Technocracy or democracy?
This is a big question, and there are many ways of answering it. The most popular way is to simply say what you, yourself, expect of government, and attribute this to the population at large. We hear politicians and opinion-makers doing this all the time. 'What the people of Australia expect of this government', John Howard will typically say, before he will then go on to answer with his own preferred version of what he thinks they should expect.
In this brief talk, let me try to answer the question another way. What I want to suggest is that people generally expect governments to be engaged with content. They expect government to be engaged with the content in the policy areas that have been established as a consequence of our political processes, with the content of the problems that affect the lives of the citizens they lead and represent, with the content of the issues that affect the interests of the nation in general over which they exercise authority.
These scarcely seem unreasonable or controversial expectations. To say that people expect governments to be engaged in the content of their job might strike you, not as an answer to the question posed by this topic, but as evasive sophistry. Instead of answering the question, you might think that I've merely re-stated it. What does government do if it's not engaged in the content of the areas over which it has authority and responsibility?
What I will suggest is that, in many areas, perhaps most, government has abdicated from an interest in content in favour of governing according to formula. Instead of governing according to content, government has been reduced to method. What this means is that, instead of a democracy, we have a technocracy; instead of a government that really knows what things it's doing, we have one that only knows how to do things.
A view from the cabinet office I want to press this view with reference to the national competition policy, but first let me underline the extent to which people do expect governments to be engaged with substance. In one of my earlier lives, I was, for many years, a senior cabinet official. Cabinet offices are shadowy places. Generally, they are the first and last bureaucratic stops in the policy making process. Matters arise in cabinet, travel to the cabinet office, and from there they issue to departments; or matters come from departments to the office on their way to cabinet for determination. Cabinet officials live at the sharp end of policy, dealing with matters at their first and final stages, recommending who should take carriage of issues under what conditions, and making the final recommendations as to what cabinet should decide at the end of the process.
The point in this story is that a cabinet official has extraordinarily privileged access to what people expect of government. Working in close daily proximity to heads of government and their ministers, when matters come to the verge of decision, cabinet officials can be deluged with meetings, submissions and correspondence on the inside, and must closely monitor the public debate on the outside.
Now, one of the things that always struck me in this was the enormous presumption of order and intelligence that is attributed to cabinet offices by virtue of their proximity to government. By intelligence, I don't mean having a high IQ. Rather, I mean that, no matter how chaotic we knew that a particular government decision-making process really was, no matter how confused we might have known that government policy was on a particular issue, no matter how completely blind we knew that we were really flying, those on the so-called outside that we had to deal with never believed such conditions were so.
We often used to remark on this. People not only expect government to be engaged with the substance of the issues, to research the issues, to know the issues, to properly think through the issues; they have, I think, a psychological and emotional need to believe that government is so engaged, knowing and thoughtful, regardless of whether they disagree with the outcomes. This was manifest on occasions when we would actually tell, say, officials in other departments that we didn't have a clue about something, or that we had chaos on our hands, since we were never believed. Eventually I discovered that you could say almost anything you like to outsiders for, if it betrayed their belief in government, invariably most people think you're just trying to disarm them or hiding the truth.
So strong is the need to believe that government is on top of its brief that, even when we knew as a matter of fact that our representatives had stuffed up completely, and even when the stuff-up was written large all over the front pages of the newspapers, one could still hear people outside suggesting that what had really happened was that the government deliberately stuffed-up. The government's agenda would be interpreted as the opposite of the truth, or people would suppose that there was another hidden agenda. I don't know whether this is a peculiarly Australian characteristic, but I've no doubt that, in this country at least, people have a deep aversion to believing that their government is incompetent.
Now you might think this strange, given the widespread longstanding public expressions of cynicism about politics and politicians. Yet it can also be suggested that the two might go together. I don't want to oversimplify, but perhaps part of the reason why Australians traditionally express a cynical and distrustful public attitude toward government is that they have such high expectations of what government should do and how it should behave. By striking a pose of public cynicism and distrust, they are, in a sense, both keeping the bar high and protecting themselves from disappointment. This motivation is not necessarily inconsistent with the observation that, in close proximity to government, people not only seek confirmation but often insist that, despite the facts, those at the top really know what they're doing. After all, this would both confirm the validity of the strategy of public cynicism and also protect them from the deep unease that I notice comes with knowing that the top really hasn't got a clue.
National competition policy What I want to suggest, and what I will illustrate in relation to national competition policy, is that the traditional Australian cynicism and distrust is now being converted into something different — into a deeper and more dangerous disaffection because increasing numbers of people are finding it impossible to sustain their belief that government is doing its job. And why they're finding it impossible to believe is that they are frequently finding that governments are not at all engaged in the content that concerns them.
Before I try to make this point more easily understood by telling you about the way the competition policy was introduced, and how it operates, it's necessary to make it clear that I'm not going to argue against competition. There are important qualifications that could and should be made about the paradigm that underlies competition policy, and perhaps Steve Keen will mention some of these. But broadly, I think we should support competition in the sense that we need the active policing of trade practices in the public interest. It was not the political right but Lionel Murphy who introduced Australia's first effective trade practices act, and it's undoubtedly important that government actively works to limit the tendencies of business toward anti-competitive behaviour, and to redress the unequal bargaining power of consumers compared with corporations.1
What I want to talk about is not competition per se, but the specific way in which the present national competition policy is contributing to the pathology of disappointed expectations of government. What I want to highlight are two undemocratic features. The first is the way the policy was introduced, and the second is the attached payments system.
The national competition policy was introduced, not through democratic processes, but by subverting them in the form of what is not unfairly described as an extra-Constitutional coup. Not only was the policy never the subject of debate in the course of an election, but nor was it ever properly considered by any of our parliaments. Rather, the policy is a product of 'executive federalism'.
As you may recall, the policy arose as a consequence of the review conducted by Fred Hilmer in 1992-93 under the auspices of the Council of Australian Governments, or COAG, a title that describes meetings of Australia's heads of government. Now, meetings of heads of government are by no means bad things, and COAG has generated some good co-operative federal policies. Yet, COAG is also a black hole when it comes to public accountability. COAG formulates its agenda in secret, meets in camera, invents its own standing rules as it goes along, and exercises full discretion about the extent to which, and the forms in which, its intentions, deliberations and decisions are publicly revealed. It's a de facto national cabinet, yet it enjoys immunity from freedom of information legislation, auditors-general, ombudsmen, the nation's real cabinets and the check of parliamentary scrutiny.
While it's true that the individual governments represented within COAG face all the usual checks and balances, the distinctive multi-jurisdictional basis of COAG itself short-circuits these mechanisms, for they're all single-jurisdiction based. What effectively happens is that, by spreading the risks in its decisions across all jurisdictions, COAG effectively answers to none. There's no formal relationship between COAG and any of our parliaments unless legislation is required to implement its decisions.
But even here, the parliamentary check is readily defeated. This is because COAG's laws are invariably designed to interlock around the country. The interlocking character of the laws, including the competition laws, means that if one parliament objects to one part of one piece of a law, it must successfully mobilise identical objections in the other eight parliaments, or vote the entire law down. In other words, for each parliament, the interlocking COAG laws are presented as all or nothing propositions. In these circumstances, the great political weight of a bipartisan national executive authority that sits over and above all the jurisdictional walls destroys any single parliament's opposition.
If you think this analysis unconvincing, I invite you to check the record. With the occasional exception of Western Australia — which at times likes to treat the nation as a posture shop for parochial political purposes — intergovernmental measures pass through our parliaments as routine.2 From a democratic perspective, all this is of course objectionable. This in turn helps to explain why the policy is so resented. As Paul Keating, the promoter of the national competition policy, once said himself when COAG was contemplating giving some tax powers to the States: 'If we are going to fundamentally alter the way this country works, and do it in a way that sticks, it has to be done with the informed consent of the people — after full public debate'.3 How apposite these words are in relation to the national competition policy. Instead of having a public debate prior to introducing the policy, we've been having it ever since, and it's gradually coming unstuck.
This is far from all. The fact that the policy was a product, not of our democratic processes, but arose by subverting or at least bypassing them has left a legacy of illegitimacy. More damaging, the way the policy began is also the way it has gone forward ever since. To understand this, you need to appreciate that the policy struck on the basis of the Hilmer report comprises three intergovernmental agreements. Two of these, I think, can be broadly supported, creating as they did, the Australian Competition and Consumer Commission (ACCC) and the National Competition Council, among other things. This is not to say that everything about these two agreements is good, only that they're not diabolical and are capable of amendment. It is the third agreement, titled the 'Agreement to Implement the NCP and Related Reforms', that contains the heart of the democratic darkness associated with the policy.
What the third agreement does is powerfully reverse the onus of proof, not in relation to competition per se — that is, not in relation to competition principles and conduct — but in relation to the public authorities and services that are presently being subjected to the great range of experiments in economic rationalism. What the agreement does is establish a set of structural arrangements that effectively work to trump social and democratic objections to this agenda, no matter how soundly based these objections may be. The nitty gritty is that the agreement provides for the Commonwealth to maintain the real value of its annual grants to the States and to make additional payments — 'Competition Payments' — in instalments, on the condition that the States implement a radical agenda for electricity, gas, road transport, water and many other areas — indeed, practically all the public sector — in line with a specific timetable.
The problems with this are manifold. In the first place, the rationale for the tied funding is bogus. The Hilmer report not only provided no warrant for the payments, it specifically noted that, 'arguments that any budgetary impacts from the adoption of pro-competition reforms, where they exist, would largely be confined to transfers between individual governments and their residents, and would not involve more than negligible revenue transfers between different levels of government'.4
Nonetheless, immediately the Hilmer report was released, the premiers set about developing a case for the Commonwealth to reward them for embracing it. In the upshot, the Commonwealth produced a report that concluded that the States should not receive any payments. When this created great consternation, a second report was promptly produced by the Industry Commission on 'The Growth and Revenue Effects of Hilmer and Related Reforms' which now purported to show that the benefits of the reforms would flow primarily to consumers and the Commonwealth through increased tax revenue, and some redistribution of the proceeds was appropriate. The benefits that the Industry Commission found (of about 5.5 per cent of GDP over 5 years) have been comprehensively critiqued by John Quiggin, who revised them down to around 1 per cent — an estimate that has subsequently proved close to the mark.5
In the second place, the payments have deeply compromised the role of the National Competition Council. Conceived by Hilmer as an advisory and analytic body to governments, but subsequently given the power to make recommendations to the Commonwealth on the competition payments, it has been converted into an active pro-competition participant in the policy process with real power, a partisan role that has been compounded by the appointment of outspoken economic rationalists to the body.
Most unfortunately, the competition payments have become the drivers of the process, instead of the actual merits or otherwise of particular reforms. They have armed the nation's Treasuries with the capacity to threaten their political masters with the loss of millions of dollars if the so-called 'reforms' do not proceed. In effect, the payments are a bribe, which severely tilts the policy playing field in favour of the reforms. The power of the payments is not to be underestimated. As Paul Keating also once remarked, 'never stand between a Premier and a bucket of money'.6 As one witness from a Western Australia regional development council to a senate select committee hearing on competition policy testified last year: 'My view is that the state treasury is probably like all treasuries around Australia. It tries to maximise its income and it takes as little notice of the social impacts as possible'.7 And as John Quiggin has observed: the imposition of an agreement under which a national agency superintends a comprehensive review of all state legislation, and recommends the imposition of financial penalties if it is dissatisfied with the results, is unprecedented. Such an imposed agreement is inconsistent with the right of citizens of the Australian states to democratic self-government.
For those who wish to have a closer look at how badly the actual reform agenda can work out in practice, I invite them to have a look at my recent book on the water authorities, where I've tried to do exactly that in the context of two of the spectacular infrastructure failures we have had in this crucial area.9
Conclusion Let me conclude with two observations. Firstly, the single most important thing to be done to fix the national competition policy is to remove the tied competition payment arrangements and subordinate the extra-Constitutional status of the policy to the federal structure of the nation's democracy. The explicit original rationale for the payments was bogus. Part of the original payment arrangements — the real terms guarantee — has already been superseded by the GST arrangements. The remaining payments should be absorbed unconditionally into other Commonwealth grants. The great benefit in this is that it would level up the policy playing field, forcing the nation's Treasuries to argue the case for particular reforms in relation to the actual content over which they are to be applied. Competition policy could then proceed to be implemented on its own emancipated and accountable and not necessarily empty merits.
The final observation is that we must remember that the national competition policy is not only an agent of disillusionment and disaffection; it's also a piece of evidence in its own right. As well as having its own directly unfortunate consequences, it's an index of the extent to which our governments have surrendered their interest in content, in favour of barren method — in this case, a method derived from the rarefied assumptions of neoclassical economics and versions of liberal ideology. If we're to restore the healthy Australian cynicism to the place where disaffection is now growing, we not only need to fix the competition policy, we need to reform the more widespread approach to governing by our governments that this policy merely exemplifies.
Christopher Sheil is a former senior executive in the NSW Cabinet Office and the editor of the Evatt Foundation's new book Globalisation: Australian Impacts (UNSW Press). This paper was delivered to the Evatt Foundation's "Privatising Democracy?" conference, convened at NSW Parliament House on 30 August 2001.
Notes: 1. See Jenny Hocking, Lionel Murphy: A Political Biography, Cambridge University Press, Melbourne, 1997, Ch 15. 2. The observation that federalism can defeat accountability is scarcely new. See, for example, Cheryl Saunders, 'Accountability and access in inter-government affairs: a legal perpective', in Michael Wood, Christopher Williams & Campbell Sharman (eds), Governing Federations: Constitution, Politics Resources, Hale & Iremonger, Sydney, 1989, pp. 123-39. 3. Paul Keating, 'The Commonwealth and the States and the November Special Premiers' Conference', National Press Club, 22 October 1991. 4. Committee of Inquiry ('Hilmer report'), National Competition Policy, AGPS, Canberra, 1993, p. 355. 5. John Quiggin, Great Expectations: Microeconomic Reform and Australia, Allen & Unwin, Sydney, 1996, Ch 15; John Quiggin, 'Productivity isn't working', Australian Financial Review, 6 December 2001. 6. Remarks at the press conference following the Special Premiers' Conference, Sydney, July 1991. 7. Australian Senate, Riding the Waves, Report of the Senate Select Committee on the socio-economic consequences of the National Competition Policy, February 2000, p. 118. 8. John Quiggin, 'Submission to Productivity Commission Inquiry into the Socio-economic consequences of National Competition Policy', September 1998, p. 16. 9. Christopher Sheil, Water's Fall: Running the Risks with Economic Rationalism, Pluto Press, Sydney, 2000.
Sheil, Christopher, 'What do we expect of government?', Evatt Journal, Vol. 1, No. 2, October 2001.<https://evatt.org.au/post/what-do-we-expect-government>