Friday, June 06, 2003

The Gulf Between Aboriginal Policies and Aboriginal People in Australia

Speech to Libertad y Desarrollo Institute
Santiago, Chile
6 June 2003


ABSTRACT

Most Australian Aborigines (1) have made the difficult transition from membership of a pre-civilisation to become citizens of the modern Australian state.  More claim and celebrate their heritage than ever before.  Unfortunately, some have not made the transition.  Many remain trapped, captured by their leaders who want to reconstruct their old culture, settle them on traditional land and subject much of their existence to collective decisions.  These people, living in discrete communities suffer the worst lives of any Aboriginal Australians, and their circumstances are deteriorating.  The dream of collective self-determination has left the unfortunate, though significant few, in a hopeless plight.  Where governments can assist Aborigines, they will have to revisit elements of the policies that have gone before;  the measured discipline of the 1940s, the equality delivered in the 1960s and the organisational confidence-building of the 1980s.  The challenge for all concerned is to devise an escape for those Aborigines who have been captured by collective self-determination.

INTRODUCTION

The tragedies of Aboriginal society in Australia are the result of a nomadic, pre-literate, animistic gerontocracy being exposed to a rationalist, liberal democratic, market society.  That elements of Aboriginal society remain intact is remarkable.  It is a reflection both of the resilience of the Aboriginal ways and the benign intent of the dominant society towards Aborigines.  Since European settlement in 1788, many Aborigines have successfully made the transition to modernity.  Those of more recent contact, the last as recent as 1984, (2) are subject to a different policy climate and different conditions to those of earlier generations.  A formidable difference is the prevailing intellectual orthodoxy that suggests that the transition can be undertaken at no or minimal cost to Aboriginal solidarity and Aboriginal culture.

The management of relations between Aborigines and Europeans has been problematic.  Policy has swung from protective separation, to regimented assimilation, then to self-determination.  There have also been elements of integration running alongside these dominant phases.  The schema at Appendix 1a:  Major Developments Affecting Aboriginal Australians, (3) seeks to explain the major legal and political changes to Aborigines from 1788 to the present.  In the early periods, there was official respect for Aborigines, coupled with a doubt as to their ability to achieve equality with Europeans.  The early collectivisation of Aborigines was to protect them from the excesses of the impact of European settlement;  disease, alcohol, and the disturbance to families that came with sexual relations between Aborigines and Europeans.  Reality intervened when the two began, often in the most unsavoury of circumstances, to produce children, labelled at the time "half-castes". (4)  The policy expectation, among anthropologists and those whom would now be known as advocates of human rights, was that full-blood Aborigines would die out.

The period of assimilation was based on equality between the races, but a poor recognition of Aboriginal identity.  Aborigines were trained, much as were the lower classes in European society, for positions in domestic service or the trades, thereafter to make their own way.  Many used the opportunity (even under forced circumstances) to make good in the wider society.  They now form a major part of Australians of Aboriginal descent.  In the 1960s and 1970s, the latter part of the period of assimilation, Aborigines won legal equality but in many cases suffered a loss of livelihood and a collapse into the mire of drug-dependence.

Since the 1980s, the new policy has promoted a cultural revival and self-determination.  It has strong elements of collective self-determination.  The policy idealises Aboriginal culture and seeks to re-establish an Aboriginal society, albeit a synthetic one.  It has established a political infrastructure and separate Aboriginal services.  It accumulates land and maintains Aborigines on that land in thrall of public servants, Aboriginal political leaders and a collective mind-set.  Its proponents misrepresent the intent of earlier policies.  They do so as a means of justifying the new orthodoxy of separation.  The new orthodoxy is fatally flawed for a host of reasons, not the least of which is that it relies on the consent and resources of the dominant society.  Its other great fault is that it has left many Aborigines, now in its third generation, very dependent on welfare.  The new policy has delayed the inevitable integration of Aboriginal people into modern society, with devastating consequences for Aborigines.

A post self-determination approach needs to be mapped out.  Every public policy for Aborigines should provide an incentive for integration and none for separation.  The equality achieved in the assimilation phase and the organisational infrastructure of the self-determination phase can be used to complete the liberation of Aborigines from the insularity of their past.  With all due care to consulting with, and understanding the wishes of Aboriginal people, no incentive should be available to promote an opportunity for a different social contract.  The same rules for access to state benefits as applies to any citizen should apply to citizens of Aboriginal des cent.  Rather than have a monopoly on service to Aborigines, Aboriginal-controlled organisations should compete with other service providers to deliver services.  Compulsory schooling, means compulsory schooling, the obligation to seek work means, at the extreme, an obligation to relocate.  This does not mean that programs to help stabilise the economic base of remote communities should not be available to Aboriginal communities.  The same assumptions apply though;  that the state is not obliged to maintain forever those communities that do not have, and are unlikely ever to have, an economic base.

If Aborigines choose a path of collective self-sufficiency that is a matter for them, it is their right as citizens to do so.  Promoting their customs and religion and language are matters for them.  Running a different economy is a matter for them.  Running their own organisations is a matter for them.  What is not however, exclusively, a matter for them is the use of public resources to promote these objectives.  This is a matter for the entire society.  In 1975 the Commonwealth government spent $200 million on Aboriginal people, rising each year until this year when it will spend more than $2500 million, (5) an amount that demonstrates huge goodwill toward Aboriginal people.


WHO IS AN ABORIGINE?

The issue of Aboriginal identity only arises, in a policy sense, if an Aborigine suffers discrimination, or if it has some bearing on the enjoyment of an entitlement different to other citizens.  In the protection period Aboriginality was obvious, full blood and half-caste were identifiable, and subject to extraordinary and oppressive civil control.  In the assimilation period, some less identifiable Aborigines disowned their aboriginality in order to overcome informal barriers to the full rights of citizenship and benefits of participation in the modern economy.  In the self-determination period many Australians felt free to disclose their origins for the purposes of solidarity, or in some cases to gain access to benefits, which include preferential access to public housing, educational benefits and land funds, or to gain employment in a resource company, or the public sector, or in the myriad of Aboriginal organisations.

Approximately 410, 000 Australians identify as Aboriginal.  While Aboriginal identity is largely a reflection of the long period in which Aborigines had the Australian landmass to themselves, the impact of European settlement and the policies applied to Aborigines has had enormous impact.  The physical features, culture, circumstances, location, number, behaviour and beliefs of Aboriginal people have all changed significantly in the past 200 years.  The result is that there is a broad spectrum that constitutes Aboriginal society, from those fully integrated in a locational and cultural sense, to those mainly separate and discrete.

The location of Aboriginal settlement as shown in the map at Appendix 2:  The Spatial Distribution of Aborigines, indicates that most Aborigines live in the major centres of population.  Aborigines who live separately and in discrete communities are in the minority.  The map at Appendix 3:  Discrete Aboriginal Communities by Remoteness Areas shows a relatively large number of predominantly Aboriginal communities, almost all of which are located in the most remote regions of Australia.  In the 2001 census there were 1216 discrete Aboriginal communities with a total population of 108, 085.  Of these, 889 communities contained fewer than 50 persons and 327 more than 50 persons (145 Aboriginal communities reported a usual population of 200 or more). (6)  Indeed, since 1981, the Aboriginal population in remote areas of Australia has grown by 23 per cent. (7)  These data are proudly displayed as proof of the resurgence of Aboriginal society, but they also indicate that the discrete communities are a fragment of Aboriginal society.

Much of the growth in the Aboriginal population, from about 80,000 in the 1960s to 150,000 in the mid 1970s to over 400,000 in 2001 (8) came from the growth in self-identified persons.  The 1970s was a period of intense political activity among Aboriginal people in the struggle for equality.  The welcome acceptance of Aboriginal people as citizens induced more Aborigines to identify as Aboriginal.  In subsequent census periods, however, the numbers continued to climb to such an extent that questions were asked about the extent to which self-identified Aborigines belonged to Aboriginal society.

Indeed, the tide of people wishing to be identified as Aboriginal has caused an adverse reaction to such identification.  The accusation of "over-identification" has occurred in disputes over eligibility to vote for Aboriginal and Torres Strait Islander Commission elections (the "Aboriginal parliament").  A number of legal challenges have been mounted to keep "late-identifiers" off the roll and out of contention.  These challenges are a cruel irony given that the 1962 Commonwealth Electoral Act ensured Aborigines the right to vote regardless of state registration, and the 1967 Referendum ensured that Aborigines would be counted in the Census.  One such case produced the following definition of an Aboriginal person.

The less the degree of Aboriginal descent, the more important cultural circumstances become in determining whether a person is "Aboriginal".  A person with a small degree of Aboriginal descent who genuinely identifies as an Aboriginal and who has Aboriginal communal recognition as such would ... be described ... as an "Aboriginal person" ... But where a person has only a small degree of Aboriginal descent, either genuine self-identification as Aboriginal alone or Aboriginal communal recognition as such by itself may suffice. (9)

The three elements of identification;  descent, self-identification and communal recognition assist in the definition of an Aborigine, but as proof of descent sometimes relies on communal recognition it places some power in the hands of those who are inside the system, much like a political party or a club.  People of Aboriginal descent may be excluded under such a "sociological" definition.  It may intensify the political nature of the proof, particularly as Aboriginal separatism needs a significant, and preferably, a growing number of followers.

The community and acceptance tests of Aboriginality become all the more important when the extent of inter-marriage between Aborigines and the rest of the community is appreciated.  The 1986 Census (10) revealed that 46 per cent of Aboriginal couple families were unions between Aboriginal and non-Aboriginal partners.  By 2001, intermixed couples made up 69 per cent of couples with an Aboriginal member.  In the state capitals, 87 per cent of couples with an Aboriginal member were intermixed.  Outside the state capitals, 60 per cent of all couples with an Aboriginal member were intermixed.  Within the Northern Territory (other than Darwin) the great majority of families -- 86 per cent -- are purely Aboriginal.  But these couples amount to just 10 per cent of all mixed couples in Australia.  What one may regard as an "Aboriginal couple" are a very small minority of all couples with an Aboriginal member.  There are fewer than 50, 000 Aboriginal couples in the whole of Australia living outside of the capital cities, and many of these couples may be part-Aboriginal. (11)

Moreover, as it appears that Aboriginal women's fertility (in all communities) may be below replacement level, aside from the momentum for growth built into the youthful Aboriginal age structure, and any further increased self-identification, it is only the contribution made by Aboriginal births to non-Aboriginal women that will sustain Aboriginal population growth. (12)  Further, if the same rule applied in the identification of a child's heritage in a family with one Aboriginal parent as applies in a family with no Aboriginal parent, the so-called growth of Aboriginal society would be far less.  In other words, the source of the growth in Aboriginal society is not Aborigines, but is through marriage out of Aboriginal society.


THE POLICY CLIMATE

Part of this picture of a variegated Aboriginal society are the major legal and political developments affecting Aborigines (discussed in Appendix 1).  These can be viewed as a contest for the future of Aboriginal people.  The advocates of separatism have been particularly keen to paint a history of Aboriginal-European relations wholly vilifying European interests.  This view argues that European society set out to destroy Aboriginal society in a deliberate and premeditated way.

Indeed, there was a time when disease, greed, ignorance, prejudice, loss of land, bloodshed and rape helped to destroy Aboriginal society.  Unfortunately, the destruction continues, but the present culprits are more benign.  They are the rights of citizenship, marriage, new technology, the modern economy, the welfare state, democracy and education.  The benefits and responsibilities of the dominant society are the cause of the destruction of the last remnants of a once separate society.  The benign nature of the current "destroyers" has not, however, stopped Aboriginal activists and intellectuals from trying to "freshen" as well as reinterpret the impact of the old destroyers.  They do so because of their refusal to accept that Aborigines are faced with a difficult choice.  The choice is whether they will be integrated into full citizenship of the Australian community.  Full integration means that they will not have rights as a group.  It means that they cannot call on public resources to satisfy their political ambitions.  It means they cannot go beyond equality.

The contest between intellectuals over Aboriginal policy in the last 10 years has been especially bitter, most likely because expectations had been raised under a sympathetic Labor administration between 1983 and 1996, and dampened when a Liberal/National government took over.  The political infrastructure of Aboriginal society grew strong in the 1980s and early 1990s and the political climate was such that once given voice, most claims of wrong were eagerly rewarded with policy action and funds.  The belief in evil intent and the desire to ignore benign intent grew.  Between 1991 and 2000 there were -- in addition to the establishment of the Aboriginal and Torres Strait Island Commission (ATSIC) in 1989 and the significant change to the common law recognition of native title (Mabo) in 1992 -- three major episodes that added weight to the separatist agenda.

These were The Royal Commission into Aboriginal Deaths in Custody (1991), The Human Rights and Equal Opportunity Commission Report, Bringing Them Home (1997) (and its court sequel Cubillo), and The Hindmarsh Island Royal Commission (1997) (and its court sequel Chapman).  These events have stirred reaction, not only in the criticism of each report, but also in debunking the groundswell among orthodox historians of violence amounting to genocide on the part of settlers against Aborigines.

The Royal Commission into Aboriginal Deaths in Custody was established in 1987 in response to a growing public concern that Aboriginal deaths in custody were too common and that public explanations were too evasive to discount the possibility that foul play was a factor in many of them.  Between 1980 and 1989, ninety-nine Aborigines and Torres Strait Islander's died in the custody of prison, police or juvenile detention institutions.  Many members of the Aboriginal community assumed that many of the deaths would have been murder committed by officers of the state.

The Commission produced 110 volumes, totalling over 12,000 pages at a cost almost $30 million.  At the time it was the most expensive inquiry in Commonwealth history. (13)  For all this, the Commission stated, "The conclusions reached in this report will not accord with the expectations of those who anticipated that findings of foul play would be inevitable ... Commissioners did not find that the deaths were the product of deliberate violence or brutality by police or prison officers." (14)  It also found that while Aboriginal people were in custody overwhelmingly more frequently than the general community, it established that "Aboriginal people in custody do not die at a greater rate than non-Aboriginal people in custody." (15)  Indeed, the Commission noted that, at least for those Aborigines who had encountered the law, "the death rate of those Aboriginal people on non-custodial orders is approximately twice that of Aboriginal prisoners," (16) in other words, the risk of death might actually be greater outside custody.

The disturbing aspect of this Commission is that the Commissioner and the Commonwealth government were made aware of the primary conclusion, that Aboriginal people in custody do not die at a greater rate than non-Aboriginal people in custody, just six weeks into the inquiry. (17)  The response by the government was not to reveal this fact, but to set the Commissioner another, altogether different task.  The initial task was to inquire into the deaths and into "the conduct of coronial, police and other inquiries."  The new task declared "you are authorised to take account of social and cultural and legal factors which, in your judgment, appear to have a bearing on those deaths."

The Commission turned from a "super" coronial inquiry into a grand social science exercise into the causes of Aboriginal disadvantage.  Much of this exercise was not at all new to the policy community.  For example,

Of the ninety-nine, eighty-three were unemployed at the date of last detention;  they were uneducated ... only two had completed secondary level;  forty-three of them experienced childhood separation from their natural families through intervention by the State authorities, mission or other institutions;  forty-three had been charged with an offence at or before aged fifteen and seventy-four at or before aged nineteen;  forty-three had been taken into last custody directly for reasons related to alcohol and it can safely be said that overwhelmingly in the remaining cases the reasons for last custody was directly alcohol related. (18)

The Commission started on a narrow inquiry for which it was well qualified.  When its terms of reference expanded, it embarked on a study for which it was not well qualified.  It simply jumped from evidence of deaths to preventive social policy.  In so doing, it took up the policy fashion of self-determination in the hope that this would stem the flow of incarceration and deaths in custody.  Moreover, it made great claims of the impact of children's removal from their parents and this regard stimulated a second grand inquiry.

The National Inquiry into The Separation of Aboriginal and Torres Strait Islander Children from Their Families was conducted by the Human Rights and Equal Opportunity Commission and produced the report called Bringing Them Home.  It was commonly referred to as "The Stolen Generations" for reasons that will become clear.  It commenced in 1995 with a view to "trace the past laws, practices and policies which resulted in the separation of Aboriginal and Torres Strait Islander children from their families by compulsion, duress or undue influence, and the effects of those laws, practices and policies." (19)  It was a most serious topic and there was little doubt that many Aborigines had been removed from their families in earlier generations, in some cases with devastating results.  Unfortunately, the report was seriously flawed, it was as a colleague described, "one of the most intellectually and morally irresponsible reports to be presented to an Australian government in recent years." (20)

A crucial fallacy of the report was that it treated all separations as forced, including those that were voluntary or where there was a clear need for the sake of the welfare of the child to be taken.  Such all-encompassing definitions enabled the Inquiry to conclude that, "between one in three and one in ten Indigenous children were forcibly removed from their families and communities in the period from approximately 1910 until 1970. (21)  This, despite evidence that many removals were in the interests of the child and in many instances children were fostered with Aboriginal families, thus undermining the charge of assimilation as the purpose of removals. (22)  It also failed to give the context of removals, for example, the considerable pressure exerted on unmarried mothers Aboriginal and non-Aboriginal, to give up their children for adoption.  Further, the method of the Inquiry was seriously flawed, as it did not test any allegations, it simply accepted all stories as valid.

The most offensive aspect of the Inquiry was its finding that the forcible removal policy constituted "genocide" and "a crime against humanity" in the terms of the United Nations Convention on Genocide. (23)  In the view of the Commission, even assimilation, that is, an attempt to give people a choice to escape poor circumstances could be genocidal.  "The Commission maintained this view despite the fact that, post WWII, the International Labour Organisation considered that bringing indigenous people into the modern world to be 'desirable and just.' ILO Convention 107 on The Protection and Integration of Indigenous and other Tribal and Semi-Tribal populations suggests that at the end of the period of the so-called stolen generations in Australia, the most 'enlightened' international policy was assimilation." (24)

Take as an example this evidence before the Commission,In a letter to the West Australian Commissioner of Native Affairs in November 1943, Inspector Bisley of Port Hedland wrote, "I recommend that this child [4 years of age] be removed when she is old enough as she will be probably handed over to some aged blackfellow at an early age".  With respect to the same child, Inspector Neill in Broome wrote to the Commissioner in December 1944, "[t]here may perhaps be an objection to the children being removed from the Hospital without first returning to the Station from which they came as it means breaking faith with the mothers. (25)

Judged by contemporary standards this behaviour was appalling, but there was an interest in saving the child from a then widely known practice among tribal Aborigines of giving young females to older men. (26)  Nevertheless, the child was not reported to be in actual danger and the mother's permission for removal was not sought.  Unfortunately, the tendency to replay the past as if later policy had not adjusted to earlier excesses makes the problem of the need to enforce standards of care just as difficult today.  The contemporary difficulty is that the state is too reluctant to intervene in Aboriginal families for fear of allegations of racism being levelled.  An Aboriginal advocate for Aboriginal children and women recently stated, "Departments of community services don't want to create another stolen generation so we find a lot of Aboriginal children are left in a dangerous situation because some white or black worker doesn't want to be called racist." (27)

The sequel to the Stolen Generations report and its attempt to press a genocidal claim has been severely dented by the Federal Court of Australia.  The Aboriginal leadership ran a test case (28) on the Stolen Generations, which was comprehensively dismissed.  For future cases to succeed there will have to be proof that Commonwealth actions were not in the best interests of the child.  The question of judging a concept like "best interest", not by contemporary standards, but in the light of the policy and custom of the day was raised.  "[T]he events that I am being asked to judge and evaluate commenced in 1942 and finished in 1960.  Thus in 1999 I am asked to judge that which took place 39 to 57 years ago ... these are events that occurred in a different Australia, a society with different knowledge, and with different moral values and standards." (29)

The judge noted the Bringing Them Home Report did not inquire into separations that were effected with the consent of a child's family.  "Nor did they require a consideration of cases where a neglected, destitute, sick or orphaned child might have been removed without the consent of the child's parents or guardian."  HREOC and the Federal Government that set the terms of reference left out the crucial matter of the context within which children were removed.  The judge in this case did not make that mistake, he remarked that alcoholism and violence became larger social problems for part-aboriginal people after they achieved drinking rights, and that it often had welfare implications for their children.

The Hindmarsh Island Royal Commission was established in 1995 by the South Australian government to investigate the truth of Aboriginal claims that a bridge linking an island to the mainland at Goolwa in South Australia would desecrate a region of enormous significance to Ngarrindjeri women.  The proponents of "women's business" claimed that the bridge would undermine the reproductive powers of Ngarrindgjeri women and threaten the survival of their people.  The whole episode was reported as a challenge by white developers to the sacred, secret and ancient beliefs of Aboriginal women.  Other Ngarrindjeri women however, disputed the claim, and were labelled "dissident" for having the temerity to challenge Aboriginal belief.

The episode may well have been an exercise in the exploitation of Aboriginal belief and its potential to escape the normal rules of evidence and scrutiny, by antidevelopment interests.  It was clear from the evidence before the Commission that the Hindmarsh Island claims were of recent origin and were probably borrowed from other Aboriginal cultures.  The claims were the result of modern political efforts by Ngarrindjeri women to shape their identity.  "Such invented claims were almost inevitable because the legislation [Commonwealth heritage legislation was being used to block the bridge] was an open invitation for their uncritical acceptance ... When the claims about middens and burial grounds failed, the Ngarrindjeri were advised on how claims of a different nature could succeed under the legislation.  Some beliefs were then imported, adopted and packaged in a suitable manner to stop the bridge." (30)

The Royal Commission found that the whole of the women's business was a fabrication.  In particular, the claim that there was spiritual and cultural significance of the Hindmarsh and other islands and waters, which was crucial for the reproduction of the Ngarrindjeri people, was fabricated.  It found that the purpose of the fabrication was to obtain a declaration from the Commonwealth Minister for Aboriginal Affairs to prevent the construction of a bridge. (31)

A particularly cruel aspect of the fiasco was the treatment of the "dissident" Ngarrindjeri women by the media and various proponents of the women's business.  As one said, "the proponent women were claiming that the aerial view of Hindmarsh Island resembled a woman's reproductive organs.  This appalled me.  The idea is ludicrous.  How would our ancestors have known what an aerial view of Hindmarsh Island looked like when there were no aeroplanes in that era?  My friend Dorothy Wilson was present at a meeting on Hindmarsh Island when the aerial map was being discussed.  Men were also in attendance;  in fact, it was a man who pointed to the aerial map and said, "Doesn't that remind you of a woman's private parts?' " (32)

The bridge was eventually built, but an extraordinary sequel to the story occurred when the developers attempted to sue the Commonwealth Government Minister and his advisers who had sought to block the bridge.  Their action failed, in part, because the Federal court concluded that the evidence received was significantly different to that which was before the Royal Commission.  The court was not satisfied that the restricted women's knowledge was fabricated or that it was not part of genuine Aboriginal tradition. (33)

The judge accepted that a number of women were custodians of knowledge, but did not disprove that one woman was the sole recipient of the particular secret women's business.  He dismissed evidence that she alone had received the information from two elder women, one of who denied handing on any such information.  The extensive anthropological evidence of the Ngarrindjeri indicated an absence of any gender distinct beliefs of this nature. (34)  No other person knew of the particular business until the day that a special investigator for the Commonwealth Minister arrived to seek evidence that would assist the Minister in reaching a decision to ban the bridge (other women had some knowledge of women's' business at an earlier time).  The Minister was a colleague of mine, I have no doubt he was seeking such an outcome.  The court decision reopens the potential for the invention of belief in an oral tradition that cannot be tested.

In the last 3 to 4 years historian Keith Windschuttle has begun to investigate claims, made by a number of historians of the alleged massacres of Aborigines by European settlers.  These re-appraisals have been published in Quadrant magazine, and more recently in the first of a multiple volume work, The Fabrication of Aboriginal History, on the conflict between Aborigines and colonists in Tasmania.  The orthodoxy, supported by many historians in Australia, is that Aborigines were fighting a guerrilla war of resistance against an invader intent on destroying them, a genocidal invader.

In a forensic analysis of primary sources, which are extraordinarily well preserved and abundant in the case of Tasmania, Windschuttle concluded that much of the new orthodoxy was poorly founded, or seriously mistaken, or outright fabricated.  Windschuttle found that the British colonization of Australia was the least violent of all Europe's encounters with the New World.  It did not meet any organised resistance.  Conflict was sporadic rather than systematic, and the notion of frontier warfare was fictional.  The claim that the colonists committed genocide was unsupported by the historical evidence.

In the entire period from 1803 when the colonists arrived, to 1834, when all but one family of Aborigines had been removed to Flinders Island, the British were responsible for killing 118 of the original inhabitants -- less than 4 deaths a year.  During the so-called "Black War" from 1824 to 1831, the Aborigines killed 187 whites this compared to seventy-two blacks who died at white hands over the same period. (35)

An important part of Windschuttle's argument was to observe the uses to which the orthodox version of history had been put.  Aborigines who were "resistance fighters" created an image far more likely to engender sympathy for present claims for compensation, especially in the form of land.  Such a use is especially silly in Tasmania where the only descendents are from European sealers who co-habited with Aboriginal women, or from children of Aborigines adopted by European settlers in the earliest days.  An example of such silliness occurred in April this year when the Tasmanian government failed to celebrate the 200th anniversary of the establishment of Tasmania at Risdon Cove.  The Aboriginal flag now flies at Risdon Cove, where the British landed in April 1803.  The seventy-hectare site of the original British settlement was transferred to the descendents of the Tasmanian Aborigines in 1995 in recognition of land rights and as a gesture of reconciliation.

Windschuttle's analysis of the genealogy of the descendents is even more revealing than his analysis of the record of conflict.  He noted that the people who constitute the dominant faction of Aboriginal activists in Tasmania are descendents of white sealers (and Aboriginal women), some of whom murdered Aborigines.  The people who constitute the lesser faction are descendant from Aboriginal children who integrated with the whites very early.  Windschuttle concluded, "Hence, the current crop of political activists must have just as much Aboriginal blood on their hands as the descendents of the other white colonists could possibly have, five and six generations later.  In short, the Tasmanian Aboriginal community today embodies both the invaders and the invaded.  Such a dilemma renders the current political movement's appeal to historical injustice an absurdity.  The descendents of whites who killed Aborigines now want compensation intended for their Aboriginal victims." (36)


UNSYMPATHETIC POLICY "DESTROYS"
ABORIGINAL CULTURE BUT SAVES ABORIGINES

These public inquiries and the, until recently, unchallenged view of Aboriginal-settler relations has suited the political purposes of the separatists.  It has created an aura of untouchability on the part of Aboriginal culture, it has enhanced an intellectual fashion of reverence for anything indigenous, indeed it has created a cult that holds that primitive culture is not inferior to modern civilisation. (37)  It has also strengthened the hand of those who argue that the solution to the ills of Aboriginal people lie with the re-creation of a separate Aboriginal society.  The problem with this fashion and the political solutions it promotes is that it suffers from two massive contradictions.  It does not acknowledge that the benefit of modernism, which almost all Aborigines want, destroys the foundations of the old society, and that many Aborigines living under the separate regime are desperately unhappy.  Here are five examples of how modernism destroys Aboriginal culture.

First, within Aboriginal tradition children do not question any information of a ritual or religious nature.  They accept it as it is and will in turn teach it to their children exactly as it has been given to them.  The teaching process establishes strong and lifelong personal bonds.  The introduction of the European school system into Aboriginal communities has therefore obvious and significant incompatibilities (38) with traditional Aboriginal acquisition of knowledge.  It has been one of the major causes of the breakdown in traditional authority.  But can the state deny formal education to Aboriginal children?  Of course not, it is their right as citizens, it is their obligation for the benefits of citizenship.  It is also the only way they can gain a livelihood.

Second, in pre-literate societies most activities have a strong social emphasis.  The society puts a high value on personal relationships.  Reciprocal responsibilities within Aboriginal society are a critical feature of the social system.  "In northeast Arnhem Land, for example, the ... maternal uncle of a boy is the person who performs the operation at the initiation of the boy who in turn has an obligation thereafter to provide food for his maternal uncle.  The provision of food on a continuing basis by the nephew ... obliges the uncle to provide one of his daughters as a wife to his nephew." (39)  This type of reciprocal obligation is fundamental to the social fabric of Aboriginal society and stands in stark contrast to European society's strong emphasis on individual responsibilities.  While it may help to explain the difficult transition of Aboriginal people it is almost impossible to preserve traditional arrangements in a modern society.

Third, Aboriginal people do not exercise any choice in whether they will follow their religion.  There are no written rules or laws.  For pre-contact Aboriginal groups in Australia, their religion establishes all the rules and laws that govern behaviour in their society.  Where there is a breach of the law, senior Aboriginal people will discuss the appropriate punishments that may be imposed, including death.  Knowledge is synonymous with authority and authority is vested in the elders.  This system of gerontocracy, or rule by the old, was highly dependent on a structured system.  However, from the earliest encounters with Europeans, Aboriginal authority has been undermined overtly and covertly.  Young Aborigines simply do not abide by the old rules, they are not in awe of their elders.

Fourth, the Aboriginal Land Rights (Northern Territory) Act 1976 and the Aboriginal Councils and Associations Act provided a democratic system of election for Aboriginal people.  It placed power in the hands of young Aborigines and white bureaucrats beyond the practical control of the traditional system.  Although Council members were democratically elected, this process was largely incomprehensible to communities used to the rule of elders.  Generally, remote Aboriginal communities appointed young men to the Councils because the elders did not see that the activities of the Land Councils would have any substantial effect on Aboriginal life.  The elders believed that, as in Aboriginal law, each man would speak for his own country and that authority could not be devolved to any other person or body.

Similarly, when ATSIC was created in 1989, its democratic elections process was equally meaningless to the vast majority of Aboriginals living in remote communities. (40)  In some cases these "systems" of election have led to the establishment not of functioning democracies but of forms of Aboriginal oligarchy run by more educated and articulate Aborigines but not extending authority to observance of traditional Aboriginal social structures or Aboriginal law.

Fifth, when Aborigines achieved equal citizenship, including equal wages and rights to welfare, they were thrown out of work and onto unemployment benefits in regions where little work existed.  They also lost both the protection of and guidance of missionaries.  The small economic foothold in the economy -- from market gardens to cattle raising -- was soon abandoned.  Welfare rights have now extended to the third generation of recipients who have no reason to make a living.

In these many ways, the price of gaining the benefits of modernism has been the destruction of traditional society.  But the destruction has been benign.  The story does not support the script of invasion and resistance, it does not lead to the policy that Aborigines need to reconstruct their own society by maintaining some of the old ways.  Indeed, the policy of self-determination has had some devastating impacts on Aborigines.


SYMPATHETIC POLICY "SAVES" ABORIGINAL
CULTURE BUT DESTROYS ABORIGINES

Sympathetic policy is meant to save Aboriginal culture, it is buttressed by the intellectual climate that encourages the pursuit of a separatist agenda.  Land rights have been the essential element of the agenda, they are meant to underpin a revival of Aboriginal society.  Australia's investment in land rights has been significant, the return on that investment has been poor.

According to one estimate, Aboriginal land covers 16 per cent to 18 per cent of Australia. (41)  The Aboriginal estate consists of many small landholdings in south-eastern Australia and large tracts of land in the north and centre of the continent.  Aboriginal landholdings can be expected to increase in the next decade, with 130,000 square kilometres under claim with the Aboriginal Land Rights (Northern Territory) Act 1976, and large tracts of land under claim with the Native Title Act 1993.  The maps at Appendix 4:  Native Title Determinations and Appendix 5:  Native Title Claimant Applications show the extent of the successful and the potential land claims.  Rights under the ALR Act are more extensive than under the Native Title Act, (42) particularly with regard to mining royalties.

A further substantial program of land acquisition is the Indigenous Land Fund, established in 1994, to enable those Aborigines who were unlikely to gain access to native title land to purchase land.  The funds are also used to manage property.  The Fund will eventually be allocated $1.3 billion, so far it has been used to purchase 160 properties totalling more than 5 million hectares. (43)

The accumulation of Aboriginal lands has been a mixed blessing.  Eligibility to claim Native Title has been recently clarified, so that only those with continuity of native title practices will be eligible to claim.  A recent High Court case stated, "One of the uncontestable consequences of the change in sovereignty was that the only native title rights or interests in relation to land or waters which the new sovereign order recognised were those that existed at the time of change in sovereignty.  Although those rights survived the change in sovereignty, if new rights or interests were to arise, those new rights and interests must find their roots in the legal order of the new sovereign power." (44)  In effect, any break in the continuity of those practices, which constitute native title, will break the claim to native title land. (45)

Native title has caused a great deal of conflict among Aborigines in the competition to lay claim to disputed land.  For example, the chairman of the NSW Aboriginal Land Council said of native title, "It's been a disaster as far as we are concerned.  It is creating a lot of division among us.  In regard to the acquisition of land, quite frankly, we're better off buying it, or claiming vacant Crown land under our state legislation." (46)

Although land rights legislation has returned significant areas of land to inalienable title, all of it is communal title, which has proved difficult to commercialise. (47)  Native title is a mismatch of the old collective rights because the claimant groups are far removed from the basic kin structure of Aboriginal society.  While individual land rights are also generally far removed from the old collective rights, individual (or family) land rights have the enormous advantage of becoming a bridge to a successful transition to the modern economy.

Many Aborigines have been able to re-establish themselves in their country, but others have not.  Communities sometimes find it difficult to accept people who had spent so long away from "country" back into their social networks on a basis of equality with those who had not been removed.  People who had suffered the trauma of removal often encountered the double jeopardy of suspicion, mistrust or even blame upon their return. (48)

The separatists admit the incompatibilities of Aboriginal heritage and success in the modern economy.  For example, they admit that kin-based relations often limit individual and household economic incentive and accumulation.  They admit that customary laws, practices, and property rights are poorly adapted to the market, and that this creates governance problems and associated political instability when market opportunities, such as major resource developments, occur. (49)  They admit that welfare dependence will not decline, because there are structural and other impediments that will limit the overall growth of the market in the remote regions where Aboriginal people live on Aboriginal land.

This has not stopped them, however, from persisting in an unsustainable economic agenda.  For example, "there is a strong moral, political and economic argument for using a different nomenclature for ... state support.  It should be defined as regional fiscal subvention ... and targeted to situations where previously unrecognised productive activity has spin-off benefits to industries and regions beyond the Aboriginal estate." (50)  In other words, in the process of building a "different" society, any pretence of economic sustainability will be abandoned, and places that have become death traps for Aborigines will continue to be funded.

It has not stopped them from persisting in an anti-democratic political agenda.  For example, "Within the body of `hard law' represented by international treaty obligations accepted by Australia, there is sufficient basis for requiring governments to deal with Aboriginal peoples in making decisions which affect their territories and their cultures.  Those requirements should ... go beyond those standards in order properly to respect the intense cultural relationship that Aboriginal peoples have with their territories ... Furthermore, participation and cultural rights require that proper respect be paid by Governments to Aboriginal peoples' authority structures and their decision-making processes." (51)  In other words, a retreat from democracy.  Sillier still, as the old authority structures have already been destroyed and new leaders have taken over they conveniently use the excuse of ancient culture for their own purposes.

Undoubtedly, the real cost of land rights and policies that have preceded it have been on the health and other prospects for Aborigines living on their own land.  Aboriginal culture, much idealised, and much used and abused for political gain, is more a set of circumstances than a way of life.  The "broken sociopathic ruin of Aboriginal settlement culture" (52) as one anthropologist described it, is not a guide to life, it is just a description of life.  As a medical doctor tending the needs of remote Aborigines dying from all too common renal disease, recently stated,

What's happening with the senior Aboriginal men and women of the desert is clear.  Finally, they are understanding the extent of the passing of their traditional world and the critical problem of where exactly they fit in our wider society -- this is what underlies their health collapse. (53)

The figures presented in Appendix 6:  Hospital Separations for Key Conditions for Aborigines indicate the stark difference in the health of those Aborigines who live in the city and regional centres and those who live in remote areas.  The number of hospital separations for Aborigines is highest in rural and remote regions.  For all other people the number of separations is highest in capital cities.  Data on mortality rates by region (not shown here) show that for Aborigines health status generally declines with remoteness. (54)  This is not a reflection of lack of resources, it is a reflection of the way people live.

Care involving dialysis was the main reason for the hospitalisation of Aboriginal and Torres Strait Islander people.  Other common reasons were injuries and poisoning, respiratory diseases, digestive disorders and mental and behavioural disorders. (55)  Kidney disease is associated with diabetes, high blood pressure, infections, low birthweight and obesity, all of which are conditions found more commonly in the Aboriginal population.  There are a number of health risk factors associated with diabetes, including obesity, poor nutrition, lack of physical activity and unspecified genetic factors.  Data from national surveys in 1994 and 1995 show that Aboriginal people were more likely than non-Aboriginal people to smoke, consume alcohol at hazardous levels, be exposed to violence, and to be categorised as obese.

Only recently has data become available that allows the comparison of the condition of the two Aboriginal societies, the discrete and the integrating.  Disadvantage indicators derived from the 1996 Census of Population and Housing, the National Aboriginal and Torres Strait Islander Survey (NATSIS), and national perinatal data collected by the National Perinatal Statistics Unit of the Australian Institute of Health and Welfare.  These indicators represent levels of education, income, housing, mobility, family structure, employment in low-paying occupations, health and access to community services.  (See also the map of these indicators in Appendix 7:  Aboriginal Socioeconomic Disadvantage and the map of ATSIC regions Appendix 8:  ATSIC Regions).

Table 1:  Ranking of ATSIC Regions:  1996 Census + NATSIS + National Perinatal Data

Least
Disadvantaged
RankLess
Disadvantaged
RankMore
Disadvantaged
RankMost
Disadvantaged
Rank
Hobart1Wagga Wagga10Kalgoorlie19Kununurra28
Brisbane2Darwin11Townsville20Warburton29
Wangaratta3Roma12Mt. Isa21Katherine30
Queanbeyan4Coffs Harbour13Ceduna22Derby31
Adelaide5Geraldton14South Hedland23Cooktown32
Perth6Tamworth15Bourke24Jabiru33
Sydney7Narrogin16Torres Strait25Tennant Creek34
Rockhampton8Alice Springs17Broome26Nhulunbuy35
Ballarat9Cairns18Port Augusta27Aputula36

Source:  Commonwealth Grants Commission, 2001.  "Report on Experimental Indigenous Socioeconomic Disadvantage Indexes." Australian Bureau of Statistics Consultant's Report, 15.


The conclusions to be drawn from the data are obvious.  Those Aborigines who live in remote areas (often on land that was not taken by Europeans) are the least well-off Aborigines.  Those Aborigines who live in the less remote regions are better of on all measures of well-being.  This has little to do with remoteness per se;  many non-Aborigines live in remote locations with far better outcomes than Aborigines, and some Aborigines in non-remote areas fare badly.  The data indicates that the experiment in separatism tends to retard the personal development and the life chances of those Aborigines unfortunate enough to have been subject to the new orthodoxy.

The measures of Aboriginal health can be interpreted to enhance the argument for further funding health prevention and health services in areas of greatest need.  The difficulties of this are immense.  For example, the cost of employing a small health team for 12 months -- doctor, nurse and an Aboriginal health worker -- in Perth is estimated at $385, 000, whereas in the remote region of Warburton in the central east of West Australia the same team for the same period would cost $1.2million. (56)  Australia cannot spend its way out of the policy implications of separatism.

The systematic collapse of Aboriginal society shows up in any number of other statistics.  School absenteeism by Aborigines is about twice the level of other students.  The 1996 Census data indicates that Aboriginal people living in the very remote ATSIC regions of Warburton, Apatula and Tennant Creek are more than 5 times as likely to have never attended school than Aboriginals in general. (57)  In an interview with a teacher (58) at remote Aboriginal community of the Cape York Peninsula, it was reported that their violent and drunken families have sexually abused most children.  These children learn violent behaviour at a young age and practice it in the class room and have a great deal of power over their parents, in effect they "parent their parents".  A consequence is that parents lack the authority to compel their children to attend school.  No child who stayed on at high school in the community graduated.  Only those who boarded at a school in Cairns, a major centre on the east coast had succeeded.  The difficulty even in these cases was the child not wanting to return after holiday breaks and again the parents being powerless to stop them.


CONCLUSION

Australia has invested heavily in a political ideology to solve the problem of Aboriginal society.  It has especially invested in political infrastructure, like ATSIC and Land Councils and the more than 3,000 Aboriginal corporations (59) that have grown in the last thirty years.  Regardless, these organisations, this investment, has not been able to stop the major factors shaping Aboriginal identity, the marriage of Aboriginal people to non-Aboriginal people, their apparent acceptance of the modern world, their citizenship and the implied contract it provides to all citizens.

ATSIC has progressively lost its funding base because of its propensity to award funding for political patronage.  With the establishment of ATSIC Services, ATSIC Commissioners have now lost the ability to allocate funds.  These will be allocated on a needs basis and reported directly to the responsible Minister.  More programs are becoming mainstreamed and taken out of the hands of Aboriginal politicians, although delivery is often confined to Aboriginal-controlled service providers.

Aboriginal solidarity, in league with the welfare state, has resulted in a "destructive dependency" (60) on the state, it has left Aborigines who live under the new protective regime unable or unwilling to fend for themselves.  The state cannot buy solidarity, it cannot deliver identity.  Although separatists wish to move beyond dependence, their collectivist aspirations are the very means of their downfall.  Successful Aborigines are those who have escaped their circumstances.  The vehicle for the escape has often been government assistance, such as schooling, administered by mainstream services.  It has often involved migration from their lands and marriage to a non-Aborigine, in short, a willingness to let go of the old ways.  Those who wake up too late to this fact suffer the consequences.


APPENDICES (WEB-BASED VERSION ONLY)

Appendix 1a:  Major Developments Affecting Australian Aborigines [56k PDF]

Appendix 1b:  Major Legal Developments Affecting Australian Aborigines [40k PDF]

Appendix 2:  The Spatial Distribution of Aborigines, 1996 [220k PDF]

Appendix 3:  Discrete Aboriginal Communities by Remoteness Areas, 2001 [125k PDF]

Appendix 4:  Native Title Determinations, 2002 [140k PDF]

Appendix 5:  Native Title Claimant Applications, 2002 [180k PDF]

Appendix 6:  Hospital Separations for Key Conditions for Aborigines, NSW, 1996-97 [45k PDF]

Appendix 7:  Aboriginal Socioeconomic Disadvantage -- Census, NATSIS and Perinatal -- 1996 [55k PDF]



ENDNOTES

1.  The noun Aborigine and the adjective Aboriginal are used throughout, though others quoted in the text use indigene and indigenous, or black.

2.  Western Desert Pintubi people on the Western Australia/Northern Territory border.  Davis, S. 2001.  "From Gerontocracy to Democracy:  The Transition of Aboriginal Society in Australia."  An Address to the Bennelong Society Conference.  25 October, Sydney, 4. www.bennelong.org.au Accessed 15 May 2003.

3.  The material is sourced from Appendix 2b:  Major Legal Developments Affecting Aboriginal Australians.

4.  The history of church intervention in Aboriginal affairs often started with a concern for the plight of the "half-caste".  See Harris, J. 1998.  We Wish We'd Done More:  Ninety Years of Christian Missionary Society and Aboriginal Issues in North Australia.  Adelaide:  Open Book Publishers, especially chapter 6.

5.  In 2002-3 dollars, this does not account for expenditure available to Aborigines on the same basis as other citizens, or expenditure by state and local government.  http://www.minister.immi.gov.au/atsia/media/media02/r02018_fact2.htmAccessed 15 May 2003.

6.  Australian Bureau of Census and Statistics, 2001.  Housing and Infrastructure in Aboriginal and Torres Strait Islander Communities, Australia.  4710.0.

7.  Taylor, J. 2002.  "Population Futures in the Australian Desert, 2001-2016."  Discussion Paper, Centre for Aboriginal Economic Policy Research, The Australian National University, 231/2002, 5.

8.  Australian Bureau of Statisitics, 2002.  Year Book Australia 2002 Population Special Article -- Statistics on the Indigenous Peoples of Australia.  Accessed 25 May 2003.

9Desmond Gibbs V. Lyle Capewell, Australian Electoral Commission And Minister For Aboriginal And Islander Affairs No. Qg 10 Of 1994 Fed No. 25/95 Disputed Election Petition (1995) 128 Alr 577 (1995) 54 Fcr 503.  Accessed 12 May 2003.

10.  Taylor, J. 1997. "Policy Implications of Indigenous Population Change, 1991-1996."  People and Place, 5(4):  1.  Accessed 12 May 2003.

11.  Birrell, R and J. Hirst, 2002.  "Aboriginal Couples at the 2001 Census."  People and Place.  10(3):  27.

12.  Kinfu Y. and J. Taylor, 2002.  "Estimating the Components of Indigenous Population Change, 1996-2001."  Discussion Paper, Centre for Aboriginal Economic Policy Research, Australian National University, 240/2002, iv.

13.  Wood, R.J. 1993.  "Black Suffering White Guilt:  Aboriginal Disadvantage and the Royal Commission into Deaths in Custody."  Current Issues, Darling Heights, 7.

14.  Royal Commission into Aboriginal Deaths in Custody, 1991.  National Report, Volume 1.2.2 Accessed 9 May 2003.

15.  Deaths in Custody, Volume 1.3.1.

16.  Deaths in Custody, Volume 3, 60.

17.  As told to me by my Australian Labor Party colleague Senator Bob Collins of the Northern Territory.

18.  Deaths in Custody, Volume 1.2.17

19.  Human Rights and Equal Opportunities Commission, 1997.  "Bringing Them Home", Report of the National Inquiry into the Separation of Aboriginal and Torres Strait Islander Children from Their Families. Accessed 9 May 2003.

20.  Wood, R.J. 1998.  "Betraying the Victims:  The Stolen Generations' Report."  Backgrounder.  Darling Heights, 3.

21.  HREOC 1997.  Part 2, 10.

22.  In a 1994 survey, over 10% of persons aged 25 years and over reported being taken away from their natural family.  Of these, 32% were raised by non-Aboriginal or Torres Strait Islander adoptive or foster parents, 31% by missions, and 28% by orphanages or children's homes.  Year Book Australia 2002 Population Special Article -- A Profile of Australia's Indigenous People.  Australian Bureau of Statistics.  Accessed 25 May 2003.

23.  HREOC 1997.  Part 4.

24.  Wood, 1998, 11.

25.  HREOC, 1997, part 1.

26.  The practice continues in some parts of the Northern Territory.  A NT Supreme Court judge sentenced a 50-year-old man to one day's gaol for having sex with a 15-year-old promised wife.  On appeal, the sentence was extended to one month!

27.  Pamela Greer, quoted in The Weekend Australian, 3-4 May 2003, 8.

28Cubillo v Commonwealth [2000] FCA 1084 (11 August 2000) Accessed 9 May 2003.

29.  O'Loughlin J. in Cubillo quoting a fellow judge.

30.  Philip Jones, head of Anthropology South Australian Museum, quoted in Kenny, C. 1996.  It Would Be Nice If There Was Some Women's Business.  Sydney:  Duffy and Snellgrove, 172.

31.  Wood, R.J. 1996.  "The False Culture Syndrome:  The Howard Government and the Commonwealth Hindmarsh Inquiry."  Backgrounder, Darling Heights, 8(2), 2.

32.  Dulcie Wilson interview in 1996, "Telling the Truth."  Review 49(1), 38.

33Chapman v Luminis Pty Ltd (No 5) [2001] FCA 1106 (21 August 2001) paragraph 12.  Accessed 9 May 2003.

34.  Wood, 1996, 3.

35.  Windschuttle, K. 2002.  The Fabrication of Aboriginal History.  Sydney:  Macleay Press, 398.  The figure of 118 has since been amended to 120.

36.  Windschuttle, 2002.  436.

37.  Sandall, R. 2001.  The Culture Cult:  Designer Tribalism and Other Essays.  Boulder:  Westview, viii.

38.  Davis, 2001, 17.

39.  Davis, 2001, 17.

40.  However, the level of voting for ATSIC in remote areas is far greater than in urban areas, which is a reflection of the low dependence of urban Aborigines on Aboriginal politics.  See Johns, G. 2001.  "The Poverty of Aboriginal Self-Determination", in G. Johns ed. Waking Up To Dreamtime:  The Illusion of Aboriginal Self-Determination.  Singapore:  Media Masters, 31.

41.  Pollack, D. 2001.  "Indigenous Land in Australia:  A Quantitative Assessment of Indigenous Landholdings in 2000."  Research Paper, Centre for Aboriginal Economic Policy Research, Australian National University, 221, 40-41.

42.  Examples of native title rights are to:  hunt and fish on the land or in the waters;  take natural resources, including digging and using minerals and quarry materials such as flints, clays, soil, sand, gravel rock;  move about on the land or waters, or live on and erect dwellings on the land;  conduct ceremonies on the land.  Sutton, P. 2001.  "Kinds Of Rights In Country:  Recognising Customary Rights As Incidents Of Native Title."  Native Title Tribunal Occasional Papers Series, No. 2, 14.

43.  Indigenous Land Corporation. www.ils.gov.au Accessed 15 May 2003.

44Members of the Yorta Yorta Aboriginal Community v Victoria [2002] HCA 58 Accessed 12 May 2003, para 53.

45.  This does not mean for example that the means of hunting and fishing cannot be updated, only that the practises have continuity.

46.  Jopson, D. "Native Title 'A Disaster' for Land Rights in NSW."  The Sydney Morning Herald, 14 March 2002.

47.  John Elferink MLA "The Failure Of Collectivism In Northern Territory Property Law."  Menzies Research Centre Weekly Comment, 15 May 2003. www.mrcltd.org.au Accessed 15 May 2003.

48.  Cape York Land Council submission quoted in, HREOC, 1997, part 4, 39.

49.  Altman, J. 2001.  "Sustainable Development Options On Aboriginal Land:  The Hybrid Economy In The Twenty-First Century."  Research Papers.  Centre for Aboriginal Economic Policy Research, Australian National University, 226, 3.

50.  Altman, 2001, 8.

51.  Nettheim, G. 1998.  "Discussion Paper 2 -- Introduction International Standards."  Australian Research Council Collaborative Research Project:  Governance Structures For Indigenous Australians On And Off Native Title Lands.  Accessed 15 May 2003.

52.  Sandall, 2001, 17.

53.  Dr Paul Rivvaland a renal specialist based in the Northern Territory, The Weekend Australian, March 29-30 2003, 32.

54.  Commonwealth Grants Commission 2001.  Health Supporting Material, Chapter 1, 1.

55.  Australian Bureau of Statistics, 2001.  The Health and Welfare of Australia's Aboriginal and Torres Strait Islander Peoples.  4704.0

56.  Office of Aboriginal Health, Health Department of Western Australia, 2001.  Consultant's Report to the Commonwealth Grants Commission 2001, 298.

57.  Commonwealth Grants Commission Report, 2001, 195

58.  Conducted by the author, 18 May 2003.

59.  Office of the Registrar of Aboriginal Corporations, Annual Report, 2001-2002.

60.  Etherington, S. 2001.  "The Most Threatened People in Australia:  The Remote Aboriginal Minority."  In Waking Up To Dreamtime, 81.

Thursday, June 05, 2003

Don't Get Trapped by the Poverty Trap

An address to a Dialogue, The Age of Entitlement
Melbourne, 4 June 2003


FORTY years ago the United States welcomed its first Catholic President.  The President and his First Lady were young, rich and beautiful.  To many it seemed that Camelot had come to Washington.  He made inspiring speeches.  There were many that moved the hearts and minds of Americans.  A few moved hearts and minds around the globe.

Perhaps the most commonly quoted statement comes from his inaugural address:  "Ask not what your country can do for you, ask what you can do for your country".  It was and remains an ennobling thought.  It says to each and every citizen:  you have something to contribute, we need you, you are a valuable part of this nation.  The recognition that we all have something to give is important.  It's inclusive.  When we realise that we have something to contribute, that we are valued, we feel enriched.

Australians are great contributors.  Some have more than others to give, but we can all give something:  it might be a skill;  it might be a sympathetic ear, perhaps just a smile.  It may be money or it could be time.  Often that can be a precious thing, involving sacrifice by the one giving or providing a helping hand when it is needed most.

We have some very generous people in Australia.  Over 4 million people over the age of 18 do some voluntary work:  they plant trees, deliver magazines in hospitals, cook breakfasts at homeless shelters and read newspapers to the blind.  We have many in the private sector who do very good things for the community and seek little if any reward for doing so.

In my home state of Queensland, the Burns for Blinds company partnered with the Youth Opportunities Association to run highly successful personal leadership programmes.  These give disadvantaged youths the skills, confidence and motivation to break free from their downward cycle.  This resulted in retention rates between Year 10–12 increasing from 50 per cent to an inspiring 88 per cent between 2000 and 2002.  For their efforts, they were awarded with a Prime Minister's Community Business Partnership Award.

We want to revive the spirit embodied in the Kennedy statement, the spirit of giving and doing what you can.  That's why we are so supportive of the Prime Minister's Employer of the Year awards and also why we established the Prime Minister's Business Community Partnership and have increased support for volunteers.

We all admire the sentiment behind Kennedy's exhortation.  Our parents and grandparents put it into practice, but today however, many seem to believe that it applies only to a part of our lives;  that part where we volunteer, or where through our business, we engage in some philanthropic activity.  We believe we can do all that and separately have expectations of what government will do for us.


ENTITLEMENT AND WELFARE

In Australia, we have built extensive expectations of entitlement.  Entitlement certainly doesn't mean just welfare.  It's an expectation of what you are entitled to have.  It comes with the view that if you don't have it, government should be providing it.

We seem to have forgotten that when we expect something tangible from government we are expecting other Australians to pay for it.  While we seem happy to keep the profits private, we are keener and keener to socialise risk and loss.  Everywhere you turn, it seems we expect other taxpayers to foot the bill.  In Australia, we have a generous welfare system.  It is not a system whereby what you put in, or how long you've worked, makes a difference to your entitlement.  It is based on need.

People in the same circumstances are entitled to the same assistance.  Each of the benefits has a maximum rate, which tapers off as your income increases.  As you start to earn more, the support from the Government is reduced.  It's this aspect of our system that makes it so fair.  It's also this aspect of the system that makes it distinctively Australian.  And yet it's this aspect that causes some consternation.

If you earn more, you get less.  You are becoming independent.  You are supporting yourself and relying less on support from others.  As your income moves into the taxable area, in addition to paying tax, you continue to substitute dollars you have earned for dollars of support the community provided you with as welfare.  So when you hit the taxable area, you are paying tax and replacing the welfare support from the community with dollars you have earned yourself.

Let's be clear about this, however.  There are two things happening here.  Like everyone else, people moving from the dole to work, pay tax.  At the same time, they are replacing welfare dollars with dollars they earn themselves.  They are building independence.  These are two different things.  For example, in the Newstart payment, the old Dole, once you start earning over $62 per fortnight, 50 cents of welfare is taken away for every extra dollar you earn.  You keep 50 cents of the welfare even though you've earned an extra dollar.  Then when you're earning $142 a fortnight, 70 cents is withdrawn for every extra dollar you earn.  At $230 per fortnight, you will start to pay 17 cents in the dollar tax.


TAX RATES AND INCENTIVES

Note, you are better off working.  The amount of tax you pay in the dollar, plus the withdrawal rate in the dollar from any benefit you lose is called your Effective Marginal Tax Rate (EMTR).  It's a term that suits economists.  It indicates that you keep fewer cents in the dollar than someone who isn't getting welfare.  It misleads in that it suggests you are giving more of your hard-earned money to the tax man than anyone else is required to do.

But, you are giving exactly the same amount of your hard-earned money to the taxman as anyone else.  You are also saying to the community that supported you when you needed it, "Here, I can support myself now."  You're not returning your hard-earned money, you're taking less of the hard-earned taxpayer dollars and you are doing it because you have some hard-earned dollars of your own.

Only part of your EMTR is tax.  The rest is simply your replacing some of the money the community has been giving you as support with dollars you earn yourself.  This is a vital distinction.

Economic behaviour gurus will tell you that if people don't feel there is sufficient reward for effort, the effort will not be expended.  The argument is that people will be more likely to stay on welfare.

I am not arguing that EMTRs do not have a disincentive effect.  I know that economists model such things.  Economists' models are not facts and we should never mistake them for reality.  Those who choose not to work -- because they lose welfare dollars by earning their own -- have an entitlement attitude.

A person with this attitude says, "I am entitled to support even though I am not doing everything I can for myself."  In other words, other taxpayers should support me even when I am not doing everything I can to support myself.

Whatever the numbers, I am certain that many people don't dismiss work as an option just because they lose welfare payments when they earn some money for themselves.  For them this is an issue of right and wrong.  They are aware that welfare is somebody else's hard-earned money, not their own.  They make a conscious decision to work through the income zone where they are replacing taxpayer dollars with their own dollars because they can see what's on the other side.  They can get to the point where they are doing everything they can for themselves and can be independent.


OTHER COSTS AND BENEFITS

The cost-benefit analysis of working, if it is to be fair to individuals, must take into account much more than just the dollars.  There are tremendous benefits in having a job.  They may not fit into a formula (such as an EMTR) -- they may be intangible, but they are very real.

Think of the benefits that flow from increased social contact:  job satisfaction;  self-esteem;  the chance of advancement;  of knowing you're setting a good example to your kids;  and, of course, there's the longer term tangible advantage of having some superannuation.

More pragmatically, attempts to lower EMTRs, to soften the withdrawal rate of welfare, have a real downside.  They cost a lot more than most people imagine because they push up the income level at which people are still receiving welfare.  This, of course, would allow people to keep more welfare dollars than they can now as their income rises.  But it also makes payments to a whole new group of people.

If your welfare payment now cuts out completely at X thousand and suppose we introduced a softer taper, so that it didn't cut out until X plus 5,000 -- then everyone between X thousand and X plus 5,000 who are not now on welfare, would become entitled to some assistance.  A new pool of welfare beneficiaries would be born.

I recognise that there are families with very high EMTRs because they are getting multiple payments.  Sadly, some people are experiencing EMTRs over 100 cents for every extra dollar they earn.


PENSIONS AND WELFARE

Over the years, attitudes to the Age Pension have changed as more and more mainstream Australians have come to rely on the Age Pension for at least part of the income needed to maintain themselves in old age.  Currently, 82 per cent of people of Age Pension age receive an Age or Veterans Affairs pension.

Disposal and restructuring of assets and incomes in order to meet the means test are routine business for financial planners these days.  So much so, that we have had to introduce legislation to catch people hiding assets and income in trusts and companies in order to qualify for the pension.  By 2050, it is estimated that 75 per cent of people of pensionable age will receive an Age Pension.  Only one-third of Pensioners, however, will be on the full rate as a result of increased availability of the proceeds of superannuation.

When most people receive at least some age pension, can we still call it welfare?  I'm sure that most of the recipients do not consider themselves as "on welfare".  Rather, they say:  I've paid tax all my life;  this is just getting what I've paid for.

Strictly speaking this isn't true.  We don't have a contributory pension scheme.  Ten years' residence in Australia, regardless of employment or tax paid, entitles an Australian resident to a full Age Pension.  By international standards this is very generous.  To get a full UK pension you have contribute for 44 years.  If you haven't contributed, you are only able to get a lower basic level of income support.


WELFARE AND NEED

We need to rethink the whole philosophy of our welfare and support system.  It is needs-based, not contributory, and yet we often think of it as if it were contributory.  The fog that clouds our thinking on this matter is the idea of entitlement.

The dole recipient who may not have paid a cent's tax in his life feels he is giving up something of his own when asked to give up part of his dole when accepting a part-time job.  The person with some means who bends over backwards with lawyers and accountants to access some pension is doing the same.  So, too, the families who use their assets, skill and planning to get their kids on Youth Allowance.

Welfare is not charity -- Australians accept it as a right -- but our system is based on need, not contributions and we need to recognise the significance of that.  When you draw the dole, you are not drawing down on a social insurance fund into which you have made payments.  You are accepting assistance from other taxpayers while you are in need.

Our system is based on targeting assistance to where it is needed.  If you have the means, you are expected to use them.  If you can work, you are expected to look for a job.  Unless we understand this, we will end up with a social security system that is unsustainable.

We will always have a strong safety net.  It's there to save you from a nasty fall.  The risk for us is if we start to treat it as a comfortable couch.

Kennedy may have had his problems, he may have had his variation on the Lewinsky affair, but he was right.  We should ask not what we can get, but what we can give.

Wednesday, June 04, 2003

Your Money Blown

Its is unfortunate that the Red Cross has come unstuck with its Bali Appeal, for the cause is worthy and Red Cross is the best non-government organisation (NGO) in the foreign aid business.

Nonetheless, it does highlight serious problems in the sector and if people think that Red Cross is poorly run, you should take a close look at some of the other foreign aid NGOs in this sector that squander people's money.

It is tough to defend Red Cross's performance of the Bali Appeal.  The facts speak for themselves.  Of the $14.3 million generously given by Australians for the victims of Bali just 54 per cent (or $7.7 million) has to date gone directly to the victims.  $6.6 million or 46 per cent being either diverted to other projects not related to the Bali victims or held back for future use.

Understandably the public, the donors and the victims are deeply unhappy with the way the money has been spent.  The money was clearly given to help the victims, not to help the other causes of the Red Cross.  Given the nature of the victim injuries they expected the money allocated quickly and not to be held back in contingency funds.  If Australians were aware that so little of their money would actually get to the victims directly, it is doubtful whether anything like raised $14 million would have been raised.

The truth is that this is the way that foreign aid agencies work.  They see a crisis, be it in Iraq, Ethiopia or Bali, they launch an appeal, raise a pile of money with few strings attached and few question asked and spend it how they like.  And no one usually checks.

At least, the Red Cross spent the money raised in it Bali Appeal is on reasonable things such as ambulances, burn research and disaster preparedness and not on junkets, talkfests and political activism as is common in the foreign aid industry.

What really got people angry was the amount spent on administration.  The Red Cross claims to have spent just less than $400,000 on administration.  In reality this is figure at just 3.5 per cent of total funds raised is very low.  Indeed, it is unbelievably low.

The foreign aid industry's peak body, the Australian Council for Foreign and Overseas Aid (ACFOA) has set a standard for admin expense at 10 per cent of funds raised and has stated that most aid agencies exceed their guidelines with the average expenditure being closer to 17 per cent.  This figure is itself is debatable and may in fact be much higher.

What people don't realise is that Red Cross like CARE, Save the Children, World Vision, Oxfam resemble multinational big businesses than charities.  These are enormous organisations whose collective budget is in the billions of dollars and rely on large, highly-paid staffs.  Volunteers play a minor role in these organisation mainly related to fundraising.  As such, their fundraising and administrative overheads tend to be large.

The Red Cross Bali Appeal has highlighted several problems.  First, most people who give money to good causes are unaware of how their money is used.  They know the names of various organisations like Red Cross but not much about how they operate.

Second, NGOs are not used to accounting for the monies they receive from the public.  This partly explains the Red Cross' rather inept handling of the issue in the media.  It was only after the Bali victims and the media starting raising questions that the public got disclosure.

Third, people really have little control over the charities once they get their money.  Charities are in many ways "above the law".

Apart from the balance of the money being held by Red Cross being allocated immediately to the victims directly, the next best thing to happen out of the current controversy over the Bali Appeal would be to see that some proper laws and regulations are brought into place that protects people's generosity from being taken advantage of.


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Monday, June 02, 2003

God Bless America

What's So Great About America
by Dinesh D'Souza
(Penguin Books, 2002, 218 pages, US$15.00)

Dinesh D'Souza is an Indian boy made good in America, an immigrant success story.  He has a great deal to be grateful for, but, he argues, so does the rest of the world.  After the tragedy of September 11 2001, the US faces the classic dilemma of free peoples, "how to articulate the blessings of freedom ...  and how a society accustomed to the pleasures of private life can prevail against a more militaristic regime ...  whose fighters are cheerfully willing to endure death".

His plea to the US is to take seriously its enemies.  After Afghanistan and Iraq, he no longer has to worry on that score.  The US has its critics, such as the Europeans who worry about a unipolar world, and their place in it, and Islam, whose objections are moral.  Islam questions whether legitimate political authority comes from God or man, indeed, whether reason or revelation is a more reliable source of truth.  There can be no more fundamental objection to American civilisation.

In the face of such a determined critique, D'Souza directs his attention to America's internal enemies, the intellectual left and its primary vehicle, multiculturalism.  "Multiculturalists seek to fill white Americans with an overpowering sense of guilt and blame so that they accept responsibility for the sufferings of minorities in America and poor people in the rest of the world".  He wants to convince these people that there is something great and noble about America, and having convinced them, to join him in defence of modernity, against Islam.

The favoured vehicle of the multiculturalists is oppression theory -- ethnocentrism, colonialism, imperialism and racism.  It is a favourite theory of the multiculturalists because it allows them to account for "the disjunction between their dogma of cultural equality and the reality that cultures are far from equal".  He argues, of course, that there is nothing especially ethnocentric about the West;  any old tribe is ethnocentric, including and especially Islam.  The West, on the other hand, has gained immensely from the absorption of ideas and inventions of other cultures.  Its great achievement is the ability to transcend ethnocentrism.

If ethnocentrism is not Western, what about colonialism?  Dinesh reminds his readers that the British were the eighth or ninth colonial power to invade India, and certainly the most beneficial.  Although it may not have been their intention, the colonialists brought to India ideas and systems that immeasurably enriched the lives of the descendants of colonialism.  Slavery, in particular, is not unique to Western colonialism, but what is distinct to the West is its abolition!  As for the West growing rich and powerful by exploiting everyone else, the fact is that before British rule there were no rubber trees in Malaya, nor cocoa trees in West Africa, nor tea in India.  Spices did not make the West wealthy!

D'Souza relates a story of a Sri Lankan postgraduate student who attended one of his lectures on America.  The student:  "Am I supposed to tell my people that America is the best and that they are shit?"  D'Souza suggested to the student that he would not state it in those terms, but, clearly, much anti-Americanism among intellectuals from the Third World is a way to salvage pride.  Colonialism and imperialism are not the cause of the West's success;  they were a result of that success.

Dinesh suggests that science, democracy and capitalism are the reasons the West became the dominant civilisation in the modern era.  These three institutions are an immense challenge to the enemies of the West.  To beat the West, they need to take advantage of these features.  If they take advantage, they will no longer be non-Western.

D'Souza concludes with a flourish, "America is the greatest, freest, and most decent society in existence.  It is an oasis of goodness in a desert of cynicism and barbarism".  I think he is mistaken;  he is really referring to the West as a whole, or perhaps the Anglosphere.  We can forgive him his enthusiasm for the US, but those gifts of many cultures, nurtured and perfected by the West -- science, democracy and capitalism -- are not America's alone.  We are grateful, nonetheless, that the US is their champion.

Sunday, June 01, 2003

Opening Up Non-Profits

Good governance and accountability are, aside from making a profit, the dominant issues in most corporations today.  Governments are under similar pressures to be accountable and open.  The same pressures, however, are not evident in the other major sector of society -- the non-profit sector.

As the recent Red Cross Bali Appeal has illustrated, the sector is light on disclosure and prone to assuming that its "do-good" reputation means that people will just trust them.  And if the Red Cross has problems, you can bet they are much worse in other organisations.  Red Cross is, by all measures, one of the most open and best governed non-profits.

The non-profit sector has a number of fundamental characteristics that make good governance more difficult, but all the more important.

First, non-profits lack shareholders and the aggressive external stakeholders demanding transparency and efficiency.  They do not have stockbrokers and analysts combing through their books with an expert eye.  They have no watch-dog or regulatory body with oversight responsibility and most have no critics.  In short, no-one is looking -- and that can breed laxity, poor standards and abuse.

Second, non-profits often have archaic systems of governance.  Many organisations have evolved from small grass root groups to become large, complex businesses funded in the main with government contracts.  For example, Red Cross used to be a community based humanitarian organisation funded largely by its members.  It is now a huge business providing 70 different services across the country, with a paid staff of over 900, income of nearly $300 million, with 80 per cent of its funding coming from government contracts for the provision of blood bank, foreign aid and other services.  While the Red Cross has done much to improve its governance systems, particularly for its blood bank operations, it retains a cumbersome state based system which appears to have contributed to its slow response on the Bali Appeal.  Other organisations have made few changes and are still run like bowling clubs.

Third, the public is gullible and has false expectations when it comes to "non profit", and non-profits tend to prey on this for fundraising purposes.  For example, the public believes that all non-profits are volunteer organisations run on the smell of an oily rag.  In truth, most large non-profits, like the Red Cross, are run by well paid professionals with excellent facilities and maintain high administration costs because of their labour intensive operations.  When people, as happened in the Bali Appeal, learn the truth about the organisation's professional nature, they tend to overact, thereby putting at risk monies for good causes.

The solution lies not with a new oversight body.  The last thing we want is to wrap non-profits up with red tape.  Rather, the solution lies in inducing them to voluntarily disclose, on the internet, basic information such as fundrasing and administration costs, voting membership numbers, executive salaries and benefits, and details of the use of funds raised from the public.  This has been required of companies for decades and is common overseas.


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Sunday, May 18, 2003

Beautiful Set of Numbers

The 2003 Commonwealth Budget once again illustrates the benefits of growing economy and reform.  The Budget put in place settings of which most Treasurers can only dream -- a budget surplus with tax cuts and spending growing faster than inflation and population.  No other country in the developed work can match it this year and few have ever done so.

It is able to do this for one fundamental reason -- reform.  As the OECD stated in it latest survey of Australia:  "Dogged pursuit of structural reform across a very broad front and prudent economic policies firmly set in a medium-term framework, have combined to make Australia one of the best performing economies in the OECD and also notably resilient to shocks, both internal and external".  The fast growing, stable economy has in turn allowed Mr Costello to produce a beautiful set of numbers.

The challenge for the Governments is to avoid killing "the golden goose".  That is to keep tax and spending under control and to keep up the "dogged pursuit of structural reform".

The 2003 Budget addresses this challenges in number ways.

The Budget keeps a steady hand on spending and taxing.  Revenue and taxes are projected to decline as a share of the economy over the next four years.  The tax cuts are fully funded and the Treasurer has indicated that if revenue growth exceeds expectations, as it has in the past, further tax cuts are likely.

The Commonwealth Budget also advances reforms on a number of fronts including higher education, Medicare, industrial relations and disability services.

Reforms to disability services which have not received much notice to date are arguably the most important.  One of the most crucial issues confronting all governments in the western world is the aging of their populations.  While Australia is better off than most nations, it is confronting a serious deterioration in economic growth and growing budget deficits or higher taxes unless the issue is addressed.  A key to addressing the issue is to ensure that the babyboomers stay in the worker force longer and that younger people with disability join the work force.

In its 2002 Budget the Government proposed a number of measures designed to arrest the trend most noticeably among older men to using the disability pension as an early retirement package.  The problem lies not just with the growing cost of the pension but also with the fact that once on the pension older people seldom re-enter the workforce.  The reforms were blocked in the Senate;  however, the Government has doggedly reintroduced them in the 2003 Budget.  The Government has augmented these reforms with measures designed to help disabled people entire or re-enter the workforces.

The real barrier to reform however lies not with the Government or its Budget, but with the populist who control the Senate.  They have blocked virtually every reform proposed in the past and are likely to do the same to the reforms proposed in the latest Budget.

For the sake of our future, let's hope the Government considers an early election.


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Friday, May 16, 2003

Wind Power and Other Renewables

Submission to the Review of the Renewable Energy (Electricity) Act 2000


INTRODUCTION

ASKING THE QUESTIONS ON CLIMATE CONTROL

In relation to combating the supposed global warming trend, environmentalists are fond of saying, "If nuclear is the answer, we are asking the wrong question".  The answer favoured by the greenhouse warriors range from a draconian reduction of energy usage to adopting the Kyoto emission levels of "greenhouse gases", primarily carbon dioxide.

But implementing the Kyoto agreement can never be more than a very hesitant move to first base.  Full implementation of the Kyoto agreement would have only a trivial effect on the build-up of global CO2 levels.  It would delay any possible effects, adverse or otherwise, by only four years.  In other words it would put back a forecast 2ºC rise in global temperature from 2100 (under business-as-usual) to 2104.

The pain in achieving even the apparently modest Kyoto goal is now being seen across a great many nations.  In Australia's case, it involves limiting (carbon dioxide) emission increases to 8 per cent above the 1990 levels by 2010.  This is unattainable under the original definition of net emissions since given that our present output would be 23 per cent above the 1990 level.  Relatively recent revisions to the basis on which Australia counts its net emissions fortuitously puts us only a few percentage points above the Kyoto target.

Whether any measures to reduce greenhouse gas emissions are appropriate may be beyond the remit of the Review.  However, it is worth noting that, notwithstanding two centuries of global industrialisation (with an acceleration over the past fifty years) global climate change has been negligible.  NASA's satellite data, available since 1978, shows only a miniscule upward climate trend.  Over a longer period, data also shows little long term trend, though considerable perturbations over the shorter term.  The Appendix illustrates this for Adelaide.


AUSTRALIA'S REGULATORY RESPONSE

Australia's approach to Kyoto involves fostering four sorts of power:  wind;  certain small-scale hydro schemes;  biomass from waste;  and solar thermal and photovoltaics.  To promote the shift away from high-carbon fuels, Australia issues green energy certificates to these eligible sources of generation.  The certificates are readily tradeable and unused ones can be "banked" for future usage.

There are two schemes currently in operation:

  • the Mandatory Renewable Energy Target (MRET);  and
  • the voluntary "Green Power" sales

The MRET scheme requires 2 per cent of "additional" electricity by 2010 to come from the approved green sources.  This is estimated to be 9,500 GWhs (equivalent to about 1 per cent of the total electricity usage by 2010).  Direct users and retailers are allocated shares of this and the penalty for non-compliance is $40 per MWh (4 cents per kWh);  for many firms this is up to $57 per MWh in after-tax terms.  Moreover, firms may pay a premium on the $40 per MWh (although at present they can meet their needs at a discount) since non-compliant companies are likely to face unwelcome publicity.

The Green Power scheme is based on the consumer opting to pay a premium (commonly $1 per week) for an additional percentage of green power to come from certified green sources over and above those falling within the MRET obligations.

A recent audit (1) estimated that about 70 per cent of green energy used the MRET subsidy.


NOT ALL ELECTRICITY IS EQUAL

Though homogeneous, electricity has different values depending on the location and type of the power source.  Some sources are more useable and others involve additional costs.

Electricity that is generated close to markets is more valuable than that which relies on long distance transmission.  Transmission lines themselves are expensive and power is lost in the course of transmission.  The delivered value of the product itself is reduced further when the supply justifies only a low capacity transmission line with consequent low scale economies and increased average losses in the transport process.

Similarly, the mode of generation is important.  The most valuable power is the fast-start plant, such as hydro, which in Australia may be worth on average, say, $70 MWh because it can be immediately turned on and off to meet high price contingencies.  Other power is worth less.  In the eastern Australian states, flat contracts -- the staple fare -- offered by coal base-loaders are presently trading at a little under $40 per MWh.

All of this is crucial to the prospects of unconventional energy sources competing with conventional sources.


RENEWABLE ENERGY IN PERSPECTIVE

In the OECD area, thermal, hydro/geothermal and nuclear are respectively responsible for 57, 14 and 24 per cent of electricity generation.  The "other" category which includes wind is responsible for only 2.2 per cent of electricity.  The only countries with a share of "other" above five per cent are Denmark, with 17 per cent, most of which is wind, Finland (12 per cent), with mainly wood by-products and little wind, and the Netherlands, 5.9 per cent.  Chart 1 illustrates this

Chart 1:  OECD Energy Shares

The global share of renewables in electricity is illustrated in Chart 2 below.  This shows the "exotic" renewables share, mainly wind, falls within the one per cent "other" category.

Chart 2:  Global share of renewablesSource:  International Energy Agency, Renewables in Global Energy Supply, Nov 2002.

The European Union has set the pace on the development and installation of renewable sources of energy.  A Directive in 2001 specified a considerable increase in renewable energy which is slated to increase its market share from 14 per cent in 1997 to 22 per cent in 2010.  The following table illustrates the requirement set for each member state.

Table 1:  EU Renewable Energy Shares

RES-E
TWh 1997
RES-E
%1997
RSE-E
% 2010
Belgium0.861.16.0
Denmark3.218.729.0
Germany24.914.512.5
Greece3.948.620.1
Spain37.1519.929.4
France66.0015.021.0
Ireland0.843.613.2
Italy46.4616.025.0
Luxembourg0.142.15.7
Netherlands3.453.59.0
Austria39.0570.078.1
Portugal14.3038.539.0
Finland19.0324.731.5
Sweden72.0349.160.0
United Kingdom7.041.710.0
Community338.4113.9%22%

Some countries have adopted targets that exceed those of the Directive.  Germany, for example, has committed itself to a 22 per cent target, compared to its EU obligation of 12.5 per cent.

In announcing the Directive Olivier Deleuze, the Secretary responsible for Energy and Sustainable Development said, "In Bonn, Europe has saved the Kyoto Protocol.  Now, it has to give to itself the means to achieve it".  The EU is therefore to pursue its manifest destiny.  And it will do so without recruiting the politically incorrect nuclear option.  The Union defines renewable energy sources as all the non fossil ones, entailing, in alphabetical order, biogases, biomass, geothermal, hydro-power, landfill gas, sewage treatment plant gas, solar and wind.

Wind is the most prospective form of unconventional power that is available in any quantity.  Installations in Europe in 2002 were as follows

Table 2:  Installed wind capacity in the European Union, MW

CountryInstalled by end 2002
Austria139
Italy785
Belgium44
Luxembourg16
Denmark2,880
Netherlands688
Finland41
Portugal194
France145
Spain3,830
Germany12,001
Sweden328
Greece276
United Kingdom552
Ireland137
EU TOTAL23,056

SOURCE:  EWEA.


Notwithstanding wind's currently small contribution, there has been a rapid increase in new installations of wind generators across the world.  In all cases, this has been on the back of hefty subsidies.  These include offering a premium price (Germany, Spain, Italy) tax credits (US), tradeable credits (Italy, UK, Australia) and capital grants (Greece, Sweden).

Denmark has been the stand-out case with up to 13 per cent of its electricity coming from a total of over 6,000 wind turbines.  But this share of the total is likely to be pared back by a new government keen to address electricity costs which, as a result of existing energy policy, are three times the Australian level.  Moreover, the need for fast start follow-on capacity to offset the oscillations in availability of the wind power was reportedly taxing the abilities of the Nordpool system in spite of its considerable hydro capacity.

Denmark has created a major industry out of wind farming.  There are about 4,000 people employed in its turbine factories and about 10,000 jobs with suppliers.

Germany and the US are other major users, with Germany boasting 9,000 MW (1.5 per cent of total electricity-generating capacity) and the US with 2,500 MW.  The latter figure is 0.2 per cent of total capacity in the US, but wind actually provided only 0.13 per cent in terms of energy because of its low availability.

The issue of meeting the targets set for the exotic renewables is the cost.  Recent estimates from around the world put wind costs (in Australian cents/kWh) as follows:

Table 3:  Estimated Wind Power Costs (cents/kwh)

Germany15
Spain10.7
USA9.8
Italy16.9
Ireland6.2
UK old5.5
UK new8.6
Australia7.5

Source:  Sinclair Knight Metz


COSTS OF UNCONVENTIONAL LOW CARBON ENERGY SOURCES

The exotic energy supplies are far more expensive than conventional ones.  The general range of costs of generation in Australia are broadly as follows:

Table 4:  Australian East Coast Generation Costs

Generation TypeCost of Generation (cents/kWh)
Advanced brown coal3.3
Advanced black coal3.7
Conventional brown coal4.0
Gas4.0
Wind7.5-8.5
Biomass8.0-9.0
Solar10+

The Sustainable Energy Development Authority (SEDA) of NSW, in its submission to the state regulator, IPART, pulled together a compendium of decentralised options that have been proposed or implemented for meeting electricity demand in the state.

Table 5:  NSW Costs of Decentralised Power (cents/kWh)

forestry waste6.1
food and ag waste8.6
bagasse5.3
landfill gas5.3
sewage gas6.6
small hydro6.8
large hydro5.0
micro hydro10.2
wind11.9-33.0
solar voltaic73.5
solar hot water7.2
tidal20.5
geothermal, acquifier19.2
geothermal, hot rock15.6
solar thermal23.9
photovoltaic for remotes146.4

Source:  SEDA Feb 2002


The NSW wind projects are apparently more expensive than those generally used.

Only certain waste products, landfill and sewage gas, and some hydro schemes offer generation at costs that approach competitive levels.  All of these are relatively limited in their availability.

Solar hot water is the next cheapest and would be highly competitive if users could rely on it totally and thereby avoid the costs of wires bringing energy to them.  However, solar hot waters can only operate when the sun is shining.  This means that solar water heaters are capable of supplying only about half the hot water of a household (more in northern Australia).  At $3,000 plus, these installations cost over three times as much as conventional water heaters.  However, the cost to the householder is offset by half their energy being free.  Costs to users are also defrayed by subsidies.

One subsidy is a capital grant.  This is available for only for installations where there is no reticulated natural gas on hand.  Where natural gas is available, solar water heaters offer a negative greenhouse gas saving compared to gas water heaters.  This is due to the considerably greater carbon dioxide emissions from supplementary electricity (partly because the electricity is mainly generated by coal with a lower heat:carbon ratio than gas, but largely due to the loss in generation and transmission from electricity).  Where reticulated gas is not available, solar water heaters attract a (State) government subsidy of about $500.

However, the fact that these units have a negative saving effect for greenhouse purposes has not prevented them attracting a subsidy from the Commonwealth's Mandatory Renewable Energy Target (MRET).  MRET imposes a target on each electricity retailer for designated renewables.  This is controlled by tradeable Renewable Energy Certificates (RECs).  RECs, presently set to total 9,500 GWhs by 2010 in line with obligations accepted by the Commonwealth post Kyoto, are deemed for each new hot water installation.  The largest producer, Solahart has contracted to Energex those RECs it acquires on sale to the household.  To the household this is equivalent to a subsidy of about $1000.  The irony of providing a subsidy to promote increased greenhouse gas emissions is apparently lost on the authorities.

Notwithstanding the double whammy of subsidies for solar water heaters, these still prove to be uncompetitive sources of hot water compared with conventional water heaters, except in those remote areas where electricity is particularly expensive.


GROWTH IN WIND GENERATION IN AUSTRALIA

Apart from some specific situations in remote areas, none of the unconventional sources provide energy cost-competitively with the conventional sources, which is of course why they are unconventional.  At issue is whether they could become cost-effective with technology and scale-led economies.

According to work by Redding, (2) there are some 270 projects completed, underway or planned with eligibility for Renewable Energy Certificates.  These account for a little under 4,000 MW capacity -- (Australia's total current electricity capacity is about 42,000 MW) -- though only 338 MW had been commissioned as at the end of last year.  The categories of projects identified are:

Table 6:  Planned Projects Eligible for Renewable Energy Certificates

Number of
Projects
Capacity
(MW)
2010 Projected
annual generation
(GWH)
Wind7422578000
Hydro616813000
Sugar, biomass477633950
Landfill gas461871300
Municipal wastewater1426170
Solar2335590
Plantation/ crops11060
TOTAL270398917220

Based on these data, annual generation, if all proposed projects proceeded, is estimated at 17,220 GWh by 2010.  This is almost twice the 9,500 GWh level required by Commonwealth legislation, (the NSW requirement for SEDA-accredited Green Power is estimated to add a further 1000 GWh to this by 2010).  Clearly the foreshadowed level of development will not occur without subsidies and, therefore, a mandated lift in the required usage of new renewable sources of energy.

At the present time renewable energy supplies under MRET can be contracted at $35 per MWh. (i.e. under the $40 penalty ceiling).  With the average contract for "flat" energy costing $40/MWh, this implies current provision at around $75 per MWh.  Using an average cost of capital at 8.6 per cent, some Australian sites are estimated to be capable of producing electricity below $70 per MWh but these are mainly in Tasmania and isolated (and scenically valued) Victorian coastal sites.  Many of these sites are also fortuitously located close to major transmission lines.  However, the availability of these less costly sites is rapidly being depleted.


COSTS OF MOVING OUT OF CONVENTIONAL ENERGY

Considerable costs are involved in the supply of the additional 9,500 GWh of new renewable electricity required by the Commonwealth in Australia by 2010.  This level amounts to about 4 per cent of electricity by 2010, half the level of the EU and below the US (where the target is 6 per cent).  Wind will clearly be the major source of this "additional energy".

For Australia, with a penalty of $40 per MWh, (indexed for inflation) even the 2 per cent "additional energy" target would mean an annual tax on energy of up to $380 million, with the funds largely diverted to high-cost, mainly wind, solutions.  On top of this there would be an additional $40 million for the NSW measures and further sums representing the subsidies for installation of solar facilities.

With the committed and planned wind and other developments exhausting the lower cost opportunities, each additional 9500 GWh would require another $380 million per annum if capped at $40/MWh.  It is likely that a doubling of the requirement would fail to bring in a further 9,500 GWh at the $40 per MWh subsidy.  Ecogeneration, the green industry's magazine, is calling for the subsidy to apply to 33,800 GWh of additional renewable energy.  This level would mean and annual cost of $1352 million, equivalent to 14 per cent of electricity and an increased cost of electricity of over 15 per cent per annum.  It is, however, unlikely that such a take-up would occur at the $40/MWh subsidy.  The estimated costs would be doubled if, as proposed by the wind industry, the subsidy were to be doubled to $80/MWh.

These illustrative costs of present and potential commitments do not take into account the further costs that grid managers are required to incur to accommodate the low quality of wind and some other exotic renewable energy sources.  Such costs involve ensuring the availability of additional very fast-start generation which is necessary to combat the unreliable energy flows from the subsidised sources.


CONCLUDING COMMENTS

There is no doubt that the growth of wind generation has been rapid.

But the fact remains that wind supplies a trivial amount of the world's energy notwithstanding very substantial regulatory requirements and subsidies for its use.

There are a number of misconceptions that people will offer to support their case for wind power


1 The price is falling and in a few years it will be competitive as long as there is adequate demand to ensure scale economies

We are seeing improved efficiency in all sources of energy supply.  Combined cycle is up 50% on the efficiency of a few years ago.

The thermal efficiency of gas generators (the amount of input that comes out as electricity) is now 50% plus when it was once only 35%.  Brown and black coal generation has also improved their efficiencies.  The gap between these sources and new renewables is not noticeably narrowing.  And there are finite limits to the degree that wind efficiency can improve even in theory.  This suggests that all economies are squeezed out with a further 30% improvement in the plant's use of the wind


2 Wind needs a subsidy to achieve critical mass.

This is a variation of the "infant industry" argument that says if only we offer early support to industry X -- textiles, motor cars, chemicals and so on -- we will reap rich dividends in the future.  It is somewhat disappointing that the present Government included this as one of the justifications -- along with saving the world -- for the requirement that "2 per cent of additional energy" be supplied by exotic renewables.

The trouble is the notion fails both on deductive and empirical grounds.  Industries dependent on government largess stay dependent on it and develop in truncated forms that lack resilience.  Empirical evidence of this is that none of these happy outcomes occurred in the past.  None of the children matured and Australian consumers were lumbered with unnecessary costs, costs we only started to shuck off 20 years ago (and they are still with us to some degree in cars and clothing).


3 All other innovations have been subsidised by government.

Actually we are hard pressed to think of any.  Certainly not the telephone, the computer (IBM got nothing) the jet engine, the motor car, the tv.  Certainly not man-made fibres, the airplane.  The absence of examples of subsidised industries that have grown to maturity augurs ill for the hydrogen economy which may have been subjected to a $4.5 billion kiss of death in the latest Bush administration budget!

Some argue that the existing power stations needed subsidies to start with.  Not so.  Electricity was developed by private enterprise and gradually taken over by governments in a lot of countries like Australia.  It is now shifting back to the private sector.  And the biggest investment have been by private enterprise, e.g. US nuclear

Wind is intrinsically less efficient than a more concentrated form of solar energy, like coal or oil, or than nuclear energy.  It is akin to harnessing a hundred cats to achieve the same pulling power as a horse.  In theory it could be done but the logistics in terms of harnessing the cats to pull in the same direction would be colossal.  And those means of organising the cats themselves use up an awful amount of energy.

So it is with windmills.  We can get 150 2MW windmills developments to put out 300 MW, the same as a decent sized gas turbine.  But it is far more complex than making use of a single source, fossilised solar energy -- the decayed plants of previous eras.

Wind and other solar power has a long history of successfully providing power in isolated places for water pumping, telephones and so on.  But wind power outside of some isolated places to which it is expensive to take grid based power will remain dependent on government regulations and subsidies.



ATTACHMENT



ENDNOTES

1.  National Green Power Annual Audit, March 2002, SEDA, March 2002.

2.  Redding, G., (Sinclair, Knight Merz) Where is renewable energy going in Australia?, Address to ESAA 8th Renewable and Sustainable Power Conference, August 2002.

GM Foods:  How the Government is Failing Everyone

It is time for the Bracks Government to stop the duplicity on biotechnology.  It can either promote the safe use of the technology or placate the Luddites but not both.

The Government has spent millions on a biotechnology strategy "to building on the State's strength in biotechnology by encouraging and facilitating investment;  promoting careers in science, innovation and technology;  assisting in the commercialisation of research achievements;  and preparing a strategic direction for the industry"

It has done this because it recognises that biotechnology is a key transforming technology:  changing old industries, creating new ones and providing means to solve many of society's most intractable problems.  It also recognised that in this globalised world technological laggards are also economic laggards.

Last Tuesday, in the Budget, the Government reconfirmed its commitment to the technology with a $321 million up-dated strategy to amongst other things "position Victoria as a leading biotechnology cluster".

On Thursday, however it did the opposite by announcing a moratorium on the use of biotechnology crops.

This was done just as farmers were about to begin planting a variety of biotech canola -- produced by Bayer.  This variety has after extensive testing received the go-ahead from the Gene Technology Regulator and has the support of the majority of farmers.

The crop in question is hardly new or unknown.  It was developed in the 1980s.  It has been commercially grown overseas since 1996 and now makes-up over 50 per cent of world canola production.  The crop has produced no adverse impact on the environment, human or farmer income.  Indeed it has proven to be a boon to the environment and growers with less pesticide use, greater use of soil saving minimum-till techniques, higher yields and lower costs.

There is concern in the community about GM food, which is understandable.  It is a new and novel technology and to date the benefits accrue to farmers and the environment and not to consumer -- though that is set to change.

These concerns have been both flamed and exaggerated by the mother-of-all-scare campaigns.  NGOs, including Greenpeace and ACF, organic farmers and front groups for "health" food manufacturers have spent millions of dollars on highly professional campaign of fear, threat, politics and commercial pressure to stop the technology.  These groups are not the luddites of old -- they are wealthy, professional, influential and commercially motivated and funded.

The Government is however fully aware that the regulatory process it helped set-up and oversee is the most rigorous in the world;  that the critics have been given ample hearing;  that due process has been followed and that all concerns have been explored.

The Governments is aware of the extensive supplemental research showing the benefits of the crop to farmers and the environment and that it posses no market access problems or threatens the markets of other crops.

The Government is also aware that the regulator and, indeed Bayer, would tightly control and monitor the introduction of GM canola and that only about 1000 hectares of GM Canola would have been planted during the first year.  As such the introduction of GM Canola would have been another necessary, controlled step in the testing of the technology.

Instead of following due process, the evidence, the advice of experts and the interest of rural communities, the Government has decided follow to the luddites and in so doing has done great harm to Victoria biotechnology sector.

The clear message to investors is to avoid Victoria as the sovereign risk is too high.  Even if the product is brought to a commercial stage and passes the regulators, the Government is likely to ban the product in response to lobby by commercial competitors.

The message to researchers and entrepreneurs is to prepare to emigrate.  When the government grants run out or products get to the commercialisation stage, you will be forced to seek more enlighten locations such as Canada.

To students contemplating a career in biotechnology, the message is to look elsewhere.

The massage to regulators and scientist is to look to politics not science.  The massage to rural communities is not to try to get ahead, and to be satisfied with being a servant of visiting Melbournians.  The message to consumers is that the luddites are right;  biotechnology must be dangerous and the regulatory process flawed.  The message to taxpayers is that the Government is squandering $312 million on a biotechnology strategy, which it is actively undermining.

The Government has failed on its first real test on biotechnology.  While it may hope, that the damage will be limited by its claims to need more information on markets, this however will fool few as it already has two detailed report on markets.  It may also hope that the fall-out will be limited to the agriculture sector but again it is will disappointed.  The technology is generic as is its luddites opponents.  Food may be the main battle ground now, but the battle will spread to medicine and manufacturing.

What is need is leadership based on good decision making and science, not duplicity driven by the politics of fear.


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Tuesday, May 13, 2003

The Need for Leadership on Biotechnology

It is time for the Bracks Government to stop the duplicity on biotechnology.  It can either promote the safe use of the technology or placate the Luddites but not both.

The Government has spent millions on a biotechnology strategy "to building on the State's strength in biotechnology by encouraging and facilitating investment;  promoting careers in science, innovation and technology;  assisting in the commercialisation of research achievements;  and preparing a strategic direction for the industry"

It has done this because it recognises that biotechnology is a key transforming technology:  changing old industries, creating new ones and providing means to solve many of society's most intractable problems.  It also recognised that in this globalised world technological laggards are also economic laggards.

Last Tuesday, in the Budget, the Government reconfirmed its commitment to the technology with a $321 million up-dated strategy to amongst other things "position Victoria as a leading biotechnology cluster".

On Thursday, however it did the opposite by announcing a moratorium on the use of biotechnology crops.

This was done just as farmers were about to begin planting a variety of biotech canola -- produced by Bayer.  This variety has after extensive testing received the go-ahead from the Gene Technology Regulator and has the support of the majority of farmers.

The crop in question is hardly new or unknown.  It was developed in the 1980s.  It has been commercially grown overseas since 1996 and now makes-up over 50 per cent of world canola production.  The crop has produced no adverse impact on the environment, human or farmer income.  Indeed it has proven to be a boon to the environment and growers with less pesticide use, greater use of soil saving minimum-till techniques, higher yields and lower costs.

There is concern in the community about GM food, which is understandable.  It is a new and novel technology and to date the benefits accrue to farmers and the environment and not to consumer -- though that is set to change.

These concerns have been both flamed and exaggerated by the mother-of-all-scare campaigns.  NGOs, including Greenpeace and ACF, organic farmers and front groups for "health" food manufacturers have spent millions of dollars on highly professional campaign of fear, threat, politics and commercial pressure to stop the technology.  These groups are not the luddites of old -- they are wealthy, professional, influential and commercially motivated and funded.

The Government is however fully aware that the regulatory process it helped set-up and oversee is the most rigorous in the world;  that the critics have been given ample hearing;  that due process has been followed and that all concerns have been explored.

The Governments is aware of the extensive supplemental research showing the benefits of the crop to farmers and the environment and that it posses no market access problems or threatens the markets of other crops.

The Government is also aware that the regulator and, indeed Bayer, would tightly control and monitor the introduction of GM canola and that only about 1000 hectares of GM Canola would have been planted during the first year.  As such the introduction of GM Canola would have been another necessary, controlled step in the testing of the technology.

Instead of following due process, the evidence, the advice of experts and the interest of rural communities, the Government has decided follow to the luddites and in so doing has done great harm to Victoria biotechnology sector.

The clear message to investors is to avoid Victoria as the sovereign risk is too high.  Even if the product is brought to a commercial stage and passes the regulators, the Government is likely to ban the product in response to lobby by commercial competitors.

The message to researchers and entrepreneurs is to prepare to emigrate.  When the government grants run out or products get to the commercialisation stage, you will be forced to seek more enlighten locations such as Canada.

To students contemplating a career in biotechnology, the message is to look elsewhere.

The massage to regulators and scientist is to look to politics not science.  The massage to rural communities is not to try to get ahead, and to be satisfied with being a servant of visiting Melbournians.  The message to consumers is that the luddites are right;  biotechnology must be dangerous and the regulatory process flawed.  The message to taxpayers is that the Government is squandering $312 million on a biotechnology strategy, which it is actively undermining.

The Government has failed on its first real test on biotechnology.  While it may hope, that the damage will be limited by its claims to need more information on markets, this however will fool few as it already has two detailed report on markets.  It may also hope that the fall-out will be limited to the agriculture sector but again it is will disappointed.  The technology is generic as is its luddites opponents.  Food may be the main battle ground now, but the battle will spread to medicine and manufacturing.

What is need is leadership based on good decision making and science, not duplicity driven by the politics of fear.


ADVERTISEMENT

Saturday, May 10, 2003

Government Falls at Biggest Hurdle

The Budget has achieved most of it key targets.  A surplus is expectedthis years and in each of the next four years.  Debt levels, though higher, are within budget.  Importantly, overall spending has been restrained and not too far ahead of target.

The Government's overall approach is both sensible and laudable.  It has cut spending on advertising and consultants;  reduced administration cost through amalgamation of departments;  cut back some defunct programmes and now plans to reorient procurement decisions more towards achieving value for money and less for helping local industry.  The last initiative is expected to save $100 million per year.

It has also concentrated spending on the priority areas of health, education, disability services and public safety and on the delivery of services.

Despite these achievements, it has failed the big test.

The Government has done nothing to fix the haemorrhaging in the health system -- aside from throwing more money at it and promising to undertake another high level study.  Health spending is set to increase by a massive 9.6 per cent next year.

As a result of its failure to address health spending, the Government has been forced to raise taxes again, with tax hikes totalling $787 million over four years as announced in the Budget.  The problem is that state governments have very limited powers to tax as a result of the great tax shuffle that gave rise to the GST.  Moreover, the taxing powers they do have are narrowly based, volatile and inequitable.  The Gallop Government has resorted to increasing stamp duties on house sales and insurance bills -- both of which are already past their peak -- and to raising its tax take on water authorities (and therefore water consumers).

The Budget does highlight the need for reform of state-federal relations.  Cost shifting by the Commonwealth does undermine expenditure control in State hospitals.  While the GST did give the states' a new growth tax, under the existing sharing arrangements the growth in revenue goes to the non-growing states, such as Tasmania and South Australia and not to growing WA.

Nonetheless, the WA Government's woes in health are largely under its control.  The Budget does announce a new high level committee to address the problem.

It had better be successful, for there is little fat left elsewhere and the tax take in WA is already high.


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Thursday, May 08, 2003

Survey Pushes Overt Agendas:  The Good Reputation Index

The Good Reputation Guide of Australia's top 100 companies -- a rating of corporate social responsibility -- used to appear in the major newspapers until the company that developed the research tool, Reputation Measurement, recently re-named and re-launched it.

Under the new name RepuTex, Reputation Measurement now sells its wares to Australia's top corporations.  If the rating of corporate social responsibility in the RepuTex guide is anywhere near as bad as the Good Reputation Guide was, my advice to corporate Australia is, do not buy it.  Save yourself $25,000 -- the cost of accessing the detailed rating results -- and stick to your business.

The Good Reputation Index which supplies the data for the guide, is an exercise by Non-Government Organisations -- politely labelled "community stakeholders and experts" -- to impose minority political agendas on corporations.  The Index seeks to measure the ability of the top corporations to manage those activities "which directly contribute to their reputations as socially responsible organisations".  In fact, the Index does no such thing.  It begins with preferred definitions of goodness and expands these, for example by measuring financial performance, to capture the whole reputation of a corporation and labelling the result "social responsibility".

Westpac was ranked number one on the Index in 2002.  It rated well in every category.  By contrast, Flight Centre was ranked number one on financial performance, but 47 overall.  It was in the doldrums in every other category, including being ranked 99 on environment.  On the surface this seems very strange, given that Flight Centre manages shop front travel agencies!  At Flight Centre's AGM on 31 October 2002, the managing director announced a 37 per cent increase in profit on the previous year.  Was this achieved in some socially unacceptable way?

Not at all, but according to one executive, Flight Centre simply declined to fill out the survey.  The company was punished with zero ratings in most categories where objective evidence, like profits or worker or customer satisfaction, was not required.

Each NGO submits a separate questionnaire to reflect its interests.  Greenpeace actually awards a negative mark for not responding to a question.  Furthermore it states:  "If we are unable to verify your response, we will default your response to a 'don't know', which will be marked and downgraded accordingly."  In establishing the Index, Reputation Measurement argued that "[i]nvestors and consumers are increasingly making decisions based on longer-term issues linked to a company's capacity to contribute to a sustainable future for all."  In other words, the Reputation Index is an instrument for advancing a number of political agendas:  corporate social responsibility, stakeholder capitalism, and sustainability.

Five corporations -- Western Power, Sigma, Tattersall's, Mitsubishi, and Boral -- rose between 40 and 60 places in the ranking between 2001 and 2002.  Pretty impressive!  Four corporations -- Telstra, Fosters, Telecom NZ, and Goodman Fielder -- slid between 40 and 60 places.  Pretty dismal!  How did they achieve these feats?  I contacted each company was contacted for their answer and in each case was the same.  No-one changed the way they conducted their business.  Those that responded to the survey were rewarded with good marks, those that did not, were punished with zeros.

Measuring corporate performance is important.  But the relevance of information will depend on the relationship between the corporation and the inquirer.  The investor will want to know about returns and good financial management.  The worker will want to know about pay and conditions.  The supplier will want to know about contract details and timeliness of payment.  The consumer will want to know about products and services, their price, availability and quality, and guarantees sold with the product.  The local community will want to know about the impact on their amenity.  A myriad of government authorities will want to know about all of these things and more.  Governments will establish rules from time to time that will apply to all corporations which will include requirements to disclose certain information.

Beyond those requirements, and the many that arise from contractual obligations and in the course of building relations with any groups a corporation chooses, there is little point to the social responsibility-as-reputation measurement exercise.  No one changed their behaviour, no one much took any notice, but those corporations that did choose the method to enhance their competitive edge should ponder the climate of regulation they help encourage.  The message to CEOs is clear, do not be afraid, just say no to the "pretend" corporate regulators.


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Sunday, May 04, 2003

Pills Pop Questions

The Pan Pharmaceuticals recall crisis has a bright side -- it has lifted the lid on the alternative "medicine" industry.

Over the last decade, the alternative medicine industry has boomed with turnover expanding by 240 per cent to $2.3 billion in 2002.  Indeed it has become a direct substitute for modern medicine with two out of three Australians consuming alternative medicines on a regular basis and with consumers spending much more on alternative medicine than on real drugs.

Why are people seeking an alternative to what is arguably the most successful technology in human history, that is, modern medicine?  Clearly a number of factors contribute to the industry's success, but a regulatory free ride is the key.

The pharmaceutical industry is one of the most tightly regulated sectors in the economy.  Even if a drug has been approved by reputable overseas regulators, before it can be sold in Australia it must satisfy the Therapeutics Goods Administration (TGA).  It must prove to our home grown regulators that it is safe, that it is manufactured in a safe and reliable manner, that its contents are what the manufacturer claims and that it does what it say it does.  Drugs deemed to be dangerous also face restrictions on place of sale, access, the need for on-going testing and the need to keep records of use.

These regulations have generally been very successful in ensuring safety and efficacy of medicine and have engendered a high degree of confidence amongst consumers.  They also impose heavy costs on drug companies.

The real scandal is that alternative medicines get the imprimatur of the TGA.  While alternative medicines are required to prove that they are not poisonous, that there contents are accurate and that they are manufactured safely (issues brought into question by Pan Pharmaceuticals), they are not required to prove their effectiveness.  The TGA does not even need to be notified of the medicinal claims of alternative medicines prior to release on the Australian market.

The special treatment provides a huge cost advantage relative to real medicines and a huge marketing advantage.  The alternative industry has exploited this to the hilt with claims of elixirs for every possible aliment.

The fault does not lie solely with TGA processes.  Indeed, it largely rests with the ACCC, which has conspicuously failed to enforce truth-in-advertisement laws in this industry.

The cost of alternative medicine quackery is high.  While the products are unlikely to cause any harm (as they are mainly common food additives), on the evidence few cure anything.  They also lure potentially sick people away from real medicine and drag up to $2.3 billion (equivalent to 50 per cent of the cost of the Pharmaceutical Benefit Scheme) away from real health care.

The solutions do not lie in banning these products or forcing them to pass the same efficacy test as modern drugs -- this would be a costly waste of largely taxpayer fund.  Rather, the solution lies with the TGA following the lead of the US Food and Drug Administration and treating them not as a medicine but as a food product and in requiring the ACCC to enforce truth and advertising laws.


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