Club Virtue: The Intelligentsia We Deserve?

Of all the shameless untruths which disfigure Australian public debate, none is greater than the claim or implication that the welfare state is shrinking.  Before Gough Whitlam came to power, expenditure by all levels of government on health, education and welfare was about 10% of GDP.  Such expenditure is now over 20% of GDP (or over $6,500 per year per man, woman and child), a growth in resources that no other areas of the economy comes even close to matching.

The breast-beating about cutbacks flow from other factors.  In desperate attempts to keep growth in spending somewhere in range of the electorate's willingness to be taxed, policy-makers have been forced to shift resources from areas of declining demand to areas of rising demand.  Such cuts make much bigger news than the expansion.

Furthermore, governments now channel almost $10bn a year through non-profit organisations, creating a huge sector always willing to claim that more is needed.

As many of the services of the welfare state are "free", demand exceeds supply, leading to rationing by queue (such as hospital waiting lists).  Delivery of services by command-and-control -- the Soviet mode of production -- leads to Soviet-style outcomes in inefficiency and poor quality (particularly in education), creating the impression that the problem is insufficient spending.

The expansion in the welfare state is also implicated in the growth of foreign ownership and foreign debt.  The increase in the welfare state under Whitlam led immediately to a collapse in government saving to such an extent that, from the late Fraser Government to the election of the Howard Government (with the exception of Peter Walsh's term as Commonwealth Finance Minister) the Australian government sector funded pensions, salaries and other non-capital expenditure by borrowing money and selling assets.  At the same time, inflation (itself a way of funding an expanding welfare state) and increasing tax rates were major factors leading to a slide in private saving.  To keep investment up (and to fund welfare on the national bankcard), capital had to be imported.  As foreigners don't let us have use of their savings for free, assets were sold and money borrowed -- hence increasing foreign ownership and foreign debt.

Policy makers tried various ways of keeping the show on the road.  Fraser and Anthony promised resources booms would save us.  The Club of Rome prediction of declining resources such ideas were derived from proved to be nonsense on stilts, based on total ignorance of the economics of resources.  Various governments tried public-private partnerships.  That led to the disasters of WA Inc, the SA State Bank, VEDC and Tricontinental in Victoria.  The Cain-Kirner Government tried pump-priming and ended up in a state of near fiscal-collapse, borrowing money to pay superannuation obligations.

The only path that has shown any sustained success is that of economic reform:  of trying to squeeze more economic efficiency out of the economy so it grows faster and is able to better provide the revenue the growing welfare state requires.  Hence the pattern of economic reform:  corporatisation to squeeze more revenues out of government business enterprises;  privatisation to reduce liabilities and increase efficiency;  free trade and competition policy to force greater efficiencies.

Mostly it has worked.  Productivity growth has improved, government debt has been brought under control, economic growth has moved to about the developed world average -- after being the second-lowest in the developed world for most of the twentieth century.

Unfortunately, the welfare state has not stopped growing, and growing faster than population and faster than the economy.  Economic reform to pay for it has become a never-ending race.

Willingness to receive benefits always exceed the willingness to pay for them, and much of the point of welfarism is to separate (or appear to separate) the two.  Moreover, since welfarist politics defines the role of the state as to "do good" -- and the range of potential good is infinite -- there are no natural limits to its expansion unless and until the range of things the state is deemed competent to do is accepted as being limited and institutional factors enforce that.  Until then, the welfare state is set to keep growing, and to do so faster than revenue.

What is more, by offering "free" alternatives funded by taxation, the welfare state undermines other forms of provisions of such services -- hence the decline of the working-class Friendly Societies of the nineteenth century.  More importantly, the steadily increasing nationalisation of the household steadily encroaches on, and undermines, the traditional role of the family in providing social support, pooling risks and intergenerational support.

Moreover, public debate on the issue is deeply mendacious.  Shameless untruth is being continuously pumped out by commentators to such an extent that it is just not widely understood that the welfare state has been growing, and that the fiscal pressure that generates has been the main driver of economic reform.  Instead, people are fed nonsense about shrinking government and economic reform as some mad, destructive, ideological illusion.

The Australian intelligentsia has become deeply corrupt.  The parading of one's finer feelings constantly triumphs over logic, truth or evidence.  Attacking "economic rationalism" and beating the welfarist drum are signs of virtue -- and so are too often not subject to proper scrutiny by journalists and academics eager to display their own virtue.  Defending market reforms and querying the cost and rise of the welfare state are signs of wickedness -- and so subject to denigration and abuse (so why bother?).  The progressivist ascendancy -- Club Virtue -- regularly hijacks public debate in the cause of its own moral vanity.  And so people are, understandably, deeply confused about what is going on.

This aggravates the perverse dynamics of economic reform.  As UK Labour Peer and economist Lord Desai points out, the welfare state relies on the surplus-producing classes to continue to produce the surplus it lives off.  Government is taking more and more from people in taxes and imposing all the insecurities and pressures of increased competition to increase economic efficiency.  Yet much of the benefits of those reforms are being siphoned off into paying for the welfare state.

Marginal members of the surplus-producing classes -- many farmers, small-business-people and self-employed plus workers in declining industries -- get the increased taxes and insecurities but don't get much of the benefits.  No wonder they get angry.

Meanwhile, they are told that government is shrinking, local services are being cut back and economic reform is being imposed because of mad ideological delusions and meanspiritedness.

If the Constitution was amended to clearly ensure that destruction of property by regulatory action -- including by State governments -- had to be compensated for (a matter of simple justice) this would do much to reduce the angst over economic reform.

As it is, tax-payers get exploited all round.  And the intelligentsia -- which is supposed to be explaining to people what is going on in their society -- is systematically pumping out falsehoods at them:  exploiting them for its own moral masturbation from -- in Kenneth Slessor's words -- the ecstasies of moral rectitude.

And none of the major parties -- the political polyglots -- has bothered to explain properly to them what is going on.

All that can fuel a lot of electoral revolt.

Added to this is the way that Club Virtue seeks to use cultural issues as the prime vehicles of moral vanity.  At least in economic policy, politicians have to deal with real consequences and our economic and business journalists are generally pretty good, so the debate does not get completely corrupted by Club Virtue's posturings.

In issues like immigration, indigenous affairs and multiculturalism, it is much easier for Club Virtue to privatise public debate more or less completely for its own preening.  Especially as that handy term of abuse "racist" can be used to silence and denigrate any dissenters.  So the public debate in these areas has become almost completely corrupt.  The fabricated "secret women's business" was one manifestation of that corruption.  The fictional genocide of the "stolen generation" is another.  That about 10% of Aboriginal children were separated from their families from 1900 to 1970 is really not that surprising, given the turmoil and disruption that indigenous Australians faced in that period.  It is nothing even remotely like a genocide, nor were most of the separated children stolen.

And, if you tell me that intrusive and paternalistic government bureaucracies granted far too much power over people's lives sometimes made bad decisions, I will be less than shocked or, indeed, surprised.  But, unlike most of those so keen on expatiating over the issue, I do not actually support intrusive government.

The visiting writer on the Holocaust who asked

What is going on in this country that people cannot tell the difference between taking children away to be educated and the gas chambers?

had not realised how completely the journalists and academics of Club Virtue -- of the progressivist ascendancy -- have hijacked public debate.

The younger members of Club Virtue are products of an education system thoroughly corrupted by the culture of virtue awarding moral vanguard status on the basis of approved attitudes (Soviet-style production is very good at producing propaganda).  This encourages, even requires, the submerging of concern with truth, logic, sceptical reasoning or the transmission of culture.  The combination expands the ego while it shrinks the mind and creates a mindset largely impervious to dissenting ideas (or even inconvenient truths).

Australia cannot afford the costs of such a corrupt intelligentsia.  It is very notable that most of the worst offenders -- academics, government school teachers and the ABC -- are in the public sector.  But they are far more shielded from consumer demand and accountability for the quality of their product.  This points to at least a partial solution:  complete privatisation, with funding for education being channelled completely through students and research grants.

But argument and exposure has to be the key element in the fight back against the corruption of public debate, and of our schools and universities.

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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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A Fine Year for the Self-indulgent Whine

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What Makes a Third World Country?

We now know it is possible to move from the third-world to the developed world in a generation:  Hong Kong, Singapore, Taiwan, South Korea have done it.  We also know that it is possible to move from the developed world to the third-world in the same time frame -- Argentina has done it.  In 1950, its GDP per head was equal to 90 per cent of the developed world average, and was, as it had been in 1900, comparable to that of France.  By 1992, its GDP per head was, at 45 per cent of the developed world average, well below that of any developed country.

Thanks to the work of a range of scholars such as Eric Jones, Jack Powellson, the late Mancur Olson, Lord Bauer and Peruvian thinker Hernando de Soto and his international band of researchers, there is no great mystery to all of this either.

Mancur Olson -- author of The Logic of Collective Action and The Rise and Decline of Nations -- posed a revealing question.  Why does the income of illiterate Mexican peasants go up, and go up substantially, when they cross the Rio Grande from Mexico to the US?  (Which is why, of course, they continually seek to so cross).  Their skills do not improve:  in fact, they move from a Spanish-speaking country to an English-speaking one.  The answer is:  American institutions work much better than Mexican ones.

P.J. O'Rourke expressed it in a joke.

American:  "why do you hate us?"
Mexican:  "because you stole half our country and, what's more, you stole the half with all the paved roads".

In a sense, the answer is obvious.  Mexico was settled by Europeans a century before North America:  most of the great Latin American cities are a century or more older as European settlements than the great North American ones.  If North America is so much more prosperous than Latin America -- and Hispanic immigrants to the US achieve American average incomes within a generation -- then the answer has to lie in institutional differences.

Hernando de Soto got some researchers to conduct a famous experiment:  to attempt to get all the legal approvals needed to set up a small textile concern in Lima, Peru.  It took 289 days of dealing with the bureaucracy, just to get the legal approvals.  The same exercise in Miami, Florida (also a largely Hispanic city nowadays) took less than a day.  It is perfectly obvious where there will be more economic activity, and where people will be more prosperous.

De Soto's teams of researchers conducted similar examinations elsewhere and got similar results.  In Haiti, for example, one can expect the process of acquiring legal title to land to take 19 years -- and even then, retaining title is not certain.  How does economic activity take place in such circumstances?  The answer is, extra-legally.  People trade, but, apart from small items, they only trade within small networks who can enforce good behaviour on each other.  This allows people to survive, but is crippling as far as aspiring to a wider prosperity is concerned.

Just think how limited your economic existence would be if you could only engage in major purchases with people known to you, or immediate friends and family, personally.  And if you had no legal title to anything, so could not use the processes of formal credit:  no bank loans, no mortgages, no credit cards.  If everything you had was fundamentally insecure, at the mercy of any corrupt official who came along.

That is what it means to live in the third world.

It is not that the poor lack assets.  De Soto estimates that, if the United States raised its foreign aid budget to 0.7 per cent of national income, it would take it 150 years to transfer to the poor of the world income equal to the value of assets they already hold.

What the poor lack, de Soto points out, is capital;  specifically the institutions which give them the ability to turn assets into capital.  In his new book The Mystery of Capital, de Soto identifies six principles a well-ordered system of property law possesses:  it fixes the economic potential of assets, integrates dispersed information, makes people accountable, makes assets fungible, networks people;  and protects transactions.  By defining and protecting property rights under a clear and open system, the institutions of developed countries allow people completely unknown to each other to trade securely.  It creates huge interlocking networks which raise the wealth and income of everyone in them.

And the Mexican peasant swimming across the Rio Grande is trying to plug into those networks.

All this is particularly interesting to Australians and New Zealanders.  Why?  Looking at long-run economic growth since 1870, New Zealand is the developed country most likely to drop out of the ranks of developed countries and we are not far behind.  From 1870 to 1997, New Zealand's economic growth rate per head was a mere 39 per cent of the developed world average.  Australia's was the next lowest at 45 per cent, followed by the UK at 50 per cent.  Then there is a jump to Belgium and the Netherlands at 71 per cent and then the US at 88 per cent.  (All those immigrating peasants don't do great things for American averages, for lots of indicators).

This is very much a twentieth century phenomena.  Australia had above average economic growth per head in the nineteenth century.  We achieved the highest average income in the world.  Australia and New Zealand took a major wrong policy turn around the beginning of the twentieth century.

Mancur Olson advanced the theory that the accumulation of interest groups could retard economic efficiency and that this could get worse over time.  One way to look at this is that all social systems produce barnacles:  interest groups which take in more resources than they produce and which actively retard the operation of the society.  The question is:  how well does a polity's institutional structure frustrate the creation of such barnacles or eliminate them if they do begin to grow?

Market economies with well-ordered property laws have barnacle elimination mechanisms:  they are called profit, loss and free contracts.  The state can provide protection from such mechanisms, allowing the barnacles to thrive.  In the extreme case -- socialism -- the society entirely lacks barnacle-removal mechanisms;  so barnacles pile up until the polity sinks.  In third-world countries, barnacles are the rulers, not the exception.

It is not hard to see why Britian's long-run growth record has been so mediocre.  The UK paid for two World Wars (the losers welshed on their debts), had the interlocking network of social cartels -- including its union structure -- we call "the class system" (again, the losers had their interest groups broken up), had become highly protectionist prior to entry into the EU and had the complacency that came from its remarkable success over the nineteenth century.

All very well, but why did we and New Zealand do even worse?  Did Australia and New Zealand inflict barnacle-generation and protection systems on themselves?  Yes they did:  they are called trade protection and wage arbitration.  Being small economies, Australia and New Zealand suffered particularly badly from trade protection restricting our ability to access economies of scale and scope in world markets and which made us more vulnerable to exploitative cartels and monopolies:  a process that wage arbitration actively encourages.  Wage arbitration represents arbitrary interference by unaccountable officials in private contracts.  It violates all of de Soto's principles.  Attacking the value of the most common asset (people's labour) by restricting its use is a great way to retard economic growth.  (If Australia had maintained equivalent American standards of living -- and we were wealthier throughout the nineteenth century -- the average Australian family would now be about $40,000 a year richer).

Further support for the barnacle thesis can be garnered from looking at the improved growth performers since 1980.  The Celtic Tiger is the star improver:  from 1870 to 1980, Ireland's per head economic growth was 62 per cent of the developed world average, since 1980 it has been 328 per cent.  Next best is the UK (from 48 per cent to 114 per cent), followed by Australia (from 46 to 97) and then New Zealand (from 44 to 61).  Thatcherism shook up the UK class system, while all four countries have moved to free trade and liberalised their internal markets.  (Ireland also massively cut company tax rates and government's share of GDP)!  Labour market reform occurred earlier in the UK and went much further than in the antipodes (given that New Zealand has recently re-regulated its labour market).

Australia has managed to catch up to average developed world growth rates (even be a star performer in the 1990s), but New Zealand has merely achieved falling behind more slowly.  Showing we have learnt nothing from a century of mediocrity, Australia is now in the process of re-regulating its labour market State by State to protect the interests of a union officialdom whose own members are deserting in droves (union membership has dropped 29 per cent since 1990) in ways which greatly extend arbitrary intervention by officials in private contracts.  New Zealand has banned forestry in Department of Conservation land (30 per cent of the country), the push is on to ban mining also.  It, a country dependant on biological production, may ban the use of bio-technology, crucial for increased productivity.  The same technology is under threat here.  We have placed 15 per cent of our land area under "indigenous title" -- a form of title which violates most of de Soto's principles -- and made property rights insecure across another 65 per cent.

Most of this nonsense is done on the basis of posturing by status-seeking elites -- also a very third-world phenomena -- supporting policies very poorly designed to achieve their alleged intentions.  If we keep this up, New Zealand really will become the only third-world country where you can drink the water, and we will not be far behind.

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Popular Support Not Required

Some questions to test your understanding of recent Australian history:  which was the first major Australian political party to adopt multiculturalism as official policy?  Who was the first Federal politician to refer to multiculturalism in Parliament?  Who was the second?  Which Federal Government was the first to make multiculturalism public policy?  When did multiculturalism achieve the support of a majority of Australians?

The answers are the Liberal Party, Malcom Fraser when Liberal Immigration spokesman, Michael Mackellar his successor as Liberal Immigration spokesman, the Fraser Government and not before the mid 1990s.

These are some of the fascinating facts in Mark Lopez's masterful study of how multiculturalism came to be adopted as a basic principle of public policy in Australia.  The Origins of Multiculturalism in Australian Politics 1945-1975 (Melbourne University Press) is a wonderful case study of the public policy process in Australia -- the real one, not the banally formal or the stupidly conspiratorial versions sometimes presented.  To me, as an ex-public servant, former political activist and someone involved in advocacy work, Mark Lopez's presentation of the ins and outs of the process of the rise of multiculturalism all ring true.

Apart from careful diligence in the use of evidence, the prime source of Mark Lopez's achievement seems to be his use of interviews with all the key participants supported by careful examination of the documentary evidence.  While Lopez never actually suggests anything of the sort, one does get the sense that many of the key participants were only too willing to talk about how clever they were.

What Lopez tells is a fascinating story, the story of how a small number of activists -- of a variety of ethnic backgrounds, including Anglo-Celtic -- sought to change public policy.  They did so not by convincing the general public and using the pressures of mass electoral politics -- as late as 1994, an opinion poll recorded 61% disapproval for multicultural ideas (what one wit has called the demand that residents adapt to newcomers).  What the activists did instead is follow classic techniques of elite and pressure-point politics.  They wrote papers (many were academics), they formed committees and organisations, they got into advisory structures, they tried to determine the wording of official reports and speeches, they lobbied key politicians.

Ironically, much of this activity, particularly after the election of the Whitlam Government in December 1972, was directed towards the ALP.  Most of the multiculturalists came from New Left or other progressivist backgrounds and were much more comfortable with the ALP as the vehicle of political change than the Liberal Party -- many were ALP members.  They were so focussed on the ALP -- with some exceptions such as Professor Jerry Zubrzycki -- that they (and the media) completely missed the significance of Fraser's acceptance of multiculturalism when Liberal Immigration spokesman and incorporation of it into Liberal policy.

Conversely, multiculturalism was never the official policy of the Whitlam Government.  It had begun to seep into government documents and reports, and Al Grassby did give a speech entitled A Multi-Cultural Society for the Future in August 1973, but Grassby himself did not become a multiculturalist until after he ceased to be Immigration Minister.  Nor did the Whitlam Government take the final step and adopt multiculturalism as policy, though events were moving in that direction.

Even though the final adoption of multiculturalism as official policy by the Fraser Government was in some ways serendipity for the multiculturalists, their efforts in creating a pervasive multiculturalist presence in advisory and advocacy structures, and in developing the ideas of multiculturalism, meant that there was an entire structure of ideas and personnel able to support and extend the policy direction of the Fraser Government once it had adopted multiculturalism as policy.

There are a range of lessons from this wonderful case study.  One is how narrowly based bipartisanship can be.  Bipartisanship does not require that a majority in the ALP and Coalition support a policy direction:  all it requires is that both spokespersons do and that they have at least the passive support of their party leadership.  It is almost certain that multiculturalism would not have survived a serious debate in either the Labor Caucus or the Coalition Party room.  That Fraser (and then Mackellar) were explicitly in favour, and Grassby and other Whitlam Ministers implicitly so, was enough to stop it being destroyed by political controversy.  In that sense, Australian public policy processes can be much more closed than, for example, American ones where primary elections and the looseness of party affiliation provides for a much more disparate -- and disputed -- public policy market which forces politicians to play much closer heed to public opinion and makes politics much more a process of continual public persuasion.

Another lovely little nugget from the book is how the tactic of accusing critics and opponents of racism was established almost before multiculturalism itself as a term was.  Then and since, multiculturalism has often provided examples of what might be called the motivational fallacy.  In the case of multiculturalism, the fallacy works as follows:  I advocate multiculturalism as a way of combating racism and prejudice, therefore, if you criticise multiculturalism you are guilty of racism and/ or harbouring prejudice.  This has a triple benefit as a mode of argument.  It delegitimises critics and criticism, it elevates the mode of action or claim being defended and it establishes or reinforces that action or claim as a moral asset for its proponents.

Lopez shows how tarring critics of multiculturalism as racist was helped by Al Grassby having been subjected to a nasty campaign by racist splinter groups prior to losing his rural New South Wales seat in 1974 as payback for his abolition of the lingering remnants of the White Australia policy.  That racists hate multiculturalism provides and provided guilt by association for other critics.

Lopez identifies four different streams in multiculturalism (pages 447-8).  The dominant stream, cultural pluralism seeks government recognition and support for the preservation and development of migrant/ ethnic groups and cultures.  Welfare multiculturalism seeks culturally and ethnically pluralistic welfare delivery services because migrant/ ethnic groups are seen as vulnerable and afflicted by a wide range of welfare problems.  Ethnic structural pluralism sees migrant/ ethnic identity as being threatened by socio-economic inequalities and institutional practices and seeks government support to preserve ethnic identity.  Ethnic rights multiculturalism sees migrant/ ethnic population as predominantly working class and the central issues as being denial of rights -- economic, social, cultural, political -- and either seeks creation of ethnic/ migrant pressure groups or migrant mobilisation through trade unions.

Even though the multiculturalists had divergent views, they still functioned as a series of interlocking networks that led to the adoption of multiculturalism as public policy without the support of, indeed against, public opinion.  They seem to have had a range of motivations, often rooted in an alienation from mainstream Australia.  People confronting such alienation always face a choice:  do you persuade the general public to adjust society or do you enforce your views to transform from the centre?  The multiculturalists essentially used a vanguard approach, capturing public policy and using the platform of government to establish multiculturalism as a fait accompli.  While some recent opinion polls do suggest multiculturalism has achieved majority support in recent years, Lopez casts doubt on this, feeling the wording of many of the polling questions is somewhat problematic.

That public opinion was unambiguously not in favour when multiculturalism was being adopted led to some dubious practices by the multiculturalists:  Lopez brings out some of the dangers of "action research" in misdiagnosing issues and obstructing dealing with genuine concerns.

Lopez also brings out how the multiculturalists were able to use the media preference for a convenient voice to represent assumed opinion to pretend to have more support than they actually did.  Thus the Ethnic Communities Council of Victoria was established by the multiculturalists to provide a platform to push multiculturalism on a presumption that the Council spoke for migrant/ ethnic opinion.  In reality, it was a classic "top down" organisation with little or no connection to ordinary migrants.

There is far more to be learned in this excellent book than the issues I have touched upon.  Anyone interested in Australian politics and public policy, and particularly anyone interested in the achievements and perils of policy advocacy, should read The Origins of Multiculturalism by Mark Lopez.

Rejoinder:  The common law and blatant interests

Since Michael Cooney chose to quote me out of context in last month's Adelaide Review, let me make my position on the common law quite clear:  I am in favour of it.  In fact, we suffer far too much statute law:  more use of the common law instead is what I say!  There is at least one area, however, where the common law performs badly -- workers' compensation, which is not one of the common laws' more longstanding areas.  Any judgement process which consumes up to half the costs of awards is hardly a satisfactory one.  It was very specifically in that context that I wrote that "sensible governments cut back common law rights".  As for lawyers not constituting an interest, as Michael Cooney remarkably implies, it is to them that those costs overwhelmingly go.  One reasonable estimate was that the Kennett changes cut incomes to Victorian lawyers by about $34 million a year.  That is a vested interest in anyone's terms.

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Does Social Democracy Require Monoculturalism?

If one were to cite the most successful social democracies, it is a fair bet that the states of Northern Europe -- the Netherlands, Denmark, Norway and Sweden -- would be high on the list.  These societies are all monocultural:  their nationhood entails a clear, and single, ethnic identity with a single dominant religion (with their more divergent citizens having tended to emigrate, typically to North America).  Is there a link between social democracy and monoculturalism?

Social democracy is the extensive delivery of income, goods and services by the state.  It obviously requires high taxation levels.  But it also presumes a high degree of efficacy in centralised delivery and direction.  This is clearly much easier to do in dealing with a culturally homogeneous population.  If people have a fairly similar range of assumptions about how to live, how to act, right and wrong, patterns of life and so on, clearly it is much easier to design rules and centrally deliver services without too much ill-will and suited to the patterns of community life than it is if one is dealing with highly varied outlooks and patterns of life.  What's more, given the obvious potential for waste and idleness from government delivery and government income, it is much easier for social pressure to minimise shirking if people speak the same language and share a common outlook.  People are also more likely to be comfortable with a "one size fits all" approach, to feel that the officials do actually think like them and will see things in a way they also share.  So, a social democratic approach will be much easier to introduce, and to keep going, in a monocultural society.

Once one is dealing with a culturally diverse population, on the other hand, things become much more problematic.  People are much more likely to feel that the officials will have a different outlook to their own.  There is much more danger of services being seriously out of step with one group or another.  There is much more potential for resistance to paying for people more clearly "other" and for arguments about which group is getting what out of the system to become bitter and divisive.  Social democracy will be harder to introduce, comfort with what government provides is likely to be lower and problems with what government delivers likely to be greater.

It is noticeable that the Anglomorph countries -- which have always been culturally diverse, starting with the English, Welsh, Scottish and Irish of the United Kingdom -- have generally tended to have smaller governments and more liberal economic structures than more culturally homogeneous developed countries (though the immediate postwar UK provides something of an exception:  it also produced, in Margaret Thatcher, the first substantive roll-back of "commanding heights" social democracy).  The most culturally diverse of the pre-World War One European Great Powers -- Austria-Hungary -- was also notably liberal in its economic policy.

It is very easy to mount an argument than a major reason why socialism, as a sizeable political movement, never took hold in the United States -- the most culturally and religiously diverse of Western societies -- is because it could never break out of particular ethnic associations.  Appealing to one group more or less guaranteed a failure to appeal to another.  It also seemed to make less sense.  Cultural diversity meant it was more socially harmonious to have a relatively simple set of rules and let people get on with it.  Conversely, it was harder to build an enduring consensus around intrusive intervention -- indeed, as the US Federal Government's role has expanded, Americans' confidence in it has fallen.  The US dealt with the social coherence problems of cultural diversity by fostering an American identity of a lowest common denominator variety rooted in a history conceived as a triumph of certain institutions and principles which left a stronger sense that the pursuit of happiness is a personal responsibility than other Western societies and took it as obvious that one person's meat could be another person's poison.

Australia provides an interesting case.  The division between Catholic Irish and Anglo-Protestants certainly provided some difficulties in creating an extensive state (that Australia has one of the strongest private school systems in the developed world was a major consequence of that division).  It also showed how religion can be an important part of cultural diversity.  Yet Australia did develop its own version of social democracy.  This was the Deakin system of White Australia, trade protection, wage arbitration, state paternalism (what Sir Keith Hancock labelled government as a vast utility) and imperial benevolence (Menzies' "great and powerful friends").  Of the various elements, it is safe to say that White Australia was the most strongly based in popular feeling and the least politically contentious -- the ALP's original statement of principles, for example, put the preservation of Australia for the British race as a fundamental aim.  We may have been of Irish, Scottish, English, Welsh, or some mixture of same, descent, but we were all White (except, of course, for indigenous Australians):  a principle which could be, and was, extended to Europeans of all varieties after the Second World War.

Despite White Australia's popularity, it was the first of the Deakin system's various elements to go.  Once substantial numbers of non-British migrants had been successfully accepted, opening up further became easier -- White Australia was breached by the Holt Government and its lingering elements were abolished by the Whitlam Government.  The referendum of 1967 abolishing the constitutional exclusion of aborigines from the Census and the Commonwealth's race power, the most consensual political act in our history, also showed that domestic exclusion was no longer acceptable.

The subsequent decay of the Deakin system is generally put down to economic and fiscal causes -- I have written of the fiscal pressure from the expanding welfare state as a fundamental driver of reform -- while the consequences of abolishing White Australia have not been much thought through;  presumably because it is so widely seen (including by this writer) as a good thing.  It is notable that popular support for high immigration collapsed during the period of the abolition of White Australia, though the entrenchment of unemployment and the shifting of the justification for migration from national interest ("populate or perish") to moral vanity (proof of anti-racist credentials) are also plausible explanatory factors.

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Victoria Redux

[an edited version also published as "Recycling fiscal mistakes" in The Canberra Times of 14 October]

Victorian "progressives" are some of the most conservative people in Australian life:  repeating old mistakes in new forms seems to be a particular passion of theirs.

The most startling example of this was the Cain-Kirner government replicating in the late 1980s and early 1990s the mistakes that made the Depression of the 1890s such a disaster in Victoria.  Victoria had a particularly appalling 1890s Depression which ensured that economic dominance would pass back to New South Wales:  from 1891 to 1901 Victorian male employment fell by 1 per cent while NSW's grew by 19 per cent.

The 1890s collapse had been set up by a speculative land boom based partly on political suppression of appropriate risk assessment.  This was replicated a century later by State-owned Tricontinental and VEDC lending for ill-judged projects the private sector would not touch.  The 1890s crash was made worse by Victorian authorities mishandling a run on the banks.  This was again replicated in the 1990s with the Pyramid Building Society disaster.  In the 1890s, disheartened Victorians fled to the Kalgoorlie gold fields, a century later Queensland was the Mecca.

Take a bow (Premiers) John Cain and Joan Kirner, (Treasurer) Rob Jolly, (chief economic adviser) Terry Sheahan! Old mistakes updated and re-delivered! (Though borrowing money to pay superannuation obligations was probably a new twist).

As part of this process, the Cain-Kirner Government took a State whose unemployment rate was persistently below the national average, and, starting in 1986/87, turned into one whose unemployment rate was very much above the national average.  Under Kennett, the Victorian unemployment rate (slowly) returned to the national average -- though full-time employment has only just returned to the level it was going into the 1990 recession.

The new Victorian Premier, nice Mr Bracks, has been assuring everyone that he is not going to make the mistakes of the Cain-Kirner Government, no sirree, not him.

Unfortunately for this comforting tale, he has already started doing so with Workcover.  The re-introduction of common law rights has meant a surge in workers' compensation costs:  some firms are looking at increases in their premiums of up to 100 per cent.  Hardly an encouragement for employing people.  Indeed, Tony Harris, (in the Financial Review of 11 August) cites a Victorian Treasury report as estimating the changes will cost 9,000 jobs.

Did you think that tender concern over common law rights in workers' compensation has something to do with the workers?  Foolish you, it is all about lawyers' incomes.  As Tony Harris points out, it is not unusual for costs to consume up to half of an awarded judgement.  Sensible governments cut back common law rights, foolish governments extend them (on this matter, the Cain-Kirner Government was sensible, the Kennett Government initially foolish but later realised, and reversed, its error).

The union movement gets a lot of pro bono work from friendly lawyers:  the pay-off is the gravy-train of workers' comp.  claims.  Cutting off common law rights not merely allows costs to be contained, it reduces mightily the income stream to labour lawyers.  It is a sign of how beholden that the modern ALP is to its supporting interest groups that three of the four Labor Governments in power in the Eastern States -- the Beattie Goverment in Queensland, the Bacon Government in Tasmania and the Bracks Government in Victoria are preserving or extending common law rights in this area.  (A prime reason Kennett's Attorney-General Jan Wade was so hated is her reforms cut the money flowing to lawyers by millions of dollar).

Where the Cain-Kirner Government was foolish on workers' compensation was introducing a statutory scheme that was far too generous, particularly in the ease with which claims could be successfully made.

But foolishness over workers' compensation is far from the only sign of Bracks being a case of Back to the Cain-Kirner Future.  Despite being a remarkably spendthrift government (with a real increase in non-capital outlays per resident of 24 per cent over its term in office), the Cain-Kirner Government were low spenders on capital investment:  the Kennett Government increased capital expenditure markedly.  Since the ALP did not expect to win the 1999 election and -- an even bigger problem -- its values are inner-city but its majority comes from provincial towns, the Bracks Government suffers from agenda-paralysis.  A gap in capital projects moving through the processes of initiation and implementation is beginning to build up.

If Mr Bracks had been a Coalition Leader, we would no doubt have been hearing endlessly about his lack of vision, just as his widely criticised replacement of popular Governor Sir James Gobbo would have been written off as nasty small-mindedness.  (The contrast with John Howard quietly extending Sir William Deane's term of office as Governor-General so he could preside over the centenary of Federation celebrations could not have been sharper).

Another sign of Bracks being a new words but the same music is the appointment of Sydney University Professor Ron McCallum to head a Taskforce into industrial relations reform.  Professor McCallum has already performed similar duties for the Beattie Government in Queensland and the Carr Government in New South Wales.  While the consequent legislative changes are currently stalled in the Upper House in NSW, the Beattie Government's Industrial Relations Act 1999 provides an excellent indication of where things are likely to be heading.

The Queensland Act contains quite a range of remarkable provisions attempting to extend the position of unions and discouraging modes of engaging labour other than conventional employment -- section 125, for example, gives the Queensland Industrial Relations Commission the power to declare any contract for services to be an employment contract.  A fascinating provision for, say, franchisees or for contractors in the housing industry.

Since regulations are not costless, imposing a new set of costs and complexities on a labour market which is still highly regulated is hardly likely to improve the employment prospects of new entrants to the labour market.  We will have to wait and see whether the Bracks Government, like its Cain-Kirner predecessors, will once again drive the Victorian unemployment rate above the national average.  The early signs are not encouraging.

There is, however, a fascinating public spat over the direction of the Bracks Government going on.  The inner city Left has noticed that Bracks has not been fulfilling their hopes -- there has been a lot of "business as usual" maintaining the Kennett legacy -- and his warm remarks over how the police handled themselves during the recent demonstrations against the World Economic Forum have been the last straw.  A wave of renunciations, angry motions of repudiation and threats of resignations from the Labor Party has followed.

Bracks did cancel a proposed congratulatory barbecue with the police, but whether the Left will get much more satisfaction is doubtful.  Bracks himself is a Catholic Lebanese lad from Ballarat.  John Brumby, the former Leader and now key minister, is from Bendigo.  This is a Government in power because of provincial Victoria, led by two Labor Right boys from provincial Victoria with a Labor Right-dominated Caucaus.  Inclination and electoral calculation march together:  a very powerful combination.

But the Left feel betrayed because they were the ones that mounted the campaigns -- against privatisation, against the Grand Prix, against government secrecy, against the Auditor-General changes -- that (in the case of the last two) eventually bit, immensely aided by Jeff Kennett's own miscalculation in gagging his candidates.  The Labor Right, by contrast, were more likely to be quietly congratulating Jeff on some of his changes.

On the other hand, Kennett's failure to spread the joy in provincial Victoria (which received a disproportionately low amount of the capital spending) was something Brumby in particular sheeted home effectively.  This internal division is the biggest danger for the Bracks Government at the moment:  but repeating the past Cain-Kirner mistakes is not a solution, though one suspects that much of the Left would only be too happy to do so.

Response

Regarding Richard De Angelis's letter classing as nonsense by alleged suggestion that Australian Aborigines were still hunter-gatherers, I would have thought it blindingly obvious that the (true) statement that going from hunter-gatherer culture to the information technology revolution in two centuries (and less in much of the continent) was a big ask did not entail the (false) statement that Aborigines were still hunter-gatherers, but apparently not.  Regarding the reality of different cultural experience, I can merely agree with the commentator who wrote of those who:

...  sometimes appear to have no more idea of the nature of indigenous community here than for the most part they have so far displayed in relation to other hunter-gatherer peoples whose country has been occupied and largely taken over by the settled material culture of the invaders.  The key to understanding Aboriginal culture likes there, and even people whom one would think had the intelligence and the background and the motives to understanding often lack it

The writer?  Don Dunstan, The Adelaide Review, March 1996.

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Manufacturing Idiocy

The story of the failure of Australian manufacturing is epitomised by H.V. McKay, the inventor and manufacturer of the Sunshine Harvester, which was a world-beating breakthrough in wheat-harvesting machinery.  At the time of Mr Justice Higgins' famous 1907 Harvester judgement -- which established the arbitration benchmark of the living wage -- McKay's firm owned the largest factory in the country.  H.V. McKay -- an innovative manufacturer and employer -- should have been as seminal in the development of the Australian economy as Henry Ford was for the US economy.  That he was not was the result of poor public policy, epitomised by the Harvester decision, which was a keystone of the system that made innovative manufacturing next to impossible in Australia.  We spent decades taxing other industries, via protection, to support manufacturing, creating a favour-seeking mentality, and redistributing those rents to workers and unions (and employer associations) via a mechanism, arbitration, which enmeshed manufacturing in a complex web of costly regulations.  The result was the same as with highly-subsidised European agriculture -- we ended up wasteful and inefficient producers of everything.  Producers whose first response to any difficulty was to call on government assistance.  By the early 1970s, about 35% of the return from manufacturing was based on the regulatory privileges handed out by government but paid for by the rest of the community, particularly exporters.

As one looks at the labour market re-regulation agenda the union movement and the ALP is pushing -- and at the Howard Government's datacasting and broadcasting policy decisions (which restricts market entry, and thus innovation opportunities, in order to protect incumbents) -- we are in the process of making the same mistakes in new forms.  A recent report, Rebuilding Australia:  Manufacturing in the New Economy by Nixon Apple, commissioned by NSW Senator George Campbell, for the Amalgamated Manufacturing Workers Union (AMWU), epitomises this.  As the AMWU is one of our more influential unions, and Senator Campbell is something of a power in the land -- Chairman of Caucus, a member of the ALP Federal Executive since 1986, National Secretary of the AMWU from 1988 to 1996 -- it is worth paying attention to.

The report was recently praised by Tim Colebatch in The Age (28 July).  Since this is The Age, we can therefore be confident it recommends more government expenditure, more intervention or both (as indeed it does).

In confronting an issue such as prospects for manufacturing, unless one asks both what is government doing that it shouldn't and what -- given the difficulties and costs involved -- should government be doing that it isn't, one is at best being intellectually lazy and at worst a policy charlatan.

It is therefore difficult to take seriously a report on the problems and prospects for Australian manufacturing that nowhere mentions our labour market institutions, makes no attempt to explain origins of problems in manufacturing prior to 1983 and wants to abolish the Productivity Commission, the only government institution which engages in rigorous and systematic public examination of economic policy across portfolios.  The report complains about a lack of investment, but nowhere examines reasons for our poor saving record -- the fundamental reason why we have so much foreign ownership and hence so much derivative manufacturing.

A fetish about manufacturing is a common feature among those who dislike economic liberalisation.  It is clear, however, that, in longer term, the "manufacturing moment" is a relatively brief interlude in the transition from an agricultural to a service economy.  Employment in production of goods (mining, construction, manufacturing) only overtook agricultural employment in the US in 1920, by 1930 it had been overtaken by employment in services, while manufacturing's share of US GDP has been falling since the early 1950s and most economic growth since that time has been in services.  And even in manufacturing establishments themselves, the proportion of workers who are actually service workers (engineers, researchers, managers, etc.) has been growing.  Nor is manufacturing an ideal job creator -- a recent IMF study, Deconstructing Job Creation, shows that relatively low employment in farming and in manufacturing makes a country a better prospect for high job growth.  Apple points out that manufacturing has increased its share of GDP in various European countries:  if your job creation record is sufficiently dismal, that is relatively easy to do.

Apple's report has the full range of ideas for "planned innovation" -- more government expenditure promoting R&D, sectoral plans, tax concessions, etc.  Yet government subsidies are already 1.3 per cent of GDP, less than the 1.8 they were in 1982-83, but more than the 1.0 they were in 1972-73, and far more per person.  Adjusted for inflation, in 1972-73, government spent $190 per Australian subsidising production and $380 in 1982-83;  by 1998-99 it was $400 per Australian.  We can be confident that a $400 tax cut per Australian ($1,600 for a family of four) would be of far more net social benefit -- once the compliance, inefficiency and administrative costs of collecting and handing out the money are considered -- than the subsidies themselves.  Western societies have become far too cavalier about alienating from their citizens the income they have earned.

But Apple wants more such alienation (for our own good, of course).  Since the Commonwealth is the tier of government with the cash, increased government expenditure to encourage manufacturing means putting the Department of Industry, Science and Research (DISR) in charge.  The suggestion that DISR (or DISasteR, as it is nicknamed) should have more money to spend is one that cannot but send shivers up the spine of anyone familiar with that Department and Canberra processes.  It is entirely typical of DISR -- which does not attract the best and the brightest of the public service -- that the working knowledge of the public servant responsible for one particular industry consisted of a walk-through of one facility and periodic chats with the Director of the industry body which, in the way of these things, primarily represents the big end of the industry.  But "looking after" an industry is merely a career interlude, and one lacking any serious performance benchmarks at that.

When Senator John Button was Industry Minister, he essentially ran the hard bits out of his own office.  Of his Coalition successors, John Moore gave every impression of never having met an rent-seeker he didn't like while the current Minister, Senator Minchin, is a right-winger who presumably doesn't believe in industrial welfare (which is what DISR hands out), but hasn't had the gumption to nuke his own portfolio's budget.  DISR is not a body which inspires any sensible person with confidence.

What if government did undertake the expansion in expenditure on manufacturing that Apple suggests?  The predictable results is the union movement would immediately line up for its chop -- a classic example was provided when the decision to pause tariff reductions in the car industry was followed directly by the car manufacturers agreeing to a 15% rise.  The higher the political priority, the more the unions would attempt to rort the process.  It is the old game:  create political hostages so that the standard rorts apply.

As the authors of the above-mentioned IMF report point out, higher union membership is associated with higher wages:  it is also associated with higher unemployment and lower job creation.  Australian manufacturing unions in particular have shown a willingness to drive individual firms to the point of bankruptcy and beyond to make their point.  Nothing has caused as much destruction in manufacturing employment as the metal trades wage surge of the early 1980s or the Hawke outbreak of the mid 1970s.  (There is therefore a certain rich irony in unions now promising faithfully to be good boys and girls over the proposed large new Holden factory).

Whenever somebody argues for a government-led recovery plan ask yourself this question:  what is the reliable and regular process of quality control which assesses the full cost of taxes, regulations and expenditure, carefully measures the actual social benefit and then reliably feeds back into government activity?  The answer is, there is none.  Any such process is, in fact, incredibly haphazard.  Which is why scepticism about government activity is so legitimate.

And arguing for a government-led manufacturing recovery -- after decades of failure at doing just that -- is a particularly silly way of extending reliance on political mechanisms.  After all, what happened to McKay's firm, International Harvester, scene of Higgins' triumph (sic) of social engineering?  It was eventually sold to a Canadian company and then closed.

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The Pretension of Virtue

I was reading one of the best, and the funniest, book on Australia I have ever read -- Bill Bryson's Down Under -- when I came across a passage which was a revelation, as one does when reading witty and perceptive observations by an outsider about the otherwise familiar.  On page 125, Bryson writes "that was another very British thing I'd noticed about Australians -- they apologised for things that weren't their fault".

I read this and thought:  now I understand all about National Sorry Day and the apology John Howard won't make.

John Howard's problem is that he takes his formal responsibilities as Prime Minister of the Commonwealth of Australia very seriously.  If he is to offer an official apology then it must be for something the Commonwealth of Australia did.  Since, from 1901 to 1967, the Commonwealth had, very explicitly, no legislative responsibility for indigenous Australians, except in the Northern Territory and the ACT, and since, compared to what many of the States did, the administration of indigenous affairs in the Northern Territory, certainly from 1949 on and arguably considerably earlier, was a model of enlightenment, then it follows that it is not appropriate for the Prime Minister of the Commonwealth of Australia to offer an apology for something that neither his Government, nor preceding Commonwealth Governments going back more than half Australia's life as a federated nation, did.

Moreover, if you offer an apology, and you are serious, then that implies a willingness to make restitution or compensation.  As the person ultimately responsible for proper dispersal of taxpayer funds, offering apologies likely to be followed by substantial demands for cash for something the Commonwealth of Australia didn't do becomes doubly repugnant.

John Howard's problem is that, because he is Prime Minister of the Commonwealth of Australia he is also Tribal Leader, and many people want our Tribal Leader do something felt to be Tribally Appropriate.  And, as Bryson notes, it is very Australian to say sorry for things that aren't our fault.

People want, nay demand, an Aussie politeness apology, the sort of thing any Australian is likely to offer someone in distress.  A gesture of sympathy and understanding.

Now, if John Howard were more of a showman politician, he would understand this, and offer some apology in a flash, with some suitable disarming rider to cut off any cash claims.  A Clinton or a Blair would carry it off without hesitation, even with panache.  But Honest John has the outlook and conscientiousness of the solicitor he used to be.  Such duplicitous flair is just not in his nature.  So, no apology.

He has offered a statement of sorrow and regret which, one would think, would satisfy the demands for a gesture of sympathy and understanding.  This is not true for two reasons;  one his fault, one not.

The reason which is his fault is that he, and his Government, have offered no explanatory context for his expression of regret.  In a democratic polity, the role of leadership is to connect enduring sentiments to contemporary needs by rhetoric and action.  There has been action, but nothing remotely resembling a coherent explanation of what is needed, and why what has been done reflects what is needed.  In this, as in so much else, this is a rhetorically challenged Government.

So, the statement of sorrow and regret just hangs there, connected to nothing, and lacking resonance because it is a solitary statement, lacking any developed context.

Of course, to develop such a context involves investment in intellectual capital:  something the Liberal Party is very bad at.  John Howard, outside a few economic areas, shares this Liberal incapacity.

The other reason why the statement of sorrow and regret has not worked is because the contemporary public agenda of so-called indigenous issues is overwhelmingly driven by the moral vanity of the Australian intelligentsia.

That agenda is all about words and gestures -- saying "sorry", sorry books, a Treaty, statements of indigenous rights, policing public language, pontificating about (and greatly exaggerating the extent of) the "stolen generation".  It is about generating and defending a set of approved opinions which function as moral assets (hence the enthusiasm with which that intelligentsia, particularly many journalists, fell for the Hindmarsh Island concoction).  It is not about anything even vaguely resembling a serious agenda for advancing the long term interests of indigenous Australians.

The moral vanity game is all about being ahead of a designated set of moral inferiors, so it is about constantly upping the ante.  "Sorrow and regret" is therefore not good enough -- it must be an apology.  If an apology was offered it then would not be good enough -- too late, too begrudging, and not backed by compensation.  The forcible removal of wanted children from functioning families -- which happened at some places at some times -- becomes genocide, and so on.

In all the settler societies, the indigenous peoples have major and endemic problems.  The reasons are not particularly mysterious, but are acute in the case of Australia.

The scattered and diverse indigenous societies of mainland Australia had not experienced the agricultural revolution of the Neolithic Age.  They did not create settled, urban communities.  They did not create any political structures which extended beyond people personally known to each other.  Their cultures were rich in many ways -- the richness of indigenous Australian art is even now exciting the art world -- and their ancestors engaged in ocean-going voyages long before any other human society.

But all the things indigenous Australian cultures had not done made them spectacularly ill-equipped to deal ineffectively with the immeasurably more capable invading British one.  Ill-equipped to resist, ill-equipped to participate.  These problems linger.  For example, cultures which have no concept of formal obligations beyond kin-groups have enormous difficulty running large organisations.  In these, nepotism and cronyism are sins of breaching formal obligations but in a system of kin-based obligations, they represent virtue.  Nor can, as my colleague Ron Brunton points out, one achieve industrial-age life expectancies with hunter-gatherer notions of good health practice, and success in improving indigenous health has to deal with real barriers, however ideologically awkward they may be.

Dispossession is often cited as the European Original Sin which is the root of the problems of indigenous Australia.  The problem with that hypothesis that Aboriginal communities which have experienced the least dispossession often have the worst health and other profiles of social pathology.

As Lawrence Harrison explains in the latest issue of The National Interest, scholars are increasingly looking to culture to explain differing social outcomes.

The essential problem for indigenous Australia is surely cultural distance and cultural collapse.  The result of that cultural distance has been an endemic and continuing disconnection between indigenous and other Australians.  The vileness of the White Australia policy was not in its exclusion of non-European migrants -- even at its height, White Australia was less ethnically exclusory than is contemporary Japanese citizenship policy.  The vileness of White Australia was something quite different.  Talking of preserving a White Australia literally whited-out indigenous Australia.

The solution to cultural distance and collapse is cultural adaptation and renewal.  Now, run through in your mind the items in the contemporary public agenda of "indigenous issues".  What is likely to make a serious contribution to indigenous cultural renewal and cultural adaptation?  Saying "sorry"?  Exaggerating the "stolen generation"?  Statements of indigenous rights?  Demands for a treaty that no government could accede to?

In fact, much of that agenda is harmful.  The vicious policing of public debate on indigenous issues in order to preserve the intelligentsia's moral assets makes even discussing problems and difficulties within indigenous cultures either extremely difficult or simply forbidden.  Debate is made difficult even for people with impeccable Aboriginal credentials.  Noel Pearson was promptly abused for pointing out that welfarism -- the manna from heaven approach to income -- massively undermines development of functional roles in a modern economy and the incentive to renew and adapt.

It makes it difficult for welfare agencies to carry out their proper roles.  In his article in the April 15 Spectator, Michael Duffy tells the sad tale of a 22-month Aboriginal baby girl found stabbed and covered with bruises and bite-marks in her inner city Sydney home;  social workers having not dared to intervene, lest they perpetuate the "stolen generation".  Extreme examples maybe, but of a type that is all too common.

Even native title is a deeply flawed process since the form of property rights given, by statute and by High Court decision, is spectacularly and needlessly ill-designed for effective participation in a modern commercial economy.  It is, however, very well designed to maximise angst and economic disruption for minimum gain -- the current slide in mineral exploration in Australia is, in part, due to the screwing up of rural property rights, a consequence not merely predictable, but predicted (see my 1997 Past Wrongs, Future Rights, pages 116-117).

That indigenous policy has been denied honest analysis of the needs of indigenous Australians is surely one reason that it has been such an unhappy failure, with many indicators of indigenous well-being remaining static or even regressing over the past 30 years.

To contemplate the current politics of indigenous issues is to understand what self-indulgent, self-righteous shits the progressivist Australian intelligentsia really are.  Michael Duffy writes "in 50 years' time, people will look back in horror and wonder how intelligent and powerful white people could have let such things happen while professing so strenuously their concern for black welfare and their superiority to previous generations".  He is right, and at least part of the explanation of failure is to be found in those pretensions to superiority.

John Howard should lift his game, but it is not he who should be saying "sorry".

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Social justice's endless maw

It is amazing how many commentators seem to think they have said something morally uplifting -- indeed the final word -- when they grandly declare that more money should be spent on schools, health, pensions, welfare, indigenous advancement or whatever.

In fact, that is precisely what we have been doing now for many years.  The amounts governments spend, for example, on education or on income support per Australian have both more than quadrupled in the last 40 years, that on health has increased more than tenfold.  In the same period, GDP per Australian slightly more than doubled.  So government expenditure on these classic welfare-state activities has been growing faster than the economy, much faster than population.  Indeed, they have been going up faster than taxes -- taxes per Australian went up a bit more than threefold in the period (all figures adjusted for inflation).

So there is nothing mysterious about what is driving welfare reform.  The general trends are easily identifiable from budget papers and national account data -- my August 1998 Backgrounder From Workfare State to Transfer State sets them out.  The welfare state, and welfare dependency, has been growing at a rate which is simply not indefinitely sustainable.  In 1970, less than15% of those aged 15 and over were on income support;  now over 30% are and the upward trend continues.

Since 1983, the scope of government action has narrowed, while the size of government has continued to grow, with the latter driving the former.  When the Whitlam Government came to power, taxes were 23% of GDP:  they recently hit a peace-time record of 31% of GDP, yet the general government sector's rate of saving has fallen dramatically.  The fiscal pressure from the increase in the welfare state has generally been greater than increases in revenue through taxes, economic reform and growth.

Between the fall of the Whitlam Government and the election of the Howard Government, all levels of government spent $119bn or $7,000 per Australian more on recurrent (i.e. non-capital) expenditure than they took in revenue.  Pensions and salaries were paid for by selling assets or borrowing money.  Politicians are perennially tempted to "do a Harradine" -- to be in favour of expenditure, but not of the taxes to pay for it.  This is welfare on the national Bankcard:  it is buying the present by selling the future.  And it is not only a matter of selling government businesses, private assets are also sold overseas to satisfy our welfare-inflated demand for capital.  It is not merely the State Bank, but companies such as Arnotts, which are sold to foreign-capital providers to pay for welfare expenditure.

But we can't only blame the politicians.  The appeal of government expenditure is the idea that someone else will pay for it.  If we all get into that game, the easiest someone else to agree upon are those in the future.

Under this sort of fiscal pressure as the ethic of self-reliance has eroded, governments have been less and less willing to support mendicant industries.  The job of industry is to provide revenue to support the growing welfare state, it is not to be a mendicant itself.  Fiscal pressure has driven governments to rationalise government activities, to reduce liabilities and to increase economic efficiency in order to increase revenues and reduce non-welfare costs.  That has led to de-regulation -- to improve the efficiency of markets -- and privatisation -- to pay off debts accumulated through rising expenditure, reduce infrastructure costs for industry and improve the efficiency of asset use and service delivery.

The Hawke Government used asset tests and provision of family assistance to low-income working families to improve the targeting of welfare.  This process has been successful, with the lowest incomes having had the highest rates of income growth over the last 15 years -- over 30% growth compared to less than 15% for the top income decile (all income deciles have experienced income growth).  There has also been increased delivery of welfare services through non-government bodies -- most dramatically through the replacement of the Commonwealth Employment Service with Job Network.  Nevertheless, the growing rate of welfare dependency has not been directly tackled.

From 1988 to 1998, excluding various forms of age pension, the total number of pensioners went up by almost a half or 350,000 to over one million.  Disability pensioners increased by 260,000 or two-thirds to over 650,000.  Parenting payment (single) increased by 134,000 or 56% to over 370,000.

In the five years from 1993 to 1998, the total number of pensioners and other income support recipients -- excluding age pensioners, veterans and students -- went up by almost 106,000 or six%, to almost two million.  This occurred while employment grew by twelve% to 8.6 million and unemployment fell 19% to 730,000.  Yet the number on benefits directly driven by unemployment only fell by almost 44,000 or four%.

So, in a five-year period when employment is going up and unemployment is falling, we still get an six% increase in welfare dependency (in line with the six% growth in total population).  The prospects when there is an economic downturn, and unemployment rises, are clearly worse.

The welfare system was originally designed to catch those who slipped through the cracks of work and family support.  We now have about two million non-age welfare dependants in a population of 19 million with 9 million employed.  Welfare has clearly expanded way beyond its original intention -- and is continuing to expand.

While policy changes -- most obviously in the labour market -- could make the economy more efficient, and so make the burden of a growing welfare state easier to bear, long-term trends (and US experience) clearly indicate that will not be enough.

If government is merely about doing good then there is no limit to how large it will grow:  there is always more good to do.  But the spruikers for social justice conceived as endlessly more government expenditure resent any suggestion that limits to government should be considered.

So the fiscal pressure marches on.  Ironically, some of the strongest voices for this simple-mindedness are in the ABC and higher education.  Since both represent regressive middle-class welfare at its worst, they are natural points for the fiscal pressure to be manifested -- so they are encouraging the pressures which lead governments to look for other ways to fund them.

The issues have gone way beyond public-sector-equals-compassion and private-sector equals-selfishness.  They can only be properly resolved by some clear thinking about what really is the proper role of government.  Welfare reform will only be effective if it grapples seriously with those limits.  Mutual obligation -- the notion that welfare is something to be used and then grown beyond and should be structured to do this -- is clearly one aspect of this.

Growing welfare dependency can only be effectively tackled by policies which target dependency directly.  The introduction of work-for-the-dole and the appointment by the Howard Government of the McClure Committee into welfare reform hopefully indicate that this is the next stage in policy.

Correction:

My article in the June issue Every Australian Child Deserves a Private Education should have read "the almost $5bn spent on capital investment and on income support for students".  The slip was mine, not the Adelaide Review's.

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