Tuesday, 18 March 2014
Government and Politics
Having been absent from this place during my secondment to the United Nations, and as I draw closer to the end of my term, I thought I would put on the record some of my observations about the current state of government and politics. In the aftermath of the last election it was a novel experience to observe events in Australia from a distance and within the context of US politics and government, which has some direct implications.
As a generalisation, I think it is true to say that around the world good government flowing from sound policy is nearly always challenged by politics. It is part of the business we work in. Politics, as we know, is, at its base, effectively about power and control of the Treasury—through which ideology and the vested interests behind political apparatus can be satisfied.
In the last election it was no different, except that the level of incompetence on policy formulation reached new depths. On the one hand the government was stuck with a budget deficit and therefore limited in the scope of its vote-winning handouts. The Abbott opposition, by contrast, made no policy announcements. Rather like the wolf in sheep's clothing, they said they would go along with almost everything, using the mantra, 'Trust us.' They had no policy announcements apart from tearing down such things as the mining tax, the renewable energy target and the carbon tax—each of which was based upon slogans rather than serious policy analysis and justification.
It is interesting to speculate on this appalling shortfall in quality policy, especially when compared with that of the Hawke-Keating time, about which there has been considerable comment and speculation in the press of late. Policy now is not thoroughly researched, groundbreaking reform, fully explained and properly implemented by competent administration of the kind pursued by Hawke and Keating, much of which remains in place today and was Australia's salvation in the more recent GFC.
Some commentators have correctly identified the causes of this switch from policy thoroughness and competence. There are a number of factors. First, the quality of elected representatives who have experience in policy formulation and government administration remains poor. The contrast here might be drawn with the first Hawke ministry—trained and disciplined by Bill Hayden, who deserves all the credit. That ministry had a core of competent, good minds, who brought to bear a collective intellectual strength which has been unmatched since.
Second, staff were far fewer but again of unsurpassed quality, through experience and intellect. They were supported by a well-led and visionary ACTU, which, after Hawke, was led by quality leaders such as Martin Ferguson, Simon Crean and, of course, Bill Kelty. There were many talented thinkers and strategists whose single focus was reform and the national interest—far superior to the green and inexperienced juniors we have come to rely on. In fact, we are now seeing within the government the recruitment of lobbyists and others with vested interests, simply because the policy focus is now on satisfying the demands of the rent seekers.
Third, the policy of government, immediately on Howard's ascension, was simply political—that is, how to garnishee, secure and keep votes. The gamekeeper under Malcolm Fraser became the poacher, and there were handouts to all and sundry from booming revenue. That continued at a jolly old pace. Even Mr Howard's $50 million gift to his bankrupt brother's business is now clearly a policy precedent, and business is lining up for further dole-outs. Policy went out the window, and satisfying interest groups—provided that they were conservatively inclined—was the new deal.
As well as this Santa Claus paradigm, good policy was hijacked by fads and daily causes. Continuing microeconomic reform was forgotten. Long-term ideology and polemics took over. Productivity and efficiency fell out of the daily lexicon. Everyone felt well off because of low inflation, relatively full employment, growing employment, and consumer prices which fell dramatically thanks to the strong dollar. Superannuation accounts were fattening up nicely as disposable incomes grew. Middle-class handouts became a daily fare. The benefits of tripartism, which are now denounced as part of the return to the polemics of the 1950s of class struggle and labour versus capital, were lost. Those who suggest its reinvention have been publicly pilloried by both sides of politics. Yet those who want more welfare, including business and even multinationals, want more and more and more.
Policy initiatives and responses to various crises, however, remained the same: no new long-term policies to suit the times but knee-jerk reactions of doling out huge sums of money. Short-term tax cuts, which in retrospect were clearly unaffordable, and gifts to all and sundry cannot be sustained. The budget became a magic pudding, always replenished by rapidly and seemingly endlessly growing revenue. New institutions and bureaucracies were created as symbols of initiative, and policy commitment was measured in financial terms regardless.
The commitment to education and defence, for example, is measured purely in those terms without any real measurable outcomes—just continuing waste and extravagance. Defence is probably the classic, where policy righteousness is still today judged by funding as a percentage of GDP—simply stupid for an organisation which wastes billions with impunity, refuses to reform, is accountable in no way and has never addressed productivity or changed its institutional structure to suit more modern times. I will speak on that matter at length on another occasion.
This is a depressing scenario, not to mention the economic outcomes of all this, including gas and electricity prices going through the roof; housing prices now the most unaffordable of all time; the manufacturing industry being reduced to rubble; depressingly slow improvement in Aboriginal living and employment conditions; a retail sector too slow to adjust to the new world of online shopping; employment conditions which, while flattening out slightly, make us uncompetitive in every facet of the economy; managerial attitudes which look too much to the rear-vision mirror, fat remuneration and perks, and the removal of government constraints intended to control sharp practices; an absolutely rapacious finance industry about to be relieved of sensible regulation which seeks to control its greed; an education system going backwards, regardless of the ongoing financial generosity of government; health costs which are out of control; urban public transport failure choking our cities and costing billions in lost productivity; and continuing procrastination concerning a new airport for Sydney, despite the land having been bought by the Labor government in 1989. While we know every element has to be addressed urgently and separately, the lack of political will is sure, I think, to stymie any worthwhile action.
I think we can be sure that good economic and management discipline and rationale will only be applied where the politically weak are affected and where traditional conservative sacred cows, like defence and primary industry, are exempt. Paul Keating's dictum that good policy is good politics is not understood. As we recall, none of these difficulties were identified by the then opposition prior to the election, and of course, because of that, no remedies have been proposed since, apart from the usual empty slogans. All we had were calming assertions of support for Gonski, the new disabilities program and a promise not to return to Mr Howard's Work Choices. There were no core or non-core promises, just platitudes and a concentration of all the faults with the then government. Indeed, we should have asked ourselves whether the conservatives had gone soft. But, as we see now, it was all a charade.
The true conservatives are back with the old agenda: belt the unions and so undermine the Labor Party some more with a three-year royal commission to continually tar the union brush with tales of shock and horror about the idiocy of some; blame the unions for business failures at Holden, SPC, Alcoa and Toyota, which were all strictly commercial failings of poor management, investment decisions and market failure; unsurprisingly, return to Work Choices after all the pre-election promises, or platitudes, are forgotten; renege on Gonski as a policy of not just throwing money at a problem, confessed as a return to the Howard dogma, but notably continuing the federal interference in state responsibilities; persist with the ridiculous parental leave proposal, which is simply unaffordable; make the same old undeliverable promise of returning defence funding to two per cent of GDP—with the code words 'over time'—while doing nothing about waste and reform; continue handouts to failing political lobbies like Cadbury but in the absence of any articulated industry policy, which is just total hypocrisy; cut the welfare sector, which is an easy, powerless target; treat environmental care as a cost rather than a responsibility—the dig-it-up-and-flog-it paradigm is here again—and continue the rural-socialisation-of-losses policy of the past rather than face up to commercial failure, in the same way as the government is doing and forcing others to do within the manufacturing sector. In other words, it is the same old prejudice and ad hockery of the past, completely free of any policy rationale and, as always, motivated purely for immediate political advantage.
There is a pressing need for reform in government—for example, the need to look objectively at the current industrial framework to make it work better. We need serious structural reform in Defence and the Defence Materiel Organisation. We need to review and reform federal-state relations to remove the overlap and waste, especially in education. We need an urgent look at the way federal policies have affected energy supplies. We need to shave those policies which have benefited the wealthier in society, including on: energy costs; generous concessions and conditions applying to superannuation; parental leave; FBT on car leases; and all other subsidies which simply distort the market and significantly result in lost revenue to the Commonwealth.
In the light of recent events, we desperately need a clear and consistent industry policy where government intervention in the market is desirable, supporting growth and not poor management. We need a national housing policy embracing all facets of supply and demand—not just funding for public housing by way of state grants but also capital gains and negative gearing. Most importantly, we need to see some action to support the rhetoric on infrastructure investment, including for ports and urban public transport. For me, however, reform of the Defence institution, including DMO, is paramount, as are the contents and approach of the proposed white paper. I will be addressing these subjects in the near future.
All of these matters require policies—and, at present, there are none. I am not aware of any. We have old-fashioned ad hockery and a defence of policies of the past that have clearly failed time and time again. Until such policy is forthcoming, we will continue to drift, opportunities will be lost and the blame game and petty pointscoring will continue.