THERE ARE ALWAYS NEW REASONS TO EXPLORE. Although Santos has come of age as Australias most successful explorer-producer of on-shore oil and gas, our primary concern Is Australias continued capacity to meet Its energy needs. We are committed, therefore, to a future of relentless exploration. For without significant new discoveries, Australias capacity to meet its fuel requirements will diminish. So, the hard work that put us amongst Australias top companies will continue. And well continue to invest In Australia. For the future of Australians.

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SANTM. TODAYS AUSTRALIAN EXPLORER May-July 1987 INSTITUTE OF PUBLIC AFFAIRS Vol. 41 No. 1 1PAROJEW ISSN 0019 0268 Australias journal of free enterprise opinion

6 How the Law is being politicised 56 Debt — an Economic and Moral Athol Moffitt Crisis The independence of the institutions of law is James Buchanan a bulwark against the tyranny of the State. It Why should future generations have to pay took the head of an English King and a bloody for what we consume today, asks the 1986 civil war to achieve. Now in Australia its Nobel Prize Winner. being rapidly eroded. Health Policy Hijack 58 Scuttling Australias 4 Bob Browning Competitiveness The new interest groups exerting influence on Geoff Carmody federal health policy think that our whole The National Wae Case Decision handed society is sick. down in March will go down as one of the Commissions worst ever. 1 9 Interview For Aborigines welfare is the problem, not the solution. Ken Baker interviews Margaret Valadian, critic of the sprawling Aboriginal Affairs bureaucracy. 22 Brides of the State Peter Swan 4 IPA Indicators Young women are ditching the fathers of their Who occupies 50 per cent of new office space children in exchange for the care ofa paternal- in Melbournes Central Business District? If istic government. you knew you might think it should be re- named the Central Government District. 31 The Moral Revolution in Education Geoffrey Partington 5 Editorial The latest tool of social engineering in the Paradoxically, public sector unions may classroom is Values Clarification. actually be aiding privatisation. 35 A Rose by Any Other Name 12 National Issues Peter Rowe John Stone Whatever they call it, Labor governments The Federal Labor Government has effec- around Australia have embraced privatisa- tively put Australias assets up for overseas tion. But is their strategy flawed? sale, at a substantial discount. Sir Joh 40 26 Strange Times John Stone tells why hes decided to work for More everyday absurdities and empty ideas Joh. from the Age of Aquarius. Les McCarrey in Around the States argues 43 that Johs Queensland is a stronghold of the 28 World Policy Review corporate state. Michael James 46 Defence Focus on. Figures Harry Gelber in Defending Australia exposes 38 flaws in the new Defence White Paper. Jacob Abrahami Governments are jumping on price rises in 48 Gerard Henderson examines Paul Dibbs the private sector while ignoring rises in their view of the USSR. own sector. Conservatives are Making the News 52 Follow-Up on Campus 61 H W. Arndt disputes Wolfgang Kaspers claim Ken Baker that Australias economic growth is being New-look student newspapers are publishing overstated. guides to the stock market and blowing the whistle on the misuse of student funds to sub- IPA News sidise left-wing causes. 63 An IPA Council is launched in the ACT.

Editor: Rod Kemp Associate Editor: Ken Baker

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The IPA Review was established in 1947 by Charles Kemp, founding Director of the IPA. Gate symbol

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Political parties are seeking to control the major institutions of justice by appointing individuals sympa- thetic to their interests. In this way and other ways the independence of the Judiciary, the crown law offices, the police and other institutions of justice is being undermined. This, one of the most disturbing develop- ments of our times, amounts to an attack on the concept of democratic government.

the Executive and the Judiciary and the internal division of the powers of each of these organs of government. This constitutional doctrine has been recog- nized or enjoyed in some form or another in other democratic societies. It is based on the view that concentration of the powers of the State in the end is bound to lead to tyranny and loss of individual freedom made possible by the breaking down of the legal system, and by the absence or loss of its independence. However, on its own, the separation of the judicial power, and hence the independence of judges, magistrates and juries, who are the ones who exercise the judicial power, is not sufficient to ensure liberty. The administration of justice, and hence its independence, integrity and efficiency, depend also, and heavily so, on there being such The Hon. Athol Moffitt qualities in those officers and institutions which I We in Australia are rapidly undermining one of the call the institutions of justice. They include the most effective protections for individual liberty— police, the prosecution authorities and the legal the independence of the Judiciary. It took the 17th profession. The prosecution authorities include the century sacking and imprisonment in the Tower of Attorney-General, the Solicitor-General and any a chief justice (Sir Edward Coke), the head of a Director of Public Prosecutions, lawyer or police King (that of King Charles), a bloody civil war and prosecutors and law officers of the Crown. Justice the temporary sacking of the monarchy to give us will fail in a particular case if the office of any one of an independent Parliament and to make the these is bent to political ends or is otherwise administration of justice independent of the con- corrupt or inefficient, no matter the integrity of the trol and influence of the Executive (the King). It judge or jury. was from these events that we derive the constitu- tional doctrine known as the separation and divi- Supremacy of the Party sion of power—the separation, namely the inde- pendence, each from the other, of the three organs In recent times, particularly in Australia, the of government, the Legislature (i.e. Parliament), political party and its leaders have become all-

The Hon. Athol Moffitt, CMG, QC served as a Supreme Court Judge in New South Wales for 22 years and headed Australias first Royal Commission into organised crime in 1973-74. He is author of A Quarter to Midnight, Angus and Robertson, 1985.

IPA Review, May-July 1987 IR)Wrt1E LAW IS BEING POLITIiIS1ih powerful and, aided by ever-increasing party regi- speaks in a way seen to harm the party. It is intimi- mentation and weakened or absent State Upper datory both of the person concerned, and of others Houses, Parliaments are now largely the puppet of against their doing likewise in future. It is the pro- the party. The major function of Parliament is to duct of power centralised in the party in govern- give legal effect to what the party has decided else- ment. which views itself as sovereign-like. Attacks where. on the person or what he has said or done have The power to appoint to judicial and other been made on or condoned in respect of Royal and independent offices and the power by legislation to other commissioners, persons or bodies that alter judicial organisation and independence now administer justice, including magistrates and lies in fact in the same hands—the party. Thus, juries. Such attacks arc nearly always detrimental although legislative and executive powers are to judicial institutions. legally separate, in reality the separation is almost non-existent. The merging of executive and legisla- Vulnerability of Law Offices tive power has removed the original foundation on which the separation of the judicial power The forces which have rendered judicial power depended so as to render the independence of the vulnerable and are undermining its independence Judiciary vulnerable. operate in the same way in relation to the institu- The political attitude now firmly held is that tions of justice. The office-bearers of these institu- the party in government, being all-powerful, with a tions, such as the law officers of the Crown and mandate to implement the will of the public which police officers, have, in relation to any action which elected it, its sovereign-like will should be done and touches the administration of justice, a constitu- that all institutions, including those participating tional duty which is similar to that of judges and in the administration of justice, should not stand in juries. An Attorney-General, although a senior its way and should further its interests, or at least member of a political party and a Cabinet Minister, do nothing to frustrate them. The reactions of some has an identical duty. His long-accepted constitu- party leaders to independent action, considered to tional duty was acknowledged at a meeting of law harm party interests, often provide eloquent evi- officers of the Commonwealth in Canada in 1977 in dence of these attitudes. Time and again, there is a a statement, to which Australia was a party, that any personal attack upon the independent deviant decision of an Attorney-General relating to law made by a party member, often a leader, and some- enforcement "should always be exercised in accord- times orchestrated across the party. The response is ance with wide considerations of public interest and more passionate, even vitriolic, where the deviant without regard to considerations of a party political is considered to owe some allegiance or obligation nature and. . . free from any direction or control to the party, or has been appointed by it. whatever... ". A like duty rests on a Solicitor-Gen- Earlier examples are Sir John Kerr and Mr eral or Director of Public Prosecutions, on the large Costigan, Q.C. The most recent is that made on Mr body, of law officers who do duty under them and on Temby, Q.C., the Director of Public Prosecutions, police officers, including their commissioner. Thus following his decision to charge Mr Wran with con- this is the duty of all who are called on to collect and tempt of court. An orchestrated attack was made collate material and advise on it and to provide the by party members and extended to resolutions basis for ultimate decisions: whether to lay or not lay being passed by a powerful NSW committee of the charges, not to file a bill or indictment after a magis- party. The validity of Mr Tembys action was put trate decides there is a case for trial, decisions as to beyond doubt by the later unanimous finding of the charges to be laid and the evidence to be pre- contempt by five senior Supreme Court judges. sented, whether to appeal, and concerning the con- The vilification of Mr Temby (a former active duct of an inquiry which touches breaches of the law member of the Labor Party) and the suggestions or law enforcement. that he be removed from office could not be a more The institutions of justice occupy an anoma- stark example of expectation that the holder of an lous place in the divisions of powers. The duty of "independent" office appointed by the party, and office holders is to act "judicially" in the way just having some past loyalty to it, will not be so inde- stated, yet they are necessarily separated from and pendent as to let the party down on a critical beyond the control of those who exercise judicial matter. power. This is because, in order that judges and These personal attacks (or "side-swipes") are juries may give decisions free from external now all too often used against anyone who acts or influences, they must stand aloof from parties, HOW THE LAW IS BEING POLITICISED including prosecutors, and from witnesses, includ- by reason of the rise of political party power and the ing the police. Further, to remain independent their rapid escalation of organized crime in Australia. function is only to decide cases put before them and Organized crime in Australia is now a billion then on the issues or charges and evidence presented dollar business extending beyond drug crimes into by officers of the institutions of justice. In the almost every field of crime. It cannot operate except absence of judicial control these institutions operate by corruption of officials on a vast scale. It has within public service departments of the Executive. hundreds of millions of dollars annually available to In consequence the office holders of these institu- do so. It penetrates and paralyses police and politi- tions are so close to the Executive that their function cal systems. Its intrusion into the political arena in is apt to be confused with that of the Executive and recent times and its mishandling is discussed in my the independent aspect of their duty ignored. book A Quarter to Midnight. The administration of justice and the independence and integrity of the institutions of justice from the police upwards have suffered because the problems caused by organised crime have not been tackled head on. Mistakenly, we have tried to live with them and to smother the damaging corruption issue. One consequence of the rise of party power is that the public service in Australia is being rapidly politicised. Most politicians in power will concede, at least privately, that they expect members of the public service to promote, or at least not harm, the interests of their party. Public interest is conven- iently equated with the interests of the party. Appointments and transfers are made on these bases. All this is inapt and dangerous when it is extended, as undoubtedly it is being, to independent institutions such as the institutions of justice. Both rank and file and more senior members of parties in power, by their utterances and their conduct, have shown a lack of understanding of the judicial duty of Crown law officers and seek to ignore that duty in favour of what is expedient for the party. A prime example of this attitude appears from the attack on Mr Temby earlier referred to. It is usually not possible to establish whether the forces which intrude into judicial independence or that of the institutions of justice in fact cause jus- tice to miscarry in a particular instance. What can be shown is that those who administer justice are too often unnecessarily exposed to improper forces, often with the expectation that those forces will pre- vail. There is often a strong suspicion, even infer- ence, that a particular appointment is made because In consequence the institutions of justice, it is expected that the appointee in a critical case will which in a sense lie between the Judiciary and the not let the party down. If a decision is made in such a Executive, are the weak point of the separation and case which happens to coincide with the party inter- hence of the independence of the judicial power. ests, it still will not appear whether or not the deci- They are vulnerable to all manner of intrusions and sion in fact was independent. But most likely there influences whether from political power, mischie- will be lack of public confidence that it is. This lack vous intervention, personal favours or the corrupt- of confidence is the greater, because invariably the ing infiltration of organized crime into police and basis of a decision of an A.G, D.P.P. or Solicitor- political systems. Vulnerability in this respect has General is kept secret. always existed, but has become an alarming reality However, suspicion, inferences and lack of con- HOW THE LAW IS BEING POLITICISED fidence in the system often arise if accumulations of and where the heads, whether Attorney-General, decisions are looked at. Thus, if all the decisions of Director of Public Prosecutions or Solicitor- Attorneys-General and others in the many politi- General or Police Commissioner, depend on a large cally sensitive cases since 1977 were put together, army of officers, nothing was done or fore- whether any such decision be to do nothing, enter a shadowed. As the duty of all these public officers is no bill, or postpone a decision, or send a matter off to serve the public interest free from executive or apparently to be buried in some further inquiry party direction, there is a strong case to have some when some party member or connection is ombudsman-type audit with reports to Parliament. involved, or whether the decision be to charge or However, consistent with my earlier theme of the publicly inquire into the conduct of some opposi- party view of its own sovereign power and wisdom, tion party member or connection, it will appear that political control over these institutions protected almost invariably the decision is that which appears by secrecy remains absolute. to conform with the interests of the party. On a The shortcomings and vulnerability in the broad view it is impossible to avoid the conclusion police and prosecution fields make the indepen- that the power is being exercised contrary to the way dence of judges and juries doubly important, so any professed at the Canadian conference. weakening of practices designed to ensure the Judi- ciarys independence becomes a more serious mat- Secrecy ter. In an independent, able, strong and profes- sional Judiciary with its own internal organisation, The open court system provides that some free from political interference or influence, lies the unfairness (such as damage to reputations) must power to protect the citizen from excesses of give way to the greater public good, which recog- bureaucratic and political power and to expose any nizes that justice administered in secret offers a shortcomings of the institutions ofjustice. dangerous cloak for injustice and manipulation and engenders suspicion and lack of public confi- Political Favouritism dence. Despite declarations of intent to have open government, the completely opposite attitude There have been erosions of many of the prac- applies to the institutions of justice, particularly tices of the past which were designed to ensure that those engaged in prosecution or allied functions. a judge once appointed by the Executive would be There is blanket secrecy which admits of virtually independent of it,having nothing to hope for or to no exception and often no discretion to disclose fear from it, by reason of the discharge of his duty, anything (e.g. National Crime Authority). It is whether favourable or adverse to the interests of claimed the secrecy is to protect reputations or pre- the government. This is critical in the case of vent prejudice otherwise, but, in its absoluteness, it Supreme Court judges because of their prerogative also serves to shield from parliamentary, judicial powers to protect the citizen against executive and public scrutiny and hence to deny all oppor- excesses. One such practice was that no judge, tunity for challenge or criticism of decisions even except the most senior, should be promoted by the when they appear to have been subject to political government to higher judicial office or selected by or other pressures, and to be given for dubious it for some favoured treatment while remaining a reasons. judge. It is apparent to all that at times govern- Professor Vinsons investigation in 1986 dis- ments, contrary to this practice, select judges for covered "statistical anomalies" warranting deeper promotion or for some favoured office and pass investigation into the administration of drug crim- over others in doing so. Pressures are put and are inal justice in NSW by courts and by institutions of seen to be put on judges to act favourably and not justice, including the Attorney-Generals Crown critically of the government. Governments now Law Office (in no bill decisions and concerning often select for promotion from a lower to a higher appeals against inadequacy of sentence). Vinson court, or to a higher office within a court, a judge recommended a general remedial system of audit not the most senior and seen by others as not the of all these functions. This was seized on by the most able, so that keeping in favour with the party Attorney-General to rush through Parliament the in government comes to be regarded by many as Judicial Officers Act, 1986 (NSW), which sets up a necessary for judicial advancement. complaints and investigations system but only An example is in point. By legislative amend- concerning judges. In the area where obviously the ment, the NSW Government took from the real problem lies, namely the institutions ofjustice Supreme Court Judiciary the power to promote HOW THE LAW 1S BEING POLITICISED judges to head internal divisions of that court. This ing party to select a commissioner to act as judge in usurped the power of the Judiciary to arrange its an enquiry where the conduct of the party itself or internal affairs, including appointing judges who one of its members is under scrutiny. shall allocate cases, a matter which can become Since publication of A Quarter to Midnight politically sensitive, e.g. in the criminal field. The political intrusions into judicial power have con- acquired power permits the government to ignore tinued, some in different ways. Several are impor- seniority and make its own selection of judges for tant and should be referred to. promotion in an important area. In one such pro- A recent example with potential for serious motion it passed over ajudge, then the most senior consequences for the integrity of judicial power is of the division, who earlier in a judgment made the Judicial Officers Act, 1986. Investigative bodies findings adverse to the bona fides of a Minister in and procedures constituted by the Act can be set in the discharge of his office. Whatever the true motion by anybody. The wide and vague terms of reasons for the appointment, it, and the acquired the Act and the publicity given to the making of power, must now be seen to show that being out of complaints against judges are apt to encourage all favour with the party in government does not aid sorts of complaints from failed or vexatious liti- judicial careers. gants or persons with some collateral motive. Whether or not complaints succeed is not in point. The rights given to individuals and the gov- Governments now often select for promotion ernment, and the potential for this to compel from a lower to a higher court, or to a higher judges to account for their exercise of judicial office within a court a judge not the most power to a body making an administrative inquiry senior and seen by others as not the most or to cause indignity, worry and unfavourable pub- able, so that keeping in favour with the party licity, can only serve to deter judges in the free, in government comes to be regarded by many independent and fearless exercise of judicialudicial power as necessary for judicial advancement. according to their individual consciences. The grounds for removal of a judge are expressed in Other exercises of power may be seen as somewhat ambiguous and general terms signifi- favours. Most judges regard commissions of cantly more narrow than the constitutional guaran- inquiry as interesting and attractive, sometimes by tees which have endured for centuries. reason of overseas excursions on favourable terms. Another significant matter is the finding of the In earlier times it was always regarded as the pro- NSW Supreme Court of contempt on the part of vince of the organised Judiciary, through the Chief Mr. Wran. The finding was that, although the Justice, to determine whether it was appropriate words of the party head found to constitute the for a judge to head a commission of inquiry, and if contempt could not be found beyond reasonable so to select the judge. In recent times, on occasions doubt to be intended to influence potential jurors this practice has been disregarded both by the Aus- in a pending criminal trial, they were made with tralian and NSW Governments despite judicial reckless indifference to whether they interfered protest. On these occasions a judge has been just with the administration of justice in order to help a selected for an appointment regarded as politically friend. The friend had been a political ally. Political important and taken without consultation and friendship thus took precedence over the inde- without the consent of the Chief Justice or organ- pendent exercise of judicial power. ised Judiciary. The Victorian judges by reason of earlier firm attitudes have so far been able to resist Undermining of Juries this happening. The selection and appointment of a judge in A final matter is that criminal trials of persons this way involves several things. One is that the of party political or union standing have led to ser- province of the Judiciary to run its own affairs and ious permanent damage to the jury system. The not release judges for duty to engage in activities long-established and important practice of ano- considered incompatible with judicial office has nymity of jurors and the confidentiality of their been taken over by the Executive. Another is that deliberations, designed to facilitate independent because the office is not unattractive to individual decisions free from the fear of publication of deli- judges, selection by the party in government can be berations and later censure of individuals, have regarded as a plum to be given to the favoured one. been disregarded in these trials. These dangerous Further, the precedent is now set to allow a govern- invasions have been condoned and seized on for

10 HOW THE LAW IS BEING POLITICISED party political defence purposes. In these trials followed, or may occur in future, involving politi- there have been attempts before, during and after cal identities will have had, or in the future will the trial to have the trial regarded as politically have, apprehensions that what they say as jurors motivated and so minimise the need to look at the may be made public, subjecting them to criticisms facts. for what outside the jury room may appear to be Jurors in the past have been exhorted by disloyalty to a party to which they owe some alle- judges to set aside external or political considera- giance. The easier course where they do have politi- tions and in the shelter of anonymity and confiden- cal sympathies will be to give effect to them and tiality jurors appear to have succeeded in doing so. acquit. The criminal jury trial is based on twelve jurors If our Australian democracy is to be truly free acting as a group of individuals being entrusted with independence in the administration ofjustice with the exercise of the communitys sense of fair- and in its institutions and professions, first there ness, responsibility and justice. Each brings an must be awareness of what is occurring and then independent view individually expressed and hears there must be an effective national will to stop and what the others say, but each acts as a member of a reverse the trends before they overwhelm us. For group in an endeavour to come to a group decision. example, that part of the Judicial Officers Act It is open in the end for jurors to withhold assent to which allows intrusions into judicial independence the group view. A decision given is that of a group. should be repealed and certainly not copied else- Such a discussion of laymen will of course spawn where. The lack of willingness of the modern politi- some untenable or prejudiced views, but it is the cal party when in power to defend the indepen- group collision of minds which in the end produces dence of the Judiciary and its supporting institu- the wise and community-accepted view. There is tions must be judged a very short-sighted attitude. no other satisfactory alternative, or at least none Political parties in power inevitably become politi- which the community will accept. It is inconsistent cal parties out of power. The institutions they have with jury function for them to give reasons for deci- been able to manipulate in government become sions as do judges. To make public that which is open to manipulation by their opponents. It is in said in confidence and which the law is astute not the interests of the leaders of all parties to ensure to require, destroys confidence for the future so as that the institutions whose independence will pro- to inhibit all future jurors, particularly jurors in tect their liberties when their party is out of power trials involving politicians. survive and prosper. No democratic party can have What has occurred—and party political inter- any long-term partisan interest in undermining the ests in exploiting and encouraging it are largely to independent Judiciary and independence other- blame—means that jurors in cases which have wise in the administration ofjustice. NATIONAL ISSUES

John Stone

currencies more responsibly—Japan, the Federal Selling the Farm Republic of Germany, Singapore and so on—are When Australians import goods and services, discovering that their yen, D-marks or Singapore and incur more (net) transfer payments to foreign- dollars now go much further than they did two ers, such as interest payments on our external years ago in acquiring real assets in Australia (land, debts, than they can pay for by exports—that is, houses, buildings and the like) or proxies for real when our balance of payments current account is in assets, such as shares in Australian companies. deficit—that deficit must be financed, in one way Teams of eager Australian property developers, or another, via a corresponding surplus (i.e., capital real estate salesmen and stockbrokers are to be seen inflow) on the capital account. By definition, the thronging the major hotel lobbies in Tokyo, Hong balance of payments must balance. It is the cumu- Kong and Singapore—not to mention London and lation, over the years, of the (net) inflows which New York—with a view to peddling their wares. produce that balance that gives rise to our total In short, there is emerging a kind of auction of external balance sheet position. Australian assets at bargain basement prices (in I say "external balance sheet position" rather terms of the foreign currencies being used to pur- than "external debt" because capital inflow takes chase them). Within that framework, it is remark- many forms, only one of which is the acquiring by able to observe the way in which our present gov- foreigners of debt instruments issued by Aus- ernment appears not to care that, largely because of tralians. True, of recent years a high proportion of its policies, the Australian "farm" is being flogged our total new capital inflow each year has involved off to foreigners at such a discount. the issue of new debt by Australian governments, Of course, when Mr. Whitlam, Mr. Hayden, corporations or individuals. At 30 September, 1986 Mr. Keating and others were so bitterly criticizing such external indebtedness totalled $101.4 billion— earlier coalition governments over foreign invest- some 41.7 per cent of Australias Gross Domestic ment policy, they had some company. It was the Product (GDP) in the year to that date. This com- late Sir John McEwen, then leader of the (then) pares with only $35.6 billion (only 21.2 per cent of Country Party, who gave currency to that very then GDP) as recently as end-June, 1983, just after phrase about "selling the farm". Equally it was Sir the present Government came to office. John Gorton who, during his period as Prime Min- It is worth pausing a moment on those figures. ister, spoke of the Treasurys alleged "tickle my In the nearly 200 years up till 1983 since Captain tummy" approach to foreign investment policy. Phillip landed in Australia, we had acquired debts to To be fair to both gentlemen, however, neither foreigners which over that time had cumulated to of them had played any part in a Government which some $35.6 billion. Just over three years later those had succeeded (sic) in devaluing the Australian dol- debts had almost tripled in $A terms, or doubled (if lar by around 30 per cent in under two years. Mr. you prefer) in relation to our national product. Keating may no longer qualify for the title of Now that the Australian dollar has fallen so Finance Minister of the Year, but someone should catastrophically, some signs are appearing that our surely be taking up a subscription for him, or for his capital inflow is altering in nature. Investors in Party, in Tokyo or other foreign parts. Certainly, countries whose Governments have managed their nobody could have done more to present overseas

John Stone is a Senior Fellow at the IPA. He is now on leave from the Institute and consequently his column will not appear in the next few issues of the IPA Review

IPA Review, May-July1987 12 NATIONAL ISSUES

investors with the bargain basement buying oppor- what it is) would of course be sensible not only tunities to which they can now look forward. from a commercial viewpoint by buyers not want- That having been said, there is a need—on ing to drive up the price of further purchases foreign policy grounds as well as on grounds of eco- against themselves. It would also be entirely sen- nomic policy—to be clear about what is wrong sible in Japanese foreign policy terms. The last about this. It is not the foreign investment as such thing that the Japanese Government—and hence that is wrong. What has been wrong, rather, were the Japanese business community—wants to see is the policies which gave rise to the need for it in such an outburst of anti-Japanese sentiment as Aus- massive proportions. tralians realise that, because of the failings of the Rather than blaming (say) Japanese investors, Hawke Government, we are now in process of we should be asking our Government why it has handing over large chunks of the country to new allowed its subservience to the trade union move- (foreign) owners. ment to lead it into endorsing wage policies which Indeed, for our Japanese friends this is a much we have clearly been unable to afford. It has been more general problem. It is not confined to Aus- those policies, together with the big spending poli- tralia, but extends worldwide, and we can therefore cies of governments generally, which have led Aus- be sure that much thought will have been given to it tralians to go on living beyond their means and in places like the Gaimusho (the Japanese Foreign needing, as a result, to borrow from foreigners or Office) and the Ministry of Finance. It is probably sell them some more paddocks from the national fair to say, however, that because of World War II farm. Thus, if we dont like those latter conse- the problem takes on an above-average sensitivity quences, we had better insist on a change in the in the Australian case. policies giving rise to them. Back in the 1960s and early 1970s the rash of I think that there is little doubt that Aus- Australian xenophobia which was then breaking tralians wont like those consequences; at the out all over against foreign investment was chiefly moment however I suspect that most of them have directed against United States investors. Mixed up only a very imperfect idea of what is happening in as it was at that time with the posturings of the Left this area. The huge property sales, to Japanese about the U.S. (and Australian) defence of the buyers in particular, which have been occurring up people of South Vietnam, it was accompanied by and down the Queensland coast and elsewhere, such graffiti as "Yanks go home" and other such, have been accompanied by a minimum of publi- less polite, injunctions. Can we shortly expect to city. So much so, indeed, that one might ask see "Japs go home" also? whether such unusual silence from an industry (real If so, that threat to one of our most important estate) not normally noted for its reticence, has foreign policy relationships will derive not merely been one of the conditions of sale imposed by from the indefensible trade policies of Japan, buyers not wishing to draw undue attention to the which are basic to its mounting balance of pay- massive sell-off that is going on. ments surpluses. It will also derive from the poli- cies of our own government, which have rendered "Japs go Home"? so cheap the Australian assets, to buying which those Japanese surpluses are now being partly Such a desire for unobtrusiveness (if that is directed.

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13 Health Policy Hijack Bob Browning

The excessive influence of unrepresentative, political interest groups—self proclaimed as "community groups"—is undermining the public health system in Australia.

The quality of Australias public health system is system on the grounds that it failed to serve the under threat. The threat comes from a startling public interest but predominantly served the change in the way health policy is being made in special interests of the private professions and the this country. pharmaceutical and other health-related indus- Traditionally, health ministers have res- tries. It appears, however, that the new model, even ponded to public demand by making policy recom- more so, will serve the special interests of organised mendations to government after consultation with social workers, social engineers, minority political expert public servants and advisory bodies com- activists and others drawing their salaries mainly prising mainly medical professionals, scientists, from the public purse. and representatives of health-related industries. The new movement has more than a trace of Now a new model is emerging. A host of social worker trade unionism. It is this aspect "community" organisations is springing up, which has drawn the criticism of Finance Minister clamouring successfully to participate in public Peter Walsh. At the ALPs Federal Conference in health policy and its administration as representa- Hobart last year he argued unsuccessfully against tives of "health consumers". the new social welfare strategy presented by Gerry Yet many of the "community" and "con- Hand and adopted by the Conference. Walsh said sumer" organisations are not, as they claim, that the new strategy "would provide sinecures for broadly based in the community. Hardly any have otherwise unemployed sociologists but do very more than 200 voting members. Some are tiny, little for the poor" (The Australian, 11.7.86). tightly controlled oligarchies. For example, one of the leading organisations, the Australian Consum- Government Policy ers Association, strictly vets its membership. As few as 59 votes have been cast in its general elec- Federal and State Governments are encourag- tions. ing the creation and development of"community" Many of these groups are politicised. Their groups by "seeding grants" and on-going financial reform agenda are often more ideological than subsidies. New mechanisms like the Consumers pragmatic, seeking to advance minority rather than Health Forum facilitate their influence on health mainstream interests. Common to many of the department policy and administration. Leading leading groups is the belief that current Western group activists are scoring over medical profes- society is the major cause of most modern sickness, sionals in appointments to key policy posts in and that the only cost-effective road to public health departments and agencies. health is through political action for social change. The stated aim of government policy is to Their attitude is summed up by the Health make public health responsive to "health consum- Issues Centre (HIC), another leading government- ers" rather than "producers", and to direct public funded "community" organisation. It recommends health resources to "preventative" rather than (Health Issues, December 1986) a health system in "curative" action. It is not, however, the consumers which "one of the major roles of public health is to whom the new policy approach gives power, but active political advocacy..." This systems "first the small groups of political activists. Underlying principle of public health" is that "we can only be this approach is a refusal to recognise that "health healthy in a healthy world." consumers" are empowered far more by their Generally these groups attack the old health ability to exercise choice in the market place, than

Bob Browning is a public affairs consultant and a Director of R. W. Browning and Associates Pty Ltd.

IPA Review. Ma y-July 1987 14 THE HEALTH POLICY HIJACK by political mechanisms which, in practice, are selection criteria which include appreciation of being hijacked by well-organised, subsidised, ideo- issues and experience in community participa- logical activists. tion". The new rhetoric stresses the moral superior- The Review recommended that the Health ity of the "public interest-oriented" public sector Forum should help "develop appropriate programs and the associated, new "community sector" over to train departmental staff", and that there should the "profit-motivated" private sector. be "staff interchange" between the department and The result is an increasingly politicised public Forum groups. The Health Forum claims (Circu- health system. The official road to public health lar, October 1986) that interchange secondments now is primarily through socio-political change are already underway. rather than traditional health services emphasising Another controversial recommendation is medical professionalism, science and technology. that the Forum should assist the Department to review all its existing advisory bodies: "The Who is Running Our Health System Now? Department, with a view to discarding those with- out an important role, should review the relevance What are the groups now influencing our pub- of all committees and working parties and consider lic health system? Who controls them? And what how re-allocation of freed-up resources might best are they really after? What are the new mechanisms be used to facilitate community participation". government has created to increase their The nine organisations which originally peti- influence? tioned Dr. Blewett for the Consumers Health The main "community" organisations Forum were: currently helping to redirect our public health Australian Consumers Association (ACA) resources to socio-political action are those which Australian Federation of Consumer Organisations prevailed on a sympathetic Dr. Blewett to establish (AFCO) the new Consumers Health Forum. Australian Council of Social Service (ACOSS) This mechanism gives several networking NSW Council of Social Service (NCOSS) groups significant influence over Australian public Health Issues Centre (HIC) health policy including the Federal Health Depart- Doctors Reform Society (DRS) ments multi-billion dollar budget. Australian Community Health Association (ACHA) Rupert Public Interest Movement (RPIM) Underlying this approach is a refusal to Australian Pensioners Federation (APF) recognise that "health consumers" are Dr. Blewett responded quickly in setting up the empowered far more by their ability to Forum. The new mechanisms self-appointed exercise choice in the market place, than by Steering Committee has selected the Forums political mechanisms which, in practice, are "Core Group"-16 organisations including six of being hijacked by well-organised, subsidised, the petitioning organisations: ideological activists. Australian Consumers Association (ACA) Australian Council of Social Service (ACOSS) The Consumers Health Forum resulted from Australian Federation of Consumers Union the Review of Community Participation in the (AFC) Commonwealth Department of Health. Dr. Health Issues Centre (HIC) Blewett set up this Review and "welcomed" its sub- Australian Community Health Association sequent recommendations. He said (Press Release, (ACHA) 6.2.86) that the Government had taken many Australian Pensioners Federation (APF) health initiatives to promote "the rights of the pub- And adds: lic rather than the demands of those with vested Australian Conservation Foundation (ACF) interests; but the new recommendations would Federation of Ethnic Communities Councils of "take this process forward by a giant leap". Aust (FECCA) The recommendations involved in this "giant National Womens Health Association (NWHA) leap" included that the Health Department should National Aboriginal and Islanders Health Organ- "adopt appropriate personnel policies, including isation (NAIHO) more flexible employment arrangements, and Collective of Self Help Groups (COSHG)

1. Commonwealth Department of Health Paper, "Health Consumers Forum; 9 October 1986.

15 THE HEALTH POLICY HIJACK

Australian Council on Rehabilitation of the Dis- professional lobbyists, town planners, ecologists, abled (ACORD) and so on ... " Australian Council of the Aging (ACOA) The Health Issues Centre (HIC), a founding Disabled Persons International (DPI) and Core group member of the new Health Con- Youth Affairs Council of Australia (YACA) sumers Forum, said (Health Issues, May 1985): plus an organisation to represent "consumers" an "essential aspect" of the health system should regarding mental health services. be advocating change regarding "such issues as The four organisations comprising the Con- poverty and housing". In its submission to the sumers Health Forums all-powerful Steering Better Health Commission, H IC stated:"Health is Committee are the ACA, ACOSS, HIC and a complex concept. Equal consideration should AFCO. These groups not only network, but also be given to social, emotional, and environmental are key members of each others organisations. factors (such as income security and housing) For example the ACA is a leading member of along with physiological and biological disease AFCO. HIC and ACOSS; ACOSS/VCOSS factors" (emphasis added). founded the HIC; AFCOs Director is on the ACF An indication of HICs politicised approach Governing Council; a former ACOSS policy offi- to health issues is given, for example, by its cial is now ACA Public Affairs Manager. recommending a system (Health Issues, Decem- ber 1986) that: "Instead of attributing malnutri- Politicising the Health System tion in children to inadequate meal preparation by parents, it should be linked to inflationary food The new "community" approach to public prices and exploitative business practices". health is typified by the policies of the Doctors In February this year, HIC widely distributed Reform Society (DRS), one of the nine "com- a glossy 46 page booklet, Medicare, as part of its munity" groups which successfully petitioned the continuing support of the Defend and Extend Federal Health Minister, Dr. Blewett, to set up the Medicare Campaign (DEMC). DEMC is an Consumers Health Forum. organisation as well as a campaign, which says it The DRS New Doctor editorial (September was formed "to respond to the very real threat, 1985) says of the traditional health system that it: made by doctors and their conservative allies, to "fundamentally reflects the 19th Century pater- the Health Insurance System. The Campaign is nalism of the `ruling classes, and openly permits union-based together with health and community profiteering from a monopoly market. groups." "Such a system ... will persist as long as the HIC, itself taxpayer-funded, acknowledged economic and industrial power of the medical in the booklet that financial assistance for the profession remains effectively unchanged. Campaign had come from the Consumers Health "Radical prevention involves a health analy- Forum and the Australian Community Health sis which encompasses such things as affirmative Association. The ACHA is another "community action, bureaucratic reform, workplace trade organisation" recently established through union structures, community development pro- Department of Health funding. grammes, and fundamental changes to economic The HIC booklet lists 59 DEMC members. and power relationships in society. 25 are leftwing unions ranging from the AMWU, "Radical prevention assumes that the major Seamens Union, Builders Labourers and Water- determinants of ill-health are social and econo- siders Federations, to the Administrative and mic and are therefore largely external to the indi- Clerical Officers Association and ABC Stall vidual". Union; 10 are Community Health Centres; 14 are A former Victorian DRS President, Dr. Nick "Community Organisations", including HIC; the Crofts, of the Collingwood Community Health other 10 comprise ALP branches, the Union of Centre, says that (New Doctor, September 1985): Australian Women, the Doctors Reform Society "we must move forward by beginning to regard and the Communist Party of Australia. whole communities as our patients". Political approaches to health are evident also in In order to make society healthy, Crofts says: policies of the Australian Council of Social Ser- "Perhaps the community health centre of the vice (ACOSS). Its Victorian State branch, future should be staffed by those with the exper- VCOSS, founded HIC and helped found DEMC. tise to change such structures— sociologists, VCOSSs 1985 annual report expressed alarm at lawyers, public relations experts, economists, the State Governments intention, at that time, to

16 THE HEALTH POLICY HIJACK increase funding to "critical care hospitals" rather bureaucracy and the associated publicly-financed than community health centres. It stated: " .. . "community sector". publicity of emotional medical cases placed pres- A former member of one of ACOSS Full sure on the state government to increase funding Member organisations, the Doctors Reform to critical care hospitals at the expense of other Society, told the National Times (12.1.80) that health services. In the lead-up to the state budget, DRS members were mainly publicly-salaried VCOSS urged the government to resist these pres- medical officers who stood to "gain handsomely sures and to adhere to ALP health policy". by having money poured into the public sector". This criticism seems to have relevance to ACOSS Social Welfare Trade Unionism and the "community sector" generally.

One characteristic of the networking "com- Results of Policy munity" groups that apparently worries some ALP Ministers is the amount of time and The results of the new "community" health resources those like ACOSS devote to social ser- policies already are becoming apparent. Even vice trade unionism. The Prime Minister, Bob some DRS members are having second thoughts Hawke, has told ACOSS (The Age, 28.8.84), for now that social workers and activists increasingly example, to "remove the mote from its own eye" challenge medical professionals, scientists, and before attacking others for inaction over social expert public servants for influence in the public welfare. He advised the public to note what health system. ACOSS was "asking for themselves". An ex-President of the DRS, Dr. John In its 1984-5 Review of Public Policy, for Powles, for example, complained to The Age example, ACOSS Victorian State body, VCOSS, (24.11.86) that "a sweeping anti-professionalism" listed one of its top priorities as the Permanent throughout the Victorian public health system Jobs in Human Services Project. This project has resulted in low morale, uncertainty and a high aimed to convince Government that it should staff turnover among senior administrators of the create 100,000 additional, permanent jobs in the Victorian State Health Department. Powles gave "Human Services Sector" through local govern- as an example the transfer of maternal and child ment, community health centres, etc. health services in Victoria to the Community Ser- In its Response to the Victorian Govern- vices Department (now being overseen by an ments Review of Funding of Non-Government urban planner). He drew attention also to the fact Organisations, VCOSS noted that: "The recent that there are now no doctors at all in the senior rapid growth of this (community) sector has management of the Office of the Intellectual Disa- resulted in a significant increase in employment bility Services. Powles said: "I wouldnt want to opportunities. It has been projected that this defend the old system of having the whole thing growth rate will continue over the next decade". run by doctor-dominated hierarchies. But we VCOSS also demanded that: "Appropriate have gone from that indefensible extreme to the award wages and conditions, comparable with opposite". other sectors of the workforce, need to be estab- Numerous other examples exist. VCOSS lished for all workers within the non-government social-worker activist, Shane Solomon, who sector". helped found and set up the HIC, has now been Continuing in trade union mode,VCOSS appointed Manager of the Victorian Health Com- went on: "Superannuation and portability of long missions key State Health Plan, a complete service leave entitlements are but two conditions review of the States health services. In South of employment which need to be universally Australia another activist, Simon Chapman, has established within the non-government sector if been appointed a Director of the South Australian parity with other sectors and industries is to be Health Commission. Chapman was a Governing achieved. Maternity and paternity leave entitle- Councillor of the Australian Consumers Associa- ments also need to be recognised". tion (ACA) and founder of MOP-UP. VCOSS includes amongst its members the Others to criticise the effect on health policy Australian Association of Social Workers, the of special interest lobby groups include Dr. Julian Australian Institute of Welfare Officers, and sev- Gold of Sydneys Albion St. Clinic (The Age eral other trade unions and associations with 24.11.86) and Professor David Penington (The vested interests in expanding both the welfare Bulletin, 17.3.87) who recently resigned as

17 THE HEALTH POLICY HIJACK

Chairman of the National Advisory Committee The key question is, of course, to whom is on AIDS (NACAIDS). Both claim that power really being transferred? Is it to the people, NACAIDS was taking more notice of"gay" lobby or the people? Is it a genuinely democratic pro- groups than professional medical and administra- cess, or merely another variety of corporate state tive opinion. Consequently, public health action elitism? is emphasising "education", including expensive ACOSS says it has been "mobilising the com- advertising campaigns, but neglecting measures munity sector" by "strengthening the network of many consider vital to protect all the public, community welfare and other groups which share rather than vocal, special interest minorities. our commitment". These measures include the testing of high risk It says that the Tax Debate in particular "saw groups and making AIDS notifiable like other ACOSS developing new and productive links communicable, serious diseases. with yet further networks of organisations. The Australian Medical Association (AMA) Among these were the womens movement, and also has spoken out. Its Federal President told the the consumer movement. Tentative links were Adelaide Advertiser (14.11.86) that in closing seven established with the environmental and aborigi- major health centres, the Commonwealth Gov- nal groups" ernment was displaying its policy of abandoning ACOSS is as much concerned with bureau- conventional rehabilitation and setting up "a cratic centralism as it is with decentralised parti- string of small local centres manned chiefly by cipatory democracy. It admits its ambition is to counsellors". "co-ordinate" all "community sector responses to the policies of all three political parties" both dur- Overall Strategy ing and between elections. It displays strong corporate state propensi- The aims of the social welfare lobbys drive ties. An illustration is the importance ACOSS for increasing "community participation" should attaches to its seat on the Governments Econo- be seen as part of its overall political strategy. This mic Planning and Advisory Council (EPAC), as strategy was best described from the Socialist Left the countrys "community group representative". viewpoint by the Minister for Social Service, It says its EPAC status is a tacit sign that the Brian Howe (Melbourne Herald 28.6.86): " ... its "community sector" is now "accepted as the about the distribution of resources in the com- fourth estate to the triumvirate of Government, munity—not just income, but power, authority, a business and unions". whole range of things. Were trying to achieve a redistribution of those resources... Somehow, What should be done? weve got to empower people, try to create a situa- tion in which people with limited power achieve While taxpayer-funded, political advocacy greater power. To have a class perspective is quite groups misuse public health resources to "treat crucial to any theory of change. whole communities" and engineer a brave new "Community sector" strategy, as Howe "healthy society", increasing numbers of sick correctly points out, is basically concerned with individuals are being left to join longer queues the transfer of power. ACOSS says (1984-85 seeking admission to our public hospitals. Annual Report) that it decided some time ago Genuine participatory democracy and real that: "having the `right policies was nowhere near consumer protection should be supported. But as important as developing a network oforganisa- PAGUTS2 are doing little to help the more prag- tions that could have the combined strength to matic of government ministers to solve the achieve real change". exploding public health system crisis. Such min- For ACOSS, "real change" involves isters should urge governments to resort to old- increased taxation, including wealth, capital fashioned surgery. Part of the solution is to cut the gains, and probate taxes, a socialised health sys- umbilical cord of taxpayer finance and other gov- tem, more regulation of the private sector, and ernment patronage to political advocacy groups, more "community" say in government generally especially those utilising health issues to advance to achieve a "massive redistribution" of power as types of social change ranging from the self-serv- well as wealth. ing to socialist.

2. Political Advocacy Groups Utilising Taxes (See IPA Review, Winter 1986). 18 INTERVIEW

Can Aborigines Escape the Dependency Trap? _1

"A welfare-dependent society, such as we have become, has no future. It cripples people" . So says Margaret Valadian, advocate of Aboriginal self-sufficiency and development and trenchant critic of the sprawling Aboriginal Affairs bureaucracy. Ken Baker spoke to her recently at the Aboriginal Training and Cultural Institute in Sydney.

Margaret Valadian points with dismay to the "stag- the former convent. In place of the Good Samari- gering 71 per cent of total national Aboriginal tan Nuns now there are classes designed to help income derived from government, mainly from Aborigines from all regions of Australia to manage income that can be described as transfers for social their affairs more competently and more respons- welfare purposes". The figure comes from the ibly. Miller Report into Aboriginal employment pub- "We established the Institute in 1978", lished in August 1985. Few statistics so strikingly explains Ms. Valadian, "largely as a response to the illustrate the depressed state of Aborigines or the situation we saw emerging at that time. Aboriginal failure of policies of successive governments in this people were being encouraged to set up community area. Solutions will not be easy to find, but at least councils without the benefit of management train- the Miller Report, says Ms. Valadian, makes a step ing". ATCI was established with the aim of provid- forward in recognising dependence on government ing Aborigines with the management skills they as a problem rather than envisaging it as the solu- lacked. A wide range of training programmes is tion, as has often implicitly been the case over the provided. Ms. Valadian highlights three which she last two decades. Dependence on welfare, she claims the Institute has pioneered: management believes, has contributed significantly to the desta- training for community councils in remote areas, bilisation of Aboriginal communities. "From the youth worker training—developed in response to late 1930s through to the early 1960s", she says, "the the problems created by teenagers leaving school Aboriginal community was a much more dynamic with nothing to occupy them—and a community community; it relied more on its own resources. programme in early childhood development. The policies of the 70s and 80s killed that initia- Around 2,500 Aboriginal people have passed tive and self-reliance". through ATCI since its inception—including Margaret Valadian is co-director with teachers, child care workers, community counsel- Natascha McNamara of the Aboriginal Training lors, state and federal public servants. and Cultural Institute (ATCI) located in the inner The Institute competes for government con- Sydney suburb of Balmain. The building which tracts and receives fee-for-service payments, but houses the Institute is old, yet not without gran- since June 1984 has received no direct government deur. A crucifix hangs above the doorway leading assistance, despite repeated submissions of man- out of the reception area reminding the visitor that agement training proposals. Margaret Valadian this was formerly the Convent of the Immaculate finds the attitude of the Department of Aboriginal Conception. The lease, arranged with the Sisters of Affairs (DAA) difficult to understand. She points the Good Samaritans, allows the Institute to out that because the sort of programmes under- occupy the building in return for the undertaking of taken by ATCI are designed to produce a more effi- renovations. ATCI employs five staff apart from cient use. of resources in the Aboriginal community the two directors; all but one are Aborigines. There they should, in the long run, save the Government is continuity in the tradition of service practised in money. Ironically, the former advisory body, the

Dr. Ken Baker is Research Fellow at the IPA and Associate Editor of the IPA Review.

19 IPA Review, May-July 1987 CAN ABORIGINES ESCAPE THE DEPENDENCY TRAP?

Margaret Valadian outside the Aboriginal Training and Cultural Institute in Bahnain: Around 2,500 Aborigines have attended courses at the Institute.

National Aboriginal Conference, was terminated interests of Aborigines. "If you want to maintain a because of alleged mismanagement of funds, exem- national department, built on the principle ofsepa- plifying the very lack of management competency rate servicing because of disadvantage you must which ATCI was established to rectify. keep Aborigines in a state of dependency to justify So why does the DAA refuse to support the that departments continued existence", she says. Institute? "Despite the acceptance of the new Aboriginal One reason is that the Institutes directors are Employment Development Policy it is going to be known to be critics of the lack of professional stan- difficult for such a department to implement pro- dards operating in Aboriginal Affairs. "We have grammes aimed at diminishing dependency. Yet consistently focussed on the need for account- that state of dependency is highly corrosive to ability in government expenditure, the need for Aboriginal families and communities." professional performance—and this has been ana- Secondly, she believes, the inhibiting of the thema to some people in Aboriginal Affairs", Ms. development of Aborigines by continued depen- Valadian says. dency also lessens their opportunities in main- Viewing the operations of Aboriginal Affairs stream Australian society, especially in relation to agencies for over a decade has brought Ms. Vala- employment. The consequences of this ought to be dian to a radical conclusion. "The needs of the objectionable to all Australians. "If Aborigines are Aboriginal community and the needs of the coun- prevented from joining the mainstream in general try", she believes, "would be better served by and the labour market in particular", she argues, rationalising the functions of the Aboriginal Affairs "then youre looking at apartheid in this country. portfolio". The functions of the DAA could be The Miller Report shows clearly that Aborigines devolved to other federal departments: health to want to work." the Health Department, sports to the Sport Thirdly, Ms. Valadian is critical of Aboriginal Recreation Department. Affairs agencies for fostering the politicisation of Her argument that the DAA has a detrimental Aboriginal issues without fostering the develop- effect on the long-term well-being of Aborigines ment necessary to the achievement of change. The has three prongs. She believes, firstly, that the inter- whole area of Aboriginal Affairs, she believes, has ests of the Department in maintaining and expand- tended to degenerate into a hotbed of political ing its influence have been in opposition to the slogans—such as those surrounding land rights-

20 CAN ABORIGINES ESCAPE THE DEPENDENCY TRAP? with too little thought being given to practical poli- positions across the public service would help cies such as how land can be used to aid self-suffi- remedy the present situation. At the same time ciency. Her own Institutes unfashionable stress on Margaret Valadian would like to see more oppor- professionalism, not politicisation, has not helped tunities for Aborigines opened up in the private relations with the DAA or other agencies within sector, "where there is expectation to perform". that portfolio. One way to aid the opening of such opportuni- ATCI relations with Aboriginal communities, ties in the private sector, she believes, would be to however, are apparently good. "We have not had to channel the finance currently used for Aboriginal do any advertising", Ms. Valadian says, "but get housing and enterprise development through the constant requests for our programmes—many private sector and have it administered by banks from remote areas". which would in turn offer training and employ- She points out that from the early 1940s to the ment to Aborigines. 1960s working for government was frowned on in In 1984 Margaret Valadian won the BHP Aboriginal communities. In the 1970s this Award for the Pursuit of Excellence in the area of changed, with government becoming an accept- community services. But it is the motto of another able, even desirable place to work. But the environ- big Australian, "the quiet achiever", that best suits ment created for Aborigines in the bureaucracy has her. She made history in 1966 as Australias first been too permissive, with no importance placed on Aboriginal graduate when she received a Bachelor accountability and performance. This has resulted of Social Studies degree from the University of not only in an inefficient use of resources but has Queensland. In 1960 she obtained a Masters provided a poor training environment for Aborigi- degree in educational communication and in 1973 nal workers. "There is a widely held view", she a Master of Social Welfare degree from the State says, "that as Aborigines we should be above University of New York. Public debate on,Abori- accountability, but this is an insult to our intelli- ginal Affairs has for some years been dominated gence". She rejects the practice of giving easy by the angry rhetoric of political activists, the advancement in the public service to a favoured self-appointed spokesmen for Aboriginal Aus- group of Aborigines., Rationalisation of the func- tralians. Such voices have tended to drown out the tions of the Aboriginal portfolio agencies and con- calmer, more constructive advice of Aborigines centration on the training of Aboriginal personnel such as Margaret Valadian and her colleagues at to enable them to perform roles and compete for ATCI.

Ms. Valadian in her office: "There is a widely held view that as Aborigines we should be above accountability, but this is an insult to our intelligence."

21 Brides of the State Peter L. Swan and Mikhail S. Bernstam

Easy access to Commonwealth benefits for single parents has encouraged a massive rise in welfare depen- dency. Each taxpayer is contributing on average $200 a year towards the Supporting Parents Benefit.

The Supporting Parents Benefit (SPB) is one of the qualification is both virtually automatic and fastest growing items in the Commonwealth Bud- immediate. Benefits cannot be denied because of get. In 1974, Commonwealth outlays on SPB the failure to look for work and there is no qualifi- totalled $140 million (in 1987 dollars); this year cation period unless the nine month pregnancy expenditure is estimated at $1,360 million. Some counts. Often the choice is unconscious and made 167,000 women with over a quarter of a million after an unplanned pregnancy has occurred. children are currently dependent on these bene- Mr. Howe debunks this "myth" by the selec- fits. tive quotation of facts: "The proportion of teenage The Minister for Social Security, Mr. Howe, single mothers has actually decreased in the last ten has recently proposed that steps be taken to ensure years; only four per cent of all supporting parents that the non-supporting parent pays some main- are teenagers". tenance. This is a step in the right direction and will More to the point the number of teenagers produce some limited savings. Nevertheless, the receiving SPB rose from 4,420 in 1975 to 9,948 scheme is unlikely to be sufficient to provide the today, a doubling in about ten years. Some of these necessary stimulus to keep couples together and are separated wives or de facto wives. At the begin- will do little to support the principle that both ning of the SPB Programme (then Supporting parents should be totally responsible for support- Mothers Programme) in 1973, 36 per cent of teen- ing their offspring. age confinements were ex nuptial. By 1985 the pro- The ACTU and its peak welfare body, ACOSS, portion had almost doubled to 68 per cent. This have put forward a package to the Federal Govern- rise in the proportion of children born to teenagers ment which calls for greatly increased welfare who are unmarried is also indicative of rising wel- spending on single parents. fare dependency. Mr. Howe appears sympathetic to this pro- Over this period the rise in the proportion of posal, arguing that it is a myth that girls have babies ex nuptial births was accomplished with little to get the pension (Sydney Morning Herald , change in the actual number of (ex nuptial) ofd 4.2.87). This denunciation follows widespread spring. The rise was a result of a major reduction in reports that teenagers have a baby so as to qualify the number of nuptial births. Teenage nuptial con- for the much higher level of Supporting Parents finements declined from 17,611 in 1973 to only Benefit compared with the single unemployment 4,576 in 1985. If this decline in nuptial confine- benefit. ments was due to improved methods of contracep- Table 1 illustrates the case of an unemployed tion and the greater availability of abortions, why teenage girl who is living at home or in private ren- have not ex nuptial confinements declined in a tal accommodation. Her (accidental!) pregnancy is similar fashion? not terminated and as a result her disposable income rises by $118 per week if she is under 18 and Rise in Number of Teenage Parents by $78 if she is 18 to 20 years old. She is fortunate enough to qualify for a housing commission flat. Although the absolute number of ex nuptial Had she not done so her pension would rise by the births by teenagers did not rise, the doubling of $15 per week rent allowance. teenagers on SPB shows that welfare dependency Not only is the benefit level much higher, but increased greatly. The actual number of ex nuptial

Peter Swan is Professor of Management at the Australian Graduate School of Management, University of New South Wales. Mikhail Bernstam is at the Hoover Institution, Stanford University.

IPA Review, May-July 1987 22 BRIDES OF THE STATE births is a deceptive guide to welfare dependency, have to care for any additional children. since the availability of SPB pensions to teenage mothers combined with changing community atti- Table 1: Income of a Single Teenager tudes has meant a virtual drying up of the number can Increase By Becoming a Mother of babies put up for adoption. In 1973, about 8,500 Before Child After Child babies were adopted but by 1985 the number had $aweek $aweek Age: under 18 fallen almost 75 per cent. It is not surprising that Her Income: frustrated couples wishing to adopt are forced to Unemployment Benefit 52.00 - look overseas for babies, since the natural mother SPB Pension - 135.20 is now paid to raise children that were formerly put Family Allowance - 5.25 out for adoption due to limited income of the Rent (less if living at home) . 60.00 mother. 30.45 Disposable Income -8.00 110.00 It is doubtless true that this dramatic change is Age: 18-20 associated with changing community attitudes. Her Income: There is a chicken-and-the-egg problem here, as Unemployment Benefit 91.75 - the hundreds of thousands of single mothers taking SPB Pension - 135.20 up the pension have helped to make it socially Family Allowance - 5.25 Rent (less if living at acceptable. home) 60.00 30.45 How did the Minister and the Social Security Disposable Income 31.75 110.00 Review get it so wrong? They have reduced an alarming and rapidly growing social problem of welfare dependency from puberty to the grave to Table 2: Income can Increase When Couples the status of a myth. The claim is based on the Separate misuse of proportions: "Of all unmarried mothers Current Position On Separating in receipt of supporting parents benefit, the pro- $aweek $aweek portion aged under 20 has declined from 21 per cent The husband has a job (two children) in 1976 to 14 per cent in 1986". His Income: Left unsaid is that the number of unmarried Earnings 300.00 300.00 mothers receiving SPB rose by 125 per cent over Medicare - 3.00 Tax 31.55 51.35 this period. "Unmarried mothers" excludes sepa- Rent 100.00 60.00 rated wives and separated defacto wives. Including Disposable Income 168.45 185.65 these other categories the number of female solo Her Income: parents receiving SPB rose over five-fold . between SPB Pension - 152.20 1974 and 1986 and rose over two and a half times Family Allowance 12.75 12.75 between 1976 and 1986. Teenagers make up a fall- Rent - 30.45 ing share of a rapidly rising number of recipients. Disposable Income 12.75 134.50 Total Disposable Income 181.20 320.15 The fact that their numbers have not risen as rapidly as some other groups is little consolation The husband is unemployed and each cares for one child on separating for a doubling in welfare dependency in a little over His income: a decade. Unemployment benefit 211.15 - Table 2 illustrates how the combined dispos- SPB Pension - 135.20 able income of a couple with a male breadwinner Family Allowance - 5.25 and two children rises by $139 per week or 77 per Rent 100.00 30.45 cent on separating. The breadwinner moves into a Disposable Income 111.15 110.00 smaller flat while his wife/defacto raises children in Her Income: SPB Pension - 135.20 a housing commission flat which she now qualifies Family allowance 12.75 5.25 for. She may also go back and live with his parents. Rent - 30.45 If the male is unemployed and the couple decide to Disposable Income 12.75 110.00 separate, then their combined disposable income Total Disposable Income 123.90 220.00 may go up by as much as $96 per week or once again 77 per cent. Each becomes a supporting Note: Figures are based on examples contained in Social parent with one child and both qualify for govern= Security Review, Issues Paper No. 3, Department of Social ment housing (but in separate flats). Unlike the Security, pp. 105-7 and relate to entitlements December 1986. pregnant teenage girl the separating parents do not

23 BRIDES OF THE STATE

On the basis of examples such as these, it is particularly blacks, since they lack the income from hard to understand why an even higher proportion ajob to support a family. of low-income families do not separate and why, In the US, unemployment benefits are gen- after relationships are terminated, new partners are erally not available to the young lacking work found so frequently. The Social Security Review experience. The price of the entry ticket into a (Issues Paper No.3, pp.105-7) constructs similar source of permanent income is the production of a examples and also expresses puzzlement especially baby by the teenager who cannot gain a worthwhile when, as the Review points out, "it is becoming job or find a husband who is capable of supporting increasingly difficult to determine whether a man a family. In effect, she becomes married to the and woman are living together as husband and state, the marriage partner of last resort. Some wife" and thus whether eligibility for benefits has might say: "spouse of first resort". been compromised by cohabiting. Until our study, it was always a mystery as to why more ex nuptial births occurred in the poor US Experience Southern states, relative to the number of females or the total number of births, than in the rich Northern There can be no doubt that Australians have states, where pension benefit levels could be up to taken to welfare benefits like junkies to a fix. The four times higher. Researchers generally found that doubling of the number of female teenage reci- the response to higher welfare benefits was appar- pients and quintupling of overall SPB recipients in ently perverse, with more teenagers responding to just over ten years is an almost unparalleled the very low benefits paid in the South. "accomplishment". By contrast, in the United Our explanation is relatively simple. The teen- States the number of recipients of Aid to Families age population in these States is generally unskilled with Dependent Children (AFDC) rose only five- with a high preponderance of blacks lacking market fold over the much longer period 1950-1980. For skills and thus most likely to be displaced by the Australia, in just over ten years the proportion of minimum wage. A low probability of obtaining a families with children dependent on sole parent job, combined with limited earnings if a job is benefits has increased from about 5 to 12 per cent. obtained, make even the low welfare benefits This includes 83 per cent of all sole parents, includ- obtained in the South relatively attractive if the ing males. alternative is destitution. Of course, once the baby The US Programme which grew out of is born to the single parent there is no need to sub- widows pensions introduced in the late 1930s has, sist in poverty in the South when the four-fold by contrast, only about 8 per cent of white families increase in benefits beckons in the North. The dependent on welfare and 37 per cent of black migratory flow of single mothers to high welfare families with 12 per cent overall by 1980. This is states is as predictable as the regular migratory pat- one Australian challenge to US supremacy that terns of the wild geese. Statistically these predic- Australia looks like winning! Australia has tions hold up exceedingly well in the US. achieved in 12 years something which took the US Can a similar scenario be applied in Australia? 50 years. Unfortunately it can with only a few modifications. Is growing welfare dependency something The availability of generous unemployment bene- peculiar to Australians or is the ability to capitalise fits to teenagers in Australia will have a mitigating on the availability of benefits something for which effect on the incentive for qualifying for SPB by a universal explanation based on incentives and producing a child. By contrast, in the US an incre- rewards is possible? dible 89 per cent of all babies to black teenagers are We have put forward an explanation for the born out of wedlock. The proportion in Australia US experience spanning 20 years and 50 States, to all teenagers is lower at 69 per cent. Moreover, based on changes in labour market regulation. 100 babies are produced per 1000 black teenagers in Increases in the coverage and level of the minimum the US and 45 per 1000 white teenagers (1980) com- wage relative to the market clearing wage at which pared with only 28 per 1000 in Australia. most teenagers would be employed, combined with The well-spring of US welfare dependency is a minimum wage which applies to all potential teenager motherhood. Including separated defacto workers regardless of age, ability or work-related wives there was a two-fold increase in the number skills, have helped to push the younger generation of unmarried mothers in Australia receiving SPB out of work. These measures have destroyed the between 1975 and 1985 with nearly a six-fold marriageability of many young unskilled workers, increase in the number of separated wives receiv-

24 BRIDES OF THE STATE ing SPB. Thus unlike the US, in Australia the break- restrictions, which hinder the youth job market. ing of marriage bonds has proved more responsive Instead of looking for ways to raise single parent to the lure of the pension than has activity in the pensions from the present $1.7 billion per annum labour ward. by another $10 billion per annum the Minister, The preliminary results from a statistical study Mr. Howe, must look at ways of reducing benefit we have carried out for Australia shows that exactly levels and restricting benefits so that they are the same factors are at work. Rising teenage unem- received only by those in genuine need. Fortu- ployment—and particularly its manifestation as a nately, cases of SPB recipients using their pen- greatly increased duration of unemployment—has sion along with undeclared sources of income to contributed to the rise in welfare dependency. The buy $400 dresses and pairs of $300 shoes in availability of the SPB from 1974 and its level rela- Double Bay are doubtless rare, but such abuse tive to the dole has been a factor. Our US evidence does go on (Sallie-Ann Huckstepp, Sydney shows that teenagers are responsive to relative bene- Morning Herald, 17.1.87). fit levels. The abolition of the six months qualifying The six-month qualifying period for benefits, period for benefits in 1980 has also been important. which was abolished in 1980, could be reintro- duced as a way of encouraging both single girls and couples to take a more responsible attitude 000s to having children and to separating. This res- 1`70 Women in receipt of: ponsibility affects the children as much as if not 150 more than it does other families and taxpayers Supporting Parents generally. In cases where the marriage breakup is 130 Benefit 1974-86 related to financial strain rather than (say) child 110 abuse, the long term future of the children may be better served by preserving the family unit. 90 One problem is that young babies are relatively 70 cheap to rear, although not all parents would agree. The expenses really start to mount up once 50 the child is going to school. A graduated pension 30 could be paid according to the age of the child with lower benefits initially. 10 The participation of sole parents in the work- force could be greatly improved. In some US 1974 1976 1978 1980 1982 1984 19861 States, Workfare rather than welfare is now the rule with the supporting parent required to work a minimum number of hours per week in return Some Necessary Reforms for the pension. Without reform along these lines, the rapidly The explanation for the massive rise in welfare shrinking number of families not yet on welfare are dependency in Australia can be sheeted home to put under further strain as they are required to sup- policies which have produced enormously higher port more and more families dependent on welfare. unemployment, reduced prospective earning pos- The more successful is Mr. Howe in his drive to sibilities, and the easy and almost instantaneous raise outlays in time for the showdown with the access to generous single-parent benefits. conservative forces at the forthcoming election, the Knowledge of the underlying causes enables quicker will the remaining "complete" families col- measures to be adopted which will lessen— lapse under the strain of higher tax payments and although not eliminate—the problem: the lure of welfare. The welfare carrot and the tax Improve the operation of the labour market; par- stick are a powerful and almost unbeatable combi- ticularly abolition of high minimum wages and nation.

1.Judy Raymond, "Bringing Up Children Alone: Policies for Sole Parents, Social Security Review, Department of Social Security Review, Issues Paper No.3, A GPS, 1987, p.103. 2.Mikhail S. Bernsiam and Peter L. Swan, "The State as Marriage. Partner of Last Resort: A Labour Market Approach to Illegitimacy in the United States, 1960-1980" Australian Graduate School of Management, Working Paper 86-029, October 1986.

25 Regulator? Burden If a proposed new which showed that under Hitler, politics was considered code from the National Occupational Health and uninteresting and was left to politicians. News Weekly notes the irony that since 1975, Safety Council is adopted, a weight handling limit of Australia has endured of I6 kg would be imposed in the workplace, The a flood hard-core pornographic films—many Sydney Mirror reports. The Council has attempted to of them degrading and violent in justify the new code on the grounds that the existing the extreme—but it is only with the success of a weight handling limits are different for females and popular family movie such as Crocodile Dundee that Sister Brady has ventured prominently into the males, and thus discriminatory. Were the new code to realm of film criticism. be introduced, four ambulance officers would be required to carry a stretcher, two persons would be needed to operate a chain saw and milkmen would Homo Australis Craig McGregor in a have to work in pairs. feature on former South Australian Premier, Don Dunstan, in Good Weekend reflects on the civilising of In Need of a Spell A questionnaire Australia: "Sexuality is largely socially constructed; circulated by the newly formed Victorian Student Dunstan and others like him belong to a vital Union to find out the needs of students has made one alternative tradition in Australian public life, a non- need in particular apparent: the need to raise macho/arts/gay subculture which stands in absolute contradistinction to the standards of basic literacy. Question 19 asks "what supermasculine Aussie stereotype and has been responsible form of support do you recieve (sic), and how much is for much of the civilising of Australian life. resort to the the amount of support your recieve (sic) for each To vernacular: better a nation catagory (sic) of support applicable to you?" The of poofters than of poofter- bashers ". question lists six items including "books/stationa ry (sic) and other educational expenses: Other questions ask for responses on "gendar" (sic) and "work Black Comedy A careless remark by committments" (sic). Archbishop Tutu has put his Australian supporters in a quandary. The anti-racist credentials of Tutu may be Greene is Well Red soviet newsagency above reproach, but in a public lecture at La Trobe Tass reports that novelist, Graham Greene, in a recent University he let slip a sexist joke which did not go unnoticed by Ruth Abbey of Clayton who wrote to lecture at the Moscow Faculty of Journalism describes The Age " ... Although the joke ended himself as "in full accord with the position of the Soviet up being on the archbishop its general tone Union, striving for international detente... "During was sexist and offensive to women, trading as it did on the traditional image his tour of Russia, Greene stressed his enthusiasm for of ugly women causing suffering to men. . . KGB Colonel Kim Philby, the centurys most infamous it is little wonder that feminists Soviet spy. Greene, according to Encounter, referred despair of the supposed progress made against sexism in recent decades to Philby as: "one of the most remarkable people when public figures such as Tutu perpetuate the ideas whom fate permitted me to meet and whose figure and attitudes typical of a sexist culture". later inspired my novel The Human Factor. Kim Philby, my colleague and compatriot, tu rned out to be a Soviet intelligence agent. I personally feel a great Silent Night "Due to some queries regarding admiration for him, for the consistency with which he copyright laws, we make the following clarification. came to his new convictions and defended them in the You can be fined for singing a hymn from the struggle against fascism ". Australian Hymn Book ... Hymns which are marked copyright are just that. Purchase of the AHB does not So Popular, It Must be Right give you the right to sing the hymn. Permission must Catholic nun and former ABC Board Member, Sister still be sought from the author or publisher" (Church and Nation, magazine of the Uniting Church). Veronica Brady, has denounced Mick Dundee of the film Crocodile Dundee as a "bully" and an "epitome of the free enterprise system" with an approach to life State of the Union NSW Labor Minister like that of the "New Right". Sister Brady said she for Education, Rodney Cavaliers call for a move back objected to the films treatment of Aboriginal problems to basics in the classroom has been condemned by the and the nuclear debate. Dundees crimes include not NSW Teachers Federation as "middle class, white, being interested in politics. She quotes a recent study Anglo-Saxon and male in outlook".

IPA Review, May-July 1987 26 Wei Meanwhile the Manly-Warringah branch of the later Mr. Benci was still waiting and according to the same union has produced a booklet claiming that rules of the public service the job had to be re- "most non-State high schools" do not provide an advertised. Mr. Benci re-applied and was once again environment that is "conducive to the effective offered the position. All that remained was for the workings of a democratic society" On the other hand, appointment to be approved by the Public Service the booklet omits to note that nations in which all Board. This, he was told, shouldnt take more than two schools are State run are rarely democratic at all. weeks. Two months later he was still waiting. Finally he received a letter of appointment. It was now more than 14 months since he had first successfully applied for The Road to Liquidation Employers in the job. Mr. Bencis patience having worn out he New South Wales are liable to fines of up to $50,000 telephoned the department to tell them he was no if the health of their employees is endangered by longer interested in the position. He was asked to alcohol, the National Safety Council of Australia has confirm this in writing to allow the position to be been told. Employees who become alcoholics through offered to someone else because, he was told, "we pressure of work or because they had to drink as part dont like to see these things drag on for too long". of their job were eligible for workers compensation, (The Age). according to Sydney Solicitor Mr. Frank Marks. Mr. Marks says that no employer has been prosecuted under the legislation, but there have been several Promiscuity Before Patriotism The successful workers compensation claims for of which we dare not speak its name, according to alcoholism (The Australian ). love the canons of left-liberalism, is love of country or of God. Phillip Adams in the Weekend Australian Negus in Neutral All social systems involve continues to brandish his scourge against all who deviate from 1970s orthodoxy. If promiscuity spreads give up trade-offs; in the case of communism you AIDS, he argues, this nevertheless "poses far less a poverty. Yet George Negus in freedom in order to gain threat to our social well-being than, for example, the choose between the the Bulletin finds he cannot greed that Sir Joh sanctifies or the aggression we liberal-democratic system of America and the Soviet- characterise as patriotism": world style police state: "one wonders, in this of "I dont believe", he writes, "homosexual glasnosts and Tower Inquiries, whether or not we communities would have been so wildy promiscuous ought to be looking at the premises for assessing our had we not branded gays as perverts ... "—a theory relationship with both purveyors of international which would predict least promiscuity where propaganda aimed at proving that their particular homosexuality is most tolerated, such as in San system is the answer to the human races political, Francisco. If the theory is correct, Adams should be economic and social problems? Anyone but the most recommending intolerance. After all, he argues, "we of the close-minded zealot knows that neither need more lovemaking, not less". Superpowers has the answer. - "But that sort of talk smacks of neutralism or neutrality, which many Australians would see as out of the question, wimpish, even gutless fence-si tting. More Complaints Needed "Aborigines Others, however, might see neutrality as something in Western Australia are being taught to identify courageous, independent and making a useful point to discrimination so that they can lodge complaints with both the Soviet Union and the United States". the Equal Opportunity Commission", reports The Australian. "The Commission has produced a 15-minute video Apply with Infinite Patience In June depicting four typical examples of discrimination which 1985 Mario Bend applied for a position advertised by will be shown extensively to Aboriginal communities. the payroll tax section of the Victorian Public Services "The State Commissioner for Equal Opportunity, Department of Management and Budget. Within a Ms. June Williams, said yesterday she hoped the week he had an interview and a few days later was commission would receive an increase on the offered the job. Only one formality remained. As he 50 complaints it recorded last year. was not already a state public servant, his appointment "`If we dont get more complaints from Aboriginal had to be approved by the Public Service Board. He people then we have failed to get our message across was told this would take about two weeks. Six months in the video, she said."

27

World Responsibility vs the Quiet Life

The arms-for-Iran scandal in the USA has been blamed WORLD on several factors, such as the inappropriate character of the President and his staff, and the muddled manage- ment style of the White House. But the ultimate cause is the division in the American psyche between the need to POLICY act like a great power and an unwillingness to do so. Americans are reverting to type after the bipartisan internationalism they displayed in the two decades after World War 11: they now combine a sense of moral super- REVIEW iority with a desire for peaceful isolation. Americans are deluding themselves if they think they can avoid the consequences of abnegating their Summaries of significant articles international role. But so long as they are divided on that from policy journals around the issue, their Presidents will be crippled by the choice between capitulating to Congressional passivity and trig- world gering constitutional crises by deceiving Congress. That dilemma is the source of the recurring crisis in the American presidency. Compiled by Charles Krauthammer, "Divided Superpower The Michael James New Republic, 22 December 1986.

The Moral Vacuum in Public Schools Restoring Control over Unions to the Members Americas schools are pervaded by mECONOM1! Trade unions, being non-proprie- Iris moral anarchy and confusion, ` AFF AI R 5 tary organisations, have a "prin- manifested in widespread vio- cipal-agent" problem not found in lence, promiscuity and drug abuse. corporate enterprises, where the Yet the educational establishment ^ members (shareholders) can disci- rejects moral education as no bet- ` 4j4 pline the officials (management) IliL than indoctrination. The con- by threatening to sell their shares stitutional prohibition on teaching to more competent organisations. religious beliefs in public schools Since the costs of leaving a union is interpreted as banning all men- - --- ^. are so high, members can capital- tion of religion. A Harvard profes- ise on their status only by "rent- sor recently found that most of his students believed in seeking" (trying to secure higher wages than they could "no-fault" history: they refused to ascribe moral respon- obtain elsewhere). sibility for the Holocaust either to the Nazis or to anyone In Britain, the power of union officials vis-a-vis else. their members was progressively strengthened during The young need moral education, and it is not the current century by legal protection (e.g. immunity indoctrination to teach them that individuals are from lawsuits following industrial action and legal back- morally responsible for their own actions or to introduce ing for closed shop agreements) and by increasing union them to the norms and concepts that sustain a free and influence within the Labour Party. The members even- democratic society. This does not rule out encouraging tually sought redress through the ballot box: only a them, at appropriate stages of development, to consider minority of them voted Labour in 1979 and 1983. alternative moral systems and to judge between them. A Thatchers union law reforms have curtailed immunities useful aid to moral education is juvenile and adult litera- and imposed some internal democracy. The subsequent ture that dramatises moral dilemmas and the conflict industrial peace may not survive a return to fuller between good and evil. "The literary device of showing employment, but there is little demand for repealing the instead of telling is a very effective way to convey truths reforms. to young minds". Charles K. Rowley, "Institutional Reform to Tame Gary Bauer, "The Moral of the Story. How to Teach Union Power; Economic Affairs, October/November Values in the Nations Classroom: Policy Review, No. 1986. 38. Fall 1986.

Dr. Michael James is Senior Lecturer in Politics ai La Trobe University.

IPA Review, May-July 1987 28

WORLD POLICY REVIEW

Australias Drift from the Western Alliance live up to their democratic rhetoric. These political orientations represent a challenge to the status quo, but it Although Australians generally support the ANZUS is a challenge that evolves from the past accomplish- alliance, various domestic forces are gradually neutralis- ments of Western democracies". ing the significant contribution Australia makes towards Russell Daunton, "The Colour Green: Environ- Western defence. The Hawke Government stresses Aus- mental Leaders in Europe; Public Opinion, Jan- tralias "independence" from America rather than the uary/February 1987. unity of the ANZUS partners. While new Soviet SS-25 missiles are being targeted on Australia, and US bases in Self-Help Spreads Among Americas Blacks the Philippines could start becoming untenable, the stationing here of nuclear-capable forces is ruled out by For some years, black American conservatives have the Australian-supported South Pacific Nuclear Free been arguing that much urban poverty stems from cer- Zone Treaty. Anti-Americanism is promoted by left- tain values that are unaffected by government pro- liberal elites in the churches, the schools, the ALP, and grammes but that may be changed for the better by other much of the media, especially the ABC. The view that means. Now more and more black Democrats are pro- Australia is under no current threat has been reinforced moting self-help schemes such as turning over the man- by the Dibb Report, whose recommendation of an isola- agement of public housing estates to groups of residents. tionist defence posture would create a dangerous power- Yet very often support for self-help amounts only to lip vacuum in the region. This at a time when the mini- service, and does not extend to its underlying philo- states of the Pacific (including Fiji) are being successfully sophy. This philosophy involves recognising (i) that wooed by Soviet diplomacy, and the Libyans are aiding America is a free society in which racism has abated suf- Kanak radicals in New Caledonia. ficiently to make equal opportunity a reality; (ii) that The Americans have themselves assisted the ero- individuals are responsible for their own actions and sion of ANZUS, as when they inexcusably harmed Aus- cannot forever blame "society" for their misfortunes; tralias farmers by subsidising their own wheat exports to and (iii) that "mediating structures" of private, volun- the USSR. Although they handled New Zealands ban on tary associations are uniquely suited to helping indi- their warships quite well, they may have been able to viduals meet their responsibilities. persuade New Zealand to stay in the alliance by spelling Many black politicians resist these principles and out sooner and more clearly the consequences of her insist that the blacks are Americas victims. But blacks actions. will complete their emancipation only when they over- Peter Samuel and Colin Rubenstein, "Australia come the mentality of dependence and, like Martin Next?; The National Interest, No.5, Fall 1986. Luther King, espouse the vision of America enshrined in the Declaration of Independence. Conservative Conservationists? Glenn C. Loury, "Who Speaks for Americas Blacks?, Commentary, January.1987.

The European Communitys Australia and Latin America: a trans-Pacific ppuuon1b .0 designation of 1987 as the "Year of the Environment" signifies the Contrast coming-of-age of Europes environmentalist movement. Ye Australasia and Spanish-speaking Latin America are the ,; . • ig..Z the political colour of the Greens is dominant cultural presences in the Southern hemi- disputed: some see them as red, sphere. If we assume that "national character" has some ? others think they are as brown as a reality, each culture may be said to embody traditions ^j d - Nazi shirt. that dominated its mother country at the time of its A systematic survey of the settlement. Eighteenth century England was aristocratic, opinions of environmentalist lead- jealous of local allegiances, enamoured of horseracing ers reveals more interesting paradoxes. While most of and outdoor life, and ruled by the common law. Imperial them identify with the political left, and almost half sup- Castile was monarchical, highly centralised, resentful of port leftist parties, they are slightly less favourable than partial, divided allegiances, and ruled by the Roman the general public towards state ownership and govern- tradition of civil law. ment intervention in economic matters. Not surpris- The contrast sustains an architectural metaphor. ingly, they are much more favourable than the average The Baroque style of Spain and the Mediterranean is citizen towards "post-material" values like affirmative above all symmetrical, concentric, rationalistic, serious, action for racial minorities, and are more disillusioned and pitted against the barbarism of nature. Englands with political parties, government, trade unions and style is Gothic: asymmetrical, chaotic, participatory, business. And yet they are more satisfied with the perfor- eccentric. Australias Gothic cultural inheritance is most mance of democratic institutions. "Environmentalists faithfully reflected in its Constitution, which success- exemplify. . . a belief that Western democracies should fully shares sovereignty and responsibility between

29 WORLD POLICY REVIEW centre and periphery, and provides for the worlds Especially helpful would be a restoration of strong Con- strongest sub-national governments. gressional leadership, which would greatly enhance the Claudio Veliz, "The Gothic Mode ofAustralian Cul- Presidents ability to negotiate effectively with Congress ture, Quadrant, March 1987. as a whole. James Q. Wilson, "Does the Separation of Powers A Swiss Solution to South Africa Still Work?; The Public Interest, Winter 1987.

^°°°M•°^°--- A current bestseller in South Progressive Backwardness in Education fSOfl Africa is South Africa: The So/u- > tion by Frances Kendall and Leon Western educational "progressives" fall into four over- W • Louw. The authors propose a sys- lapping groups. Child-centred progressives want educa- !;f . tern of devolved, cantonal govern- tion to enable children spontaneously to realise their ment similar to Switzerlands. The interests and potentialities. Radical progressives see central government would under- education as a major tool in the radical restructuring of tL^^ take only the necessary minimum society. Instrumental progressives want to make educa- 1 1 of functions. One of these would tion increasingly efficient in serving the economic, poli- be to enact a bill of rights guar- tical and cultural needs of the wider society. Liberal pro- anteeing basic civil, political and gressives want to introduce increasing proportions of the property rights. All citizens would be free to live in the young to liberal knowledge, i.e. knowledge held to be canton of their choice. Whites who objected to living valuable in itself, without regard to childrens felt inter- with other races would be free to try to buy all the land in ests or to the technical requirements of the economy. one or more cantons and then exercise their property The first three varieties of progressivism are especially rights over it. The scheme promises to meet black needs predominant in Scandinavia and the English-speaking while allaying the fears of other groups. It also caters for countries, while liberal progressivism remains the norm the ethnic diversity within the black community. in France and Italy. The cantonal proposal will be resisted by those poli- Liberal progressivism offers the best hope for the ticians of all races who want to exercise wide powers future. It is always in danger of being hijacked by educa- currently reserved to the central government. But it is tors afraid to make serious educational demands on their receiving serious attention from Indaba, a multi-racial pupils, but one of its abiding strengths is that it suffers group of leaders in Natal-KwaZulu. However, real pro- from far fewer tensions and contradictions than the gress towards a post-apartheid constitution will be other kinds of progressivism. impossible unless the government releases Nelson Man- Geoffrey Partington, "The Disorientation of Western dela and legalises the African National Congress and the Education , Encounter, January 1987. Pan-African Congress. Frances Kendall, "South Africas Only Hope?; Some Effects of Teacher Unions Reason, January 1987. The effect of teacher unions on the costs of public educa- The Separation of Powers as a Source of Good tion in the USA has been the focus of much controversy. Government Two recent national samples of school districts have produced evidence of a strong link between teacher In the United States, the Committee on the Constitu- unions and expenditure increases per student of between tional System (CCS) is pushing for reforms reducing the 7 and 15 per cent, with a mid-range of about I1 per cent. separation of powers and increasing the powers of the The link was found to exist equally in large and small President, claiming this would make for more "efficient" school districts and in large and small cities. The pri- and "rational" government. But there is no evidence that mary cause of the cost differential was the higher salaries democracies with parliamentary systems provide more paid to unionised teachers. Unionised districts did enlightened economic policies: most of them have rela- achieve slightly higher levels of productivity than non- tively larger budget deficits than the US. The reformers unionised ones, but this again was offset by the cost of real aim is to promote the expansion of the American their higher teacher-student ratios. public sector: the CCS proposals stop conspicuously The analysis thus supports the claim that the net short of reforming the Supreme Court, whose judicial effect of teacher unions is to benefit teachers at the activism of recent decades has done much to extend the expense of taxpayers. But it fails to support the claim reach of government. that unions have reduced the average level of student The separation of powers is as valuable today as it achievement. ever has been in preserving liberty and slowing down Randall W. Eberts and Joe A. Stone, "Teacher political change. Reformers should concentrate on Unions and the Cost of Public Education; Economic improving the unwritten aspects of the Constitution. Inquiry, Vo1.24, No.4, October 1986.

30 The Moral Revolution in Education

Geoffrey Partington

All values, beliefs and forms of behaviour are of equal worth. It sounds absurd, but this is the assumption of Values Clarification, the latest influence on syllabus designs in Australian schools.

Since 1970 there has been a virtual revolution in the Sermon on the Mount, etc) might be advanced as treatment of moral questions in the schools of the an underpinning of moral attachment. The child in English-speaking world. In Australia before 1970 a government school who spoke slightingly of his state schools were secular both in their exclusion of parents in the classroom would be just as likely to the teaching of religious doctrines (apart from very be chided for failing to honour his father and his limited provision for bible reading on a voluntary mother as would the child who had learnt by heart basis outside school hours) and their avoidance of the fifth commandment in a church school. contentious questions about which adults signifi- The two systems were also similar in that very cantly disagreed. On the other hand, such schools little inquiry took place in the classroom into the acknowledged, perhaps in an unreflecting way, a thought and action of the child as a fantasizing moral dimension to education: they sought to individual, as a member of a peer group or as a inculcate virtues and moral habits such as respect member of a family. for the persons and property of classmates and the The new orthodoxy which has established schools also believed for the most part that such itself in the last fifteen years in Australia has two habituation into moral beliefs was not only instru- main features which contrast with traditional prac- mentally good for learning or for some other exter- tices. The first radical breach with the past has been nal purposes of society, but was to be valued and to insist that the whole realm of personal pro- prized in itself as part of the formation of moral nouncements on public matters is "value-free" character. without being valueless, "morality-free" without These schools did not exist in a moral vacuum, being immoral, and "non-judgemental" without but were powerfully influenced by a Christian being injudicious. The main form this new ortho- tradition of ethics, which Romans, Anglicans and doxy takes in our schools is that devised by the Dissenters broadly shared, despite significant dis- Values Clarification movement. The second fea- agreements between Catholics and the rest. Some ture has been to bring into the school curriculum Christian Churches had their own schools, of and the activity of the classroom a wide range of course, in which specific religious doctrines were personal experiences and relationships of students, taught and devotional practices imbued at varying as well as matters of public controversy. atmospheric pressures, but it is doubtful whether the moral structure of the denominational or con- Values Clarification fessional schools were deeply at variance with that of the state schools. In both systems the range of The authors of most syllabuses recommended prima facie moral goods was perceived to be largely for use in social education, health education, trans- self-evident, although in non-government schools ition education, social studies, social sciences etc. additional religious reasons (Ten Commandments, in recent years rely heavily on Values Clarification

1. Examples in South Australia, for example, include: Learning and Living: Social Studies R-7 Curriculum, 1981; Learning and Living: Social Studies 8-12 Curriculum, 1982; Religious Education R-12 Syllabus, 1978; Transition Education. Myself, 1981; Health Education Syllabuses, 1976 and subsequently; Laws for Living. Ethics and Religion, 1979; Social Control (pro- duced on behalf of Social Education Materials Project, 1977). Geoffrey Partington is a Senior Lecturer in Education at Flinders University.

31 IPA Review, May-July 1987 THE MORAL REVOLUTION IN EDUCATION authors. Values Clarification was first developed-in judged that I sang better than Joan Sutherland the 1960s by Louis Raths in the United States. Its might well be considered eccentric. Yet a willing- attraction was two-fold. First of all it gave the ness to accept some values as simply matters of promise of being immensely "relevant" to children taste and personal preference ought not to be and young people, since students own experience extended automatically or as a matter of course to within their families and their peer groups and the whole of our moral life. their very own opinions were made the centre of Sydney B. Simon and his wife Marianne were the curriculum. Secondly it allayed fears of indoc- fairly frank. At the conclusion of a severe criticism trination or moral censorship among emancipated of the limited treatment the traditional American young American teachers, who were assured that schools gave to sexuality they wrote:3 they could and should be entirely non-judgemental "Some changes are desperately needed. in their approach. The teachers task was to enable Schools can no longer be permitted to carry students to clarify or to understand their own out such a horrendously effective programme values better, not to seek to change these values at for drying up students sense of their own sex- all. In Values Clarification, Raths tells us, the ual identity. The schools must not be allowed teacher "avoids moralising, criticism, giving values to continue fostering the immorality of moral- or evaluating". He excludes all hints of "good" or ity. An entirely different set of values must be "right" or "acceptable" or their opposites. nourished". Values Clarification requires that the neutral A two-stage operation seems to be at work. In and non-judgemental teacher should ensure that all the first stage moral relativism is advanced under children have a fair chance to speak and are lis- liberal or libertarian colours, and an attempt is tened to with equal respect by other members of made to convince children and young people that the group. Yet those procedural principles imply a all opinions, values and behaviour are of equal commitment to values which are, alas, far from worth, since there can in principle be no "right" universal. It is only by being judgemental that the answers to questions about what we ought to do. conditions can be established in which Values Parents are gently assured at this stage that schools Clarification can be carried out. Howard Kirschen- ought to reflect outside society and that if a lifestyle baum answers2 the questions, "What about disci- exists it has every right to equal expression in the pline? Suppose a fight breaks out, is that free choice classroom. too?; by stating "not in my classroom. Nor is cheating, ridiculing others, or several other behav- Self-revelation and Values Clarification iours that are going to cause physical or emotional hurt and/or that can damage the climate of trust in One of the most effective methods employed our group. I put a stop to those right away. But I do by Values Clarifiers has been the technique of self- not pretend that this is Values Clarification". The revelation derived from encounter groups and sen- original opposition to being judgemental is thus sitivity training. In order to overthrow "the immo- entirely withdrawn in so far as procedural ques- rality of morality" Simon and Clark recommend tions are concerned,but it is morally obnoxious to "probing deeply into individuals who have private suggest that behaviour which is prohibited in class- thoughts. It is hoped they will all want to share their rooms because it is destructive of good learning thinking". Success in this enterprise requires that should not be condemned outside classrooms too. the Values Clarifiers gain far more knowledge of a Has Values Clarification simply over- students thinking than any teachers ever sought in extended the area in which values are merely a the past. matter of opinion. None would quarrel with the In many Values Clarification classrooms a proposition that a preference for strawberry wide range of information is also sought about the flavour over vanilla was purely subjective; few activities and opinions of other students or about would dispute that for a teenager to prefer to their parental backgrounds. Such probing is surely become a doctor rather than a truck driver, or vice a prima facie violation of rights of privacy. A pos- versa, is a legitimate individual choice; most would sibly more defensible procedure is to seek a much concede to each individual a wide scope of personal more detailed knowledge about the personal beliefs values in aesthetics, although any person who and emotions of the students alike except that a

2. Kirschenbaum, H., Advanced Values Clarification, La Jolla, California, University Associates, 1977. p.9. 3. Simon, S. and M., Sexuality and School, New York, National Humanistic Education Centre, 1978 4. Simon, S. and Clark, J., More Values Clarification, San Diego, California, Pennant Press, 1975, p.32

32 THE MORAL REVOLUTION IN EDUCATION student will be asked questions about physical phe- "Some early attempts at health education were nomena, about the intentions and achievements of heavily moralistic in tone and apparently real or fictitious persons in history and literature, designed to scare people. We were to be pan- and indeed, in a suitable context, about aesthetic, icked into driving slowly or out of sexual political and moral questions of a general character. promiscuity or perhaps away from experimen- When students are quizzed about their personal tation with drugs". emotions, beliefs and behaviour there is not the Since those bad old days an age of enlighten- issue of violating the privacy rights of others that ment has dawned, so that McArthur can advise arises with parents and peer groups, but students government teachers to adopt "comprehensive may well find themselves in a position where con- health education" which "avoids moralisms. It siderable pressure is placed on them to reveal does not categorise drugs and sex as evil and exer- aspects of their thoughts and activities which they cise as good. It helps students to explore their have no wish to share with 30 others. Indeed, experience of issues..." teachers, generally totally untrained as they are in The major work currently recommended by diagnostic assessment, play with fire when they Australian Education Departments is Teaching employ these techniques, however well-intended. About Sex: The Australian Experience, edited by They do not understand the implications of Wendy McCarthy. Space only permits a very brief unleashing such highly charged emotions, or the examination of one of the ten papers in McCarthys results which can follow outside the classroom. collection, that by Diana Wyndham, a Research The enormous pressure on children to expose Officer in the Social Welfare Research Centre of the for public scrutiny their most intimate thoughts University of New South Wales. and experiences is exerted under the claim that In "No News and bad news: A brief history of students values will thereby be clarified, but an sex education for children" Wyndham, like indirect if not an intended result of such activities Malcolm McArthur, denounces6 old books (i.e. is to open children to radical reorientation in their before c. 1969) which "emphasised the horrors of values and loyalties. Despite their many disclaim- illegitimate pregnancy and venereal disease which ers the Values Clarifiers offer a substantive set of were waiting.. . to punish any teenager who dared moral judgements: they reject as regressive and to be sexually active". Nowadays despite efficient repressive all values related to "my station and its contraception devices and abortion on demand we duties" or to "persons and their interests". Moral have more illegitimate pregnancies, more V.D. and egoism or, in Christopher Laschs phrase, "the cul- more teenage suicides, but this does not weaken ture of narcissism; or in their own terms "me and Wyndhams panegyric of progress. She fears my feelings" is the core of the moral life proposed though that there are still some "myths" around, by Values Clarification and fostered by our such as "that sexually active teenage girls are more schools. We ought not to be deceived when the fos- likely to have cervical cancer in later life, particu- tering of moral egoism is advanced as simply a larly if they have had multiple sex partners". method of clarifying values in a context to which Wyndham does not attempt to refute this research moral judgements do not apply. finding, but claims that it only shows that "medical research is not value-free and that in this instance Sex Education medical research is blaming the victim and may be adding to the old-style fear tactics used by the anti- There is little difference between most of the sex `educators". If only medical research had not Australian State education departments in their established any connection between cervical approaches to sex education. Typical is the advice cancer and early sexual promiscuity or between given to South Australian teachers by Dr. Malcolm AIDS and homosexual promiscuity, the "victims" McArthur, the South Australian Education could be free of fears, old or new style! Departments Superintendent of Curriculum, to Wyndham praises Wardell Pomeroy for his move away from earlier modes of sex education, claim that masturbation is "not only harmless but associated with institutions such as the Family Life it is positively good and healthy and should be Movement. McArthur writes dismissively:s encouraged because it helps young people to grow

5.McArthur, M., "Sex Education—Too little, too late?" in Pivot (Adelaide), 10(5).1983,p.28 6. Wyndham, D., "No news and bad news: A brief histor y of sex education for children " in McCarthy, W.-(ed), Teaching About Sex: The Australian Experience, Australian Federation of Family Planning Association Inc./Allen and Unwin, 1984, p.6 7. Op.cit., p.9

33 THE MORAL REVOLUTION IN EDUCATION up sexually in a natural way". Wyndham considers A great obstacle to moral education is failure that "Sex is so good and important a part of life that to provide such defensible moral reasons for con- if children dont happen to discover sexual enjoy- duct as children are able to make their own, but an ment for themselves, if we really like them we will even greater danger is to fail to ground children in make sure they do. God! We dont leave reading to good moral habits through fear that indoctrination chance in a reading environment—and then punish is entailed whenever such grounding precedes chil- kids for doing it, do we?" Wyndham adds that drens full understanding of the justifiability of the "unfortunately, the realisation that this sensible habit. John Wilson points out that under uncondi- advice is unlikely to be followed in our conserva- tional moral relativism of the Values Clarification tive society strongly suggests that childhood sex- type "if a pupil says, `Im going to beat her up uality is the last of the great taboos". because its Tuesday/because I hate her/because shes black. all we can say is Ah, thats a point of What Should Be Done view". Our society can and must make a commitment Sex education ought not to be confined to the to moral principles. Karl Popper in arguing that basic facts about human "plumbing about the neither history nor nature gives us as men and anatomy and physiology of sex. In mere physical women our moral ends, wrote, "It is we who intro- terms human reproduction is little different from duce purpose and meaning into nature and into that of the rest of the mammalian order. Yet out of history. Men are not equals but we can decide to the convenience of dwellings we have fashioned fight for equal rights. Human institutions such as glorious architecture, out of the need for food and the state are not rational, but we can decide to make drink have produced refinements of cuisine and them more rational". Moral proposals cannot be gracious living, and out of the advantage of cover- proven right in a way analogous to scientific laws or ing our nakedness have fashioned elegancies of to mathematical theorems, but this does not render dress. Most importantly of all on the basis of the them merely subjective or arbitrary. Fortunately need of the human child for lengthy care and suc- the majority of our people, the back-sliders as well cour we have developed the human family and the as the conscientious, accept the importance of ini- human capacity for affection and love which far tiating children into truth-telling, regard for the transcends lust and selfishness, enduring though rights of others, carrying out promises, control over these baser sentiments are in human societies. propensities to violence, and so on. Our children can go through a whole school Satisfactory moral education is not guaranteed life, let alone sex education courses, without being by labelling a school as Christian. In some non-gov- acquainted with that selfless and indeed self-sacri- ernment schools the gap between the formal moral ficing love which is at least as typical of human content of school assemblies and services and the beings as are lust and rapine. A television diet of atmosphere of other aspects of school life is very Dynasty, Dallas, Prisoner and the rest is not likely wide. Values Clarification has a strong presence in to present young people with examples of those many non-government schools. Furthermore, many deeper feelings which are the highest and not the teachers in government schools ignore the official rarest expression of the human spirit. guidelines and foster a defensible moral education. Tenderness and delicacy in sexual emotions Yet, this admitted, the general state of moral educa- are found in many different cultures, but in socie- tion in non-government schools is at any rate less ties such as our own the central Christian doctrine grievous than that in the state system, which many of the Divine Love, of pain and sacrifice freely parents have deserted in recent years because they undergone for a sinful humanity, has been a power- wanted their children to enjoy a more wholesome ful force in softening and uplifting our sexual appe- ethos rather than for career or academic reasons, tites. Believer or non-believer though we may be, although these considerations often intermingle. surely our hearts have not become so hardened and A cohesive and adequately based moral edu- our vision so narrowed that we should permit cation policy is an immediate necessity. Close co- human passions to be introduced to our young operation between Christians, people of other reli- people almost solely in their grossest, their most gions, and secularists who agree broadly on what selfish and narcissistic, and even their most per- constitutes virtue and good character is one of the verted forms? pre-conditions of any possible success.

N.B. Some of the questions raised in this article are explored at greater length in The Treatment of Sex in South Australian Education by Geoffrey Partington, Malvern Press. 1985 (available from Flinders University School of Education at $3).

34 A Rose By Any Other Name Labors Privatisation Initiatives Peter Rowe

Despite their anti -privatisation rhetoric at election times, Federal and State Labor Governments have begun a giant "garage sale" of government property. However, they still lack a coherent privatisation strategy.

Privatisation of government assets has well and Further privatisation moves may flow in the light truly arrived in Australia—and on the initiative of of recommendations from the Block Inquiry into Labor governments at both the Federal and State public sector efficiency. levels. While Australia has been slower than other Having retreated from its initial wholesale countries to recognise the advantages of privatisa- opposition to privatisation, the Federal Labor tion, our overburdened and indebted governments Government has left a state of total confusion as to are now seeing at least some of its virtues. In recent why some assets should be sold and others should months greater pressure has been brought to bear not. The Minister for Finance, for example, con- on Governments to reduce budget deficits and pri- cedes the case for selling government properties vatisation options are being considered. Both the that are not returning a yield on their value at least State and Federal Governments are testing the equal to the market rate of interest. If that criterion water and finding it to their liking. were applied to government enterprises, there Indeed, various plans to privatise public enter- would be few retained. However, while agreeing prises and sell off public assets indicate that up to that airport terminals and naval dockyards could $3.2 billion will be raised by the Commonwealth be sold, the Prime Minister and the Treasurer reject and State Governments if they all go ahead. the idea of selling the Commonwealth Bank, Tele- Under Labor governments privatisation is com and Australia Post. taking a variety of forms. There have been sales of Instead, privatisation to date has been very public enterprises—all or part—and contracting much an ad hoc matter. The Hawke Government out the provision of public services. Sales of crown has gone ahead and sold the Whitlam white ele- land have contributed billions of dollars to govern- phant, the Belconnen Shopping Mall in Canberra. ment coffers in recent years. The Commonwealth Rehabilitation Centres have been sold. The development of the Tuggeranong Changing Attitudes Town Centre which was to be undertaken by the now defunct Canberra Commercial Development Some eight months ago, the Federal Minister Authority has also been passed to private for Aviation, Mr. Morris, leaked the Liberal Party enterprise. document which showed that a Coalition Govern- In his 1985 May economic statement Trea- ment would sell off TAA (Australian Airlines). The surer Keating announced that the Government aim of this was to embarrass the Opposition in its would pass the Defence Services Home Loan stance on privatisation. Scheme to private enterprise at a saving of $130 The announcement on 1st April 1987 that the million per year. A plan to this end was prepared Federal Government was considering selling off or though as yet it has not been implemented. partially privatising a number of public enterprises including Australian Airlines, the Williamstown Land Sales Dockyard and Qantas, suggests that such cheap political shots are already outdated. The Chairman Governments in Australia have traditionally of Australian Airlines, Neil Smith, proposed form- been large-scale land holders—owning from cattle ing a corporation with private shareholders. stations to domestic properties. While crown land

Peter Rowe is a Research O cer at the IPA States Policy Unit based in Perth.

35 IPA Review, May-July 1987 A ROSE BY ANY OTHER NAME sales have regularly taken place, recent announce- and facilities to make money for the government ments indicate that we are seeing disposal of gov- and therefore the community". He argues that all ernment assets on a scale which has not been seen sales undertaken by the Government are structured in recent times. Some examples of this are: to ensure they remain under public control and this • A key element of Mr. Keatings May expenditure is different from the Liberal Party approach. statement was the proposed sale of Common- In a move to improve the government owned wealth assets in Australia and overseas to raise Australian Mineral Development Laboratories $1 billion in 1987/88. (AMDEL) financial position and to give it a better • In March the Victorian Government announced marketing profile Premier Bannon decided to sell it would progressively release property worth $1 off a 35 per cent stake. The South Australian Public billion for sale. This programme has a sense of Service Association took exception to the sale on urgency about it because the Government the grounds that the price was undervalued (the requires that $50 million worth be sold by 30th valuation was performed independently by June. Plainly this money is required to balance Coopers Lybrand). Perhaps more importantly, the budgets. the union felt the Government had betrayed its trust and has gone back on the anti-privatisation On the one hand it will be said that by rational- stance so actively supported by the union in the ising their holdings Governments are acting res- election campaign. ponsibly. Alternatively it may be that what we are Brian Burke, in line with other Labor witnessing is more akin to selling off the family Premiers, has taken his first tentative steps towards silver to buy food. selling off public enterprises to the private sector in Western Australia. The Government has sold a Approaches of State Governments third of the Rural and Industries Bank of WA to a mixture of private and public institutions. How- It is Labor Governments which are now hav- ever, not wishing to give too much credence to the ing to deal with entrenched union resistance to dis- Burke Governments privatisation venture, the turbance of privileged public service conditions. State-run State Government Insurance Office and In NSW, Premier Unsworths election pledge Motor Vehicle Insurance Trust did take up major was to introduce "a more effective, efficient, eco- shareholdings. The sale was announced almost nomic and equitable administration. . immediately after the 1986 election, which saw the The release of the Newcastle State Dockyard Labor Party enter its second term of office, and to the private sector was seen as a way to achieve only two months after it had vigorously attacked this (it should be noted that the dockyard had lost the Opposition for even considering privatisation. $30 million since 1980). However, the controlling This attack on privatisation was actively sup- unions feeling that this was a threat to their power ported by the public service union, the Civil Ser- base, and their subsequent strike action, forced the vants Association (CSA), Western Australias big- Government to prematurely close the dockyard gest trade union. Twelve months later the union is with the loss of 384 jobs and potential revenue attacking the Burke Governments economic from contracts. The fact is that had the dockyards rationalistic (privatisation) policies, much the continued operation and the union accepted the same as in South Australia. Any further moves to generous offer from the Government, there would sell off public assets will no doubt be vehemently be 180 men less looking for work in the area and opposed by the CSA as the union believes that its their families would not be relying on the Govern- power base will be seriously eroded. ment for financial support. The Victorian Government has taken steps to According to the Premier of South Australia, alleviate staff shortages in several areas, for John Bannon, his Government does not privatise, example in the Public Works Department and the it is merely undertaking a programme of commer- Law Department by engaging private consultants. cialisation. Indeed, in the lead-up to the last State This is an important step towards increasing gov- election Mr. Olsen was lambasted by the ALP for ernment efficiency and reducing costs. However considering a privatisation policy. John Bannon the Victorian Public Service Association has seen argues that commercialisation is "the quite proper fit to protest strongly on this encroachment into its use of government resources, intellectual property territory. It would appear it matters not what is best

1. This does not seem a particularly helpful distinction. Mrs. Thatchers Government has also retained control in a number of major privatisation sales.

36 A ROSE BY ANY OTHER NAME for the State, but what serves interest groups the for governments which refuse to rein in their best. spending but recognise that the burden of public Nevertheless, Victorian Ministers are unde- debt cannot go on increasing forever. There is little terred. In March 1987 a Victorian Government evidence of a responsible strategy for privatisation. Department recommended that the Port of Mel- Indeed, Labor Party privatisation strategy at the bourne Authority (wholly government owned) sell moment is dominated by the need .to avoid Labor off the World Trade Centre at an estimated price of Party splits. This is a poor way of making policy. $110 million. This would make it the most expen- The dominant consideration should be to privatise sive Melbourne building sold in recent years. The where there are maximum benefits to the Transport Minister, Mr. Roper, supported the consumer. recommendation to sell the Centre. The Cain Gov- Second, the Treasurer has given the impres- ernment will sell off most of Victorias 1,800 coun- sion that a major benefit from sales of public assets try teacher houses. In February, the Minister for would come from using the proceeds to "reduce the Health, Mr. White, canvassed the possibility of pri- budget deficit and reduce government debt" How- vatising some of the facilities in private hospitals. ever, while it is certainly welcome that the proceeds Premier Gray from Tasmania is Australias are not to be used to finance on-going outlays, the only Liberal Leader in power, and it is interesting benefit from using the proceeds to retire govern- that following the defeat of the South Australian ment debt would be very marginal. Selling govern- Liberal Party in the 1986 State election, he sought ment assets draws on private sector savings in to distance himself from the privatisation issue. much the same way as the sale of government However, despite Mr. Grays assertions that priva- bonds and, unless the net call on private savings is tisation was not the path to take, the Tasmanian reduced, there will be no significant reduction in Film Corporation has been passed to the private pressures on interest rates or stimulus to business sector. Additionally private contractors are investment. engaged to perform such diverse functions as The key point that has not been addressed by audits, road construction and printing. Indeed it is any of the major political parties is that the main estimated that more than 30 per cent of Tasmanias potential benefits from privatisation come from government construction work is placed in private improving the efficiency of use of national hands. resources (capital and labour). Increasing reports of The Bjelke-Petersen Government in Queens- over-manning and restrictive work practices in land emphasises its free enterprise small govern- public enterprises have made it abundantly clear ment credentials. The Queensland Government, that there is enormous scope to improve the however, has no current privatisation programme national return on capital investment in such nor is any in the pipeline. Its proposal to sell crown enterprises and reduce the costs of their services to land on the Barrier Reef islands, which recently both businesses and consumers. This becomes all caused a storm of protest, seems to be a "one-off" the more vital in circumstances where Australia initiative rather than part of a more general stra- desperately needs to improve its international tegy. Suncorp, The Queensland Governments competitiveness. corporation is the States locally based largest The main question at issue now should not be financial and capital investment body. Its $2.5 bil- whether or not public enterprises should be sold. lion base has interests in banking, building socie- Rather, it should be whether there are circum- ties, stock broking, property, securities trading and stances, such as "natural" monopoly or over- insurance, and was formed through the Govern- whelming social policy reasons, that would make it ment purchase and restructuring of the formerly inappropriate to privatise. No such reasons have private Bank of Queensland with the State Govern- been advanced to date. ment Insurance Office. Therefore, instead of priva- Finally, unlike their Federal colleagues, it is tising government enterprises Queensland is clear that State Liberal Party politicians are very expanding its government corporate holdings. reluctant to promote privatisation proposals. This defensiveness does not seem to be warranted in Conclusions view of the moves of Labor Governments around Australia towards the disposal of the States First, current privatisation policies are largely interests in public assets. A rose by any other ad hoc responses to the need to find more revenue name...

37 FOCUS ON FIGURES

Jacob Abrahami

marginally to 9.3 per cent while the OECD average Australias High is 2.2 per cent. In the latest 12 months for which figures are Inflation Economy available Australias inflation was 9.8 per cent Australia has developed into a high inflation compared with Italy 4.2, Canada 4.0, U.K. 4.0, economy; our record over the last decade and a half France 3.4, U.S.A. 2.1, West Germany —0.2, Japan is significantly worse than that of most industrial —1.0 and Holland —1.1. countries. In the decade prior to 1970 Australias infla- tion rate (as measured by the CPI index) tended to Physician Heal Thyself be below the average for OECD countries. Since In view of Australias appalling inflation 1970 it has been lower than the OECD average in record, it is not surprising that the response of the only four years, and in one of these years the CPI State and Commonwealth governments to the was temporarily depressed because of the introduc- latest upsurge in Australias inflation has-been to tion of Medibank. announce new initiatives to try to contain price increases. The Commonwealth Government has Australia: A High Inflation Economy appointed Barry Jones as the Minister in charge of an army of voluntary price watchers whose job will Inflatlon Index 1960=100 700 be to report to the new Consumer Affairs Bureau any price "rip offs" they detect. 600 The State Government in Victoria has gone a step further and nominated 160 grocery items AUSTRAUA 500 whose prices will, on average, be limited to a 6 per cent increase over a period of 12 months. But these 400 moves attack the symptoms not the cause. Moreover, these price-watchers are focussing on private sector trends when in fact public sector policies have had a major effect on consumer 200 OECD prices. Av. For instance, as the graph below illustrates,

100 A i since June 1983, the increase in the price index of 1960 1963 1988 1969 1972 1975 1978 1981 1984 1987 items whose price is determined mainly by govern- ment was 31.0 per cent. Privately determined If anything the inflationary tendencies of the prices increased by only 25.7 per cent over the Australian economy are becoming worse relative same period. The figures suggest governments are to other countries. In 1983, when the Hawke Gov- guilty of double standards in criticising the private ernment came to office, Australias inflation rate sector for price increases. was 10.3 per cent compared with the OECD aver- Nearly all States have recently announced sub- age of 5.2 per cent. The latest figures show Aus- stantial price increases, particularly in public trans- tralias inflation rate has been reduced only port, water and sewerage rates, and gas and electric-

Jacob Abrahami is the IPA s Senior Economist

38 IPA Review, May-July 1987 FOCUS ON FIGURES ity supply. These increases are not subject to performance rather than attempting to sheet the scrutiny by the Prices Surveillance Authority. blame for inflation onto the private sector. It surely is a case of physician heal thyself. Public and Private Sector Inflation Indexes Multicultural Lottery 132 130 We dont know how much the Government 128 actually spends on multiculturalism because many programmes with a specific ethnic, cultural or reli- 126 PUBLIC 124 INFLATION gious content are funded out of general government 122 allocations. For example, the Commonwealth

12D Government allocated in 1984/85 some $67 mil- lion for child care distributed at a rate of $11 to $16 118 TOTAL 116 INFLATION per child; ethnic groups which operate their own 114 programmes are eligible for these grants. 112 Putting aside such problems, S.J. Rimmer, a 110 postgraduate student at La Trobe University, esti- PRIVATE mates in an unpublished thesis that in 1984/85 the 108 INFLATION 106 Commonwealth Budget provided $200 million for 104 multicultural expenditure—that is "expenditure in

102 which a major component involves encouraging 100 cultural identity and all post arrival services and 98 welfare programmes specifically designed for JUN SEP DEC MAR JUN SEP DEC MAR JUN SEP DEC MAR JUN SEP DEC migrants and the ethnic community". 1983 1 1984 1 1985 1 1985 Surprisingly, the biggest spending department Various Commonwealth actions have also on multiculturalism in 1985/86 was Sport, Recrea- added substantially to private sector prices. First a tion and Tourism; it allocated 22.1 per cent of its whole range of new tax imposts has added to the $98.9 million budget. costs of private producers. These include capital One further. point, which emerges from the gains tax, fringe benefits tax, and the prescribed graph below, is the disparity among grants to dif- payment systems. Since many private companies ferent ethnic communities, in this case in Vic- make only a few cents (1.5 cents in the case of the toria. large food retailers) per dollar of sale, there is little Victorian Government Grants to option but to pass the new taxes onto consumers in the form of higher prices. Ethnic Groups In order to protect its revenue base the Com- GRANT PER HEADS monwealth has taken special action to prevent the Indo Chinese 15.11 full fall in world oil prices experienced in recent Lebanese 11.96 years being passed onto Australian industry and Turkish 11.08 consumers. In 1986/87 alone, the Commonwealth Greek 5.05 will have increased excise collection on petroleum Chinese . 4.59 products by some $2,800 million to make up for a Polish 3.27 similar loss expected from the substantial fall in Spanish 2.30 import parity prices of crude oil in 1986. Had the Maltese 1.51 Government restrained expenditure in the budget Russian M 1.45 it could have foregone this additional impost and Hungarian — 1.32 thereby dampened price increases. Yugoslavian = 1.20 Government policy has also added to prices Egyptian 1.03 through the Commonwealths support for a wage Italian W 0.93 increase in line with that awarded by the Commis- German I 0.161 sion. Following the Arbitration Commissions Austrian I 0.07 March decision, wage increases in 1986/87 will Dutch I 0.04 most probably be over 7 per cent. UK/idsh I 0.01 Its time the Governments looked at their own

39 Why I am Working for Sir Joh John Stone

As most Review readers will know, I recently • In these circumstances,, what can be done to announced that I had accepted a request from the ensure that whatever Government is in office in National Party (Queensland) to assist it in fleshing Canberra after the next Federal election will out the details of the single-rate tax proposal which bring to its task a sufficiently hard-headed view Sir Joh Bjelke-Petersen has recently been putting of what needs, in the national interest, to be forward at the national political level. In my view done? equally importantly, I shall also be helping to Let me take each of these points in turn. devise the detailed policies to cut spending in Can- berra sufficiently both to enable a single-rate tax to A Fearful Mess be instituted responsibly, and to balance the Federal Budget. As to the first, Australia today certainly is in a I should perhaps say that, living as I now do in fearful mess. Our debts to foreigners reached Melbourne, I am not a member of the National $101,400 million last September. In order to go on Party (Queensland). Indeed I am not, nor have I living beyond our means (at current levels of ever been, a member of any political party. During restrictive-work-practice-ridden national produc- my 30 years as a Commonwealth public servant I tivity) we are adding to them at around $9,000- believed, rightly or wrongly, that political party $10,000 million a year. In addition, we are selling membership was not compatible with retaining the off another $3,000-$4,000 million of Australian capacity to serve governments, of whatever politi- assets to foreigners each year. I comment on this cal complexion, in that apolitical manner which bargain basement "fire sale" of Australia. in my our Westminster system of government requires National Issues column in this Review. the Public Service (and particularly its more senior Every family in Australia knows what must members) to do. happen when its outgoings exceed its income. Why then have I accepted this post, -particu- The family may continue in that way for a larly since it will undoubtedly involve a further time, if a bank manager, or a finance company, or in upheaval of my life during the period leading up to the end a loan shark, will lend it money to do so; or the next Federal election? Personally, I do not wel- if it can sell off some of its assets—the furniture, the come that prospect, nor does my family. television set, the family motor car. In the end, That question effectively constitutes the title however, those means of putting off the inevitable of this article. I can best answer it by making (and outcome cannot go on any longer; the family knows then elaborating upon) three observations which that it has to face up to the real problem—the fact seem to me central in assessing Australias present that it is living beyond its means—and really deal situation and prospects: with it, rather than just go on running away from it. • First and foremost, Australia today is in a fearful It can do this by working harder, or "smarter" (or mess—economically and, beyond that, socially. both), so as to increase its real income, or by cutting The task of cleaning up that mess—what some back its spending. time ago, in another context, I called "repairing Paul Johnson has said of Mrs. Margaret Australia"—is increasingly urgent. Thatcher that she is a "handbag economist". • Secondly, none of the major Federal political Although he used that term as a form of praise, it parties today appears ready to face up to the has been fashionable in Australia, particularly magnitude of that task. To date at least, none of among our more simple-minded Keynesian econ- them has demonstrated either the policy grasp, omists, to sneer at the economic analogies between or the intestinal fortitude, which will be neces- families and nations. Surely, it is said, any educated sary to do so. person must know that nations are not subject to

John Stone, an IPA Senior Fellow, is currently on leavefrom the Institute.

IPA Review, May-July 1987 40 WHY I AM WORKING FOR SIR JOH the same economic and financial rules as families. lowing Sir Joh Bjelke-Petersens emergence upon Nations do not have "handbags". the national political stage, he claimed that he and Like so much else that has been conventional his then Coalition colleagues would have beaten wisdom among economists brought up (badly) on the Hawke Government in the next election. In the Keynes, this example of the genre is highly open to end, the Australian electorate has a great deal of question. In particular, when we address such ques- common sense. It may not care much for the look tions as national solvency, nations really are no dif- of the alternative, but it knows when the incum- ferent from families. So, to revert to my family ana- bents have had their chance and it is time to dis- logy above, Australia today has well and truly miss them. This, I believe, the electorate will now reached the point where it has to face up to the do with the Hawke Government whenever the truth about what has been happening to it for some election is held. time now, and for the past four or five years in par- Where, however, I would have differed from ticular. Mr. Howard earlier this year was in his then stated All of us owe it to our children—and my wife assessment that the emergence of what are now and I have five of them—to do so. Otherwise we called "the new Nationals" would damage the shall bequeath to them a country laden with debt; a chances of achieving that change of government. country which has lost its economic sovereignty, That, I believe, was (and is) incorrect. because lenders, not borrowers, call the tune; and As noted earlier, it is vital to Australians perhaps ultimately most serious of all, a country future that whatever Government comes to office which will be racked with the social divisions after the next Federal election should bring with it which those factors will produce. Make no mistake; policies which do not merely tinker at the edges of it can happen here—and to a now significant degree their predecessors (including their Fraser Govern- it has already begun to do so. ment predecessors) failure but which boldly move In short, as noted above, the task of "repairing to set us on a new course. Australia" has now grown urgent. That brings me I do not wish to be personally critical of Mr. to my second observation stated earlier. Howard. He is undoubtedly the best leader to be found within the present Parliamentary Liberal Failure of the Major Parties Party, and full allowance should also be made for the problems within his own Partys ranks with Faced with such a national mess as we now which he has had to contend since gaining its lead- have, it would be normal to look to our Govern- ership. ment to enact policies which would set the country to rights and thereby avert the further sharpening of those social divisions just referred to. Essentially that concern boils down to the Unfortunately, in Australia today there seems strong feeling that, although these parties to be little real hope from that quarter. Our present would repair some of the errors of the Hawke Government continues to hold out synthetic Government (and also some of its hope—notably through its skilful manipulation of predecessors), they would not bring to that the media—but the reality is lacking. task, as things now stand, the people, the So far from providing the solution, the Hawke energy, or the policies which will be needed Government seems likely to remain part of the really to repair Australia in the manner now problem. Year after year it has persistently run so widely seen as vital. away from dealing with our problems—or, save for some minor lapses into veracity, from even Yet as I move around Australia, I continually telling us that they exist. Recently it even went so encounter expressions of concern about the likely far as to canvass publicly the thought of another performance in Government of the present Federal early election; this being the policy most beloved of Liberal and National Parties. Essentially that con- Governments which wish to avoid having a cern boils down to the strong feeling that, although policy. these parties would repair some of the errors of the Nevertheless, at some time within the next ten Hawke Government (and also some of its prede- months at the utmost, Australians will have an cessors), they would not bring to that task, as opportunity of replacing this failed Government. things now stand, the people, the energy, or the pol- As to that, I think that the Leader of the icies which will be needed really to repair Australia Opposition (Mr. John Howard) was right when, fol- in the manner now so widely seen as vital.

41 WHY I AM WORKING FOR SIR JOH

I would like to think that those expressions of ways it will help to raise the level of national sav- concern are wrong. Certainly, if the policies of the ings, which is now urgently necessary if we are to next Government prove to be inadequate, we may reduce our now chronic dependence upon the sav- not be given another chance to get them right. ings of foreigners (which is what the balance of pay- Regrettably, I have to say that I personally do share ments deficit really is). those concerns. Cutting taxes (and cutting government spend- It is against that background that I have wel- ing in order to do so) is not the only matter, as I comed the general thrust of the policies which, in understand it, on Sir Johs agenda. In some ways, recent months, the Premier of Queensland has been there is almost an even greater need to cut interest advancing to the Australian people with his custom- rates. There are, after all, many small businesses in ary vigour. That brings me to my third, and final this country (including many farmers) to whom the point noted earlier—namely, what can be done to rate of income tax will be irrelevant until, by lower- ensure that whatever Party is in office after the next ing interest rates, they can once more enjoy an Federal election, it will bring to its task both the income. toughness of mind and the effectiveness of policies Interest rates cannot be reduced by a wave of which will be needed to turn Australia around? some magic wand. They will come down only when we can cut the pressures of borrowings by govern- Sir Johs Agenda ments on the markets for funds; when, by raising national savings in that and other ways, we sharply In my considered opinion, during the past few cut our balance of payments deficit, and hence the months Sir Joh has already made a sizeable contri- interest rate pressures which flow from having to bution to ensuring a better outcome in that regard. finance it by borrowing from abroad; and when we The effects of his presence are to be seen for can sharply reduce inflation. example in the scurry for new and lower (flatter?) Reducing the size of government, and giving tax policies within the "Coalition" ranks than those people back their own income to spend, or save, for they had previously been on the point of proposing. themselves will itself do much to reduce inflation- Those effects are also to be seen in the pressure ary pressures. Equally important in that process upon the Liberal Party to abandon the broadly- however will be the reduction of those pressures based indirect tax proposal. upon costs and prices which currently flow from That is not, I hasten to add, because the latter the monopoly power of trade unions. proposal is inherently wrong—on the contrary, it is That power can no more be justified than was, inherently right. It is rather because it is also seen earlier this century, the monopoly power of capital. by its proponents as a means of raising (net) Reducing it—and in the process rendering trade revenue in order to assist in financing any proposed unions and their officials subject to the same laws, reduction in the personal income tax burden. The the same real Courts, and the same real Judges, as view of its opponents (and my own view in these the rest of us—has been clearly stated as one of Sir circumstances) is rather that at this time there Johs principal objectives. It is an objective which I should be maximum pressure on the next Govern- strongly support. Indeed, I believe it will be ment to finance lower income taxes by cutting gov- supported by all Australians who are concerned ernment spending. about the industrial lawlessness into which we have Sir Johs proposal for a single-rate system of allowed ourselves to drift over the past 20 years or personal income tax at a rate of 25 per cent would so. provide a massive improvement in incentives to In the end, it is policies—not political parties— work, to save, and to create jobs, and disincentives that I care about. I see in this initiative by the to cheat on paying tax; but its effects would go far Premier of Queensland, including through its wider. effects upon the policy-forming processes of all the A chief virtue of such a tax change is that in Federal political parties, a real chance of turning order to achieve it, it will be necessary to cut the around those policies which have brought Aus- size of government (and particularly government tralia to its present pass. That is why I am working in Canberra) very significantly. In that and other for Sir Joh.

42 Around the States

Les McCarrey

The Last of the Big Spenders

Politicians are not slow in trimming their sails to commitment (or lack of it) to expenditure control shifts in the wind of public opinion. Such has been because outlays of this kind become ongoing com- the turnaround of public attitudes in the past year mitments and are more difficult to cut back. In this that today no Australian Government would go to area there have been some marked differences in an election on a big spending programme. performance, as the following table shows. Indeed, acknowledgment of the need for In this analysis 1982/83 has been taken as the reduced Government expenditure has become part base year because all budgets after that year were of the rhetoric of all political parties. Unfortun- brought down by the governments presently in ately, it is still to be translated into real resolve. If power and presumably reflect their policies. the high rate of growth of public expenditure in CURRENT OUTLAYS OF GOVERNMENTS recent years, and the high taxes required to fuel that Increase 1982/83 to 1986/87 (Est) % growth are to be turned around, firm action will have to be taken at all levels of government. Government Nominal Real Per Cap Some governments are more culpable than New South Wales 50.3 12.2 43.8 others. It is clear from an analysis of expenditure Victoria 53.4 14.3 47.1 since 1982/83 that the Commonwealth has exer- Queensland 64.4 22.8 54.1 cised less control over expenditure for its own pur- West Aust. 60.8 20.1 49.7 poses than it has over payments to the States. South Australia 53.5 14.6 48.8 Moreover, the States as a whole have been consid- Tasmania 46.5 9.8 40.5 erably more restrained than the Commonwealth, All States (a) 54.4 15.3 46.8 although none of them has much to crow about. Commonwealth -own purposes 63.6 22.2 55.6 TOTAL OUTLAYS OF GOVERNMENTS Percent Increase 1982/83 to 1986/87 (est) (a) includes Northern Territory Government Per cent Increase (Decrease) The big spenders on current outlays have been Nominal Real the Commonwealth, Queensland and Western Commonwealth Australia, with Tasmania and New South Wales the -own purposes 62.0 17.2 most restrained. Assist. to States 39.2 (3.0) Real increases in excess of 20 per cent in All States (a) 46.9 6.3 current outlays recorded by the Commonwealth (a) includes Northern Territory and two State Governments in just four years are indicative of a lack of any .real concern to restrict Among the States, Western Australia shows the drain of government spending on the nations the highest increase in total outlays with 55 per cent limited resources. (12.2 real) and Victoria the least at 43.6 per cent (3.9 The growing anger of Australians at such real). unbridled spending for so little discernible social However, comparison of the States perform- gain, at the constant increases in taxes and charges ances over time on the basis of total outlays can be and at the damage inflicted on the nations econ- misleading. Capital expenditure can vary widely as omy will not easily be abated. Nothing less than a States undertake major projects at different times. complete turn around in the attitudes of politicians The increase in current outlays on wages and ser- to other peoples money, and drastic surgery on the vices can give a better indication of a governments bloated body of government, will do.

Les McCarrey is Director of the IPA States Policy Unit based in Perth.

43 IPA Review, May-July 1987 AROUND THE STATES— LES McCARREY The Corporatism of Burke and Bjelke-Petersen

There is a curious parallel between Labor that governments have given to themselves today leader Brian Burke and the arch-conservative Sir already goes beyond what should be tolerated by a Joh Bjelke-Petersen. Both are leading exponents of genuinely free people. corporatism in government. Simplistically, this is a The presence of government in commerce, policy of government involvement in private sec- through regulation, licensing, planning approvals, tor commercial activities through government- tariffs, contracts and investments is already mas- owned corporate structures. It is the obverse of sive and is overlaid by power to legally enforce its privatisation. bidding. The added power derived from govern- Sir Joh has established the Queensland Indus- ments or their agencies being able to influence the try Development Corporation, to provide funding decisions and actions of major companies from the for higher-risk industrial and other developmental other side and hidden from public view through projects, and Suncorp, a corporation formed from substantial shareholdings, loans or guarantees the State Government Insurance Office and a pri- should cause us deep concern. vate bank acquired by the Government. The latter Corruption begins well before the stage of is a major investment, insurance and financial con- monetary kickbacks, favours and preferential con- glomerate with a large shareholding in many tracts. It exists in any retreat from principles of fair- Queensland based industrial companies. ness, equity and the integrity of government deci- Mr. Burke has the Western Australian Devel- sion-makers. Or, as John Hyde recently put it, "It opment Corporation, established with similar occurs wherever a person is diverted from his objectives to its Queensland counterpart but with responsibilities by the hope of gain. Gain may be its principal activities so far appearing to centre on measured in money, office, votes and many other generating cash from the sale of government assets. things". Western Australia also boasts Exim Corporation I do not seek to imply that the Governments of with a charter to promote trade with and invest- Queensland and Western Australia are corrupt ment in that State. By comparison with Suncorp, because of their ventures into corporatism, but Exim has a sorry record having become involved in point to the dangers inherent in any government some disastrous ventures which to date have going down that path. The only safe course is for chalked up little more than losses from the public governments to stay out of commerce and restrict purse. Indeed "Exim watching" is something of a their role to framing the rules under which the fun pastime in St. Georges Terrace these days. game is played. One suspects that the philosophy behind As an aside, it can be said that if corporatism Queensland corporatism is no more than commer- in Queensland and Western Australia is to be cial opportunism and the exploitation of wider judged by the narrow standard of the contribution sources of income for the Government. Mr. Burkes made to revenue and the consequent reduced need philosophy in this area has been stated (if not for recourse to taxation, Sir Joh seems to be doing clearly articulated) often enough. It stems from a quite well out of it while Mr. Burkes version is belief that there is money to be made out there in making heavy weather of it. the private sector, that Government has access to As noted above, Queensland and Western the cash flows needed to exploit those opportuni- Australia are clear leaders among the States in the ties, and that the income so earned could ulti- growth of current outlays since 1982/83 with mately replace a large part of taxation. increases of 64 per cent and 61 per cent respectively. Adequate consideration of the fallacies and In the same period, revenue from taxes, fees and dangers of corporatism in government would fines in Western Australia has increased by 64 per require more space than this column allows. cent (only Tasmania is higher) compared with a 42 But it must be said in passing that it has the per cent increase in Queensland (with Victoria, the capacity to corrupt the whole political process and lowest increase of all the States). to provide a means of coercion of business interests To the extent that Mr. Burke has obtained that goes far beyond the accepted role of additional income from his venture into corpora- governments. tism, it has served only to fuel higher government Politics is about power and power is the basis expenditure. Western Australian taxpayers are yet of tyranny. The power over every aspect of our lives to see any benefits.

44 AROUND THE STATES—LES McCARREY

Expenditure Limits the only way to go

The revelation earlier this year that the Net point. In that year the States and Local Govern- Public Sector Borrowing Requirement of the States ment obtained an increase of $568 million in aggre- and Local Government was estimated to increase gate Loan Council approvals when expenditure on by 45 per cent to $7.1 billion in 1986/87 triggered capital works barely increased over the previous acrimonious exchanges between Mr Keating and year. The reduced draw on internal funds com- some State Treasurers, each accusing the other of bined with increased balances held in the form of lack of spending restraint. paper purchased from the private sector (the cash The Premiers claim, with some justification, flow equivalent of lending) partly offset borrowings that the figures recently given so much prominence by the sale of semi-government securities. ABS are only estimates usually subject to substantial estimates indicate that as a result, the net public downwards revision. Be that as it may, there seems sector borrowings of the States and Local Govern- little doubt that notwithstanding the cut in Loan ment fell by almost $1 billion in that year. Council approved borrowing programmes the The reverse of that process appears to be hap- States have been able to increase capital outlays by pening this year as the States draw on internal drawing more heavily on internal funds and funds to make up for the reduction in borrowing balances. The latter (which include, in some cases, approvals. This requires the realisation of invest- borrowed funds squirrelled away in later years) ments by selling securities back to the private sec- constitute a significant source of funds for State tor to obtain the cash. and Local Governments, as the following figures This capacity of the States to offset Loan show. Council borrowing restrictions poses a headache for the Commonwealth. The public sector borrow- STATE AND LOCAL GOVERNMENTS ing requirement for 1987/88 must be cut back hard Year Capital Loan Capital Internal Other Expenditure Council Grants (c) Funds and to this end the Commonwealth can be (a) Funds (b) expected to move in Loan Council for a deep cut in Amount Percent the States global borrowing allocation for next year. $M $M $M $M But there must be doubt as to how much effect that 1982/83 11,525 7,658 2,099 1,768 15.3 action will have on actual net borrowings as the 1983/84 12,571 8,201 2,556 1,814 14.4 States could still have sufficient in reserves to 1984/85 12,601 8,769 2,633 1,119 9.5 maintain expenditure (and hence net borrowings) 1985/86 13,652 8,779 2,657 2,216 16.2 for another year. (a) Gross fixed capital expenditure plus increase/decrease in stocks. Moreover, Premiers are adept at using tough (b) Loan Council program (including capital grants) Premiers Conference and Loan Council decisions and Global Borrowing Allocation. as an excuse for increasing State taxes and charges. (c) Specific purpose grants for capital purposes: The temptation to add another 1 or 2 per cent to planned increases in electricity and water charges, With funds from internal sources providing etc., to generate additional funds for their works for about 15 per cent of capital expenditures, there programmes will be strong. The Commonwealth is clearly considerable scope for the States to com- will want to avoid further inflationary pressures of pensate for changes in Loan Council borrowing that kind. allocations by varying the call on internal and other All of this means ,thai the appropriate course funds. for Mr. Keating would be to push for a commit- From the States viewpoint this is seen to be no ment from the Premiers to constrain total public more than sensible financial management. Fund- sector outlays to, at the most, zero real increase in ing of works under construction is not easily 1987/88. The Premiers need to be forcefully switched on and off and State Governments try to reminded that together they are. responsible for half avoid wide fluctuations in capital expenditure with of Australian public sector outlays and that the attendant disruption to private sector activity and States have no less responsibility than the Com- employment. monwealth for reducing the public sector drain on The 1984/85 experience is an illustration of the domestic savings.

45 DEFENDING AUSTRALIA Fl Harry Gelber

grander than the reality behind it. While the practi- Flaws in the White cal suggestions are sensible enough as far as they go, to describe an ability to detect and track as one Paper "layer" of defence is a curious use of words. The new White Paper on Defence has been But there are more serious worries about the greeted by almost universal applause. Much, of that Paper. For one thing, its assertion that Australias is deserved, for it is an able document, in clear line environment is favourable can be questioned. of descent from the 1976 White Paper and the Though true in strictly military terms it has suf- rather agonised discussions which took place after fered from political deterioration in recent times. the Vietnam War about Australias future defence ANZUS is not what it was. Relations with Indone- role. It is likely to be welcomed within the defence sia have worsened. The Soviet military and politi- community, in Washington and in most places in cal presence in the Pacific, including the South Southeast Asia. Pacific, has grown. In fact, Australias claim to a For one thing, it moves helpfully away from sphere of influence in the South Pacific—that is not the inward-looking tone of the strategic perspec- what we call it, but that is what it is—is under tives of the Dibb Review and the limiting implica- severe challenge and may not be sustainable. And, tions of Paul Dibbs Strategy of Denial. Though it as always, there could be changes in larger power provides a framework for the adoption of most of alignments, for example in relations between Dibbs force structure recommendations, it expli- China and the Soviet Union, or between Japan and citly recognises that the Australian Defence Force the USA, or a more intent southward look by India, may need to co-operate with allies, might be or an end to the Iran-Iraq war which destabilised required to operate beyond Australias "region" the Gulf region. Any of these developments could and that an effective defence strategy is likely to have a major impact on Australias national inter- involve preparation for retaliation and attack. ests, including consequences which involved the The White Paper gives a proper and primary use or threat of force. emphasis to the American alliance and points out, This leads to the second concern. The Paper yet again, that its mere existence itself largely tends to perpetuate the assumption that defence depends on the links with America, for instance in and foreign affairs are somewhat separate activi- intelligence matters and weapons purchases. ties. But contemporary problems are often caused As in most documents of this sort, there is a less by direct attack than by politico-military pres- certain amount of hyperbole. The stress on "self- sure. Though the White Paper is correct to say that reliance" in public discussion, for instance, is only the Soviet base at Cam Ranh Bay is vulnerable in a rhetorical device. We are not self-reliant and can- the event of an all-out Soviet-American war, in not be, least of all on defence expenditures of less most contingencies short of that it can be a major than 3 per cent ofGDP. The phrase is only useful if means ofexerting or aiding the use of politico-mili- we take it to mean that we should do as much for tary pressure in the region. The White Paper may and by ourselves as we can. Similarly, the White give insufficient stress to the notion that direct Papers concept of "layered defence" sounds military threats, whether at high or low levels, are

Harry Gelber is Professor of Political Science at the University of Tasmania.

IPA Review, May-July 1987 46 DEFENDING AUSTRALIA by no means the only or even the most likely There is also the key question of costs, which problem. Mr. Beazley has inevitably left a little vague. It is It is therefore not enough to say, as Mr. Beazley not clear how defence will fare in a period of public does, that the Soviet Union does not have air or sector cuts. And the White Paper argues realistic- naval predominance in the region. There are cer- ally that costs place severe limits on force structure tainly grave doubts about the White Papers view plans and that it is not plausible simply to propose (para 2.31) that there is a contradiction between the wish lists of what we cannot afford. But defence Soviet military presence and the political goodwill gaps do not become less real because a government, which Moscow seeks. The attitudes of States in the or a society, cannot or will not pay to fill them. region will not be shaped by the "sincerity" of For example, while the Governments pro- Soviet gestures but rather by their unsentimental posal for a two-ocean navy is very welcome, it is calculations of Soviet power and credibility. not clear that even after the proposed increase in The White Paper also reflects conventional numbers of ships the RAN will be large enough to wisdom by emphasising "our region". But Aus- have more than a token in either West or East. tralias national and security interests are inevi- Equally, it is clear that the RAN cannot continue to tably wider than its region, and dangers within it rely on land-based air for operations at any dis- are less likely to arise than ones outside. The Paper tance from our shores. if integral air is not to be refers to the global purposes served by such things provided, air cover will have to come from allies. If as the Joint Facilities and briefly considers the pos- so, that expectation and its implications should be sibility of military action farther afield. But the more clearly spelt out. proposed force structures would give Australia less Most of the suggestions about rationalisation than a token role in the Northern Indian Ocean, or and efficiency in defence industries are welcome, in the Gulf, or the waters off Korea. And the strategic particular the notion that government-owned enti- innocence of the Antarctic will only last for as long ties must operate according to commercial criteria. as that continent remains demilitarised, something Many of these suggestions could and should have which is desirable but cannot be taken for granted. been introduced a decade ago. So should the pro- Even more important, there is no mention of posal to encourage Australian industry to partici- outer space. Yet it is certain that by AD 2000 some pate more strongly in offset arrangements. It has powers will have mechanisms in orbit capable of for many years been a public scandal that so many affecting not just satellites, including Australian of the offset activities available in relation to ones, but aircraft and even targets on the ground. weapons and equipment purchases from the US None of this receives attention, any more than the have not been taken up because Australian manu- likely impact of advanced weapons systems which facturers could not or would not undertake the might be used against us from within or beyond work. If Mr. Beazley (and Senator Button) can that region, not necessarily by a superpower. New change that situation, they will have done the coun- generations of advanced cruise missiles, even with try a major service. converted warheads, could be a case in point. One other gap in the White Paper must be There is more conventional wisdom in the mentioned. It says nothing definite about the need great emphasis on the benefits we receive from the to retain more of the highly-trained personnel of all US alliance as compared to the contributions we ranks who are currently resigning from the armed can or should make to it. But one can reasonably forces in alarming numbers. Whatever the other ask whether the admittedly very important role of merits of Mr. Beazleys defence plans, they will the Joint Facilities plus an enhanced (and overdue) come to nothing if competent men and women ability to defend our shores against low-level cannot be attracted to the services to carry them attacks is really all that we can be expected to out. Maybe the new Chief of Defence Force, contribute to an alliance which, to be healthy, must General Gration, should try to get a Gurkha regi- be a two-way street. Self-defence is a necessary ment or two. Or what about an Australian Foreign start. Whether it is, by itself, sufficient is another Legion? matter.

47 Paul Dibbs Myths about the USSR..

Gerard Henderson

Mr. Paul Dibb is a rising star in what Dr. Robert tion to another. He will no longer be responsible for ONeill refers to as the "twin communities of aca- making force structure recommendations that will demia and intelligence analysts". This rise and rise affect Australias defence capability beyond the has seen Mr. Dibb occupying such important posi- turn of the century. His present responsibility is to tions as Deputy Director of the Joint Intelligence provide top level technical advice to the govern- Organisation (JIO), Head of the National Intelli- ment of the day on Australias security. For any gence Committees National Assessment Staff and public official this is an awesome responsibility. Senior Research Fellow in the Australian National Never before has Australia had such a high- Universitys Strategic and Defence Studies Centre. profile director of the Joint Intelligence Organisa- The culmination of all this was Mr. Dibbs appoint- tion. Mr. Dibbs current views and assessments are ment as Director of the Joint Intelligence Organisa- not only available in his Review of Australias tion in January 1987. Defence Capabilities. There are also many journal Paul Dibb is no academic ivory-towerist. His articles, conference papers and monographs March 1986 Review ofAustralias Defence Capabil- (including a regional study on Siberia and the ities (the Dibb Report) sparked a wide-ranging Pacific). The most recent of this significant output debate on Australias defence and foreign policies. is an important (if, so far, little noticed) book Most of the Reports recommendations on the entitled The Soviet Union: The Incomplete Super structure of Australian Defence Force have been Power, published by Macmillan and the Interna- accepted in the recent Defence White Paper. tional Institute for Strategic Studies in early 1986. Certainly there are some significant differ- The Australians Washington correspondent, ences. The White Paper stresses the need for Peter Samuel, has described Dibbs book as "fasci- "defence in depth" in preference to the Dibb nating" precisely because it gives a rare insight into Reports advocacy of a "strategy of denial". Also the attitudes and methods of a senior figure in the the White Paper emphatically states that "an exten- intelligence world. As Samuel has pointed out, sion of Soviet influence in our region at the expense "most men in Dibbs position. . have published of the United States would be a matter of funda- little, so there are few clues to their analytical mental concern to Australia and would be contrary method, political frame of reference or intellectual to our national interests". The Dibb Report does depth". With Dibb, instead of a molehill we have a not contain any such blunt warnings. mountain. It is well worth exploring. But, by and large, the force structure recom- The Soviet Union: The Incomplete Super mendations in the Dibb Report appear to have Power contains many useful insights. It makes found acceptance in the 1987 Defence White Paper. sense to examine the USSRs weaknesses—e.g. its For Mr. Dibb this is no mean achievement. In ailing economy and the nationalities problem—as tabling the White Paper the Defence Minister, Mr. well as its strengths. There is little point in over- Kim Beazley, paid tribute to Dibbs work and said estimating the strength of any country and cer- that "whatever his critics might think of the pro- tainly Mr. Dibb does not fall into this trap with the duct of his review it has set a new standard for Soviet Union. On the technical side, however, the defence debate in this country". book is seriously flawed. It is quite unsatisfactory Paul Dibb is that sort of person. He aims to set that a publication issued in London in March 1986 standards. Since his appointment as Director of should appear to have been completed before Mr. JIO Mr. Dibb has moved from one important posi- Mikhail Gorbachev became General Secretary of

Dr. Gerard Henderson is Director of the Institute of Public Affairs (NS W).

IPA Review, May-July 1987 48 PAUL DIBBS MYTHS ABOUT THE USSR the Soviet Communist Party in March 1985 and spectrum". Just as the reader is about to mutter contain no reference to President Reagans Stra- "Thank God", Mr. Dibb advises that he "has much tegic Defence Initiative which was first announced in common with the work of these moderate in March 1983. The end result is that The Soviet analysts" (Thank God, again). Union: The Incomplete Super Power was seriously dated before it was published. At the very least an attempt should have been made to make some contemporary assessments in the preface. But the more serious criticism of Mr. Dibbs book is that it contains and perpetrates a number of myths about the Soviet Union.

The Detached View From Moscow Myth

Mr. Dibb makes much of the fact that his book "attempts to contribute to the current debate about the Soviet Unions future by presenting a percep- tion of the world as seen from Moscow". Scattered throughout are references to the assumed views of "a prudent Soviet military planner" or, indeed, "a prudent military planner in Moscow". There is mention of "the Soviet perspective", "the Soviet Paul Dibb view", a "reasonably authentic Soviet world view" and "the Russian mind". And so it goes on. As one would expect from so moderate a man, This is all very simplistic. The implication that Dibb believes that to maintain that the Soviet there is a Soviet position or attitude which can be Union is an evil empire (as President Reagan once understood by the Western powers is highly did) is to exhibit a "false sense of moral self-right- dubious indeed. The fact is that there are many eousness. But is it? Was Churchill self-righteous Soviet views and that, from time to time, even the because he came to the sincere belief in 1939 that official view may change. From Lenin, to Stalin, to the Nazi regime was the embodiment of evil? Khrushchev, to Brezhnev, to Gorbachev there Today the Soviet leadership belongs to the same have been some significant changes. It is idle to all-powerful political party that created the terror pretend otherwise or to suggest that, somewhere or and the purges, murdered the Ukraine peasantry other, there exists an ideological key capable of during the forced famine of the 1930s, negotiated unlocking the "Russian mind". the Nazi-Soviet Pact and which continues to sup- press individual rights and the aspirations to free- The Reasonable Man Myth dom of half of Europe. Why is it self-righteous to recall contemporary history? Mr. Dibb sees himself as a man of eminent (and obvious) reasonableness and moderation. The 20 Million Dead Myth This is all very nice for his self-esteem but is not very helpful in analysing the policies of Stalins The Soviet Union: The Incomplete Super heirs in Moscow. According to Dibb, it is rather Power is littered with references to the alleged 20 "too simplistic to divide the world, as some Ameri- million who died in "the `Great Patriotic War can commentators do, between the forces of good against Hitlers Germany" and to the traumatic and evil". This, we are told, is a "dangerous atti- effect which this has had on the Soviet psyche. Cer- tude". Paul Dibb classifies most of those who take tainly the USSR suffered heavily between 1941 and part in "the debate in the West about Soviet mili- 1945. But any analysis of the effect of war on the tary capabilities" as either "hawks" or "doves". The Soviet psyche should not neglect the Nazi-Soviet reader becomes increasingly depressed about the Pact of 1939-1941. The Hitler-Stalin Pact actually poor standard of the debate until the author lets on initiated the Second World War and the USSR still that "in recent years. . . there has emerged a more contains within its boundaries many of the ill- balanced and carefully analysed alternative posi- gotten gains that resulted from this infamous tion which lies somewhere in the middle of the treaty.

49 PAUL DIBBS MYTHS ABOUT THE USSR

The myth of the 20 million dead has been ser- Soviet economy could well lead to greater, not less, iously disputed by Nikolai Tolstoy who maintains international disorder. This is a consideration in Stalins Secret War that this figure includes which Mr. Dibb overlooks. Soviet losses during the Nazi-Soviet Pact (e.g. the Paul Dibb believes that the real danger to the severe casualties suffered during the Soviet inva- West lies in an economically weak USSR contri- sion of Finland) and many of those who died in buting to "greater global disorder and disruption Stalins on-going war against his own people. The which could result in some major external miscal- figures just dont add up. Between 1914 and 1917 culation". Im not so sure. In my view an economi- Russia was defeated on the Eastern Front at an esti- cally strong Soviet Union will be a greater threat mated loss of 1.7 million dead. Between 1941 and than an economically weak one. To this extent Mr. 1945 the German Army is estimated to have had Gorbachevs mooted reforms do not automatically 2.5 million killed during its military defeat in the suggest the ushering in of a new international East. The USSR won the battle on the Eastern period of sweetness and reasonableness between Front during the Second World War but maintains the super powers. that its casualty rate was eight times that of the force it defeated. It just doesnt ring true. But this The Value of Soviet Moderation Myth figure has been accepted by Mr. Dibb and others as somehow or other explaining Moscows alleged According to Mr. Dibb we should all take paranoia about its security. some comfort in the fact that Soviet behaviour in There is another explanation for the evident international crises is "conservative rather than Soviet paranoia that so disturbs Mr. Dibb. Stalins radical, cautious rather than reckless, deliberate heirs in Moscow lack legitimacy. The Soviet leader- rather than impulsive, and rational rather than ship has survived through terror and it presides irrational". Once again, Im. not so sure. If Hitler over an official ideology, Marxism, in which had acted rationally he would have controlled most nobody believes (i.e. outside of the West). Totali- of the world by dint of military might. To maintain, tarian regimes that lack legitimacy tend to be para- as Dibb does, that "unlike Nazi Germany, foreign noid—whether or not they have been involved in policy expansion is not a vital necessity for the traumatic military engagements. But, in any event, USSR" misses the point. The issue is not whether what is important about paranoia is not the cause expansion is a "vital necessity" for the Soviet but the treatment. Union but, rather, whether the USSR is expansion- ist. And even Mr. Dibb admits that the Soviet The Incomplete Super Power Myth Union is an "inherently expansionist state".

The title of Mr. Dibbs book is disconcerting. The Lets Be Careful Myth The implication is that the USSR is the (rather than an) incomplete super power. But surely both super Mr. Dibbs advice to the West is that it should powers are incomplete. Moscow is hindered by a concentrate on "economic competition" and that it weak economy. But Washington is shackled by the should "not over-react on the occasions (which are political restraints of being a democracy—as the relatively rare) when the USSR makes an appar- issue of aid to the Nicaraguan Contras vividly ently spectacular gain in the Third World". Above demonstrates. all, "the West must leave a door open to the USSR". Paul Dibb has an ambivalent attitude to the I certainly hope that the United States does not Soviet economy. He believes that "Soviet econo- leave such "open doors" in Central and South mic achievements have been striking" (say that America. Otherwise the whole future of western again?), yet maintains that the system "which was democracies could be threatened. successful in industrialising a backward economy half a century ago seems incapable of adapting to Warnings the demanding requirements of lifting productivity in a modern industrial state". This is a dubious The Soviet Union: The Incomplete Super assumption. The Soviet economy has been a con- Power postulates many myths. But it does, how- stant poor performer since 1917. But during that ever, contain one timely warning. Paul Dibb con- time the USSR has become a mighty military cedes that "the Soviet Union has often used the power that directly controls half of Europe. Viewed Soviet armed forces as a political instrument in in this light, any significant improvement in the support of state goals, without going to war". This,

50 PAUL DIBBS MYTHS ABOUT THE USSR surely, is what the Soviet threat is all about. As such "Current strategic guidance identifies no like- it does not make all that much difference whether lihood of adverse effects on Australias secur- the USSR-is, or is not, an incomplete super power. ity from developments in the South Pacific in There is a message here for Australia as the Soviet the next decade. But it also notes that access by continues its build up in the Pacific. the Soviet Union, especially the establishment From time to time Paul Dibb does come up there of a presence ashore, would be cause for with important warnings. In 1983, for example, he concern." wrote: Since the Dibb Report was completed, the "The Soviet military lodgment in Indo China Soviet Union has become increasingly involved in is likely to continue, at least through the 1980s, the South Pacific—especially with Vanuatu. What and removing that presence, which is poten- is more, Libya has shown that it is willing to stir up tially threatening to regional security, should trouble in the region, e.g. concerning the future of be a central Australian policy concern." New Caledonia. Recently Fiji appears to have One year later Mr. Dibb recognised that: "done a New Zealand" on visits by the United "The demise of the ANZUS Treaty, or even States Navy. severe political tensions within it, would have Perhaps in his Review of Australias Defence several important strategic benefits for the Capabilities Mr. Dibb should have paid more heed Soviet Union. . . A break up of the ANZUS to his 1983 comment that "the warning time for Treaty would be of enormous benefit to the some political and strategic events is extremely USSRs world-wide interests." short" and that "we are often surprised by the By the time Mr. Dibb came to write his Review unpredictable or irrational act of a nation state". ofAustralias Defence Capabilities the Soviet build The recent developments in the Pacific have up in Vietnam had ceased to be "potentially threat- disturbing implications for Australia. The USSR ening to regional security" and had become, may, or may not, be the "incomplete super power" instead, merely a development in the region which and it may, or may not, be shackled by what Paul required "close attention". Dibb terms its "semi-developed economy". But On the South Pacific the Dibb Report con- Soviet power, and that of its allies, is increasing in cluded that: the Pacific. Thats no myth.

tary and then, for the year preceding honesty. He was completely reliable HAL WARREN his retirement, 1977, as Director. His and therefore trusted by everyone contribution was considerable. who knew him. He was a good man (1913-1987) Hal was utterly dedicated to the to have as a friend. causes for which the IPA was work- Apart from his work with the ing and, apart from his distinctively Institute, Hal was always ready and secretarial responsibilities, was, eager to assist in worthwhile com- because of his economic knowledge munity causes. Nothing was too (acquired as a graduate of the Uni- much trouble. He was a true lover of versity of Melbourne) of great assis- his country and its history. On his tance in the production of the Insti- retirement from the Institute he tutes publications. served notably for nearly 10 years as Over the years he made a major Director of the Royal Historical contribution to the financial stability Society of Victoria. of the IPA, both in his untiring atten- The tremendous regard in which tion to the Institutes subscriptions Hal Warren was held was demon- and in the conscientious care that he strated by the remarkable attendance exercised in the expenditure of the at his funeral service. The large Institutes funds. church of St. George in Glenferrie Hal had an exceptionally wide Road, Malvern, was spaced to capac- circle of friends and acquaintances in ity, with probably over 500 mourn- It is with very great regret that we business and was universally liked ers. record the death of Hal Warren. and respected. The secret of his great We extend our deepest sym- Hal was associated with the IPA popularity stemmed from his kind- pathy to his wife, Bess, his son John for some thirty years, first as Secre- ness to others and his transparent and his daughter Claire.

51 Conservatives are making the news on campus Ken Baker

For 20 years student newspapers have by and large been power bases of political extremism. On a small but growing number of campuses around Australia, however, the stranglehold of the far Left is weakening. Ken Baker spoke to some of the student editors who are turning the tide.

On the campuses of the ANU and the University of Before its change of direction at the start of Sydney a democratic revolution is under way. Its 1986, Honi Soft, according to editors Brendan most significant victory to date has been the suc- Wong, Fiona Gray and Nick Straus, had fallen into cessful storming of the citadel of the Left, the the hands of a tiny left-wing clique who had little to student press. In the offices of the ANUs Woroni say to the majority of students. For a while the and Sydney Universitys HoniSoit there now hangs extremism of the paper had a certain shock a portrait of Queen Elizabeth II. At Woroni the appeal—a special issue, for example, was run on Queens portrait, flanked by the Australian lesbianism—but this was hardly what most National Flag and a map of the United States, students wanted from the publication which their deposed one of Lenin. The symbolism could not be union fees financed. more striking. Woroni suffered from much the same prob- Editors of both papers—all of them full-time lems. Its last issue under the old regime carried students—are elected directly by the student body. articles about animal liberation, women against Both teams ran their election campaigns along simi- racism, Pine Gap, a socialist critique of neoclassi- lar lines: a promise to open the paper to a wider cal economics and a piece reprinted from the com- range of views and place less emphasis on politics, munist paper, Direct Action, pleading the case for particularly the exotic political causes that had been the downtrodden BLF. An article called "The U.S. championed relentlessly in the student press by the War on Nicaragua" applauds the Sandinista regime far Left. When Gerard Wheeler and Stephen for closing down La Prensa, the countrys only Kirchner—as part of the winning coalition team of independent newspaper, because it had become an Liberals and moderate Laborites—moved into the "organ of internal reaction and- external aggres- Woroni office the first thing they had to do was paint sion". The importance of a free press is not a value the walls, to cover the slogans scrawled there abus- that emerges from Woroni under its former ing them, calling them "fascists" and "lackeys, of US editors. imperialism" The slogans were as hackneyed and Perhaps the question should be not why the bigoted as the student newspaper had become. Left lost control of these papers, but how it retained A third student paper with similar goals, control for so long. One reason is that few launched in August last year, has also entered the students—as few as 20 per cent—bother to vote at campus scene. Called Australian Student News and student elections, a factor which has tended to based at the University of Queensland, it is distri- favour the Left which for many years has consisted buted to 30 campuses around Australia and has a of the most politically committed and highly moti- print run of 55,000. James Power, one of a team of vated at universities. In other words, the Left has 4-5 active editorial staff, says that the aim of estab- been the most able at activating its base of support. lishing ASN was to produce a quality readable Conservatives on campuses have tended to be dis- newspaper representative of student opinion. That organised, ineffectual or simply apathetic. opinion, he believes, has shifted to the Right in All the editors with whom I spoke, however, recent times. believe that there has also been a shift of the

Dr. Ken Baker is Research Fellow at the IPA and Associate Editor of the IPA Review.

IPA Review, May-July 1987 52 CONSERVATIVES ARE MAKING THE NEWS ON CAMPUS majority opinion on campus away from , the Left. shortage . of contributions— so that virtually any- Brendan Wong, who is also President of the Sydney thing submitted gets published—as it is of the edi- University Liberal Club, has watched the club grow tors policy of fostering a representative pluralism from a base of less than 50 three or four years ago to in their papers. 400 strong today and the largest political club on But the most refreshing feature of the papers is campus. The ANU Liberal Club, in which the current of dissent from the orthodoxies of the Kirchner and Wheeler are actively involved, has 1970s which runs through their pages. A mischie- quadrupled its membership over the same period. vously inserted note on Woronis contents page But, says Wong, the key factor may be less the reads: "Inspiration: Ronald Wilson Reagan, Presi- changing attitudes of the student majority than that dent of the United States of America". A quiz for "the Right finally got organised" and presented a freshers recommends that those with a particularly credible, confident alternative. He quotes Edmund low score would be better off being "parasitic on Burke: "the easiest way for evil to triumph is for the taxpayer.. . as a poet in residence with the good men to do nothing", and this he believes is ACTU". And a new regular feature, "The Student what had been happening. Broker; gives investment advice. Both papers enjoy satirising the Left as quaint people whose minds, in a state of suspended animation, are still befuddled by 1960s flower power. There is of course a serious side as well. Kirchner in Woroni reports on a Sydney conference to strengthen ties between democratic nations in the region and intelligently reviews a number of books in the controversial area of peace research. But the highlight of Woronis first issue is the juxtaposition of Shadow Education Minister Peter Shacks reassurances to students that a Liberal Government would abolish the $250 tertiary administration fee and not introduce tuition fees with a critical column by editor, Gerard Wheeler. For a student editor to criticise Liberal Party policy on education is hardly news; but it must be unprecedented for that criti- cism to accuse the Liberals of being too wet. Wheeler argues, perhaps a trifle optimistically, that "university students are becoming increasingly aware that the current level of taxpayer funding for education cannot continue. One need only look at the dismal attendance at anti-fee rallies to realise that. If one looks at the faces at these events, the same lefty rent-a-crowd continues to appear. It is Woroni 27 April 1987 reports on the ANU Liberal Clubs obvious that many of the so-called student leaders protest against ANC leader Oliver Tambo, looks at the are neither students nor leaders". His view, shared advantages of privatisation and celebrates the spirit of by Kirchner, is that "much of government spending Anzac. on higher education is middle-class welfare". The Diversity and Dissent government, he believes, should cut the level of funds to higher education and give tertiary institu- The new-look Woroni and Honi Soit are eclec- tions the autonomy to charge fees or seek corporate tic papers—much more so than Australian Student sponsorship. He argues that unless the Liberal lead- News. In Honi Soit, a hard line anti-communist ership is prepared to bite the bullet on educational article is followed by a defence of nuclear-free zone expenditure then it is not serious about cutting taxes treaties. In Woroni, a feminist page, "Sisters or the size of government. Unite, is followed by a conservative Christian Wheelers views are not shared by all the edi- page, sponsored by the Bible Society (neither page, torial team at Woroni. The debate on fees is hot on unfortunately, makes exciting reading). This eclec- tertiary campuses and it divides students at the ticism is as much a consequence of the chronic ANU as much as at Sydney—including the Honi

53 CONSERVATIVES ARE MAKING THE NEWS ON CAMPUS

Soit editors (Gray supports fees with scholarships, new blood elected to the Union Board. The new Wong does not). Liberal President of the Union has voluntarily halved his own salary from $11,000 to $5,200 per Right Agenda annum to set an example of cost-cutting. It makes the socialists took positively selfish. Two other issues are rapidly rising on the agenda at campuses, and both are being put there by the Right. The first is voluntary student unionism; the second is the waste or misdirection of student funds by elected officials. The two issues are related. At present, because membership of a union is compulsory for students, those who disap- prove of their money being used to subsidise politi- cally dubious causes or extravagant projects cannot protest by withholding their dues.

For a student editor to criticise Liberal Party policy on education is hardly news; but it must be unprecedented for that criticism to accuse the Liberals of being too wet.

The student editors with whom I spoke see their papers as playing an important role in expos- ing the abuse of student funds. An example of this sort of watchdog role occurs in a recent issue of Australian Student News. According to the report, the Monash University Union Board is increasing its budget allocation to an organisation called Community Research Action Centre (CRAC) which in 1986 received the sizeable sum of $99,960 from the student coffer. CRACs special projects Brendan Wong, Honi Soir editor and President of Sydney have included: a Lesbian and Gay Mens Informa- Universitys Liberal Club. tion Booklet, Palestinian Awareness Campaign, Censorship Animal Rights Campaign, Women and Unemploy- ment Project, a Sexuality Festival and Hiroshima But the political pressure is not all one way. 40th Anniversary Project. To help pay for projects The dependence of Honi Soit on the SRC and Wor- such as these, the report notes, the Students Ame- oni on the Student Association for funds does ren- nities fee at Monash in 1986 was increased from der the papers vulnerable to political pressure. To $229 to $252. this extent, Australian Student News, produced Wheeler and Kirchner have written a chapter independently of any student union or council, has in a book on voluntary student unionism, just pub- an advantage. Honi Soit has already had to answer lished by the Australian Institute for Public Policy. to the SRC for an editorial critical of the SRC. In Honi Soit Brendan Wong has attacked the SRCs Things are worse at the ANU where the Director of refurbishment of the building which, not coinci- Student Publications (DSP)—appointed by the dentally says Wong, houses the SRC itself—an act SRC President and something of a cultural com- of irresponsibility, he believes, considering that the missar—is empowered to censor any material SRC now carries a debt of $100,000 which, in imi- deemed by her to be defamatory, sexist or racist. As tation of Australias national problem, will be Wheeler and Kirchner point out, her definition of passed down to future generations of students. the latter two categories is broad. In the first issue The presence of an independent media raising of Woroni this year her presence was evident in questions of accountability has put the socialists in footnotes. On the Christian page, for example, a the corridors of power on notice. Pressure on union huffy note criticises the use of "He" as a pronoun bureaucrats is also coming at the ANU from the for God when "there is no reason to presume that

54 CONSERVATIVES ARE MAKING THE NEWS ON CAMPUS

God is male". An appended comment from the edi- ian ethic which breeds uniformity and mediocrity. tors replies: "It is widely rumoured, however, that Wheelers entry into politics was inspired by Jesus was a bloke". By the second issue, an empty experiencing this egalitarian ethic in practice. In box sits where the editorial should be, with the 1983 in his final year at a conservative Catholic note: "The Editors regret that they are unable to Boys School he organised a delegation to protest to provide an Editorial until such time as they are Senator Ryan at the tampering with final year granted Editorial control —currently residing in the grades of ACT school pupils to equalise the scores office of the Director of Student Publications—and of boys and girls. freedom of speech is restored on this campus". Wheeler and Kirchner admit to being strongly Attempts have been made by the Left to ban the influenced by the Economics Department of the distribution of Australian Student News, but so far ANU with its predominance of free-market think- they have failed. Such experiences merely confirm ers. It shows in their conversation, often giving the editors views that the Left is a force for autho- their analyses a well-honed cutting edge, although ritarianism and repression; that it fears freedom of sometimes blinding them to the value and expression. influence of cultural factors which elude the econo- The solution in the long run might be for the mic rationalists narrow definition of utility. papers to become financially independent. The If politics is war, then ideas are weapons. The student editors recognise that if voluntary student experience of university, political debate on cam- unionism is introduced then funds for a paper will pus and running a paper has taught these student be tighter, because union funds will be less. But this editors the power of ideas. They intend to be well- does not greatly concern them. "There is no reason armed. Wheeler and Kirchner were founders, with why a campus based newspaper in this country two others, of the Conservative Forum at the ANU. cannot run at a profit", says Gerard Wheeler. Honi which discusses policy and ideas and publishes a Soil retains an advertising consultant and three- photocopied journal, Laissez-Faire. Interestingly, quarters of the cost of its first issue was paid with all those with whom I spoke were critical, even dis- advertising revenue. Woroni did even better, missive, of the Young Liberal Movement—which covering the full cost of its first issue in this way. supposedly should be cultivating future conserva- The injustice of the present situation, says Wheeler, tive leaders. It has a reputation for being a haven is that "under compulsory unionism students must for socialites rather than opponents of socialism. pay for a paper which they may never read" He To an outsider student politics can appear fri- believes the paper could be sold for 20-30 cents a volous or juvenile. But in truth it is a serious busi- copy on campus. ness. For a start, large sums of money are involved. The political philosophy of the group at The annual SRC budget at Sydney University is Sydney and the ANU with whom I spoke is best around $380,000. Moreover, campus politics pro- summed up by Kirchners statement: "I regard vides an important training ground, an apprentice- myself as a libertarian, but I am still prepared to ship for future leaders, advisers, diplomats and toast the Queen". On foreign policy, they see them- journalists. selves as "strongly anti-communist", but their The battle on Australian campuses which libertarianism puts them somewhat at odds with began with the fight to disband the Australian the moral conservatives on campus. All see the Union of Students, finally successful in late 1984, is conservative Christian movement as the real wild- far from over. Indeed it has probably just begun. card in campus politics. Sydney University has 12 Even at the ANU, where the Union and the paper Christian clubs, the largest of which claims 300 have been won by conservatives, the Student Asso- members. ciation remains in the hands of the Left. And There is, belying the conservative label, a ANUs own radio station 2XX—which ran a whole current of youthful rebelliousness in the editors day of programmes on the theme "Invasion Day" stance toward the world and Kirchner describes last January 26—is hardly conservative. What himself as anti-establishment in the way that a seems clear is that the outcome of the battle will young radical of the sixties might. But the tables have a long-term impact on Australias political have turned since then. Now the establishment that culture, just as the relative lack of confidence Kirchner and the others see themselves as rebelling shown by the conservative side in politics in recent against is the left-liberal New Class establishment years is in part the fruit of the weakness of conser- with its ranks of privileged bureaucrats and union vatives and the strength of the Left on campus over officials, its suffocating welfare state and egalitar- the last 20 years.

55 Debt-An Economic and Moral Crisis

James Buchanan

Increasing government deficits, and the resultant increase in debt, have both economic and moral dimen- sions, argues Nobel Prize winner James Buchanan. Economically they threaten an upsurge in inflation and economic crisis; morally, they constitute a totally unjustified passing of the cost to future generations.

It is grossly misleading to measure debt by relating through two centuries were basically correct. The it to GDP because debt can always be eliminated resort to debt can, indeed, be justified in two by allowing higher inflation (which is a confisca- separate settings. tory tax on the capital values of all debt instru- Firstly, where there is a "lumpy" capital ments). There is now a real danger that rising inter- investment that will yield benefits over an est rates flowing from continued increases in extended period, there is an argument for financing borrowings will put pressure on monetary author- such outlay by debt so as to roughly match the ities to allow inflation to accelerate, dissipating the benefit and cost streams. This makes the public gains of the early 1980s and leaving us worse off debt completely analogous to corporate debt in than at that time. In this sense, deficits are that sense. extremely important and nothing is more urgent Secondly, if there is an extraordinary bunching than getting them under control, whether this be of revenue demands, such as in a war, there may be through legislative initiatives or through Constitu- some justification for spreading out the cost over tional change. Precious little time remains: I think an extended period. Currently, however, we are not 1987 will be extremely critical. involved in any extraordinary spending: ordinary But debt and deficits matter for reasons that federal spending is being financed by debt, or one- transcend the macro-economic issues. My empha- fifth of it at least. sis is on the moral dimension. I consider it grossly I have explicitly left out of account any Keyne- immoral to finance current public outlays on con- sian justification for resort to debt issue, because sumption, including transfer payments, by an issue no such argument can be mounted. Even if the of debt. Keynesian analytical model was accepted fully, We are eating up goods and services that niust there would be no argument for debt issue. Any be paid for by taxpayers in all future periods. There financing ought to be by direct money creation and is no way we can come up with a justification for not by issue of debt. There is simply no logical basis this sort of inter-generational transfer. You could for saddling future generations of taxpayers with. not imagine possible agreement on a policy that interest burdens in a pure Keynesian world. would allow a majority of the Congress, in a single To finance public consumption by debt is generation, to use up resources for current purposes equivalent to the eating up of national capital while imposing costs on everyone who is going to value. By placing claims against future incomes, come later. with no future offsetting benefit stream, we are low- I am not, of course, suggesting that public ering the capital value of that , expected income debts should never be issued. In this respect, the stream. To state that even more dramatically, we classical principles which were hammered out are bequeathing negative capital value to future

I. An example might be the building ofa power station. A large investment of money is required over a relatively short period. but the benefits will continue to fow for many years to come. (Editor) James Buchanan is the 1986 Nobel Prize winner in economics. He is currently Professor of Economics at George Mason University, Virginia USA. This is an edited extract from a speech he made to a conference entitled "Financing Economic Growth: How Much Debi, How Much Equity?" held on 19 November 1986 by the Citizens for a Sound Economy Foundation, Washington D.C.

IPA Review, May-July 1987 56 DEBT-AN ECONOMIC AND MORAL CRISIS generations in our capacities as members of the actually give up command over resources now, the body politic. claims that they hold against future incomes are It does not seem legitimate to try to deny that legitimate claims—but is the legitimacy of those effect by pointing to the accumulation of private claims sufficient to provide an ethical basis for capital. Assets transmitted inter-generationally as non-default? I do not think that it is. The tempta- private capital are assigned in ownership to par- tion for default directly and indirectly increases ticular persons. They are not generally valuable to a with every extension of the debt. citizen as a citizen in the future; but, as a citizen, It is argued that we owe debt to ourselves and each and every one of us is liable for the claims that somebody is going to get the interest when we against incomes held by the legitimate claimants of pay the taxes to pay that interest. But it is basically the state, the owners of the debt instruments. a macro-aggregation fallacy to try to lump every- body together as part of a "glob" and to conclude that debt is not a burden. We are individuals and We are eating up goods and services that we owe debt interest in our capacities as taxpayers. must be paid for by taxpayers in all future The fact that somebody has invested voluntarily in periods. There is no way we can come up with a government security, that he gets interest as a a justification for this sort of inter- payment for what he has given up in future periods, generational transfer. has absolutely no relevance to the incidence of debt. We do face, I think, an interesting and almost The observed fiscal profligacy of the federal intractable problem when we examine the status of government is only one symptom of a more inclu- these future taxpayers from a moral or ethical per- sive and pervasive characteristic of our age. This is spective. What are the ethical grounds for adhering reflected also in the large and growing private debt, to the debt contracts made by earlier and irrespon- in the low rate of domestic savings and in many, sible generations? We may agree that financing many other aspects of modern life. current public consumption in the here and now by We seem to have raised the effective discount debt is immoral, but is it immoral for future tax- rate that regulates our behaviour. I frankly think payers to default on this debt, either by inflation or the Victorians had it right; they acted as if they by outright repudiation? were going to live always and constructed institu- I think the answer to that question is neces- tions accordingly. By contrast, we seem hell-bent sarily mixed. Why should the taxpayer in the year on acting as if there is no tomorrow. The effects on 2000 or the year 2010 pay for the goods and services the growth of our capital stock—I include the that we are enjoying now in 1986? Of course, for physical, but also the moral and social capital those who purchase the securities now and who stock—are easy to predict.

Buchanans analysis, made in the US context, has direct relevance to Australia. While most attention has been focused in Australia on the growth in external debt (which includes both government and private debt). internal debt has also been increasing rapidly. The most worrying aspect is that, as in the USA, the increasing spendingfinanced by increased debt has very largely gone on consumption and we have not been adding commensurately to our stock of capital, which determines our future capacity to grow The IPA is undertaking a major research project on the reasons for this development and its ramifications. (Editor)

57 Scuttling Australias Competitiveness National Wage Case Capitulation, March 1987 Geoff Carmody

There is mounting disillusionment with Australias centralised wage -fixing system. The recent National Wage Case Decision exemplifies why the Arbitration Commission continues to lose support.

The National Wage Case Decision handed down on the Commonwealths analysis that the conse- 10 March must surely be one of the Commissions quences of an inadequate response would be worst. It will contribute to an erosion of our inter- severe, viz: national competitiveness totalling at least 10 per "Correction of the imbalances that have developed in cent in 1986-87 and 1987-88 (see Box 2). Australias external accounts is necessary. If this is not The Commission acknowledged that the eco- done, the economy runs the risk of becoming enmeshed in a vicious circle of exchange rate deprecia- nomic situation was more serious than in June tion, mounting inflation and deepening external 1986, (when an across-the-board increase of 2.3 per balances. cent was awarded). Yet this time it handed out even This would result in an erosion in overseas and more. domestic confidence in the economys future, seriously The Commissions justification for this action undermining private investment, economic activity and employment. The current account deficit would lay in its claim that an economically rational Deci- eventually be reduced, but at a cost of a deep recession sion would cause the unions to break out of the sys- in the economy." tem, resulting in damage through an increase in How is it possible for the Commission to industrial disputes and even higher wage increases. reconcile its own assessment of economic condi- Given the likelihood of even greater belt-tightening tions with the smorgasbord of labour cost increases requirements in future as a result of this Decision, (see Box 1) offered in its Decision? Section 39(2) of that rationale is myopic, at best. the Conciliation and Arbitration Act which The Commissions economic assessment can requires the Commission to have regard to the state be condensed as follows. It noted that all parties of the national economy and the likely effects on agree that Australias current economic perfor- the economy of any award, with special reference mance must be improved quickly. It conceded that to effects on the level of employment and infla- there is a strong case that the economy should tion—is for the present dead. not be asked at this time to absorb Australias loss of international competitive- increased labour costs. The Commission accepted ness from any wage increase was repeatedly under

1: The Decision The Commissions decision provides for: • arbitration or ratification of superannuation claims, • a $10 "first tier" increase (about 2.4 per cent on aver- up to 3 per cent of ordinary time earnings, spread over age) payable immediately; the next two years; • an increase of 4 per cent to be available under the • arbitrated reductions in standard working hours, "second tier" principles, either by consent or through where these exceed 38 per week, arbitrated increases arbitration, over the next year or so; in, or the introduction of, supplementary payments, • consideration in October of a further "first tier" and improved conditions of employment for some increase of 1.5 per cent; employees.

Geoff Carmody is Senior Economic Consultant with ACIL Australia Pty Ltd. He prepared and presented the National Farmers Federation Wage Case Submissions in 1986 and 1987.

IPA Review, May-July 1987 58 SCUTTLING AUSTRALIAS COMPETITIVENESS lined in employer submissions to the Commission, proposals were adopted (and the Commission has in particular by the National Farmers Federation. granted more) average earnings in Australia would As a result of the Commissions Decision, and increase by "around 6 per cent" in calendar year assuming an unchanged exchange rate, Australian 1987 while earnings for our trading partners would competitiveness could fall by 5.5 per cent in 1986- increase by about 4.5 per cent. Thus, even assum- 87 and a further 4-5 percent in 1987-88. (See Box 2) ing labour productivity growth in Australia were That is, a total loss in excess of 10 per cent is comparable with that for the OECD in 1987 (the probable. Commonwealth refused to say whether its own The Commonwealth repeatedly emphasised thinking on productivity is in line with such an the importance of maintaining international com- assumption), that implies a unit labour cost petitiveness (but its own wage proposals denied increase 1.5 percentage points faster in Australia such an outcome). No other participant in the than for the OECD. In fact, our productivity National Wage Case questioned the validity of that growth could be significantly less than overseas. point. Most explicitly supported it. It was noted In short, even before allowing for adverse with approval by the Commission in its Decision. terms of trade effects likely to operate in calendar The Commission attempted to deal with this year 1987, this justification fails. Moreover, the central issue in its Decision as follows: First, it cited forecast for 1987-88 shows erosion of our competi- an EPAC discussion paper (87/01) which, at page 2, tiveness at a similar rate to that in 1986-87. paragraph 12, asserts: "... Australian industry is currently about 30 per cent Creating Expectations: The Commonwealth and more cost competitive than it was on average over the Commission Roles two decades 1966-85. Even if unit labour costs were to continue to grow 1.5 per cent per annum faster in Aus- More than any other single factor, it was the tralia than in our trading partners over the next 10 failure of the Commonwealth to inform the Full years, we would still retain (at present nominal exchange rates) about three-quarters of our recent com- Bench of the gravity of the situation that led the petitive gains at the end of the period". Commission away from a sensible National Wage The Commission relied on this assertion to claim Case Decision. (page 33 of its Decision) that the increases it has On page 32 of its Decision, immediately after awarded will make "no more than a marginal noting that there was a strong case for no labour inroad, if any, into our improved international cost increase at present, the Commission said: competitive position". That is clearly wrong and ` ... We do not think that such an outcome (i.e. no increase) is feasible, given the immediate needs and the Commission knows it (see Box 2), as indicated expectations of wage and salary earners. Many may by its acceptance that there was a strong case for no already be feeling at least some of the effects of the wage increase. current situation but equally may he unaware of the In any event, even accepting the EPAC figur- immediac y of the economic problems that con front the ing this "justification" does not stand up to analy- country." (Parenthesis and emphasis added.) sis. Our new-found competitiveness is not analo- That asserted unawareness can only be attri- gous to a bank deposit that can be run down. We buted to the failure of the Commonwealth to pro- cannot allow it to be eroded at all if Australia is to vide leadership to the community. It can only be be able quickly to adjust the economy to the new, attributed to the Commonwealth offering $10 plus tougher international environment of today. 3 per cent—and more—when its own figures show The Commission also attempted to justify its that we cannot afford it. Decision by focussing upon the possible effects in However, the Commission cannot be held calendar year 1987 instead of the financial year, blameless, either. It cannot reasonably argue that it viz: should avoid its own responsibilities—it appre- "The wage outcomes are consistent with a slowing ciated the gravity of the situation fairly well down in the rate of inflation and a narrowing of the gap simply because it may believe that others are not so between Australias inflation rate and that of our major well informed. It would have been more appro- trading partners. In particular, the wage rate increases priate for it to probe the obvious weaknesses in the allowed by our decision for 1987 are not expected to exceed those of our major trading partners during the Commonwealth case (e.g. on competitiveness). On same period notwithstanding the higher level of infla- the-basis of that probing it could have contributed tion in Australia". to a better community understanding of the sever- However, the Commonwealth itself advised ity of Australias economic problems. In fact, des- the Commission that, if the Commonwealths own pite ample assistance from other participants as to

59 SCUTTLING AUSTRALIAS COMPETITIVENESS

2: The Consequences Prospects for Australias international competitiveness terms of trade expected this financial year. are: • Overall, on a unit labour cost/trade financing basis • Wages growth (inclusive of the March National Wage this all adds up to a loss of competitiveness of 5.5 per Case Decision) is likely to be 6.5 per cent in 1986-87: cent in 1987-87. about 2.0 percentage points faster than that expected • In 1987-88, earnings growth in Australia is likely to for our trading partners. approach twice that expected overseas. While produc- • Productivity among our trading partners in 1986-87 is tivity growth may be positive, it will probably be expected to grow on average about 2.0 percentage below the average for our trading partners. The terms points faster than in Australia (given an expected fall of trade will fall further. On a unit labour cost/trade here). financing basis, a further loss of competitiveness of 4 • Official forecasts are for a decline of about 8 per cent to 5 per cent is likely. in Australias terms of trade, although it could be even • Over the two financial years 1986-87 and 1987-88, higher. This means that merely in order to sustain our assuming a broadly unchanged exchange rate, Aus- capacity to import Australia needs productivity tralias competitiveness will be reduced by over 10 per growth of about 1.5 per cent just to offset the fall in the cent. where the Commission might probe the Common- Of course, to the extent that second tier wealths Submission, it did not even attempt such a increases are granted under the restructuring prin- dissection of the Commonwealth case. ciple, there may be some productivity "offset". But, at best, that will leave unit labour costs unchanged. Is the New System a Source of Greater Flex- The key point is that productivity growth cannot be ibility? distributed twice: it cannot be used to finance adjustment to our inflation/balance of payments The Commonwealth and the ACTU have difficulties if it is dissipated in wage increases. claimed that the new two-tier wage fixing system Besides, past experience with "productivity bar- will provide for greater labour market "flexibility". gaining; here and overseas, is not encouraging: Is this likely? productivity gains have been minor. First, the flat $10 increase under the first tier In short, the only increase in flexibility is likely operates to compress wage relativities. That is a to be in the range of rationalisations available to perverse reaction to present mismatches in the "justify" wage increases. labour market: skilled labour is in relatively strong demand, while unskilled labour is still in substan- Conclusion: The Need for Fundamental Change tial oversupply. The immediate effect of the flat increase will be to intensify the problems faced by The basic legislation, power structures and the lower paid, in the sense that those at the margin players that largely dictate labour market arrange- of employment or out of work will now find it ments and industrial relations in this country have harder to retain or get a job. Over time, the com- not changed. The "two-tier" system does not pression of relativities will increase pressures for involve any significant change in substance, des- larger increases for higher paid employees, generat- pite changes in form. A new cosmetic job on the ing increased "wages drift" (something, that the frills of the system ("repaint with alacrity" rather Commonwealth insists must not happen!), or than "restraint with equity"?) is hardly likely to award-based "rectification". alter the basic tendencies of that system. Second, the Commission has opened the door If we needed more evidence that Australias to "second tier" increases (consent or arbitrated) up wage determination system is inflexible and unres- to 4 per cent over the next year or so. The ACTUs ponsive, even to the most serious economic pres- costing of its second tier claim—now granted—at 4 sures, this Decision provides that evidence. The per cent indicates that it is assuming that, over time, system must be changed, starting with the legisla- all employees will receive the full increase. Against tion on which it rests—and in a direction opposite that background, the Commissions warning that it from that envisaged in the Hancock Report. With- does not expect that "second tier" increases will be out that change, "down under" will acquire a new "uniformly distributed" rings hollow indeed. meaning.

60 current account deficit) and are common to think of education as, Australias based mainly on income data in part, investment in "human (income tax, etc) because these capital".) Negative become available more quickly (c) The fact that government than production data by sectors. expenditure is financed by taxa- Growth Rate: But this is really irrelevant to Pro- tion or public borrowing does not, fessor Kaspers main argument in itself, constitute a case for An Exchange because GDP and GNE both excluding government services include the services produced in from output for purposes of meas- H.W. Arndt the public sector which he wants uring economic growth. Defence to exclude. or health services, financed by Heinz Arndt disputes Wolf- 2. The notion that only the private taxation, may satisfy community gang Kaspers claim, argued in sector is "productive" and that demand and contribute to welfare, the Autumn 1986 issue of the therefore the output of services by as much as transport and enter- IPA Review, that official statis- the public sector should be tainment services, sold by private tics overestimate Australias excluded from measurement of enterprises in the market. Profes- economic growth. economic growth is surely at best a sor Kasper raises different issues Professor Kasper argues that gross exaggeration. (The Soviet when he argues that the long-term Australias economic growth has economy which has no private consequences of fast spending and been overstated because it has sector may be inefficient, but it improved public services are "that been measured in terms of gross can hardly be said to have zero inflation destroys someones real national expenditure (GNE), output or economic growth). wealth and that future generations including expenditure on govern- (a)It has long been recognised that are burdened with a growing ment administration, defence and the inclusion of services such as repayment load". Colin Clark and community services, financed by defence, justice and police inflates others have warned against the taxation and borrowing. Instead, national product since they are danger of inflation if the ratio of economic growth should be more properly regarded as costs of taxation to national income is measured in terms of the "real producing final output. But this is pushed too high. Similarly, exces- output of goods and services by equally true of private sector out- sive growth even in the domestic the productive, private sector", i.e. put of intermediate services such public debt may have adverse by private domestic product as banking; and it is not true of effects, though these need to be (PDP). If this is done, Australias public sector services, such as edu- much more sharply distinguished economic growth during 1980/1 to cation and health, for private con- from those of rising foreign debt 1983/4 per capita can be shown to sumption. (Food as a "cost" of than Professor Kasper does in this have been negative. maintaining the stock of labour is article. But neither of these con- One can share Professor Kas- a well-known reductio ad absur- siderations can be held to justify pers concern about the rapid dum of this argument.) exclusion of all public sector out- growth of government expendi- (b) "Growing public consumption put from GDP in measuring eco- ture, taxation and public debt, but and burgeoning community ser- nomic growth. the argument he advances is faulty vices are not raising the nations 3. Professor Kasper argues that in so many respects that it is liable productivity potential, but feeding growth should be measured "by to damage rather than advance his off it". Obviously, public con- genuine private productivity cause. sumption expenditure does not growth if labour incomes are to be 1. It is not correct to suggest, as he raise productivity by contributing adjusted according to productiv- does, that the Australian national to capital formation, but neither ity growth—as indeed they should accounts statistics are focused on does private consumption expen- be" If this means that national an "expenditure approach" diture. Should all consumption be productivity guidelines for wage instead of a "production excluded? (It was Adam Smiths adjustment should be based on approach". The ABS publishes concern with growth in the value of output per worker aver- estimates of gross domestic pro- "wealth of nations", i.e. with capi- aged over the private sector, duct (GDP). They are quite pro- tal formation, that led him, and excluding government services perly derived from gross national subsequently Ricardo and Marx, (but presumably including public expenditure by deducting net to exclude all services from enterprises which sell their pro- imports of goods and services (the national product. Nowadays, it is ducts), the result would normally

H. W. Arndt is Emeritus Professor of Economics at the Australian National University.

61 IPA Review, May-July 1987 FOLLOW-UP be larger wage increases than how far wage adjustment for pro- complaint was—and is—that pro- would result from measurement ductivity gains should be averaged duction data by sector become of productivity growth in terms of over the whole economy or the available rather slowly compared total GDP. The reason is that gov- private sector or individual indus- to income data—a point Professor ernment services are valued in the tries or even firms. To the com- Arndt also makes, but in a tenor as national accounts at cost, imply- plex efficiency and equity issues if this were God-given and could ing by definition zero growth of which arise, Professor Kaspers not be improved upon. productivity. (Since government particular option does not neces- One key point I tried to make services are not sold at market sarily present the optimum solu- was that the medium-term growth prices, it is difficult to measure tion. rate of PDP per worker was a good value added and therefore value base to estimate the productivity productivity of labour in the pub- increase in society. I agree with the lic sector; but it is probably safe to Wolfgang Kasper Business Council: if we want to assume that labour productivity aim for a non-inflationary wages normally grows more slowly on Replies policy which is based on a con- average in the public than in the The measurement of what should stant cost level, we should take the private sector.) Thus, except in the be considered wealth creation in average of marketed output (PDP) unusual case of negative growth of society is inevitably based on con- as a measure. If that, at times, PDP which Professor Kasper vention. One of these conven- were to lead to a higher wage gui- claims to have found for Australia tions—accepted since the 1940s— deline than GDP, as Professor during 1980/1 to 1983/4, the rate of has been to assume that the public Arndt correctly points out, so be productivity growth based on sectors non-marketed output is it! At least this productivity PDP will exceed that based on part of national wealth creation. measure is based on products GDP. If, as is politically inevi- Since one cannot put any market which people pay for in the market table, government employees value on what the state taxes away place, and it does not include pub- demand "flow-on" of wage adjust- and re-spends, it has been lic and community services that ment based on productivity assumed that the value of govern- are given away free. growth in the private sector, Pro- ment activity is measured by the This rejoinder gives me the fessor Kaspers proposal would cost which it creates. opportunity to dissociate myself result in more rapid growth of The main argument in my from the heading ("Negative public sector wages. article was to say that the assump- Growth Rate"). The heading, Three further points may be tion made in the 1940s, when gov- which the editor added, gave an added. The first is that something ernments took away and spent unintended impression that one like Professor Kaspers procedure much less income, is now contri- years decline in a statistical does in fact seem to be used in the buting to an increasingly mislead- measure indicates negative formulation of national produc- ing impression: the more growth. Economic growth is a tivity guidelines. The Business resources are taxed and re-spent medium-term objective and we Council Bulletin (August 1984, by government, the more we should judge its attainment only p.7) has pointed out that the statis- engage in what I believe to be over a 3 to 5 year time span. And tical problem presented by the double-counting in the minds of over that time span Australian assumption of zero growth of pro- those fellow citizens who have not economic growth—however ductivity underlying the national been brainwashed by national- measured—has been positive. accounts estimates of public sec- accounts statisticians. If we were To sum up, I do not accept tor output "is normally overcome to raise taxation and government Professor Arndts statement that by excluding the non-market sec- spending—directly or through its what I say is "faulty". Deciding on tor from the analysis". client welfare agencies—by the best convention for measuring Secondly, the appropriate another 25 per cent, just how societys productivity is not a mat- aggregate for purposes of produc- many Australians would find it ter of right or wrong, but a matter tivity adjustment of wages—in so plausible to say that the nation is of what society plausibly finds to far as it is desirable to pass on the substantially better off? Only our be of economic value to it. Despite gains from rising productivity in gross national expenditure statis- the well-known statistical conven- higher wages rather than in lower tics would be bloated! tions (which I do not want to abo- prices—is neither GDP nor PDP I do of course not dispute lish, but only to supplement), I but national income, i.e. GDP less Professor Arndts point about the continue to believe that channell- depreciation and net indirect fact that the Australian Bureau of ing ever more resources through taxes. Statistics estimates gross domestic government does not enhance our Thirdly, all this still ignores product. Indeed, I used those data material well-being. one of the most difficult and con- in my own estimates for "Private" I therefore suggest we agree to tentious issues in wage policy: Domestic Product (PDP). My disagree.

Wolfgang Kasper is Professor of Economics and head. Department of Economics and Management, University College, University of New South Wales, Defence Academy. 62 Ira IPA Council established in ACT An IPA Council of leading Canberra citizens has Australias leading think-tank, on public policy been established in the ACT. issues that warrant research and debate. They Sir William Cole, former head of the Public will also assist in bringing the IPAs work to the Service Board and the Department of Defence, attention of ACT residents and in attracting Professor H.W. Arndt, a leading ANU academic, members. Mr. Robert Campbell, a businessman, grazier At a function held in Canberra on 15 April, and a member of the National Farmers Federa- Mr. Goode said "the IPA is a broad-based organ- tion, Dr. Tony Griffin, medical practitioner, and isation. The numbers of both corporate and indi- Mr. Arthur Kenyon, Chairman of the Canberra vidual members are growing rapidly". Building Society, will be members of the Coun- "We are attracting attention because of the cil. Des Moore, IPA Senior Fellow, will be acting high quality of our research and our willingness as Director of the Institute in the ACT. to forcefully promote issues such as the need for IPA (ACT) was officially launched on 15 lower taxation, higher standards in education, a April 1987 in Canberra by John Stone. strong defence capability and responsible Announcing the formation of the Council, unionism". IPA President, Charles Goode, said that mem- Mr. Goode said that the IPA was also plan- bers will assist in advising the IPA in its role as ning to establish a branch in South Australia. Chinese Ambassador Visits IPA

Mr. Zhang Zai, Chinese Ambassador to Aus- From left to right: Mme Xu Dequan, Mr. Charles Goode, tralia, visited the IPA on 26 February, 1987. Ambassador Mr. Zhang Zai, Mr. Rod Kemp, Mr. John Stone He wished to hear about the work of the IPA and Mr. Des Moore. and was met by the IPA President, Charles Goode, Director, Rod Kemp, and Senior Membership rises Fellows, John Stone and Des Moore. The number of individual members of the IPA has Topics discussed included Soviet expansion increased rapidly in the last ten months, rising by 1,000 to 3,000. in the Pacific, trends in the Australian economy The Director of the IPA, Rod Kemp, said he and the work of policy think-tanks such as the believed this rapid increase reflected the fact that the IPA. Recent developments in China were also Institute was tackling issues of relevance to main- discussed. stream Australia. The Chinese Ambassador was accompanied The increased support meant that the IPA had by his wife, Mme Xu Dequan, and his first been able to improve the formats of the popular IPA Review and Facts. Secretary.

63 Abolish the Constitutional Commission

A leading academic, who is stitution that has founded a free, democratic nation an international authority and served its needs, at least as well as the Constitu- on federal systems, has tion of any advanced society in the world, is a con- called for the Constitu- fession of political failure without precedent in any tional Commission to be mature political system. abolished. The paper, published by the IPA States Policy In an Occasional Unit in Perth, has been posted to all IPA sub- Paper entitled The Consti- scribers. tutional Commission: the inescapable politics of con- stitutional change, Rufus Study of debt crisis Davis, Emeritus Professor The IPA is preparing a study on Australias debt of Politics, Monash Uni- crisis. versity, argues that the Des Moore, the IPA Senior Fellow, will be current Constitution has proved a remarkably flex- supervising the research. He said that while there ible and adaptable document. has been considerable discussion on Australias In an introduction to the paper, Les McCarrey, external debt problem, little attention had been asks whether a sweeping review as distinct from the given to internal corporate household and govern- process of evolutionary change is likely to result in ment debt. a superior product to the present Constitution. The results of the study are expected to be Professor Davis argues that to replace a Con- released later this year.

What the Press say... "Efforts by the Soviet Union to expand in the around the year 2002. As the IPA remarks quiz- South Pacific must be countered by more inten- zically, another form of child abuse?" Michael sive involvement by Australians in diplomacy Barnard, The Age, 24 February, 1987. with their near neighbours, the latest Institute of "IPA Senior Fellow Des Moore, a former Public Affairs Review said. Federal Treasury deputy secretary, even argues Mr. Michael Danby, a member of the Vic- for an immediate budget surplus. IPA Senior torian ALP Foreign Affairs and Defence Com- Economist Jacob Abrahami reckons a $6 billion mittee, writing in the IPA Review , said that spending cut is needed over the next five years. expanding Soviet influence in the region threa- He points out that new programs introduced by tened Australia with a Cuba in its front yard". the Hawke government in its first three budgets The Australian, 16 February 1987 lifted expenditure by $5 billion." Time, 2March, "The growing pressure for further spending 1987. cuts and borrowing restraint received added "Mr. Cains sensitivity to criticism of public impetus yesterday with a strongly worded state- sector borrowing is understandable given the ment in Perth from the Institute of Public size of Victorias deficit. According to estimates Affairs (IPA). compiled by the Institute of Public Affairs, the The Director of the IPA Policy Unit, M. Les net deficit in Victoria for 1986-87 is $2511 mil- McCarrey, criticised the spending and borrow- lion—far and away the biggest of any of the ing record of both the Federal and State govern- States or territories. In per capita terms, Vic- ments and called for further restraint to reduce torias deficit is second only to Western Aus- the public sector borrowing requirements". The tralia, and over the past four years it has Australian, 24 February, 1987. increased faster than the average of all States". "... each child born today begins life with a The Age, 4 March, 1987. debt, incurred on his or her behalf by free-spend- "Mr. Des Moore. . . an adviser to the con- ing governments and local authorities, of around servative IPA cautioned yesterday that the $7000—a figure, which on Institute of Public OECD report (on the Australian economy) was Affairs projections, could become $70,000 by `seriously flawed, claiming it was too optimistic the time such children enter the workforce in its forecasts". Canberra Times, 2 April, 1987.

64 This year well be the sixth largest supermarket chaff in America. Surprising, isnt it? Surprising that a completely home-grown Australian companyis so big. For instance, if we were to transport our operations, lock, stock and barrel to the United States, there would be only five supermarket chains with more outlets than us. If youre not surprised by this statement, then it may be because you already know that we are Australias largest food retailer. But Woolworths is more than just a food retailer; did you know that we have operations as diverse as land development, fashion and exporting, and that Dick Smith is one of our wholly owned subsidiaries? To many people its a surprising fact that Woolworths operates more than 950 stores across Australia: That we serve over 7 million customers a week. Not bad for a company that started 62 years ago as a "bargain basement" store in the Sydneylmperial Arcade and knows it still has the best years ahead of it. Woolworths Ltd. And you probably thought -we were just a chain of supermarkets. wLWH 0021 TOGIFT THE NATION

To celebrate Australias Bicentenary in 1988 The National Trust and AMATIL Limited are presenting a Gift to the Nation. This community-based heritage program represents the largest of its kind ever undertaken in Australia and consists of thirteen individual projects.

Each project in the Gift to the Nation will present a different aspect of-our heritage. Historic buildings of national significance will be restored and important museum and educational facilities will be developed to assist and encourage all Australians to better understand and enjoy the architecture, history and culture of our young nation.

Juniper Hall, OafordStreet, Paddington, Sydney built in 1824 u one ofAustralia c most important historic houses. It will befully restored and opened to the public in 1988.

AMATIL recognises that as a large and successful enterprise it has a responsibility to make a contribution to community life. This takes the form of sponsorship of community activities and donations to voluntary groups. AMATIL is proud to be the sponsors of such an important heritage program as a Gift to the Nation .

- AMATIL LIMITED