In Search of Good Government Read online

  Paul Kelly defined the way we see the 1980s and 1990s in his seminal book The End of Certainty, in which he argued that the great era of deregulation dismantled the pillars of the Australian settlement that were implicitly or explicitly agreed at the time of federation: White Australia, industry protection, wage arbitration, state paternalism and imperial benevolence. Kelly argued that deregulation unleashed powerful new forces in Australia’s politics, as well as its economy, which smashed this settlement. Writing as it was happening, his great achievement was to place the change in an historical perspective.

  Yet there are things we can observe now which were not so apparent in the early 1990s. Kelly believed that the choice in politics would be between those who pursued this new Australia exposed to the demands of globalisation, and those who sought to retreat into the old world. But that is not quite how it has been turning out. What was not apparent then was that our politicians would not prove universally capable of leading us to understand the implications of dismantling the cosy “protection all round” world.

  Our post-deregulation politics has been dominated by politicians reluctant to admit that one implication of opening up the economy is that they don’t have quite as much control as they once did. In the old Australia, our economy contained institutions and policies that both protected us and gave our governments considerable control over events. Wages and work conditions were determined by a central body. Industries could be protected by tariffs and subsidies. The value of the dollar could be set by the government, as could interest rates. Such policies were the embodiment of a paternalistic world in which we had come to expect the state to look after us.

  When the change came, there were some notable attempts at shifting people’s expectations. Paul Keating famously warned in 1986 that if Australia did not reform its economy and adopt sensible economic policies, it would end up a third-rate “banana republic.” His remarks prompted a 10 per cent fall in the value of the Australian dollar and galvanised a sense of crisis. Pollsters reported for the first time that people were talking about their collective responsibility to the economy. Bob Hawke and Keating seized the opportunity to push for reform that would better equip Australia for a competitive world.

  They persuaded voters not only that they were not entitled to regular pay increases, but that they needed to accept pay cuts to help lower Australia’s inflation rate. They persuaded voters that industry protection was a bad thing, although removing it would cost jobs. They argued that Australians could not presume that the state would fund their retirements through the age pension. The provision of an age pension had been entrenched early in Australia: the still very new federal parliament enacted legislation in 1908. By the 1980s it was regarded as an unquestionable right. To turn this expectation of entitlement around was difficult. But Hawke and Keating promoted the development of superannuation savings as a means of funding retirement, and in doing so pushed the revolutionary idea of self-sufficiency in old age.

  Even amid all this, the Hawke–Keating governments used the levers at their disposal to protect Australians from the full force of change. Tax cuts were dispensed to make up for loss of wages. The “social wage” became part of a new national “settlement,” offering free medical care, family income supplements for low-income earners, increased pensions and orderly transition plans for industry.

  But just as Australians were being forced to alter – and scale down – their expectations of government for the first time in a century, John Howard made a U-turn and gave us the second big shift in as many decades. The promise was that we didn’t have to change anything. Not only that – we were entitled to feel relaxed and comfortable. Howard’s greatest political moments came when he persuaded Australians that they – and their government – were in control of events that they didn’t feel in control of. His famous battle-cry about asylum seekers arriving by boat – “We will decide who comes to this country, and the circumstances in which they come”– remains the best encapsulation of this.

  Howard – the supposed advocate of small government – built an entirely new edifice to service the expectation of entitlement. Australians were told that they were entitled not just to tax cuts, but to government support if they had babies, if they stayed in the workforce, if they took out private health insurance, if they bought a home. People who retired with their superannuation savings would never again have to pay tax, regardless of their circumstances. He limited direct government spending on education and health, but gave subsidies to those who used private education and health services. Howard gave us tax cuts as Hawke and Keating had done, but instead of using them to “buy” acceptance of change, soften its effects and achieve better economic outcomes for the nation, he used them as evidence of the Coalition’s commitment to small government. In reality he was dressing up big government as personal entitlement.

  There has been a third change, too, the one that Kevin Rudd tried to bring about but failed to deliver in full. After the complacency – and talk of less government – encouraged by Howard, Rudd rode to power on the back of a promise that he would transform the way government worked. Governments, he argued, could change the world. He argued that his could and would do something about climate change, while Howard had argued to the death knock that it could not. Rudd argued for a return to interventions that were made through direct government spending, rather than through individual entitlements. He wasn’t just going to subsidise private health care, he was going to fix the hospitals. He wasn’t just going to subsidise private schools, he was going to provide massive new funding for all schools.

  Instead of telling Australians that they had to fend more for themselves in future, as Hawke and Keating had done, or that they were entitled to payouts from the government, as Howard had done, Rudd was changing the message about what governments could and should do. He was delving into the too-hard basket. He promised radical reform, but not reform that would hurt people, as the changes in the deregulatory 1980s had done; this was reform of institutions to make them work better for people.

  Rudd told us that he could make our hospital system work better, and our schools. He identified the frustrations of voters with federal–state blame shifting, with the never-improving crisis that characterised our education system and hospitals. Voters had seen promises of more money for health and education doled out at each state and federal election without it materially changing anything.

  The vast ambition of Rudd’s agenda, the fact that it – at least briefly – changed once again the expectations of the role of government, has been lost in the ensuing failures to deliver and in the change of circumstance that came with the global financial crisis. Instead we’ve seen a return to deep cynicism about our politicians and what it is that governments can do, and do well.

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  It is not just the changes in political message that have led to our growing confusion. It is not just that politicians don’t like admitting that they don’t have the means to change things. It is also that the pervasive presence of politicians in the media has forced them to take on an even bigger role in public discussion, even as they have less power to influence events. In a relentless 24-hour media cycle, politicians are the ultimate free providers of content. They are always on hand to comment on anything that might be going – from something that actually does concern them in the political world through to the latest sporting win or controversy.

  It used to be the case that questions asked at question time in federal parliament were directed to the responsible minister, not to the prime minister. Ministers spoke only on matters within their portfolio. That restraint has been lost in recent years. With the increased demand on politicians to have something to say on every topic, it is little wonder that many rely on stock lines provided by the prime minister’s office each morning. Or that prime ministers overshadow their governments.

  While the role of politicians has been changing, so too have the institutions we deal with every day, as the pendulum has s
wung from public sector to private. The institutions we rely on to deliver services and run our community were once arms of the state. Now these necessities are delivered by the private sector. Transport, banking, electricity, water, insurance and telecommunications: all these sectors were once wholly owned or else heavily shaped by major publicly owned institutions operating in their markets. Even in the fields of health and education, the rise of the private sector and the relative decline of the public sector has been occurring apace in the last few decades. As a result, we have become increasingly angry about corporations and their influence over our lives, but we also still hold government responsible for the shortcomings of markets that they no longer control.

  Twenty or thirty years ago, the image of a group of council workers having a smoko, not working, by the side of the road, was a wonderfully simple metaphor not just for inefficient government, but for our lackadaisical approach to life. Whom do we complain of now? Private institutions, such as banks and telecommunications companies and their outsourced call centres.

  Our view of politics has failed to keep up with the implications of this shift from public to private. Deregulation, obviously, involves government ceding control over large parts of the economy, whether it be the rate of interest banks can charge on mortgages, the value of the dollar or the wage-setting process. The politician who once had ultimate control over the person who installed your phone, or who ran the local jail as an employer and manager, has become simply another shareholder, or a contractor of services with much less say, and less clear lines of accountability, than their predecessor thirty years ago. The terms of our political debate are still framed by the expectation that governments can control events, or at least protect the community from them. But because our leaders seem as powerless to control private sector institutions as we are, we are constantly reminded of their impotence – and we don’t like it.

  In the early 1980s, federal ministers still controlled the interest rates on housing loans. Then these were deregulated, the Reserve Bank was made more independent, and banks moved interest rates up and down in a reflection of the RBA’s money-market cash rate. Politicians would emerge to take implicit credit when interest rates moved in the right direction, or to explain why it wasn’t their fault if they didn’t. The fact that their actions had little to do with the result was irrelevant.

  More recently, with banks borrowing more and more of their funds offshore, the banks have argued that the domestic cash rate is not necessarily an accurate reflection of their cost of funds. So they have started not to move their home-loan rate when the official rate moves. This should be the ultimate test of market forces: if customers don’t like what their bank has done, they can move to another bank. Instead, the political argument becomes one of whether the treasurer of the day has enough machismo to bully the banks into doing what he or his critics want.

  Language about the size of government also spiralled out of control in the last few decades. Politicians no longer talk at elections or budget time about how much they will spend in a year, but about how much they will spend in four years. The amounts spent on health and education in an expanding economy therefore always seem to increase. In fact, in the Howard years, as a percentage of GDP, health and education spending declined significantly, as money was transferred to security and defence, to counter-terrorism and waging wars. Popular frustration and confusion about failures in health and education resulted. Coming on top of the loss of control that was still flowing from the deregulatory period, it was no wonder that Australians became confused about exactly what it was governments were supposed to do.

  Politicians set expectations. They are also the conduit through which people’s expectations about the state flow. But expectations also build up insidiously over time. We may not know why the givens of any particular policy debate are given. They seep in quietly over the years until someone comes along to challenge the entire edifice that has built up without our realising it.

  A person’s sense of entitlement in life – what they expect their life to look like – is all-pervading. A person may have a small sense of entitlement, or a large one. It will shape their sense of how capable they are of changing their life – should they wish to change it – or of creating the life they desire.

  I noted earlier that we don’t value our politicians or public service. Yet our leaders have often risen to the challenges laid down for them. In the 1890s, we created a social and economic compact built on a huge wave of prosperity. Whatever the constitution’s limited ambit at the time of federation, you have to wonder whether our present generation of politicians could achieve anything close to this. Is that because the politicians then had to argue only among themselves – state to state – and not against a whole new layer of federal representatives and bureaucrats?

  We struggle today to find either a politician or a message that can give effective, inspiring voice to our personal or national aspirations. We fight attempts at intervention that aim to fix our problems, such as the mining tax (yet complain about the impact of the high Australian dollar) or a carbon price (despite wanting politicians to do something about climate change just five years ago).

  Much of the debate about the nature of Australian politics, and about our policy settings, naturally refers back to federation, since that was when “Australia” got started. But the structures, and perhaps more importantly the habits and expectations, of much of our governance were established, and had become entrenched, well before that.

  Autocrats and Democrats

  Amazing things were happening in the world when Arthur Phillip and the First Fleet left that world in May 1787 and made their way to Australia.

  A congress of American colonies had published a Declaration of Independence from England a decade earlier, stating that “all men are created equal” and had “certain unalienable Rights,” including Life, Liberty and the pursuit of Happiness. No one had put things quite like that before. Declarations dating back to the ancient world and up to the beginnings of the English parliament had set out what might be expected of the rulers of a particular society, or where the people might fit into that society, but no one had ventured to start from the basis of an individual’s rights and on that foundation fashion a political order.

  The world, and the world of ideas, was being turned on its head in the wake of the Age of Reason. In France, the state’s financial instability was provoking resistance among the nobility to the imposition of taxes, and a public clash with Louis XVI. There was civil unrest in the Dutch Republic, the Netherlands and Poland.

  As the First Fleeters were spending their first months at Sydney Cove, the American colonies were, one by one, ratifying the new constitution of the United States. In the newly formed union, George Washington took office as the first president. The Americans had, by a series of deliberate and deliberative processes, created a nation suffused with the ideas of the Enlightenment.

  Eighteen months after Phillip arrived at Botany Bay, the French Revolution would burst forth with the storming of the Bastille. The French had begun a process that would eventually, and painfully, overturn the old order across Europe.

  It is hard for us to comprehend just what huge changes these were, how they overturned all the rules, from the most basic statements of human rights to the seemingly most trivial considerations.

  In his book on the second American president, John Adams, David McCullough documents the heated discussions among the American founding fathers about what to call the president of their new republic. Should they call him “Your Highness”? The US Senate took a month on the question of titles, which superseded all other business. A committee appointed to consider the issue reported back with the suggested title, “His Highness the President of the United States of America and Protector of the Rights of the Same.”

  George Washington, in the meantime, had sent out a list of queries to trusted confidants about appropriate presidential behaviour. Would it tend to “prompt impertinent ap
plications and involve disagreeable consequences,” he asked, “to have it known that the President will, every morning at eight o’clock, be at leisure to give audience to persons who may have business with him?” After all, that was how things were done in the royal courts of Europe. Despite the Americans having just fought a long war to throw off the British monarchy, this was the only model they had for the protocols and expectations of government. Etiquette and titles were questions of form, not substance. But to those self-consciously trying to create something new, they were worth getting right.

  On the other side of the world, Arthur Phillip was also establishing a new society. It was not one bothered by revolutionary ideas or the conundrums they created. But that is not to say Phillip lacked ambition. “What Frobisher, Raleigh, Delaware, and Gates did for America, that we are this day met to do for Australia, but under happier auspices,” he reportedly told his motley crew after his commission as governor of the new colony was read on 7 February 1788.

  Our enterprise was wisely conceived, deliberately devised, and efficiently organised, the Sovereign, the Parliament, and the people united to give it their authority, sanction, and encouragement. We are here to take possession of this fifth division of the globe on behalf of the British people, and to found a State which, we hope, will not only occupy and rule this great country, but will also be the beneficent patroness of the entire southern hemisphere. How grand is the prospect which lies before this youthful nation!

  With his allusions to British explorers and fortune-seekers in the Americas, Phillip’s ideal was one of imperial grandeur. Little thought had been given to how the penal colony might function over time as a society or a polity; instead it would develop in a happenstance way. Isolation would create some wildly contradictory pressures on the nascent polity. It had no parliament or delusions of democracy, and no imported social structure. Thanks to King George III’s lofty supposition of terra nullius it had no land ownership issues to consider. Eddie Mabo and the High Court were 204 years in the future.