union support, particularly in fundraising and for election campaign workers).  The lack of a Victorian industrial relations system has undermined, almost completely, the reason for existence of the Victorian Trades Hall Council and its officials.

That the ratio of union officials to members trebled between 1968 and 1996, that amalgamation of unions into "super unions" did not result in a single cut in the number of officials and that union membership fees rose faster than wages from 1971 to 1989, points to some of the problems now besetting unions, and why so many workers no longer value union membership.  Unions simply do not provide services of sufficient value for workers at prices that workers are willing to pay.  The combination of declining service value, and rising membership fees, makes it easy to understand why workers are abandoning trade unions, particularly when doctrines of class struggle and class exploitation now appear as museum rhetoric.

But to suggest that workers are leaving unions because they are no longer providing services that workers want at prices they are willing to pay is not a welcome argument for union officials.  That workers may, in economic terms, be considerably better off without them is an argument that is even less welcome.

How much more congenial to be told that it is the evils of deregulation which have done this and that the solution is to re-regulate the labour market.  Re-introduce a Victorian industrial relations regulatory system and Trades Hall will again have an arena of its own.  Set up a State Tribunal and union officials can attempt to use their role within the new system as a basis to recruit members.  They can even "forum shop" between the State and Federal systems (and seek to complete their careers as Tribunal members in either State or Federal jurisdictions).

But there is a potential problem here.  Conventional full-time, permanent employment is in decline.  Other modes of workforce engagement -- part-time, casual, contract, labour hire and other forms of self-employment -- are on the increase.  All these modes of workforce engagement are more difficult for union recruitment.  That union officials have often been highly critical of workers thus employed, has hardly helped recruitment of such workers.

As the regulatory complexity surrounding conventional employment expands, other modes of workforce engagement become more attractive as ways of avoiding the escalating costs such regulatory complexity imposes on both workers and businesses.  Even within conventional employment arrangements, many companies, most notably within the mining industry, can offer their workers significantly higher remuneration for contract employment because such arrangements avoid the extra costs and onerous complexities of award employment.  They can, and do, cash out the complexity and thereby achieve a win-win situation for workers and businesses.  And there are considerable benefits available -- even in the US, whose labour market is generally more lightly-regulated than ours, the overall cost of regulation has been estimated to be as high as 19% of GDP.

Union officials will resist this simplification to the utmost because their expertise lies in creating and then dealing with complexity as intermediaries between employers and employees.  Attempts by union officials to resist such simplifications in the mining industry and elsewhere have seen dramatic drops in union coverage, as employees have walked away from unions which have strenuously resisted increases in their income.  Employees opt out of regulatory complexity because they can earn more, and opt out of unions because they operate in the interests of their officials, not their members -- which is why there are so many former union members and a falling number of new union members.

The attempt to protect unions by creating new legislative privileges for them by re-regulating the labour market is not restricted to Victoria.  New laws re-regulating the labour market have been introduced in Queensland and New Zealand.  There have also been attempts to introduce them in New South Wales and Tasmania.  It is Labor Party policy to do so in WA.  Federal Labor Policy now says:

• The protection of the industrial relations system should be extended beyond a narrow definition of employees to include those in employment type relationships.

The justificatory claims about the Victorian situation are only the local excuses to push a re-regulation agenda which extends around the country and across the Tasman to address a common problem -- the rapid decline in the reputation of trade unions within the community at large, and the workforce in particular, the most visible manifestation of which is falling union membership.

The unions, and Professor McCallum, have realized that it would clearly not solve the unions' problem if a Victorian IR system were to be set up which, by increasing the cost and legal complexity of permanent employment, further encourages people to shift to other modes of workforce engagement -- more casualisation, more contract work, more use of labour hire from agencies.

The solution to this problem in the Bill has been a breathtakingly simple one:  define "employee", "employment" and "employer" so widely that all imaginable modes of workforce engagement were covered.

The Bill not only sets up a new and unnecessary bureaucracy, it attempts to redefine contract and company law -- for only one reason, and that is to provide a statutory crutch to a poorly performing and increasingly irrelevant and unpopular union movement.

But doing that means placing arrangements which have grown up under conventional contract law under an entirely new mode of regulation.  To attempt effectively to rewrite contract law at a stroke was bound to cause major problems.  Which is why the Government has since had to engage in amending the Bill "on the run".

UNINTENDED CONSEQUENCES

Already, the brief history of the Bill demonstrates that the intentions of legislators are no protection against unintended consequences.  The ambit of the Bill can be seen in its definition of an employee.  The Bill excludes those earning $71,200 per annum (indexed) or more from its industry sector orders (the new awards) and workplace grievance claims, thus using the same cut-off as that for unfair dismissal claims under Federal legislation.  Chapter 3 of the Bill covers workplace grievances and other employment-related matters.  For the purposes of this Chapter, an employee includes a person engaged to perform work under a contract for services.  This gives the Tribunal the power to inquire into, amongst other things, the fairness of the contract for services.  In other words, almost any commercial contract other than one concerned specifically with the transfer or use of land or provisions which turn out to be excluded by coverage by Federal law (no doubt a matter for future litigation) will come under the ambit of the Tribunal, a Tribunal that can make its own mind up about "fairness".  (The dispute between Melbourne airport and taxis would be covered, for example.)  This provision gives union officials a statutory lever of great power.  The massive second-guessing of contract arrangements involved will make entering into ordinary business contractual arrangements in Victoria much more uncertain and risk-laden than entering into matrimony.  Such uncertainty will have a seriously deleterious impact on business and investment activity in the State.

For all purposes, the original Bill included in the definition of employee each person, being 1 of 4 or more persons who are, or claim to be, partners working in association in an industry.  That raised the spectre of partnership disputes (such as those for family farms organised as partnerships) ending up in the Tribunal, with a disgruntled family member suddenly claiming "back pay" entitlements.  This provision has since been dropped.  A classic case of, in the words of Professor McCallum himself, "when governments hurriedly pass laws often they don't mesh together".

Under the original Bill, the Tribunal was given the power to declare a class of persons who perform work in an industry under a contract for services [the term used to described traditional contractual relationships] to be employees.  More uncertainty is thus introduced into business arrangements via the overriding of the choices of free individuals.  This provision has since been restricted so that it can apply only to a class of persons each of whom has consented in writing to being included in the class for the purposes of being declared an employee which restricts the application of the power, but still allows the changing of fundamental aspects of an arrangement after it has been entered into and without the consent of one of the parties (in this case, those hiring the said services).

This new restriction is more apparent than real, since all contracts for service are still covered by the workplace grievance provisions.  And even with the restriction, a business could still enter into contractual arrangements, then find that the other party or parties had signed such a consent order and suddenly have its relationship governed by the Tribunal without its consent.  Again, the increased uncertainty must discourage business activity by raising the risks that businesses face.

Under the Bill an outworker is defined as a person engaged, for someone else's industry, in or about a private residence or other premises that are not necessarily business or commercial premises, to (a) pack, process, or work on articles or materials;  or (b) carry out clerical work.  What counts as "clerical work"?  If, as appears to be the drafters' intention, it is defined according to award definitions, then it includes everyone from routine clerical workers to people operating with minimal supervision with significant computing, administrative, specialist or financial skills (provided they earn less than $71,200 a year).  On the other hand, if it follows the Macquarie Dictionary definition it covers those employed in office, shop etc. to keep records and accounts, to keep correspondence &c. one who keeps the records and performs the routine business of a court, legislature, tribunal &c.  Either way, the capacity of the Tribunal to interfere arbitrarily in arrangements after they have been freely entered into is very large.

The breast-beating about outworkers is particularly ironic in the light of history.  Over 100 years ago, in the 1890s, Henry Bournes Higgins, later the second President of the Arbitration Court, was claiming in the Victorian Parliament that an industrial inspectorate, with powers of entry into private homes, would stop the exploitation of outworkers.  A century later and they are again being used as the overt justification for a new regulatory empire.  That the original Bill can confer such extensive powers of entry to its inspectors and union officials -- since wound back to those under the Workplace Relations Act -- show such ambitions are still alive.

Section 93 of the Bill makes principal contractors liable for the remuneration of employees of subcontractors, greatly increasing the risks of such contractual arrangements, thereby reducing their attractiveness.  Under pressure, the Bracks Government has since announced that this provision will apply only to outworkers.  Again, the risks involved in such arrangements will be increased, discouraging their use.

Similarly, the Government has announced that unfair contract review provisions will be limited to owner-drivers, security guards, childcare workers and cleaners.  These industries will be "blessed" by having their contractual arrangements made more uncertain due to the potential for unilateral re-writing of contracts by Tribunal officials who are in no way responsible for the consequences of their decisions.  Again, the risks involved in contractual arrangements in this industry will be increased, discouraging their use.

This trend of narrowing the ambit of the Bill speaks volumes for the inherent problems of the exercise (and shows how spurious were the claims that the Bill should be passed urgently).  The Government is now claiming as a virtue the much decreased coverage of the Bill which, according to the Minister for Industrial Relations, is "merely trying to bring 13 per cent of the our workforce up to minimum standards".

Minister Gould's media release of 29 January 2001 goes on to say:  "the minimum conditions ... mirror the minimum conditions currently found in the Workplace Relations Act.  'Right of entry conditions for authorised union officials are exactly the same as those in the federal Act ... and the power of the Information Service Officers in the legislation also mirror the powers of inspectors under the Workplace Relations Act'."

Which, of course, raises the question:  why bother if the Workplace Relations Act is merely being "mirrored"?  Particularly when Victorian taxpayers will have to fork out at least $10m a year for this new regulatory empire.  The answer is because it provides a new Industrial Relations jurisdiction in which union and Trades Hall officials can seek to operate for their own benefit.  In particular, the operation of "industry sector orders" provides a means for ramping up of specific benefits to display how valuable the services of unions are, regardless of the implications for Victorian employment and business activity.

Once the basic structure has been implemented, the Government can hope to extend its ambit back towards the Bill as originally introduced if favourable circumstances develop.

RESTRICTION OF WORKERS' CHOICE OF REPRESENTATIVE

The Bill carefully restricts applications before the Tribunal to a recognised organisation, [that is, a trade union or employer's association], a peak body or the Minister in some provisions (such as a declaration as to who is an employee) and allows employers or employees, only if given leave by the Tribunal, to apply in some others (such as minimum conditions and industry sector orders).  Such restrictions increase the role of the approved agents and limit the capacity of private advocacy service providers, such as lawyers, to compete with unions to provide services to employees.  It is a clear case of granting legislative privilege to protect unions:  a union movement which is very important in providing funding and workers for the ALP -- both directly and through supporting campaigns such as that run by the teachers -- and which has 60% of the votes at the ALP's State Council.

CLEARLY UNNECESSARY

Returning to Professor McCallum's justifications for legislative action, it is clear that none of them stand up.  Professor McCallum alleges that:

you've got 30% of the Victorian workforce, the bottom 30%, who aren't receiving community standards.  They're receiving less minimum terms and conditions of employment than other employees throughout Australia.

• Actually, on average, their pay is higher than federal award recipients, and the Government is now making much of the fact that the Act will only set conditions for 13% of the workforce.

it's up to the employer and employee to determine.

• And, on the evidence, they generally seem to do so at least as satisfactorily as happens under Federal awards.

there is no agency which can go into bat on their behalf and prosecute employers who breach the law.

• This does not require a vast new regulatory structure to fix.  Furthermore, if there is a demand for such services, this provides a recruitment opportunity for unions.

These Schedule IA employees ... don't even get bereavement leave or personal carers' leave.

• It is perfectly open to employers to provide such leave under Schedule IA, just as it is open to make an application to the AIRC for the right under Schedule IA.  (Nor did the ACIRRT study for the McCallum Task Force bother to report whether, and to what extent, such leave is provided to Schedule IA workers.)

The aim was to ensure those on Schedule IA aren't the sort of lumpen proletariat second-class citizens in Victoria.

• But, on the McCallum's Task Force's own evidence, they are not.

WRONG WAY, GO BACK

This is a costly and unnecessary Bill which seeks to squeeze what freedom still exists out of an already over-regulated labour market.  Moreover, it will not even provide the assistance to the union movement that it is intended to do.  While the Bill will give union officials and Trades Hall a new jurisdiction in which to play their costly IR Club games, it will do nothing to improve the services that unions offer members.  Union membership was declining before the limited labour-market liberalisations established since 1992 and will continue to decline unless membership of unions is enforced by statute.

What the Bill does is put a series of loaded guns in the hands of entrepreneurial lawyers.  Given that individuals will be given the right to make application to the Tribunal for workplace grievances -- the area of jurisdiction of the Tribunal with the widest ambit -- lawyers and other private advocacy services will be able to provide direct services to employees and others, thereby competing with unions in this arena.

The consequences of the Bill are clear:

• a growing and increasingly popular range of forms of workforce engagement will become riskier;
• the complexity of employment arrangement and the costs to business in compliance will increase for all those covered by the Bill;
• to the extent its regulatory complexity and restriction raises the costs and reduces the benefits of labour, it will discourage employment;
• it will not and cannot increase the returns from hiring labour;  and
• it is an illusion that it can raise the returns to labour itself.

All the costs of labour -- wages, taxes, workers compensation, etc., etc. -- incurred by a business in hiring a worker, are earned by the worker, including benefits such as bereavement leave:  they are just different ways of distributing the income available to workers.  The returns to labour (as distinct from the returns to capital), as always, come from skill, effort and the effectiveness of institutions (what economists call "productivity").  By feeding the illusion that the returns to labour are not dependent on these things, and by reducing the effectiveness of market institutions, the Bill and the Tribunal will simply repeat once again the century-old experience with wage arbitration (see Appendix).  That experiment has shown that wage arbitration serves narrow, vested interests;  that it does not benefit those people it is supposed to benefit -- ordinary workers and the wider Australian society.

Anyone running a business in Victoria should oppose this Bill regardless of whether it will cover their workforce or not.  Even if it does not cover their workforce directly, it will affect businesses they are likely to have to deal with, raising costs and risks and adversely affecting the general business climate in Victoria.

Any business which is likely to be directly affected by this Bill -- remembering that its coverage could easily be broadened by unions, or even entrepreneurial lawyers, seeking to "forum shop" -- should oppose this attempt to make their employment arrangements costlier, more complex and riskier.  There are enough risks in modern business without having such a basic relationship subject to the arbitrary intrusion of unaccountable officials.  There is nothing in this Bill for Victorian workers or Victorian business but increased costs and regulatory burdens and an underlying contempt for the right of Victorians to make their own arrangements.  Victorians did not vote for this in September 1999.  It should not be imposed on them in 2001.

APPENDIX
WAGE ARBITRATION -- THE FAILED EXPERIMENT

In the 1890s, Australia and New Zealand began an experiment, led by Victoria, with trade protection and wage arbitration.  A century later, we can see clearly the experiment was a mistake.  Australia and New Zealand moved from being countries with good economic growth records in the nineteenth century to being the developed countries with the second-lowest and lowest economic growth rates in the developed world in the twentieth century.

Per head economic growth rate compared
with developed world average (%)

Source:  Maddison, OECD.

* 1870 to 1913 for NZ

It is hardly likely to be an coincidence that the two countries which adopted protection and wage arbitration became the two developed countries with the lowest economic growth rates over the twentieth century.

The fall in Australia's and New Zealand's relative standing has been stark, from the per capita richest and third-richest countries in the world to steadily falling below the developed world average.

Per capita GDP
(Developed country average = 100)

Source:  Maddison, OECD.

The policy framework of having officials arbitrarily interfere in workplace relationships entered into by free and responsible people and restricting the use of people's most important economic asset -- their labour -- has not proved to be a happy one.  Re-regulating the labour market, moving back in the direction of a failed experiment, is not the way to go.