From the Editor MICHAEL WARBY

OME wit once remarked developed by the IPA and the Tasman that the Soviet Union was Institute, arguably represented the S the only country with an greatest policy success of think-tanks in unpredictable past. Since the Australian history. Soviet Union was the culmination of In the years 1992 to 1993, the IPA history (doesn’t this all seem remarkably reached its maximum influence as bizarre now?), the whole path of history measured by income, staff, publications, had to, of course, support whatever the media interviews or any other measure of Soviet leadership was doing at the time, output or influence. The IPA was known, and whoever was Soviet leader. Since by Dr Carroll and his confrères, to be both these things changed from time to leading the economic reform movement time, history—as officially presented (and which was transforming the Australian unofficial presentations were forbidden, political scene. A transformation Dr forcibly)—had to change as well. Carroll certainly did not approve of. Australia is certainly no stranger to Given that Dr Carroll was an avid critic struggles over history. Much of what reversal imply about the twentieth? (In of the IPA at this time, and the finances of passes for intellectual debate in this the ‘heads I win, tales you lose’ rhetoric of the IPA are available through Australian country is most emphatically concerned such feminism, the marginalization of Securities and Investments Commission with how to view the past, what stories it philanthropy, no doubt.) records, Dr Carroll has no excuse for not tells, what values it supports. The entry on poverty by Tom Stannage knowing this. As a free society, in place of Soviet- sanctifies the standard ‘progressive’ Financial support for think-tanks is style centrally directed history, we have leaching of the concept of genuine best described as counter-cyclical. The various scholarly publications which are deprivation out of the concept of poverty. worse the situation, the greater the widely regarded as authoritative. The The concluding statement ‘Poverty, in concern, the easier it is to raise money. recently published (1998) Oxford relative if not absolute terms, was The late 1980s were a good time to be Companion to Australian History, edited by probably worse than at any time since the raising funds, particularly in the Victoria of Graeme Davison, John Hirst and Stuart Depression; politically, its alleviation has Cain and Kirner. As Victoria and Australia’s McIntyre—two Professors and a Reader never been such a low priority’ is just position has improved—significantly due in History—is such a volume. bizarre given the massive increase in to the adoption of market-oriented Now, such Companions are average incomes since the Depression— economic reforms—the fundraising somewhat at the mercy of their the standard pension, for example, has climate has become harder. Nevertheless, contributors, their knowledge and quadrupled in real value. That government the IPA continues to operate at a level of judgement. The quality of contributions— expenditure per Australian on health, activity and influence considerably greater particularly about contentious issues— education and welfare has increased than it did prior to the early 1980s. can tell one much about the general fivefold in real terms in the last 40 John Carroll is a strong opponent of quality of intellectual life. years—leading to taxes being at record market reforms. His entry in the Oxford Three entries at least suggest that peacetime levels as a share of GDP— Companion to Australian History on the IPA there are real problems with that quality surely suggests a certain ‘social priority’. ends as (inaccurate) polemic in Australia. The entry on philanthropy by But the triumph of ideology over masquerading as history. It is the belief Shurlee Swain reeks of ‘progressive’ accuracy and judgement is nicely displayed that history is the plaything of one’s suspicion of action not blessed by being in John Carroll’s entry on the Institute of ideological preferences which marks the undertaken by the state or ‘approved’ Public Affairs. His concluding sentence is: mentality of the apparatchik. institutions such as the labour movement, ‘In the years 1991–96, under the Unfortunately, judging from some of the and contains a strong dose of rant about directorship of John Hyde, the IPA entries in the Oxford Companion, gender roles. Having recently had the became so single-minded and extreme in ideological self-indulgence is the order of pleasure of speaking to several senior its economic libertarianism that it steadily the day in much of Australian academia. figures in non-government organizations, lost both influence and financial support’. No wonder that knowledge of history is the large role that women play in this Where does one begin to unravel this in decline among Australian students—if sector was very obvious. Since Swain wish-fulfilment masquerading as history? they are to be fed fairy stories, then implies that male domination of 1992 saw the election of the Kennett modern fantasy writers and game- philanthropy in the nineteenth century Government, whose adoption of the designers do it so much better. was a negative thing, what does the broad outlines of Project Victoria, as I P A

MARCH 1999 1 From the Executive Director MIKE NAHAN

putation has reduced this bias, but not Business Tax Review: eliminated it. The other flaw of the in- Tinkering with a come tax system is that it requires the impossible. It requires changes in Broken System wealth, whether realized or not, to be estimated on an annual basis. The result is a tax base which is HE business tax system has highly complex, loaded with distorting serious weaknesses. The simplifications and open to political hard question is: how can we engineering. It is the reason why the T fix them? Income Tax Act has expanded to about Unfortunately, the Business Tax 4,000 pages and why a review—such Review—the Ralph Committee— as the latest Report of the Ralph Com- which issued its second and most im- mittee—requires 1,200 pages of impen- portant report on 22 February 1999 has etrable detail in order to recommend failed to address many of the big ques- minor changes. tions. If the recommendations of the Re- What is needed is a completely sidered in the Review is the elimina- view are implemented, it will improve fresh approach to the taxation of busi- tion of accelerated depreciation, the the tax system—but only for a while ness. What we appear to be getting is a outcome will be that the effective tax and then not far enough. ‘nip-and-tuck job’ on the old system— rate will rise for firms with long-life as- There is an alternative tax base— albeit a very detailed and extensive sets—such as many mining and manu- an expenditure tax—which overcomes ‘nip-and-tuck job’. facturing firms—and the effective tax the flaws of the ‘comprehensive income The Committee, however, was rate will be reduced for firms with tax’. Under this tax base, only income hamstrung from the start by its terms shorter-life assets—such as business that is consumed is taxed. Income that of reference. It was required to investi- services and restaurants. The overall is saved is not taxed until it is con- gate the ways and means of lowering effective tax rate will remain the same. sumed, so the tax avoids the need for the corporate tax rate from 36 per cent Clearly the current accelerated de- complex depreciation arrangements. to 30 per cent while raising the same preciation system contributes to the An expenditure tax system would amount of tax revenue. In other words, irregular and perverse tax playing include a company tax. Such a tax, it was prevented from addressing the field—where firms of similar nature however, would not only be much sim- most significant weakness of the tax face different tax rates. The problem pler than the current company tax but system, which is that too much of the is, however, that capital taxation is provide immediate write-off of all capi- tax effort falls in the first instance on uniformly too high—even for those tal. In other words, it would provide business. businesses that now receive special accelerated depreciation for all capi- Business, of course, does not in the treatment. In other words, the aim tal—irrespective of longevity or indus- end bear the burden of tax, but shifts it should be to lower the effective tax try. to individuals—shareholders, employ- rates, not to equalize at an excessive The expenditure tax is the tax of ees and consumers. On equity and effi- rate. the future—globalization will see to it. ciency grounds, it is far better to im- The second major limitation of the Any review that aims to prepare the pose tax directly on individuals rather Review is that it remains committed Australian tax system for the 21st cen- than indirectly on them through busi- to pursuing a flawed ideal—that of the tury must, at the very least, explore at ness. ‘comprehensive income tax’. length the eventual shift from the old The Ralph Committee should The primary flaw of such a tax is income tax system to an expenditure have, at least, been allowed to explore that it results in double taxation of sav- tax. The Ralph Committee—having the merits of reducing the overall ef- ings and therefore creates a bias against neither canvassed an expenditure tax fective tax rate on business and invest- investment and in favour of current in its first two reports on the problems ment rather than simply being limited consumption. Under it, invested in- of the current system nor commissioned to shifting the tax burden from one type come is taxed twice—once when first the relevant research—avoids the is- of business to another. earned and then again when in- sue. The simple fact is that, even if the vested—whereas income consumed is As Albert Einstein once said: ‘Prob- company tax rate is reduced to 30 per taxed once—when first earned. lems cannot be solved by the same level cent, the tax will be structured so as to This bias is the central flaw of our of thinking that created them.’ This is raise the same amount of revenue, so personal and business income tax sys- the trap into which the business tax re- the effective tax rate will be the same. tems and one of the main reasons for view has fallen. Given that the main change con- our poor savings record. Dividend im- I P A

2 MARCH 1999 Tasmania’s Green Disease

DAVID BARNETT

Going Green is a great way to end up in the red. A look at the decay of the island State.

ASMANIA is chronically ill herself as a national from the Green virus, and figure, and to win a seat wasting away. According to in the Tasmanian Leg- T the Australian Statistician, islative Assembly. Tasmania is the only State or Territory It is also Bob whose population will decline—regardless Hawke, who was Prime of which of the ABS’s three sets of assump- Minister when the tions are used about immigration, fertility Wesley Vale project Photo removed for reasons of copyright and interstate population flows. By the was proposed, and year 2051, Tasmania’s population will be Graham Richardson, down from its present level of 473,000 to Hawke’s environment either (depending on which set you adopt) minister. You should 462,100, 445,700 or 418,500 people. also include Tasma- Perhaps Tasmanians are fortunate that nian Senator Shayne their fertile and pleasant island has be- Murphy, although he come an economic backwater, and a place made his contribution for mainlanders to escape the hustle and as an official of the Construction, Forestry Robin Gray a thermal power station and bustle which goes along with economic and Mining Union (CFMEU). a lump of money to abandon the Franklin activity, the roar of urban traffic which is Tasmania’s unemployment rate is 10.6 project. the consequence of two cars in every ga- per cent, against a national average of 7.5 Gray saw himself as another Charles rage. per cent; despite a decline in population Court, the Western Australian Premier If that is so, Tasmanians, providing as a result of interstate immigration dur- who incited tiffs with Fraser, and profited they can find jobs, should be gratified, ing the year to March of 4,650, or one per from ‘standing up to Canberra’. Court because Tasmania’s fate is mostly, if not cent. picked his issues so that they were storms completely, all their own work. Tasman- There hasn’t been a worthwhile devel- in teacups, not fundamental conflicts ians vote consistently for the Green and opment project in Tasmania for decades. which would inflict real harm on a frater- ALP politicians who have made their Incat, one of the world’s leading boat- nal government. State so quaint. builders, is Tasmanian, but that just hap- Gray’s other role model was the They have just done it again, tipping pened as the result of the enterprise of one Queensland Premier, Sir Johannes Bjelke- out a State Liberal government and dis- man, Robert Clifford, whose success sur- Petersen, whose antipathy to Canberra missing the last two Liberals among their prised everybody. was deep seated. The Franklin was no five members of the House of Representa- The rot began 25 years ago, with the storm in a teacup. tives. flooding of Lake Pedder, in the central Gray had been elected on a develop- The consequence, as Peter Nixon re- Tasmanian highlands, to generate electric- ment programme after the ALP Premier ported early last year in his joint Common- ity. The ALP Premier, Eric Reece—aka Doug Lowe had vacillated for a year. wealth–State Inquiry into the Tasmanian ‘Electric Eric’—who was strongly commit- The Whitlam Government had ac- economy, is that Tasmania has an un- ted to development driven by hydro-elec- cepted the right of the Reece ALP Gov- friendly business environment. tric power, was cheered in the Tasmanian ernment to proceed with the Pedder Nixon told the Prime Minister, John Assembly when he announced that, scheme in the 1970s, but the price had Howard, who commissioned the report in Green opposition notwithstanding, the been high—Lake Pedder contributed to October 1996, and the State Premier, Pedder project would go ahead. Whitlam’s landslide loss in 1975. Tony Rundle, who lost office in Septem- Less than a decade later, a proposal by The Hawke-led ALP was not about to ber 1998, that this unfriendly business the then Hydro-Electric Commission to put economic development ahead of po- environment made it difficult to develop dam the Franklin River, in south-west Tas- litical considerations. It had, as a basic manufacturing industries which would be mania, as the last major project of the strategy, a determination to exploit the viable and competitive on world markets. State’s hydro-electric development pro- concern about the environment which ‘This factor has been associated with gramme, was defeated by Green agitation. had developed—concern helped along by the high levels of sovereign risk associated The issue became symbolic. Greens the highest rate of population growth in with the Tasmanian forestry industry,’ said around Australia took up the cudgels on the developed world, which, ironically, Nixon in his report. behalf of a river they had never seen. The was a basic strategy of the Hawke Gov- ‘Sovereign risk’, in the context of Tas- Coalition government of Prime Minister ernment. mania’s forests, is comprised of Senator Malcolm Fraser, sensing the electoral tide The Franklin became an issue in the Bob Brown and of Christine Milne—who and the strength of conservationist senti- 1983 election campaign which tipped out used the Wesley Vale project to launch ment, offered Tasmania’s Liberal Premier the Fraser Government—a case can be ▲

MARCH 1999 3 made that it was the decisive issue: ing newsprint without the benefit of tariff in the middle of the nation’s best horti- greenies in platypus suits haunted Liberal protection. cultural land, where Christine Milne had and National Party candidates across Aus- Associated Pulp and Paper Mills a farm. tralia. (APPM) operated on Tasmania’s north- As with Pedder and the Franklin, Newly installed as Prime Minister, Bob west coast, producing pulp at Burnie and Wesley Vale became a politico-emotional Hawke forced the cancellation of the paper at Wesley Vale, near Devonport. It battleground, launching Milne on a po- Franklin project by having it listed as a is a remarkable part of Australia, possessed litical career which took her to the Tas- World Heritage area at the United Na- of rich, red, well-watered basalt soil. No- manian Assembly, where she was to re- tions and legislating to enforce the can- where else in Australia is so suitable for main until unseated in September 1998. cellation; legislation ruled (by 4 to 3) con- horticulture. For the ALP government in Canberra, stitutionally valid by the High Court. Burnie had a pulp mill, a paper mill Wesley Vale was another political god- Tasmania got no thermal power sta- and a hardboard mill marketed as send. Hawke appointed Richardson to be tion. It got top-up money to build the King Burnieboard. At Wesley Vale, another environment minister in 1988, not be- and Anthony dams on the West Coast, APPM mill produced white paper. The cause Richo was a famous greenie, but be- which made up 112 megawatts of the 180 plant was antiquated, and the operation cause, as former NSW ALP machine man, megawatts which the Franklin would have survived behind a 25 per cent tariff which he was a famous political operator. supplied at less cost, and an undertaking was already moving down. Hawke and Richardson could not deny that the other 68 megawatts would be fi- In these circumstances, APPM de- that they knew there were playing fast and nanced if there was ever a demand for it. cided on a new mill at Wesley Vale to pro- loose with the livelihoods of the Burnie It can be argued that, from that mo- duce pulp by the kraft process, which uses workforce, as they shifted the environ- ment, Tasmania’s downhill course was set. caustic soda to dissolve lignin. mental requirements on Wesley Vale The ALP was ever mindful that saving a The new Wesley Vale mill was to be a around, in order to wring every last drop Tasmanian tree at the cost of a Tasmanian massive project, involving capital invest- of political capital out of the project. job was worth votes on mainland Aus- ment of $1 billion. APPM brought in a It was just as obvious to then ACTU tralia. A pattern emerged of knuckling un- partner, the Canadian firm Noranda. President Simon Crean, who said at the der to Green pressures, mobilized nation- Wesley Vale was to produce 440,000 time that the company was prepared to ally, to rescue this river or that forest from tonnes of pulp a year on an internation- comply with standards more stringent capitalism. ally competitive basis. There would be than any in the world, and no government Brown made his name campaigning 20,000 tonnes for the Tasmanian mills, could ask for more. against the Franklin. He got 10 years in with 420,000 tonnes being exported. There were other factors at work, as the Tasmanian Assembly as a member for APPM, wholly own by the listed there always are. Robin Gray’s environ- Denison from 1983 to 1993, and has been North Limited, wanted the Wesley Vale ment minister, Peter Hodgman, became elected for six more as a Senator. He was pulp mill as a replacement for its Burnie nervous about the strength of the Green elected as a conservationist, but pursues a pulp mill, which was 50 years old and at push, so that the State government ap- Left agenda. the end of its working life, although they peared ambiguous and uncertain in its sup- It may be difficult for the rest of us to never did say so. They sited it next to their port for APPM. perceive how voting against economic paper mill at Wesley Vale, 40 kilometres The last straw was when Richo com- reform saves rivers, trees and little furry from Burnie, and made plans to build a missioned the CSIRO to draw up a fur- creatures, but not for Bob Brown, who is further paper mill, at the same site. ther report and guidelines for such just as adamant about the GST as he was It was always obvious to the Hawke projects. North and Noranda pulled out. about the Franklin. Perhaps he has arrived Government, that Wesley Vale was to re- As it happened, the Wesley Vale project at an ultimate truth—economic stagna- place the mill which had been the basis was within those CSIRO guidelines when tion is good. for a rise in Burnie’s population from 4,000 they eventually appeared, but the issue in Australian Newsprint Mills—which in 1938 to 10,000 at the end of the Sec- 1989 was not the environment. It was sov- was jointly owned by the Herald and ond World War, and to 18,000 today. ereign risk, that is to say government risk: Weekly Times group and Fairfax, and Furthermore, being within bare com- a concern more common in Third World which is now owned by Fletcher Chal- muting distance, it was the last chance for countries than developed nations like lenge of New Zealand—has a pulp and pa- Burnie. It was also, you might say, just what Australia. per mill on the Derwent at Boyer produc- Tasmania needed, even if it were plunked Simultaneously with these events, a retired judge of the NSW Supreme Court, Michael Helsham, was conducting an in- quiry at the request of former environment minister Barry Cohen into the Lemon- thyme and South Forests, to consider whether 283,000 hectares of forest should be up for World Heritage listing. Photo removed for reasons of copyright Helsham found only eight per cent of the area he was investigating warranted nomination for the World Heritage list. Richo was appalled. It was a blow at the election strategy which he had developed. The Helsham report became unavailable. There was no media distribution. Richo took a submission to overturn the suddenly secret Helsham recommen-

4 MARCH 1999 The pulp and paper in- tinue to reward the instruments of their dustry on Tasmania’s north ruin by electing them to office? coast was now doomed but, Not only did Christine Milne get nine just to make sure, the years in State Parliament, not only is Bob CFMEU in 1992 pulled on Brown a Tasmanian Senator, but so is a work practices strike in Shayne Murphy, who, as an official of the Burnie. They won. CFMEU, led the Burnie strike in 1992. In 1993, North sold The former Liberal MP, Chris Miles, lost APPM to Amcor—which his seat in Federal Parliament on October was once known as APM, 3 to the ALP’s Peter Sidebottom, another Photo removed for reasons of copyright and which already had a union official. sizeable operation at Mary- Of the 17 Tasmanian members of Fed- vale in Gippsland, produc- eral Parliament, all but the five Liberals ing pulp and paper using the can be fairly described as opposed to eco- kraft process. nomic reform—Brown unthinkingly, You might wonder why Brian Harradine on reflection because the such a company would need measures are ‘ideological’ and the ALP antiquated plant in Tasma- members because they are only following nia, with a militant work- orders. force. Amcor must have Peter Nixon, in his hard look at the asked themselves the same Tasmanian economy, came to the conclu- dations to Cabinet, which was divided. question, for the company shut the Burnie sion that the State government should sell Richo had the support of Kim Beazley, who pulp mill down in October 1998. the Hydro-Electric Corporation, use the suggested Richo shore up his case. Richo Amcor still has mills making paper at proceeds to discharge the debt incurred on enlisted the support of Treasurer Keating, Burnie and Wesley Vale, both of them re- behalf of the HEC in building dams and who carried the day. quiring further investment to survive, fed start again. The ALP Cabinet agreed to nominate with pulp imported from Asia at a cost Nixon also recommended electoral 70 per cent of the Helsham area for World which is $100 lower than the cost of pro- reforms to reduce the number of State Heritage listing—which Hawke subse- ducing pulp from Tasmanian woodchips. politicians, which Premier Rundle fol- quently and unilaterally raised to 80 per Pressing on with Tasmania doesn’t lowed in a deal with ALP Opposition cent—to make a total of 378,000 hectares seem to make a lot of sense. Nor does fur- Leader Jim Bacon, once of the Builders’ excluded from logging. ther investment, when Maryvale is pro- Labourers Federation and brother of The Huon Forest Products joint ven- ducing the same product. Why not con- prominent Sydney Green activist Wendy ture was established in 1986 to use waste centrate activities at Maryvale, say a final Bacon. timber from sawlog operations in the Aus- farewell to Burnie, and let it sink, eco- Bacon campaigned on a pledge to save tralian Newsprint Mills and Southern nomically speaking, into the Southern the Hydro from privatization, and won. Concessions which would otherwise be Ocean? Stand by, for the next instalment When the Death Star is in their sector, left to rot. All feed into the chip mill was of this saga of decay and decline. Tasmanians can’t help themselves. Maybe, to be residues. But how sad for the Burnie workforce, if economic stagnation is what they want, There seemed to be no reason, even and for a town which grew from 4,000 in we should let them get on with it, and just for a Green, to oppose the project. The 1938 when the first mill was opened to enjoy the place on our holidays. only effluent was logwash—earth washed 18,000 today, but where the unemploy- Tasmania is, after all, very beautiful— off logs to clear them before milling. But ment rate is 13 per cent and rising. We should we care if, like Marilyn Monroe, it oppose it the Greens did. The Gray Gov- must weep for them. is also dumb and self-destructive, prepared ernment—fearful of losing the 1989 elec- Well, must we? The people who foolishly to place its destiny in the hands tion—dithered again, postponing the worked at the Burnie mills, producing of ruthless, powerful men and women who granting of environmental licences. pulp, particle board and, for the time be- hold their own interests to be absolute? Gray lost anyway. The ALP’s Michael ing, paper, are not children. They are Field entered a pact with the Greens, with- adults, with the right to vote, and to raise out whose support he could not become their voices. Premier. Bob Brown had 100 conditions, How sorry should the rest of Australia one of which was the dumping of the be for people who do not exercise those Huon Forest Products project. rights in the interests of their country, their Richo was now satisfied. The Green State, their families and their own jobs? preferences strategy was in place. In the How sorry should the rest of Australia be 1990 Federal elections, Richo and the for people who voted for their own Darth ALP Secretary, Bob Hogg, appealed suc- Vaders, and, furthermore, continue to vote cessfully to those voting Green to give the for them? ALP their second preferences. How sorry should we be for a workforce Just as the Franklin was a winner for which forces up labour costs when, at any the ALP in 1983, so Wesley Vale was to time, the five o’clock whistle’s next blast help give the ALP a fourth term in Can- might be its last? berra. Richo had done the job he was given Isn’t it enough, just to have to pay when Hawke so unexpectedly made him unemployment benefits to people who David Barnett is a senior Press Gallery journalist environment minister. brought it on themselves and who con- I P A

MARCH 1999 5 Tax Reform in New Zealand: The Shape of Things to Come in Australia?

ANGELA RYAN

New Zealand had preceded us down the path of tax reform. We can learn from its experience.

VER a decade ago, New As a result, tax reform was tackled is equal to one-eleventh) or on tax-ex- Zealand undertook many of on a wide front with the key elements clusive turnover (the tax is one-tenth). the tax reforms that Aus- being: Similarly, at 12.5 per cent the tax frac- O tralia is currently contem- • reduced reliance on income tax tion is one-ninth or one-eighth. The plating. As a result, it gives us first-hand through the introduction of a broad- next rate at which tax fractions can be evidence of the benefits of lasting tax based value added tax—a GST, in- used is at 20 per cent, where the frac- reform, the strategies that can be em- cluding items typically not taxed in tions would be one-sixth and one-fifth. ployed to deliver an efficient, fair and Europe such as food, clothing, health simple system, and the problems that and education; COMPENSATION ISSUES can be solved by good reform. • the removal of tax concessions and On its own, the GST can be described In the late 1970s, tax was a very con- the closing of tax loopholes in the as regressive. The revenue from the GST troversial political issue in New Zealand, income tax; and was, however, used to finance substan- reflecting a poorly-constructed tax sys- tial reductions in personal income tax tem. Tax collections were failing to meet as well as financing a compensation government revenue requirements and The reforms that package that saw social welfare benefits the system overall was highly increased across the board by 5 per cent distortionary with numerous concessions made up the tax (overall, at a 10 per cent GST, Treasury and high rates of tax. calculated that prices would rise by only reform package five per cent because of the elimination THE TAX REFORM PACKAGE have stood the test of of sales tax and the range of goods not The package approach to tax reform subject to GST). In New Zealand, peo- adopted by the Labour government time because they ple accepted the GST on the basis that elected in 1984 reflected the view of it was part of a system that was fairer New Zealand’s then Finance Minister were linked by a than the burdensome income tax system that rapid reform on a broad front common theme it was, in part, replacing. spreads the burden of reform equitably, Compensation was handled by redis- thus enhancing the legitimacy and ac- tribution through the income tax and ceptability of the programme. • the reduction of personal rates of tax benefit system. Providing exclusions was The reforms that made up the tax (the top marginal tax rate was cut found to be an ineffective way of pro- reform package have stood the test of from 66 per cent to 33 per cent, and tecting the poor. For example, it was es- time because they were linked together was aligned with the company tax timated that households with the low- by a common theme. That theme was rate). est 20 per cent of income would have the need to have broad bases (so that if The catch cry of reform was broad- received only 15 per cent of the aggre- you are taxing income, you want to tax tax bases, levied at lower and less vari- gate benefit of an exclusion for food. The all kinds of income, or if you are taxing able rates of tax. This approach was other 80 per cent of households, which goods and services you tax all goods and adopted as the best means to: were not considered to be poor, would services) and low rates. This ‘broad base/ • raise sufficient revenue to correct get 85 per cent of the benefit. The same low rate’ strategy was not mere political New Zealand’s fiscal imbalances; is true of other exclusions —the well- rhetoric, it was reflected in all aspects • increase efficiency by reducing tax off spend more on everything: therefore of the package. differentials that distorted economic they pay the most GST when the base Such an approach recognized that behaviour; and is broad. genuine tax reform would allow re- • reduce the tax burden on wages and Overall, because the revenue base sources to be used more efficiently be- salaries and thus be seen as fairer. was stronger, it was possible to provide cause deadweight costs of taxation would The GST rate in 1986 was 10 per compensation for those who genuinely be reduced and business would be able cent but it was raised to 12.5 per cent in needed compensation from within the to compete on a genuinely equal foot- 1989, when further income tax cuts were reform package. ing. It meant that New Zealand’s na- introduced. Unlike most VAT systems, It is easy to understand the pressure tional income would be higher, and New only one tax rate applies. At 10 per cent, that politicians were under to give way Zealand businesses would be better able tax may be quickly and easily calculated and, overseas, there are many examples to compete in the world and at home. based on GST-inclusive turnover (this of exclusions for basic foods, children’s

6 MARCH 1999 clothing, books, health costs and so on. to keep separate accounts for supplies dence available of the problems faced Any exceptions add enormously to the taxed at separate rates; and when the existing tax bases are inad- complexity of the system. Much of the • it is a fact of life that governments equate to raise the revenue which gov- pressure applied in New Zealand was need at least two broad tax bases to ernment considers necessary to meet countered by providing offsetting relief fund their revenue needs. The alter- public demand for government expendi- in the form of tax cuts and benefit in- native to a GST is not a compliance- ture. There is a growing sense of unfair- creases. cost free world of no indirect taxa- ness when the tax authorities are forced It is interesting to note that book- tion. to push every margin to its limit to ex- sellers who argued strenuously for an When accounting, audit and other tract more from the tax base, and some exclusion for books on the basis of a associated costs of collection are taken taxpayers are able to get around the more United Nations Convention that books together, the GST is expensive to ad- stringent rules while others are not. should not be taxed, subsequently ap- minister. However, the sales tax admin- The New Zealand experience shows plauded the introduction of GST on the istrative system was dismantled, and the that the road to greater harmony and basis that high income earners (who costs are lower than in countries with stability is to broaden bases (so people tend to read more books than lower in- multiple rate GST/VAT regimes. perceive that the system is fairer) and come earners) were significantly better to lower tax rates (so the incentive to off overall as a result of the tax cuts they WHAT CAN NEW ZEALAND’S avoid and evade is reduced). Together, had received. EXPERIENCE TELL US? they provide a strong revenue base from Australia undertook its own tax reforms which adequate compensation can be COMPLIANCE AND in the mid-1980s and introduced many drawn. ADMINISTRATION COSTS of the changes that New Zealand has on In looking at the application of such It is undoubtedly true that the GST im- the income tax side. These included in- a framework for Australia, business posed some additional compliance costs troduction of the fringe benefits tax, in- groups have come out firmly in favour on businesses in New Zealand. The GST troduction of an imputation system and of a broad-based GST, and welfare called for improved accounting systems, so on. Nevertheless, New Zealand had groups have traditionally been con- improved record-keeping, and in some pursued a broad-based approach to in- cerned with broadening the income base cases additional skilled administrative come tax more zealously than Australia to ensure that people pay a fair share of staff. There are compensations, however. with, for example, the removal of accel- tax on their income. The interesting First, sales tax was scrapped and sec- erated depreciation, that is only now question now is; can we take something ond—and more importantly—the GST being considered in Australia. from both of these approaches by adopt- provides cash-flow benefits to registered The more incremental approach to ing the New Zealand model of broad persons (although this comes at the price reform and the failure to address the bases and low rates for both our con- of a cash-flow cost for the revenue au- shortcomings of the indirect tax base in sumption tax and income tax and get thorities). For a cash-based supermarket, Australia means, however, that, a dec- the best of both worlds? Could this be for example, the GST collected is likely ade later, there are strong echoes of Aus- the way to real, lasting tax reform in to be held for up to two months and the tralia’s current tax system in what New Australia? use of money in that time will far ex- Zealand left behind when it initiated Key lessons from the implementa- ceed any additional costs incurred in tion of tax reform in New Zealand sug- complying with the accounting require- gest: ments associated with a GST. One su- The New Zealand • a package approach is best—it allows permarket chain calculated that the use for trade-offs; of the money benefit would exceed experience shows • the tax system needs to be directed NZ$500,000 per annum. at raising adequate revenues at the In addition, many businesses in New that the road to lowest possible economic cost as its Zealand found that the requisite record- greater harmony main objective—this allows for keeping assisted in making better use of much greater simplicity in the sys- their own resources and business plan- and stability is to tem, as well as enhanced efficiency; ning. • providing a single, consistent theme It must be stressed that it is the broad broaden bases … and to reform (like the broad-base, low- base applied in New Zealand that has to lower tax rates rate policy) makes it easier for peo- kept the compliance and administration ple to see the benefits of reform and costs to a minimum: provides a degree of certainty in the • with any tax, boundary issues will reform. The ramshackle wholesale sales midst of change; and arise—a base that is as broad as that tax system; the relatively high rates of • there needs to be a determination to applied in New Zealand keeps these tax which apply to average income earn- get tax policy right first, with ad- to a minimum; ers; the perceptions of unfairness because equate compensation to be delivered • for many businesses, especially small of the apparent tax planning that is outside the tax system. ones, the impact of the GST on day- available to non-PAYE taxpayers (due to-day business is relatively minor as to the different rates that apply to dif- SPECIAL FEATURES OF THE simple fractions can be applied to ferent entities and the holes in the in- AUSTRALIAN SYSTEM cash book entries or through elec- come tax base) are all features of Aus- While there are many similarities be- tronic records. As soon as multiple tralia’s current system. tween Australia and New Zealand that rates are introduced (including ex- There is an increasingly adversarial make the New Zealand experience of emptions and exclusions), adminis- relationship between the tax office and great interest to Australia, two main fac- tration goes up because of the need taxpayers. This is perhaps the best evi- tors relating to institutional structures ▲

MARCH 1999 7 have to be kept in mind when translat- ing the New Zealand experience to Aus- tralia. First, New Zealand has a unicameral Used Anglicans Parliament and in the days of the intro- duction of a GST had a first-past-the- post voting system. This meant that The Australian Education Union and once the government of the day had de- cided it wanted to introduce a GST it the Anglican Synod Report could do so. It did not have to be con- cerned about ‘getting the numbers’ from KEVIN DONNELLY minor parties, as it did not have to get the legislation through a chamber in which it did not hold the balance of It is not only when supping with the Devil that one needs a long spoon power. In addition, sub-national authorities in New Zealand play a comparatively We ask members to wear a blue rib- and community groups who, as you would very minor role in terms of functions and bon as a symbol of public education. expect, argue the union’s case. revenue-raising powers. Because of that, It will be an important sign of our One such meeting occurred at the the New Zealand Government was resolve to fight for the survival of Melbourne Town Hall in June 1998. De- spared the problems that can arise with public education in this country. Let scribed as a ‘community summit’ (AEU State governments. us not lose what has evolved as a News, July 9, 1998), the meeting gave spe- None of this makes reform any less quality, free, secular education sys- cial prominence to those opposed to the necessary. But it does make it that much tem. Let the battle begin, we will Government and those guaranteed to pro- harder to achieve. If Australia chooses defend state education against the mote the union line. Not surprisingly, the to go down the New Zealand path, it conservatives and ensure that future Melbourne meeting concluded with the means more work has to be done in en- generations will have access to a sys- following: suring broad-based support for the tem based on the principles of equal- The final outcome of the Summit was change, and effort has to be put into ity and social justice. a resolution that condemns the ever- making sure that everyone is prepared The AEU News, widening gap between the haves and to make changes in the national inter- June 4, 1998, page 9. the have nots, rejects the concept of est. economic rationalism and calls for a The New Zealand tax reform proc- HE Australian Education society that is tolerant and considers ess has many lessons from which Aus- Union (AEU), if nothing community needs. tralia can learn. It is a demonstration else, is quite open and hon- The AEU News, that even something that seems as po- T est about its intentions to July 9, 1998, page 16. litically impossible as a broad-based con- overturn recent changes to the Austral- sumption tax coupled with a broad- ian school system. The rhetoric is one of A second meeting, also held in Mel- based income tax can become ac- ‘battle’ and words like ‘survival’, ‘fight’ and bourne, organized to argue what the un- cepted—even part of conventional wis- ‘defend’ make it perfectly clear that, in the ion defines as the case for public educa- dom—over time. war against so-called ‘conservatives’ and tion, occurred on 2 August 1998. Once ‘economic rationalists’, the AEU will do again, the meeting involved those sympa- almost anything to win the day. thetic to the union: including pro-Left Since the national conference in Syd- politicians, trade union representatives ney last year, organized by the AEU and and ‘friendly’ academics. The meeting from which the above quotation has been agreed on a ‘Statement of Principles for taken, the teacher union has implemented Public Education’ that endorsed the a number of strategies to achieve its ends. AEU’s policy on education. The first relates to a marginal-seats Supporting publications willing to ar- campaign undertaken before and during gue the union’s case is a third strategy the the recent federal election. Obviously, one AEU is using to further its cause. The pub- very effective way to have the union’s poli- lication of Going Public: Education Policy cies taken up is to have a Labor govern- and Public Education in Australia by the ment in Canberra willing to repay its debt Australian Curriculum Studies Associa- to the union movement. Not only did the tion (ACES) and the Centre for the Study union letterbox drop marginal seats, but a of Public Education at the University of series of anti-GST advertisements were South Australia, provides a very recent also run on evening television. example of this approach. A second strategy employed by the The book includes essays opposed to recent changes in the school system and Angela Ryan is Director—Taxation for the AEU is to orchestrate public meetings in- Australian Society of Certified Practising volving fellow travellers and sympathiz- very critical of the so-called ‘conservative’ Accountants. A more detailed paper on these ers. The union, instead of appearing agenda in areas like accountability and matters can be found at www.cpaonline.com.au. alone—and thereby being seen as self-in- increased parental choice. The benefits of terested—brings together a collection of this particular strategy are that the union I P A ‘independent’ academics, commentators appears at arm’s length from what is writ-

8 MARCH 1999 ten, the book has public credibility as it is Evidence that the report is not inde- Finally, much of the statistical infor- published by an ‘independent’ third party pendent can be found on examining the mation in the report about class sizes, stu- and it can be used at a later stage as evi- names of those involved in its production. dent/teacher ratios, education budgets and dence that all is not well with the public Ann Morrow, a member of the Task resourcing schools uncritically accepts education system. Group, is also a prominent member of the much of what the AEU has argued over That the union uses the preceding group established by the AEU in late 1997 the last 12 months. three strategies to further its cause should to defend public education. Not only has Like the union, the Task Group fails not be considered unusual or wrong. We she taken a key part in the meetings de- to mention that the base line used to com- live in a democracy and one of the great- scribed earlier in this article but, under the pare education spending in Victoria— est freedoms we have is the right to or- previous ALP government, she was a close spending for the years 1989-92—was not ganize and to enter the public debate. confidante of the then Minister for Edu- financially viable. Also ignored is the fact Given the union’s affiliation with the cation, Joan Kirner. that a succession of Labor education min- trade union movement, and its consistent One of those responsible for carrying isters had to seek substantial additional support of the ALP during elections, it is the research for the report, Michaela funding from the Treasury in those years also not surprising that the union is a stri- Kronemann, is currently Research Officer to meet costs which had been incurred in dent critic of conservative governments. for the Victorian Branch of the AEU. Ms excess of approved parliamentary appro- Where there should be cause for con- Kronemann has also been involved in the priations. cern is when the union, and those who public meetings orchestrated by the AEU The report also fails to mention the support it, employ respected and inde- and, as one would suspect, is a strong ad- substantial real increase in education ex- pendent third parties to argue their case vocate of the union line. penditure since 1991–92—including an without showing their hand or admitting Further evidence of the lack of inde- increase in funding for students with dis- that what is intended is part of an orches- pendence in the report is the way it abilities from $199m in 1992 to $250m in trated political campaign. uncritically mirrors union policy on a 1998—and the fact that parent and Such is the fourth strategy employed number of important issues. One of the teacher surveys carried out by schools by the AEU and it is evidenced by the union’s key policies involves restoring the show a high level of satisfaction with the publication of The State of Our State New Schools Policy and abolishing the state of State education. Schools: The Report of the Synod Schools Enrolment Benchmark Adjustment In the weeks leading up to the Report Task Group on Victoria’s Public Education (EBA) mechanism—the effect of these being tabled at the Synod meeting, it suf- System. The report is the product of a task Howard Government initiatives has been fered a good deal of media criticism. Not- force established by the Anglican Mel- to make it easier to establish non-govern- withstanding the very positive description bourne Diocesan Synod and it was tabled, ment schools and to penalize government of the Report in the teacher union’s news- amid much controversy, at the October education systems financially if they lose letter (‘Anglicans blast education cuts’ 1998 meeting of the Synod. market share. AEU News, 1 October 1998), a number If governments and parties are com- While one might expect that a Task of articles and reports in Melbourne’s daily promised by their involvement in politics, Group representing the Anglican Church, papers criticized the Report for being one- then the Church represents a beacon and Anglican schools, would be a staunch sided and factually incorrect. symboliszing truth and independence. defender of the non-government school Such was the flawed nature of the Task Given such currency, it is understandable system, such is not the case. Not only does Group’s Report, that, when it finally came why those committed to political solutions the Task Group’s recommendations adopt to the Synod vote, it was only accepted would be very happy if the Church advo- the union’s stance about the New Schools by a handful of votes—219 voted in fa- cated their particular case. Of course, such Policy and the EBA but, in the body of vour, 212 against with about 150 abstain- support should not be too obvious or eas- the report, those parents who send their ing. ily identified. children to Anglican schools are criticized The report of the Anglican Task for undermining the government system Group is, on the surface, an independent and for worshipping money (pages 6–7). and balanced evaluation of the state of The rhetoric and arguments used in Victorian State schools. It traces the his- the Task Group’s report also mirror those tory of secular education in that State, of the AEU. The report argues that gov- describes a number of models that have ernments around Australia, by making influenced its development and provides schools more accountable and allowing a critique of recent changes. parental choice, are simply concerned The recommendations at the end of with increasing the power of the privileged the report present a series of innocuous and leaving the less well off with ‘a residual statements that, amongst other things, low-cost government sector targeted to seek ongoing support for public education, low income groups’. the need for government to increase ex- Referring to what it terms the penditure and agreement that the report ‘marketisation of education’, the report be commended to parishes for ‘study and also argues that recent changes have ‘the Dr Kevin Donnelly is Director of Education action’. potential to destroy the system itself’. Not Strategies, a Melbourne-based consulting group. Notwithstanding the above, a closer only is the school system under threat, but He advises State and Federal governments and, in reading of the report reveals that it is very the report goes even further and states that the words of The Age, is someone who ‘was a critic much a political document written so as the very fabric of society itself is at risk: of the previous State Labor Government and had to endorse and support the AEU’s public ‘in the name of free enterprise, social soli- recently defended the Coalition’s campaign and to condemn the conserva- darity is being suppressed and inequalities record in education’. tive agenda in education. normalised’. I P A

MARCH 1999 9 Slave Labour

BOB DAY

If we are so concerned about youth unemployment, why do we impose it?

It was the best of times, it was the be the value of the labour itself to the pletely at odds with the realities of the worst of times, it was the age of wis- person hiring it. modern workplace. The notion of vol- dom, it was the age of foolishness…it If all youth employment in Aus- untary acceptance of a wage unrelated was the spring of hope, it was the tralia today was provided by firms with to an award seems to offend those who winter of despair…We had every- the resources and staffing policies of see it only as ‘exploitation’. But this thing before us, we had nothing be- BHP in the 1960s, we wouldn’t have a view is demeaning to the common fore us. problem. Such companies would be sense of those it purports to protect as Charles Dickens, able to amortize, over time, the cost of well as the decency of most employers A Tale of Two Cities subsidiszing junior wages considerably and, as far as the small business sector in excess of the value of the work be- is concerned, it is a ham-fisted inter- HE paradoxes in this pas- ing done. Unfortunately, the bulk of vention in the relationship between sage from Dickens capture prospective employers of young people employee and employer. the predicament of young are in the trades or small to medium- The only sensible and intellectually T people entering the labour sized businesses which simply do not consistent position is for junior wage market today. They’ve been born into have the margins to afford such luxu- rates to be based on the value of the one of the most affluent eras in human ries. work to the person purchasing it and history—with access to better medical Under the present arrangements, set by agreement between the employ- care and longer life span than any pre- such prospective employers are pre- ers and the employees. It is, practically vious generation. As well, rapid cluded from providing gainful employ- speaking, impossible for third parties— progress on the medical, scientific and ment and on-the-job training to young except, perhaps, for the parents of a technological fronts will continue to people who are desperately looking to junior employee—to understand or transform their lives. In many respects, get a foot on the employment ladder. make judgements about what is, or is we can confidently say there’s never Employees who want to sell their serv- not, in the employee’s best interests. been a better time to be alive. ices to an employer at a price the em- Those to whom such a prospect is But the mechanisms for dealing anathema simply have not confronted with such remarkable change have sel- the fact that, as they presently stand dom, if ever, been so ill-matched for nearly all junior wage rates are set at the task. The lack of flexibility in the Australia’s … levels which make them uncompeti- youth labour market means that tive in the job market. They do not appallingly high percentages of young industrial relations is appear to have applied the traditional people are excluded from the world of still based on the test of cui bono—’who benefits’, in work. The tragically high incidence of whose interests are such arrangements? youth suicide is one direct result. An- theory of conflicting Certainly not those of the young un- other is drug addiction and related employed. crimes—which account for more than interests completely A regulatory system that excludes half the prison population—along with at odds with the so many from employment and pre- youth alcoholism, homelessness, al- vents employers from giving them work ienation, poor health, the collapse of realities of the must eventually be exposed for the family life … the list is all too familiar. scandal that it is. To those most directly And, whilst it is commonplace to sug- modern workplace affected by the intransigence of the gest that there are no simple solutions, process, it is increasingly plain that it there is something close to a panacea has less to do with concerns about so- for these ills—a job. ployer can afford are likewise prevented cial justice and a lot to do with the It has been suggested that the con- from doing so. Yet there are perfectly highly politicized role of trade unions cept of ‘competency’ can replace jun- sound reasons why prospective employ- and the tribunals themselves. Poli- ior wage rates. This notion appeals to ees might want to reach an arrange- tics—rather than economic or social many in the union movement and else- ment outside an award—a greater de- considerations—blocks our young job- where because it is marginally more gree of independence, a contribution less from access to the world of work. defensible on the basis of equity than to their own keep, job satisfaction and, The falling rate of participation in the present archaic arrangement—al- of course, the incentive of future op- the union movement among those who though the proposed mechanism for portunities are among the more com- have jobs is partly attributable to the calculating such competencies is to- mon motives. perception that unions are more con- tally implausible. Australia’s ‘rear-view mirror’ of in- cerned with protecting their own in- There is an alternative to both: that dustrial relations is still based on the terests than those of their members. the only relevant consideration should theory of conflicting interests com- The rhetoric of equity in income dis-

10 MARCH 1999 tribution pales even more quickly for the price of goods or services—like la- the issue, ‘youth unemployment is a those who have no job and have been bour—without it resulting in a decrease problem which has directly affected 4 priced out of the market thanks to a in demand for those goods and serv- out of every 10 households having 16– centrally determined award wage. The ices. Price does matter. And ‘pricing 24 year old family members in the last young, who are generally well aware of young people out of the job market’ is 5 years’. their need to acquire skills if they are not just employer rhetoric but a harsh Among the survey target group— to become productive employees, will reality over which they have no con- people living in the northern and not thank those who have precluded trol. north-eastern suburbs of Adelaide— them from on-the-job training. Over- The laws of supply and demand are acquaintance with the realities of our regulated wage-fixing systems, by con- immutable and they apply as much in Proportional Rate System was more tributing to the destruction of jobs, add the workplace as in any other market. than merely theoretical. Respondents to the inequity they profess to correct. When there are external distortions, were well aware that a scheme that As P.P. McGuinness recently ob- locks adult rates and junior rates to- served in the context of unskilled gether is incapable of adapting to con- workers, ‘it makes sense not to compel temporary conditions. In the 1970s, for employers to pay such a high minimum The burden of example, an inexperienced school- wage, but instead to preserve living supplementing the leaver or job seeker was typically only standards thought socially appropriate value of the labour 16 years of age. Today, that same inex- through the tax and social security sys- perienced person is more likely to be tem. If, for some reason, you want em- to the employer so 18 years old, and the relevant rate is ployers to pay more, this is best as to achieve the much higher than the rate for a 16- achieved through the tax system’.1 year-old. It is absurd. The same applies to youth wages. unrelated goal of a Another anomaly inherent in cen- The burden of supplementing the value minimum wage tralized wage-fixing is the preoccupa- of the labour to the employer so as to tion with ascertaining what constitutes achieve the unrelated goal of a mini- ought to be met by a ‘living wage’—a rhetorical construct mum wage ought to be met by the com- the community which ought to be recognized as such. munity at large. The community is, af- Variations in the cost of living across ter all, like the individual youth, get- at large Australia make it virtually impossible ting considerable benefit from the fact to determine what an appropriate liv- that they are employed. According to ing wage might be. A young person liv- a National Youth Affairs Research it is the weakest who suffer most. It was ing on a farm in the mid-North of Scheme Study (The Price We Pay, once the case that bricklayers em- South Australia clearly has a com- 1997), youth unemployment already ployed lads to carry their bricks, as pletely different set of circumstances to costs the Australian community more plumbers employed someone younger deal with—and thus different criteria than $2 billion a year. It is simply in- to dig trenches for them. In exchange, in deciding on what constitutes an ad- equitable to expect small business and the lads were taught a trade. Until the equate income—compared with young tradesmen to foot the entire bill and cost became prohibitive, as a direct people living on their own in the in- unrealistic to pretend that they can af- result of centralized wage-fixing, this ner-western suburbs of Sydney. That ford to do so and still remain competi- arrangement suited all parties and was people in different situations need dif- tive. Yet it is widely acknowledged that well-understood by all. fering amounts of money has nothing small business is the sector which has Historically, the collapse of that intrinsically to do with the employer- the greatest potential for generating employment-generating system is well employee arrangement. Cost of living new jobs. In the Prime Minister’s own documented. In 1951, a first-year ap- adjustments ought to be made through words, ‘The way to solve youth unem- prentice was approximately 7.5 per the welfare system—not through an ployment is to liberate the small busi- cent of a tradesman’s wage and there award system. ness sector’.2 were virtually no unemployed teenag- It is very clear to most of the peo- It is one of the long-term conse- ers. By the mid-1970s, the wage rate ple who are directly involved that the quences of the Federation settlement had doubled to 15 per cent and the intangible benefits an employer con- that we have developed a selective term ‘youth unemployment’ began to fers by taking on a young employee are blindness about economic fundamen- have some currency. The wage rate is as significant—and probably more pro- tals. ‘Historically, Australia developed now 40 per cent and youth unemploy- found in their consequences—than the a centralised wage-fixing system as a ment is now regarded as the ‘single wage transaction itself. Anyone who result of the political consensus which most important social problem of our doubts this greatly underestimates the also gave us tariff protection. It’s safe time’.4 capacity of young people to understand to say that, without the one we would In the Sexton Report, 70 per cent where their own best interests lie. They have never had the other. High tariff of respondents, unprompted, character- can see the benefits of starting on a low walls led to what’s been called “the ized the issue in those terms. Approxi- wage to learn a trade and there is in- cost-plus mentality”. Whatever goods mately 70 per cent of respondents also creasing evidence of their wholly jus- cost to manufacture—including the said they ‘would support the introduc- tified resentment of paternalistic state cost of labour—the manufacturer tion of a youth wage equivalent to the interference which prevents them from would simply add his margin to arrive dole or Austudy in return for full-time receiving those benefits. at a price’.3 apprenticeship employment or train- From a young person’s perspective, But, at some point, we have to stop ing’. Among respondents, as an indi- there must be something especially deluding ourselves that we can increase cation of the gravity and familiarity of galling and hypocritical about society’s ▲

MARCH 1999 11 double standards regarding employ- ment. One the one hand, we praise young people who undertake volunteer work. On the other hand, we hold in Opinion Polls and high regard those who have found em- ployment. Yet woe betide anyone who offers or accepts any arrangement in between. It is a ‘no-go’ area—although Baseball Bats it is self-evidently a fertile field for mutually acceptable and agreeable ar- rangements between the parties. It is inconceivable that the present What Really Went on in the system, with all its inflexibilities, will be allowed to continue indefinitely to exclude so many of our young people Queensland State Election from the world of work. Not even the most relentless demonization of the CHRIS MITCHELL motives of small business employers could achieve that end. The struggle for liberalization of the existing wage regime has echoes of the campaign T should tell astute observ- tion’s campaigning. They felt that against slavery, invoking Ernst Howe’s ers much about the divided theirs had been a service delivery gov- description of it as a ‘bitter conflict nature of modern Australia ernment, with a good record on hospi- with contemporary sentiment and the I that most of the commentar- tals and road building and that those interests of gigantic power’. Liberty. ies about the rise of One Nation and, messages had been lost in the cam- Freedom. The long struggle to break indeed, almost all the latest tome on the paign. They felt the campaign was giv- the shackles of workplace regulation subject (Two Nations) have been writ- ing their own base voters permission goes on. ten by people outside of Queensland— to lodge a protest so long as they chan- the birthplace of One Nation. nelled their vote back to the conserva- Apart from Nick Rothwell and a tives via their optional second prefer- NOTES couple of other grown-ups, the com- ences. And once the Liberal Party mentators have almost all got it wrong. opted to preference One Nation, small- 1 Sydney Morning Herald, ‘So, Back to Conservative protest politics has a ’l’ Libs in Brisbane were always going the Quack Remedies for Jobs’, page long history in Queensland. Remem- to repeat their 1989 desertion of the 15, 29 October 1998. ber the Labor Split, the Confederate conservatives. 2 The 7.30 Report, 28 February 1997. Action Party, the CEC? The interac- For its part, Labor focused almost 3 Checkpoint Charlie, a submission to tion of such politics plus an optional entirely on the one line—it was either the House of Representatives Stand- preferential voting system with an elec- a stable Beattie government or a rag- ing Committee on Youth Unem- torate just as disenchanted with John tag Coalition government relying on ployment, 1997. Howard as it was with Paul Keating, One Nation support. Mr Beattie was 4 Sexton Report, 1997. which still had (to quote Wayne Goss) on-message throughout the campaign. its baseball bat in hand and which saw He spoke of a five per cent unemploy- the ‘unread head’ Mrs Hanson as an ment target—which was an inten- underdog, was always bound to deliver tional dry run for Kim Beazley’s subse- a large amount of support to One Na- quent five per cent campaign—and tion, even though most people knew constantly referred to the ‘rag-tag Coa- they were voting out of protest. lition’. Observers of politics in Brisbane But what really sealed the June 13 will have heard this phrase thousands Queensland State election were the of times in the two months leading up campaigns of the governing Coalition to the election. parties and the Labor opposition. But, beyond that, both sides of poli- The entire thrust of the Govern- tics had internal polling several months ment’s campaign was negative, with a ahead of the election showing One Na- plea for One Nation preferences. The tion at near 30 per cent throughout Borbidge National/Liberal Coalition Central Queensland. Government had already accepted— After Premier Borbidge sacked because of its own internal research and Trevor Perrett—his then Minister for the feedback from the wiser heads in Resources and Primary Industry—for Bob Day is Managing Director of Homestead the Government—that One Nation his admission to The Courier-Mail that Award Winning Homes Pty Ltd and President of had been on a roll since the previous he had carried on a relationship with a the South Australian HIA. This is an amended October. murdered prostitute, The Courier-Mail version of his submission to the AIRC inquiry into In private conversations, with peo- polled his seat of Barambah four-and- Junior Rates of Pay. ple as high up as Premier Borbidge him- a-half months before the State elec- self, many in the Coalition expressed tion. That poll showed One Nation’s I P A concern at the negativity of the Coali- Dorothy Pratt at 28 per cent. The Cou-

12 MARCH 1999 rier-Mail was subsequently leaked in- Mayor Jim Soorley predicted nine a There was undoubtedly an element ternal Labor polling which showed fortnight before the election. A former of anti-media sentiment in the vote for One Nation at near 30 per cent in National Party State Secretary thought Mrs Hanson’s Party. The problem is, Wide Bay. One Nation would score in double fig- many of the commentators who have For this reason, the paper decided ures and told me so. There is no sub- observed this anti-media sentiment against State-wide polling in the lead- stitute for on-the-ground knowledge. have not really paid attention to how up to the June 13 election, and con- Those people who picked the result the Queensland media handled Mrs centrated on marginal polling. All up, best were those who’d spent most time Hanson. They are more familiar with we published 18 marginal polls and all actually looking at what was happen- how their own newspapers, radio and those in the eventually successful One ing in the provincial electorates of television stations treated the One Na- Nation areas were showing votes of Queensland. State-wide polling was tion phenomena. near 30 per cent in the lead-up to the useless—because of the very diverse, The Courier-Mail tried to address election. regionalized nature of the State. the questions of Hansonism in a ra- When Premier Borbidge called the Second, negative advertising has its tional fashion. election, One Nation’s aggregate vote limits in a compulsory voting system. We appealed to Queenslanders to in key marginal seats was 16 per cent, The exclusively negative advertising of consider the open nature of the according to internal political tracking the Coalition played into One Nation’s Queensland economy, its dependence polls. The last tracking polls the ALP on services and exports and the ben- undertook—on the nights of June 10, efits that its interaction with the re- 11 and 12—put support for the fledg- gion had had on the Queensland ling party at 18 per cent. growth rate. We pointed out regularly Labor’s track illustrates that One The exclusively that we had benefited more than the Nation’s vote was very steady through- other States from reductions in tariff out the 26-day campaign, peaking at negative barriers and from trade with Japan. 20 per cent at the beginning of June Unfortunately, a fairly misguided and reaching a low point of 14 per cent advertising of the anti-racist campaign driven by Mrs during the first half of the final week. Hanson’s political opponents played The polling day jump of One Nation’s Coalition played into the hands of people who saw her vote—which rose five points to 23 per into One as articulating their concerns. Un- cent—was entirely at the expense of doubtedly, fringe racist elements had the other minor parties—the Greens Nation’s hands attached themselves to One Nation. and the Australian Democrats. The But, whereas The Courier-Mail and the ALP and the Coalition held their fi- Australia-Israel Review actually set nal track support on the day. This sug- about trying to expose those elements, gests that, in the last hours, a group of hands. After a single introductory posi- many in the national media were more protest voters decided to ‘get with the tive commercial, every advertisement content to put their hand firmly on strength’ and vote for a real protest the Coalition team put together was their heart and profess that they were party—One Nation—and not a pale an attack—even their single ‘issues’ ad indeed better than those displaced imitation. But the point of this polling on law and order was negative against Australians who were resorting to the is that the campaign itself hardly themselves. In the United States, nega- baseball bat of Hansonism. moved One Nation’s vote, making a tive advertising is used to drive voters How sad that so many Australians mockery of claims that it was a media- away from the polls; to push down your were held in such contempt by their driven phenomenon that saw voters opponent’s numbers in a voluntary vot- fellows. reacting to published poll results. ing system. Australia’s compulsory vot- The One Nation vote recorded by ing system means negative advertising the parties and by news organizations often sends the cynical to the ‘non-po- during the campaign was not signifi- litical’ candidates, whether they are cantly different from polling under- Greens, Democrats or One Nation. taken up to nine months before the During June, Mr Borbidge, unable to campaign. balance the competing demands of his There were some interesting lessons natural constituency (which was break- in the final results. ing off in large lumps) and swinging Firstly, metropolitan Brisbane re- voters (who were offended by the bra- jected One Nation out of hand. This zen politicking on preferences) was rat- is largely because metropolitan Bris- tled in his often strident political tone bane—which is The Courier-Mail’s as he pushed One Nation’s hot buttons. major circulation catchment area— Labor played a high stakes game— had a pretty good idea of exactly what and actually lost more seats to One Na- was going on in the State. Those areas tion than did the conservatives—but outside our catchment area probably still managed to hang on with the sup- did not expect the level of One Na- port of Independent Peter Wellington. Chris Mitchell is Editor-in-Chief tion success eventually achieved. Our It was risky politics indeed, and it de- of Queensland Newspapers. editorial writer, Dennis Atkins, former pended on minimizing losses in provin- Press Secretary to Wayne Goss, pre- cial Queensland and maximizing gains dicted eight One Nation seats. Lord in Brisbane. I P A

MARCH 1999 13 Xenaphobia: The Great Local Content Myths

R.J. STOVE

Recent agitation by Australian media pressure groups over New Zealand content on our TV screens represents a mish-mash of rancorous chauvinism, historical ignorance and double standards.

HE scene: Jacobean Eng- can—True Blue being an amalgam of the heart of what we are as a society. It land, circa 1610. The place: the Australian Writers’ Guild (which puts under threat our role as Austral- Ye Olde Worlde Star Cham- covers authors for TV and the movies), ians, our culture, our history, our tradi- T ber, where Ye Olde Worlde the Screen Producers’ Association of tions.’3 As with so much in modern Luvvie Lobby Groups are once again in Australia (SPAA), the Media Enter- Australian life (the waterfront above session. The defendant: one William tainment and Arts Alliance (MEAA), all), so with the True Blue affair: shop- Shakespeare, actor, former poacher, and the Australian Film Finance Corpora- steward sentiments which one hoped dramatist, who has been summoned to tion and the Australian Film Commis- had been silenced by simple global eco- answer the charges of infringing local sion. From its plenipotentiaries’ rage at nomic reality have emerged from the content regulations in play after play. the High Court’s pronouncement, you’d swamplands with redoubled punitive Instead of doing the decent thing and think that the judges involved had ad- strength, the spectacle suggesting a new sticking to portrayals of the authentic vocated pædophilia or something. (On Night of the Living Dead. English National Identity, he ransacks reflection, you wouldn’t: pædophilia ad- By the bye, if you’re wondering writings from Saxo Grammaticus (the vocacy would have been much better re- when you last heard of Miss Todd and 12th-century Danish author who ceived in luvvie milieux.) Mr Jeffrey, you’re not alone. Save for dreamed up Hamlet’s storyline), Matteo The MEAA’s representative, actor Mother and Son’s celebrated jokesmith Bandello (the 16th-century Italian re- [sic] Sonia Todd, proclaimed the arrival Geoffrey Atherden—and even he sponsible for Romeo and Juliet), Scottish of ‘a black day for the Australian tel- seemed, in The Age, to be going through chroniclers (who gave him the idea for evision industry.’1 True Blue as a whole the motions rather than doubled up Macbeth), Greek chroniclers (Pericles, described the judges’ decision as ‘a dis- with righteous anguish4—none of the Timon of Athens), and even, horror of lobbyists quoted were exactly household horrors, France (Joan of Arc swash- names, except, perhaps, in their own buckles onstage in Henry VI Part I, households. Were Ruth Cracknell or where—to add to Shakespeare’s ‘élitist’ Shop-steward Ron Haddrick to join the barricades, sins—she’s referred to by her French they would deserve a respectful hearing, name of La Pucelle). Incapable of de- sentiments which one if no more. But then the leaders in any nying these indictments, the Swan of hoped had been profession usually have better things to Avon pleads guilty and is sentenced to do with themselves than dominate condign punishment: having to write silenced by simple vested-interest quangos. The leaders in the next 592 episodes of that classic global economic any profession can usually get a life. Jacobean soap, Ye Olde Worlde What exactly is this ‘local content EastEnders. realities have emerged requirement’ that True Blue is so keen Does this scenario strike you as far- from the swamplands to defend? Clearly a sensitive plant, that fetched? It shouldn’t. It’s no different in will shrivel at even the slightest breath principle from, and all too similar in fine with redoubled of foreign competition. Well, up to a detail to, the antics of Australia’s True punitive strength point, Lord (or Comrade) Copper. As Blue media lobby group. True Blue has The Age pointed out, no less than 55 per been incensed by the High Court’s cent of televised material between 6 am judgement on 28 April, which found and midnight on every station is Aus- that Australia’s obligations under the aster that would cost the local industry tralian-made already.4 (Antipodean 1988 Closer Economic Relations agree- between $100 and $150 million,’2 which newspaper scribes never being reticent ment with New Zealand must take prec- lament inspires puzzlement as to when about stating the bleeding obvious, The edence over the Australian Broadcast- anybody in the Yartz last cared about fis- Age included such definitions of ‘Aus- ing Services Act’s local content require- cal prudence. Tom Jeffrey, the SPAA’s tralian-made’ as ‘made by Australians’. ments. President, emitted a veritable yelp of These Australians can, need one say, be Certainly True Blue is running Les-Pattersonish existential despair: ex-Kiwis: Jane Campion, Sam Neill …) scared, as only a special interest group ‘This issue [the judges’ finding] goes to Stop and think about that statistic:

14 MARCH 1999 55 per cent. A 55 per cent market share only historical accident prevented Aus- (and even non-pseuds like McGuin- doesn’t strike most people as justifica- tralia and New Zealand from being—to ness) assert. Xena’s playfully affection- tion for publicly funded cocooning. If coin a phrase—one nation. (P. P. ate treatment of legend rests in the hon- the rest of us could by our own voca- McGuinness in his newspaper column ourable tradition of T. H. White’s The tional endeavour acquire 55 per cent of made this point,5 which nonetheless Sword in the Stone. Its dialogue, like any market, ordinary politeness would seems to have escaped every other com- White’s, sometimes rises to genuine wit surely prevent us from shrieking (true) mentator on the judges’ ruling.) When (‘I said no copying, Xerox!’). Its peri- blue murder about any threats—real or Australia’s colonies first considered Fed- odic hokum is not only deliberate but fictive—from competitors. But clearly eration, New Zealand’s government enjoyable. And in its harmless, intermit- the Yartz apparat has, once again, dif- wanted to be in on the act. It changed tently silly but commendably tactful ferent notions of politeness from the its mind in the 1890s, but that didn’t way, it bears messages we can do with norm: to say nothing about different stop our own Constitution’s draftsmen hearing afresh: that courage is A Good notions of economic sanity, the apparat’s from including New Zealand along with Thing; that not all the sociologists af- own economic outlook not having dis- fixed to all the world’s bureaucratic teats cernibly progressed (or even altered) can abolish evil; that—to quote Damon from what was considered hot stuff on Runyon—the race is not always to the East German factory floors in around New Zealanders can swift, nor the battle to the strong, but 1952. be publicly humiliated that is where the smart money is. Com- Every apparat needs a scapegoat; and pare these implications with the True Blue’s scapegoat is New Zealand, … in terms which, if Weltanschauung of South Park—which whose success at producing ratings-win- could be called bastardized Norman ners of mythological bent—Xena, applied to duskier- Mailer did it not more closely resemble Hercules—is seemingly criminal. We skinned and more a doodle-pad belonging to Charles must reluctantly admire True Blue’s ex- Manson. pertise in having found a Politically In- truculent ethnic Yet Xena could be the vilest bilge correct target to pick on. Had True Blue minorities, would ever to assail TV-addicted eyes, and still taken to denouncing China, Japan, In- True Blue’s performance would be un- donesia, Israel or the Arab nations, Can- violate all race- justified. One of art’s central truths—if berra-based heavies would have con- relations statutes we jib at deeming TV ‘art,’ it isn’t par- demned any such adverse criticisms as ticularly clear what else we can deem ‘racist’. Even Britain and America are TV at its best—is this: that no great art- no longer the Aunt Sallies that they ist seeks to protect his art through any were pre-Blair and pre-Clinton. But New South Wales, Victoria, etc., as part nationalistic cordon sanitaire. First-rate how many divisions has New Zealand of the Commonwealth (see Section 6). artists, and most second-rate artists, sim- got? How many people has New Zealand Evidently Tom Jeffrey hasn’t. Perhaps ply don’t work that way. However pa- got? (Fewer than Melbourne, actually.) the ANZ Bank’s existence furnishes an triotic their philosophies (and no more Moreover, for numerous Australians, equal affront to his rancorously chau- impassioned patriots than Grieg, New Zealanders fill the same psychic vinistic sentiments. With single-issue Sibelius, Smetana, Tolstoy or need which Australians themselves fill lobbyists, anything seems possible. Dostoevsky have ever existed, outside for numerous Britons. That is, New Zea- Anything except logic and histori- lunatic asylums), their mental antennæ landers can be publicly humiliated cal literacy. True Blue wails about are so sensitive to their cultural envi- here—as Australians can be by Fleet Triffid-like invasions of Kiwi product ronments that they freely acknowledge Street—in terms which, if applied to upon our television screens; but it has precursors whom they admire, whatever duskier-skinned and more truculent eth- no qualms whatsoever about facilitating those precursors’ habitat. Grieg, whose nic minorities, would violate all race- invasions of Australian product upon whole creative life was a hymn—implic- relations statutes. The importance of television screens abroad. (Shades of the itly anti-German at that—to Norway, such a soft target shouldn’t be underval- US Republican Party’s economic doc- studied in Germany and revered the ued, given the bile levels which True trine, as noted by British historian great German composers. Tolstoy found Blue displays. Conceive of what mis- Timothy Garton-Ash: an unfettered free in Dickens and Carlyle literary pleasures chief its motormouths could wreak if market in which, somehow, every of a kind that no Russian could repli- they didn’t have Kiwis to victimize. American enterprise gets protected.) cate. Did all this make Grieg and Tolstoy There are (ahem) unfortunate 20th- Additionally, sneers by the nation treasonous? Perhaps True Blue would century precedents for the taxpayer-sub- which produces Home and Away at the consider that it did. It’s hard to imagine sidized whipping-up of popular indigna- nation which produces Xena are not just this view being shared by anybody more tion against persons who happen to be dishonest—it’s a fair bet that True Blue conversant than is your average True of the ‘wrong’ tribe. operatives, for all their nationalist blus- Blue ideologue with a cosmos outside True Blue’s propagandists, though, ter in public, faithfully consumed in pri- one’s own navel. shine less by their mischief than by their vate every episode of Seinfeld—but ar- Besides, when we survey pre-19th- ignorance. Someone should gently tistically dubious. century artists (in whom by definition break the news to Tom Jeffrey, before While Xena might not be the 20th national consciousness could scarcely be he treats us to more cant about ‘our cul- century’s most edifying creation, it is even embryonic), the case for protec- ture, our history, our traditions,’ that never the rubbish which so many pseuds tionism becomes still more ludicrously ▲

MARCH 1999 15 weak. Almost every great artist has been a cosmopolitan, if not in behaviour, then in thought: even, or rather espe- cially, when he has also loved his home- The ‘R’ Files land. Handel, that epitome of Saxon beefiness and English stateliness, spent ALAN MORAN his formative years in Italy and wrote most of his operas to Italian words. Milton, far from being parochial in his puritanism, rejoiced in his Italian liter- Energy and the ary forebears. Dr Johnson was entirely conversant in Italian and French. These Environment: Nuclear three could no more have pleased True Power in Australia Blue than Shakespeare could have done. It was, however, left to a figure of our own century, Richard Strauss, to provide the wittiest and shrewdest refu- THE CITY OF CHURCHES AS A tation of ‘local content’ bully-boys, MARKET FOR A NUCLEAR wherever they manifest themselves. He FACILITY did so while assuring his librettist friend Stefan Zweig, a Jew, that he shared February of this year marked both the Zweig’s contempt towards Nazi artistic death of Don Dunstan and the letting nationalism. ‘For me,’ Strauss wrote, of a contract by the South Australian ‘there are only two types of people, those Government for a new gas-fuelled who have talent and those who haven’t power station at Pelican Point. The erate at a cost of $35 to $40 per mega- … It’s all one to me if they come from power station, eventually to reach a watt hour. Nuclear costs in France and China, Upper Bavaria, New Zealand or capacity 500 MW, is about the mini- Canada are at the high end of this. Gas- Berlin. Provided,’ he could not resist mum size for a commercial nuclear fired units would be a little more ex- adding, ‘that they’ve paid full price at power station. The go-ahead marks a pensive but can be operated to take the box office.’ Such a remark empha- postponement, perhaps an indefinite better advantage of peak-demand re- sizes anew how long and dusty a road postponement, of a nuclear power fa- quirements. True Blue’s functionaries must travel cility in Australia. before attaining comparable creative Before succumbing to the new insight. Meanwhile, they might at least Labor orthodoxy of opposition to nu- ADD THE GREENHOUSE stop pretending that wharfie-like job- clear power in any form, Don Dunstan FACTOR preservation rorts denote æsthetic vir- was an energetic campaigner for the nu- The greenhouse juggernaut, com- tue. They might even let the rest of us clear industry in his State. With the menced with exaggerated estimates of watch Xena in peace. wave of nostalgia for the dark satanic global temperature changes as a result mills that infected the Labor Party af- of industrialization and increased afflu- ter its disastrous foray into government ence. The conferences and resolutions under Whitlam, his successors barely have continued for a decade. Targets NOTES managed to salvage the building of the have been set, notwithstanding the world’s largest uranium mine at Roxby only reliable measure of global tempera- 1 Kelly Burke, ‘All black and blue,’ Downs. Previously, Dunstan had com- ture trends, the NASA satellite data, The Sydney Morning Herald, 29 April missioned work which purported to showing obstinately stable tempera- 1998, page 15. show that a South Australian nuclear tures since readings began in 1979. 2 Michael McKinnon, ‘Kiwi TV is industry would create half a million The most recent major milestone in dinky-di,’ The Advertiser, 29 April new jobs in the State. the saga was the Kyoto Conference in 1998, page 3. South Australia is the State least fa- 1997, which set “firm” targets for emis- 3 Burke, op. cit. voured by fossil fuels. Its coal is of poor sion reductions. The targets are illu- 4 Adrian Rollins, ‘Industry outrage at quality and badly located. Its gas is at sions because it is inconceivable that NZ ruling,’ The Age, 29 April 1998, the State’s remote north-east region. the US Congress will endorse any meas- page 3. Something like one-third of its electric- ure with adverse economic impacts. 5 P. P. McGuinness, ‘A common mar- ity is already imported from Victoria. Moreover, developing countries, where ket with sunny days and Blue Sky Proposals to build another line from most of the growth in emissions will ahead,’ The Sydney Morning Herald, NSW were wrecked on the shoals of occur, are also adamantly opposed to 30 April 1998, page 19. an electricity regime in the process of limiting their emissions to meet any shifting from a centrally planned to a greenhouse targets. market system. All this said, there are no guaran- R. J. Stove is a Sydney writer, editor and radio The hard core of electricity supply tees that governments won’t tilt at the broadcaster, who publishes the Internet magazine is best generated by massive stations us- windmill targets. At Kyoto, the Aus- Codex (www.codexmag.com.au). ing coal or nuclear as their fuel. In the tralian Government agreed to limit eastern Australian States, a newly con- Australia’s growth in emissions to 8 per I P A structed base-load coal station can gen- cent by 2010. The estimated increase

16 MARCH 1999 in emissions without such a target would be 36 per cent. Hence, though Effect of Carbon Tax on Different Generation far in excess of the levels that the en- Technologies vironmentalist lobby wanted to foist on 45.0 us, 8 per cent is not nearly enough to operate on a business-as-usual basis. 40.0 Energy, and more specifically, electric- 35.0 ity is the key to future reductions. In a statement of 20 November 30.0 1997, the Prime Minister encapsulated 25.0 the latest estimates of where Australia stands. The statement also pointed to 20.0 proposed market interventions with in- 15.0 evitable consequences for the costs of energy and for energy-using goods. 10.0

12

Conspicuously absent from mention 12 12 12 5.0 12 12 12 were the two most greenhouse-free 12 12 12 123

12 12 12 123 sources of energy production: nuclear 0.0 12 12 123 and hydro. Wind

EFFECT OF A CARBON TAX Black Coal SA Solar Thermal Brown Coal VIC Black Coal NSWCandu Reactor The Australian Bureau of Agricultural New Nuclear Costs Gas Combined Cycle and Resource Economics (ABARE) has Photovoltaics (current)

123

estimated the tax required to stabilize 123 Australian emissions at the Kyoto level Total Net123 Tax Total Gross to be US$34 per tonne of carbon diox- ide in 2010. This works out at A$208 per tonne of carbon. ments are auspicious. And if the public are both more expensive and more The tax imposts required to abate reaction to the visual intrusion of tel- greenhouse intensive. Australian carbon dioxide outputs ephone cables is to be a guide, we would We need no reminder in Australia transform the economics of electricity soon see massive opposition to wind that signing an agreement is different generation. They would more than farms dotting our landscapes. from putting it into practice. An Aus- double the cost of generation and lead tralian government has previously, with to an increase in costs to customers of the 1992 Rio Treaty, agreed to reduce some 70 per cent. Electricity prices COAL’S EPILOGUE, NUCLEAR’S emissions of greenhouse gases but found would still be low compared to those RESURGENCE? sufficient caveats to avoid doing so. in many other countries, but Australia Without any greenhouse gas imposi- As for nuclear, this is a source of would cease to be the low-cost energy tions, Australia’s abundant and power that is well-proven, safe and supplier that has attracted many cheaply-mined coal means that nuclear could have a place even in a fossil fuel- processing industries. Our disadvantage power is viable as a source of electric- rich nation like Australia. Its econom- would be compounded to the degree ity only in South Australia. With ics make it the generation source of that the developing countries were ex- greenhouse gas taxes (or their equiva- choice if greenhouse commitments are empt from the controls. lence in tradeable emission rights), to be taken seriously. But would any Serious reductions in greenhouse nuclear would become the lowest cost Australian government have the forti- gas emissions would have a devastat- option. tude to withstand the chorus of ill-in- ing effect on the coal industry includ- Much depends on the merits of the formed opposition that would inevita- ing a total eradication of Victoria’s greenhouse fear and, more importantly, bly accompany any proposal to build a brown coal resources (worth at least the Government’s reaction to these. nuclear power station? Labor remains $12 billion). Its knock-on effects would With each year that passes, notwith- hostage to its anti-development wing also require a massive restructuring standing the breathless ABC and SBS on this issue. The Coalition has also away from resource processing. Any propaganda documentaries on climate shown little determination to stand up emission control measures, while pre- change that infect our living rooms, the to vocal minorities. And it is certain senting opportunities for some genera- lack of evidence for climate change that the regulatory morass in Australia tion sources, would clearly be alien to mounts. would be no less onerous than Jane Australia’s national interest. Governments sign solemn treaties. Fonda-inspired US levels—which have The following chart measures the They just as readily break them. The lifted new nuclear power station costs cost of electricity generation with a tax latest example is to be seen in Germany. in the US beyond the level of competi- set at A$208 per tonne of carbon. There, a 50-page agreement to phase tiveness. It is worth noting that even with out nuclear power between the Greens these taxes, the only exotic fuel that and Social Democrats is now being could prove cheaper than coal is wind trashed. The majority Social Democrats Dr Alan Moran is the Director of the and the value of wind must be consid- have been mugged by the reality that Deregulation Unit within the IPA in Melbourne erably discounted because of its episodic nuclear produces 30 per cent of the nature—it only works when the ele- nation’s electricity and all other options I P A

MARCH 1999 17 Free_Enterprise.com by Stephen Dawson File View Go Bookmarks Options Directory Window Help

A MILITARY NETWORK … pable of being fitted with a modem, and made it useable for everyone else. The Internet is an odd creature. A someone, somewhere in the world, By increasing the market, it has made bastion of individualistic thought and had indeed provided that little pro- its commercialization possible. creativity, its parent was the United gram. And usually provided it for free. Commercialization is, of course, States Government, in particular its So we had an enormously decen- military arm. tralized community, consisting largely With the Cold War seemingly in of computer enthusiasts and academ- place forever, and nuclear arsenals ics, all joined together by an enormous aimed both ways, the military was collection of electronic threads wend- keen to establish a system of commu- ing arbitrary routes all over the free nications which could not be de- world. Advances were undirected in- stroyed by well-aimed blows at a small novations, usually by individuals work- number of communication points. ing to supply a perceived need, offer- ARPAnet was created as a massively ing their solutions, with the results fil- redundant system designed on the tered through the usual Darwinian assumption that many of the commu- mechanism of survival of the fittest. nications links between computers Standards have indeed developed, would not be working. Instead of but like dictionaries for the English computers connecting to a commu- language, they lag behind the state of nication system in a structured, hier- the art and tend merely to describe archical way, a near-chaotic system of what has survived through broad ac- deplored by some of the pioneers and each computer speaking to many ceptance and usage. early adopters, and their hostility to other computers was developed. As a result, the Internet is a con- ‘newbies’ is often little disguised. But Naturally such a system is incred- temporary example, compressed in while many people created spider-like ibly inefficient. Just as capitalism is time-scale, of what Hayek called the motor cars at the end of the 19th cen- incredibly inefficient when compared ‘Spontaneous Order’. Without any tury and the early years of this cen- to the theoretical benefits of a cen- individual or group providing over- tury, it was the Henry Fords and other trally controlled economy. Of course, sight, the Internet has proven itself commercially minded makers who socialist efficiencies are only achieved created the motor car age. So, with if everything works as it is supposed the Internet, it is the commercial pro- to, and all people are prepared to viders, determined to gain market abandon their individualistic ways. share and profits, who will take the The real roots of the Internet were whole system to higher levels of ac- established in the late 1970s in the cessibility and usefulness. United States, Great Britain and a Still, the Web is new, effectively number of Scandinavian countries as starting in 1993. Even before this, an various communications networks Internet-based broadcasting and pub- internal to universities were linked lication system was in place. Called together. By the early 1980s Australia UseNet or Newsgroups, it continues was joining in. to thrive as a place for interactive dis- cussion. … DEVELOPING ITS OWN SPONTANEOUS ORDER capable of meeting a wide range of NEWSGROUPS Despite sporadic attempts to set needs, even effectively absorbing UseNet is a text-based system that standards, the Internet grew furiously within it such valiant attempts at offers enormous resources for any per- in both range and the mechanisms planned proprietary networks as son with an interest in anything at available. In essence, it is a system free CompuServe and the Microsoft Net- all. It is essentially a discussion sys- of direction and controls. Most mo- work. tem, but is public rather than private. dem-equipped computers, regardless It looks like email, but operates on an of other incompatibilities, were able BEFORE THE WEB entirely different system. to gain access to it if someone, some- The World Wide Web is the best Let us look briefly at electronic where in the world, had implemented thing that has happened to the mail. For most of us it works like this. the small bit of consistent computer Internet for the simple reason that it You write something on your compu- code called TCP/IP for that brand of has brought the Internet out of the ter. You press the ‘send’ button and computer. And if a computer was ca- world of enthusiasts and academics, your computer connects to your ▲ Reading File...Done

18 MARCH 1999 Free_Enterprise.com by Stephen Dawson File View Go Bookmarks Options Directory Window Help

Internet Service Provider’s (ISP’s) when I last updated the Newsgroup ply far too much to read. computer. Your message is uploaded list from my ISP, I discovered that it As with all discussion groups, it’s to that computer. It is directed to the provides 23,870 different ones! wise to sit around and watch the in- ISP of the person to whom you want Internet Service Providers can terplay for a week or so before par- the message to be delivered. That choose which Newsgroups they will person will sooner or later connect to make available to their customers. their ISP and download your message. This allows them to avoid carrying How the message gets from your groups concerned with child-sex and ISP to the other ISP is where the term the like. ‘massively redundant’ comes into You need a Newsgroup reader to play. It may well go by the most cir- access Newsgroups. The major Web cuitous route imaginable. A message browsers (Netscape Navigator and from me in Canberra to the editor in Microsoft Internet Explorer) include Melbourne may travel straight down useable readers as part of the pack- the Hume Highway, or it may go via age. Or you can use a specialist Brisbane, or Helsinki, depending Newsgroup ‘client’, such as Forté upon the links that happen to be Agent. The client will need to be available at the time. Any email mes- configured with the address of a news ticipating yourself. Each is like a lit- sage may travel through several com- server. This information will be avail- tle community, with its own trouble puters during its transit. But its pas- able from your ISP. Then you need to makers and social mores, and some sage is fleeting, and a copy of the start up the program, connect to the participants can get rather cranky message is generally not left behind Internet, and download the list of with those they consider to be wast- in those computers. available Newsgroups. This will take ing the group’s time or ‘bandwidth’. Newsgroups are different in that several minutes. Good starting places are news server computers, many thou- When you have the list on your alt.politics.economics, aus.politics, sands of them around the world, hold computer, you can use the reader’s or alt.politics.libertarian. As with copies of all the messages ‘posted’ to search facility to look for key words every other aspect of the Internet, a Newsgroup. If I want to sell some- expect a good deal of chaff with the thing, I can write a little note about grain. it and post it on aus.ads.forsale. Because of the volume of informa- That will sit on my ISP’s news server. tion, it is the rare ISP that allows a But this news server is connected to message on a Newsgroup to last more a number of others, with which it au- than week. But the purging that is tomatically exchanges information done by ISPs does not mean that from time to time. They in turn au- Newsgroup history is lost forever. At tomatically update others. least one Web site keeps an archive Through such automatic commu- of most Newsgroups. You can conduct nications, my message will, within a full text searches to find obscurely ti- day, ripple across the world to be tled groups that may have just the available to all Internet users whose information you are after. Go to: ISP provides access to aus.ads. of interest in the titles, such as ‘eco- http://www.dejanews.com forsale. nomics’, ‘philosophy’ or ‘politics’ (or, There is a process called ‘subscrip- for that matter, ‘heinlein’—yes, there tion’. But this is not like a magazine is an alt.fan.heinlein). Also ‘objec- subscription. When a user subscribes tivism’ or ‘socialism’ or ‘marx’ (but no A SHORTCUT to a Newsgroup, he or she is not tell- ‘capitalism’). All these sites may be accessed from ing the Newsgroup to send anything. Then click the ‘subscribe’ button links on my own web page. Go to: Instead the user is merely instructing for the groups that look to be of in- the program on his or her computer, terest, log on again and download the http://www.ozemail.com.au/ the Newsgroup reader, to check that titles of those groups. You can then ~scdawson Newsgroup from time to time for any choose which messages to download. Unfortunately I’m not omnis- new messages. It is unlikely, except for a few very low cient, so let me know about other volume groups, that you will decide great sites by writing to me at: INFORMATION OVERLOAD to download all the text of all the [email protected] Why not check them all? Because, messages automatically. There is sim-

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MARCH 1999 19 Labor’s Class of ’98

GARY JOHNS

More than a quarter of the Federal ALP Caucus are new members. What does this mean for the alternative government?

HE October 1998 election change. One was even selected under a Just across the electoral boundary lies delivered 29 new recruits to party rule which weighted her vote by 20 a new colleague, Julia Gillard in Lalor, an- Labor’s 95-member Caucus. per cent. Kelly Hoare, daughter of Bob other industrial lawyer, this time on the T Is it a new guard or the old one Brown (Labor’s, not the Green), won left of the party, a follower of Martin in new clothes? Of the 29, eighteen cap- preselection by 1.2 votes! The eleven reti- Ferguson and devotee of Joan Kirner. She tured seats from the Coalition. These are rees were senior members of Caucus, fully is joined by Tanya Plibersek, a Senator the people who are cheered loudest in the eight had served as ministers and three of George Campbell staffer, who spent most party room at the commencement of the these were Cabinet ministers: Peter of her first speech saying she was sorry to new Parliament. After all, government is Baldwin, Peter Morris and Ralph Willis. the Eora Aboriginal people on whose ‘sto- only won by taking seats from the other Factionally, the ground has continued len land’ Sydney is built, and for good side. Four of these were returnees: Horne to shift under the independents, who are measure the ‘Stolen Generation.’ Another (Paterson, NSW) Sciacca and Swan barely hanging on. Barry Jones’s replace- left-winger is Jill Hall (Shortland), backed (Bowman and Lillee, Queensland) and ment is Julia Gillard (Left) and Peter Mor- by the CFMEU and the Maritime Union, Snowdon (NT). ris’s, Jill Hall (Left). Nevertheless, Kelly whose preselection numbers were so strong Some of the freshers already have Hoare remains staunchly independent and she was unopposed. She has been quick form: Cheryl Kernot (Dickson, Queens- Cheryl Kernot claims to be independent— off the mark and chairs the Caucus com- land) of course courtesy of some late postal though her ideological home is with the mittee on Government Service Delivery. votes from holidaying teachers; David Cox Left, who tried very hard to find her a ‘real’ Finally, Julia Irwin, a 32-year veteran of (Kingston, SA) a Gordon Bilney protégé seat in NSW. In fact the last Labor incum- the Party, who worked for members Dick and veteran adviser to Labor, especially bent for Dickson was Michael Lavarch Klugman and Ross Free as well as her pred- Ralph Willis; Graham Edwards (Cowan, (AWU) and Cheryl has an AWU minder ecessor Ted Grace, is a fan of the last of WA) Vietnam veteran and former State on her staff. The remainder are factional the ‘Labor Mates’, Laurie Brereton and Leo minister; and Kevin Rudd (Griffith, replacements, Michael Danby for Clyde McLeay. Queensland) former senior diplomat and Holding (Right), Craig Emerson for David Queensland Labor was not so adven- confidante of Wayne Goss. Kernot has Beddall (AWU), Julia Irwin for Ted Grace turous, the only woman apart from shot straight to the front bench, and Rudd (Right), Tanya Plibersek for Peter Baldwin McLucas was Kirsten Livermore, another to the chair of the Caucus National Secu- (Left), Bernie Ripoll for Les Scott (AWU) left lawyer, in Keith Wright’s old seat of rity and Trade Committee—a position for and Nicola Roxon for Ralph Willis Capricornia. The newcomer very quick off which he is eminently suited. Rudd un- (Right). The gender may change but the the mark is Dr Craig Emerson, former tax derstands the game, his opening line in faction does not! specialist in the Commonwealth Treasury, his first speech to the Parliament reads: In the Senate, Joe Ludwig—heir to the staffer to Hawke and head of Environment ‘Politics is about power …’ He acknowl- Bill Ludwig AWU throne—replaces Mal under Goss. He chairs the Caucus Living edged the support of Swan, Sciacca and Colston (it now becomes clear why Standards and Development Committee, Senator John Hogg—all AWU—despite Colston was allowed to warm the seat for again a strong appointment. He is close the fact that he is Labor Unity. It was just so long!), and Jan McLucas replaces to Bill Ludwig and will catch up with, if a simple matter of geography. He relied Margaret Reynolds (Left). not overtake, his more senior Queensland on preselection numbers in Ben The same generally holds true for those rivals Sciacca and Swan pretty quickly. Humphrey’s old base and the best way to who won seats from the Coalition. acquire them was to join the faction! Roxon’s (Gellibrand) party back- The real interest lies with the remain- ground is impeccable. She was an indus- der, those who replaced retired Labor trial lawyer with Maurice Blackburn & members. More muted cheers in Caucus Co., the firm in which John Button was a for this lot, but these will be the stayers, senior partner, the famous Maurice holding seats that survived the Keating Blackburn who modified the party’s social- rout of 1996. Except, that is, for trade un- ist objective in 1921. Prior to that she was ion official Bernie Rippoll in Oxley— an industrial officer with the National Pauline Hanson’s abandoned seat, but Union of Workers (the old Storeman and unlikely to be let loose from Labor’s Packers, more affectionately known as the clutches in the foreseeable future … ‘stackers and wackers’) the former leader Of the eleven safe seats, including two of which was Simon Crean. Roxon is a new Senators from Queensland who take strong advocate of greater access to the up their seats next July, ten were held by legal system, but makes the mistake of Gary Johns is a Senior Fellow with the IPA. men. No fewer than seven of the replace- many lawyers—equating access to the law ments are women. This is a remarkable with justice. I P A

20 MARCH 1999 Black and White

RON BRUNTON

Who Speaks for enous and other social and cultural is- sues. His complaint was justified. But at Australia? least part of the reason lies in the Liber- als’ failure to articulate an intelligent and morally defensible alternative to the R Howard’s election-night prevailing leftist wisdom on these issues. announcement that he It is not enough to tell Australians would make Aboriginal rec- that Liberals are committed to mateship, M onciliation a priority, and his egalitarianism and tolerance, or to em- subsequent acceptance that reconcilia- phasize the need for practical efforts to tion would also involve a formal docu- address Aboriginal disadvantage, as im- ment, holds many risks. One hopes that portant as all these may be. It is neces- he has thought everything through, al- sary to spell out a coherent philosophi- though past experience suggests that this cal framework that is consistent with the might be too optimistic a hope. Cer- mainstream Australian values that Lib- tainly, in his first term of office, there erals claim to endorse, and to explain were few indications that Mr Howard The Government’s vulnerability to how this framework leads to courses of was preparing the ground for what he is being wrong-footed on this issue is in- action that offer a realistic hope of re- now proposing. But having made a com- creased by the political circumstances solving those issues that divide Aborigi- mitment to producing a reconciliation it faces in the Senate after 30 June, with nes and non-Aborigines. It is also nec- document by May 2000, Mr Howard has the Democrats holding the balance of essary to actively seek out and promote placed his government in a pressure power. With Aden Ridgeway, former Aborigines who are similarly commit- cooker in which most of the heat is con- Executive Director of the NSW Abo- ted to such an approach, and who dis- trolled by people who have little sym- riginal Land Council as part of their like the existing Aboriginal industry. pathy for the Coalition. line-up, the Democrats are likely to take But this would require a degree of intel- Given the strange potency of Abo- an even more active role on Aboriginal lectual imagination, moral assurance riginal issues for influential sections of issues than in the past. Although Sena- and capacity for social and cultural the educated middle class, a reconcilia- tor-elect Ridgeway is a moderate who analysis that the Liberal Party does not tion document will be a quintessential accepts that reconciliation is a two-way seem to possess. symbolic statement, even more central street, the outcome of the conflicting Ever since all Aborigines gained full to their psyche than the issue of the re- pressures that he will face make it more citizenship irrespective of their mode of public. Its wording is certain to be highly likely that both he and his party will life, the Australian Government repre- contentious. But if it is to form a con- push for a position involving consider- sents all Australians, and not just those structive and harmonious basis for the ably greater concessions to the Aborigi- of non-Aboriginal descent. Mr Howard future development of the nation, the nal industry than what the Government rightly insists that the starting point for document must undermine any argu- presently envisages. any reconciliation document must be ments for Aboriginal separatism or spe- The constituency supporting Abo- the indivisibility of the nation. But the cial indigenous rights not available to riginal identity politics is far less diffuse very process of creating and enshrining other Australians. And it cannot be and timid than the constituency favour- such a document could tend to act something which might open up av- ing an inclusive approach which would against such an insistence, especially if enues for future litigation. transcend the injustices of the past with- the demands of the Aboriginal industry The touchstone for the suitability of out enshrining victimhood. So it is hard are heeded. If we must have a document a reconciliation document must be to feel confident that the Government of reconciliation, it should be forcefully whether mainstream Australians, both will have the backbone to resist deals phrased to make it clear that indigenous white and black, are happy to endorse with the Democrats which would prom- or non-indigenous identities are com- it, not whether the Aboriginal industry ise easier passage of other legislation and pletely irrelevant for being Australian and and its supporters in the media, univer- the kind of ‘warm inner glow’ that that it has been the failure to make these sities and churches find it acceptable. galvaniszes the café latte set, whatever identities irrelevant that has bedevilled But with the Liberals’ general ineptitude long-term dangers these deals may pose the nation from its beginnings. This fail- on cultural/symbolic matters, the Gov- for national integrity. ure is the fountainhead for all the injus- ernment could easily be out-manoeu- Just before the October election, Mr tices for which Aborigines now seek vred into adopting a document that dis- Howard commented that those who apologies. pleases most Australians, and which denounced him and his government for does nothing for reconciliation, how- supposedly being divisive simply could Dr Ron Brunton is Director of the Indigenous ever that vague concept might be inter- not accept that there might be princi- Issues Unit within the Institute of Public Affairs. preted. pled conservative positions on indig- I P A

MARCH 1999 21 Letter from London

JOHN NURICK

next 10 to 20 years’. These are not al- Welfare reform? ways very ambitious, but they are a good deal better than nothing. For instance, What welfare the chapter entitled The Importance of reform? Work ends with these success measures:

ONY Blair’s first action on welfare reform, immediately Eight key principles after the 1997 election, was will guide our T to appoint Frank Field Min- ister of State in the Department of So- welfare reform cial Security with special responsibility programme for welfare reform, telling him, in as many words, to ‘think the unthinkable’. (A big department such as the DSS has spending is increasing. The system acts 1 The new welfare state should several ministers: a Secretary of State, a in many ways to discourage people from help and encourage people of Minister of State, and three Parliamen- seeking work. Fraudulent claims reduce working age to work where tary Under-Secretaries.) It was hard to the amount of money that goes to those they are capable of doing so. imagine a much clearer signal that the genuinely in need. The system started 2 The public and private sectors new government was serious about tack- with the ‘most noble’ aims, but it should work in partnership to ling the welfare monster. For an Aus- has failed to keep pace with profound ensure that, wherever possible, tralian parallel, imagine Bert Kelly or economic, social and political people are insured against fore- John Hyde being put in charge of trade changes. The machinery of welfare seeable risks and make provi- and industry policy. has the air of yesteryear … It often sion for their retirement. A long-serving and independent- fails to offer the kind of support 3 The new welfare state should minded Labour backbencher, Frank needed in today’s world. It chains Field had specialized in welfare policy. people to passive dependency instead provide public services of high He consistently argued against the cul- of helping them to realise their full quality to the whole commu- ture of dependency that the welfare state potential. nity, as well as cash benefits. was creating, and believed that the wel- There are three possible ‘futures’ for the 4 Those who are disabled should fare system should promote individual welfare system. The Green Paper re- get the support they need to responsibility and self-reliance. During jected the first two more or less out of lead a fulfilling life with dignity. Labour’s far-left wilderness years in the hand: 5 The system should support 1980s and early ’90s, these views meant • privatized, as a ‘residual safety net for families and children, as well as he was isolated and often reviled within the poorest and most marginalised’; tackling the scourge of child the party. • ‘the status quo but with more gener- poverty. With the dramatic changes in La- ous and costly benefits’; or bour policy under Tony Blair, not only •a third way—‘promoting opportunity 6 There should be specific action did his views become acceptable, but his instead of dependence, with the wel- to attack social exclusion and understanding of welfare policy was rec- fare state for the broad mass of peo- help those in poverty. ognized—or so it appeared from this ap- ple, but in new ways to fit the mod- 7 The system should encourage pointment—as a key asset. ern world.’ openness and honesty and the In due course, the Government pub- The third way would lead to a wel- gateways to benefit should be lished Mr Field’s Green Paper on wel- fare system that was ‘pro-active, prevent- clear and enforceable. fare reform.1 The introduction, signed ing poverty by ensuring that people have 8 The system of delivering mod- by Tony Blair, described the Govern- the right education, training and sup- ern welfare should be flexible, ment’s aim as rebuilding the system port. We will widen the exits from wel- efficient and easy for people to ‘around work and security. Work for fare dependency by offering tailor-made use. those who can; security for those who help for individuals.’ Such a welfare sys- cannot.’ tem would be guided by ‘eight key prin- The Green Paper began by listing ciples’ towards a ‘new welfare contract’ The Government is determined to ‘three key problems with the existing (see sidebars). Commendably, each put these principles into action and system’. Inequality and social exclusion chapter of the Green Paper sets out ‘suc- be held to account. are worsening even though welfare cess measures to be achieved over the

22 MARCH 1999 • A reduction in the proportion of litical and presentational skills proved Exchequer, Gordon Brown, and accused working age people living in work- much less sure than advertised, and Field colleagues of not supporting him: less households. did not manage to conceal all his frus- If the past 15 months have taught • A reduction in the proportion of tration at being stuck in a non-execu- me anything, it is not only that the working age people out of work for tive position beneath a Secretary of biggest of all reforms requires an ex- more than two years. State he could think rings round. As the ecutive position for a person with • An increase in the number of work- Daily Telegraph put it in its reporting of convictions about welfare reform, ing age people in work. the July Cabinet reshuffle, ‘she soon but that the entire Cabinet, espe- • An increase in the proportion of lone came to regard him as an unreliable cially the Chancellor, shares beliefs parents, people with a long-term ill- maverick with his eyes on her job, while about that common endeavour.3 ness and disabled people of working he despised her political cowardice and The Labour machine promptly set about age in touch with the labour market. lack of brainpower’.2 vilifying and discrediting Mr Field. Field, The Green Paper was published in In the reshuffle, both lost their jobs. in an ill-judged series of interviews, ac- March this year. Closing date for re- Ms Harman was sacked. Mr Field re- cused Ms Harman of having blocked his sponses was 31 July—but by then, the signed when Mr Blair would not give reform proposals. The new Social Secu- wheels had fallen off. him the job he wanted, Secretary of rity Secretary, Alistair Darling, went out As I said, Frank Field was number State for Social Security. What followed of his way to suggest that Mr Field’s ideas two in the Department of Social Secu- demonstrated some very depressing were hopelessly impractical. Labour rity. As his Secretary of State, Mr Blair things about Mr Blair and his govern- spin-doctors cast such aspersions on Mr appointed Harriet Harman, a dedicated ment. Field that one began to wonder why on Blairite with the front-bench experi- Mr Field used his right to make a res- earth Mr Blair had ever given him a job ence, media-friendliness and high pub- ignation statement in the Commons, in the first place. lic profile that Mr Field lacked. Even at despite pressure from the Labour ma- Aha! Tory columnists said, it was all the time there were doubts as to whether chine not to do so. As he was called by PR: appointing Field was the perfect sig- Ms Harman—not the cleverest of poli- the Speaker after Prime Minister’s Ques- nal that Labour was serious about wel- ticians—had the intellectual capacity tions on 29 July, Mr Blair walked out of fare reform, but it was all signal, no sub- and drive to master a huge and difficult the chamber, a studied discourtesy. stance. No, no, Mr Darling said. The department, let alone to juggle success- Mr Field denied rumours that Mr time for words was past, now it was time fully what were bound to be the irrec- Blair had vetoed early drafts of the for action. ‘We now need to implement oncilable demands of Treasury, of Sir Green Paper as ‘too radical’. With tra- our programmes so that people can see Humphrey, and of Mr Field and his ditional indirection, however, he con- a real difference.’ thoughts of the unthinkable. firmed reports that his bolder plans had Well, we shall see. In his previous And so it turned out. Harman’s po- been frustrated by the Chancellor of the position as a junior Treasury minister, Mr Darling proved able and effective—but what comes next in welfare reform is in Towards a New Welfare Contract fact more words, more consultation in the form of a Green Paper on pensions expected this autumn. In the meantime, Duty of Government: Duty of Individual: the whole episode has strengthened the • Provide people with the assistance • Seek training or work where able general impression that the Blair Gov- they need to find work.. to do so. ernment doesn’t know where it is going or how to get there, and doesn’t much • Make work pay. care provided it can win the next elec- • Support those unable to work so • Take up the opportunity to be in- tion. that they can lead a life of dignity dependent if able to do so. and security. • Give support, financial or otherwise, NOTES • Assist parents with the cost of rais- to their children and other family 1 New ambitions for our country: A new ing their children. members. contract for welfare, Cm 3805. Read- • Regulate effectively so that people • Save for retirement where possi- able on the Web at http://www. can be confident that private pen- ble. dss.gov.uk/hq/wreform/gpintro.htm, sions and insurance products are or download in PDF format from secure. http://www.dss.gov.uk/hq/wreform/ • Relieve poverty in old age where • Not to defraud the taxpayer. pdfintro.htm. 2 Robert Shrimsley, ‘Double act who savings are inadequate. couldn’t work with each other’, Daily • Devise a system that is transparent Telegraph, 28 July 1998. and open and gets money to those 3 Hansard, 29 July 1998, Col. 374. in need.

Duty of us all: John Nurick is a management consultant based in the South of England. From 1985 to 1990 he was To help all individuals and families to realise their full potential and live a dignified editorial director of the Australian Institute for life, by promoting economic independence through work, by relieving poverty Public Policy, and he later edited newsletters reporting on the UK parliament and the where it cannot be prevented and by building a strong and cohesive society where European Union institutions. rights are matched by responsibilities. I P A

MARCH 1999 23 S T R A N G E T I M E S

Compiled by Andrew McIntyre, Mike Nahan and Michael Warby

PINOCHET the ABC put on a two-part series, AS THEY SAY, ‘AND The arrest of Senator Augusto Against Nature, bringing some surpris- FURTHERMORE …’ Pinochet in Britain, to the great ex- ing balance on these issues. As pre- David Ridenour of the National citement and satisfaction of the dictable as a summer heatwave, how- Center for Public Policy Research in Allende groupies in the Blair Govern- ever, there has been a sudden increase the US has calculated that about 7 ment, has brought into focus once in temperature, brought on this time million litres of jet fuel will be burned again how much the mainstream me- by November’s Fourth Meeting of the by the 9000 environmentalists, jour- dia has a particular brand of selective Conference of the Parties to the nalists, delegates and observers trav- morality in its inability to discuss com- Framework Convention on Climate elling an average of 12,000 miles to plex issues. Press reports here vividly Change in Buenos Aires. Britain’s Buenos Aires and back on a Boeing brought us back to the time of Hadley Centre for Climate Change 747. This does not include taxis, light- Allende, who, if we are to believe our has surpassed itself in the ing, air conditioning and other con- journalists’ notions of history, was a catastrophism stakes, claiming that sumption once they are at the confer- democratic hero, brutally overthrown ‘parts of the Amazon rain forest will ence. If they put an end to inevitably for trying to be fair-minded and just be turned into desert by 2050, threat- useless multi-million-dollar junkets to the people of Chile. But where do ening the world with an unstoppable like this one, as Ridenour comments, we read the other version of events? greenhouse effect with land tempera- ‘greenhouse gases won’t be the only Some, heaven forbid, thought Allende tures rising 6 degrees by the end of the hot air curbed’. was a hard-headed Marxist, who was next century. The consequences are intent on destroying Chile’s constitu- so terrifying, I will skip the details tion and economy, and imposing a here.’ How on Earth does this crystal- Cuban-style totalitarian state. ball gazing work? The secret, appar- STUDENT NEWSPAPERS (OR Pinochet and the other generals only ently, is billions of calculations made WHERE IT ALL COMES FROM) agreed to act against him, so the other by the world’s biggest super-computer. It is no news to say that university stu- story goes, when they had irrefutable But aren’t they the same calculations dent newspapers tend to be on the proof that communists were moving that scientists have been making for radical side, and that they are train- to take over Chile, Allende having around 20 years, which, from time to ing grounds for the next generation of allowed in about 14,000 foreigners— time, need ‘readjusting’ to better fit journalists and politicians. Farrago at including hardline Spanish and Por- reality? Professor Pat Michaels, a sen- Melbourne University is periodically tuguese communists, Soviet and ior fellow in environmental studies at under attack from its own students for Czech experts in subversion, North the Cato Institute, puts it rather being, well, just too much of the one Korean specialists in weapons train- bluntly. ‘Forget the notion that scien- thing. In its last edition for 1998, un- ing and terrorism and an invitation for tific truth has anything to do with der the heading ‘farago sucks!!’, it was Cuban DGI agents to organize Chile’s [these computer models]…People are reported that 7000 people took to the security along the lines of Castro’s se- beginning to realize that the new, im- streets to register their disappointment cret police. Even Chile’s Supreme proved versions are making such fun- with it. With self-righteous irony, the Court and Parliament ruled that the damental errors as to make us wonder editors asked, ‘you be the judge, is far- Allende Government was repeatedly what scientists really do all day…[A]ll rago full of crap?’, and provide a handy violating the Chilean constitution. of the warming in the free atmosphere guide to its contents; ‘terror in small Even more confusingly, Dictator over the last 40 years occurred in one town Melbourne (some dyke trying to Pinochet got a higher ‘yes’ vote for gulp 22 years ago. That hiccup was so act the victim), cloud over the rain- continued rule in the free vote he slight that no one noticed it until two bow nation (some socialist trying to called—and which he lost and so decades later.’ When Professor make a point about South Africa), stepped down—than Allende had Michaels put some of these disap- cool stuff around town (the editors try- been elected President on. All a bit pointing facts to senior staff of the ing to be cooler than thou), games, too hard for the simple-minded mor- Argentine Senate—the hosts of the films, music & theatre reviews (the alists of the press. present United Nations confab, and editors friends who scammed freebies, beneficiaries of considerable green- tossing off about art and shit).’ The house-related Washington largesse— outgoing Farrago editors commented, the chief of staff of a key Senator told ‘we don’t really give a f…. We had fun THINGS ARE REALLY Michaels, ‘Look, the science doesn’t and all out friends got heaps of stuff HOTTING UP matter. I don’t care if it’s cooling or published.’ Well, not to draw too long A relatively cool and stable climate warming. You have money, and we a bow, doesn’t it all sound like a descended on our local press over the need it, and we’ll do what you say.’ younger, more honest version of our last few months on matters environ- national broadsheets and the attitude mental after the excitement of the of some of our senior journalists? signing of the Kyoto protocols. Even

24 MARCH 1999 S T R A N G E T I M E S

THE PRICE OF PRINCIPLE rest—could end up being much worse thousands of land- and sub-based mis- The ALP, Greens and no-pokies coa- than any pure outcome of the prob- siles aimed at them. The upshot is a lition have blocked the privatization lem itself, especially since the actual much increased risk that the Russians of South Australia’s electricity. So the problem is being attacked with billions would make a ‘serious miscalculation’ Government is to go ahead with a 99- of dollars of remediation. The same (tech-speak for ‘accidentally blow the year lease of the assets. The difference day, the Wall Street Journal reported world up’.) The paper included an in- between a sale and a 99-year lease? that not all of the hoarding will be terview with the former Russian officer Nothing, except a price discount that done by guys in Montana cabins ei- who decided on a hunch that an ap- leaves the South Australian citizens ther. It turns out that in anticipation parent September 1983 American some $200 million worse off. of possible Y2K-driven supply inter- ICBM attack was a false alarm and so rupts, companies like Xerox are plan- didn’t start World War III. Good of ning to take on more inventory than him. And now selections from usual in the last part of 1999. Which is driving a search for extra warehouse one fortnight of US space and could even affect GNP. CLONING BILL? (GATES NOT papers (courtesy of And wait, that doesn’t include the CLINTON) Slate e-zine) … 1.999K problem! It seems that certain The Washington Post (15 February older software systems use “9999” to 1999) reported that the US Govern- signal an error or the end of the pro- ment’s discussions about what sort of gram. Which means September 9, remedies to ask for if Microsoft is FUR SENSITIVE 1999 may be a bit of a glitchfest. There found in serious violation of antitrust The Los Angeles Times (4 February are, says the Journal, nine such prob- law have become more detailed re- 1999) reports that the City of Beverly lematic dates this year. cently because prosecutors feel the Hills may be about to implement an company is stumbling in its court de- unprecedented consumer notification fence. A forced break-up is currently procedure relating to one of the town’s EDUCATION REALLY IS envisioned by the Government as most cherished substances: fur. The GOOD FOR YOU! coming in two flavours: 1) carve city council has, says the Times, agreed The Washington Post (10 February Microsoft into one company that sells to hold a special election on requir- 1999) reported on results of the first only the WindowsTM operating system ing all local furriers to put warning tags study to cover the full range of sexual and one that would sell other on their garments that would read: problems since the Kinsey Reports of Microsoft software products; or 2) split ‘This product is made with fur from 50 years ago. The results show that the company into two or more nearly animals that may have been killed by four out of ten women and nearly one- identical units. The big question is electrocution, gassing, neck breaking, third of men suffer from sexual dys- whether such moves would really cre- poisoning, clubbing, stomping, or function. The authors of the study say ate new competition. And which drowning and may have been trapped this is a ‘significant public health con- company would get Bill Gates? A in steel-jaw, leg-hold traps.’ The story cern’. There is at least one hopeful problem that could be avoided if clon- includes far more detail about meth- finding though: college-educated ing technology continues to pick up ods of extinguishing life than any of women are more than twice as likely speed … the stories about the anti-abortion not to suffer from lack of sexual desire Website recently ruled not to be pro- as those who did not complete high tected by US constitutional protec- school, and men who complete col- tions of free speech. lege also tend to complete something WELL-SUPERVISED DEAD- else, suffering much less premature WOOD ejaculation than male high school A reader’s letter to the Washington Post dropouts. This data could surely be the (16 February 1999) noticed something FEAR ITSELF basis of the best stay-in-school ad cam- telling in a previous Post story about The millennium bug essentially comes paign of all time. ‘deadwood’ federal employees. The from programs being originally writ- story had mentioned that in its effort ten for computers with far less capac- better to understand the problem, the ity—hence having only two fields for US Government’s Office of Personnel year, for example. The New York Times THAT WAS CLOSE, BUT Management had ‘interviewed 200 (9 February 1999) reported on con- THINGS STILL A WORRY supervisors who directly managed cerns that the social ill effects of fear- A report in the Washington Post (10 3,114 employees. Of that total, 429 ing the Y2K problem—such as bank February 1999) revealed the deterio- were supervisors themselves.’ In other runs, hoarding of food and gas, fires ration of Russia’s early warning de- words, notes the reader, 629 supervi- caused by newly acquired wood stoves fence against nuclear missile attack, sors in the sample were directing the and a rise in gun violence accompa- which has gotten to the point that, for work of 2,685 nonsupervisory work- nying the upsurge in gun sales to those several hours each day, Russian mili- ers, which translates to one manager fearing post-millennial-bug civil un- tary commanders cannot see any of the for every 4.3 employees.

MARCH 1999 25 Codes of Conduct Are Good for NGOs Too ANTHONY ADAIR

Those who seek improvement in others should remember that sauce for the goose is sauce for the gander. HE defensive nature of the such groups, few have questioned their agement procedures and practices, cor- response in the Melbourne motivation or their desire to bring about porate governance and lack of demo- Age (18 August 1998) by the what they regard as worthwhile solu- cratic processes within some prominent T Executive Director of the tions to potentially serious problems. NGOs. Public concern at the exagger- Australian Council for Overseas Aid In today’s politics, however, the key ated—often apocalyptic—tone of pub- (ACFOA) to my article about Codes of mantra is ‘consultation with stake- lic statements; serious doubts about the Conduct for Non-Government Organi- holders’. The word stakeholder origi- integrity and honesty of some of the sci- zations (IPA Review, May 1998) suggests nally meant those with a direct interest entific and technical claims made by that a sensitive nerve was struck. in the subject under discussion e.g. the some NGOs; increasing alarm at some When the integrity and credibility owners, employees, customers and of the more high-risk stunts undertaken of an organization are under challenge, neighbours of an industrial plant. Today to attract media publicity; all these com- the organization has to demonstrate by the word is very loosely defined as any bine to leave such organizations with a its actions that it continues to be worthy person or organization which claims to growing credibility problem. Govern- of public support. It is not enough to have an interest, no matter how remote. ments take less seriously those NGOs proclaim your innocence and your vir- Therefore in a world of ‘stakeholder that misunderstand science or fabricate tue. power’—where media coverage is often data in efforts to support their case. The NGOs, no less than commercial en- the principal way to raise political public is less inclined to give money and terprises, have to earn their role in soci- other forms of support to organizations ety. that prove to have many of the same Skilful, well- failings that they accuse their opponents THE CREDIBILITY GAP of having. FOR NGOS organized NGOs are These concerns can be expected to In recent years, NGOs have carved out intensify as NGOs—like other special for themselves an increasingly promi- well placed to have a interest groups—seek to become more nent role in the formulation of public and more involved in the political and policy at both the national and inter- powerful role in decision-making processes which deter- national level. Perhaps the most nota- mine the outcome of development ap- ble has been their role in efforts by the determining public plications, business investment, envi- United Nations to establish global re- ronmental, health and safety standards sponses to perceived environmental policy and and other matters in which they seek to problems such as global warming, haz- influencing political influence the outcome. ardous waste disposal and the use of dan- gerous chemicals. They see themselves decision-making CODES OF CONDUCT— as champions of the public good, with a PRECEDENTS mission to reverse much of the physi- Codes of Conduct are increasingly wide- cal, environmental and social harm awareness and invite action—skilful, spread among commercial, professional done in the world because of the fail- well-organized NGOs are well placed to and government organizations but only ings of governments, corporations and have a powerful role in determining a handful of NGOs—predominantly the professions. public policy and influencing political groups involved in the provision of hu- Much of the domestic legislation in decision-making. manitarian aid—have taken the initia- Western democratic countries regulat- Inevitably, as a reaction to the per- tive to establish their own Codes. ing the conduct of business has come ceived power of NGOs, their opponents The obvious question to ask is: why about as a result of political campaigns or ‘victims’ will respond by placing these have so many organizations found it nec- by well-organized, energetic, clever and organizations under intense scrutiny, essary or desirable to have Codes of well-funded private organizations which searching for any flaws or weakness in Conduct when so few NGOs have done claim to represent the wider public in- their structures and behaviour in order likewise? Are there important differ- terest. While many have questioned to limit or damage their credibility. ences between the structure and behav- both the scientific validity and the long- At the same time, legitimate con- iour of NGOs, and that of other groups term consequences of the problems cerns have been raised about the secrecy, in society, to make such Codes unnec- identified and the solutions proposed by sources and application of funds, man- essary for NGOs?

26 MARCH 1999 Codes of Conduct are essentially a against which they are prepared to be lars annually, large staffs that are well response to the high level of public mis- judged. paid relative to their clients, and often trust of institutions and of the individu- with career paths and promotional pros- als who run them. Business enterprises WHY NGOS SHOULD ADOPT pects, international assignments and fre- have found themselves under increas- CODES OF CONDUCT quent travel as part of the normal con- ing public scrutiny and criticism border- NGOs have claimed for themselves— ditions of employment. ing on hostility over a variety of envi- and in many cases have been granted— More positively, a Code of Conduct ronmental, safety, social, financial and recognition for their special experience, establishing definite standards of ethical be- economic failures. Consequently, busi- skills, knowledge and expertise in their haviour, corporate governance, democratic ness has become increasingly subject to fields of interest. This recognition is used working systems and financial transparency Codes of Conduct that supplement na- to exert influence and pressure upon would enable NGOs to build their support tional and international law. Such governments and the public policy mak- bases and give them greater credibility and Codes are either general in their appli- ing process. This pressure can be overt authority in their activities. cation—e.g. the OECD Guidelines for or covert; it can take the form of intel- At present, it is too easy for unscru- Multinationals—or of specific applica- pulous people to claim that their NGO tion to particular industries or types of has a large membership or that it repre- companies—e.g. the Code of Conduct It is too easy for sents the views of a large number of peo- for companies selling infant formula ple. food. Those business enterprises covered unscrupulous people It is too easy for unscrupulous peo- by Codes of Conduct are subject to in- ple to make exaggerated, distorted or tense public scrutiny over their compli- to claim that their false claims about the scientific proper- ance with the provisions of the Codes. ties and implications of particular phar- Failure to comply can result in adverse NGO has a large maceuticals, chemicals, industrial proc- criticism and hostile reaction from gov- esses or agricultural practices without ernments, shareholders, consumers and membership or that credible and reliable verification from customers; all of which can affect the reputable professional or scientific bod- financial and operational performance it represents the ies. of the company. views of a large It is too easy for unscrupulous peo- There are over 30 such Codes in ple to question the integrity, motivation, existence today; some imposed on en- number of people honesty and ethics of individuals in- terprises by international bodies while volved in activities of which an NGO others were initiated by companies disapproves. themselves. lectual persuasion or the threat of direct A Code of Conduct would enable Government agencies also face mis- political action. In other words, NGOs NGOs to enhance their legitimacy by trust from a population that demands seek to convert their reputations into demonstrating their accountability, the highest standards of probity and per- power. their openness to public scrutiny, their formance across the range of human and For organizations that exercise or adherence to acceptable ethical stand- other services provided by the agencies. seek to exercise power in democratic so- ards of behaviour, and their commit- The same applies to the professions— cieties, a Code of Conduct should be ment to a democratic approach to mem- one of the oldest Codes of Conduct for seen at the very least as a necessary de- bers and supporters. any profession is the Hippocratic Oath fence against some of the criticisms out- The choice for NGOs then is quite for physicians, while other arms of the lined above, namely, that they are simple: put your own house in order medical profession such as psychiatry secretive, undemocratic in their deci- through self-regulation, or face the pros- and nursing have also seen the need for sion-making processes and have less pect that sufficient political pressure will a code for themselves. than rigorous standards of governance. be exerted upon governments to impose The ethical dilemmas in contempo- This is essentially a defensive argument a Code of Conduct upon you. rary journalism are well known. The but one that should be persuasive to Australian Journalists’ Association has those perceptive NGO leaders who rec- had a Code of Ethics for over 50 years, ognize the validity of the public concern and many news organizations have their and are keen to respond. own specific standards and principles Adherence to a public Code of Con- which co-exist with the AJA Code. duct would thus enable NGOs to answer Some NGOs working in the area of the accusation of double standards and en- emergency response, humanitarian as- able them to head off the imposition of com- sistance and development aid have al- pulsory Codes of Conduct by regional or ready developed Codes of Conduct. national governments. These include the International Red Their critics could no longer say that Cross, Catholic Relief Services and they were demanding standards of be- Oxfam, as well as the ACFOA Code haviour, accountability and transpar- mentioned in my previous article. ency in business that they were unwill- Whatever the limitations of these ing to accept in their own organizations. Codes, these organizations have recog- This is especially true of those global, Anthony Adair is Senior Associate with nized the need to state clearly the un- entrepreneurial NGOs that are effec- the Centre for Independent Studies derlying principles and the standards of tively multinational enterprises with behaviour under which they operate and turnover running into millions of dol- I P A

MARCH 1999 27 Knowing Our Place in the World

MICHAEL BACKMAN

HAT is the population of into the national psyche. Among the de- sure, each collapse no doubt is a devastat- Jordan? With the extraordi- veloped countries, it’s not just New Zea- ing event for Indonesia’s economy but it nary media coverage both in land that we are bigger than. helps to keep such events in perspective. W Australia and overseas de- Then there’s Brunei—that well- Even in good times, Indonesia’s larg- voted to King Hussein’s death in Febru- known, mega-rich oil producer. Well not est private bank, Bank Central Asia, had ary, and with presidents past and present, quite. Brunei produces 150,000 barrels of just US$11 billion in assets which made and other world leaders flocking to his fu- oil per day. Even at its peak, around 1979, it about six per cent of the size that the neral, one might imagine it is 60 million. oil production did not rise above 250,000 National Australia Bank is today. Another Or is it 40 million? Perhaps 20 million? barrels per day. Australia is in fact an oil leading Indonesian bank, BII, had no Actually, none of these. Try five million. giant compared with Brunei. Our produc- more than US$6 billion in assets—not That’s right, Jordan has a population less tion currently is in excess of 500,000 bar- quite four per cent of the assets of the than the State of New South Wales. It is rels per day. It is not the absolute level of National Australia Bank. Indeed, prior to difficult to imagine world leaders flock- oil production that has made Brunei fa- the economic crisis, the assets of any one ing to Sydney for the funeral of the New mous (despite common perceptions to the of our major banks would quite easily have South Wales Premier. But then, of course, contrary) but the fact that with a popula- covered the assets of Indonesia’s entire King Hussein was able to punch above his tion of just 300,000, per capita incomes banking system. Most of Indonesia’s more weight on the world stage for geo-politi- are high. In fact, Brunei is not hugely than 200 banks would not have even cal reasons. wealthy at all—it’s just that there aren’t qualified as credit unions in Australia. Nonetheless, the world really only that many Bruneians. Today, of course, the entire Indonesian cares about the Middle East as much as it Australia’s stock market is another banking system as a whole is insolvent. does because of its oil. But even on that ‘giant’—at least in regional terms. At In terms of net assets there simply aren’t point Jordan misses out. Its main item of around US$314 billion, its current mar- any. production is phosphate—the very same ket capitalization way exceeds the com- Part of being Australian means under- as was mined on Nauru and Christmas Is- bined market capitalizations of the stock emphasizing who we are and down-play- land. markets of Singapore, Jakarta, Manila, ing our achievements. But every now and Phosphate has not made Jordan terri- Bangkok and Kuala Lumpur—indeed all again it is useful to take stock and remind bly rich—the country’s GDP is about what of South-East Asia. It is about the same ourselves of our true place in the world. we spend on Veterans’ Affairs and about size as all the listed companies on the King Hussein’s prominence was in spite a fifth of what we spend on all of Korean and mainland Chinese stock ex- of, rather than because of, the realities of Centrelink each year. In fact Jordan’s changes, and the combined market capi- his country. That is not a problem that economy is about the same size as the talization of the National Australia Bank Australia needs to have. State of Tasmania’s. This doesn’t mean and Telstra is about the same as the com- that King Hussein was not important. He bined value of all the companies listed on was. It’s just that his country doesn’t pack the Jakarta and Bangkok stock exchanges. much of a punch. There’s a lot about Asia that was for- And what of Libya, another of those gotten during the days of the ‘Asian mira- countries in the Middle East that we hear cle’. Remember Vietnam—the new tiger so much about? It has just six million peo- that every American multinational seem- ple—about a quarter of our own and just ingly was lining up to invest in? Its entire two per cent of the population of its great economy is less than five per cent of Aus- adversary, the United States. tralia’s, despite its having four times the There are some other prominent population. Given that our annualized countries in the world that are only a growth rate currently is almost five per shade of Australia in terms of population. cent a year, it means that as a nation, we Many European countries are in this boat. are adding an entire Vietnam to our Austria has less than nine million people, economy every year. Denmark barely more than five million, Then there’s Indonesia. It has ten Michael Backman is the author of Asian Eclipse: Ireland has not quite four million, Swit- times Australia’s population but even in Exposing the Dark Side of Business in Asia zerland has seven million, Sweden less the good times the size of its economy was (John Wiley & Sons, 1999) and a regular contributor to the Asian Wall Street Journal. than nine million, and Portugal less than barely a quarter of that of Australia. He is currently based in Melbourne. ten million. Too readily we allow false Newspapers are filled with talk of this ideas of our place in the world to creep or that Indonesian bank collapsing. To be I P A

28 MARCH 1999 Reforming Economic Reform JOHN HYDE

It is about fairness and morality—so reformers should say so.

Y host had barely accom- in the wind. Even those people who accept the plished the usual pleasant- Reform must be made acceptable, existence of self-regulating ecosystems ries when he opened what if not popular, and how to make it so tend to reject the possibility of a simi- M might have been a vigorous is itself an issue. The democratic eco- larly self-regulating economic (or any conversation with ‘What price eco- nomic reformer faces three formida- social) system. Seeing no other order, nomic rationalism now?’ I had only ble hurdles: one is that economic logic they turn instinctively to command- started to protest that Australia was is counter-intuitive to most people; and-control methods even though escaping the Asian meltdown for some another is that reform always imposes mainstream economists tell them that reason, when his wife said firmly, ‘I am costs on some people and the costs they have no more hope of redesign- seating you two at opposite ends of the come before the benefits; and a third table’. I’m not very brave in such situ- that people who benefit from the sta- ations and have let him go on believ- tus quo are identifiable, concentrated ing that Hawke’s financial deregula- and organized, while those who will Even those people tion and tariff reduction, Howard’s fis- benefit from change are not. He no cal rectitude and labour market reform longer, however, has to convince who accept the (such as it was) and the privatizations economists and administrators and existence of self- and deregulations of both political more thoughtful political leaders, such sides, State and Federal, were in vain. as Tony Blair, who are already experi- regulating In spite of 3 to 5 per cent economic menting with terminology and argu- growth, less than 2 per cent inflation ment to give reform an acceptable ecosystems tend to and a relatively stable dollar while face. reject the possibility neighbouring currencies burn, people Reports of economic rationalism’s will keep telling me that economic ra- death are greatly exaggerated. It is of a similarly self- tionalism has failed. It is true that we true, for instance, that several leading still suffer around 8 per cent unem- economists now advocate a measure regulating economic ployment, inadequate savings and of government control over capital system high welfare dependency. These are, movements. It is not the case, how- however, long-standing problems for ever, that they have abandoned their which the economic rationalists’ so- belief in foreign investment or learned lutions have not been attempted. Nei- that investors don’t care whether they ing the economy than a biologist has can recover their funds; it is just that, of redesigning the ecology. rapid withdrawal being disruptive, Like biologists, however, econo- they believe that a modest brake on mists do have a reasonable under- capital flows from vulnerable econo- standing of the environment required Public, not informed, mies will, in current circumstances, for their self-regulating order to flour- opinion is the produce net gains. Current warnings ish. The social environment depends about deflation reverse nothing. Re- on what social scientists refer to as ‘in- principal barrier to serve bankers have always feared de- stitutions’. The more fundamental of flation but until recently their prob- these are as old as society itself. They change and it must lem has been inflation. Similarly, al- resonate even with devout economic though many economists doubted that irrationalists who, along with the rest be addressed. The Hong Kong could burn off of the of us, were once spanked for being speculators (actually manipulators), unjust, untruthful, irresponsible, un- public will not they had always recognized the risks charitable, uncivil and taking Johnny’s quickly be turned inherent in fixed exchange rates, toys. The institutions we were once never doubted that monopoly power spanked for flouting uphold private into economists could be employed to counter mo- property, contract, adherence to what- nopoly power, cheered when it suc- ever rules other parties expect and ceeded, and are right about the price accept, and personal responsibility. that has been paid for the success. Economic reform is thus ultimately a ther will they be tried until voters ac- Public, not informed, opinion is moral matter. cept the need to do so. Meanwhile, the principal barrier to change and it Take the textile tariff. It is regres- the 8.5 per cent of the vote captured must be addressed. The public will not sive raising the prices of items that are by One Nation is more than a straw quickly be turned into economists. a high proportion of low-income budg- ▲

MARCH 1999 29 ets by far more than would the pro- posed GST. It is unjust, capriciously transferring wealth from people who derive their incomes from other indus- Book Reviews tries, especially export industries. Those who demand them of govern- ments seek to be unjust, irresponsible and uncharitable. Their spokesmen also proved blatantly untruthful. The tariff is not only inefficient, it is Déjà Vu Again wrong! Not every lobby behaves as badly Michael Warby reviews as the textile lobby has. Nevertheless, most of the needed economic reforms are to correct the same type of crony Against the Tide: capitalism that got so much of East An Intellectual History Asia into current difficulties. It flour- ishes at a lower level in Australia. of Free Trade Rules capriciously favouring some citi- zens over others are surely a breach of by Douglas A. Irwin trust. Princeton University Press, Reform of the welfare system raises 1996, US$16.95 the same fundamental issues but is more difficult because what is in fact When I first read Hancock’s Australia, equitable is not so easily established. it seemed that Australia had not so Assisting the unlucky battler without much had eight full decades of federal too much encouraging the loafer is not public policy as reiterations of the same easy. Nevertheless, a charitable regard two or three decades—particularly when for one’s fellows is also a necessary so- one compared ‘Black Jack’ McEwan’s cial institution. Since governments ‘protection all around’ of the 1960s with and charities cannot give without tak- Earle Page’s ‘New Protection’ of the ing, economic rationalists should not 1920s. The policies even had similar be condemned for pointing out the denouements, with Australia doing did volume shows. cost of middle-class welfare and of worse than comparable countries when Irwin does not attempt to write a his- subsidiszing rich men’s toys. We can the world economy ran into problems: tory of public policy on trade, or the con- have subsidized arts and games at the whether in the Depression of the 1930s sequences of such policies. Instead, he expense of hospitals and pensions. The or in the 1974 and 1982 recessions. confines himself to the intellectual de- issue is: Should we? More recently, the car and textile bate over free trade. This he expounds If voters are to go along with eco- tariff decisions of the Howard Govern- brilliantly and clearly, displaying a deep nomic reform they must believe that ment’s first term seemed to take place grasp of the trade theory and a wish to it is fair. Tony Blair is in many matters in a backdrop where the arguments inform which translates into a remark- more Thatcherite than Thatcher. which had been fought, and apparently ably clear presentation of the ideas and Nevertheless, he is by-and-large get- won, over protection and free trade in arguments. ting away with this by the small expe- the 1980s eerily might never have hap- Reading Against the Tide, one quickly dient of changing Thatcher’s empha- pened. finds confirmation that the ideas served sis on responsibility to one of equity. Actually, the latter feeling was a lit- up as so ‘obvious’ in the Op. Ed. pages These are, however, but opposite sides tle too pessimistic—the decisions only of The Age or on the ABC are old ideas of the same moral coin. slowed down the rate of tariff cuts, they recycled: ideas considerably more anti- did not reverse or stop them. And even quarian than the free trade ideas they ‘Black Jack’s’ policies were more sophis- attack. ticated and forward-looking than those Irwin surveys the relatively meagre of the 1920s. While the Depression was offerings of classical, early Christian, made far worse by the international scholastic and natural law writings on adoption of ‘protection all round’ which international trade—writings which, devastated international trade and thus apart from the natural law theorists, of- global economic activity, the GATT was ten reeked of the standard intellectual something of a saviour in more recent (whether aristocratic or priestly) global recessions, acting to prevent an- sneerings at merchants as vulgar and sin- other Depression in precisely the way it ful (some things really do not change was intended to. So, one can see some much) with strong doses of xenophobia progress. and fear of foreign contamination (such But, it is still progress of a very slow, as are frequently expressed about foreign John Hyde is a Senior Fellow of the IPA. two-steps-forward-one-step-back kind. ownership of Australian media, for ex- Which is precisely the long-term history ample). He then moves on to the mer- I P A of free trade, as Douglas Irwin’s splen- cantilists, who were much more favour-

30 MARCH 1999 able to merchants and much more im- of labour. In Martyn’s eyes, to force more fully by Friedrich List (though only for pressed by the importance of interna- expensive domestic production in place manufacturing: List supported free trade tional trade—often to the extent of dis- of cheaper foreign production was sim- for agricultural goods and raw materials paraging domestic production since it ply to waste labour which could be far and eventual attainment, under the did not (in their zero-sum view of the better employed in producing other right political conditions, of global free world) add net value to the ‘common- goods so as to purchase such production. trade), has never attained the level of wealth’, such as occurred through profit- Martyn understood the difference be- intellectual coherence to be more than taking from foreigners. Contemporary tween the level of wages and unit costs a vague possibility. Its defenders have commentary which sees exports as of labour—something that still eludes never provided a case why any tempo- ‘gains’ and imports as ‘losses’ recycle many commentators—arguing that ral problem would not be dealt with by greater productivity is what secured capital markets or why any (unspecified) prosperity. market failure should not be dealt with It was one thing to Irwin goes on to cover the physio- directly. crats and moral philosophy (Chapter The ‘increasing returns to scale’ ar- establish the Four), Adam Smith’s pathbreaking syn- gument advanced in the 1920s by theoretical basis for an thesis creating a ‘systematic, coherent Francis Graham, the ‘wage differential’ framework for thinking about the eco- argument advanced by Mihail optimal tariff, it is quite nomics of trade policy’ (Chapter Five), Manoilescu in 1929, the ‘Australian another for that to be the outpouring of free trade classical eco- case’ for protection based on income nomics, including the concept of com- distribution effects, Keynes’s ‘macroeco- translated into practi- parative advantage: that immensely nomic’ argument for protection and stra- cal policies—not least powerful, and counterintuitive idea tegic trade policy have all been, in the which shows how A and B can trade to end, shown to be very limited in their because of the effects mutual advantage, even when A is better scope, serving mainly to better define of foreign retaliation at making everything than B (Chapter and delineate the case for free trade. Six). In Part Two, Irwin deals with con- Irwin concludes with an insightful troversies about free trade doctrine, trac- chapter on the (very limited) role of these same views: all sellers are winners ing each back to its historical roots. empirical analysis in these debates and and all buyers are losers. Which, of These controversies generally oper- the difficulties economists have regu- course, poses the question: why is any- ated around exceptions to the general larly pointed to in actually implement- one silly enough ever to buy? case for free trade. The first, and most The mercantilists saw things reso- important, of these being Robert Tor- lutely in terms of a trumping national rens’ terms of trade argument. In work The trouble with a interest, which required that merchants published between 1830 and 1844, Tor- book like this is that be regulated so that they conformed rens—who, along with David Ricardo, with this national interest rather than developed the concept of comparative none of the people who following potentially wayward private advantage—argued that the use of tar- should read it will interests. A national interest that mer- iffs could change the terms of trade (the cantilist writers were sure they com- price of imports in terms of the price of bother to. They will, pletely understood. Again, a familiar exports) to a country’s advantage, however, continue to attitude from contemporary commen- though global welfare was best served by tary: ‘economic nationalism’ being alive unrestricted free trade—since the ben- advance arguments by- and well and advocated by the Demo- efits to the particular country were less and-large refuted be- crats, Greens, One Nation, large sec- than the losses imposed on others. Tor- tions of the ALP and many commenta- rens was subject to a torrent of abuse for fore the European tors favoured by The Age and the ABC. his ‘heresy’ before being rescued by John colonization of Irwin identifies the original pioneer Stuart Mill’s more rigorous restatement of serious analytical thought about trade of his argument in 1844, with the final Australia as being Henry Martyn in his Consid- confirmation of basic elements of the erations upon the East India Trade pub- theory coming from F.Y. Edgeworth in ing interventions to genuinely benefi- lished in 1701 and reprinted in 1720, a 1894. cial effect. Irwin’s own final comment work of which he writes ‘it would not But it was one thing to establish the sums things up: ‘if the historical experi- be unreasonable to suggest that he sur- theoretical basis for an optimal tariff, it ences described here continue, free trade passes even Adam Smith in his analyti- is quite another for that to be translated will remain one of the most durable and cal contribution to the case for free into practical policies—not least be- robust propositions that economic trade’ (page 57). In this work, Martyn cause of the effects of foreign retaliation. analysis has to offer for the conduct of uses concepts of opportunity cost, effi- As Irwin says, the most that can be economic policy’ (page 230). ciency and productivity. He was con- shown is that, under certain circum- The trouble with a book like this is scious of going against received wisdom stances, unilateral free trade can be un- that none of the people who should read in arguing that the public benefit came desirable. A problem for which mutual it will bother to. They will, however, from improving the volume of trade— agreement mechanisms for free trade continue to advance arguments by-and- not the profits of particular manufactur- (such as GATT) provide an answer. large refuted before the European colo- ers—from allowing competition to drive The ‘infant industry’ argument, nization of Australia. Intellectual innovation and from taking maximum scorned by Smith, endorsed in a brief progress is a limited commodity. benefit from the international division passage by Mill and expounded force- I P A

MARCH 1999 31 derstanding that today would allow him actuarially sound basis. Rational Figuring to ‘barely squeak by in a third-grade The late seventeenth and the eight- Michael Warby reviews arithmetic class’ (page 43). The idea that eenth century saw the development of one could put numbers on chance was sampling and other elements of statisti- foreign to the ancient or medieval mind: cal theory, starting with John Graunt’s Against the Gods: The they were close, but, prior to the adop- 1662 book Natural and Political Observa- Remarkable Story of Risk tion of the Hindu-Arabic numbering sys- tions Made upon the Bills of Mortality, a tem with its vital concept of zero and easy path-breaking analysis of births and by Peter L. Bernstein basis for calculation (try doing long di- deaths in London from 1604 to 1661. vision in Latin numerals some time) and Charles II insisted that Graunt—a mer- John Wiley & Sons, 1996, 1998, to the acceptance of the idea of a change- chant of buttons, needles and such like— 383 pages, $24.95 able—and different—future they never be admitted to the Royal Society, whose took those crucial extra steps. august members were not keen on admit- I was originally introduced to econom- Steps which started with gambling. ting a mere tradesman. The King replied ics by the writings of John Kenneth Bernstein’s story has its forgotten pio- that ‘if they found any more such trades- Galbraith. I have come to disagree with neers—people who made path-breaking men, they should be sure to admit them Galbraith on many things, but his prac- discoveries whose work was ignored, or all, without any more ado’. Admission tical demonstration that the ideas of eco- entirely unpublished, during their life- followed. Graunt reasoned about raw nomics can be expressed, as they ought time. A sixteenth-century physician and data in ways which are the normal stuff to be, in fine English had great value as gambler, Girolamo Cardano (1500-71) of analysis now, but which no-one had a starting point. was one such. His Liber de Ludo Aleae done before—including inferring from There are some things on which I still (Book on Games of Chance)—the first se- what had been observed to what had not: concur with him. Long before it became what is now known as ‘statistical infer- policy consensus, Galbraith agreed with ence’. Graunt’s work was taken further Milton Friedman and Karl Marx that by Edmund Halley (he of the Comet) capitalism, if you were lucky enough to who used more complete data from get it, was definitely the best option for Breslaw to work out improved life ex- developing countries. (There always was pectancy tables. Halley thus superseded a great difference between the intelligent the work of Ulpian—whose AD 225 ta- Left and the lumpen-Left: one is re- bles had been the standard work for 1400 minded of the late Joan Robinson’s com- years! ment that the one thing worse than be- It took a while for the full implica- ing a Third World country that a multi- tions to catch on: the English govern- national wanted to exploit was being a ment started selling annuities in 1700 Third World country that no-one which repaid their purchase price over wanted to exploit.) On the cover of the 14 years. It was not until 1789 that they softcover edition of this brilliant, and began to take into account the age of the brilliantly lucid, work by Wall Street in- buyer. Then we come to the gathering vestment adviser Peter Bernstein, Pro- of underwriters in the coffee shop that fessor Galbraith is quoted as saying Edward Lloyd opened in 1687 and With his wonderful knowledge of the Bernstein takes us into the history of the history and current manifestations of commercial application of risk manage- risk, Peter Bernstein brings us Against ment. the Gods. Nothing like it will come There is far more in this wonderful out of the financial world this year rious study of games of chance—was book (the foregoing only takes us to page or ever. I speak carefully: no one written in 1525, re-written in 1545 but 89). His descriptions of the interaction should miss it. not published until 1663. He was, how- between the development of theory— Absolutely. ever, a popular lecturer, so his ideas may particularly concepts of rationality and It is difficult to know where to start well have been disseminated anyway— rational decision-making, including in praising this work. It brings intellec- Galileo’s 1623 essay Sopra le Scoperte dei game theory—and commercial practice, tual history alive in a way only very few Dadi (On Playing Dice) covered much of in particular, are greatly enlightening. scholars—one thinks of the late Sir the same ground. After millennia of slow The story is, in many ways, inspiring, as Isaiah Berlin—have managed. Bernstein movement, things took off in a rush. The it is about humanity’s search to under- has the talent of the truly great exposi- key ideas of probability theory—the stand the world around us and to seek tors—of making everything he writes study of outcomes for a world where more ways of rationally dealing with that most clear to any interested lay reader. can happen than will happen—were de- obscure of all things—the future, the key The virtue which stuck in my mind veloped in the seventeenth century— extra elements which made the Renais- the most, however, was the way that particularly by Pascal (he of the famous sance the ‘take off’ point being ‘freedom Bernstein brings alive how much of our Wager) and Fermat (of the Last Theo- of thought, the passion for experimen- current commonplaces about simple rem) in 1654. As Bernstein writes ‘after tation and the desire to control the fu- arithmetic and—even more—risk and 1654, mumbo jumbo would no longer be ture’ (page 54). probability are profoundly new—and ex- the forecasting method of choice’ (page I recommend the book heartily. tremely powerful—ways of looking at the 72). By the late 1660s, Dutch cities were world. The great Renaissance genius able to put the annuities they sold as fi- Michael Warby is editor of the IPA Review. Leonardo had a level of arithmetical un- nancing arrangements on a reasonably I P A

32 MARCH 1999