Policy Volume 28 No. 2 • Winter 2012 ideas • debate • opinion

CONTENTS

FEATURES: FEATURES The State of Australian Federalism 24 is There a Regional ? Paul Collits 3 Now is the Spring of Our Mild Content Regional policy in Australia requires clear principles based on a proper understanding Greg Craven of the nature of the regions. Australian federalism has survived to be a potent constitutional and political force. 30 On Tolerance Frank Furedi 8 First Principles Frank Furedi argues that the meaning of tolerance Robert Carling has changed in the modern world, and not for Robert Carling provides an overview the better. of how federalism in Australia works. 38 is State Intervention in the Economy Inevitable? 14 The Case for Federalism Peter Boettke James Allan Ongoing economic woes demand drastic Federalism creates a more competitive reduction in state intervention into free market. and prosperous society. 43 Australia’s Metropolises at the Crossroads 18 Judicial Betrayal Oliver Marc Hartwich Augusto Zimmermann How do Sydney and Melbourne The High Court has undermined Australia’s fit in a world of megacities? federalism and the framers’ wish for a balanced by allowing the Commonwealth to expand its powers.

22 Federation 2100 Interview John Hirst The states will survive in a largely 46 The Middle East and Geopolitics homogenous Australia. Lydia Khalil discusses the Middle East in a period of rapid and substantial change 23 Senate Committee on Federalism with Sergei DeSilva-Ranasinghe. John Uhr Parliament needs to monitor the state of the federation in Australia.

(contents continued overleaf) Policy staff Editor-in-Chief & Publisher: Greg Lindsay Editor: Greg Melleuish Assistant Editor: Mangai Pitchai Design & Production: Ryan Acosta Subscriptions: Kerri Evans and Alicia Kinsey

Policy Magazine CONTENTS Ph: +61 2 9438 4377 • Fax: +61 2 9439 7310 Email: [email protected] ISSN: 1032 6634 Please address all advertising enquiries and Review Essays correspondence to: The Editor 48 The Fog on the Hill: Policy How NSW Labor Lost its Way PO Box 92 St Leonards NSW 1590 Australia By Frank Sartor

© 2012 The Centre for Independent Studies Limited looking for the Light on the Hill: Level 4, 38 Oxley Street, St Leonards, NSW Modern Labor’s Challenges ABN 15 001 495 012 By Troy Bramston Cover images: © Sbotas | Dreamstime.com Reviewed by Gary Johns Printed by Ligare Pty Ltd Distributed by Gordon & Gotch Australia and Gordon & Gotch New Zealand. 52 Tomorrow’s Federation: The Editor welcomes unsolicited submissions. All full-length Reforming Paul Kildea, articles (other than reproductions) are subject to a refereeing process. Permission to reproduce articles may be given upon Andrew Lynch, and George Williams (eds.) application to the Editor. Reviewed by Michelle Evans Editorial Advisory Council Professor James Allan, Professor Ray Ball, 56 What’s Wrong With Benevolence: Professor Jeff Bennett, Professor Geoffrey Brennan, Happiness, Private Property, and the Limits Professor Lauchlan Chipman, Professor Kenneth Clements, Professor Sinclair Davidson, Professor of Enlightenment David Emanuel, Professor Ian Harper, Professor By David Stove Helen Hughes, Professor Wolfgang Kasper, Professor Chandran Kukathas, Professor Tony Makin, Professor Reviewed by Barry Maley Kenneth Minogue, Professor R.R. Officer, Professor Suri Ratnapala, Professor David Robertson, Professor Razeen Sally, Professor Steven Schwartz, Professor Judith Sloan, Professor Peter Swan, Professor Geoffrey de Q. Walker. Book Reviews

Policy is a quarterly publication of The Centre for Independent Studies in Australia and New Zealand. Views 60 Coming Apart: expressed are those of the authors and do not necessarily reflect The State of White America, 1960–2010 the views of the Centre’s staff, advisers, directors, or officers. By Charles Murray

Policy is a publication of Reviewed by Peter Kurti The Centre For Independent Studies. 61 The Righteous Mind: Why Good People are Divided by Politics and Religion The Centre for Independent Studies (CIS) is Australia’s leading independent public policy institute. Its major By Jonathon Haidt concern is with the principles and institutions underlying a free and open society. Reviewed by Peter Saunders CIS believes in: • individual liberty and choice, including freedoms of 63 Keynes Hayek: association, religion, speech, and the right to property The Clash that Defined Modern Economics • an economy based on free markets • democratic government and the rule of law By Nicholas Wapshott • the importance of an autonomous and free civil society Reviewed by Sinclair Davidson CIS promotes its vision by fostering public debate about major social, constitutional, and economic issues. To remain independent of government influence on its activities and direction, the Centre relies on untied contributions from individuals, companies, and charitable trusts, and income from the sale of its publications.

For information on CIS membership, Policy subscriptions, and other CIS publications and events, please visit our website at www.cis.org.au or: ph: +61 2 9438 4377 • fax: +61 2 9439 7310 email: [email protected] The State of Australian Federalism

NOW IS THE SPRING OF OUR MILD CONTENT Greg Craven describes the survival of Australian federalism as a potent constitutional and political force

ncredibly for a phenomenon that has robust industrial relations approach embodied in scarcely dared speak its name for the last half WorkChoices marks 1 to 446, forced Australia’s century, Australian federalism is undergoing left-leaning intellectual establishment—including a brief moment, if not of sunshine, then of its Labor components—to contemplate almost Ifaintly lightened gloom. Perhaps for the first time for the first time the joys of divided power. An since the early 1960s, it almost is respectable to omni-competent Commonwealth apparently describe yourself as a ‘federalist,’ provided you are might be a good thing if directed by Gough not too strident about it. Whitlam or Paul Keating, but not by John This compares starkly to decades of café Howard or Peter Costello. Astonishingly, discussions, constitutional law tutes, and Carlton in the first decade of the twenty-first century, wine sippings, where to confess to even the a remarkable number of Labor politicians and faintest defence of ‘states’ rights’ was instant Labor-leaning thinkers began shyly courting social, and quite possibly career, death. Federalism a mild form of federalism, feeling their way routinely was disparaged as a historical accident, towards its deployment not as a mechanism of foisted upon the country by dead nineteenth- states’ rights but as a restraint upon power. century naifs. It obstructed every progressive This tendency was reinforced by the attitude project, mostly of the Left but occasionally of , Howards’ Labor successor. of the Right. It protected divisive hicks from Rudd, who had a substantial background in from profound schemes inter-governmental relations in , designed purely for their own enlightenment. As was significantly inclined to see federalism as a form of government, it was as outdated as the a possible vehicle for change rather than as Ancien Régime, and centred on the postulated complicating the Commonwealth agenda. existence of distinct states that were in fact as He announced ambitious changes in health and alike as unpleasant green caterpillars in an empty water policy that relied heavily on cooperation peapod. In short, Australian federalism was so between the Commonwealth and the states antiquated, counter-productive, and deeply through agencies such as the Council of uncool that no serious thinker supported it. That federalism now is even a serious subject of discussion in Australia owes much to the Greg Craven is Vice Chancellor of the efforts of former Prime Minister John Howard, one of its most dedicated opponents. Howard’s Australian Catholic University, Deputy disdain for the limits imposed upon central power Chairman, Council of Australian by the federal Constitution, coupled with his Governments (COAG) Reform Council, determination that this power, once liberated, was and a constitutional lawyer. to be used for such conservative projects as the

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Australian Governments (COAG). For a a dying constitutionalism in need of palliative substantial portion of the Rudd Camelot, care, which is a far cry from the denunciation of federalism almost became synonymous with federalism over most of Australia’s history. potential and possibility, rather than obstruction That denunciation proceeded upon a more or and disappointment. Hopes faded with a reversal less wilful misunderstanding of the twin pillars towards more coercive approaches towards of federalism that stood firmly in the minds of the end of his reign, prompted partly by the Australia’s founding fathers. The ‘subsidiarity exigencies of the global financial crisis and axis’ posits that in a country especially the size partly by bureaucratic habit in such contexts as of Australia, with its consequent economic, education. But hope is not an experience easily geographical, climatic and other diversities, forgotten. Nor were all the cooperative gains of decisions should be made as close to the people Rudd transitory or dismantled. affected by them. In Australia, this quite reasonable philosophy of governmental system, Despite its widespread dismissal with its strong roots in both European and American political theory, was rendered as a blind by intellectual, cultural and political commitment to non-existent regional diversity elites, Australian federalism clung regardless of the national imperatives of the day. grimly to certain headlands of The second great rationale of the founders— legitimacy and plausibility. the ‘balance axis’—fared even worse at the hands of subsequent federal detractors. The idea as understood by the founders, who were Paradoxically, the comparative waning of deeply versed in both British conservative and Rudd’s program of federal cooperation, and the American constitutional theory, proceeded on Commonwealth resuming a more traditional the not entirely unknown premise that power directive approach, has underscored the survival is dangerous, and that absolute power is very, of Australian federalism as a potent constitutional very dangerous. It therefore makes sense to and political force, after many years of being design a constitutional system in which power is regarded as having all the resilience of a wilted balanced, with federalism achieving this object lettuce. Perhaps for the first time in living within a geographical framework to much the memory, Canberra is being confronted by the same ends as the separation of powers operates reality that there are many areas—education, upon an analytical terrain of types of powers. health and water—where it simply cannot This line of reasoning was less pooh-poohed by unilaterally achieve its objectives at an acceptable detractors as written out of history. Doubtless political or real cost without the grudging to their own posthumous surprise, the founders cooperation of the states. Like the British Celts were dismissed as far too rusticated, colonial and facing the invading Saxons, states have been Anglo-centric to have ever been motivated by forced to retreat so far into the rocky heartland such new-fangled Yankee ideologies. Edmund of their few remaining powers that overcoming Burke would have smiled. them is highly problematic. This is less because Despite its widespread dismissal by of their inherent strength and more the result of intellectual, cultural and political elites, the unpromising policy terrain. With premiers Australian federalism clung grimly to certain having nowhere else to run, the states could look headlands of legitimacy and plausibility. Most feistier and more determined, if also a good deal fundamentally, it remained, in A.V. Dicey’s more desperate, than ever before. words, ‘The Law of the Constitution.’ For all This new dawn of Australian federalism is their self-certitude, Canberra’s reformers could hardly a golden one, but there are welcome signs rarely persuade Australians to modify the federal of progress. Federalism is being spoken of for principle under the distressingly federal (and good or ill as a subsisting reality, rather than as even more distressingly egalitarian) referendum

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procedures ordained by section 128. Less direct structure, not the glories of Westminster means, such as sympathetic high courts and parliamentary democracy. We need more such fiscal arm-twisting, were needed. safeguards as second- and third-generation Even less conveniently for federal doomsayers, Canberrans—and graduates of the Australian Australia’s divided Constitution on the whole has National University—tighten their grip proven remarkably effective by world standards. on the senior ranks of the Commonwealth It is undeniably inconvenient that a Constitution policy bureaucracy. allegedly programmed to produce policy paralysis Of course, our federalism has its flaws, many and crippling regional strife—and unable to which have undermined the institution itself. grapple with changing circumstances—has in The founders’ reliance on the tripartite defences fact presided over one of the world’s most stable of a States-House Senate, limited central powers, and prosperous democracies. Moreover, it has and an independent High Court collapsed outperformed the most splendidly centralised when the Senate operated along party lines and states in economic terms in the world’s worst routinely endorsed laws that undermined financial crisis of the last 70 years. Either the federation and cheerfully upheld by High Court fatal effects of Australian federalism have been appointees of the Commonwealth Executive. exaggerated, or we have developed sustained Of course, this is easy to predict with hindsight. coping mechanisms. In the pre-party days of the 1890s, Deakin was The original axes of the Australian the exception in predicting the dominance of Constitution—subsidiarity and balance—have the Commonwealth. stood up remarkably well to the tests of time. Notwithstanding the invention of the aeroplane, television, personal computers and Twitter, Federalism has operated as a Western Australia still is a very long way from force for restraint and moderation Sydney; its economy is fundamentally different; against the hasty and excessive its health and education systems have to cope use of federal power. with challenges of distance unknown between Fitzroy and Daylesford; the extent of its responsibilities to Indigenous peoples is Rather less disputable is the proposition immense and particular; and its population no that the federal financial arrangements of the more wants to become part of an undifferentiated new Constitution would end in disaster for the herd of Australians than it would welcome states. The founders were great statesmen and annexation by Cuba. excellent constitutionalists, but by and large, In the same way, the notion of balance of dreadful accountants. With an enduring financial powers has turned out to be a rather underrated settlement proving beyond them, they left constitutional commodity. In reality, the transitional arrangements in place. Inevitably, detractors of Howard’s WorkChoices and its the Commonwealth’s superior taxing powers attendant battery of constitutional artillery should and the wider centralising developments reduced not have been surprised by their own insights. the states to financial subservience long before Throughout Australia’s history, with all of its they realised they had foregone most of their inconveniences and annoyances, federalism has constitutional independence. operated as a force for restraint and moderation One critical but understated outcome of against the hasty and excessive use of federal this process is that not only do the oxygen- power. Probably the two biggest and worst starved states compare unimpressively with their policy ideas in Australia’s nationhood—Menzies’ former selves, but their decline is readily and proscription of the Communist Party and painfully apparent—not just to the citizenry at Chifley’s attempted nationalisation of the large but also to themselves. In terms of popular banks—were frustrated by Australia’s federal perception, this means the substantive problems

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of the states are exacerbated by Australians, who In general terms, it sometimes seems the quite rightly, see states as waning institutions. survival of Australian federalism in practical Those seeking favours and kudos turn towards terms owes much to the complete implausibility the ascending sun of the Commonwealth, of any alternative. Conversion to a unitary particularly when it streams rays of useful cash. state would flounder catastrophically upon the Compared to Canberra and its coffers, the states conservatism of Australian voters when faced present as faintly down at heel propositions, and with any referendum, let alone one recasting are regarded accordingly. the entire Constitution, which is what would be involved. Sporadic outbursts of enthusiasm Australian federalism is highly for replacing federalism with ‘regionalism’ are recognised for what they are—Trojan horses volatile and deeply responsive used to advance central power by dissecting to economic and political states into smaller, more manageable units. change within the nation. Against this gloomy posterity is the recent resurgence in the reputation of Australian federalism, and whether it will substantially Within the states themselves, the ongoing improve the position of the states and the psychological effects of perpetual decline have federalism they comprise. In this context, been almost as unhelpful. Some states, have Australian federalism is highly volatile and developed a range of less than feisty learned deeply responsive to economic and political behaviours in response to repeated pulverisation change within the nation. For example, in the by the Commonwealth. Like the Commonwealth, short term, the emergence of relatively strong the states too regard themselves as lesser orders coalition governments in all eastern states of constitutional being. They are not only and Western Australia obviously will alter the beaten before they start, but know it, and act dynamics of Australian federalism, not only for accordingly. The consequence is that more the Gillard Labor government but also the style ‘obstreperous’ states find it difficult to form and practical considerations of any potential united fronts because some other state is ready conservative successor. In the much longer to sell its patrimony for a mess of pottage. Trust term, the transformation of the Australian in such circumstances is not an option. Any federation from an asymmetric one in which two jurisdiction prepared to take a stand against the powerful states—NSW and —dominated Commonwealth knows it may end up standing, four relative minnows, will be profoundly if not alone, then in limited company. The challenged by the ongoing emergence of only thing more destructive to self-respect and Western Australia and Queensland as potent independence is knowing that you are likely economically driven middle powers. to lose again. Worse, after the first thousand There are perhaps three reasons why the or so catastrophic defeats at the hands of the next few years may see a modest resurgence in High Court, the Treasury, or other agencies of federalism, and even a slight increase in Commonwealth dominance, hope not only cooperation by the Commonwealth. These starts to fade but injury can, in more submissive factors correlate closely but not precisely with states, subtly hurt and matter less and less. some of the reasons for the improved reputation Demoralised states make for compliant of federalism in Australia. (or resigned) states subsisting within a First is the ‘Cornwall’ factor. Over the past demoralised and compliant federation. Against 90 years, the Commonwealth has gone from such tendencies is the inter-governmental picking the low-hanging fruit among state agreement on federal financial relations, which powers to reaching ever higher, and constructing has at least given the states a principled line to progressively longer and increasingly daunting hold; however, it may bend and bulge in practice. ladders. It is now clambering around the spindly

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outer braches of education, health, water, Finally, if the Gillard government is succeeded resources and assorted micro-economic reforms, by a conservative administration, Australian with gains becoming harder, state resistance Tories will have had six years to contemplate more desperate, and progress more difficult to the realities of the prodigious batteries of demonstrate. There must come a point when centralised power assembled by Howard. The even Canberra realises that if it is to drain the corporations’ power is not nearly as much fun last and most stubborn swamps of perceived from a conservative perspective when it is being duplication and inefficiency, it is going to require, deployed not for industrial reform but to even if it does not desire, state cooperation. This alleviate climate change and regulate resources. will come at a price. Significantly, such recent Oppositions, like goldfish, have notoriously tendencies as the Commonwealth moving from its traditional position of coercing the states with promised largesse in return for concessions to The outer limits of Australian federal the almost bizarre position to programs such as fiscal banditry may well have been the Gonski reforms in school education—where reached. From here, there is nowhere much of the promised funding is to be siphoned to go but very, very slightly backwards. from the states themselves—suggests the outer limits of Australian federal fiscal banditry may well have been reached. From here, there is short memories, but is too much to hope that nowhere to go but very, very slightly backwards. the side of Australian politics that supposedly Second, this perception of tough going for espouses a philosophy of limited federal limited gains tends to be verified by the vast power might rediscover, in the light of painful rafts of federal reform propounded by the Rudd experience, a qualified commitment to government. At the time of its election, it almost federalism? Might such a lesson be reinforced seemed that within the life of the government, by contemplating the mistakes and difficulties Canberra would occupy the commanding of their Labor predecessors in their pursuit of hills of health provision, direct education forced rather than cooperative federalism, and from kindergarten to cloister, and direct the the law of diminishing returns that is making Murray-Darling Basin from the backblocks of the process of centralisation so much less fun Queensland to the SA coast. Five years and than it used to be? Might the ruthless disciplines thousands of pleas, demands and threats later, of surplus budgets finally suggest to a conservative Australia remains proudly federally bifurcated government that it might be worthwhile to on all these issues, notwithstanding increased return functions to the states, even if it means cooperation in minor matters. Surely, the returning at least some of the inadequate fiscal chequered history of Rudderalism must suggest base that supported them? to his Commonwealth successors, as the statue Only time, and possibly a healthy dose of of Ramses suggested to the poet Shelley, that reality, will tell. there are more effective courses to success than grand programs of general subjection.

Policy • Vol. 28 No. 2 • Winter 2012 7 The State of Australian Federalism

FIRST PRINCIPLES Robert Carling provides an overview of how federalism in Australia works

M offers billions for skills the actual behaviour of federal governments training,’ announced a recent as masters—and state governments as newspaper headline, referring to supplicants—over a very long period, and that the latest Commonwealth offer Commonwealth/state interaction would be ‘Pof money to the states (albeit with some strings seen in a different light if the basic principles attached). This is what the ordinary citizen of federalism had been more closely adhered to sees as modern federalism at work: the central in practice. government raising tax dollars and using them to cajole state governments to implement A world view of federalism and Canberra’s policies. It would never occur to most decentralisation citizens to ask whether the central government Only two dozen or so of the world’s 196 countries should be involved at all in functions such as are , Australia among them. We are ‘skills training.’ in the company of the , , Complex forces have enabled the power of , , Germany, , India the federal government to grow continually since and Malaysia, while other familiar names such the Commonwealth came into being in 1901. as Japan, China, South Korea, the United The skills training and countless other examples Kingdom and France have adopted more highlight key issues raised by this well-established centralised models of government. Each trend: does the expansion of Commonwealth country’s governance structure is the result of power matter; is it something to welcome; why accidents and exigencies of history, but deliberate has it occurred; and how could it be stopped choice has also played a part. The founding or reversed if the body politic were of a mind fathers of Australia’s federation, and ultimately, to do so? the populations of the six colonies, made a Broad public opinion on federalism is conscious decision to federate using the United pragmatic. It has no quarrel with the principle States (modified to a Westminster platform) of an expansive federal government, and is as a model. This has made us a member of a more concerned with how well the functions small group of countries. We possess something of government are performed than with which valuable, but do not value it. level of government performs them. It is also Instead, Australia has become something fair to say that whatever view people take of of an oddity. While other federations have also particular governments of the day, there is drifted towards stronger central governments, wide disenchantment with the performance we are exceptional in the extent to which this of state governments in general.1 Federalism has occurred. Abolishing the states is sometimes to the general public means arbitrary lines on the subject of serious contemplation here, but the map, too many governments and elections, rarely or never in the United States or Canada. wasteful duplication, inconsistencies, and Meanwhile, in the large slabs of the world that endless squabbling. But before accepting these views as the natural order, and consigning federalism to the dustbin Robert Carling is a Senior Fellow at of history, we should allow for the possibility the Centre for Independent Studies. that public opinion has been conditioned by

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are not federations, many countries—from the formation of the United States as a federation, United Kingdom to Peru—have been making which in turn strongly influenced the architects their governments more decentralised to of Australia’s federation a century later. a degree. Most countries, except the smallest, have concluded that running everything from the national capital doesn’t work. There are The Australian Constitution, like the powerful economic, political and administrative American one, specifies the powers reasons to decentralise at least to some degree. of the Commonwealth in quite narrow Federalism is a form of decentralisation. If Australia did not possess decentralisation terms and leaves everything else in the form of the federal structure, some (the residual powers) to the states. other form of decentralised government would have evolved. Federalism is not merely one form of Essential features of federalism decentralisation among many, but one that has The constitutional division of sovereignty between the advantage of being constitutionally the most the Commonwealth and state governments is robust. Both the national government (in our an essential feature of federation. Nonetheless, case, the Commonwealth of Australia) and the balance between national and sub-national the sub-national governments (the states) are governments must be expected and allowed sovereign governments in their own right, to change over time as underlying conditions entrenched by a Constitution that neither change. The constitution must by its very nature can change unilaterally. Anything else is be difficult to change, and it has certainly proven ‘decentralisation-lite.’ to be the case with the Australian Constitution. Although federalism is synonymous with However, formal constitutional amendment is decentralisation, the very act of forming a not the only way the federation can change. federation is a step towards centralisation when Another essential feature of the federal the starting point—as in the case of Australia— model is a constitution that specifies the was a collection of separately governed colonies. responsibilities, functions and powers of each The act of federating created a central government level of government, backed by a judicial that was not present before. The colonies authority (in our case, the High Court) that federated because they had enough in common interprets the constitution and rules on any and saw economic gain from combining under a disputes about the division of powers. The single national government, but they also chose Australian Constitution, like the American one, to retain a substantial degree of independence in specifies the powers of the Commonwealth their internal affairs. in quite narrow terms and leaves everything The rationale for federal systems is that they else (the residual powers) to the states. This are good at balancing centripetal and centrifugal was designed to make the Commonwealth the forces. The former, such as common needs weaker partner in the federation, or at least to for external defence, are best met by a central circumscribe its powers. government, while the latter, such as geographical The guiding principle for the allocation divisions or the existence of regional consciousness, of powers in a federation is the ‘subsidiarity’ are best satisfied by sub-national governments. principle, according to which each function of Federalism has less ideological content than government should be performed at the lowest other ‘isms,’ but it does appeal to those who tier at which it is practical for the function believe it is important to protect the individual to be performed. Although the architects of from the concentration of power in the hands of the Constitution would not have known a single government. The constitutional basis of the subsidiarity principle by that name, there of federalism provides the strongest defence are traces of it in the Australian Constitution. against such concentration of power. This The powers specified for the Commonwealth thinking was certainly important in the encompass defence, foreign affairs, and trade and

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commerce with other countries—and among the consumption tax bases. (Note that the states, taxation, post and telecommunications, Commonwealth’s taxation power does currency and banking, insurance, weights and not prevent the states from imposing measures, immigration, marriage and divorce, taxes—with one important exception as and invalid and old age pensions. There is discussed below—but it does give the nothing too surprising in this list; they are Commonwealth priority.) functions that sit logically with the national 3. The Constitution bars the states from government, but a government fitting that job imposing customs duties and excises. The description bears little resemblance to the actual latter have been interpreted broadly by federal government of today. It is noteworthy, the High Court in relation to indirect in light of the Commonwealth’s present-day taxes, and constitutional law experts functions, that the Constitution does not give believe states would also be barred from it powers in relation to higher education, school a broad-based consumption or sales tax education, or health, which combined now such as the Goods and Services Tax (GST), absorb a quarter of the Commonwealth budget. although this has never been directly tested. 4. The Commonwealth’s power to pass Forces for centralisation in Australia laws in relation to corporations, and the How did the Commonwealth get from being Commonwealth’s subsequent broad use the weaker to the dominant partner in the of this power (for example, in its coverage federation? The primary instrument has not been of industrial relations). Corporations formal amendment of the Constitution to assign were not the dominant form of business greater powers to the Commonwealth. Many organisation in 1901. more such amendments have been proposed than have been approved under the demanding Fiscal federalism tests specified in the Constitution. The only Four broad sets of indicators highlight the shift amendments that have been approved are those in the balance between the Commonwealth giving the Commonwealth powers over various and the states in favour of the former: increased social security and medical benefit payments, Commonwealth involvement in activities and to make laws in relation to Aborigines. Far that the Constitution assigns to the states; more important has been the evolution of what financial relations between the Commonwealth David Solomon calls the ‘working constitution,’ and the states (‘fiscal federalism’); increased which includes not only formal amendments Commonwealth regulatory activity; and the but also effective changes brought about by the increased emphasis on ‘cooperative’ as opposed Commonwealth’s inventive or opportunistic use to ‘competitive’ federalism. of various powers originally granted to it; the The Commonwealth is now heavily High Court’s interpretation of the constitutional involved—via grants to the states—in powers; and changes in the general economic and education, health and housing services, which political scene.2 the Constitution leaves to the states. It is also The most significant changes driving involved in transport in ways that go beyond increased centralisation have been: international and interstate transport, which 1. The Commonwealth’s broad use of its logically rest with the central government. financial power under section 96 of the It makes grants to local government through Constitution to make grants to the states the states. ‘on such terms and conditions as the Where the Commonwealth extends its Parliament thinks fit.’ Grants to the states influence by making grants, its main influence now comprise around one-quarter of is through policies such as in education and the Commonwealth budget and almost health. It is not involved directly in the delivery one-half of total state revenue. of the services. But its formal constitutional 2. The Commonwealth’s use of its taxation powers over social security, welfare and medical power to monopolise the income and benefits to individuals ensure it is directly

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involved in these areas and has driven the the Commonwealth persuades states to adopt long-term expansion of the welfare state. policies they would not adopt of their own Commonwealth budget outlays, including volition, or in which the Commonwealth grants to state and local governments, brokers agreements between states to adopt account for around 73% of all public sector uniform policies or legislation in particular areas. (general government) outlays by the three Examples in recent times include the National tiers of government. The main features of Competition Policy (for which the states were Commonwealth/state financial relations are rewarded with conditional Commonwealth the Commonwealth’s domination of taxation payments), the harmonisation of occupational (around 80% of national taxation) and the high health and safety laws, and the adoption of a level of financial grants to the states, which common school curriculum. Big business is comprise around 22% of Commonwealth a strong advocate of greater harmonisation of budget outlays and 43% of total state revenue on state regulation to achieve what it calls a ‘seamless average across the states. State expenditures are national economy.’ around 14% of gross domestic product (GDP), Cooperation is not necessarily the antithesis but revenue raised by the states themselves of federalism. A lot of it is necessary to the (as distinct from money received as grants from efficient functioning of a federal system. the Commonwealth) comprises only 8% of Without it, trains running between NSW and GDP.3 This disparity is called ‘vertical fiscal Victoria would still have to stop at the border imbalance,’ and while such an imbalance is a to change to a different rail gauge. It is only feature of all federations, it is especially steep when too much emphasis is placed on uniformity in Australia.4 and harmonisation of policies and legislation at Another feature of fiscal federalism is the expense of competition and diversity that horizontal fiscal equalisation, better known in cooperation undermines the foundations of Australia as the way in which Commonwealth federalism. At the extreme, if all state policies and grants (mainly GST revenue now) are distributed legislation were ‘harmonised,’ there would be no to the states unevenly so as to correct for states’ point in having a federal system. intrinsic advantages and disadvantages in raising revenue and providing services. While horizontal The first benefit of federalism is that equalisation as a principle is widely accepted in it divides government power and federations, its application is highly controversial provides greater protection to the in Australia because we have institutionalised the pursuit of equalisation to a higher degree individual than does a unitary state. than most other federations. The recurrence of disputation over this issue in Australia—which Benefits of federalism many find tiresome—is not an inevitable feature The Australian federation is alive, but is running of federalism. on two cylinders. If there are benefits worth The Commonwealth has successfully used having from federalism, Australia is missing various constitutional heads of power to extend out to a significant degree. Do the greater costs its regulatory reach in areas such as industrial of federalism warrant greater centralisation? relations, the environment and business So what are these benefits and costs? regulation. In some cases, this expansion has The first benefit of federalism is that it been facilitated by the voluntary referral of divides government power and provides greater powers from the states to the Commonwealth. protection to the individual than does a unitary The other measure of the centralisation is the state. Decentralisation within a unitary state growth of ‘cooperative’ federalism, as opposed cannot guarantee this benefit, because ultimately, to the ‘competitive’ variety. Cooperative the central government makes all the rules. federalism does not refer to an absence of Second, federalism brings government closer to rancour and disputation in the Commonwealth/ the people, allowing a better chance for policies state relationship, but to situations in which and services to be tailored to local needs and

Policy • Vol. 28 No. 2 • Winter 2012 11 FIRST PRINCIPLES

preferences. Third, it results in competition delivery agents of the central government. This between state governments, for example, would be the ultimate death-knell for federalism. in taxation. Federations tend to have smaller Whether desirable or not, it is safe to say that it total public sectors and lower overall tax burdens will never happen. As Twomey and Withers say, than unitary states. Fourth, federalism allows it would face an even higher constitutional state governments to innovate and experiment hurdle than ordinary constitutional reform with different policies, with the best results (which is difficult enough). It may even go as providing a demonstration effect to other states. far as requiring a ‘constitutional revolution’ as distinct from formal amendment, because It is safe to say that replacement it would involve the dissolution of the ‘one indissoluble Federal Commonwealth,’ which is of the states will remain a the very purpose of the Constitution itself.7 centralist’s pipedream and the It is safe to say that replacement of the states three-tier system is here to stay, will remain a centralist’s pipedream and the with sovereignty of the states three-tier system is here to stay, with sovereignty preserved by the constitution. of the states preserved by the constitution. The question is whether this system in operation (the ‘working constitution’) continues to drift The costs of federalism come mainly in the towards greater centralisation of policy and form of a higher administrative overhead in finance, or steps are taken to halt and reverse electing and running multiple parliaments and this process—such as the Commonwealth public services, and the costs faced by businesses withdrawing from certain functions and with operations in more than one state in dealing handing some taxation powers back to the with different tax policies and regulations. states. For the latter to happen, the strong Duplication is often cited as another cost, but centralising forces that have been at work for federation need not involve much duplication more than a century would have to be overcome, if central and state governments have clear and there is little prospect of this happening. and distinct responsibilities. There is a good It is one thing to describe how increased deal of duplication and overlap in Australia, centralisation has occurred, but quite another but this is because of the Commonwealth to explain why it has occurred. Remarkably, increasingly intervening in state responsibilities the electorate has rejected most proposals for as discussed above. formal constitutional amendment extending Proponents of federalism believe that the Commonwealth powers, but has accepted the de benefits vastly outweigh the costs, provided facto growth of such power through other means the federal system adheres to the principles of as described above. Some of the main reasons federalism. One estimate of the net benefits for this could be the following: suggests that Australia is reaping only half the potential benefits because the federal 1. There are few political champions system has been allowed to drift so far from its for federalism. When states resist original design.5 Commonwealth encroachment on their functions, more often than not, it is Where to from here? because they are holding out for a better The reform most cited in any discussion of the deal rather than taking a stand on principle. future of federalism is abolishing state and (State politicians in Western Australia local government in their current form, and are the main exception.) No politician replacing them with as many as 50 regional is extolling the benefits of federalism to governments.6 Despite having a degree of policy the public. and revenue autonomy from Canberra, these 2. Money is the key to power, and the governments would for the most part be service Commonwealth is more financially

12 Policy • Vol. 28 No. 2 • Winter 2012 FIRST PRINCIPLES

dominant than ever. The assignment 6. The evolution and growth of the modern of GST revenue to the states has not welfare state and the heightened emphasis changed this; in fact, it has increased the on equity as a goal of government— states’ dependence on revenue raised by whether or not desirable—have favoured the Commonwealth. In general, state the central government, as uniform politicians are happier to receive and spend national standards of equity are generally money raised by the Commonwealth than seen as being appropriate as distinct suffer the political opprobrium of raising from different standards in each state. This more of their own tax revenue. trend has favoured the Commonwealth, 3. The public, notwithstanding inconsistent with its powers in relation to pensions and attitudes to taxation and spending, are social security payments, and encouraged happy to see more tax dollars poured into its involvement in areas such as health health, education and what is broadly which has become part of the welfare state. termed ‘infrastructure,’ and are pragmatic about where the money comes from. It is impossible to foretell the circumstances People know the Commonwealth is in that could reverse this centralising trend. One the stronger position and their experience possibility is that federal and (some) state leaders of state taxation makes them wary of with a strong commitment to the principle of wanting more. competitive federalism are elected to office at 4. The Commonwealth largely collects the same time. If something like this does not money and disburses it to individuals, happen, Australia will continue to bear the largely rather than running services that bring hidden costs of an overly centralised system. it into contact with the public. These functions involve less reputational risk of inefficiency compared to traditional state Endnotes government activities such as running 1 For example, a 2010 survey by Griffith University public hospitals and schools, controlling showed that only 17% of respondents perceived crime and public disorder, and providing states as the most effective level of government, public transport and roads. The public may compared with 44% for the federal level and 27% for the local level. ‘Australian attitudes to conflate inefficiencies in service delivery federalism reinforce need for reform,’ Griffith by particular state governments with a University media release (10 April 2010). breakdown in the federal system in general. 2 David Solomon, Australia’s Government and 5. The concept of national economic Parliament (Nelson, 1973), 118−119. management was hardly known in 1901, 3 All data sourced from ABS (Australian Bureau of but came into its own after the Great Statistics), Government Finance Statistics, Australia, Depression and particularly after World 2010-11, Cat. No. 5512.0. War II. This is not the place to argue the 4 Neil Warren, Benchmarking Australia’s rights and wrongs of Keynesian fiscal Intergovernmental Fiscal Arrangements, Final policies, but the same policies gave the Report (May 2006). 5 Anne Twomey and Glenn Withers, Federalist Paper Commonwealth’s fiscal role a major boost. I, Australia’s Federal Future: Delivering Growth More recently, the concept of national and Prosperity, a report for the Council for the economic management has come to Australian Federation (April 2007), 40–42. encompass goals such as productivity and 6 This idea had the support of about 40% of labour force participation, which have respondents to the Griffith University survey given the Commonwealth another reason referred to above, which is a high percentage to to broaden and deepen its economic favour such a radical change. policy interventions. 7 Anne Twomey and Glenn Withers, as above, 44–45.

Policy • Vol. 28 No. 2 • Winter 2012 13 The State of Australian Federalism THE CASE FOR FEDERALISM James Allan argues that federalism creates a more competitive and prosperous society

have a confession to make. In this country, I don’t buy any of that. Maybe it’s because it’s more in the nature of revealing a dirty I’m a native-born Canadian, but I think there little secret. Now don’t gasp with horror, is a great deal to be said for federalism. I don’t but you see, I’m a federalist. I believe you think either side of politics at the Commonwealth Iget better outcomes across a range of criteria level is remotely serious about promoting when states have real power and are not at federalism, which is a shame because federalism the mercy of the central government’s diktats. by and large delivers good consequences. Yes, yes, yes, I know that the vast preponderance of our federal politicians, The one-size-fits-all rule on both sides of the House, are centralists. Take a few of the arguments in favour of For them, the states are at best an annoyance, federalism. First off there’s this point, and it’s and at worst, something to be gotten rid of as amazing how often it is overlooked. Uniformity soon as they figure out how. Meantime, they and standardisation are only good things if you opt to parade around under the pretence of assume that the uniform or one-size-fits-all ‘cooperative federalism,’ as though that phrase rule that’s chosen is the best one on offer. So if means anything more than having two layers we’re talking about what school curriculum of bureaucracy, with the states kowtowing to to follow in educating our kids or how to run the Commonwealth. a medical system, uniformity is bad if the You see, there’s a widespread belief in one-size-fits-all rule that ends up being chosen is Australia that federalism just means duplication less than great. and extra layers of bureaucracy. But in well- This is where our attitude to government functioning democratic federal states, federalism comes into play. If you think government almost is always competitive, not cooperative. Think of always makes the right policy decisions, then Switzerland, the United States, Canada, or federalism is indeed a dumb idea because it Germany: the states or provinces or cantons would only entail duplication. But why should we or lander in all those countries compete against assume that the government always gets it right? each other. In reality, any government would be lucky to get You don’t have to live in Australia very long things right even half the time. If we agree that to hear the case against federalism from all points government is not always right, we certainly on the political spectrum—it’s inefficient; it’s just an extra layer of duplication; and it gives us James Allan is the Garrick Professor of too many politicians for the number of people. And then there’s this one that seems to be a Law at the University of Queensland and clear favourite, namely, that those elected to the a constitutional scholar. A native Canadian, state legislatures just aren’t up to the job. They’re he taught law in New Zealand for 11 years second-rate hacks compared to those who go into before moving to Australia in 2005. Commonwealth politics.

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don’t want one curriculum across the country. Citizens’ preferences We want six or more curriculums. Some will A second argument for federalism also revels in be awful. Some will be not so bad. But the best differences. This is the argument that claims that bits from here and there can be replicated. different rules in different parts of a country can Of course, if you’re sure that government satisfy more citizens’ preferences. So it’s not just almost always gets things right, then you should that you get more efficient outcomes over time be able to easily defend the new national school (that’s the first argument), it’s that you satisfy curriculum. Others, like me, will point to more of your citizens’ preferences. Canada where none of the 10 provinces would dream of letting the national government tell them how to draw up a school curriculum. Sure, More to the point, if federalism really some provinces have what most of us would is so inefficient, why are the United think are awful school curriculums, but some are States and Switzerland among the very good; indeed, Alberta’s school results rank wealthiest nations in the world? extremely highly internationally. So this first defence of federalism starts from the very plausible premise that one-size-fits- Take something contentious, like legalising all rules are overwhelmingly sub-optimal ones. euthanasia or prostitution. Imagine that either As someone who works in a top Australian way you go, about half the population of your university, where the obsession with one-size- country will disagree with the government’s fits-all rules surpasses even that of the former choice and be unhappy. But if you leave it to East Germany, I can tell you there is little reason the states to decide, meaning that Queensland to believe any bureaucracy or government can can do what it wants and NSW what it wants, be trusted to choose the best or optimal set or California can go one way and Texas another, of rules. you may find that 60% to 70% of citizens will be More to the point, if federalism really is living under rules they think appropriate. so inefficient, why are the United States and This is not to say that everyone in, say, New Switzerland among the wealthiest nations in the York State will agree with the socially liberal world? For that matter, Germany and Canada choices of its government or that everyone in too. These countries take federalism far more Texas will concur with a more conservative seriously than Australia. Don’t forget that on choice there. Clearly there will still be plenty of the face of things, capitalism also looks a lot less people who dislike where the line in their state efficient than central planning. In capitalism, has been drawn. But across the country as a companies regularly go under; lots of businesses whole, there will be many more people satisfied. make the same product (but differently); and Instead of an issue splitting the country 50-50, one-size-fits-all products and services are it becomes 60-40 or 70−30 under federalism. shunned. Command economies with central More preferences are satisfied because decision- planning from the top down, by contrast, have making takes place at the state level, and different a superficial veneer of efficiency, when in fact states can reach different decisions according to they’re a disaster. their own citizens’ wishes. So on a purely comparative basis, and this goes strongly against the ‘get rid of the states’ Checks and balances position mouthed by a good many Canberra A third argument for federalism points to its politicians, centralists need to tell us why one- effects on checks and balances and citizens’ size-fits-all centralised countries such as France freedoms that can come with a federal and New Zealand do not do as well economically arrangement, rather than with the unitary as the multi-layered federal countries such as (or one-size-fits-all) state. By dispersing power, Switzerland or the United States or Canada. (The you minimise the dangers of its misuse. (Although size of the population doesn’t explain this either.) many defenders of federalism think this is the

Policy • Vol. 28 No. 2 • Winter 2012 15 THE CASE FOR FEDERALISM

most potent argument, though I am a something nine decades, our states have been at the losing of a sceptic on this count.) end of just about every important High Court Here’s the thing. Federalism really only makes decision related to Commonwealth-state disputes sense if it involves differences across the country. over who has what powers. At its heart, federalism is about competition and I don’t think any of the framers of our difference. Of course I well know that bureaucrats Constitution would believe how weak and and planners and lots of big businesses and not insipid the states have become. To make a small number of judges dislike this idea of a federalism work you can’t be a supplicant; you diversity of arrangements and different regulatory can’t be in the position of begging for grace and regimes. Life can be far more difficult for them favour handouts. You need to be able to look the under federalist arrangements. And if that were Commonwealth in the eye and tell it to get stuffed, the ultimate test of what we should do, it might and then enjoy or suffer the consequences. be determinative. But of course it’s not. So in Canada, the United States, and Switzerland, you have a federal income tax for The federal system in Australia the country as a whole and each state sets its own income tax. Each of these states competes with is in disarray, largely because of all the other states, and spends the money it the and collects. You get competition. You can live in high a series of awful decisions where taxing, high service providing California or low it consistently sided with the taxing, fewer services providing Texas. The same Commonwealth over the states. goes for Canada with high taxing Ontario looking quite different to low taxing Alberta.

When a government talks about ‘cooperative Federal dysfunction in Australia federalism,’ that talk is almost incoherent; The federal system in Australia is in disarray, indeed, it’s a sham. Federalism simply is not a largely because of the High Court of Australia and cooperative endeavour. It’s a competitive one. a series of awful decisions where it consistently Different jurisdictions try different things, and sided with the Commonwealth over the states. with luck, one or two occasionally get it right. The top judges decided a treaty could be used to And other places eventually, not soon but let the Commonwealth stop a dam being built eventually, copy them. If you take away the in under the external affairs power; differences and competition in the name of it implausibly relied on the corporations power feel-good slogans like ‘cooperative federalism’ or to let the Commonwealth win the WorkChoices ‘intelligent federalism,’ you take away the core case; it sided with the centre in the cases benefit of federalism. And then it really does that moved all the income tax raising power seem bizarre to have two different levels of (in practice, whatever the theoretical remnants government doing exactly the same thing. for the states might be) to the Commonwealth. Cooperation really just means standardisation, Just take the last of those. We in Australia at which point you’ve thrown out the baby with have the worst sort of vertical fiscal imbalance the bath water. imaginable. The states have to spend large amounts of money on education and health, State taxes areas clearly within their domain, but they have Then there are the practical problems with no capacity to raise much money. So the federalism in Australia that aren’t in evidence in government spending the money is not the one Canada or the United States. States in Australia raising it, and the one raising it is not the are too enervated and emasculated. For all one spending it. practical purposes, they lost their income This causes problems of accountability; taxing powers back in the 1940s, so there isn’t it generates perverse incentives; and it creates competition over what tax you pay—as in the a vertical fiscal imbalance. Australia’s fiscal United States or Canada. In fact, over the past imbalance is as bad as it gets in the developed

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democratic world. I can’t think of another about touchy-feely cooperative federalism is a functioning federal democracy where states don’t lot of hot air. Take every mention of ‘cooperative have income tax powers. But in Australia, the federalism’ and replace it with ‘do as we say and level of government that spends the bulk of we might throw you a few crumbs you otherwise money (on education and health) is the level won’t get’ and you’ll have a more or less workable that doesn’t raise that money. Talk about idea of what is going on. perverse incentives! Don’t get me wrong. The Howard government And despite the numerous academic was no better. A bit less adept at high flown conferences on fixing Australian federalism, one rhetorical sloganeering perhaps, but every bit can’t help but be massively pessimistic. What we as centralist. really need to do is return revenue raising powers Again, ask yourself why decentralised federal back to the states. Given that we can’t hope for states like Switzerland, Canada, the United our top judges to start reading the Constitution States and Germany outperform one-size-fits-all in the federalist way it was intended, the only unitary ones like France, the United Kingdom, hope is for some state premiers to start telling or New Zealand. Or ask yourself which of those the one-size-fits-all prime minister and treasurer two camps are wealthier? It’s a no-brainer. to get stuffed. What few remaining revenue raising sources we have, we’re going to do with as Conclusion we please. The conceit in this country is that a one-size- Which brings me to Colin Barnett in Western fits-all central government would spend money Australia, and more recently, Campbell Newman better than the states would. And there is in Queensland. Where do I sign up to their fan a further assumption that every service and clubs? I ask because both premiers are doing outcome ought to be the same across the entire this country a great service in standing up to the country. That first conceit is generally empirically Commonwealth government. false, and the second assumption is a highly Take Barnett’s grievances and you’ll see that contestable moral position. he’s correct on just about every count right down All of us who care about lean, efficient the line. Does Western Australia get a bad deal government in Australia ought to be cheering on financially? Yes. Does it put in way more than it the Newman and Barnett governments as they gets out? Yes. Do you win in the long term by appear to be giving a hint of life to a workable giving in to the bullies in Canberra? Never. federalist system of government in this country. One of the big differences one notices as an I work in a top Australian university. I experience ex-pat Canadian living in Australia is that every day the most thorough going mania for Canadian premiers regularly and often tell the one-size-fits-all regulation imaginable. And I can national prime minister to get stuffed. And they assure you that it does not translate to efficiency do it especially fiercely when they both come or particularly good outcomes. from the same political party. They do not put Think of how chaotic capitalism looks with their party above their state. In Australia, state loads of duplication and failures, at least compared premiers are far more inclined to follow party to a centrally controlled command economy. diktat because they are essentially mendicants And then think of how the former massively having to go, cap in hand, to the Commonwealth outperforms the latter. for money. In Canada, they have far more The analogy is far from perfect but the same financial room to manoeuvre. sort of unspoken bias is at work with those who So our premiers are generally far too lily-livered. disparage federalism. They think those at the I know, I know, I know, that’s what comes from centre have sufficient information and skill to being a mendicant hoping for Commonwealth make better decisions than a more decentralised handouts. Alas, there is no obvious solution. arrangement. And they dislike different regimes But that doesn’t change the fact that this Labor and arrangements that compete against each other. government’s Obama-like and high flown rhetoric I think such people are wrong.

Policy • Vol. 28 No. 2 • Winter 2012 17 The State of Australian Federalism

JUDICIAL BETRAYAL Augusto Zimmermann describes how the High Court has undermined Australia’s federalism and the framers’ wish for a balanced federation by allowing the Commonwealth to expand its powers

n drafting the Australian Constitution, sense the protectors of the Constitution. the framers sought to maintain a balance They are in no way bound … to assume the in the distribution of powers between constitutionality of laws passed by the federal the states and Commonwealth. They legislature.’ 5 [emphasis added] Idesigned the Constitution to be an instrument The High Court originally comprised Chief of government intended to distribute and limit Justice Samuel Griffith and Justices Edmund governmental powers. Hence, one of the basic Barton and Richard O’Connor. Griffith was the characteristics of Australia’s Constitution is its leader of the convention of 1891 and Barton express limitation on federal powers. Whereas the in 1897–98; O’Connor was one of Barton’s central power is limited to express provisions closest associates. These judges sought to protect in sections 51 and 52, with these powers the federal nature of the Constitution by applying being variously concurrent with the states and two basic doctrines: ‘implied immunity of exclusive, the substantial remaining residue is instrumentalities’ and ‘state reserved powers.’ left undefined to the states.1 The idea was to ‘Implied immunity of instrumentalities’ reserve to the people of each state the ultimate ensures that both the central and state right to decide on the most relevant issues governments remain immune from each other’s through their own state legislatures.2 Sir laws and regulations. If federalism implies that Samuel Griffith, the leading federalist at the each government enjoys autonomy in its own first Constitutional Convention, commented spheres of power, then no level of government in 1891: should be allowed to tell another level of government what it must or must not to do. The separate states are to continue as ‘State reserved powers’ ensure that the autonomous bodies, surrendering only residual legislative powers of the states must so much of their powers as is necessary not be undermined by an expansive reading to the establishment of a general of federal powers.6 The doctrine protects government to do for them collectively the powers belonging to the states when the what they cannot do individually for Constitution was formed—‘powers which have themselves, and which they cannot do as a collective body for themselves.3 Dr Augusto Zimmermann is a Senior When Alfred Deakin introduced the Judiciary Lecturer and Research Dean at the bill into federal Parliament, in 1903, he explained School of Law in Murdoch University, and that the federal courts should be in charge of President of the Western Australian Legal guaranteeing the preservation of the federal Theory Association (WALTA). nature of the Constitution. He called the High Court of Australia the ‘keystone of the federal arch’4 because, as Albert V. Dicey pointed out, Endnotes for this feature can be its members were ‘the interpreters, and in this found at www.policymagazine.com.

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not by that instrument been granted to the their intention was to allow these powers to Federal government, or prohibited to the States.’7 ‘continue,’ they opted for defining only the Such doctrine is actually manifested in section federal powers specifically. This so being, it is 107 of the Australian Constitution, which says: correct to infer that the continuation of state ‘Every power of the Parliament of a Colony powers in section 107 is logically before conferring which has become … a State, shall, unless it is powers to the federal Parliament in section 51. by this Constitution exclusively vested in the As Nicholas Aroney points out, ‘such scheme Parliament of the Commonwealth or withdrawn suggests that there is good reason to bear in mind from the Parliament of the State, continue as what is not conferred on the Commonwealth at the establishment of the Commonwealth.’ by s.51 when determining the scope of what is In other words, every power that is not explicitly conferred. There is a good reason, therefore, to given to the Commonwealth shall ‘continue’ with be hesitant before interpreting federal heads of (or be reserved to) the Australian states. power as fully and completely as their literal Unfortunately, these doctrines of ‘state words can allow.’11 [emphasis added] reserved powers’ and ‘implied immunity of instrumentalities’ started being undermined Under Isaacs’s leadership, the ‘implied when Justices Isaacs and Higgins were appointed to the High Court in 1906. Isaacs and Higgins immunity of instrumentalities’ and had participated at the 1891 and 1897–98 the ‘state reserved powers’ doctrines conventions, but they were often in the were overturned by the High Court. minority in most of the debates and had no formal role in shaping the final draft of the Constitution. In fact, they were excluded from This leads to section 109 of the Constitution. the drafting committee that settled the final Many have suggested that section 109 confirms the draft of the Constitution for consideration by supremacy of the Commonwealth over the states. the conventions.8 According to section 109, ‘when a law of a State Although there is a good reason to question is inconsistent with a law of the Commonwealth, the reliability of their views about the underlying the latter shall prevail, and the former shall, ideas and general objectives of Federation,9 to the extent of the inconsistency, be invalid.’ from the beginning Isaacs and Higgins adopted Two things must be said about this. First, a highly centralist reading of the Constitution. only federal powers are explicitly limited by Under Isaacs’s leadership, the ‘implied immunity the Constitution, not state powers. Second, of instrumentalities’ and the ‘state reserved it is only a valid federal law that prevails over powers’ doctrines were overturned by the High a state law. Hence, no inconsistency arises if Court. For Isaacs, section 107 was not about the federal law goes outside the explicit limits protecting state powers, but about continuing of the Constitution. If so, the matter is not its exclusive powers and protecting them by inconsistency but the invalidity of the federal express reservation in the Constitution. This is a law on grounds of unconstitutionality. misreading of section 107, which confirms that But a controversial ‘test’ has been applied by the state parliaments should have continued the courts to resolve matters of inconsistency. to exercise full legislative powers, except for Such a test has been instrumental in expanding those exclusively given to the federal Parliament federal powers at the expense of the states. at Federation. Inconsistency, which can be nowhere found The drafters intended to provide the states in the text of the Constitution, is said to arise with ‘original powers of local self-government, when the Commonwealth, either expressly or which they specifically insisted would continue impliedly, evinces the intention to ‘cover the field.’ under the Constitution, subject only to the First mentioned by Isaacs J in Clyde Enginnering carefully defined and limited powers specifically Co Ltd v Cowburn (1926), and then endorsed by conferred upon the Commonwealth.’10 Because the High Court in subsequent cases, the ‘cover

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the field’ test suggests that ‘if a competent Parliament so that they embraced literally legislature expressly or impliedly evinces its all fields.17 intention to cover the whole filed that is a conclusive test of inconsistency where another WorkChoices legislature assumes to enter to any extent upon The federal power for the regulation of the same field.’12 As Sir Harry Gibbs indicated, industrial relations is section 51 (xxxv), which the adoption of such a test ‘no doubt indicates provides a very limited scope for federal that the Courts have favoured a centralist point regulation of the area. It limits federal law only of view rather than a federal one.’13 to matters of conciliation and arbitration for the prevention and settlement of industrial disputes WorkChoices confirms the extending only beyond the limits of any one centralist method embraced state. This is why the recent federal industrial by High Court in matters of relations system is not based on section 51 (xxxv) of the Constitution, but primarily on section constitutional interpretation. 51 (xx), which allows the federal Parliament, subject to the Constitution, to make law ‘with The court’s centralist approach can also respect to foreign corporations and trading or be observed in the interpretation of section financial corporations formed within the limits 51(xxix) of the Constitution, which gives the of the Commonwealth.’ federal Parliament the power to make laws with The Commonwealth has used section 51 (xx) respect to external affairs. The federal Executive to subject all the employees working at has entered into thousands of treaties on a ‘constitutional corporations’ formed within the wide range of matters. These treaties are often limits of the Commonwealth to its industrial related to topics not otherwise covered by the relations system. Of course, this is a clear enumerated powers of the Commonwealth. attempt to overcome the express limitations However, in R v Burgess; Ex parte Henry (1936), of the Constitution. In WorkChoices (2006), the High Court decided that the use of external however, a five-to-two majority of the High affairs by the Commonwealth is not restricted Court held that so long as Commonwealth law to its power to make laws with respect to the can be characterised as a law with respect to external aspects of the subjects mentioned a subject matter within the federal legislative in section 51.14 power, it does not really matter whether that Together with the regular operation of might also affect another subject matter section 109 (inconsistency), the external affairs altogether. In sum, a head of power does not power therefore offers the potential to ‘annihilate need to be read narrowly to avoid breaching an State legislative power in virtually every explicit limitation provided by another head respect.’15 Such possibility was once recognised of power, even if the final result renders the by Dawson J, who saw a broad interpretation latter ineffective. of external affairs as having ‘the capacity to WorkChoices confirms the centralist obliterate the division of power which is a method embraced by High Court in necessary feature of any federal system and matters of constitutional interpretation. The our federal system in particular.’16 Likewise, in Commonwealth has been allowed to regulate Tasmania Dam (1983) Gibbs J stated: areas originally under state control. Strongly The division of powers between the dissenting in WorkChoices, Callinan J Commonwealth and the states which the commented that such ‘centralizing principles’ Constitution effects could be rendered quite have produced ‘eccentric, unforeseen, improbable meaningless if the federal government could, by and unconvincing results.’ These principles, he entering into treaties with foreign governments added, ‘have subverted the Constitution and on matters of domestic concern, enlarge the the delicate distribution or balancing of powers legislative powers of the [Commonwealth] which it contemplates.’

20 Policy • Vol. 28 No. 2 • Winter 2012 JUDICIAL BETRAYAL

There is nothing in the text or the be able to achieve under its own enumerated structure of the Constitution to suggest powers, such as education,23 health, roads,24 that the Commonwealth’s powers and compulsory purchase of land.25 Section 96 should be enlarged, by successive has become, as Sir Robert Menzies once put it, decisions of this Court, so that the ‘a major, and flexible instrument for enlarging Parliament of each State is progressively the boundaries of Commonwealth action; or, reduced until it becomes no more than to use realistic terms, Commonwealth powers.’26 an impotent debating society. This Court too is a creature of the The states have turned to other Constitution. Its powers are defined sources of ‘taxation’ such as in Ch III, and legislative made under gambling, although remaining heavily it. The Court goes beyond power if it reshapes the federation. By doing that dependent on federal grants. it also subverts the sacred and exclusive role of the people to do so under s 128.18 The financial problems of the states have been aggravated by court decisions that have The money problem prevented states from raising their own taxes. One of the least satisfactory aspects of the States cannot raise anywhere near the revenue federal system is its vertical fiscal imbalance.19 they need. The Commonwealth collects over While the drafters wished to secure the states 80% of taxation revenue (including the GST), with a privileged financial position and but is responsible for only 54% of government independence, the courts have allowed for a outlays. By contrast, the states collect 16% of dramatic expansion of federal taxation powers. As taxation revenue but account for approximately a result, the states have become heavily dependent 39% of all outlays.27 As a result, the states have on the Commonwealth for their revenue, turned to other sources of ‘taxation’ such as so that any semblance of federal balance has gambling, although remaining heavily dependent largely disappeared. on federal grants. When the Commonwealth In 1901, only the states levied income grants money to the states, it often does so with tax. In 1942, the Commonwealth sought to many strings attached. As George Williams acquire exclusive control over the income tax points out, ‘the States have no real choice but to system, which was then confirmed by the High accept the money, even at the cost of doing the Court in the First Uniform Tax Case (1942).20 Commonwealth’s bidding.’28 When the war was over, however, the Commonwealth kept monopolising the income Conclusion tax system. Hence, a further challenge was The continual expansion of Commonwealth made by the states in the Second Uniform Tax powers has resulted in a Federation far removed Case (1957).21 There the court confirmed the from that originally envisaged by the framers. Commonwealth’s income tax system as well as Since the 1920s, the High Court has allowed its power to impose whatever conditions it saw the Commonwealth to expand its powers to the fit in granting money to the states. point where many of the advantages of federalism Section 96 gives the Commonwealth power have either been lost or are not being realised to to grant financial assistance ‘to any State on such their full extent.29 This court needs to understand terms and conditions as the Parliament thinks that the federal structure of the Australian fit.’ The High Court has allowed the grants Constitution, particularly its limited powers section to be used subject to any conditions the conferred upon the central government as opposed federal government chooses to impose.22 As such, to the powers which should have continued with the states have been induced to achieve all sorts the states, ‘by no means implies that federal of objects on behalf of the Commonwealth, legislative power is to be accorded interpretative which the Commonwealth itself would not priority.’ Quite the contrary.30

Policy • Vol. 28 No. 2 • Winter 2012 21 JUDICIAL BETRAYAL

Endnotes 1 Mark Cooray, ‘A Threat to Liberty,’ in Ken Baker 20 v Commonwealth (1942) (ed.), An Australian Bill of Rights: Pro and Contra 65 CLR 373. (Melbourne: Institute of Public Affairs, 1986), 35. 21 Victoria v Commonwealth (1957) 99 CLR 575. 2 Albert V. Dicey, Introduction to the Study of the 22 In South Australia v Commonwealth (First Uniform Constitution (Macmillan, 1915), 387. Tax) (1942). 3 Samuel W. Griffith, Official Report of the National 23 In A-G (Vic); ex rel Black v Commonwealth Australasian Convention Debates (Sydney: 1891), (DOGS) (1981), the High Court held that the 31–32. Commonwealth could grant the states money 4 Commonwealth Parliamentary Debates 8 (1902), on condition that the states then paid it to 10,967. Cited in Geoff Gallop, ‘The High Court: religious schools. Usurper or Guardian?’ Legislative Studies 92 24 In Victoria v Commonwealth (Federal Roads Case) (1995), 60, 61. (1926) 38 CLR 399, the High Court allowed 5 Albert V. Dicey, Introduction to the Study of the the Commonwealth to grant the states money Constitution, as above, n 2, 387–388. on the condition that it should be used to construct 6 Peter Hanks, Jennifer Clarke, Patrick Keyzer, roads designated by the Commonwealth, even and James Stellios, Australian Constitutional though road building did not fall within any Law: Materials and Commentary, seventh edition enumerated power. (Butterworth, 2004), 569. 25 In Pye v Renshaw (1951) 84 CLR 58, the 7 Thomas M. Cooley, Principles of Constitutional High Court dealt with the effect of section Law, third edition (Little, Brown and Co., 1898), 51(xxxi) (Commonwealth’s power to acquire 35−36. property on just terms) and on section 91 (the 8 Walter Sofronoff, ‘Deakin and the Centralising grants power). The High Court held that the Tendency,’ Quadrant (September 2008), 86. Commonwealth is able to get around the 9 Nicholas Aroney, ‘Constitutional Choices in restrictions in section 51 9xxx) by ensuring that the WorkChoices Case, or What Exactly is Wrong the law could not be characterised as land with the ,’ Melbourne acquisition. Hence, section 51 (xxxi) does not University Law Review 32:1 (2008), 1. restrict the section 96, and the Commonwealth 10 As above. can therefore evade the section 51 (xxxi) requirement 11 As above. that property must be acquired on just terms. 12 Clyde Engineering Co Ltd v Cowburn (1926) 26 Robert Menzies, Central Power in the Australian 37 CLR 466, 486. Commonwealth (Cassell, 1967), 76. 13 Harry Gibbs, ‘The Decline of Federalism?’ University 27 Andrew Stewart and George Williams, WorkChoices: of Queensland Law Journal 18 (1994), 1, 3. What the Court Said (Federation Press, 2007), 12−13. 14 R v Burgess; Ex parte Henry (1936) 55 CLR 608, 28 As above, 13. 641. 29 George de Q. Walker, ‘The Seven Pillars of 15 Harry Gibbs, as above, n 13, 5. Centralism,’ in Upholding the Australian Constitution, 16 Victoria v Commonwealth (Industrial Relations Act) proceedings of The Samuel Griffith Society (1996) 187 CLR 416, 9. Conference, vol. 14 (2002). 17 (Tasmania Dams) (1983) 30 Nicholas Aroney, ‘The Ghost in the Machine: 158 CLR 1—Gibbs CJ, dissenting. Exorcising Engineers,’ in Upholding the Australian 18 v Commonwealth (WorkChoices) Constitution, proceedings of The Samuel Griffith (2006) 229 CLR 1, 779. Society Conference, vol. 14 (2002). 19 Brian Galligan and Cliff Walsh, ‘Australian Federalism: Developments and Prospects,’ Plubius 20:4 (1990), 7.

Policy • Vol. 28 No. 2 • Winter 2012 21B The State of Australian Federalism

FEDERATION 2100 Homogeneity may be desired in Australia but it will not destroy federalism

here are unitary states less socially Labor was not party to the formation of the homogeneous than federated federal compact. Australia. France, Italy and England Frustrated by its restrictions on central power, have more regional diversity in speech Labor was committed to a unitary state until Tand manners than we have. Federalism is an the 1970s. Just as Labor became reconciled to acknowledgment of difference, but in Australia federalism, the High Court started removing federation has been used to reduce difference the restrictions on the power of the central between its constituent states. Australia was an government. The scope of section 92 was much early and the most determined practitioner of reduced; the scope of the treaty and corporation apportioning central government funds so that powers were much expanded. Labor, if it the people in every state enjoy the same level were so inclined, could now nationalise banks of governmental services. The GST, raised by the and monopolies. Commonwealth for the states, is apportioned The Constitution is no longer a bar to a on this principle. When Western Australia, made determined federal government doing pretty rich by a mining boom, complains about how much whatever it likes. The case against federalism little it receives, the premier of Tasmania persists chiefly within the commentariat and answers: ‘Do we want to end up like the US or relates to waste and duplication and uncertainties Europe, where there is a gross divide between about accountability. These are standard within the wealth and quality of life enjoyed across federations. Critics who complain of Australia the individual states or member countries?’ being over-governed with its three tiers of (The Australian, 1 May 2012) government overlook the fourth tier—the If there is a deep instinct in Australia to arrangements between governments to make treat its citizens as one and make state borders the federation work. Australia has been creative irrelevant to the quality of life, why do we need in this realm, particularly with the formation of a federation? We don’t have anything like a the Council of Australian Governments (COAG). Quebec that requires federal treatment to keep No voices are ever raised in Tasmania or it in the nation. If the size of the continent was Western Australia about doing away with the once an argument for federalism, it has ceased states. State loyalty is strong everywhere, and to be so with instantaneous communication and stronger in the smaller states where it is cheap air travel. coupled with distrust of Canberra. Since their Federation from the first has been criticised concurrence would be necessary to end the as unnecessary for Australia, and suggestions federation, it is most likely to persist albeit with that the states should be abolished are regularly ever-more elaborate administrative arrangements. made. So will the states survive another The states will survive to 2100, and Australia hundred years? will be an example of the local attachments of a homogenous people being sufficient to sustain a federation.

John Hirst is a historian; his latest book is The Shortest History of Europe.

22 Policy • Vol. 28 No. 2 • Winter 2012 The State of Australian Federalism

SENATE COMMITTEE ON FEDERALISM This article is about an important feature missing from the current federal arrangements: close legislative scrutiny of the state of the Federation by the Commonwealth Parliament

t is remarkable how little the federal consistent with this ‘post-Westminster’ spirit of Parliament does in the name of federalism. institutional innovation. One would think that the Senate as the But there were limits, none more obvious than originally intended ‘federal House’ would the subservience of federalism to ‘responsible Iat the very least have a standing committee on government,’ as exemplified in the readiness to federalism. One possible explanation of the tolerate changes to the Senate so long as they did absence of such a committee is that the political not obstruct strong party control of the lower, parties prefer to mainstream federal issues so and allegedly primary, house. that each and every Senate committee includes a The Senate already delivers remarkable remit to take note of relevant federal implications federal dividends by ensuring that all states are of law or policy under its scrutiny. Such a represented in equal numbers, not only on the political preference would be plausible, but I floor of the Senate but across its pesky committee suspect it is not the real explanation for the system. I acknowledge that the Senate is only Senate, in particular, failing to establish a half the size of the House of Representatives and dedicated committee to monitor the Federation. cannot be expected to devise an institution or The failure reflects the underlying practice to repair every defect arising from the commitment by the major political parties to underlying culture of ‘.’ ‘responsible government’—by which they mean But the one innovative device I hope to see strong party government based primarily in the is a dedicated committee on the state of the House of Representatives. It is sad to think how Federation, comprising representatives of each Australian political parties have overinvested in state and territory, reporting annually on ‘the a very dated version of the ‘Westminster Model,’ state of the Federation.’ something Westminster itself abandoned long The business of this committee would be ago. The Australian constitutionalists in the quite simple: monitor the Council of Australian lead-up to Federation broke away from the Governments (COAG), hold public hearings United Kingdom in so many valuable ways: into COAG activities, and promote wider public They left us a constitutional system that was debate over the content and consequences of the years ahead of Westminster in its explicit executive-dominated agenda of COAG and its commitment to popular democracy. participating ministerial councils. No matter that That spirit of institutional innovation was this committee would holds no real power over nowhere better expressed than in the Australian COAG; what is more important is that the model of where both houses Senate champions regular debate over the reflected elector choice, with an open page of developing nature of Australian federalism potential changes that Australia could then make by bringing an element of public accountability to the Old World Westminster practices. Female to the black box of COAG. suffrage was one of the first, with women voting as equals and eligible to stand as candidates in either house, a generation before Westminster. John Uhr is Professor of Politics at Later changes to bring in preferential and the Australian National University. subsequently proportional voting were

Policy • Vol. 28 No. 2 • Winter 2012 23 FEATURE

IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON? Paul Collits argues that regional policy in Australia requires clear principles based on a proper understanding of the nature of the regions

ollowing the election of Labor in 2010, thing I said, before attempting to answer the the rural independents holding the question, was that there was actually no such thing balance of power in the federal Parliament as ‘regional Australia.’ Rather, there are many negotiated a deal with the minority regional . This is not to say that places Fgovernment that saw a raft of new arrangements outside the capital cities (that part of the country and some new spending initiatives for regional normally thought of as ‘regional’) do not share at Australia.1 least some common characteristics and problems, This was hailed by some as indicating a ‘new but rather that there are many issues specific paradigm.’ The new paradigm was meant to usher to particular kinds of regions—the differences in a fundamental shift in the way governments among regions might actually be as significant, or deal with regional Australia and develop policies more significant, than the differences between the towards it. What this paradigm has wrought for cities and ‘regional Australia.’ Australia as a whole I will let others determine. Regional variations in economic opportunity But what, if anything, has it achieved for and performance reflect, among other things, regional Australia? distance from, and connectivity to, the city; make- To answer this question, I first provide some up and skills of the population; infrastructure; size context to the ongoing debates about regional of the economy; the degree dependence on one Australia, its problems and prospects, and the industry; access to investment capital; the relative proper role of government in ‘managing’ regional impacts of global trends on them; and so on. Australia. I then argue that, first, the notion of Hence, investigating ‘the biggest issue regional Australia is itself problematic; second, confronting regional Australia’ is not a profitable any considerations about regional policy must exercise. take into account certain economic realities, Of course, it is a truism that people in the cities especially those related to Australia’s economy don’t really know much about, or understand, and settlement pattern; third, views about the life in regional areas. The same probably goes for efficacy of regional policies reflect a philosophical perceptions in the other direction.2 debate over ‘people’ versus ‘place’ policies; fourth, regional policy in Australia often gets confused (wrongly) with overall government spending on regional Australia; and finally, while less is nearly Paul Collits is an Associate Professor at always better in terms of regional policy, some the University of Southern Queensland regional policies are decidedly better than others. and Research Director of the Economic Development and Enterprise Collaboration. Is there a place called ‘Regional Australia’? Recently, I was asked what I thought were the Endnotes for this feature can be biggest issues facing ‘regional Australia.’ The first found at www.policymagazine.com.

24 Policy • Vol. 28 No. 2 • Winter 2012 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

Indeed, the prisms through which most city Yet the enduring strength of cities should not people view issues in regional Australia are quite come as a surprise. Large cities offer households inaccurate in at least three respects. First, exposure and businesses one great advantage over regional through the national media to the big stories that locations—you can move house without changing occur in regional areas—often natural disasters, your job (or business location), and you can extreme weather events, and new economic change jobs (or sell your business) without moving opportunities like the resources boom—and to the house. It is far harder to do this in regional areas ongoing perceptions of a lack of services (shortage that lack the cities’ thick labour markets, and of doctors and so on) tends to exaggerate both the hence, broad opportunities for employment and negatives and the opportunities, and miss many career enhancement. This provides a measure of of the underlying complexities of regions and the economic security to people in the cities, as do substantial differences among regions. real increases in housing values, increases that Second, the common urban narrative of (along with superannuation) provide most of the regional Australia—declinism—also often misses wealth in one’s senior years beyond the limits of a the mark. Many regions are performing well government pension. economically and many regions are growing. Many also have vibrant cultures. And regional problems do not always relate to decline, if Regions will always struggle to decline is taken to mean people, businesses and compete with cities as a result of services leaving town. Regional problems also this reality. Their economies are more include skills shortages and high unemployment, narrowly based and more fragile. and some regions arguably can have too much growth and too many people. Third, regional Australia is not just a giant Regions will always struggle to compete with farm or mine. In many ways, regional economies cities as a result of this reality. Their economies are now mirror the national economy, in terms of more narrowly based and more fragile. Lacking their industry structures and employment diversity and scale (‘critical mass’), they are prone patterns, and are certainly not all dominated to external shocks, which they cannot control and by agriculture or mines.3 typically cannot easily ameliorate. The impact of Despite these caveats, and while not all regions the high dollar on tourism is but one of many are the same or in decline, they still do share current examples of this. some important characteristics, so contrasts Broadly speaking, regional Australia relies for with the city are therefore reasonable. its economic fortunes on two things—first, its capacity to sell resources, goods and services for Regional economic realities good prices to the outside world (which includes One of the great features of economic geography Australian cities), and second, the movement is the persistence, even growth, of urbanisation of city dwellers to the regions for ‘lifestyle.’ In in the globalised age, an age where cheaper and rural regions that rely on agriculture and mining, better access to telecommunications technology favourable commodity prices and/or good seasons was meant to reduce the need for most of us to keep the local economy buoyant. In lifestyle (or live in large cities.4 Yet the cities keep growing, ‘sea’ or ‘tree’ change regions), employment grows their success built on the enduring strength of and declines largely on the back of in-migration agglomeration economies and the importance of by city people, including retirees and cashed-up face-to-face interactions.5 people in their 50s. This is a central issue in debates over regional There has been a process of continuing Australia: extreme urbanisation, the relative migration to regions from the cities that absence of mid-sized cities, and the vast, empty compensates for the inevitable out-migration inland. This has been termed the ‘feedlot’ of young people from the regions. This is settlement pattern and is a source of ongoing how regional populations remain relatively astonishment to many who live in regional areas.6 stable, even if they are now ageing considerably.

Policy • Vol. 28 No. 2 • Winter 2012 25 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

(Cities continue to grow, not because of There are (broadly) two ways of looking at the population drift to the city from the country, as ‘problem’ of regional development and regional is often believed and stated, but because of the wellbeing. Recognising that there will always be location preferences of overseas migrants and regional disparities of some sort, one can simply natural increase).7 ignore the disparities and pursue what might Regional prosperity is therefore enhanced by be called ‘people policies,’ that is, encouraging this demographic churn—the continued mobility the most productive use of national resources of city people willing and able to move out— irrespective of where economic activity and which in turn depends on them continuing to people might happen to be located. If this means be confident about their financial futures. This having a few large cities and lots of empty spaces, is under threat because of ongoing nervousness so be it. If regions are in decline, or suffering from following the global financial crisis, and we may the impacts of some economic shock, then policy be witnessing the early stages of a structural shift should encourage people to leave and move to in our national economic psyche—one that could places with greater economic opportunities. This is have profoundly negative consequences for many the so-called neoclassical or economically rational regions, especially lifestyle regions. approach that is, essentially, ‘spatially blind’ and leaves it to the market and to the individual If regions are in decline, or location decisions of households, businesses and investors to determine where economic suffering from the impacts of activity occurs. some economic shock, then A second, more interventionist, approach policy should encourage people is to provide policy support to regions that to leave and move to places with experience problems like population decline or greater economic opportunities. high unemployment. Such an approach might recognise that resources (labour and capital) are mobile and move more or less freely to and In summary, opportunities for businesses from regions and cities, and may concede that and households in regional Australia vary over governments cannot control all the drivers of time and across space. Regional development regional development. It still, however, sees a processes are complex. Regional economic role for government in ameliorating regional problems vary in type and intensity. For some problems. In some more ambitious attempts at regions it is high unemployment, for others it is supporting regional wellbeing, policies seek to the loss of population and skills. While economic achieve a measure of spatial equality by lifting opportunities abound, it can be genuinely difficult ‘lagging’ regions to be closer to the performance to build careers and wealth because regional of other regions. These are so-called ‘place’ policies economies are inherently lacking scale, narrowly (also known as regional or spatial policies).9 based, and fragile. In most regions, incomes are We have certainly had our fair share of place lower than in the cities, and skills shortages are policies in Australia over many decades, though often endemic because of structural mismatches nowhere near on the same scale as (for example) between the skills people living there have (or Europe since the creation of the European Union. more accurately, do not have) and the (often Traditionally, state and national governments limited) opportunities available. in Australia have sought to address problem issues in regional areas in four ways—first, by providing Policy interventions in regional services that aspire to replicate the standard Australia of services offered in the cities, for example The varying conditions and structural fragility of in health and education, to support rural and regional economies raises the question as to what, regional lifestyles (notwithstanding the difficult if anything, should be done by governments to realities of distance); second, by providing address these fundamental regional deficits.8 economic development support for regions to

26 Policy • Vol. 28 No. 2 • Winter 2012 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

address the narrowness of their economies or the (which include just about anything that could effects of economic shocks through a range of be seen as contributing to regional Australia) programs; third, by providing modest funding in their election and budget documents. But for a structure of local and regional institutions this only shows how much they care about the to help organise regional development; and regions, not whether the policies are warranted fourth, by compensating regions for the negative and appropriate. impacts of other government policies. These Part of the problem, of course, lies in seeing policy instruments are shaped by the reality that ‘regions’ outside the capital cities as equalling local government is weak almost to the point of something called ‘regional Australia,’ then powerlessness in Australia and that we do not comparing this thing to the evil capital cities have genuinely ‘regional’ government to match that get everything, own everything, dominate our regional economies.10 While the level of the government, and ignore regional Australia. policy support to regions has generally not been (Having an Australian prime minister once liken substantial, from time to time there have been living outside Sydney to ‘camping out’ might be ambitious, even grandiose, attempts at resetting seen as feeding the regional-policy-as-addressing- Australia’s settlement pattern and the location grievances mindset that is so common). This of economic activity, but these (mercifully) have continues to be a large part of the narrative been rare. about ‘regional Australia.’12 Redressing perceived political inequalities is the rationale behind the How big is my commitment? regions-first rollout of the NBN and the fetish Does size matter? for big-ticket infrastructure projects such as new One of the big problems for regional policy regional hospitals or university campuses. Again, debates in Australia is equating regional policy this demonstrates political ‘commitment,’ not with ‘spending on regions.’ There is an unfortunate policy efficiency or a new paradigm. tendency to see regional policy as nothing more than spending money on regions, either as a vote buying exercise in particular regions The reduction of regional policy (electorates) or as a demonstration of government to spending money on regions is ‘commitment’ to regional Australia as a whole. unfortunate because not all regional An example of the first problem was the policies are worthless or motivated Howard government’s Regional Partnerships by politics. Program, which was subjected to the criticism that its implementation was politically motivated.11 Many other regional policies have suffered The reduction of regional policy to spending from similar criticisms, including the Gillard money on regions is unfortunate because not all government’s rollout of the National Broadband regional policies are worthless or motivated by Network (NBN), and such criticisms are politics, and not all regional policies are equally often deserved. worthy of criticism. Equating ‘big spending The second problem means that whatever on regions’ with ‘regional policy’ is particularly the intent or shape of the various types of policy disappointing for those of us who want more intervention over time, most people (especially thoughtful, evidence-based policies for regions. politicians) outside of cities have seemingly Politicians and bureaucrats should be able and worried more about a government’s ‘commitment’ willing to defend their spatial interventions to regional Australia (generally measured by the by referring to the objectives of the spending, size of the spend) than about the thoughtfulness explaining what the policies have achieved or are of the policies, their relevance to particular likely to achieve, and demonstrating an awareness regions, or their likely effectiveness. This is why of the opportunity costs of regional spending. governments and their spin doctors routinely Equally, the tendency of regions and their emphasise the dollars spent on regional programs leaders to focus on a government’s ‘commitment’

Policy • Vol. 28 No. 2 • Winter 2012 27 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

and the level of spending rather than on the the questions: What would good regional policy quality of the policy means they often mistake look like? Would we know it if we saw it? Can it ‘big’ policy for ‘good’ policy. This can be seen be justified? If so, under what circumstances? in the longing for EU-style interventions or the These are questions every government should mistaken belief that simply diverting funds to ask and answer before either choosing to ignore regions experiencing economic difficulties will regions in their policies or starting big ticket turn the fortunes of those regions around. spending initiatives. And what of the ‘new paradigm’ that was said The questions are fundamental yet relatively to have arisen following the 2010 election and the straightforward, and generally are never asked emergence of the rural independents? Despite its or answered by Australian governments and attempt to embed new structures in government in political parties. Strangely, especially in this era of Canberra that gave greater recognition to regional endless references to ‘evidence-based policy,’ no Australia, the new paradigm looks a lot like the government to my knowledge has sat down upon previous peaks of political interest in regional winning office (or in opposition beforehand) matters. Despite glib references to the ‘patchwork and asked them. Again, this has a lot to do with economy’ and ‘localism,’ neither the government politicians seeing regional policy as being about nor its backers on the crossbenches have narrated ‘commitment.’ (Ironically, perhaps the one a convincing account of what regional Australia exception here was the Whitlam government, is, what its problems are, and why it is important which, whatever its other foibles, did try to name to support it in various (particular) ways through the regional problem and address it systematically. policy and government spending. There is more It is just that the problem it identified—the to justifying regional policy than just reflecting on fundamental imbalance in Australia’s settlement the fact that a third of Australians live outside the pattern—is impossible for any government capitals, or that the cities get unfair advantages. to solve). The core questions of regional development Good regional policy should have are as follows: What are we trying to achieve (or, clear objectives. These should relate put another way, what is the ‘regional problem’)? Whose responsibility is regional wellbeing to the problems of different regions. and regional development or (which level of government is responsible, or is it not the role of In terms of the specifics of the current government at all but rather of local communities approach, there continues to be the familiar and business)? What really drives regional growth mixture of apparently unconnected regional and decline? What can government policies do programs; inadequately resourced regional about these drivers? What has actually worked structures (the Regional Development Australia in terms of strategies and programs, and at what committees) looking for a serious role; and an cost? When should government intervene (what unflinching faith that spending large amounts triggers intervention)? Where (that is, in which on infrastructure projects big and small across regions) should government intervene? And, how most regions is the best way to fund regional much should government intervene? development. The latter is seen in the substantial Some of these questions can be answered spending on the Regional Development Australia empirically using appropriate metrics and Fund (RDAF), which resembles in many respects research, while others are a matter of ideology the Regional Partnerships Program of the Howard and philosophy. And governments tend to ignore government, only with more dollars. them, at least partly because, as John M. Keynes once said, ‘There is nothing a politician likes so What does good regional policy little as to be well informed; it makes decision look like? making so complex and difficult.’13 Spending big (or bigger) on regional Australia is Good regional policy, which I believe will not the same as good regional policy. This begs turn out to look very different from ‘big’

28 Policy • Vol. 28 No. 2 • Winter 2012 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

regional policy, must address these questions. While there is no doubt the Europeans squander The following modest proposals might take untold monies on chasing the unreachable dream regional policy in a better direction than of spatial equality of outcomes, they do at least hitherto experienced: analyse what they do in regional policy, measure • Above all else, good regional policy should it, evaluate it, and debate it robustly. They engage have clear objectives. These should relate researchers and practitioners through various to the problems of different regions, mechanisms that lead to policy learning. as measured against previous regional performance and the performance of other regions. Spending decisions should be • It should be up to regions to identify radically de-politicised and given their own issues and priorities. Spending to regional bodies, and central decisions should be radically de-politicised governments should do less. and given to regional bodies, and central governments should do less. At least this should be debated. They also have a very good principle called • Interventions should reflect the drivers of ‘subsidiarity,’ which accords responsibility for growth and decline in the region concerned. the delivery of policy to lower and more local • Failure standards (yes, the idea that levels of government. This is a very worthwhile spooked ‘Sir Humphrey Appleby’) should philosophy that recognises regional differences be embedded and should inform policy and remembers that the views of people in the decisions. Realistic evaluations must be regions are significant when determining how best part of the policy cycle. to support them through policy. • Regions should determine their own regional boundaries. Designated regions Where to from here? should be real economic regions with Finally, will good (or better) regional policy save definable communities of interest. regions experiencing the structural difficulties • The impacts of non-regional policies described above? The short answer, from the on different regions should be routinely foregoing analysis, must surely be ‘no.’ examined. I believe regional policy sceptics make a • Local governments should have a bigger powerful case. The case is made even more role, more powers, and fewer constraints. powerful by the many examples of poor regional Their staff should be better trained in policy initiatives that abound, and which so often regional development. can be shown to be based on not much more • Regional development authorities should than electoral white boarding. More importantly, either be funded properly or disbanded, the drivers of regional wellbeing are so complex, and not simply used as filters for centrally and so recognisably beyond the control or even determined funding decisions. influence of central governments, that extreme • A statutory authority at some distance from policy caution is advised. Regional policy is ministers could assist in embedding good no panacea. regional policy in central governments. On the other hand, achieving far better • Finally, regional policy must get let go regional policy is quite achievable, and given of the conviction that big infrastructure that policy interventions to ‘help’ regions will no projects like the NBN or indeed hundreds doubt continue till the end of time, why don’t we of smaller infrastructure projects will ‘save’ at least have a better go at getting it right? regional Australia.

Policy • Vol. 28 No. 2 • Winter 2012 29 IS THERE A REGIONAL AUSTRALIA, AND IS IT WORTH SPENDING BIG ON?

Endnotes 1 Australian Labor Party, ‘The Australian Labor Party 8 John Freebairn, ‘Economic Policy for Rural and the Independent Members Agreement’ (2010). and Regional Australia,’ Australian Journal of 2 Judith Brett, ‘Fair Share: Country and City in Agricultural and Resource Economics 47 (2003); Australia,’ Quarterly Essay 42 (2011). Grattan Institute, Investing in Regions: Making 3 Richard Stayner, ‘The Changing Economics of a Difference (Melbourne: 2011). Rural Communities,’ in Chris Cocklin and Jacqui 9 Tony Sorensen, ‘Regional Development: Some Dibden (eds), Sustainability and Change in Rural Issues for Policy Makers,’ Australian Parliamentary Australia (Sydney: 2005). Library Research Paper 26 (2000); Andrew Beer, 4 Joel Kotkin, The New Geography: How the Digital Alaric Maude, and William Pritchard, Developing Revolution Is Reshaping the American Landscape Australia’s Regions: Theory and Practice (Sydney: (New York: 2001). 2003); Edward L. Glaeser and Joshua D. Gottlieb, 5 Edward E. Leamer and Michael Storper, ‘The ‘The Economics of Place-Making Policies,’ Economic Geography of the Internet Age,’ Harvard Institute of Economic Research, National Bureau of Economic Research Working Discussion Paper No 2166 (2008). Paper Series 8450 (Cambridge, Mass: 2001); Mario 10 Paul Collits, ‘Planning for Regions,’ in Susan Polese, The Wealth and Poverty of Regions: Why Thompson and Paul Maginn (eds), Planning Cities Matter (Chicago: 2009); Edward L. Glaeser, Australia: An Overview of Urban and Regional Triumph of the City: How Our Greatest Invention Planning, second edition (Melbourne: 2012). Makes Us Richer, Smarter, Greener, Healthier and 11 Australian National Audit Office, ‘Performance Happier (New York: 2011); Philip McCann and Audit of the Regional Partnerships Programme,’ Zoltan J. Acs, ‘Globalisation: Countries, Cities Vols I–III (Canberra: Commonwealth of and Multinationals,’ Regional Studies 45:1 (2011). Australia, 2007). 6 Tony Windsor quoted in Judith Brett, ‘Fair Share: 12 Judith Brett, ‘Fair Share: Country and City in Country and City in Australia,’ as above. Australia,’ as above. 7 Paul Collits, ‘A Question of Balance? The Fate 13 Quoted in Ian Sanderson, ‘Evaluation, Policy of Balanced Development as a Regional Policy Learning and Evidence-Based Policy Making,’ Objective in New South Wales,’ unpublished Public Administration 80:1 (2002). PhD thesis (University of New England, 2002).

Policy • Vol. 28 No. 2 • Winter 2012 29B FEATURE ‘On Tolerance’ Frank Furedi argues that the meaning of tolerance has changed in the modern world, and not for the better

olerance is an important ideal that ‘had not been a virtue at all, but, on the contrary, is indispensable for the working of a a sign of weakness, not to say cowardice.’ genuinely free and democratic society. He added that ‘duty and charity’ forbade people Yet it is an ideal we take for granted to be tolerant.1 Tand do not take very seriously. Numerous articles It was in the seventeenth century that and books on this subject treat it as a boring attitudes towards tolerating competing ideas and rather insignificant idea that doesn’t go far and religions began to change. In part, the rise enough to secure a just society. Others depict of secularism and rationality encouraged a more tolerance as a disinclination to judge or to have sceptical orientation towards religious dogmatism strong views about the behaviour of others. and intolerance. This was also a period when Increasingly, we are in danger of forgetting Europe was overwhelmed by bitter religious what tolerance as an intimate companion conflicts that frequently resulted in bloody civil of liberty and freedom actually means. The wars. In such circumstances, calls for tolerance aim of this lecture is to remind ourselves that were influenced by the pragmatic calculation tolerance constitutes one of the most precious that without a measure of religious toleration, contributions of the Enlightenment movement endemic violence and bloodshed could not be to modern life. Without tolerance we cannot avoided. This was the moment when a significant be free, we cannot live with one another in minority of Europeans recognised that tolerance relative peace, we cannot follow and act on our was a pre-requisite for their society’s survival. conscience, we cannot exercise our moral The American philosopher Michael Walzer autonomy, and we cannot pursue our own road emphasised the significance of this insight when towards seeking the truth. he said toleration ‘sustains life itself.’ Time and It is important to recall that tolerance is again, we have needed to remind ourselves that a very recent ideal in historical terms. Until ‘toleration makes difference possible; difference the seventeenth century, the toleration of makes toleration necessary.’2 different religions, opinions and beliefs was The aim of seventeenth-century advocates interpreted as a form of moral cowardice if not of tolerance such as John Locke was to protect a symptom of heresy. Indeed, medieval witch- religious belief from state coercion. Locke’s hunters and inquisitors were no less concerned advocacy of tolerance represented a call for with stigmatising those who questioned their restraining political authorities from interfering intolerant practices than they were with hunting with the workings of individual conscience. down witches and heretics. The fifteenth-century Over the centuries, this affirmation of religious witch-hunters’ manual, Malleus Maleficarum, claimed those who denied the existence of Professor Frank Furedi is the author witches were as guilty of heresy as the active of On Tolerance: In Defence of Moral practitioners of witchcraft. In the sixteenth century, scepticism was frequently treated as Independence. This essay is based on the a particularly dangerous form of anti-Christian speech ‘Freedom of Speech: The Case heresy. As the French historian Paul Hazard for Tolerance’ he gave for The Centre for noted in his pioneering study, The European Independent Studies in Melbourne in 2011. Mind, until the seventeenth century, tolerance

30 Policy • Vol. 28 No. 2 • Winter 2012 ‘On Tolerance’

tolerance was expanded to allow the free it becomes evident that the meaning of this expression of opinions, beliefs and behaviour term has radically altered. It has mutated into a associated with the exercise of the individual superficial signifier of acceptance and affirmation conscience. Tolerance is intimately connected to of anyone and everyone. In official documents the affirmation of the most basic dimension of and school texts, tolerance is used as a desirable freedom—the freedom of belief and conscience. character trait rather than as a way of managing The ideal of tolerance demands that we accept conflicting beliefs and behaviour. So one can be the right of people to live according to beliefs tolerant without any reference to a set of beliefs and opinions that are different, sometimes or opinions. Moreover, tolerance as an act of antithetical to ours. Tolerance does not invite us not interfering or attempting to suppress beliefs to accept or celebrate other people’s sentiments. that contradict one’s own sentiments has given It demands that we live with them and desist way to the idea that it also involves not judging from interfering or forcing others to fall in line other people and their views. So instead of with our own views. serving as a way of responding to differences of Tolerance pertains to the domain of the views, tolerance has become a way of not taking political/philosophical through its avowal of them seriously. Arguably, when tolerance is the principle of non-interference towards the represented as a form of detached indifference or way people develop and hold beliefs and a polite gesture connoting automatic acceptance, opinions. Tolerance affirms the freedom of it becomes a vice rather than a virtue. conscience and individual autonomy. As long as an act does not violate a person’s moral autonomy and harm others, tolerance also calls The ideal of tolerance demands for the absence of constraint on behaviour that we accept the right of linked to the exercise of individual autonomy. people to live according to beliefs From this perspective, tolerance can be and opinions that are different, measured in relation to the extent to which sometimes antithetical to ours. people’s belief and behaviour is not subject to institutional and political interference and restraint. Second, tolerance is also a social/cultural One reason why tolerance was interpreted accomplishment. A tolerant society is one where as a virtue historically was because it implied tolerance as a cultural orientation discourages a willingness to tolerate disagreeable beliefs and restrains social intolerance. This was and opinions instead of attempting to suppress a concern eloquently pursued by the philosopher them. According to the classical liberal outlook, John Stuart Mill, who warned about the ‘tyranny tolerance involved an act of judgment and of public opinion' and its tendency to stigmatise discrimination. But judgment does not serve as and silence minority and dissident beliefs. a prelude to censoring another person’s wrong Upholding the disposition to be tolerant is belief because tolerance demands respect for always a challenge, and as experience shows, the right of people to hold beliefs in accordance legal safeguards can always come unstuck when with their conscience. Indeed, the recognition confronted by a tidal wave of intolerance. of the primacy of the virtue of freedom imposed on the truly tolerant implies the responsibility What tolerance is not to refrain from attempting to coerce religious Anyone perusing policy documents, mission and political opponents into silence. Voltaire’s statements, school textbooks, and speeches made frequently repeated statement, ‘I disapprove by politicians and policymakers is likely to be of what you say, but I will defend to the death struck by the frequency with which the term your right to say it,’ expressed the intimate tolerance is used and praised. Outwardly at least connection between judgment and a commitment everyone appears to celebrate tolerance, and it to freedom. In contemporary public discussion, is difficult to encounter any significant acclaim the connection between tolerance and judgment for intolerance. However, on closer inspection, is in danger of being lost due to the current

Policy • Vol. 28 No. 2 • Winter 2012 31 ‘On Tolerance’

cultural obsession with being non-judgmental. signifies a form of automatic acceptance, An analysis of the current usage of tolerance it becomes a performance in expected behaviour. indicates that it is frequently used as a companion The most troubling consequence of the rhetorical term with ‘inclusive’ and ‘non-judgmental.’3 transformation of this term has been its As a fascinating survey of American political disassociation from discrimination and judgment. culture concluded, ‘Thou shalt not judge’ has When tolerance acquires the status of a default become the eleventh commandment of middle- response connoting approval, people are protected class Americans. Alan Wolfe, the study’s author, from troubling themselves with the challenge of noted: ‘Middle-class Americans are reluctant engaging with moral dilemmas. to pass judgment on how other people act and The call to reinterpret tolerance as a sentiment think.’4 While the reluctance to judge other to convey non-judgmentalism or indifference people’s behaviour has its attractive qualities, it is is often presented as a positive character trait not necessarily a manifestation of social tolerance. of the open-minded person. But the gesture of affirmation and acceptance can be seen asa When tolerance acquires the way of avoiding making difficult moral choices and of disengaging from the complicated status of a default response challenge of explaining the values that have to connoting approval, people be upheld. It is far easier to dispense with the are protected from troubling idea of moral judgment than with explaining themselves with the challenge of why a certain way of life is preferable to the one engaging with moral dilemmas. that can be tolerated but not embraced. Tolerance has also been adapted by well- meaning national and international agencies and The confusion of the concept of tolerance institutions as an adjective that conveys a sense with the idea of acceptance and valuation of of harmony and peacefulness. Not infrequently, other people’s beliefs and lifestyles is strikingly it is depicted as the polar opposite of conflict. illustrated in UNESCO’s Declaration on the The UNESCO Declaration on Tolerance is Principles of Tolerance: ‘Tolerance is respect, paradigmatic in this respect. Its call for tolerance acceptance and appreciation of the rich diversity is presented as a response to its alarm: of our world’s cultures, our forms of expression and ways of being human’ and it is ‘harmony … by the current rise in acts of in difference.’5 From this perspective, tolerance intolerance, violence, terrorism, becomes an expansive and diffuse sensibility that xenophobia, aggressive nationalism, unquestioningly appreciates other cultures. It is racism, anti-Semitism, exclusion, a sensibility that doesn’t judge but automatically marginalization and discrimination accepts and offers unconditional appreciation directed against national, ethnic, of different views and cultures. This official religious and linguistic minorities, declaratory rhetoric of tolerance is often used refugees, migrant workers, immigrants in schools, and children interpret it as an and vulnerable groups within exhortation to be nice to other people. societies, as well as acts of violence and The reinterpretation of tolerance as a intimidation committed against psychological attitude that conveys acceptance, individuals exercising their freedom of empathy and respect means that it has lost its opinion and expression—all of which real meaning in public deliberations. Yet it threaten the consolidation of peace is precisely the intimate connection between and democracy, both nationally and disapproval/disagreement and toleration that internationally, and are obstacles to endows tolerance with enormous significance. development.6 The act of tolerance demands reflection, restraint and a respect for the right of other people to find The representation of tolerance as an antidote their way to their own truth. Once tolerance to a variety of group conflicts represents an

32 Policy • Vol. 28 No. 2 • Winter 2012 ‘On Tolerance’

understandable but unhelpful expansion of the Historically, laws concerning religious meaning of tolerance. tolerance emerged before other forms of The reorientation of tolerance from personal democratic freedoms were recognised. It is beliefs to group identities does not simply mean essential to understand that tolerance is not only its quantitative expansion but a qualitative chronologically but also logically prior to the ideas transformation in meaning. Tolerance has of freedom and liberty. If people are not allowed a different meaning when addressed towards to hold their own beliefs and act in accordance religious beliefs and political opinions that with them, their very potential for exercising express ‘individual moral understanding’ to when their moral autonomy becomes compromised. it is directed towards ‘attributes or identities taken to be given, saturating, and immutable.’7 The tendency to perceive differences in group Unfortunately in contemporary and cultural terms distracts attention from society, differences in views are conflicts of belief and opinion. However, it is invariably represented as cultural important to understand that tolerance pertains rather than as linked to individual to beliefs and behaviour and not to differences conscience or moral reasoning. in cultural or national identities. Everyone who upholds liberty will adopt a liberal and open-minded approach towards the right of all Outwardly, we live in an era that appears people to be who they are. But the recognition more open minded, non-judgmental and tolerant of this right has little to do with the classical that at any time in human history. The very ideal of tolerance. Tolerance is in the first term ‘intolerant’ invokes moral condemnation. instance directed towards opinion and belief Time and again, the public is instructed on the and not towards groups and people. In such importance of respecting different cultures and circumstances, what’s called for is the affirmation diversity. Students are frequently reminded that of the democratic right to equal treatment. there is no such thing as the right answer and The term tolerance can be used to signify an that there are many truths. Those with strong approach towards a person and a group insofar beliefs are often dismissed as fundamentalists as it pertains to beliefs and opinions and forms or zealots. Yet the language of open-minded of behaviour linked to them. So tolerating liberalism exists in an uneasy relation with Protestants, Muslims or Jews pertains not to censorious and intolerant attitudes towards their DNA or their cultural or national identity those causing moral outrage. That policymakers but to their beliefs and the rituals and practices and politicians can so casually demand ‘zero associated with them. Unfortunately in tolerance’ indicates that at the very least, society contemporary society, differences in views are is selective about how it applies the principle invariably represented as cultural rather than of tolerance. as linked to individual conscience or moral Zero tolerance can be understood as a cultural reasoning. According to this perspective, metaphor that prescribes an indiscriminate belief is not so much the outcome of reflection, template response to different forms of conscience, revelation or discovery but an undesirable behaviour. Initially, zero tolerance attribute of identity. One important consequence was invoked as the threat of an automatic of this shift in emphasis is that belief and opinion punishment of certain forms of criminal are seen as less an attribute of individuals and behaviour and legal infraction. Since the 1990s, more as an immutable character of the culture the policy of zero tolerance has been expanded they personify. No longer a product of reflection into the school system to refer to acts of and thought, beliefs acquire the fetish-like form bullying, harassment, possessing drugs or of a cultural value that is fixed and not susceptible weapons. In the UK public sector, it is common to a genuine conversation. In such circumstances, to come across signs that warn zero tolerance tolerance can only mean an acceptance of the towards aggressive behaviour towards members fossilisation of difference. of staff. In recent times, the term zero tolerance

Policy • Vol. 28 No. 2 • Winter 2012 33 ‘On Tolerance’

has been adopted by politicians, opinion makers, to promote tolerance opportunistically and and business people to communicate the idea tactically. This tendency continues to this day. that they feel strongly that the target of their During the course of a debate in Amsterdam, concern should be suppressed. The casual way I encountered people who agreed that there with which zero-tolerance policies—which serve should be tolerance towards people prepared as warrants for intolerance—are affirmed expresses to criticise Islam but that there should be zero the shallow cultural support enjoyed by the ideal tolerance towards deniers of the Holocaust. of tolerance. I also have had the pleasure of meeting people who argue the reverse and insist that while The casual way with which zero- it is tolerable to question the existence of gas tolerance policies—which serve chambers in Auschwitz, any blasphemy directed towards the Koran should be banned. as warrants for intolerance— The double standard that afflicts discussions are affirmed expresses the around the Holocaust or Islam is regrettably all shallow cultural support enjoyed too evident in relation to a variety of subjects, by the ideal of tolerance. even in serious academic literature. Somehow, abstract philosophical explorations of the tensions contained within tolerance conclude by Although the term zero tolerance conveys the taking sides. Indeed, it is difficult to avoid the idea that its author means business, it also calls conclusion that such philosophical enquiries are into questions the cultural and human qualities far from disinterested studies of the application usually associated with the capacity to tolerate. of the idea of tolerance to contemporary debates As social commentator Bruce Schneier reminds about identity politics, lifestyle controversies, or us, ‘these so-called zero-tolerance policies are the right of free speech to offend. All too often, actually zero-discretion policies.’8 These are the they represent a plea for tolerating or respecting policies that are meant to be applied arbitrarily groups and views that they uphold and for and punish without regard to circumstances. It adopting an intolerant stance towards those they spares judges and officials from having to think condemn. So the Italian political philosopher about the circumstances affecting a particular Anna Galeotti insists that minorities are not just event and from exercising their capacity to to be tolerated but also respected, whereas those discriminate and judge. The abolishing of the use ‘hate speech’ against them can be censored employment of discretion reflects a general unease and silenced. ‘It is argued that the restriction of with the act of judgment and discrimination. some people’s liberty is necessary to allow for the Yet these qualities are essential for developing full toleration of differences which are the target of the disposition to tolerate and also to develop discrimination and prejudice,’ she contends.9 an understanding of what form of behaviour The regularity with which double standards cannot be tolerated. The widespread usage of are applied towards tolerance indicates that such this metaphor indicates that non-judgmentalism inconsistency is not simply a symptom of moral is a value upheld not only by the advocates of opportunism but also the absence of a robust tolerance but also by promoters of zero tolerance. system of cultural support for genuine tolerance. Their joint hostility towards discretion indicates Indeed, it is striking how the official exhortation they may have more in common than they suspect. to be tolerant appears to lack significant intellectual and moral support. Although there Tolerance under attack are some important honourable exceptions, Tolerance has always been very selectively academics and social commentators do not elaborated, conceptualised and applied. From appear to take tolerance very seriously. Often, the outset, its advocates believed in the tolerance tolerance is casually dismissed, treated as an ideal of some views but not others. Throughout past its use-by date, or represented as a necessary the seventeenth century, religious leaders, but passive act of putting up with someone philosophers and political leaders tended else’s view. The act of tolerance also attracts

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fundamentally negative connotations because it Calling upon powers to be tolerant involves putting up with views deemed wrong once meant asking them to moderate or inferior. ‘Because of tolerance’s negative their strength and to limit their ability connotations, it is frequently rejected as a to do harm: this actually implied an political principle in favour of loftier ideas of acceptance of a power relationship equality, liberty, or respect,’ writes one thoughtful that might exist between the State and commentator on this subject.10 individuals, the police and citizens, or In recent decades, the negative representation between colonizers and the colonized.13 of tolerance has gained significant momentum. ‘In many circles, toleration has a negative It is important to recall that the call for image,’ writes an Australian political scientist. tolerance by early liberals like Locke, and later ‘It is associated with either mere toleration by Mill, was not motivated by the objective of (as opposed to some sort of enthusiastic challenging relations of power but by the goal acceptance or respect), and also with the necessary of restraining the state from regulating people’s association of a negative value.’11 The idea views and opinions. This outlook was motivated that ‘mere tolerance’ is not enough or is even by the impulse of upholding the freedom of disrespectful is fuelled by a cultural sensibility belief, conscience and speech because liberals that is deeply uncomfortable with the act of took the view that it was preferable for people making value judgments and of questioning and to find their own path to the truth than that criticising other people’s version of the truth. truth should be imposed from above.14 It was Indeed, one way of freeing tolerance from having how the power of the state was used rather a negative image is by disassociating tolerance than the relation of power that the demand from judgment. for toleration sought to address. However, The claim that tolerance is not enough is often Ramadan’s principal motive for questioning the associated with the argument that it is not really virtue of tolerance is not his commitment to suitable for managing conflicts between different question the prevailing relations of power but individuals and groups in contemporary society. his objection to the acts of judgment, evaluation Professor of Islamic Studies Tariq Ramadan is and discrimination that are integral to the act prepared to accept that tolerance had some value of tolerance. in the distant past but contends that it no longer possesses any positive virtues. Liberals took the view that it was What was once an act of resistance in preferable for people to find their the face of powers (which can also be own path to the truth than that truth represented by the majority, the elite, the should be imposed from above. rich, and so on), and a brave, determined call inviting them to be tolerant, changes its meaning and import when Ramadan regards tolerance as a form we are dealing with equal relationships of paternalism towards the objects of their between free human beings, relations tolerance. He castigates tolerance as the between the citizens of civil society, or ‘intellectual charity’ of the powerful. Indeed, even relations between different cultures from this perspective, this act constitutes an and civilizations.12 insult since ‘when standing on equal footing, one does not expect to be merely tolerated According to this argument, tolerance or grudgingly accepted.’15 In an era where has lost its positive content because it no acceptance and affirmation have acquired longer involves the questioning of power. the status of a default gesture towards other Consequently, Ramadan portrays the call for people, tolerance can readily be interpreted as tolerance as expressing acquiescence to prevailing patronising or simply not enough. It is power relations. frequently argued that people ‘do not want to

Policy • Vol. 28 No. 2 • Winter 2012 35 ‘On Tolerance’

be subject to the negative valuation that tolerance meaning, he seeks to consign it to the vocabulary necessarily seems to carry with it.’ According of cultural domination. He insists that ‘when to the philosopher John Horton, people want it comes to relations between free and equal more than tolerance: ‘The demand for more human beings, autonomous and independent than mere tolerance is the demand that what nations, or civilizations, religions and cultures, one is or does no longer be the object of the appeals for the tolerance of others are no negative valuation that is an essential ingredient longer relevant.’ Why? Because ‘when we are of toleration.’16 on equal terms, it is no longer a matter of conceding tolerance, but of rising above that and educating ourselves to respect others.’18 It Calls for respect and is worth noting that the liberal idea of tolerance recognition do not simply mean also upholds the notion of respect. Not the an exhortation to be polite and unconditional affirmation transmitted by today’s sensitive to the beliefs, cultures anti-judgmental respect but the liberal notion and predicament of other people. of respecting people’s potential for exercising moral autonomy. It is important to understand that calls for The statement that people do not want to be respect and recognition do not simply mean tolerated is another way of saying that not only an exhortation to be polite and sensitive to do they not want to be judged but they also want the beliefs, cultures and predicament of other to be affirmed. Western culture’s dissonance with people. It often expresses disenchantment with tolerance is further reinforced by its celebration people’s capacity to exercise moral agency. The of the therapeutic value of affirmation and provision of unconditional recognition is based self-esteem. Today, the affirmation of individual on the belief that individuals and groups are and group identity is frequently presented as disposed towards psychological harm unless a sacred duty. It is precisely the contradiction they are routinely affirmed. The conviction between tolerance and affirmation that fosters that people require affirmation is based on the an inhospitable cultural climate for the practice premise that they lack the intellectual and moral of tolerance. One strategy for overcoming this resources to cope with conflicting opinions. contradiction is to expand the meaning of In particular, critics of tolerance are frequently tolerance to encompass the ideas of acceptance hostile or sceptical about the very exercise of and respect. Galeotti argues along this line for individual autonomy. a ‘general revision of the concept of toleration.’ Opponents of the liberal idea of tolerance What she proposes is the transformation of the insist they aspire to something more elevated or meaning of tolerance so that it communicates progressive than the gesture of mere toleration. the act of recognition, saying ‘toleration will Often, they insist that the classical concept of be conceived as a form of recognition of tolerance is too negative and what they propose different identities in the public sphere’ through is a more positive version of this ideal. Former a ‘semantic extension from the negative meaning Taoiseach of Ireland Garrett Fitzgerald recalled of non-interference to the positive sense of that for him the word toleration ‘still carries acceptance and recognition.’17 This semantic echoes of at best grudging acceptance, and at extension of the concept to encompass the idea worst ill-disguised hostility,’ which is why he of uncritical recognition transforms its very wants a more positive term that affirms ‘human meaning. Positive tolerance is a contradiction solidarity.’19 The German philosopher Karl-Otto in terms. In effect, it is another term for Apel argues that negative tolerance is not unconditional acceptance. sufficient to deal with the challenges faced bya Ramadan also upholds the value of recognition multicultural society. He calls for the embrace and respect but because he is far more consistent of ‘positive or affirmative tolerance’ that respects than Galeotti, he rejects the concept of tolerance and ‘even’ supports a ‘variety of value traditions.’20 altogether. Instead of giving tolerance a new However, the claim that the classical ideal

36 Policy • Vol. 28 No. 2 • Winter 2012 ‘On Tolerance’

of tolerance is merely negative is based on a Endnotes misunderstanding of the dialect of tolerance 1 Paul Hazard, The European Mind: 1680−1715 and disapproval. An example of this confusion (1935) (Harmondsworth: Penguin, 1973), 344. is provided by Galeotti when she writes, ‘if they 2 Michael Walzer, On Toleration (New Haven, CT: could, tolerant people would wish the tolerated Yale University, 1997), xii. behaviour out of existence.’21 The argument 3 See Frank Furedi, On Tolerance: A Defence of that given half a chance, the tolerant would Moral Independence (Continuum Press, 2010). rather get rid of the views that they disapprove 4 Alan Wolfe, One Nation, After All: What Middle-Class misunderstands the meaning of tolerance. The Americans Really Think About (New York: Viking act of tolerance is not a grudgingly extended Penguin, 1998), 54. altruistic gesture. Nor does it simply mean 5 UNESCO, ‘Declaration on the Principles of deciding to live with behaviour and sentiment Tolerance’ (1995). that one disapproves. It represents a positive 6 As above. appreciation of the necessity for diverse views 7 Wendy Brown, Regulating Aversion: Tolerance in the and conflicting beliefs. As Mill noted, individual Age of Identity and Empire (Princeton, NJ: Princeton autonomy can only flourish when exposed University Press: 2006), 35. to a variety of opinions, beliefs and lifestyles. 8 Bruce Schneier, ‘Zero-Tolerance Policies’ Tolerance represents a positive orientation (3 November 2009). towards creating the conditions where people can 9 Anna Galeotti, Toleration as Recognition (Cambridge: develop their autonomy through the freedom Cambridge University Press, 2002), 14. to choose. 10 Leslie C. Griffin, ‘Fighting the New Wars of Critics of so-called negative tolerance not Religion: The Need for a Tolerant First Maine Law Review only overlook its liberating potential but by Amendment,’ 62: 1 (2010), 27. 11 Peter Balint, ‘The Practice of Toleration and failing to take this ideal seriously, they often the Attitude of Tolerance,’ paper presented become accomplices to projects of intolerance. to the Australasian Political Studies Association Once tolerance is regarded as an instrumental Conference (University of Newcastle, 2006), 4. act of indifference to views and opinions, the 12 Tariq Ramadan, The Quest For Meaning: Developing upholding of the freedom of belief and speech a Philosophy of Pluralism (London: Allen Lane, ceases to have any intrinsic virtue. That is why 2010), 47. Herbert Marcuse, in his critique ‘repressive 13 As above. tolerance,’ could effortlessly make a leap from 14 See Susan Mendus (ed.), The Politics of Toleration his denunciation of capitalist cultural domination (Edinburgh: Edinburgh University Press, 1999), 77. to calling for the suppression of views he found 15 Tariq Ramadan, as above, 47. objectionable. He had no problems about the 16 John Horton, ‘Toleration as a Virtue,’ in David Heyd ‘withdrawal of toleration of speech and assembly (ed.), Toleration: An Elusive Virtue (Princeton, NJ: from groups and movements’ that promote Princeton University Press, 1996), 35. ‘aggressive policies’ or ‘discrimination on the 17 Anna Galeotti, as above, 10. grounds of race and religion, or which oppose 18 Tariq Ramadan, as above, 48. the extension of public services, social security, 19 Garrett Fitzgerald, ‘Toleration or Solidarity?’ in Susan 22 medical care.’ Numerous contemporary critics Mendus (ed.), The Politics of Toleration, as above, 13. of ‘negative’ tolerance follow Marcuse’s path and 20 Karl-Otto Apel, ‘Plurality of the good? The argue for a selective approach towards tolerance problem of affirmative tolerance in a multicultural to find themselves elaborating some very society from an ethical point of view,’ Ratio Juris inventive arguments for policing speech and 10:2 (1997), 200−201. censoring views they find abhorrent. In such 21 Anna Galeotti, as above, 159. circumstances, developing a consistent and 22 Herbert Marcuse, ‘Repressive tolerance,’ in Robert genuinely liberal approach towards tolerance is Paul Wolff, Barrington Moore, Jr., and Herbert an urgent task confronting those who are Marcuse, A Critique of Pure Tolerance (Boston: concerned about the future of democracy. Beacon Press, 1965), 7.

Policy • Vol. 28 No. 2 • Winter 2012 37 FEATURE

IS STATE INTERVENTION IN THE ECONOMY INEVITABLE?

Ongoing economic woes demand drastic reduction in state intervention into free market, says Peter Boettke

iven the prevailing ideology of our age, when the number of ‘impertinent obstructions’ and the alignment of incentives within grow from hundreds to thousands so that the modern democratic governance, market economy can no longer hide the costs of the intervention of the state in the the folly of human laws. Geconomy (and in all walks of life) is not inevitable These follies are a consequence of ideas but highly probable. And that is unfortunate. and interests. We need to first address the In this essay, state intervention refers to ideas that demand state intervention and then discretionary acts by government to intervene in the institutional environment that structures the market economy. Such intervention violates incentives in the policymaking process. Mario the general operating rules of social interaction Rizzo recently listed three big threats to the that were agreed upon in establishing the argument for a free market unencumbered framework of governance. The good society is by government intervention: (1) externality one where the framework of governance enables environmentalism, (2) the resurgence of individuals to realise the gains from social Keynesianism, and (3) behavioural economics. cooperation under the division of labour, and But these are just the most recent manifestation therefore experience the benefits of material of arguments that strive to undermine the progress, individual freedom, and peace—a laissez faire principle. As these arguments gain society of free and responsible individuals who in strength, the probability of state intervention participate and have the opportunity to prosper into the economy will also rise. The task of in a market economy based on profit and loss, the economist committed to the laissez faire and who live in and are actively engaged in principle is to lower that probability. caring communities. Government’s growth in terms of both scale The great expansion of trade and technology (expenditures as a percentage of GDP) and scope in the twentieth and twenty-first centuries has (increasing responsibilities of the state) in the produced a level of material wealth that enabled twentieth century has been astronomical. In the the cost of government intervention to be offset, twenty-first century, this growth has accelerated and remain largely hidden to many observers. as the Western democracies have had to deal This possibility is not a new phenomenon. with perception of tensions due to globalisation Adam Smith pointed out long ago that the and the widening income gap between the power of self-interest exercised in the market ‘West and the rest.’ But as the fiscal situation in economy is so strong that it can overcome a ‘hundred impertinent obstructions with which Peter Boettke teaches economics at the the folly of human laws too often encumbers its operations.’ But it is important to stress that Department of Economics, George Mason the great material progress realised over the past University. This essay is based on the paper 100 years was not caused by the expansion of he presented at the 2011 Mont Pèlerin state invention into the economy but in spite Society Meeting in Istanbul. of those interventions. And the tipping point is

38 Policy • Vol. 28 No. 2 • Winter 2012 IS STATE INTERVENTION IN THE ECONOMY INEVITABLE?

Europe and the United States has demonstrated point of the empirical confirmation that the so clearly over the past few years, the current scale private property market economy was criticised and scope of government is unsustainable. as an illegitimate form of social organisation Government spending in Western democracies because of the injustice it permitted. The as a percentage of GDP has grown from about development of the marginal productivity theory 12.7% in 1914 to 47.7% in 2009.* Spending of wages did not stop the spread of the moral has increased even more since 2009 in the effort belief that capitalism was unjust. The cold logic to boost aggregate demand in the wake of the of economics clashed against the hot emotions global financial crisis. Government spends of moral injustice. because the economy is weak, and the economy continues to perform poorly because government spending is crowding out productive private Economics is a scientific discipline investment. It is a vicious cycle that has to be that offers conjectures about how broken by re-evaluating the role and scope of the world works, while moral theory government in a society of free and responsible passes judgment and suggests individuals. The important political/intellectual how the world ought to be. activity of our age is not to starve the state of resources but build the intellectual case that we can starve the state of responsibility. Why does this tension exist? Economics is Society can in fact provide the necessary a scientific discipline that offers conjectures framework and acts of compassion to render about how the world works, while moral theory state actions needless. But before that, it is passes judgment and suggests how the world necessary to demonstrate that the justificatory ought to be. But what if our moral intuitions are arguments for the state are not as airtight as at odds with the institutional demands that imagined, and that the supply and demand for must be met so individuals can flourish? Hayek state action actually has its sources elsewhere. postulated that this tension between our moral intuitions and the moral demands of the Moral intuitions and the moral extended order was a product of our evolutionary demands of the extended order past. Culturally, human beings were conditioned One of the greatest challenges to the unhampered by social norms that were appropriate for market economy is the belief that the wealth small group living. But with specialisation and discrepancies as a result of ill-gotten gains are exchange, the norms of the intimate order must destructive to social order. Class war breeds give way to norms more appropriate for the real war, as the downtrodden rebel against the interactions with anonymous others. injustice. Analytical egalitarianism (striving for a Our dilemma is not how to ensure a fair politics characterised by neither discrimination division of a fixed amount of income but nor dominion) becomes a political demand for deciding what rules we can live by that will resource egalitarianism, and the step from one allow strangers to live better together by realising to the other is taken without much thought. the gains from trade with one another. Small This claim of injustice is deeply rooted in group morality must be replaced by large group our evolutionary past. As James Buchanan morality. Instead of moral sympathy, we need put it, the great contribution of the classical general rules that are equally applicable—rules political economists was the demonstration for anonymous interactions. Deirdre McCloskey that autonomy, prosperity and peace could be argues that this shift from the morality of the simultaneously achieved by the private property ancients to the ascendancy of the bourgeois market economy. But it was precisely at the high virtues resulted in the miracle of modern economic growth and improved the lives of * The Economist (19 March 2011), special report billions in Europe, the United States, and on ‘Taming Leviathan.’ eventually throughout the world.

Policy • Vol. 28 No. 2 • Winter 2012 39 IS STATE INTERVENTION IN THE ECONOMY INEVITABLE?

The state is not required to intervene to rid recourse to a government entity, or at least injustice with respect to income discrepancies without expanding the role of government. that result in a truly free market economy. While humans have historically exhibited Individuals earn profits by satisfying the demands a propensity for violence (rape, pillage and of consumers—the lure of profit not only alerts plunder), we have also found ways to overcome the entrepreneur to opportunities for beneficial that propensity and realise the benefits of exchange but also gains from technological peaceful social cooperation (truck, barter innovation. Competition drives costs down and exchange). The worlds that cater to our while improving product quality, so businesses cooperative propensity grow rich and create can earn higher profits only by better meeting healthy and wealthy people, whereas worlds that the demands of their consumers. Ultimately, cater to our violent propensity subject their consumers decide the profitability of commercial people to a life of ignorance, poverty and squalor. venture by buying or abstaining from buying. The state as the geographic monopoly on There is nothing unjust about such a distribution. the legitimate means of coercion is put in the Yes, Bill Gates has greater wealth than I do, advantaged position to predate and violate the but only because he better met the demands of a human rights of its citizens and impoverish far greater multitude of individuals. the population. Empowering the state to curb private predation creates the possibility of public Empowering the state to curb predation. As David Hume stressed, when private predation creates the designing governmental institutions we must assume that all men are knaves, and that the possibility of public predation. appropriate constraints are built in to ward off knavish behaviour even if knaves are in power. Curbing private predation, creating A robust political economy, similar to what the public predation classical political economists wanted to establish, The idea of curbing private predation is used is one that builds in constraints on the predatory to justify the very existence of the state: without ability of government such that bad men if they a sovereign to define and enforce property somehow got in power could do least harm. rights, the state would devolve quickly into a war of all against all, and life would be ‘nasty, Market failure becomes justification brutish and short.’ Everyone would be better for impediments to market adjustment off if they cooperated with one another, but the Market failure theory provides the economic opportunists would be even better off if justification for government intervention into everyone else cooperated and they could the unhampered market economy. The four basic confiscate the wealth created from everyone’s market failures are: (1) monopoly, (2) externalities, cooperation. The only way out of this predation (3) public goods, and (4) macroeconomic equilibrium is to establish a strong third instability. To classical economists, monopoly party enforcer. power was a creation of state intervention, not But such entities are also capable of far of market forces. This definition gave way in the greater and more menacing public predation late nineteenth and late twentieth centuries to the than private predators. Research done in the past theory that monopoly power was an outgrowth 25 years shows communities can curb private of competitive capitalism. Despite empirical predation by making rules that (a) limit access, evidence and theoretical developments proving (b) assign accountability, and (c) institute that the definition of classical political economists graduated penalties for violators. In small group is the more coherent explanation of monopoly settings, this is mainly done through reputation power, the idea that monopoly power is an and ostracism, but in larger group environments, outgrowth of unbridled capitalism dominates. where the actor is not clear, deterrence and Classical economists argued that public effective punishment must be instituted without goods did result in a demand for increased

40 Policy • Vol. 28 No. 2 • Winter 2012 IS STATE INTERVENTION IN THE ECONOMY INEVITABLE?

state intervention into the economy. Roads and Public choice problems rather than bridges, for example, would not be provided by market failure are the reason for the market economy because individuals could intervention benefit from them but due to their nature could Even if the counter-arguments and evidence for avoid paying for that benefit. The ‘free rider’ non-intervention are persuasive, standard public problem would impede the ability of firms to choice arguments will lead to state interventions profitably provide that service. This intuition into the market economy because of the erosion developed into a pure theory of public goods. of constraints on democratic action. But there are technological solutions to the Independent of any intellectual argument ‘free rider’ problem and numerous examples of demanding state intervention, the political Coasean bargains that enabled private solutions process is governed by the vote motive (on the to public good problems throughout history. demand side) and vote-seeking behaviour (on According to the theory of external effects, the supply side). Policymakers will favour policies the market economy will often overproduce that have immediate and easily identifiable economic ‘bads’ and underproduce economic consequences over policies that have only long ‘goods’ because the social costs and private term consequences even if those are wealth costs in decision making are not aligned. The enhancing. But as multiple studies of the ‘invisible hand’ fails to reconcile the differences. conservation of natural resources within But the primary reason for the breakdown is the a setting of well-defined and enforced property inability to define, assign and enforce property rights have demonstrated, the market economy rights. Pollution is one example, where because will effectively allocate investment funds of the confused defining and poor enforcing of over time. property rights, individuals will overproduce, but if we could clarify the rights then the State intervention, on the other hand, internalisation of the externality would reduce thwarts that process of discovery and pollution to its optimal level. Today’s inefficiency market adjustment by individuals and represents tomorrow’s profit opportunity for the entrepreneur who can address the inefficiency instead offers a political solution. effectively. State intervention, on the other hand, thwarts that process of discovery and market Government by definition holds a geographic adjustment by individuals and instead offers monopoly on the legitimate use of coercion, and a political solution. as such there is a strong incentive for interest The most significant claims for state groups to capture this powerful entity to benefit intervention into the economy in modern times themselves at the expense of others. Government come from the argument about macroeconomic can be, and will be, used by interest groups instability. The unhampered market economy to benefit themselves at the expense of others is unstable and suffers from periodic crises; unless effectively constrained from doing so. it brings uncertainty about the future and unemployment and thus poverty. The Great A politics without discrimination or Depression destroyed an entire generation’s dominion faith in the market economy in Western James Buchanan divides the economic role democracies. The global financial crisis has of government into three distinct categories: once again challenged it. But in both instances, (1) the protective state, (2) the productive government policy was responsible for the state, and (3) the redistributive state. A wealth economic distortions that led to the current creating society will empower the protective state economic crisis. The length and severity of the (law and order) and the productive state (public recovery is due to failed monetary and fiscal goods such as infrastructure), and will constrain policies, and increased regulations and restrictions the redistributive state. The churning state will that inhibit the market adjustment process. unleash the redistributive state (rent-seeking)

Policy • Vol. 28 No. 2 • Winter 2012 41 IS STATE INTERVENTION IN THE ECONOMY INEVITABLE?

and thwart the wealth creating capacity of the need to establish binding rules for monetary protective and productive state. The puzzle and fiscal policy or take away the responsibility of modern political economy, according to from the state. We cannot talk about fiscal policy Buchanan, is to find constitutional rules that outside the sphere of state action but we can do will enable a wealth creating society. something about monetary policy, which can Adam Smith argued long ago that and has historically been outside the domain of governments ancient as well as modern had state action for certain periods and in certain a strong proclivity to endlessly engage in the countries. So some combination of binding ‘juggling trick’ of running deficits, accumulating constitutional constraints, fiscal decentralisation, public debt, and debasing the currency to and denationalisation of money may empower monetise the debt. Bankruptcy, on the other the policy regime and constrain it effectively. hand, Smith argued, was the least dishonourable Without such drastic restraining steps, the and least harmful policy but rarely followed. demand for state intervention into the economy In the current crisis, this endless cycle of deficit, will be constant. Not inevitable but probable. We debt and debasement continues to plague need a rejuvenated defence of the classical liberal European and US economies. argument for binding rules on government. Faced with ‘juggling tricks,’ the only way to Only then can we reduce the probability of state constrain the state is to tie the decision-maker’s intervention and unleash the wealth creating hands or take away the juggler’s balls. So we power and creative energy of the free market.

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42 Policy • Vol. 28 No. 2 • Winter 2012 FEATURE

AUSTRALIA’S METROPOLISES AT THE CROSSROADS

Oliver Marc Hartwich examines the future of Sydney and Melbourne in a world of megacities

ntil a few decades ago, Australian But size is relative. Our cities cannot cities were rank outsiders in the ever compare with megacities (or cities with Asia-Pacific region. Prosperous, populations of more than 10 million people). globally connected, democratic, Of the 26 megacities of the world, the biggest UWestern-standard—they were in effect European is Tokyo, with more than 34 million people, enclaves in Asia’s southern backyard. These and the smallest is Paris, with 10 million people. characteristics made Australia’s top cities attractive Asia has 14 megacities, Europe four, North locations for multinational companies from America three, South America three, and Africa Europe and America. two. Asia also has the top five megacities, Since then, Australia’s cities have not changed a phenomenon that is set to completely dwarf much. They are even more prosperous, still well our cities. In the new Asian era, with massive connected, still democratic, and still offering economic growth happening along the Pacific high standards. But they can no longer be Rim, Australia’s cities could soon look tiny and regarded exclusively European in style. unimportant—not because Australian cities have Australia’s big cities are now less different moved backwards but because growth elsewhere (or more similar) to their neighbours in the has been so spectacular. Asia-Pacific. Not only are they becoming more Villages have catapulted to megacity status ethnically Asian but Asia’s cities have become within the last few decades, particularly in wealthier, more productive, and more Western. China. Thirty years ago, Shenzhen was a village McDonald’s and Starbucks, Benetton and Sony, of 30,000 people. Today, its official population Mercedes and Gucci are now as ubiquitous in is just below 9 million (the real figure could the city centres of Seoul, Bangkok or Singapore be several millions higher as not every resident as they are in Sydney, Melbourne or Perth. is registered). What does this mean for the role and Using lower measures doesn’t help. The character of Australian cities in what is turning Citypopulation website, which tracks census out to be the Asian century? In fact, the challenge data for the world’s largest cities, listed 481 posed by the rise of Asia’s cities is so great that agglomerations with populations of at least Sydney and Melbourne cannot claim to be big 1 million inhabitants as of April 2011. Sydney cities in their region any longer. ranked 75, Melbourne 88, Brisbane 209, Perth Of course, with population figures above 268, and Adelaide 400.1 the 4 million mark, many Melbournians and Size may not be everything, but it is a useful Sydneysiders would instinctively believe they live measure to show our cities are not exceptionally in big cities. From a historical perspective, they large by international standards. We may be are certainly right. In 1900, there were only two proud of living in globalised, ‘world class’ cities cities with more than 4 million inhabitants, but the mega-urbanisation trend has passed us by. London and New York. In fact, it was not before the British census of 1881, which recorded a population of 4.7 million for Greater London, Dr Oliver Marc Hartwich is the Executive that any city in human history had ever Director of The New Zealand Initiative. exceeded the 4 million mark.

Policy • Vol. 28 No. 2 • Winter 2012 43 AUSTRALIA’S METROPOLISES AT THE CROSSROADS

Of course, our cities have grown in the past continued to function as a global hub for trade decades, but other cities have grown even faster. and commerce, particularly in financial services. In relative terms, Australian cities are smaller History matters, and established connections than they used to be. remain longer than the causes that once But second-league does not equal second- created them. grade. Every European city, perhaps with the Another key finding of the GaWC study is exception of Greater Paris, now ranks as mid-size relevant to Australia: the emergence of a new city by global standards. Even London, for 150 league of cities below the NYLON duopoly. years the standard setter in modern urbanisation, Previous studies had given the Alpha+ level to can no longer claim a place in the top league of only four cities: Hong Kong, Paris, Tokyo and the most populous cities. Singapore. The 2009 study added four more: However, this does not mean that London, Milan, Shanghai, Beijing and Sydney, indicating Berlin, Rome—or even smaller cities like that the global cities network is moving to the Amsterdam, Zurich or Prague—do not matter Pacific Rim. Of the 10 best-connected cities anymore. Size is one thing. Being part of global in the world, six are in Asia and Australia, social, political and economic networks is three in Europe, and only one in America. This another. This is true for Europe’s cities. It is true reflects the growing importance of Asia, which for Australian cities as well. has consistently outperformed the developed Cities interact with each other through economies of Europe and North America in exchange of products and services, people and— recent decades. most crucially—ideas. Australia is in the enviable position of being The Globalization and World Cities—Study geographically close to these developments, and Group & Network (GaWC) at the University of our economy has benefitted from the stimulatory Loughborough analysed the real hierarchy of effects of the emerging economic giants of world cities based on the workflows of service China and India but also of countries like firms and the network that results from these Indonesia, Vietnam and Malaysia. interactions.2 The findings reveal that global However, we tend to view this development urban relations involve both competition in terms of resource exports of coal and minerals and cooperation. only. We haven’t yet fully grasped the impact Two cities in the GaWC research stand out: of Asia’s rise on Australia’s cities and other the Alpha++ cities of New York and London. ways we could benefit from our physical and cultural proximity as well as economic benefits. London and New York define a duopoly This could be Australia’s greatest opportunity that constitutes a case apart—‘NYLON’ if it manages to become part of the new is the global cities dyad par excellence. Asian networks. Australia cannot compete with rising Asian The interconnection between these two cities on size. Seoul has two million people more cities is no surprise. They were the drivers than the entire population of Australia; Beijing is of industrialisation and modern capitalism equal to the six biggest Australian cities combined. throughout the past two centuries. They were Unless Australia substantially increases its also the effective capitals of the two biggest overall population, way beyond the projected empires the world has seen over the same period, 35.9 million in the 2010 Intergenerational the British Empire and the (commercial) empire Report, we will never have a megacity. Even dominated by American capitalism. if an Australian city eventually reached the If there is anything surprising about this 10 million mark that currently determines result at all, it is how London has decoupled megacity status, there may be new categories by from Britain. After the end of Empire, Britain then. And even if Sydney or Melbourne reached was reduced to a medium-sized European the 6 or 7 million people by the middle of this country with a diminished global role and a century, as is widely assumed, they would only withering manufacturing sector. But London be mid-sized cities in a fast growing Asia. The

44 Policy • Vol. 28 No. 2 • Winter 2012 AUSTRALIA’S METROPOLISES AT THE CROSSROADS

best we can hope for is that Melbourne and needing approval from national authorities and Sydney will still be considered one of most regulators based on a mythical and hardly ever prosperous cities in the Pacific region, although defined national interest. the gap between Australian and Asian cities will Unfortunately, Australia’s big cities are heading become smaller in terms of GDP per capita or in the opposite direction. average incomes. Though some highly successful global The Australian GDP per capita of more companies are operating in Australian cities, we than US$55,000 is much higher than in the have not produced the clusters of industries that US$10,000 in 11 Chinese cities in 2010.3 eventually define a city. Transport remains one But only five years earlier, the GDP per capita of the greatest weaknesses of both Melbourne was $5,457, $7,600 and $7,300 in Beijing, and Sydney. Daily commuter traffic and CBD Shanghai and Shenzhen respectively.4 Adjusted rush-hour gridlock, combined with the inability for purchasing power, these figures would to increase air traffic capacity, are hindering be somewhat higher, but there is still a wide economic activity. We have been discussing gap between Asian and Australian per capita a second major airport for Sydney for almost incomes. Growth rates in Asia will eventually 70 years now. slow, but the wealth gap will be narrower in The political signals also fail to promote the future. Australia as part of a connected cities network. Both these developments, the economic By blocking the proposed merger of the catch-up in Asia and the rapid growth of Australian Stock Exchange with the Singapore Asian cities, raise questions about the future of Stock Exchange, the federal government sent the Australia’s cities. A pessimistic scenario would message to Asia that Australia defines its be that by the end of the twenty-first century, national interest too narrowly and does not wish Australia’s two aspiring world-class cities of to integrate with Asia and its capital markets. Sydney and Melbourne would be neither Australia is simply not moving as fast as its particularly wealthy nor big in the regional Asian competitors. Perhaps Australia cannot context. They would not feature in the ambitions build airports as fast as China, where the new of the Asian, let alone global, elites. Their fate Beijing airport was completed in just four years. would be an existence in mediocrity. But it is just disgraceful that a city like Sydney In the optimistic scenario, too, Asian cities cannot introduce an integrated public transport would still be much bigger than Australia’s payment system similar to the one operating in cities. The wealth gap would have also narrowed Hong Kong (Octopus card) or London (Oyster substantially. But Australian cities would play card) for many years. a markedly more important role in the new Australia’s two biggest cities stand at the global cities network, similar to the kind of role crossroads. If they want to play a leading role that London now plays globally, that is, not into this century, they need to keep pace with particularly big but extremely well-connected. the changes in the Asia Pacific region. If they They would find business niches in which to don’t, both Melbourne and Sydney risk becoming excel—just like Milan, a city of just 1.3 million international backwaters over the coming decades. people, is reputed as one of the global fashion capitals. Similarly, universities in Australia’s Endnotes big cities would be renowned for cutting-edge 1 Thomas Brinkhoff, The Principal Agglomerations of research and high-quality teaching. The high the World, Citypopulation. connectedness of Australia’s top-tier cities would 2 PJ Taylor, et al. Measuring the World City Network: make it easier to travel to and within them. Doing New Results and Developments (2 March 2009). 3 ‘GDP Per Capita Exceeds 10,000 USD in 11 Chinese business would be facilitated by governments Cities,’ www.eChinacities.com (10 April 2010). (local, state and federal), not slowed down. 4 ‘Guangzhou: Per Capita GDP Exceeds US$10,000,’ International capital movements, mergers, and www.china.org.cn (4 January 2007). takeovers would be regarded as normal without

Policy • Vol. 28 No. 2 • Winter 2012 45 INTERVIEW

THE MIDDLE EAST AND GEOPOLITICS

Today’s Middle East is characterised by instability and conflict in the form of the geopolitics of oil, prevalence of extremist groups, Western military intervention, escalating Sunni-Shia tensions, and the Arab Spring. According to US-based counterterrorism expert Lydia Khalil, who spoke to defence analyst Sergei DeSilva- Ranasinghe, the Middle East is in a period of rapid and substantial change and is headed for an uncertain future that will continue to affect world geopolitics

Sergei DeSilva-Ranasinghe: How strategically how is the al Qaeda and its networks likely to important is the Middle East in geopolitics? shape the region’s evolving geopolitics?

Lydia Khalil: The Middle East is critically Lydia Khalil: Al Qaeda has been in decline for important to geopolitics. Although we are hearing quite some time. Some of that has to do with more and more about the ‘Asian Century,’ the US counterterrorism measures, but most of it is Middle East will continue to be a strategically because the organisation has struggled to resonate important region and its goings on will continue with its target audience—Muslims in the Middle to reverberate around the globe. East and in the diaspora. Although al Qaeda The region is experiencing an exciting yet retains its hard core adherents, it has utterly treacherous transformation after the Arab Spring. failed to gain a foothold in the heart, minds and It is an incredibly dynamic period and we do politics of the majority of Muslims in the region. not yet know the future trajectory of the region. Its ideology and methods are not appealing Will the region turn to democracy? Will Islamists to most Muslims. The most transformative event dominate politics and society? Will we see in the region—the Arab Spring—blindsided a return to neo-dictatorships in the region? The al Qaeda. Despite its many efforts to bring answers to those questions will determine not about political change and topple dictatorships only the fate of the region but how the new through terrorism, it was peaceful protests that Middle East fits into the global order. did it. However, we are starting to see some The Middle East shall remain vitally disturbing signs of an al Qaeda influence in important because of its geography that straddles the Syrian conflict, and it remains a threat and important global supply routes, its energy presence in Yemen. resources, and its complex mix of politics, ethnicity and religion that contributes to Sergei DeSilva-Ranasinghe: To what extent are instability within and outside the region. Salafist/Wahabist groups influencing the Arab The potential for Iran to obtain a nuclear Spring? What are the likely consequences for weapon is also a game changer. the region, especially in relation to countries like Egypt and Libya and their future relations with Sergei DeSilva-Ranasinghe: The United States the West? claims to have caused serious damage to al Qaeda and its affiliated networks in the Middle East. Lydia Khalil: Islamist parties, the more mainstream How far is this true, and in the decade ahead, Muslim Brotherhood and newer Salafist parties

46 Policy • Vol. 28 No. 21 • WinterAutumn 2012 2012 THE MIDDLE EAST AND GEOPOLITICS

have deftly inserted themselves into the political Shia-Sunni tensions. Iran becoming a nuclear opening that has arisen from the toppling of power will instigate significant opposition from long-time dictators. Although these parties majority Sunni countries like Saudi Arabia, Egypt did not begin the protests that started the Arab and Turkey, adding another layer to conflict in Spring, and were in fact late to participate, they the region. quickly entered the political fray after the dictators were toppled. They are the most organised opposition forces in the Middle East, and the As a general statement, you can liberal and youth-led parties at the forefront of say that US influence in the region the protests were no match for them. has indeed declined, but that is not Islamist parties are here to stay and will to say the United States has little continue to influence the future of politics in the or no influence in the region. region. This is not necessarily a negative thing as they represent a significant portion of the population. However, it will be vitally important Sergei DeSilva-Ranasinghe: Since the US for more alternative political parties—more military intervention in Iraq, the advent of the secular, liberal, socialist—to become stronger in Arab Spring and the ongoing Shia unrest, there order to balance Islamists and blunt some of their is a growing sense among certain academic and more illiberal tendencies. Minority representation journalistic circles that US influence in the is also critically important to the functioning of Middle East is in steady decline. How accurate healthy democracies. is this perception and what is your prognosis on the state of US power in the Middle East in Sergei DeSilva-Ranasinghe: How are Sunni- the decade ahead? Shia tensions affecting the Middle East? What are the likely future implications of the Iran-Saudi Lydia Khalil: As a general statement, you can Arabia rivalry on the region’s future stability? say that US influence in the region has indeed declined, but that is not to say the United States Lydia Khalil: The Sunni-Shia conflict received has little or no influence in the region. It is still a lot of attention a few years back. Scholars like a major player, but the rules of engagement Vali Nasr wrote about the ‘rise of the Shia crescent’ have changed after the Arab Spring. Gone are and the ascendancy of Shia majority countries many of the ruthless but reliable dictators of like Iran and Iraq and their conflict with the the past with whom the United States knew more Sunni majority Gulf monarchies and stalwarts like or less how to engage. They have been replaced Egypt and Syria. Now the attention is more by a motley crew of political forces who are still focused on the fallout of the Arab Spring, but finding their feet. Shia-Sunni tensions are still a factor in the region’s The transition period has proven challenging new politics. for the United States as its traditional levers Syria is threatening to devolve into a civil of influence and its previous partners have war on sectarian lines, Iraq continues to struggle disappeared from the scene. But because the with its sectarian tensions, and Bahrain’s minority transition period post Arab Spring has been Sunni monarchy has been seriously destabilised so dynamic, we cannot accurately predict the after protests by its majority Shia population future of US power and influence in the region. last year. These internal sectarian tensions will A lot depends on what type of governance no doubt be exploited by regional neighbours. structures are in place, the character of emerging The Iranian nuclear issue also plays into the leaders, and whether the United States can figure out how to deftly engage with them.

Policy • Vol. 28 No. 2 • Winter 2012 47 review essay

The Fog on the Hill: How NSW Labor Lost its Way By Frank Sartor Melbourne University Press, 2011 $34.99, 224 pages ISBN 9780522861068

Looking for the Light on the Hill: Modern Labor’s Challenges

By Troy Bramston Scribe, 2011 $32.95, 288 pages ISBN 9781921844379

y old federal parliamentary Sartor is the experienced and practical colleague Barry Cohen politician and NSW focused. Bramston is the recently wrote, ‘There young idealist and reflects on the national scene. will always be a party that Both attempt to account for the ALP’s current devotes itself to looking after electoral, organisational and philosophical the dispossessed and the downtrodden. The dilemmas. Both make worthy contributions. Mquestion is, will it be the Australian Labor They fear the causes of the party’s decline, both Party?’ Recent huge losses for the ALP at state as a community and electoral presence, are elections in NSW and Queensland, narrow losses deep-seated and possibly fatal. In broad in Western Australia and Victoria, imminent terms, they both blame leadership failings, an losses in Tasmania and South Australia, and a outdated ideology (or values), and an insular potential landslide loss federally give substance party structure. to his question. Is Cohen right to be so pessimistic, or is the current Labor predicament cyclical? Is it only Labor? This is the context for two serious analyses Neither author, given their focus on Labor’s of the ALP’s future. According to Frank Sartor, woes, understandably poses a deeper question. former lord mayor of Sydney and NSW minister, How much ‘party’ does a successful mainstream ‘The crisis in NSW Labor is so deep andhas political party need? Clearly, there are basic such significant ramifications that we need a massive dose of unadulterated, no-holds-barred honesty.’ Troy Bramston, former speechwriter to Dr Gary Johns is Associate Professor in Kevin Rudd and Labor ministers, writes, ‘Make the Public Policy Institute at the Australian no mistake: Labor is in real trouble. Today, the Catholic University, and was a former Labor Party has almost entirely divorced itself minister in the Keating Labor government. from what it once was.’

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minimums: people to hand out how-to-vote Country Party in Australia becoming the National cards at election time and select candidates. Party, the support base may remain. Then there is a core of apparatchiks to advise on fundraising, administer rules, select candidates, Leadership and formulate policies. But the latter can be paid, Part of the Labor crisis is therefore not unique to and are largely (if indirectly) paid for from the Labor. A test of ‘the party is in trouble’ thesis is public purse. Arguably, Labor’s 1984 public to suggest an alternative scenario. For example, funding laws started the displacement of branch had Kevin Rudd stood firm against the advice members. Candidate selection and policy of Julia Gillard and Wayne Swan to abandon formulation are important party roles, but the emissions trading scheme, Labor and Rudd how many members are needed to perform the would have likely survived with a majority at the duty? Much policy comes from lobby groups— 2010 election. Indeed, the debate would then businesses, NGOs and trade unions—and have been about the demise of the Liberal Party contributions from these sources are almost (like the National Party) and the subsequent always widely reported and often occur by way tearing down of Malcolm Turnbull. of submissions to parliamentary and government Because he came to power with little idea inquiries. Party members rarely have had of what he wanted to achieve, Rudd folded on much say. carbon pricing, and too readily accepted Wayne Questions about the role of, and need for, Swan’s ill-conceived resources super profits tax. party members exercise the minds of all party Bramston writes: managers. Indeed, Labor and other major parties may be returning to an older incarnation of Rudd walked onto the stage, and was political parties, a collection of ‘professionals’ met with thunderous applause and (albeit unpaid) whose job was to assemble exuberant cheers. But the initial policies to win sufficient votes to get elected. energetic soon turned to one of Large majoritarian parties arose out of organised disappointment. Rudd’s speech was labour and capital. With the labour/capital divide strangely flat. He did not seize the less determinative of voting allegiances, with moment to claim a great victory. electronic media the most powerful form of Instead, he spoke in predictable clichés communication rather than the soapbox, with and platitudes, with little originality public funds substituting for mass memberships, or memorable phraseology … the true and with the decline of party preferment in believers had had their wind knocked public service jobs, the major parties have out of them. Unfortunately, it would hollowed out. be a sign of things to come. Neither should the machinations of the party be confused with the endurance of the Labor and other major parties may party label. The endurance of the party label depends on the electoral advantage gained by be returning to an older incarnation politicians in organising collectively around the of political parties, a collection of label. Despite electoral disasters, there is evidence ‘professionals’ (albeit unpaid) whose that party labels endure. After all, the Liberal job was to assemble policies to win Party of Great Britain disappeared in the 1930s to sufficient votes to get elected. return as the Liberal Democrat Party in coalition with the Conservative Party at the 2010 election, and the Progressive Conservative Party of Canada There is no better illustration that Rudd had was all but wiped out in the 1988 election but no clue how or for what purpose to govern than returned as the Conservative Party in the early his gathering of the ‘great and good’ at Parliament 2000s. Another reason they endure is that even House, Canberra, for the 2020 Vision conference. when the party label changes, for example, the As it turned out, neither did the great and the

Policy • Vol. 28 No. 2 • Winter 2012 49 review essay

good have a clue. The gathering was, in effect, that Labor suffers from ‘leadership anxiety’ (a new a Labor cheer squad and confirmed the status pathology?) for which he offers as a remedy seven of the party as ‘boutique.’ The difficult task of elements (unfortunately, number four of the governing without a robust program was made announced eight was not listed in the book) of a even more difficult when the major element of distinctive Labor leadership culture. For example: the program—the climate change response—was • Labor is always best when it is bold, with cast out at the first hint of electoral trouble. big ideas and big ambitions … The electorate can sense weakness. • Labor have been courageous by pursuing Which brings us to Sartor’s critique of NSW popular and unpopular causes … Labor: the ‘superficiality of many of the key • Leadership is about being persistent … etc. players’ in the NSW government and party [emphasis added] officials. Special mention was reserved for Mark Of course, these are no more than platitudes Arbib, party secretary in 2004, and later federal for the party members. All apply to most parties minister recently resigned, who was regarded as the at some time or other. We recall the immortal ‘twenty-third Minister’ in the NSW government. lines of Sir Humphrey (Yes, Minister) about Sartor describes him as ‘a significant factor in a minister’s courageous decision! Bramston’s the government shifting from considered policy romance is not assisted by his blind spot. responses to pure cosmetic politics, the politics ‘John Howard is a leader with several notable of appearance.’ achievements to, such as gun-law reform, but he was also a leader who utilised dirty tricks, Labor is still clinging to its wedge politics, and deceit, and was personally socialist objective, which lies buried rejected by the Australian people when he lost his seat in 2007.’ Demonising the opposition is in all its glory in the ALP national not analysis. constitution as its second objective. Ideology (values) In another insightful but damaging remark, The fact is Labor had a chance to lead but blew Sartor says: it. Labor’s long-term prospects may depend on its underlying values. Bramston argues that Party officials armed with polls and Labor must better define and communicate focus group results, harangue premiers, its ‘enduring values.’ He suggests replacing prime ministers, ministers and their the abolition of the socialist objective with staff, not to provide them with relevant his formulation of Labor’s objective— information pertinent to their work, economic justice, social justice, environmental but often to insist on shifts in policy sustainability, internationalism, equality of and direction as we have seen with the opportunity, nation-building, and democratic Rudd and Gillard governments. liberalism. Each, of course, is shot through with holes, but nevertheless a party needs its sacred cows Sartor recalls a particularly bruising attempt to attract the hopeful, and to which politicians, to raise a portfolio issue in 2010 with his state in the light of realpolitik can attach real policy. Labor treasurer and former state secretary Eric The wonder though, especially after the fall of the Roozendaal, who responded, ‘I don’t give a Berlin Wall in 1989, is that Labor is still clinging f— about good government. It’s all about the to its socialist objective, which lies buried in all deals.’ Bullying behaviour is not unknown in its glory in the ALP national constitution as its politics, and party officials can be shallow, but second objective. leaders nevertheless have sufficient incentive to govern, not just survive. The Australian Labor Party is a It does not help the analysis by being lulled into democratic socialist party and has the a romantic idea of leadership. Bramston suggests objective of the democratic socialisation

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of industry, production, distribution Hawke and Keating understood this, but the and exchange, to the extent necessary next generation of Rudd and Gillard forgot. to eliminate exploitation and other anti-social features in these fields. Party changes (p. 231) The one true problem that distinguishes Labor from other parties is the union link. Right There is romance and there is populism. now, Labor needs all the friends it can muster Sartor’s is a strangely populist stance when it so it is unlikely to sever the link, but there are comes to values. Sartor disliked the Treasury: suggestions to lessen the bonds, particularly over ‘The process of government has convinced me candidate selection. that for some years the influence that NSW Both authors note the trial in NSW of Treasury has had on policy has been excessive.’ a primary style pre-selection for the Sydney But Sartor’s preference to spend without mayoralty. Primaries have the potential to apparent due regard to costs and benefits is weaken the hold of trade unions over the party not reassuring. He argues, for example, that and to draw candidates from beyond trade money from taxes on mining should have been unions and members’ staff. It is an experiment hypothecated. ‘Imagine $7 billion being spent that the National Party has already conducted annually for ten years on public transport in our with some success. Indeed, it has been tried capital cities?’ Is it too much to ask a minister and has apparently succeeded in Europe among justify such expenditure? leftist parties. The Labor campaigner, Bruce Contrast those thoughts with these: Hawker, cites the recent success of the French Socialist Party’s François Hollande, the only The biggest encumbrances on the socialist president of France since François NSW Labor government’s ability to Mitterrand, and only the second one since govern were the quadrennial enterprise direct election started 1958. Hawker attributes bargaining negotiations, during which Hollande’s success to the introduction of a the unions insisted on pay rises that party primary for the election of the presidential were simply not sustainable. candidate. Of course, the performance of Sarkozy and the problems in the economy had a great Sartor presents evidence that NSW public deal to do with it, but nevertheless the primary sector wage rises were running well ahead of may also have had a role. According to Hawker, both private sector and Commonwealth public nearly three million people voted in the sector. ‘Is NSW Labor now little more than presidential primary, and more than five million a party for NSW public sector workers?’ This people watched the televised debate between the acute observation has direct links to Labor values candidates for the Socialist Party’s nomination. and policy. Labor has confused its role on behalf Barry Cohen is probably correct in arguing of the ‘downtrodden’ with size of government, that there will always be a party to look after and Sartor understands this confusion. the interests of the downtrodden, but it may well be that many parties undertake the work With the ever expanding size of the of gathering the votes of this constituency, public sector, governments are reaching especially as those numbers are great in a welfare their limits in terms of the direct state. Labor Australia will take a long break services they can deliver competently. from power. Whether it returns will depend on There is nothing in the … Labor party’s its constituency remaining intact and its new platform that dictates that services leaders being a tad more competent than the must be delivered by direct rather than current crop. indirect means.

Policy • Vol. 28 No. 2 • Winter 2012 51 review essay

Tomorrow’s Federation: Reforming Australian Government Pragmatism and working through existing institutions may be the key to federal reform

Paul Kildea, Andrew Lynch, and George Williams (eds.) The Federation Press, 2012 $59.95, 400 pages ISBN 9781862878228

omorrow’s Federation offers new from the John Curtin Institute of Public Policy insight to the well-traversed at Curtin University, former WA Premier Geoff topic of Australian federalism Gallop AC, and Melissa Perry QC. Given that by bringing together diverse and the area of federalism, and indeed constitutional interdisciplinary perspectives law, has been somewhat male dominated, it is and a practical approach to potential reforms. also commendable that 11 of the 22 contributors TIts editors acknowledge the ‘unhappy state of are women. Australia’s federal system’ because of the increased The editors of Tomorrow’s Federation are even centralisation of legislative and financial powers more distinguished, with George Williams AO (p. 1). This increased centralisation has resulted and Andrew Lynch, both from the Faculty of in part from the Commonwealth Parliament’s Law at the University of New South Wales, being increasing attempts to enact legislation that two of Australia’s most prolific and well-respected encroaches on traditionally state matters and constitutional law academics. The book’s lead from the High Court’s interpretation of the editor, Paul Kildea, teaches constitutional and Constitution, post Engineers. As the editors say public law at UNSW and is the director of the in the introduction to the book, this centralist Federalism Project. approach is entirely contradictory to that The editors, in compiling Tomorrow’s envisaged by the framers of the Constitution who Federation, sought to identify how reforms to saw the states as equal partners in the Australian the Australian federal system have been achieved federation, and in no means reliant on, or inferior and propose further reforms through existing to, the Commonwealth. institutions, such as the Council of Australian The contributors to the book are a notable Governments (COAG) and the COAG Reform cohort of authors who are academics (in law, Council, and intergovernmental grants and politics and economics), PhD candidates, former politicians, legal practitioners, and senior policy advisors. They include Professor Nicholas Aroney Michelle Evans is Senior Lecturer in Law from the University of Queensland, Professor A.J. at Murdoch University, Western Australia. Brown of Griffith University, Professor Alan Fenna

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agreements. Their message is that cooperative April 2012, which will create a HECS-style system federalism can gradually reform the system, and for vocational training to improve the nation’s is in fact a more realistic and pragmatic approach skills base and employment opportunities. than constitutional amendment, which is likely This, however, contrasts with the ongoing to be effective if implemented but difficult to debate over the distribution of GST revenue to achieve. However, the authors are not averse to the states through horizontal fiscal integration— constitutional amendment. and highlights the fundamental flaws in Australian fiscal federalism. The GST Distribution Review Given that the unhappy state of Panel, comprising The Hon. Nick Greiner, Australia’s federal system has long been The Hon. John Brumby, and Bruce Carter, will recognised, it is no surprise that much present its final report later in the year.1 The panel has also been written about what needs will proceed on the basis that the horizontal fiscal to be done to repair it. Indeed, discussion equalisation method of distributing GST revenue of the topic far exceeds what has actually between states and territories should still be been done to fix the problem. Common applied but will focus on making improvements prescriptions include a reallocation of to the system.2 The panel’s interim report in roles and responsibilities between the March 2012 affirmed that horizontal fiscal Commonwealth and the states, and equalisation will continue but it needs to be more restoring revenue-raising powers to understandable and transparent.3 The report also the latter so as to reduce vertical fiscal notes that an increase in a state’s share of GST imbalance. Many of these proposals revenue means another state’s share will decrease. are wise responses to the diagnosed From the perspective of states such as Western problem and would, if implemented, Australia, the ultimate recommendations made stand a fair chance of recalibrating the by the panel are unlikely to be significant enough tiered system of government in this to restore the fiscal federal balance to the states. country. But their proponents only In addition, although the terms of reference rarely address the practical means by state that the federal treasurer will present the which such reform might be achieved. panel’s final report to COAG before deciding This is unfortunate given that, in many the distribution of GST revenue,4 there is no respects, the mechanisms of reform are guarantee that the Commonwealth government just as important as the substance of the will implement its recommendations, although it reform itself. As a result, the field suffers will be under pressure to do so. In fact, despite not from a lack of good ideas, but from the review being underway, the Commonwealth the means of realising them. (pp. 1−2) reduced Western Australia’s portion of GST revenue for 2012–13 by approximately $600 The book is divided into five parts, with the million.5 In his speech at the opening of the first two focusing on intergovernmental relations WA Parliament on 21 February 2012, several and intergovernmental grants. The following days prior to this announcement, Premier Colin comments about the book’s pragmatic approach Barnett highlighted the need for urgent fiscal are largely based on those parts. Although I reforms and the frustration of the state for having wholeheartedly agreed with the book’s philosophy to rely heavily on Commonwealth funding. that some very effective reforms to federalism can be achieved through existing political institutions Unless something changes, the crunch and enhancing cooperative federalism, as a will come on State Government Western Australian, I believe such an approach finances. The people of Western Australia will not do much to redress the federal imbalance. know we are being short-changed in I acknowledge that a pragmatic and cooperative the carve up of Goods and Services Tax approach does result in benefits such as the $1.75 (GST) revenues. billion National Agreement on Skills, signed in

Policy • Vol. 28 No. 2 • Winter 2012 53 review essay

Last year, we received 72 cents for every I am not suggesting that the pragmatic dollar paid in GST. The big States of approach suggested by Tomorrow’s Federation New South Wales, Victoria and is not valid (once again, I acknowledge that the Queensland all received over 90 cents editors are not opposed to constitutional reform, in the dollar back. It is a bizarre system just realistic about the likelihood of achieving that penalises Western Australia for it). In fact, suggesting that, and exploring how, having a successful mining industry, federal reform can be achieved through existing while at the same time rewards other institutions is a proactive and logical approach States for their reliance on gambling that the states and territories should be following revenue. The message is all wrong! at every opportunity. Sadly, studies on federalism to date have neglected this logical and sensible approach, which is why Tomorrow’s Federation is an Federal reform can be achieved important contribution to the study of federalism through existing institutions is a and may indeed result in positive reforms to the Australian federation by raising consciousness, proactive and logical approach that and indeed hope, about the possibility of reform the states and territories should in the absence of constitutional amendment. be following at every opportunity. Given my penchant for more long-lasting federal reforms, and the difficulty in achieving them through referendums, I read the third part State Treasury forecasts are that our of the book, ‘Legal Mechanisms and Federal share of GST revenues will fall below Reform,’ with great interest. In the chapter ‘The 50 cents in the dollar by 2013–14 and High Court and Dynamic Federalism,’ Melissa could be as low as 36 cents in the dollar Perry writes about the pivotal role of the High by 2014–2015. This will see us lose $12 Court in altering the federal balance through billion in revenue to 2014–15, or even constitutional interpretation of federal powers, more if recent reports that our GST using excise and external affairs powers as case share will fall to 55 cents in the dollar studies. She notes that the importance of the High next year are true. The Commonwealth Court as a guardian of federalism has been greatly just doesn’t care. By anyone’s measure enhanced due to the failure of the Senate, which this scenario is unfair, unrealistic and was originally intended to be a ‘states house,’ to unsustainable. It is forcing the State protect state interests in the legislative process. into an over reliance on debt to fund Perry observes that this centralist interpretation infrastructure and services … of the Constitution has itself led to the need for greater cooperation between the Commonwealth Western Australia accepts it can make and the states, emphasising the pivotal role of a net contribution to other States and institutions such as COAG. Interestingly, she only asks for a floor of 75 cents in the notes of institutions such as COAG, ‘This raises dollar for our share of GST revenues. the question as to whether the evolution of these We’re not asking for a special deal, we’re sub-constitutional processes and institutions only asking for a fair deal. For Western ought now to be formally recognised as part of Australia, fixing the GST is the number the constitutional law landscape in Australia, and one issue in Federal-State relations.6 whether there are implications to be drawn from the Constitution that might impact upon and This reliance of the states on funding from regulate them.’ (pp. 172, 189) Also of interest GST revenue from the Commonwealth and was Perry’s observation about the future direction their own inability to raise adequate finance is of federal ‘battles,’ which she says are likely to be good reason for more permanent measures, such about the scope of executive power, particularly as a referral of income taxation powers to the due to the endorsement of ‘the comparative states, to help restore the fiscal federal balance. superiority of the position of the Commonwealth

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in the federal structure’ in Pape v Federal Australia,’ A.J. Brown analyses responses from Commissioner of Taxation (pp. 172, 191).7 the public to two surveys on constitutional Andrew Lynch’s chapter, ‘The Reference values (conducted in 2008 and 2010), which Power: The Rise and Rise of a Placitum,’ is indicated Australians’ dissatisfaction with their particularly interesting and relevant in terms of political system and their desire for reform. cooperative federalism. Lynch discusses the use, As an advocate of subsidiarity, I was interested and limitations of, section 51 in federal reform, to note the survey results revealed an evenly a once neglected power whose use has increased divided response between those in favour in recent times. He warns of the potential of decentralisation and those in favour of impact on cooperative federalism if states are centralisation (pp. 310, 317). Also noteworthy reluctant to make future referrals fearing the is an excellent chapter by Sarah Murray, Commonwealth Parliament may take advantage ‘State Initiation of Section 128 Referenda,’ in of the High Court’s likely broad interpretation which she argues in favour of amending section of the power. Lynch cites the recent attempt to 128 to allow states to initiate referendums. create a ‘national scheme’ through the National Vocational Education and Training Regulator Survey results revealed an evenly Bill, which the Commonwealth proceeded with despite strenuous objections from Victoria and divided response between those Western Australia (pp. 193, 207−208). in favour of decentralisation and Consistent with the book’s practical and those in favour of centralisation. interdisciplinary approach, ‘Part 4: Case Studies in Federal Reform’ contains three separate case studies in gender, health policy, and water reform. Tomorrow’s Federation will have a wide and These case studies offered a refreshing perspective diverse appeal. It will be of interest to students on cooperative federalism, given that these areas and academics in the areas of economics, law, are traditionally neglected in studies on federalism. government and politics, and will no doubt The book concludes with ‘Part 5: The be regarded as a significant resource to those Constitution and Federal Reform.’ As a participating in public life in political and policy proponent of constitutional reforms to the roles, political commentators, and members of federal balance, I was most interested to read the public interested in Australian politics and George Williams’ chapter, ‘Rewriting the government. Tomorrow’s Federation makes a Federation Through Referendum,’ in which he significant contribution to studies in Australian addresses the difficulties in achieving a ‘yes’ vote federalism, and I highly commend it as an at referendums and suggests mechanisms to outstanding contribution to federal scholarship. achieve it. Williams co-authored the excellent book, People Power: The History and Future of the Referendum in Australia, in which he examined the history of (pp. 294, Endnotes 302). In his concluding comments in Tomorrow’s 1 GST Distribution Review, The Review (2011). Federation, Williams suggests that although 2 GST Distribution Review, Issues Paper (2011), 1. some federal reforms can be achieved through 3 GST Distribution Review, Interim Report (2012), v. institutions such as COAG and cooperative 4 GST Distribution Review, Terms of Reference (17 November 2011). federalism, ‘any wholistic approach ... must 5 Annabel Hepworth and Paige Taylor, ‘Western include changes to Australia’s Constitution by Australia’s fury at plunge in GST share,’ way of a referendum. The referendum must The Australian (25 February 2012). be part of any viable, long-term strategy for 6 Western Australia, Premier’s Statement, Legislative the enhancement of Australian federalism.’ Assembly (21 February 2012), 16a–69a (pp. 294, 309) (Colin Barnett). In his fascinating chapter, ‘Measuring 7 Pape v Federal Commissioner of Taxation (2009) the Mysteries of Federal Political Culture in 238 CLR 1, 85.

Policy • Vol. 28 No. 2 • Winter 2012 55 review essay

What’s Wrong With Benevolence: Happiness, Private Property, and the Limits of Enlightenment ‘Will enlightened people ever learn that benevolence, if directed to relieving poverty and equalizing wealth, always tends to make poverty widespread?’ (p. 83)

By David Stove Encounter Books, New York, 2011 $17.03; 221 pages ISBN 139781594035234

hus, 23 years ago, did an exasperated indulgent parent who may ‘spoil’ a child, and, on David Stove sum up his theme the other hand, instances of well-directed rescue of in this intellectually bracing and the starving by a supply of food from a voluntary morally acute book, which he wrote charity, or spontaneous action by individuals as an essay a few years before he to help restore the homes of others damaged by died in 1994. Its provenance in Stove’s writings natural disasters. Tis discussed in an excellent foreword by Roger But when governments abstractly purport to Kimball, editor of the New Criterion, who act benevolently, their coercive powers are remarks, ‘the most thrilling intellectual discovery necessarily exercised in disposing money of my adult life came in 1996 when I chanced appropriated from their citizens for achieving upon the work of the Australian philosopher ends and arrangements that may or may not be David Stove.’ This is followed by an illuminating achieved or which, when achieved, may have introduction by Andrew Irvine. unforeseen consequences that work against the Stove (1927–94), former associate professor interests of both putative beneficiaries, taxpayers, of philosophy at the University of Sydney, is not and the common wealth. widely known outside professional philosophical In considering the origins of the benevolence circles, within which he was greatly respected. movement that came to the fore with the Apart from being a brilliant teacher and the Enlightenment in the eighteenth century and its object of much student affection, he attracted development in the nineteenth, Stove distinguishes international attention for his philosophical and contrasts the emergence of systematic studies and contributions to many subjects investigation of economics and demographics in beyond technical philosophy. Above all, he was the hands of economists such as Adam Smith and a devastating polemical critic of the varieties of Thomas Malthus with the distinct and sudden political correctness, social justice, and (as he growth of a ‘benevolence’ movement directed called them) the intellectual ‘slums’ now so much towards advancing the ‘happiness’ of mankind in in evidence. general that was unprecedented in human history. He directs this talent to analyse and critique ‘benevolence’ as both a private motive and a When a Condorcet, a Bentham or Marx principle that animates aspects of governmental plans for universal happiness, there is actions, notably welfare policy. Private benevolence ‘nothing in it’ (as we say) for Condorcet, driven by generous motives expressed in voluntary philanthropy or kindness might, or might not, confer actual benefit for the recipient. Sometimes Barry Maley is a Senior Fellow at the benefit is manifest, but we all know examples The Centre for Independent Studies. of misplacement, such as the benevolently

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Bentham, or Marx himself. Whereas, of This is the man, intoxicated with ‘moral course, when a father plans his child’s vanity,’ who now flourishes everywhere in happiness, or a teacher his pupil’s, or developed societies, personifying the wave of a friend his friends, there is something abstract compassion and universal caring that, in it, should the plan succeed, for the together with ‘equality,’ became the validating father, teacher or friend: there is the elements for widespread redistribution of wealth. increased affection of the child, the gratitude of the pupil, strengthened This is the man, intoxicated with friendship with the friend. (p. 27) ‘moral vanity,’ who now flourishes So, this interested link in private and voluntary everywhere in developed societies. benevolence is absent in the state benevolence to be dispensed in a society-wide political As Stove comments: movement with three main characteristics: universality (all present and future human Equality as a moral value is, of course, beings); disinterestedness; and externality, something quite different from the where happiness is to consist not in changing egalitarianism which was also an axiom people directly but by changing their external of the Enlightenment. That was the circumstances such as through money, housing, belief that human beings are naturally or new legal rights. Stove goes on to say this equal. What I am here speaking of is ‘needs only the additional element of popularity the conviction that every privilege, to be extremely dangerous.’ (pp. 27–28) advantage, or superiority of one human Energising this movement was a moral- being over another is morally wrong. sentimental transformation: From this axiom, many important Suddenly, the softening of human life Enlightenment theories obviously became the great desideratum. The follow: for example, an enmity to kings, genius of Rousseau made the shedding and to parents. But another and even of tears the hallmark of moral elevation: more important theorem flows from a thing which was, with good reason, this same axiom: communism, or without precedent in European life. an enmity to private property. This Classes of people who had previously has often not been recognized as an been only on the margin of the moral Enlightenment theorem at all; yet its map, or off the map altogether— derivation is very obvious. For what children, women, servants, the poor, inequality is more cruel, more glaring, prisoners, the insane, slaves—found or more arbitrary than inequality of themselves all at once at the center, and property? What inequality brings so the object of a powerful outpouring many other inequalities in its train? of benevolence. Every earlier human There ought always, therefore, to be landmark of moral authority, whether equality of property, and there is only dating from antiquity or the Christian one way of ensuring permanent equality centuries, was buried under a tidal of property: community of property. wave of benevolence. Leonidas and (p. 35) St. Anthony, Cato the Elder and Joan of Arc, Luther and Loyola, all met a Here were the seeds of the communism that common doom; and the new moral followed in the twentieth century and which, hero, to replace all these, who was he? ironically enough, became a vehicle both for Why, the benevolent man, ‘The Man of equality of poverty and misery for the masses Feeling.’ (p. 33) and outrageous privileges, wealth and power

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for their masters. However, Enlightenment non-indigent and lowly paid, at least some of thinking ranged widely and included those whom will themselves be forced into poverty who saw immediately the implications for and dependence. Moreover, aware that public disaster of radical social and economic equality. succour is available for the needy, the poor will Those ‘economists,’ broadly considered to perhaps be encouraged to abandon any effort include others than Adam Smith—such as to support themselves and instead seek public Bernard Mandeville, Thomas Malthus, and support. And, of course, those already in receipt David Hume—were among its early critics. Stove of support are no longer under the pressure to quotes a prescient passage from Hume published support themselves that would otherwise be there. in 1751: Stove quotes Malthus: Stove’s overriding purpose is to draw attention to the profound The poor-laws may therefore be said to diminish both the power and the will moral and attitudinal changes to save among the common people; implicit in the working out of and thus to weaken one of the strongest the benevolence and happiness incentives to sobriety and industry, and movement and its powerful influence consequently to happiness. on politics and economic life. And later on:

But historians, and even common To the laws of property and marriage, sense, may inform us, that, however and to the narrow principle of specious these ideas of perfect equality self-interest which prompts each may seem, they are really, at bottom, individual to exert himself in bettering impracticable; and were they not so, his condition, we are indebted for all would be extremely pernicious to the noblest exertions of human genius, human society. Render possessions ever for everything that distinguishes the so equal, men’s different degrees of art, civilised from the savage state. care and industry will immediately break that equality. Or if you check Stove’s overriding purpose is to draw attention these virtues, you reduce society to the to the profound moral and attitudinal changes most extreme indigence; and instead implicit in the working out of the benevolence of preventing want and beggary in a and happiness movement and its powerful few, render it unavoidable to the whole influence on politics and economic life. This community. (p. 42). is the subject matter of the last third of the book, which is devoted to a discussion of the This was a line of thought seized upon by persistence of socialist thinking and extensive Malthus as he considered the Poor Laws of welfare in the developed countries, the Elizabethan England and their effects, problems continuing fascination and dismay with and implications for later developments. As inequalities of wealth, and the continued calls Stove points out, Malthus was as desirous as any for higher taxation and more redistribution. other man to relieve the distress of his fellow Stove was realistically pessimistic about countrymen, and he agreed (pp. 49–51) that the the prospects of escape from the grip of Poor Laws helped relieve distress among the poor ‘benevolence’ in the modern welfare state and unemployed. He nevertheless concluded and the interest-group politics with which that they must tend to create more poor since it is associated. Perhaps he might have been their support creates social and economic costs encouraged by the present-day critique of that must be borne, at least in part, by the welfare and the manifestation of its problems in

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recent financial crises, which in turn implicate the the more sinister and sneaky form of destroying fundamental democratic problem of public choice the legal power to control and manage that electoralism. defines property rights. The attack extends to We could be sure, though, that he would the individual right of adults freely to bargain have been a trenchant critic of the emergence and determine the terms under which they will of current measures to subvert property rights offer their services in making a living. and to control the citizenry that are latter-day developments of ‘benevolence.’ Stove is a versatile philosopher and He would have had a field day with current acute critic who is as comfortable events such as the huge socialistic ‘co-investment’ by the federal government to protect the decrepit and enlightening in the broader car industry, and the intrusive authoritarianism fields of intellectual controversy as of the ‘nanny state’—a term whose nursery he is in the exacting discipline of mildness softens the subversive attack on philosophical scholarship and criticism. responsible, individual autonomy that it is. This has consonance with ‘benevolence’ and the pursuit of ‘happiness’ by purporting to act in Calling this suffocating embrace, and the the name of our safety and security, while large-scale redistribution and ‘churning’ of generating the servility that goes with state wealth, as no more than benevolent concern regulation and control of what should be for our welfare is a stroke of genius. Unmasking free decision-making about how we and our its character and its dangers, moral and material, children go about our daily business. Control is Stove’s intention. He addresses it with is increasingly the objective in more and more polemical verve and insight in this important of what we do, the purchases we make, what book that should figure as part of the moral we eat, the attitudes we take, and even what we and intellectual armoury of every liberty lover. say and write. The means are state surveillance, Stove is a versatile philosopher and acute regulation, petty interference, and sometimes critic who is as comfortable and enlightening in worse. I leave the reader to think of examples. the broader fields of intellectual controversy as As for the attack on property rights, this is he is in the exacting discipline of philosophical part of the daily fare of every business in the scholarship and criticism. For those interested in country and those who work in them or ‘own’ pursuing his writings (and responses to them), them. The attack does not take the form of this book contains an exhaustive and valuable simple expropriation of property; rather, it takes bibliography of Stove and related writings.

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Coming Apart: The first significant factor in social disintegration The State of since the events in Dallas is the emergence of White America, a new elite so isolated from the rest of American 1960–2010 society that it casts into doubt questions the future By Charles Murray of the American project. Murray defines the new Crown Forum, 2012 upper class as the top 5% of Americans who run US$15.88, 416 pages the country but live lives increasingly separate ISBN 9780307453426 from mainstream America. The new elite are rich and exceptionally clever; they breed among themselves and send their rich, he United States is bright children, in turn, to the same elite colleges ‘coming apart at the seams—not ethnic where they themselves were educated. These seams, but the seams of class’ (p. 269). homogamous practices confer not just financial TAnd, according to American social scientist, Charles advantage but also cognitive advantage. The new Murray, it has been doing so for 50 years. upper class also lives apart in what Murray calls In his new book, Murray uses the assassination the ‘SuperZips,’ suburbs in certain parts of the of President John F. Kennedy in 1963 as the country that enjoy a high concentration of symbolic point of transition in American society wealth and educational attainment. All these factors ‘leading to the formation of classes that are different compound the danger that ‘the people who have in kind and in their degree of separation from so much influence on the course of the nation anything that the nation has ever known’ (p. 11). have little direct experience with the lives of This story of class divergence is one of collapse ordinary Americans, and make their judgments and decline, at the heart of which lies the idea about what’s good for other people based on their of ‘the American project.’ The project ‘consists of own highly atypical lives’ (p. 101). the continuing effort, begun with the founding Murray is a self-confessed libertarian (p. 234), and [of the nation], to demonstrate that human as such, doesn’t want to force the super elites to live beings can be left free as individuals and families differently. Rather, he wants them to rediscover for to live their lives as they see fit, coming together themselves the importance of the founding virtues voluntarily to solve their joint problems’ (p. 12). and teach them to those most in need of instruction, But this civic culture, which was once ‘so widely a new lower class that comprises about 20% of shared among Americans that it amounted to the white population. It is to this class, whose a civil religion,’ is now unraveling (p. 12). social norms are disintegrating through neglect Murray explores the reasons for the collapse of the founding virtues, that Murray turns his and demonstrates just what is needed to restore this attention next. ailing civic culture. He uses four ‘founding virtues,’ Murray sketches the new lower class using a lying at the heart of the American project, to frame fictional Fishtown where ‘nobody has more than his analysis of social change. The virtues are: a high school diploma [and] everybody who has an industriousness (the determination to improve occupation is in a blue-collar job, mid- or low-level one’s lot); honesty (essential if a market economy is service job, or a low-level white-collar job’ (p. 146). to flourish); marriage (the foundation for stable Once again, he uses the frame of the founding virtues family and social life); and religiosity (the basis to analyse this class and concludes that high rates for moral virtue and the healthy functioning of of male unemployment; children being raised in limited government). ‘The success of America homes with one or two parents, neither of whom depended on virtue in the people when the country are married; criminal behavior; and religious began and still does in the 21st century,’ Murray indifference have combined to bring about a says (p. 143). collapse of the social capital needed for the possibility of community.

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‘Decay in the founding virtues is problematic The Righteous Mind: for human flourishing’ (p. 266), Murray says. These Why Good People are virtues have a direct and strong relationship to Divided by Politics and self-reported happiness (p. 255), and he argues that Religion they may already have been lost to the extent that By Jonathon Haidt American exceptionalism (freedom coupled with Pantheon Books, New responsibility, the product of the cultural capital York, 2012 bequeathed by the founders) is threatened. ‘Discard US$18.97, 419 pages the system that created the cultural capital, and the ISBN 9780307377906 qualities we have loved about Americans will go away’ (p. 305). he Righteous Mind: Being the libertarian he is, Murray makes no case Why Good People are Divided by Politics for government intervention to support the founding and Religion is an important book that is virtues. Indeed, one of his fears is that America Talso fun to read. Drawing on the latest discoveries will adopt the ‘welfarist’ policies of Europe and let of evolutionary psychology, author Jonathon bureaucrats fix things. This would be a mistake, he says, Haidt investigates where our most fundamental even though the new upper class might be comforted moral ideas come from, and why we cling so by the salve of paying higher taxes. ‘Taking the tenaciously to our version of what is right when we trouble out of life strips people of major ways in get into arguments with people whose political or which human beings look back on their lives and religious beliefs differ from our own. The sub-title say, “I made a difference.’’’ (p. 283). suggests we should accept that political and ethical Rather, Murray seeks a return to the founders’ positions radically different from our own still have conception of limited government. At various moral validity, although it seems to me that the points in its history, three or four religious Great book inadvertently demonstrates the superiority Awakenings have swept across America. Now of conservative ethics over socialist or libertarian Murray proposes—or rather, pleads for—‘a civic ones (Haidt, as a man of the left, can’t quite bring Great Awakening’ to stir the new upper class in himself to acknowledge this, and I suspect many their SuperZips. His vision of an upper class civic readers of Policy might be reluctant too!). awakening ‘starts with a question that I hope they The first part of the book is fascinating. It shows will take to heart: How much do you value what has how core elements of human morality appear to made America exceptional and what are you willing be grounded in instinct, not reason. We react first to do to preserve it?’ (p. 305). and rationalise our reaction afterwards. Even when In Coming Apart, which, he says, is his ‘valedictory we find it difficult to offer a logical explanation on the topic of happiness and public policy’ (p. 308), for a gut feeling that something is right or wrong, Murray builds a statistically detailed case for the acceptable or unacceptable, we feel it deep in our renewal of the American project. Yet the book is soul, so much so that we are often willing to sacrifice more than an exercise in social science. It is a call our own interests to stop other people from doing the to attend to the threat posed by a widening wrong thing, or to punish those who do. Humans cultural divide in twenty-first century America. apparently are naturally righteous. Unless heeded, Murray cautions that the Philosophers have tried to explain morality logically, Jeffersonian experiment in ordered liberty, ‘unique deriving rules from a few basic axioms (e.g. that among the nations, and immeasurably precious’ something is wrong if it harms others). But they (p. 306) may yet fail. have got things the wrong way around. Our brains are already wired to tell us what is good and bad, Reviewed by Peter Kurti right and wrong. We learned this in the course of hundreds of thousands of years of individual and

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group evolution. It is only since we developed ‘cuteness,’ for example, tend to bring forth a strong language that we have felt the need to reflect on why urge to care, nurture and protect whenever we we feel the way we do. Using language, we select encounter them, and today in the West, this often arguments that fit our intuitions. Ethical thinking translates into compassion for animals and even is confirmatory, not exploratory. cartoon characters. The caring instinct is common to Haidt doesn’t just assert that morality is grounded all of us, but it is triggered differently in people in evolved instincts; he demonstrates it, drawing on growing up in different cultures (or even in different a wide range of experimental and other evidence. families within the same culture). Indeed, religions For example, show a six-month-old infant a and political movements deliberately target these puppet struggling to climb a hill. Now introduce triggers to elicit emotional commitment to their cause. a figure that tries to help the climber’s efforts, and The things that trigger kindness and compassion another that does its best to hinder them. Which of thus vary over time and across places, and they are these two figures does the infant select to cuddle to some extent learned or even manipulated. afterwards? The helper, of course. And if the Universal morality is not just about caring for climbing puppet is shown embracing the hinderer, people. There are other evolved ethical instincts the infant stares perplexed, for this is not what its that also get triggered to varying degrees in different brain is hard-wired to expect. As early as six months, cultures. The ‘fairness/cheating’ instinct generates long before parents or school teachers can teach us the anger we feel against those who gain individual the appropriate rules or reason with us about why advantage through deceit and free-riding; the something is the right course of action, we already ‘loyalty/betrayal’ instinct is reflected in the pride know the rudiments of how we should behave of belonging to a group and the rage felt against (although Haidt also shows that it is more important traitors; the ‘authority/subversion’ instinct generates for us to demonstrate our goodness to others than feelings of respect and deference based on one’s place to actually be good). in perceived pecking orders; the ‘sanctity/degradation’ Of course, Haidt recognises that people who grow instinct makes us recoil from the unfamiliar and up in different cultures often subscribe to very different inspires feelings of piety and disgust; and the ‘liberty/ sets of moral rules. He also knows that even within oppression’ instinct is expressed in an emotional the same culture, people disagree passionately about reaction against oppressive domination. All these right and wrong. So if ethics are instinctive, why doesn’t evolved as adaptive solutions to the struggle for the whole world agree on what constitutes morality? individual and group survival. The answer is that instincts are triggered or It is at this point in the analysis that Haidt, smothered by cultural socialisation. Everyone (barring a self-confessed ‘progressive,’ finds himself sliding psychopaths) knows, for example, that you shouldn’t towards the apparent conclusion that conservative hurt other people for no reason. Haidt calls this the ethics are superior (in the sense of being more ‘care/harm’ instinct, and in one form or another, comprehensive and more in tune with human it appears to be universal among humans. Bentham nature) to social democratic or socialist ones. The tried to explain and justify it by his utilitarian ethics, universal foundations of human morality are built, just as Kant did with his categorical imperative, he says, on all six of these evolved instincts, but the but Haidt says it derives not from such abstract Left in modern Western societies barely recognises principles but from an evolved need for humans more than two of them. It’s very alive to the importance to protect and care for children who cannot survive of showing compassion for those who suffer (hence, without nurturing. Those of our ancestors who the passionate support for state welfare) and to lacked this instinct are likely to have died without challenging oppressors (particularly when they successfully bringing their children to maturity, take the form of banks, big corporations, or fascist which is how more compassionate genes gradually dictators). But it’s a bit lukewarm when it comes spread among human groups. to enforcing just deserts by punishing free-riders Once this ‘care/harm’ instinct had evolved, however, (the fairness/cheating module), and it is downright it could be mobilised by all sorts of other cultural uncomfortable with expressions of group loyalty stimuli in addition to needy children. Signs of (like patriotism); respect for authority; and observance

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of shared, sacred totems and taboos. Conservatives ‘Each team,’ he says, ‘is composed of good people may be a bit less compassionate and bolshie than who have something important to say.’ (p. 313) This socialists, but their ideologies do manage to straddle sounds a bit too cosy for my taste. But perhaps my all six moralities, whereas those of the Left concentrate cynicism is just an atavistic throwback to that evolved only on two or three (p.184). instinct driving me to defend my own group and This sounds like political dynamite to me, so after attack everyone else’s. I finished reading his book, I emailed Haidt (he’s an Read this book. It’s important, and it may turn out approachable chap) suggesting that ‘if conservatives to be an agenda-shifter and a debate-changer. are the only people to embrace all six [modules], doesn’t this mean conservatism is the most Reviewed by Peter Saunders (or superior) moral political stance, and that we should therefore all be conservatives?’ He replied: ‘I think the answer is no ... In a modern society with strong institutions, it’s possible to “off-load” Keynes Hayek: much of the burden of creating order or social capital The Clash that Defined onto institutions. The Scandinavian countries do that Modern Economics well, and seem to rely less on loyalty, authority and By Nicholas Wapshott sanctity, and they report the highest levels of happiness.’ W.W. Norton & Company, This looks like a cop-out to me. For a start, 2011 the Nordic nations actually emphasise loyalty and $16.91, 400 pages authority quite strongly (take a look at all the ISBN 9780393077483 Danish flags in people’s gardens; see what happens if you flaunt social conventions in Sweden). More cannot recommend that importantly, a political ethic that encourages people anyone read this book. to abdicate personal moral responsibility by allowing For those who already know the story of the state to look after things is surely a negation of IFriedrich von Hayek and John Maynard Keynes, morality. Morality governs how we as individuals there is little new. For those who do not, the story are meant to behave towards each other, so how is distorted and they would likely get the wrong can it be ethical to shrug your shoulders and leave impression. others to do what has to be done? The Good There are some factual errors that although Samaritan didn’t call up the social workers, he dealt trivial, Australian readers would find annoying. We with the problem himself. are told that John Curtin attended Lord Keynes’ Of course, it is not just socialists who are likely memorial—yet Curtin died in 1945 and Keynes to be discomfited by this book. There is a challenge in 1946. for classical liberals and libertarians, for they too Nicholas Wapshott’s thesis is that Keynes was a are shown by Haidt to be preoccupied with just pragmatic do-what-it-takes defender of capitalism two of the core moralities (‘liberty/oppression’ and while Hayek was some sort of abstract theorist. ‘fairness/cheating’) to the neglect of all the others. While Hayek concentrated on an abstract utopia, If Haidt is right that human beings have gut instincts progressives were winning battles over civil rights about all six, this might explain why libertarians for African-Americans, women, homosexuals, and have made such little headway in popularising the disabled … their arguments about the good society. Yet the public debate slowly moved in Hayek’s The Righteous Mind is a stimulating, rewarding favour. In Chile in the 1970s, Hayek was invoked and well-written book. I found it a bit less convincing to counter communism. (p. 292) towards the end, where Haidt complains about Yet Wapshott is unable to provide any evidence that political polarisation in modern America and tries to Hayek opposed civil rights for African-Americans, get us all to accept the socialist case for more regulation, women, homosexuals, or the disabled. Similarly, the classical liberal case for free markets, and the the gratuitous reference to Chile is a dog-whistle conservative case for treasuring cultural homogeneity. to the left. Wapshott doesn’t actually tell us that

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Hayek beat his wife, but we do get the gory details that predicts we cannot experience unemployment of his divorce from his first wife (pp. 214–215). and inflation at the same time has been contradicted In short, he never misses an opportunity to belittle time and again. When government decides to ‘stimulate’ and smear Hayek. the economy, it is simply impossible to avoid ‘waste, The notion that a clash between Hayek and Keynes inefficiency and corruption.’ It is not Hayek who is defines modern economics is a misrepresentation— the abstract theorist but Keynes. Reality simply does and is certainly not true of the economics not conform to his theoretical prescriptions. taught at university. The Keynesian revolution Wapshott also overemphasises Hayek’s influence. completely dominates macroeconomics, which is For example, he tells us that Hayek influenced unsurprising because Keynes is the founder of that Newt Gingrich’s views on the size of government sub-discipline. Hayek’s economics is largely unknown (p. 272). He describes Contract with America (1994) in economics classrooms. Keynes’ intellectual as a ‘Hayekian Republican manifesto.’ I suspect victory is complete—so much so that Wapshott is this claim to be false. Wapshott provides no evidence able to relate a story where Hayek’s colleagues that Hayek influenced Gingrich’s thinking or the and students were disrespectful to his face (p. 182). subsequent government shutdown. Gingrich told [Hayek relating what Nicholas Kaldor] said, ‘Professor the PBS show Commanding Heights he had been Hayek, this is intermediate economics and you influenced by Adam Smith, the US founding fathers, ought to know it.’ [Kaldor in reply] I said, ‘I protest. and Barry Goldwater—and that he came to Hayek I never said you ought to know it.’ via Ronald Reagan. This is a simple thing to check and Wapshott quotes other material from that I suspect that view is typical in most economics same interview (p. 254). departments around the world. Hayek is simply I do not accept the view that this book introduces not remembered for his economics. the Hayek-Keynes debate to a new generation. Nor Regrettably, Keynes is remembered but not do I accept that capitalism must be ‘saved’ through the problems with Keynesian stimulus spending. stimulus packages, wasteful spending, and frankly, Wapshott reminds us that Keynes knew the problems the kind of crony capitalist bank bail-outs that we (p. 159) at least in the early 1930s, when he said, have witnessed over the past few years. ‘There are many obstacles to be patiently overcome, The book’s basic premise isn’t supported by its if waste, inefficiency and corruption are to be arguments. There are errors of facts. Many of the claims avoided.’ Yet by 1936, Keynes recommended that the lack evidence. And the basic story has been told before. government bury banknotes in disused mine shafts Readers, beware! and have the private sector dig them up again. To my mind, Wapshott underemphasises the Reviewed by Sinclair Davidson failures of Keynesian economics. A theoretical model

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