INSTITUTE OF PUBLIC AFFAIRS REVIEW ISSN 0019 0268 To Our Readers Regular readers of "IPA Review" will notice the journals new improved format. We have decided to take this step, not only because it allows a better presentation of ideas, but because it will assist in our new policy of selling "Review" through commercial outlets. In order to assist us in taking this major step we have combined the Autumn and Winter editions into a single larger issue. The "Review" will continue to be issued on a quarterly basis. The new look "Review" is just one of our recent initiatives. In addition to "Facts; IPA subscribers also receive exclusively our new series of publications, "Policy Issues" We will also be issuing a series of occasional papers during the coming year. These initiatives reflect major advances in the activities and research interests of the Institute. Those of you who are reading the "Review"for the first time may wish to return the subscription form located inside. This will enable you to receive the full range of our publications. Rod Kemp, Editor. Contents Editorial The New Privileged 3 Commentary Tax Reform; have the Liberals missed the real , issue? 5 Budgetary Restraint 5 Media: who watches the public watchdog? 6 Government Expenditure Government Expenditure Can Be Cut 8 John Stone Limiting Government Spending 11 Peter Samuel Regulation The Two-Airline Policy 15 Professor David Starkie Industrial Relations Department of Unemployment 18 Dr. Gerard Henderson Unleashing the Unions, Tying Up Management 20 Peter Costello Workers Control 23 Barry Maley Youth and Education Youth Ditches the Left 28 Greg Sheridan `Work, Discipline and Emulation 31 Special Correspondent Research Report Four Corners: the Pattern of Bias 34 Dr. Ken Baker Special Supplement Peter Graces War on Government Waste Focus on Figures The Trilogy; Cutting the Size of Government; 43 Public Sector Inflation; Government Income Recipients Jacob A bra hami Historical Document John Curtin and the American Alliance 46 Follow-Up The Bicentenary Controversy 49 John Reid and Ken Baker Telecom and Competition 55 R.W. Brack and Chris Trengove Contributors Jacob Abrabami: The IPAs Senior Economist. He has lectured at Melbourne University. His main academic interests are in the areas of income distribution and public finance. Dr. Ken Baker: Research Fellow with the IPA. His research interests centre on the media and the sociology of culture. R.W. Brack: Chairman of Australian Telecommunications Commission since 1981. Peter Costello: Member of the Victorian Bar Council practising in the area of industrial relations. Dr. Gerard Henderson: Senior adviser to the Shadow Treasurer, John Howard, and formerly a principal executive officer with the Department of Employment and Industrial Relations. His publications include `The Industrial Relations Club, Quadrant, September, 1983. Barry Maley: Senior Lecturer in organisational behaviour in the Faculty of Commerce at the University of N.S.W. His publications include research into the sociology of the professions and organisational behaviour. John Reid: Chairman of the Australian Bicentennial Authority and Director of a number of major Australian companies. Peter Samuel: Special Washington correspondent for News Limited, and formerly economics editor of the Canberra Times and a correspondent and columnist for The Bulletin for 15 years. Greg Sheridan: Journalist with The Australian newspaper, where he writes leaders and political features. For five years he was staff writer with The Bulletin. David Starkie: Professorial Fellow in the Department of Economics at the University of Adelaide. John Stone: Former Secretary to the Treasury and Senior IPA Fellow. Chris Trengove: Research Fellow at the Centre of Policy Studies, Monash University. His work has concentrated on public enterprises, regulation, telecommunications, energy and resources. EDITORIAL The New Privileged A dilemma for the ALP Many observers have commented on a shift to privileges serve mainly the interests of trade the right in Australian society. There are union leaders themselves. They include legal certainly indications of a changing attitude monopoly rights to claim employees of a towards the role of government, but to regard particular trade as members, effective rights to this as a move to the right seems to miss the main break contracts without penalty, and, under the point. Accord, virtual veto power over economic and What seems to be true is that this changing tax policy. People are increasingly asking where mood expresses disillusionment with a number the real government in Australia resides --- in the of aspects of the Corporate Welfare State: Cabinet Room or in the trade union hierarchy. • governments perceived failure to consistently The special privileges of the public service represent the public interest over and above include job security, working conditions and the clamour of powerful special interest retirement benefits unparalleled in the private lobbies; sector, and access to government to influence • the feeling that in the Corporate State of Big policy in their own interests. These privileges can Government, Big Unions and Big Business the be sustained only by the willingness of individual no longer counts; governments to raise the taxes necessary to • the increasingly common observation that finance the imperial ambitions of the public many of the benefits of government sector. intervention in the name of social justice, Although private enterprise retains some compassion or equality go to the highly paid privileges in the form of government assistance, professionals appointed to administer and limited liability and property rights, these rights, carry out government policies; as Barry Maley points out in his article in this • and, most important, the emergence of a new Review, "Workers Control", are being rapidly stratum of privilege in the society composed eroded. of government employees and trade unions: Some public service privileges may be the rhetoric of the corporate Welfare State - justified in the public interest (for example, consensus and compassion — is increasingly tenure for judges), but what we are seeing at the seen as a rationalisation for the power and moment is the massive growth of privilege in interests of the "new privileged" - trade union institutions simply because they are powerful leaders and public servants. and have direct access to government. This is not If anything, the mood is against established only unjust but is damaging to the well-being of government institutions and privileged groups in Australians. By maintaining the privileges of the community. It is for restoring power and these groups government is finding it impossible status to the consumer, the small business man, to tackle the major source of poverty in the the unemployed and elderly. These are hardly the community — unemployment. classical ingredients of a right-wing revolt. Employment opportunities in the private sector are diminished by the ever-increasing tax Union and Public Service Power burden needed to finance the government sector. The power of trade unions has grievously Trade unions have never been so powerful as harmed the economy, condemned many they are today. The unions have privileges employees to unemployment and interfered with granted to no other institution and these the freedom of individuals. The unions labour EDITORIAL market privileges have produced perhaps the left without adequate representation. Ironically, most inflexible labour market in the Western this creates opportunities for the other political World and must be seen as a major continuing parties to put themselves forward as cause of Australias slow growth and representatives of the little man, the average unemployment. Australian, and to defend him against This stratum of privilege in society, exploitation by powerful self-serving interest composed of public service professionals and groups. powerful union bureaucrats, is tending to use the Something similar to this seems to have Labor Party as its political wing. The dilemma taken place in the United States. Increasingly the this poses for the ALP is that its traditional U.S. Democratic Party, once the Party of the commitment to the weak, the powerless, and the downtrodden, is seen as the spokesman for underprivileged, and its traditional distaste for special interest lobbies and the Republican Party privilege in any form has been replaced by an (the traditional defender of powerful interests) is apparent commitment to defending a new layer being seen as the voice of the public interest. of privilege. The task before Mr. Hawke, if the Labor As a consequence the ordinary working Party is not to lose its credibility, is to revive the man, ,the taxpayer who pays for the public sector, Partys traditional ideal of representing the the unemployed and the disadvantaged are being interests of the common man. UNDERSTANDING TAX REFORM by Mr. John Harrowell, FCA (formerly National President, Institute of Chartered Accountants and Member of the Taxation Board of Review) — a detailed explanation of why fundamental tax reform is necessary, and — a proposed new integrated tax system for Australia (a modified, expanded and up-dated version of the Authors "Outline" of a new system published in February 1984) Order your copy now: Institute of Public Affairs (NSW) Price: $4.95 (including postage) 4th Floor, 56 Young Street, Sydney, 2000. Tel: (02) 231 4755 IPA COMMENTARY size of government and policies to reduce Tax Reform: