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INSTITUTE OF PUBLIC AFFAIRS LIMITED(Incorporated in the ACT)

ISSN 0019 0268IPA REVIEWVol. 41 No. 2 August-October 1987

6 The Rat Pack 64 An Economic Bill of RightsGerard Henderson President Reagan proposes to reinforce theIt prides itself on the independence, incisive- political freedoms guaranteed in the Ameri-ness and critical powers of its members—but can Constitution with economic freedoms.even the Canberra Press Gallery has its blindspots.

14 Debt: the Real ImplicationsDes MooreThe true nature of Australia's debt crisis is notwidely appreciated. What we have borrowed 3 IPA Indicatorsis less important than how we have spent it. Which AustraliaWhich Australian companies recorded the

plosses 1n8 c18 Peacemaking—No Child's Play

Rita H. JosephPeace educators have acted reprehensibly inloading their own fear and panic about animpending nuclear holocaust onto theshoulders of children.

24 Deadlier than WarR. J. RummelAbsolutist governments—especially commu-nist governments—have proved a far greaterthreat to life than war.

31 Handbooks for Good GovernmentMichael JamesTwo Australian think-tanks have producedquite different policy strategies for reducinggovernment.

35 Review's 40th BirthdayIt's a very different looking journal now, butfrom it's inception Review has occupied arespected position in public debate.

43 Public Service or Political ServiceLes McCarreyGovernments around Australia are sacrific-ing the independence of the public service tothe interests of the party.

52 The Capture of the Welfare StateDelia Hendrie and Michael PorterThe current welfare system serves the inter-ests of some people, but rarely those most inneed.

56 Privatization a la FrancaisPrime Minister Chirac is breaking with thelong-time French tradition of asserting thesuperiority of the State in all things.

5 EditorialThe Labor Government must face some harddecisions if it is to get the economy right.

22 Defending AustraliaHarry GelberThe neglect of foreign affairs and securityissues in the recent election campaign revealsthe unreality of Australia's view of the world.

38 Map: Advance of DemocracyIn ten years ten countries in Latin Americaand the Caribbean Basin have become demo-cracies.

40 Focus on FiguresJacob AbrahamiAustralians drink more, drive more anddepend on government more than they did 40years ago.

47 Ten Conservative PrinciplesRussell KirkAn eminent Philosopher for Freedom illumi-nates the art of the possible.

59 Around the StatesLes McCarreyIf the founding fathers had foreseen currentlevels of taxing and spending, federationmight never have happened.

62 Strange TimesKen Baker's further tributes to New AgeAwareness.

46 IPA Councils

37 Subscription Advice

Editor-in-Chief Rod Kemp Editor.• Ken BakerAdvertising: Peggy Nicholls (03) 8301097 Review Office • . Articles and LettersProduction Assistant: Fiona Macaulay 6th Floor, Unsolicited manuscripts should be accompanied byCirculation: Laura Johnson (03) 614 2029 83 William Street, a stamped, addressed return envelope.Distribution: Gordon & Gotch Ltd. ' Melbourne, 3000 Letters to the Editor should be kept to no more than

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Printing: Wilke & Company Ltd. Phone: (03) 614 2029 - Public Affairs Limited are those of the authors andDesign: Bob Calwell & Associates Facsimile: (03) 62 4444 do not necessarily reflect the views of the Institute.

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

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IPA INDICATORSIncrease in major crimes reported in Victoria

between 1945 and 1985-86: 1,060 per cent. Increasein number of police over the same period: 303 per

cent. Increase in population: 106 per cent.

Largest losses recorded by Australian companies in1986: $619 million by the Victorian State Insurance

Office, $221 million by the Victorian StateTransport Authority and $140 million by the

Victorian Metropolitan Transit Authority.

Proportion of Australian households relying ondirect government benefits as their principal source

of income in 1974: 13 per cent.In 1984: 26 per cent.

Number of military personnel in USA: 2,143,955.In USSR: 5,130,000.

Ratio of generals to personnel in the US Army:1:1,735. In Australia, for all Services: 1:500

(approx.).

Population of Afghanistan in December 1979:13-14 million. In December 1986: 8 million.

Increase in working days lost due to strikes in theyear to March 1987 compared with the year to

March 1986: 23.2 per cent.Proportion of employees participating in strikes

over the same period: 1:8.

Wage growth in Australia in the latest twelvemonths: 4.9 per cent Average for Germany, Japan,

USA: 2.4 per cent.

Most common sources of income used by addictsto buy heroin, in order sale of drugs; social securitypayments; employment or savings; property crime;

prostitution.

Cost of loading a tonne of scrap metal in the USA:$3. In Britain: 64 cents. In Queensland: $15.

Estimated cost in 1978 of the new ParliamentHouse in Canberra: $469 million (in 1987 dollars).

In 1987 $997.5 million.

Fastest growth in part-time jobs between 1973 and1985 of all industrial countries: 6 per cent in

Australia.

Number of unpaid parking fines incurred by theNigerian high commission in Britain in 1984:

108,000.

Number of domestic, maintenance, cleaning etc.staff per 100 in-patients in public hospitals: 91.8.

In private hospitals: 51.5.

Number of divorces in Australia, average perannum 1971-1975: 17,348 (1.3 per thousand

population). In 1986: 39,417 (2.5 per thousandpopulation).

Number of dependent children of parents divorcingin 1986: 45,200.

Proportion of marriages in 1986 in which one orboth partners were previously divorced:

31 percent,

Proportion of all employees in Australia employedby Coles Myer, Australia's largest retailer

one in 38.Profit made by Coles Myer in each dollar of sale:

less than 2 cents.Number of people apprehended by Coles Myer for

shop stealing or fraudulent theft claims in theii months to June 1987: 41,000.

Number of robberies or break-ins suffered by ColesMyer stores in the same period: 687.

Number of bomb threats: 235.

SOURCES;(1) Victorian Police Statistician, TheAge, May 15 1987; (2)Australian Business, May 13 1987;(3)Iohn r'reebairn, Michael Porter and CIiffWalsh, Spendingand Trcring: Australian Reform Options. Allen and Unwin, 1987; (4) Encyclopaedia Britannica Year Book, 1987; (5) Michael O'Connor, Testing the Water, AustralianDefence Association. 1987; (6) Encounter, April 1987; (7) ABS. Industrial Disputes Australia March 1987. Cat No. 6321.0, ABS, Employed Wage and Salary EarnersA usrralia March Quarter 1987, Cat No. 6248.0 (B) The Economist, July 25 1987; (9) The Bureau ofCrime statistics and Research. Drugs and Crime, Phase Two, NSW1987; (10) Liberal Party "Rort Report" BR 13', May 22 1987; (11) The Auditor-General, Efficiency Audit Report, Parliament House Construction Project Management,June I987;(12) The Economist. July 41987;(13) The Spectator. May 21987;(14) Senate Select Committee on Private Hospitals and Nursing Homes, Pri rate Hospitals inAustralia, April 1987; (15) ABS, Dirorces Australia 1986, Cat. No. 3307.0; ABS, Marriages Australia 1986, Ca t. No. 3306.0; (16) Brian Quinn, Managing Director andChief Executive ofColes Myer Ltd., James Thompson Memorial Lecture, July 23 1987.

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EDITORIAL

What Direction Now?

With its election victory, Labor assumes a heavyresponsibility for putting the economy right.

The Government must first clearly acknow-ledge that the task is much greater than it has so farrecognized. The wild fluctuations in assessment ofthe economic outlook and of required policies donot inspire confidence. Nor has the Oppositiondone a great deal better. In short, there has been alamentable failure to provide leadership.

An acknowledgment of past mistakes wouldbe a helpful start. After Mr. Keating's first Budgetin 1983 the IPA argued that "the Hawke Govern-ment has made critical errors in economic manage-ment—budget policy and wages policy." The sub-sequent blow-out in Australia's external debt, pri-marily reflecting expansionary fiscal policies, andacceptance of wages growth inconsistent withachieving international competitiveness, confirmsthat assessment. The Government should acceptthat the worsening terms of trade since early 1985have only brought forward the need to recognizethat over recent years the Australian economy hasbeen on a declining path.

That path has meant weakening growth innational disposable income, reflecting deteriorat-ing productivity and investment. That in turn hasreflected a growth in Government that has wroughtunprecedented—and inappropriate —changes tothe structure of society and the economy. We havebecome a society of consumers, living predomi-nantly for the present. It is scarcely surprising thatinterest rates and unemployment have over recentyears moved to ever higher levels while the dollarhas fallen. Despite the Government's propaganda,the depreciating dollar is scarcely an achievement:it reflects a loss of competitiveness that has increas-ingly forced a "bargain basement" sell-off of Aus-tralian assets.

The Government's responses have been slowin coming and inadequate when they have come.Neither before nor during the election has the Gov-ernment provided any clear guidance as to itsplans. This needs to be remedied.

The IPA has consistently argued that the mainproblem is the size ofgovernment itself. The explo-sion of the public sector has reduced private sectorincentives to save and to work and increased incen-tives to consume. The Government's continuing

support for a centralized wage determination pro-cess, and its increased regulation of business, hasmade investment less profitable and more risky.The growing taxpayers' revolt is forcing AustralianGovernments to put a cap on their revenue raising;but there is a need to go much further than this.

The Government would considerably enhancethe prospects of sustained economic recovery if in

•the forthcoming Budget it were to:• clearly acknowledge the need for major structu-

ral change involving a reduction in the size ofgovernment and in government "regulation". Anannouncement of targets for reducing Common-wealth expenditure and the size of governmentwould be a useful start. For example, a reductionin the overall size of government equivalent tothree percentage points of GDP a year wouldreduce the government sector to around 36 percent of GDP in 1989/90 compared with an esti-mated 42 per cent in 1987/88;

• cut back strongly total public sector borrowingsby recognizing its inability to control net Statesector borrowings and budgeting for a substan-tial surplus on Commonwealth account.

It should reject the "corporatist" approachinherent in the ACTU's Australia Reconstructedand in the Industrial Relations Bill shelved duringthe election campaign. Instead, the Governmentshould recognize the need for a much more compe-titive labour market, based on enterprise unionswhich would allow a more internationally competi-tive wage structure and would recognize the scopefor much needed productivity gains of the sortachieved at enterprises such as SEQEB and Robe'River. The time has come to accept that, while con-frontation is never desirable, acquiescence to uniondemands is not the road to peace and prosperity; itsimply stimulates further demands while under-mining the long-term health of the economy.

At a time of great uncertainty internationally,Australia urgently needs to reduce its vulnerabilityto external shocks and to build up its economicstrength. The Government must put aside policies,including the Australia Card, which divert atten-tion from the over-riding economic priorities. Theway forward is to reduce dependency on govern-ment and encourage individual initiative, enter-prise, and responsibility.

THE RAT PACK

that I might be aiming at some kind of hatchet job.But he conceded that he could not refuse an inter-view. Kate Legge also predicted a demolition piece.She actually mentioned some of my earlier essayson the "Industrial Relations Club" and the "FridgeDwellers".

Michelle Grattan greeted my arrival in heroffice with the news that she was "tired and mudd-led." It was, after all, 11.30 p.m. when I spoke to herbut Michelle has never allowed a politician or astaffer to get away with this excuse when she ischasing a late story for the second (or third) editionof The Age. I have known some staffers to auto-matically answer . "Hello Michelle" if the phonerings anytime between midnight and dawn. Notonly was she tired and muddled, I found that Ms.Grattan had developed a sudden aversion to taperecorders. She initially objected when I turned onthe machine claiming that she never used tapes. Tothose who know Michelle, this comment is almostNixonian. During my period in Parliament House Icannot recall anyone with a more insatiable appe-tite for tapes and transcripts. Needless to say, Itreated Ms. Grattan in the same manner as shetreats politicians and recorded the interview.

And then there was Paul Kelly. Mr. Kelly alsoexpressed shock/horror when I produced my tape-recorder. It was like conversing with a politiciansitting on a less than one per cent majority in aswinging seat. There were requests to go off therecord (where I obliged by turning off the tape).There were also enormously long pauses while Paulweighed up the pros and cons of saying this or that.During one interminable silence my eyes glazedover. Having just asked a tricky question Iimagined myself getting up from the table, going tothe bar to ring a cab and returning just in time forMr. Kelly to commence (yet another) excessivelycautious answer to a rather incautious question.

I don't know where Michael Dodd learnt jour-nalism. But from my experience he seems to havepicked up his question-response technique fromPaul Kelly. Mr. Dodd is noted for his ability to firefast verbal yorkers at the feet of politicians. Butwhen it comes to batting against my medium-paceattack he adverted to a stone-walling techniquewhich would have done. Trevor Bailey or Ken("Slasher") Mackay proud.

My interviews with the Rat Pack took placeless than two weeks after the election. As such thediscussions were affected by the widespread allega-tions of media bias that surfaced during the cam-paign. As a group, journalists are quite insensitiveto criticism but it was obvious that some of the

public censures of the media had .left a mark. Irecall, for example, a certain tension developingwith some of my interviewees when I raised thequestion whether journalists (like politicians)should be required to declare any pecuniary inter-ests. I was still getting phone calls on this on the daybefore this article hit the presses.

During the campaign there were those whodirected their criticisms at the proprietors—espe-cially Alan Bond (National 9 Network), KerryPacker (Australian Consolidated Press) and RupertMurdoch (News Corporation). And there werethose who focused on the role played by journalistsin the election—in particular the Canberra PressGallery. Former Prime Minister Malcolm Fraserconcentrated his fire on Rupert Murdoch while IanMacphee and Ian Sinclair both went for the Bond-Packer-Murdoch trifecta. Mr. Doug Anthonyblamed proprietors and journalists alike. But Sena-tor Michael Baume (who initiated the controversy)and Liberal Party Director Tony Eggleton identi-fied the alleged problem as stemming from theworking journalists. So did (then) Shadow Treas-urer Jim Carlton who accused the media ofa "bit ofnaughtiness."

The debate over bias demonstrated that thereis much misunderstanding about the media.Messrs. Macphee, Fraser and Sinclair have got itwrong. The key movers and shakers are not theproprietors or the editors (although the latter dodetermine whether to accept or reject copy) butrather the working journalists. The leaders of theRat Pack—Laurie Oakes, Michelle Grattan, PaulKelly, Greg Hywood and (from Sydney) MaxWalsh—are among the most influential figures inAustralia. Increasingly they have more than onemedia outlet. For example, Laurie Oakes has a reg-ular column in The Bulletin. Paul Kelly appears onNetwork 10 as a political commentator. Max Walshhas columns and a TV show. Michelle Grattan andGreg Hywood bob up regularly on radio and televi-sion. In terms of setting the political agenda andassessing policies and performance, the Rat Packare more significant than an Alan Bond, a KerryPacker, a Rupert Murdoch or (indeed) a JamesFairfax.

There is no doubt that Senator MichaelBaume's decision to raise media bias as an electionissue was a valuable political tactic. The Liberaland National campaigns were (and remained) adisaster. At one time it looked as though media biaswas the only issue which the Liberals had. Cer-tainly it was one of the few they seemed willing torun with (trade union power, waste, etc. having

THE RAT PACK

`y

^^ Laurie OakesThe Gallery has "an inflatedview of itself'

Kate Legge_

Estimates that about 80 percent of the Gallery vote Labor,

Paul Kelly but does not have "strongThe Gallery is "very much criticisms of the Gallery or theinto practical politics': way it operates".

_

Michelle Grattan"A significant proportion,probably a majority, of thepeople in the Gallery wouldthink that the HawkeGovernment has performed asa " - '__government pretty well.

Mike Steketeer . Believes that the Gallery

reported fairly the "otherside" (i.e. the Thatcher-Howard position) of the SouthAfrican sanctions issue.

THE RAT PACK

been virtually ignored). But, tactics aside, the roleof the media is an issue that deserves evaluation initself. Is there media bias? If so, what form does ittake? What is the role of the Canberra Press Galleryin all this? Does it matter? These questions (amongothers) were in my mind when I headed off to Can-berra to meet the Down Under version of journal-ism's best and brightest.

Middle Class and Left-Liberal

From my seven years experience of working inParliament House I have formed a view of thePress Gallery which I was anxious to test on thecurrent members of the Rat Pack. The Gallery ispredominantly middle class in background andleft-liberal in political attitudes. The overwhelm-ing majority of journalists vote ALP—albeit with acertain scepticism towards political parties andpoliticians born of the latent contempt which Par-liament House familiarity invariably breeds.

The Pack operates according to an informalhierarchical structure with Pack leaders determin-ing the political orthodoxies and fashions. Becauseof the similarity in attitudes of Pack members,there is very little diversity within the Gallery. Inother words, heretics are hard to come by. By andlarge the Gallery acts professionally. After all, astory, is a story, is a story. But the political orienta-tion of Gallery members is such that if there is anyslippage in professional standards (as there must befrom time to time) it is the non-Labor side that willinvariably suffer. Moreover, conscious bias aside,the attitudes of journalists must affect the mannerin which issues (as distinct from political parties orparty leaders) are presented.

Most of the Rat Pack members to whom Ispoke agreed that the Gallery consisted of predom-inantly Labor voters. Greg Hywood put the figureat 70 per cent while Kate Legge went 10 pointshigher. Michelle Grattan, Mike Steketee and JohnStanley conceded that a majority of the Galleryvotes Labor. Laurie Oakes had the impression thatthis was so in the 1987 Federal election butexpressed some doubts as to whether this wasalways the case. Paul Kelly declined to commenton the record (even after a long pause) but did sug-gest that there were "more Liberal supporters in theGallery than people think." Michael Dodd was notconvinced that there was majority support withinthe Rat Pack for the ALP but he could only identifyone Liberal supporter. (Note to Editor—I think Iwasted some of my allowance on the Michael Doddlunch.)

All maintained that political preference wasirrelevant and that, by and large, professionalismrules—OK. Greg Hywood was emphatic that oncea journalist entered the Gallery "ideology reallygets sucked out very quickly" and that journalistsmade essentially pragmatic judgments on parties,policies and politicians based on "their knowledgeof the way the system works." Paul Kelly regardedit as natural that members of the Pack were "verymuch into practical politics" because most werenot economists or specialists in other fields. Therewas a widespread view that the Gallery was verymuch influenced by .its assessment of politicalcompetence. Michelle Grattan expressed theopinion that "a significant proportion (probably amajority) of the people in the Gallery would thinkthat the Hawke Government has performed as agovernment pretty well." Laurie Oakes concededthat if you hold that the Government "is morecompetent than the Opposition. . . then that is theway you will end up voting, I suppose."

By and large, the Rat Pack members rejectedmy view that the Gallery was infatuated with PaulKeating. I could find no other way to explain whyKeating had received wide acclaim when he was aregulator and potential nationalizer, when (in 1983)he became a deregulator but remained a big spen-der and when (two years later) he was further con-verted to cost cutting. There was, however, a gen-eral agreement that Keating was a skilled politicianwho worked harder than any of his contemporarieson either side of politics in selling his message byconstantly treading the Gallery corridors. No onedisagreed with Laurie Oakes' view that Keatingwas regarded as "colourful, tough, outspoken,brave (and) competent."

One of the few areas in which there wasgenuine disagreement turned on whether therewere any common Gallery attitudes. I believe thatthere was almost a unanimous Gallery position on,for example, the David Combe affair, the MX mis-sile issue and the Liberal Party's policy of labourmarket deregulation. The Gallery almost to a man(and woman) opposed the Hawke Government onthe first two and the Liberal-National Oppositionon the last one. The Combe and MX affairs wereone-off issues. But in my view opposition to JohnHoward's approach to industrial relations and sup-port for the ALP-ACTU Accord has been a consis-tent Gallery position. So has support for economicsanctions against South Africa.

On 31 October 1985 (less than two monthsafter Mr. Howard became Opposition Leader) GregHywood introduced a report—not a comment

I0

THE RAT PACK

piece—with the assertion that "the deep problemsJohn Howard is having with his policy on SouthAfrica were epitomized at a press conference..."(Mr. Hywood is quite fond of this type of introduc-tion.) Hywood wrote that Howard's position was'"away behind the times" and as a result of this "hischances of receiving a sympathetic hearing for hisviews from the Australian media" were "minimal."Howard, Hywood suggested, was "set for a difficulttime on South Africa." And so it turned out to be.

During our interview Greg Hywood main-tained that South Africa was different because thisissue was essentially bipartisan. By this he meantthat there was a common Bob Hawke-MalcolmFraser position. A similar view concerning theessential difference of the sanctions debate was putby Grattan and Kelly. Steketee and Dodd main-tained that Hywood's October 1985 assessmentwas wrong—with Steketee holding strongly to theview that the media had fairly reported "the otherside" (by which he meant the Thatcher-Howardposition). Oakes and Stanley did agree, however,that there was some kind of Gallery position onSouth Africa and that this did influence the waythis particular issue was reported. Oakes clearlyregarded South Africa as an exception—claimingthat since the Gallery consisted of "middle classpeople with human rights concerns" it was morelikely to run a line on an issue like sanctions thanon more mainstream political or economic. issues.John Stanley said he sometimes "wondered"whether members of the Gallery seek safety innumbers. In my view this is especially so withyoung Gallery reporters—of which there aremany.

If there is (or was) a Gallery position on, say,South Africa then it is quite plausible to suggestthat there will be other positions across a widerange of issues. It is hard to find anyone in the Gal-lery these days who is not an economic rationalistor who is highly critical of the way the Governmentis handling the economy. Nor are there many whowould now argue against the view that Australia'sindustrial relations system needs more flexibilityprovided this is achieved within a centralized sys-tem. Nor are there many who would oppose a for-eign policy approach which allowed the US Navyaccess to Australian ports but which was critical ofcertain aspects of the Reagan Administration's pol-icies on, for example, the Strategic Defence Initia-tive, the Comprehensive Test Ban Treaty and sup-port for the Contras in Nicaragua.

To put it another way (to use one of NevilleWran's famous terms), there is not much evident

criticism among the Rat Pack of the approachtaken by Messrs. Keating, Willis and Hayden toeconomic policy, industrial relations and foreignpolicy respectively. At times this is taken to ridicu-lous lengths—for example when Kerry O'Brien (theABC's chief political correspondent) suggestedduring a radio, interview that there was virtuallynothing on which you could criticize the economicpolicy of the Hawke Government or when therewas a similar suggestion in a Sydney Morning Her-ald feature article written by one-time Rat Packmember John Edwards.

The Heretics

I believe that subconsciously at least there issome. concern about .what Michelle Grattan con-ceded was a Gallery tendency towards "some sortof common view of the world." Invariably when Iraised this sensitive issue, members of the Rat Pack(with the conditioned reflexes of a herd of Pavlov'sdogs) would invariably bark out the name DavidBarnett. During my interviews Paul Kelly,Michelle Grattan, John Stanley, Michael Dodd andKate Legge all raised the spectre of Barnett.

David Barnett was Prime Minister Fraser'spress secretary from 1975 until April Fools Day1982. He writes a one-page column each week forThe Bulletin and has no regular television or radiocommentary spots. But, nevertheless, he appears tobe consistently on the minds of Rat Pack members.It is as if Barnett is perceived as the resident conser-vative heretic who can be conveniently trotted outwhen allegations are made concerning politicalimbalance in the Gallery. You get the impressionthat if David Barnett were to fall off.the Galleryperch, a waxworks model would be created over-night by Rat Pack members and placed in a promi-nent place outside the office of the Leader of theOpposition.

There are a few—but not many—Gallery here-tics who consistently criticize the Governmentfrom the left. .Recidivist Keynesians are hard tofind these days—with the notable exceptions ofKen Davidson (The Age), Paul Malone (CanberraTimes) and (perhaps) Mungo MacCallum.

Melbourne Herald journalist Peter Smarkrecently wrote that the "Canberra press gallerythese days looks like an interchange bench for poli-tical press secretaries." The problem is that thebench is overloaded with those who are willing topull on a Labor guernsey but very few want to runaround for the Opposition. Sometimes you get theimpression that David Barnett comprises the

THE RAT PACK

backs, the forwards and the interchange bench ofone side—all rolled into one—and that arrayedagainst him is a side that is fielding teams in allthree grades.

In the latter years of the Whitlam LaborGovernment when the media proprietors were per-ceived to be supporting the Liberal-Nationalparties, a number of key journalists (including RatPack members) signed a petition expressing con-cern at the "overwhelming concentration of mediaownership in Australia" and dissociating them-selves from what they described as the "inherentlyconservative bias expressed by the majority of pro-prietors." The signatories included Alan Kohler,Mungo MacCallum, Paul Malone, Kerry O'Brien,Alan Ramsay, Ken Randall and (wait for it)Richard Farmer. In 1987 when two key media pro-prietors—Alan Bond and Kerry Packer—publiclydeclared themselves for the Hawke Labor Govern-ment there was no similar response.

Mike Steketee believes that a governmentalways has some advantages when dealing with themedia primarily because it controls access tostories and information. Certainly this has been sosince the election of the Hawke Government inMarch 1983. Labor handles the media very well.But, at times, there is an atmosphere of intimida-tion in the air. This was evident during the electioncampaign when (in an off-the-record briefing) Mr.Keating indicated that he had marked certain jour-nalists whom he felt had dealt unfairly with him.Even Mr. Mick Young felt compelled to suggestthat perhaps the Treasurer was becoming toosensitive.

The Liberal and National parties, on the otherhand, do not sell their political product to themedia with the same degree of intensity as do theirLabor colleagues. Nor do they consistently fightback hard when they believe they are the victims ofunfair reportage. Media bias may become an issueevery three years at election time. But sporadicoffensives seldom work.

The 7.30 Report's David de Vos recentlyreferred to the "ever polite" John Howard. InSeptember 1986 Ms. Grattan described Mr.Howard as a "soft media target." When I wasHoward's Chief of Staff I used to (privately) jokethat there was Methodism in his madness. Theexcessive and continual snide personal referencesto Howard in the media suggests that nice guys tendto get treated badly. I recall a prominent FinancialReview report (published on the day before theelection) where reference was made to Mr.Howard's "worried, gold-capped grin" and his

"usual press conference semi-yell." What, youmight ask, is the professional justification for thisput-down and others like it?

The complicated issue of journalistic compe-tence is virtually never tackled by the media. It ismuch easier to write endlessly of leadership chal-lenges (which inevitably tend to involve Opposi-tions rather than Governments) than to undertakethe hard task of analyzing what the latest currentaccount or debt figures really mean. The SundayTelegraph's Warwick Costin in recent times hasemerged as the Malcolm Mackerras of the Liberalleadership prophets. Costin predicted in February1987 that John Howard had only "weeks if notdays" left. In June he suggested that Howard mightbe rolled even if he won the 1987 election andbecame Prime Minister.

You can learn all about academic Mackerras'false election prophesies in the media. But journal-ists seldom criticize one another. During the elec-tion campaign the Sydney Morning Herald dealtwith one allegation of media bias by interviewingsuch paid-up members of the Rat Pack as RichardCarleton, Paul Kelly, Mike Steketee and Geoff Kit-ney. Not surprisingly they all felt their electionreportage was very much up to (if not above)scratch. It was akin to asking Pope Pius IX inDecember 1864 whether he approved of the Sylla-bus of Errors: Ms. Legge is a lively journalist withan enquiring mind. Yet she informed me with astraight face that she did "not have strong criti-cisms of the Gallery or the way it operates." TheRat Pack is like that.

During the seven years I worked with theCoalition in Canberra (1976-79 and 1984-86) I wasstaggered by the amount of genuine respect, if notawe, which Liberals and Nationals had for the lead-ers of the Rat Pack. I had been brought up in theMalcolm Muggeridge "from pulp thou art to pulpthou shalt return" school. So I was genuinely sur-prised to see many senior Coalition figures race forthe newspapers or turn on their radios and televi-sions to await with bated breath for this or thatcomment from leading Gallery figures. It was as ifthey were actors waiting for reviews of a first nightperformance. The problem was compounded bythe fact that almost every night was first night.

According to Laurie Oakes, the Gallery takesitself too seriously. I agree and merely add that theLiberals and Nationals take the Gallery too ser-iously. Mrs. Thatcher has demonstrated that it ispossible to appeal to the electorate over the headsof the media. It would be worth trying DownUnder.

12

There are many able and professional journal-ists in the Canberra Press Gallery. But there are notmany Liberal or National supporters. I wasreminded of this the other night when I turned onTim Bowden's ABC Backchat program and notedthat a viewer had written in complaining aboutMax Walsh. According to the (somewhat irate)

THE RAT PACK

Channel 2 watcher, during his coverage of theelection results on the evening of 11 July Mr.Walsh twice used the term "we" when referring tothe Labor Party. Maximilian Walsh was notthe first prominent Australian journalist to makethis election night slip. I doubt that he willbe the last.

Journalists on Media Bias

"...what a lot of people suspect is probablytrue: that most of the press gallery journalists inCanberra support the Labor Party... (Partly thiswould) result from the fact that the gallery isquite young, unconventional in life-style and,therefore, liberal in attitudes."

Phillip Chubb, Time, July 13 1987"I do not believe the gallery has set out to

get Howard; it has simply given him away."Peter Bowers, Sydney Morning Herald,

June 23 1987"... considerable sections of the media

seem now to be acknowledging that the Govern-ment has got away with more than it should havein this campaign, and that even if the Leader ofOpposition is taking a long count, the media stillhas a professional job to do."

David Bowman, The Age, June 24 1987"There has been a bias against Mr. Howard

in his period as leader and, of course, judgmentsabout this can only be subjective. It was moreeasily identified in the initial six to nine months.Unusually, Mr. Howard got no media honey-moon as leader. The media were a factor in theinitial undermining of his leadership."

Paul Kelly, The Australian, June 18 1987"Of course the media is biased. Even Blind

Freddy and his dog can see it. The real surprisewould be if it wasn't. After all, at least 80 per centof the people who work in it would be intendingALP voters.. . But it is largely a bias of omis-sion, rather than commission."

David Clark, Australian Financial Review,June 22 1987

"...they're not doing their job properly,they're not doing it professionally. . I think partof the reason is they personally admire theHawke Government, most of them support the

Hawke Government. Most of them think it's agood government, that it contains some of thebest and the brightest, that it believes in econo-mic rationality and so forth, and they've let thatinterfere with their professionalism."

Brian Toohey, The 7.30 Report, June 221987

"Whilst John Howard remains in conten-tion, his chances are gradually being whittledaway by a press, led by the flagship of the Fairfaxempire, the Sydney Morning Herald. Not sinceArthur Calwell has a Federal political leaderbeen given such a rough time by the media."

R. D. Chalmers, Inside Canberra, June 191987

"For the past couple of days, I have forsakenthe soft luxuries of the campaign and headedinto the newspaper morgues. . . Over manyhours, in two cities, I reviewed all the coverageby the main newspapers on sale in Sydney andMelbourne. As a result of these studies, I firmlybelieve that the coverage has, at times, beenunfair to the Liberals."

Robert Haupt, The Age, June 19 1987"...the media. . . probably are ailowing the

Government to get away with more, more easily,than it allows the Opposition."

Michelle Grattan, The Age, April 7 1986"Paul Keating admitted this week the media

generally had given the Government a `fairgo'."

Michelle Grattan, The Age, September 191986

"...the most biased election coverageagainst the Liberals that I can recall."

Brian Toohey, ABC Radio PM Program,June 18 1987

13

Debt: The Real Impliocadoo'nsDes Moore

In the last IPA Review, Nobel Prize winner, Professor James Buchanan, wrote about the moral and econo-mic crisis being threatened by the growth of debt in the USA. This article outlines the results of a majorresearch study on Australian debt conducted by Des Moore, to be published shortly by thie, IPA. To date, itargues, the debate, has concentrated too much on the source of the debt and insufficiently on how theborrowings are being used.

Australians have heard a lot about the growingforeign debt, have been told by the Governmentthat the . large increase- in recent years mainlyreflects adverse external developments beyond ourcontrol, and have been warned that this will requireadjustments to policies to limit the increase in liv-ing standards (or, in some versions, to prevent anyincrease) and to effect a restructuring of our indus-tries. What we have not been_ told by the Govern-ment, however, is that it is of less significance thatthe debt increase is entirely in foreign debt thanthat the increased borrowings have been used tofinance consumption, that debt has grown relativeto income because failed domestic governmentpolicies have wrought major structural changes inthe economy and in social attitudes that have beeninimical to economic growth, and that we are prob-ably now falling into a deflationary debt trap whichwill end in a depression unless major. changes in awide range of policies are implemented.

The essence of the debt problem is this. For thepast 15 years or so, Australians have been increas-ing their borrowings at a faster rate than . theirincomes and, for each of the three major sectors ofthe economy-government, corporate and house-hold—the cost of servicing those borrowings hasbeen taking an increasing proportion of receipts.These trends have worsened since the early 1980s.

Too much 'can be made of the fact that theincrease in total debt and debt servicing costs is areflection of increased foreign debt. Those whoargue that external debt "matters"_ while internaldebt does not matter—"because we owe it to our-

selves"—overlook the key point that what reallymatters is how borrowings have been used. Internaldebt can be just as much a real burden as externaldebt if the borrowings are not used productively.'

Unfortunately, that is just what has happened.The increase in total borrowings has not been usedto finance increased investment but has, rather,financed increased consumption. As a result, Aus-tralians have incurred a lot more debt but have notcommensurately increased the productive _assetsneeded to service that debt (which explains theincreasing proportion of incomes going on debtservicing). Moreover, an increasing proportion ofinvestment has been for replacement of"worn out"capital rather than expanded productive capacityand some of the investment that has been financedby borrowing has not produced satisfactoryreturns.

Per Cent To GDPCon- Gross

sump- Invest- Gross Debttion() ment( b ) Total (c ► External

Av 1970/71 to 73/74 72.5 18.5 124 12Av 1974/75 to 77/78 75.6 17.4 110 9Av 1978/79 to 81/82 77.1 18.0 114 13Av 1982/83 to 85/86 79.0 17.4 129 291986/87 (est.) - 77.4 17.0 140 41(a) Private plus government. Includes consumption ofcapital.(b) Excluding investment in dwellings (and real estate trans-fer expenses) and stocks.(c) Excluding all debt of financial institutions, i.e. is under-stated to the extent of borrowings by financial institutionsfrom overseas.

Des Moore, Senior Fellow at the IPA, was formerly Deputy Secretary to the Commonwealth Treasury.1. In his book, Public Principles of Public Debt: A Defence and Restatement (1958), Professor Buchanan established thatborrowing involves a voluntary exchange in which there is no "burden"incurred at the time of the borrowing. rather the burdenof debt is on the future generation. Hence, the importance of haw borrowings are used. He also pointed out that there is noessential difference between borrowing externally and borrowing internally unless (real) domestic and external interest ratesdiffer. Of course, if (nominal) interest rates take inadequate account of exchange rate changes such differences may arise andmay exacerbate the burden of external debt.

IPA Review, August-October 1987 14

These developments do not conclusivelyestablish the existence of a debt problem. In myjudgment, however, debt levels—and more par-ticularly debt servicing levels—have reached apoint, relative to income, where they are inhibitingspending on consumption, and (more importantly)on investment, to such an extent that we are prob-ably now falling into a deflationary debt trap. Thebasic notion of such a process is simple.

If people and businesses find that, after payinginterest, they have less income left with which tofinance other spending (or, if not less, a slowinggrowth in other income), they will naturally tend tospend less on goods and services or to take less risksin expanding productive capacity. This process canbe self-reinforcing in the sense that the less peoplespend on buying goods and services the less likelybusinesses will be to undertake new investment toprovide those goods and services. Moreover, gov-ernments are susceptible to the same influences. Asdebt levels increase relative to income, there is thusan in-built, albeit almost imperceptible, tendencyfor economic growth to slow.

But the process does not necessarily end there.As debt levels become excessive relative to income,fears of default increase and risk premia demandedby lenders also increase. At a certain point, highdebt levels—and associated major concerns aboutdefault—not only deter investment but start toundermine confidence more generally. Somethinglike this process may have been an important factorin the 1930s depression, which was preceded by alarge increase in debt.' The stage has now beenreached in Australia where there is a real possibilitythat excessive debt levels will lead to the debt trapbeing sprung and a depression ensuing.

Of course, debt traps can be avoided ifgovern-ment policies and community attitudes are condu-cive to an increase in labour productivity and toinvestment. But high debt levels mean that majorpolicy and attitudinal changes need to be made toovercome the inhibiting effects of those highlevels.

If there is a real possibility of falling into a debttrap why isn't there greater recognition of that—and why aren't governments taking more steps toprevent it?

THE REAL IMPLICATIONS

One reason is that, as the factors that havecontributed to the accumulation of debt have alsocontributed to the slowing economic growth, highlevels of debt relative to income are thus seen as asymptom of other failings and are not recognized asa contributor per se. Another reason is that anyslowing down effects from the build up of debt ine-vitably involves a gradual process that cumulatesover time and is not susceptible to measurement: inthese circumstances there is a natural scepticismabout assessments that must be based essentiallyon judgment rather than statistical "proof'. Also,the focus of economists (and others) on the short-term economic outlook may have contributed to atendency, which has only recently started to beremedied, to have less regard to longer term struc-tural changes and their implications for the econ-omy. This has tended to result in an assumptionthat adjustments in key short-term economic vari-ables (such as public sector borrowing or theexchange rate) will do the trick. Associated withthis is the tendency to suggest that the major causeof our debt problem is the adverse overseas econo-mic trends; while such an approach does not rejectthe need for domestic policy action it avoids attri-buting fault to earlier domestic policy failings—andimplies the need for adjustments in policies that arelimited mainly to taking account of the changedinternational economic scene.

Of course, Australia has been adverselyaffected by slowing overseas economic growth andincreased agricultural protectionism, resulting in along-term decline in our terms of trade. But, whilesudden changes in the overseas scene can provideshort run "excuses" for inadequate policies, suchexcuses are not credible over an extended period:Australia has to cut its coat according to its clothand is not incapable of doing so. In any event, asthe graph shows, there was virtually no change inour terms of trade between the September quarterof 1977 and the December quarter of 1984, bywhich time gross external debt was already wellover $50 billion and the exchange rate was alreadyclearly overvalued.3 The main recent adversemovement in our terms of trade has occurred onlysince early 1985. We should face the reality that therecent downturn in our terms of trade has only

2. See Professor Schedvin's article, "The Australian Economy on the Hinge of History" in Australian Economic Review 1,87which shows that propert y income payable abroad as a percentage ofexports ofgoods and ser vices is now about the same as it wasin 1928— about 25 per cent. It subsequently peaked at over 40 per cent in the early 1930s.J. i.e. the level of external debt in Australian dollars was understated at that time because it would necessarily be increased bysubsequent depreciations. Moreover, a substantial part of the subsequent increase in external debt - which may have reachedaround $110 billion at end June 1987— cannot be attributed to the fall in the terms of trade from early 1985. Also, it is unlikelythat policies would have been "tightened" as early as they were in the absence of the fall in the terms of trade from earfv 1985.

15

THE REAL IMPLICATIONS

brought forward the need to recognize the deterio-rating path we were pursuing.

There is also a tendency to argue that, as Aus-tralia's total debt relative to GDP is still consider-ably lower than in many OECD countries, we can-not be said to have a debt problem. However,OECD countries' economic growth has also beenslowing and they may be experiencing similar"over-borrowing" and the factors contributing tothat .4 Alternatively, they may have used theirincreased borrowings to a greater extent than Aus-tralia to finance an increase in productive assets;this is almost certainly true of countries such asJapan. Moreover, most OECD countries face fewerdifficulties in expanding exports.

Terms of Trade(1979-80 = 100.0)

20

Sept 69 Sept 71 Sept 73 Sept 75 Sept 77 Sept 79 Sept 81 Sept 03 Sept 85 Mar 87

Comparisons of international debt levels arenot something, therefore, from which we can drawcomfort any more than we can draw comfort fromcomparisons that show that the government sectorin Australia is smaller than in most OECD coun-tries. It avails us little to be running with the manytortoises that exist amongst those countries!Equally, given the uses to which increased borrow-ings have been put, we cannot draw comfort fromthe fact that total debt levels are not historicallyhigh relative to GDP.

Finally, to conclude that the policies pursuedover the past 15 years or so have largely been inap-propriate.is not something that finds ready accept-ance. Yet an examination of developments over thewhole period makes it difficult not to conclude thatthis debt problem has emerged because of a com-prehensive failure of government policy which hasinvolved, as a key part, a marked expansion in thesize of the government sector. This growth of thepublic sector, fuelled by adherence to "Keynesian"

4. There is considerable evidence that the USA has, for one.

economic policies since the late 1950s and early1960s, has been partly financed by debt. Even moreimportantly, however, this expansion of the Statehas reduced private sector incentives to save and towork and increased incentives to spend—and to gointo debt to do so; private sector "gearing up" hasbeen stimulated by perceptions that the State hasput a "safety net" under the economy, both viaindustry support and through the Welfare State.Moreover, the spreading perception that gettinginto debt is acceptable—even economicallyresponsible—has probably enhanced private sectordebt accumulation, especially in the more recentenvironment of financial deregulation. Also, theincreasing involvement of the State in incomeredistribution, whether directly through taxationor "social wage" programs, or indirectly throughinterference in the wage determination process,and increased "regulation" of business, has madeinvestment less profitable and more risky.

The end "product" has thus been an increasedemphasis on consumption, financed increasinglyby borrowing, and a decreased emphasis on invest-ment, resulting in slowing economic growth and adiminished capacity to service the accumulatingdebt. What I argue, essentially, is that the growth ofgovernment has been responsible for a slowingdown in the output (or income) side of the equationbut that this bigger government has not takenaction to restrain the spending side commensur-ately. The difference between the output andspending sides of the equation has been made up byincreased borrowings which, after a time, start tohave their own independent effect in deterring bothspending and output.

What Should We Do?

If we are falling into a debt trap, how do weavoid it? The short answer is that we have to adoptpolicies that will result in increased output while atthe same time containing spending. There nowseems to be general agreement on that. But what isnot agreed is the speed, extent, and even (in somecases) the nature of the changes. In particular, thereis as yet only limited recognition of the ongoingdetrimental effects that the increased size of gov-ernment (and particularly the increase in socialwelfare spending) is almost certainly having on theincentive to save and to work. The recent report on"Structural Adjustment and Economic Perfor-mance" by the OECD—a body not known for being

16

a supporter of small government—provided someencouragement to such supporters when itincluded as one conclusion that the growth of pub-lic spending has operated, at the margin, to reducenational income of OECD countries by 10 to 15cents for every extra $1 raised in taxes. The analysissuggested that it is the interaction of the combinedeffects of higher taxation and increased welfareexpenditure that is relevant. Some academicstudies suggest that the effects of high taxationalone are probably even greater. 5 Little attentionhas been paid in Australia to such studies.

Unless we take radical action across a numberof fields to halt the growth in debt, we face at best along period of economic stagnation; indeed there isnow a real risk of an economic depression. Thosewho argue that radical action is "impracticable"and cannot be "forced" on society do not addressthe point that, unless society is "persuaded" to takesuch a course, the continuation of a "gradualist"approach towards change will result in even moredrastic action being required later. There is also fartoo much "fence-sitting" by those who accept theneed for major change but who are reluctant tofully engage the debate because they fear beinglabelled politically: what we require is leadershipfrom all major non-political groups, includingbusinessmen, academics and bureaucrats, in thelong run national interest. But, above all, we needthe Government to provide the community with arealistic assessment of the difficulties we face andto implement the policies to overcome thosedifficulties.

if we are to avoid the debt trap, we should set athree year program along the following lines:-• a reduction in government outlays of around

THE REAL IMPLICATIONS

three percentage points of GDP annually toaround 33 per cent;

• after allowing for a reduction. in the net publicsector borrowing requirement to two per cent ofGDP (from its present level of around four percent), a broadly commensurate reduction intaxation;

• the establishment of a wage negotiation systemthat allows/encourages a substantial increase inproductivity. This would best be achieved by asystem under which wages and conditions ofemployment are negotiated primarily at theenterprise Ievel, with full protection for indi-vidual employers and employees from attemptsby unions to exercise monopoly power;

• the improvement of productivity in the publicsector through the virtual elimination ofcontrolspreventing businesses from competing in themarkets of goods and services produced by mostpublic enterprises, and the "privatization" ofmost such enterprises;

• the reduction of costs through a reduction ofindustrial protection against imports at a signifi-cantly faster rate than envisaged by presentplans;

• pending an improvement in productivity, poli-cies which exercise heavy restraint on consump-tion spending. To the extent that other policiesdo not ensure this, monetary policies will need tobe operated "so as to produce continued highinterest rates.

To state such a program is to indicate just howgreat our difficulties are. The worst is far from overand we will need strong leadership from the Gov-ernment, and from other groups, if our debt prob-lem and its underlying causes are to be overcome.

5. See, for example, Edgar K. Browning. "On the Marginal Welfare Cost of Taxation" in the American Economic Review,March 1987.

17

Peacemaking-No Child'sPlay

Rita M. Joseph

"Peace at any price" is an unworthy ethic to instill into our children.

In the summer of 1212, an estimated 50,000 chil-dren set out from Europe for the Holy Land tomake peace between the Christian world and theMuslim world, to conquer by love instead of mili-tary might. There were two groups of children, oneled by a French shepherd boy named Stephen fromClove-sur-le-Loir, and the other by Nicholas, a tenyear old from Cologne. It was a peace march parexcellence and it generated tremendous excitementand attracted enormous crowds of cheering specta-tors. But it was to end in terrible tragedy. Some ofthe children became lost, others were shipwrecked,and the rest fell into the hands of slave-traders whoshipped them to the slave markets of NorthernAfrica from where they were sold as slaves to theEast.

With horror we may wonder now how theparents and those in authority in 1212 could everhave condoned the Children's Crusade. But reallyit should not puzzle those of us who watched lastyear as our own children were caught up in anexcess of crusading fervour, whipped up by some ofthe more fanatical adult members of the PeaceMovement, and assisted by the only slightly lessunscrupulous persuasiveness of well-publicizedtelevision programs like "Mum, How Do You SpellGorbatrov?," in which children were presentedglamorously as splendid ambassadors of peace.

It is all too easy to imagine those crusadingchildren of long ago as they set off in good faith andwith high hopes—their faces aglow with the zealthat can be seen on our children's faces each year atPalm Sunday Marches.

In moments of optimism, it has been said thatwe learn by our mistakes. But even the most cur-sory glance back over the manipulative antics andPeace Studies programs devised for children tomark the International Year of Peace should cause

us to doubt the truth of that old adage. Indeed, weshould be moved to ask why the more senior mem-bers of the Peace Movement, who may have man-aged, before these days of Mickey Mouse options,to acquire a smattering of history, have deliberatelyignored or conveniently forgotten the lesson of his-tory so painfully learned by adult European societynearly eight centuries ago.

While it should be acknowledged that thesePeace educators are sincere people, it should bepointed out that their sincerity cannot compensatefor the deficiency in prudence and wisdom of manyof their judgments. No doubt they mean well butthe road to slavery is paved unfortunately like theroad to hell. . . Their campaign is designed aroundtwo distinct thrusts, which are, oddly enough, socontradictory as to border on the irrational.

On the one hand, like their mediaeval for-bears, they have fostered unrealistic expectationsof the ability of childpower to achieve peace. Theyhave inspired a naive zeal for peace, equippingchildren from kindergarten upwards with anarmoury of simplistic catchwords and glib sloganswith which they are assured of being able to convertthe warmongers.

On the other hand, the Peace educators havedeliberately dispelled the natural peace of mindand heart that has traditionally belonged to chil-dren. The natural security and trust that character-izes childhood has been blasted to smithereenswith the Peace educators' "realistic" horror-inspir-ing predictions of imminent nuclear immolationfor the whole world. That this part of their teachingprogram has been superbly successful was demon-strated recently in the results of a poll taken amongAustralian schoolchildren, which revealed that theoverwhelming majority was convinced that theworld would end in a nuclear disaster "in their life-

Rita M. Joseph has been a teacher for 17 years, of both Primary and Secondary students and of a broad array of subjects.including History.

IPA Review, August-October 1987 E 8

PEACEMAKING-NOCHILD'S PLAY

time". The children's optimism appears to havebeen utterly destroyed. Optimism, so natural tochildhood, has been tampered with, replaced by adefeatism programmed by Peace educators toswamp any consideration of happier possibilitiessuch as that• human ingenuity may yet devise solutions, a dis-

covery, perhaps, that will render nuclearweapons obsolete, or

• human resourcefulness and tenacity of purposemay yet secure for us the capacity to surmountand survive a nuclear conflagration.

In every age there have been uncertainties,frightening possibilities, looming disasters. Theghastly slow-motion of famine, the swift scourge ofraging diseases like smallpox and the Black Death,the utterly monstrous inhumanity of genocide, andthe horrific destruction of wars with massacres,pillaging and burning...

Man has always had to live with these things.But over the thousands of years of history, weshould.be able to take some comfort and couragefrom the sure, vivid testimony therein to theindomitability and astonishing resilience of thehuman spirit. And of these characteristics,nowhere is there more evidence than in the readi-ness of each generation to go to extraordinary, evenheroic lengths to protect the next generation, tryingto ensure that their children might enjoy, howeverbriefly, some measures ofcarefree happiness, that ifthey reach adulthood, they might retain some sus-taining memory of the good and enduring things oflife.• In the history of civilization, the reversal ofthis tradition of protecting children is a remarkablyrare aberration; and it will be to our eternal shameif we are prepared to condone such an aberration inour own age. In truth, it is a cruel and shockingperversion to seek to reverse the natural roles, todump adult burdens of fear, doubt and anxiety onchildren's shoulders. The shallow spiel about howit helps children to grow up to be responsible,peace-loving, non-aggressive adults needs to heexamined more closely for traces of self-righteousrationalization.

It is imperative that adult society thinks morecarefully about that small precious prelude calledchildhood. A prelude in which small human beingsshould be privileged surely to grow confident andsturdy in a protected environment (not frightenedout of their wits by the certainty, mercilessly andhysterically thrust upon them in the name of real-ism, that panic-stricken adults have lost control ofa world that is reeling inexorably towards nuclear

destruction). A prelude in which small humanbeings should be allowed gradually and con-trolledly to come to grips with the myriad problemsof the adult world. A prelude in which childrenslowly but surely come to learn both the moreencouraging lessons of history—that good cantriumph over evil even under the most intimidat-ing circumstances —and the more sobering . les-sons—that they must be vigilant against evil, learn-ing to recognize it and learning above all not tounderestimate it. They must come to learn whatthose poor children of 12J2 were never taught—that zeal for peace is useless without prudence,without the wisdom furnished by that most funda-mental of all history lessons that teaches the for-midable nature of evil and the treachery that ine-vitably ensues from abject surrender to it.

In the history of civilization, the reversal ofthis tradition of protecting children is aremarkably rare aberration; and it will be toour eternal shame if we are prepared tocondone such an aberration in our own age.

There is so much to learn, and as I sift throughthe recommended textbooks and resource mater-ials for the various Peace Studies courses offered inAustralian schools, I am appalled at the narrow-ness of the perspective being given, at the blinkeredsentimentality of their hopelessly simplistic blue-prints for achieving peace.

True, we can't get far along the road to peacewithout the will to forgive. But an essential ingre-dient for forgiveness is universal recognition of thewrong that has been perpetrated. And this is whereAustralian Peace Studies are farcically inadequate.Comprehensive history lessons would be far morepertinent. For it is in the sympathetic acknowledge-ment by the rest of the world (including Australianteachers and students) of injuries sustained andinjustices endured that the reconciliation process,amelioration of the burning anger from the longyears of bitterness can begin. Peacemakers who tryto negotiate "no fault" settlements cannot succeed.For there are few things that rankle more than theswiftness of others to grant blanket pardons to theperpetrators of an injustice done to oneself.

Yet in the name of Peace, Australian school-children are being exhorted to forgive the Sovietson behalf of the Afghans, to forgive the Vietnamesefor the ordeals of anguish suffered by their boatpeople, and by the people of Laos and Cambodia.Such "forgiveness" is ludicrously presumptuous,

19

PEACEMAKING-NO CHILD'S PLAY

for to be valid, forgiveness, like insurance, requiresthat one has a vested interest (the insurable interestprinciple).

What About Justice?

Teachers may need to be reminded that, whilethe peacemakers shall be called the children ofGod, the thirst for justice is blessed too. Childrenneed to learn from history the intrinsic complexityof intertwined atrocities, anomalies and mistakesthat have to be negotiated to achieve a just and last-ing peace. They need to know that all too often inthe past our peacemakers have been too eager forpeace—that in their haste to have done, they havelaid the foundations for further conflict and morewar. In short, children should not be given tounderstand that peacemaking is child's play. It isnot comprised of preposterous activities likeSamantha Smith-style pilgrimages, anti-Americangraffiti writing, the erection of road signs like "Wel-come to Waverly, a Nuclear-Free Zone", and thewearing of T-shirts boasting slogans of such exqui-site insight as "Make love not war", and "Every-body, learn to sing together".

It would appear that the overwhelmingemphasis has been placed on fostering an appal-lingly naive tolerance. But incredibly, the Peaceeducators have refused to draw the crucial ethicaldistinction between tolerance of cultural differ-ences and tolerance of evil. Nowhere is it madeclear to children that to tolerate evil is no virtueand that not even that most virtuous of motives,viz, for the sake of peace, can make it so.

As the French Resistance understood only toowell, tolerating evil is tantamount to collaboratingwith it. Even in the present, there are countlesspeople who are attesting in the most vivid way tothe truth that one cannot collaborate with an evilregime without oneself incurring some of the blameand compromising one's own integrity... Sovietdissidents in psychiatric hospitals, Lithuanian andVietnamese clergymen in prisons and labourcamps, and political prisoners and exiles from ascore of African and South American countries.

And if ever silence about injustice andacquiescence to aggression is the price of peace,then surely we must teach children that it is toohigh a price. Silence and acquiescence are synony-mous with complicity. In effect, Peace Studies areuseless if they do not teach that the preservation ofhuman integrity is a higher value than the preserva-tion of human life itself.

Instead, however, our children are being

drilled in the shockingly immoral principle: "Peaceat any price". It is this principle that surreptitiouslyunderpins the standard peace education programs.Courses are so structured as to leave students withthe overwhelming conviction that the pacifist'shasty resort to surrender is the only rational optionin the event of a threat of foreign aggression ortyranny. Students are gulled into adopting the cyni-cal belief that all war is crazy, that there is abso-lutely nothing worth fighting for.

Such a reversion of educational philosophy tonihilism is scandalous. Essentially, educationshould always constitute a civilizing influence; butthis new Peace education is, in effect, a reversion tobarbarism, to the barbaric notion that there isnothing to discern between good and evil, thatthere is no point in even attempting to championgood above evil, for good and evil are indistingui-shable. (Again and again, the USSR and the USAare acclaimed by Peace literature to be morallyequivalent; and the Westminster system of law andjustice and the Soviet systems are proclaimed to beequally flawed. One wonders whether the SovietJews and Ukranians in the Gulags really would beall that indifferent to a transfer to Newgate or evenBogga Road')

And perhaps the most significant blunder inthe Peace education initiatives is this fanatical alle-giance to the idea that the threat of nuclear war is sohorrendous that it warrants that we be willing tosacrifice everything, including our principles, toavoid it. But how can Peace educators be so surethat our fear is greater than any other generationhas ever known, thus justifying as never before theabandonment of any concerted effort to resist theaggression of a superior power?

So why then are we permitting the nuclearthreat to frighten us out of our wits, paralyzing thehope which up until now has sprung eternal in thehuman breast? Why then are we sabotaging sane,brave, resolute efforts to retain human decency andavert disaster, with wanton displays of unbridledpanic and craven cries of"Peace at any Price"? For-get justice, forget human dignity, forget everythingthat man has ever learned of nobility and goodness,decency and fairness, compassion and love—let'sall surrender unconditionally, turn ourselves overto evil, sell our children into slavery, anything, any-thing at all, just to be assured of being allowed to goon living...

That is the Peace Movement's fundamentalmessage to our children, and what a contemptible,pathetic and dishonourable message it is.

20

1r

I.

N. 4k I___ JL •

1 7A.UdAhbVE AND IIOPV1

Ronald McDonald House is a place of love, a homeaway from home for the parents and families of

children undergoing treatment for leukaemia, cancerand other serious illnesses.

There are two Ronald McDonald Houses, one inSydney and the other In Melbourne.

They came into being when senior paediatriciansrecognised that children respond better to treatmentwhen their families are close by.

McDonald's was approached and offered assistance.In the words of Sydney House Manager, Virginia

Delaney, "The families and children support eachother. They share the good times and the bad times.It's a very warm, very loving atmosphere!'

Love built the Ronald McDonald Houses and lovesustains them.

MCD More than a restaurant.

DEFENDING AUSTRALIA

Harry Gelber

The Cost of IgnoringForeign Affairs

One of the most disturbing aspects of therecent election campaign was the almost totalomission, by both sides, of foreign relations andsecurity issues. It was a highly significant indicatorof the prevailing public view of the world, whichharbours at least three kinds of illusion. It thinksthat foreign -affairs are somehow separate from"real" domestic problems and can be put on theback-burner when we concentrate on serious thingslike social services and taxation. It assumes thatsecurity has almost solely to do with defendingAustralia against invasion or other direct attack;and since that is very unlikely, paying attention tosecurity is a waste of time. And it assumes thatbecause we are inoffensive and far away, we wouldbe wise not to embroil ourselves with the outsideworld except in things like sport and trade, prob-ably in that order.

What all this ignores is the fact that foreign andsecurity considerations, economic and social poli-cies at home, trading advantage, political clout andthe preservation of our values and interests, formone complex whole, where warp and woof areinseparable. The importance of external relationsin shaping the fate of Australia, including the dailylives of individual Australians, has increased, isincreasing and cannot be diminished.

It is true that a major strand in the electoraldebates has been the question of Australia's com-petitiveness. But even that has been treated almostentirely as a yardstick for discussions of domesticreform. There has been almost no mention of thefact that our interest rates are determined by viewsand judgments in New York and Zurich rather

more than by ones in Sydney and Canberra. Or thatthe viability of Australian enterprises can dependon Japanese investment policies in Europe. Or thatthe fate of Australian farmers, depends in part onthe success or failure, of agricultural modernizationin China and the USSR, or on the outcome of thepolitical/economic dispute between the USA andthe European Community. Or of the obvious factthat in a period of expanding Australian overseasinvestment, the success of that investment candepend, sometimes critically, on the political rela-tions between Australia and the country into whichinvestments are placed.

For that matter, the entire corpus of proposedindustry policies and the improvement of Aus-tralian competitiveness depends fundamentally onan understanding of external factors. If our focus isdomestic, as traditionally it has been, industrypolicy will be one in which government action canlargely substitute for the market. If, however, wefocus on the global economy, no industry policycan make sense unless it becomes market-con-forming instead of market-replacing. Altogether,governments must increasingly compete with oneanother to make their countries attractive targetsfor investment. The entire regulatory and taxationsystem must therefore be redesigned with an eye onthe potential investor in Rio or New York or Lon-don, who can only be persuaded, not constrained.And if he is to be persuaded, that must be a politicaltask as much as a financial one.

There has been even less mention of the way inwhich Australian views and news can be affectedby almost instant world-wide flows of news andopinion, or the way in which turmoil, political orreligious dispute in other continents can have quickrepercussions in our own.

It may be that illusions about security have

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

IPA Review, August-October 1987 22

DEFENDING AUSTRALIA

been especially damaging. They have not merely ledto the assumption that economic and security con-siderations are separate, but to the view that what-ever happens nearby—like the Fiji coup or develop-ments in Papua/New Guinea—matters to us whiledevelopments further afield probably do not.

More surprising still, given its immediaterelevance to Australian affairs, is the way inwhich general Australian opinion eitherignores the implications of the Japanese-American dispute on trade, payments andinvestment, or else regards it as a kind offootball match in which we are interested butessentially unconcerned spectators.

Yet a moment's reflection must show that theFiji affair, however regrettable, is relatively trivialand in any case not a matter where we could orshould seek to intervene. Ethnic and racial disputeswill not disappear from the world merely becausewe say we want them to. Whether Fiji has a regimethat we like will, in the end, make very little differ-ence to the security and welfare of Australia. Bycontrast, events in Europe or the Persian Gulf oreven Central America could have a decisive effect.If, for example, unrest and "revolution" in CentralAmerica were to spread to Mexico—and little inMexico's political and social structure gives oneconfidence that it could not—the United Stateswould be placed in a most difficult position.Washington might be forced to divert massiveeffort and attention to its Southern border, if onlybecause millions of frightened Mexicans might tryto cross it to seek refuge. Such a diversion of effortcould easily make the maintenance of the US posi-tion in Europe and the Pacific impossible. There isno sign that those Australian groups whichspecialize in airing moral outrage about US policiesin Latin-America have seriously considered whatwould happen to Australia's security and otherinterests if such a thing happened.

Nor is there much sign that the wider publichas thought about the problems of the NorthernPacific, or the wider implications of the Sovietnaval and air build-up in the region. Messrs.Hawke and Beazley have no doubt been correct toargue that the Soviet base at Cam Ranh Bay, in

Vietnam, would be highly vulnerable in the eventof war. But in the meantime it is of very great valueas a means of "showing the flag" and exercisingpolitical influence, as well as for intelligence opera-tions, not to mention any positioning of forcesprior to the outbreak of a conflict.

Still less does Australian opinion seem to havefocused on the seeming retreat from reform andliberalization in China, on the tensions in that hugesociety between modernization and Party control,between xenophobia and the desire to learn foreigntechniques or even on the careful balance, in themanagement of China's external relations, betweenthe West and the Soviet Union.

More surprising still, given its immediate rele-vance to Australian affairs, is the way in which gen-eral Australian opinion either ignores the implica-tions of the Japanese-American dispute on trade,payments and investment, or else regards it as akind of football match in which we are interestedbut essentially unconcerned spectators. Yet the dis-pute harbours dangers of major political as well aseconomic disruption, with potential results of thegreatest seriousness for us and for others. That anelection campaign of several weeks should go bywithout so much as a mention of the economic, letalone the political, implications of these events issurely alarming. To indicate just two of the possibledevelopments: what if serious political difficultieswere to produce a major Japanese economic down-turn? Or what if such difficulties were to propelJapan into a more rapid development of variouskinds of post-nuclear, even if chiefly defensive,strategic weapons?

We have even ignored the organic relationshipbetween security, research and development andindustry policy, including the much-discussedbusiness of technological upgrading. One looks invain to the recent Defence White Paper, or to theelection campaign, for more than a brief asideabout fhe new strategic arena of space which hasbeen opened up by the superpowers and, increas-ingly, by others also. Yet that area of competition islikely to be decisive not just for many aspects ofintelligence, communications and defence but forthe development of many of the lead-technologiesof the next era of Western economic development.Can it really be wise for most Australians to lookthe other way?

23

Deadlier than WarR. J. Rummel

If the peace movement is serious about preventing the slaughter of human lives, it should rethink its centralfocus---for a greater killer of people than war has been absolutist governments, and the most murderous ofthese have been communist governments.

While libertarians have recognized the economicand moral virtues ofa free society, they have largelyignored or been ignorant of an intrinsic hallmark offreedom: that libertarian governments of freesocieties are the most peaceful, the greatestrespecters of the value of human life.

In a number of scientific books and articles', Ishowed that libertarian governments do not makewar on each other, that they have the least foreignand domestic violence, and that the greater thefreedom in two nations, the less there has beenmilitary violence between them. Indeed, the mostviolent governments have been totalitarian, thoseleast free. And this is not only historical fact but iswhat we should expect in the future. Non-violenceis inherent in freedom.

In a recent article (Reason, October 1985),James L. Payne calculated that communistregimes, the dominant totalitarian form today, areclearly the most militaristic. They have an averageof thirteen full-time military personnel per 1,000population, compared to six for non-communistnations.

That non-free, or absolutist, nations are moreviolent and militaristic has been occasionallypointed out by libertarians and others. The majorvirtue of recent research is to provide the statisticalconfirmation and to make more people aware ofthese facts.

But what is generally unknown about absolu-tism, and to my knowledge has not been mentionedelsewhere, is that absolutist governments kill manytimes more people than have been killed in all theinternational and civil wars put together.

And the worst type of these absolutist govern-ments is communism. It is a killing machine,

responsible for the massacre, executions, starva-tion, and deaths from forced exposure, slave-labour, beatings, and torture of at least 95,153,600people in this century, or 477 people per 10,000 oftheir populations. By contrast, the number of battlecasualties from all wars in this century is35,654,000, or 22 per 10,000 people of the popula-tions involved. On a per capita basis, communismis at least 20 times deadlier than war. Communismin this century has killed even more people, asidefrom communist wars, than the 86 million that per-ished in all the wars and revolutions since 1740.

Before elaborating on these incredible asser-tions, let me present and define the relevant data.Table 2 provides the definitions and national dataand Table I gives the summaries.

By war is meant any international or civil vio-lent conflict (such as a guerrilla war, rebellion, revo-lution, or terrorist campaign) involving at least1,000 killed in battle or action. This includes not

Table 1: Twentieth Century Killed by Cause*Cause Total Averages per

(thousands) 10.000 population

Government 119,394 349Non -Free 115,423 494

Communist 95,154 477Other Non-Free 20,270 495

Partially Free 3,140 48Free 831 22War 35,654 22International 29,683 17Civil 5,970 26

*The data on wars is from J. David Singer and MelvinSmall, Resort to Arms: International and Civil Wars, 1816-1980 (Beverly Hills: Sage, 1982). All figures in the table arerounded, therefore totals may be slightly out.

Dr. R. J. Rummel is Professor of Political Science at the University of Hawaii.

1. R. J. Rummnel, Understanding Conflict and War (Vol. 1-5, Beverly Hills, California; Sage Publications, 1975-1981);"Libertarianism and International Violence, "The Journal of Conflict Resolution (Vol. 27, March 1983, pp. 27-71), "Libertar-ianism, Violence within States, and the Polarity Principle, "Comparative Politics (Vol. 16, July 1984, pp. 443-462): "Libertar-ian Propositions on Violence Within and Between Nations: A Test Against Published Research Results," The Journal ofConflict Resolution (Vol. 29, September 1985, pp. 419-455).

IPA Review, August-October 1987 24

DEADLIER THAN WAR

Table 2: People Killed by Government in the Twentieth CenturyState' Years Govt. Pop. Killed Killed per Code' NOTES

Type2 (mil)l (000) 10,000 Pop I. Occupying or colonial statesAfghanistan 1978-79 C,NF 19.9 27 13.6 S responsible for the deaths in aAlbania 1944-47 C,NF 0.8 150 1,816.0 S nation are given in parenthesis.Algeria (France) 1945;1955 F 47.0 36 7.7 S 2. C = communist; NF = non-free;Allied Democracies 1943-1947 F 218.6 7955 36.4 S 3. The population is the estimated

The partially free; the esti

Angola 1976-78 C,NF 7.0 71 101.4 U mid-point figure over the indi-Argentina 1976-81 NF 26.5 15 5.7 A cated years.Brazil 1960- PF 93.0 1' 0.1 R 4. Government killed is defined asBulgaria 1944-45 C,NF 7.1 4 5.6 U any direct or indirect killing byBurundi 1965; NF 3.5 I50 428.6 A government officials, or govern-

1972-73 ment acquiescence in the killingCambodia 1975-79 C,NF 7.5 2,000 2,666.7 A

by others, ex , of more than 1, hatpeople, except execuUOn for what

Chile 1973- NF 9.2 17 18.5 S are conventionally consideredChina 1949-70 C,NF 670.0 45,000 671.6 A criminal acts (murder, rape, spy-Colombia 1948-57 PF 11.6 67" 57.7 S ing, treason, and the like). ThisCroatia 1941-44 NF 4.5 836 1,857.8 5 killing is apart from any ongoingCuba 1959- C,NF 7.4 21 28.3 U military action or campaign, orCuba 1952-59 PF 6.0 1 1.7 U

any conflict event. That is, thoseCzechoslovakia 1945- C,NF 13.3 1309 97.4 U

killed in a riot by the police are notcounted; nor are those civilians

East Timor(Indoncsia) 1975- NF 0.6 100 1,666.7 S thatdiefromurbanbombingdur-Eastern Europe 1944- C,NF 60.4 2,10010 348.0 M ing a war, or from starvation dur-E. Europe & USSR' s 1945-50 C,NF 2,1 1 1 S ing a military siege or enemyEl Salvador 1931-44; PF 2.6 42 159,7 S embargo.

1979- 5. A = an approximate average ofEquatorial Guinea 1968-79 NF 0.4 50 1,250.0 S numerous published estimates;

M=a clear minimum estimate;Estonia (USSR) 1940-45; C,NF 1.1 65 570.8 R R = author's rough guess and

1949 probably an underestimate;Ethiopia 1977-78; C,NF 29.4 150 51.0 U S = directly from one source;

1985 U =a most likely underestimate.Germany 1939-45 NF 17,00012 S 6. The estimated Soviet killed ofGermany. E. 1945- C,NF 16.0 81 50.6 U Soviet citizens, POWs and Rus-Germany, E. (USSR) 1944 C,NF 16.0 500 312.5 R Agn exiles repatriated by the

Allies.Guatemala 1966- PF 5.4 20 37.4 M 7.OfethnicIndians.Hungary 1944- C,NF 9.5 10 10.5 U S.Of the approximate 200,000Hungary 1941-44 NF 9.5 19013 200.8 A killed by contending politicalHungary (USSR) 1944 C,NF 9.0 150 166.7 S partiesand"bandits",one-third isIndonesia 1965 PF 104.9 600 57.2 S attributed to the governmentIran 1960-78 PF 28.7 1 0.3 R (party in power).Iran 1979- NF 34.6 21 6.1 U 9. Partially based on an estimated 5Japan 1937 NF 450.0 4014 0.9 U

per cent per annum death rateover ten-years for those in tabour

Korea. N. 1948- C,NF 11.1 10 9.0 R camps.Laos 1974- C,NF 3.3 2015 60.6 U 10. Exclusive ofethnic Germans andLatvia (USSR) 1940-45; C,NF 2.0 72 366.5 S ReichcitizensexpelledfromEast-

1949 ern Europe.Lithuania (USSR) 1940-45; C,NF 2.6 152 590.7 R 11. Includes only those ethnic Ger-

1949 mans and Reich citizens that wereMalaysia 1979-80 PF 13.0 156 11.5 S

killed Wor died during their forcmpost-WWII expulsion From

Mexico 1914-20 PF 14.9 10 6.7 R largely Eastern Europe.Mozambique 1975- C,NF 9.5 1 1.1 R 12. Includes Europeans and SovietNicaragua'' 1979- C,PF 2.4- 1 4.2 S Jews, Gypsies, Soviet POWs,Nicaragua" 1960-79 PF 2.0 1 5.1 R Poles and Ukrainians.Nigeria 1966 PF 49.9 719 1.4 S 13. Jews killedbytheHungariangov-Pakistan 1971 PF 117.0 2,000 170,9 A ernment,independentofGerman

uaParaguay Y 1966-72 PF 2.3 1° 4.3 MThe "Rape.

14. The "Rape of Nanking".Poland 1944- C,NF 26.2 1 1 21 4,2 R 15. See note 9.Poland (USSR) 1939-41 C,NF 12.0 285 237.5 S 16. An estimated 20 per cent deathRomania 1941-44 NF 15.1 21022 139.1 S toll of those Boat People forcedRomania 1944- C,NF 15.6 100 64.0 S back to sea by thegovernment.Romania (USSR) 1944 C,NF 15.0 430 286.7 S 17. Sandinista government.Romania 1940-41 C,NF 2.0 63 312.5 S 18. TheSomeTn

ethnic lbo.government.

19. Of Northern ethnic Ibo.Bessarabia (USSR) 20. Of Ache Indians.Russia 1900-17 PF 160.0 3 0.2 S 21. Includes Ukrainians killed duringRwandi 1959-63 PF 3.1 20^3 65.4 S resettlement.Spain 1936-39 NF 24.8 12614 50.8 S 22. Jews killed by the Romanian gov-Sudan 1955-66 PF 12.6 150 119.3 S ernment, independent ofGermanSyria 1980-82 NF 8.0 15 18.8 S authorities

(China) 1955-71 C,NF 1.5 325 2,166.7 AOfeth

24. By thnic utsi.24. By both the Republican and

Turkey 1909; NF 19.0 1,50025 789.5 A Nationalist governments.1914-18 25. Includes mainly Armenians, but

USSR 1918-22; C,NF 170.0 39,50026 2,323.5 A also Greeks and Christians.1930-53 26. Includes the deliberate Ukrainian

Ugandan 1971- PF 12.0 200 166.7 A famine of 1933-34.Vietnam 1945-6; C,NF 17.0 51026 300.0 A 27. Includes post-Idi Amin govern-

1956c; ments.28. Includes 100,000 Boat People.

1974-Yugoslavia 1945- C,NF 16.1 1,105 688.4 STOTAL AVERAGE 119,394 349.5

25

DEADLIER THAN WAR

only all the major wars, but also such "little" warsas the Druze War (1925-1927) of France, theIndonesian War (1945-1946) of the Netherlands,and the First Kashmir War (1947-1949) of newlyindependent Pakistan and India. Examples of thekind of civil wars whose battle deaths are countedhere are the Spanish Civil Wars (1936-1939), thePalestinian uprising in Jordan (1970), and theLeftist campaign in Guatemala (1970-1971).

The figures on those killed by war can only beestimates, of course. But war deaths have been theobject of much recent social science and historicalresearch and I believe that even better data col-lected in the future will not significantly alter thetable's totals.

The statistics for the number killed by govern-ment are a different story, however. I know of onlyone, very incomplete, attempt to tabulate the over-all number of people killed by government (GilElliot, Twentieth Century Book of the Dead). In thecase of some of the most lethal governments, suchas those of the USSR, China, Nazi Germany andTurkey, there are also figures based on muchscholarly and demographic research. But I am surethat there are many more cases of "minor" mas-sacres, genocide, and the like, that are underesti-mated or for which information is unavailable, andwhich together would increase significantly thetotals in the table. These overall totals in Table I forgovernment killed, therefore, are most likely anabsolute minimum and perhaps an underestimateby twenty per cent or more. This makes the com-parisons to war even more fantastic.

Now, government killed is defined here as anydirect or indirect killing by government officials, orgovernment acquiescence in the killing by others,of more than 1,000 people, except execution forwhat are conventionally considered criminal acts,such as murder and rape. This killing is apart fromany ongoing military action or campaign, or anyongoing national or international conflict. That is,those killed in a riot by the police are not counted;nor are those civilians that die from urban bomb-ing during a war, or from starvation during a mili-tary siege or enemy embargo.

The Jews that Hitler slaughtered during WorldWar II would be counted, since their merciless andsystematic killing was unrelated to any campaign(and actually conflicted with Hitler's pursuit ofwar); similarly, the genocidal massacre of Ibo inNorthern Nigeria in 1966 was quite apart from theNigerian Civil war; and the deliberate Armeniangenocide by the Turkish Government during WorldWar I had nothing directly or indirectly to do with

Fig.1 Twentieth Century KilledCommunist Governments and WarTotal 155,048,000

Communist61.4%

Civil War

yr

3.9%

Non-Communist International War156% 19.1%

Killed per 10,000 PopulationrnCommunist Governments versus War

450 40035030025020015010050

0 Communist Non-Communist Inter'I War Civil War

military action. Unless otherwise indicated, figuresfor government killed are assumed to be for killingsapart from war.

While any intentional killing that is govern-ment policy obviously must be included, shouldthose that indirectly die from government policy becounted also? What about those political prisonerswho perish from exposure and thirst while packedinto freight cars transporting them to slave-labourcamps, who freeze to death while being forciblymarched long distances to labour in the snow ininsufficient clothing, or who succumb to disease,malnutrition, exposure, or beatings in camps wherethe death rate may be ten to thirty or more per centper annum? What about those who die in perilousattempts to escape abroad from being rounded upfor concentration camps, forced resettlement ininhabitable wasteland, collectivization, or simplyfear and terror?

When the policies of the government are sorepressive and terroristic that citizens imperil theirlives by trying to flee their country, then I believethat government should also bear the responsibil-ity for the resulting deaths. Where figures are avail-able, they are included in the list of governmentkilled. Thus, for example, I added into the totalsthe conservatively estimated 100,000 Boat People

26

DEADLIER THAN WAR

that have died on the ocean fleeing Vietnam andCambodia.

Moreover, as far as government responsibilityis concerned, I see little difference between govern-ment executing a dissident and sentencing him tolabour in a gold mine for ten years under condi-tions that reduce his life expectancy to less thanthree years, except that the latter death is a reliefafter a kind of prolonged torture. Thus, I haveincluded estimates of those who have died in theslave-labour camps of the Soviet Union and China,and the "new economic zones" of Vietnam.

The total killed in Table 2 also includes theSoviet Government's planned and administeredstarvation of the Ukraine begun in 1932 as a way ofbreaking peasant opposition to collectivization anddestroying Ukrainian nationalism. As many as tenmillion may have been starved to death or suc-cumbed to famine related diseases; I use the figureof eight million. Had these people all been shot, theSoviet government's moral responsibility could beno greater.

There are two more famines for which govern-ment responsibility is more attenuated and contro-versial. The first of these is the Soviet famine of1921-1922 caused by the disruption of the 1918-1921 civil war in the countryside and especially the

forced requisitions of food by the Soviets, imposi-tion of a command agricultural economy, and'liquidation campaigns of the Cheka. This famineresulted in three to five million dead. My estimateis four million.

The second famine is the worst in history, anduntil recently, a well kept secret. It was caused inChina by Mao Tse-tung's agriculturally destructiveGreat Leap Forward in 1958-1959. As many asforty million people may have perished; I wouldestimate twenty-seven million, which is closer tothat of American demographic studies. TheChinese government itself now admits over tenmillion dead.

I believe that the Soviet and Chinese govern-ments should be held accountable for the dead inthese famines, no less than should a drunken driverbe responsible for those he kills on the road, or anhotel owner for those who cannot escape a firebecause of blocked exits and lack of alarms. How-ever, because including the dead from these twofamines would be so controversial as to distractfrom the other figures, I will exclude them fromfurther consideration here.

One more aspect of the table needs clarifica-tion. That free governments have killed 831,000people in our century should come as a shock tomost readers. This figure involves the French mas-sacres in Algeria before and during the Algerianwar (36,000 killed, at a minimum), and those killedby the Soviets after being forcibly repatriated tothem by the Allied Democracies during and afterWorld War II.

It is an outrageous fact that in line with (andeven often surpassing in zeal the letter of) the YaltaAgreement signed by Stalin, Churchill, andRoosevelt, the Allied Democracies, particularlyGreat Britain and the United States, turned over toSoviet authorities more than 2,250,000 Sovietcitizens, prisoners of war, and Russian exiles (whowere not Soviet citizens) found in the Allied zonesof occupation in Europe. Many of these people heldinternational passports, some even having lived inEurope since fighting the Bolsheviks in the Russiancivil war of 1918-1921.

Most of these people did not want to be turnedover to the Soviets, were terrified of the conse-quences, and refused to co-operate in their repa-triation; often whole families committed suicide toavoid it. British and American officials had to uselies, deceit, and force (and tight secrecy and publicdeception to avoid public outcry—apparently evenrelevant officials who might have blocked the repa-triation were deceived) to achieve this repatriation.

27

DEADLIER THAN WAR

Incredibly, Soviet agents were allowed behindAllied lines to help hunt down those who tried toescape repatriation; numerous escapees were shotin the process.

Select high British and American officialsknew that large numbers of those returned wereexecuted within hours, most of the others beingsent off to slave-labour camps to die slowly. Ofthose the Allied Democracies so turned over tocommunist mercies, an estimated 795,000 wereexecuted, or died in slave-labour camps or intransit to them.

If a government is to be held responsible forthose prisoners who die in freight cars from priva-tion, or in camps from exposure, surely those liber-tarian governments whose officials turned helplesspeople over to totalitarian rulers with fore-knowledge of their peril, also should be heldresponsible.

Comparative Risks

To give a different perspective on the figures ofTable 1, the annual risks of a citizen being killed inwar or by government, especially communist gov-ernments, is compared in Table 3 to some of thelargest commonplace risks. These political risks aresimply extraordinary, indeed fantastic, for boththeir size in comparison to common everyday risksand to the general lack of knowledge about them,even among experts. For example, the worldwideannual risk of dying in war is close to that of anAmerican (I presume from the source) being in amotor vehicle accident (including pedestrians), an

American policeman dying in the line of duty, or ofa mountaineer being killed while climbing a moun-tain. Note especially, however, that the worldwiderisk of being killed by one's own governmentbecause of one's race, ethnic group, politics, etc., ismore than three times greater than the risk of war,and greater than that for a motor vehicle accident,or policeman. In fact, you are safer climbing moun-tains than you are from government generally.

The high risk of being killed by government ismainly due to the death toll of communism. Theannual risk (odds) of being killed by the govern-ment for those living under communism is about1,000 to 1, or up there with the risk of dying fromany cancer or from smoking a pack a day.

Turning now to compare the overall mortalitystatistics shown in Table 1, it is a sad fact of recentdecades that tens and hundreds of thousands ofpeople can be killed by governments with hardly aninternational murmur, while a war killing severalthousand people can cause an immediate worldoutcry and global reaction. Simply contrast theinternational focus on the relatively minor Falk-land Islands War of Britain and Argentina with thewide-scale lack of interest in Burundi's killing oracquiescence in such killing of about 100,000 Hutuin 1972, of Indonesia slaughtering a likely 600,000"communists" in 1965, and of Pakistan, in aninitially well-planned massacre, eventually killingfrom one to three million Bengalis in 1971.

Figure i graphically compares the total killedby governments to that for all wars.

A most noteworthy and still sensitive exampleof this double standard is the Vietnam War. The

Table 3: Comparison of Political to some of the Largest Commonplace Risks

Type Annual Risk x Uncertainty(odds of x to 100,000)

CommonplaceCigarette smoking a pack a day 360 Factor of 3All cancers 280 10%Mountaineering (mountaineers) 60 50%Motor vehicle accident 24 10%Police killed in line of duty 22 20%

PoliticalKilled in any war 18Killed in international war 15Killed in civil, guerrilla, or revolutionary war 3Killed by government genocide, mass murder, etc. (total) 62Killed by communist genocide, politicide, mass murder, etc. 61For those living under communism 110

25% upward only20% upward only50% upward only20% upward only?% upward only?% upward only

28

DEADLIER THAN WAR

international community was outraged at theAmerican attempt to militarily prevent NorthVietnam from taking over South Vietnam and ulti-mately Laos and Cambodia. "Stop the killing" wasthe cry, and eventually, the drumbeat of foreign anddomestic opposition forced an American with-drawal. The overall number killed in the VietnamWar on all sides was about 1,216,000 people.

With the United States subsequently refusingthem even modest military aid, South Vietnamwas militarily defeated by the North and com-pletely swallowed; and Cambodia was taken overby the communist Khmer Rouge, who then tried torecreate a primitive communist agriculturalsociety. All urban centres were immediately emp-tied of people by force; all former government offi-cials were executed; all bourgeois were liquidated;any actual or possible opponents or resisters werekilled; most of the remaining educated and profes-sional Cambodians were murdered; and "com-mon" folk violating tie numerous rules governingtheir dawn to dusk forced peasant labour werekilled.

While international attention finally did turnto Cambodia and the United Nations was pushedinto taking reluctant official notice, this was as amurmur compared to the screams over America'sefforts to prevent, among other consequences, justsuch a bloodbath that would follow communiza-tion. The best estimate of those killed after theVietnam War by the victorious communists inVietnam, Laos, and Cambodia is 2,270,000 (notcounting those who have died in the subsequentwars of Vietnam with China and Cambodia, andthe continuing guerrilla war in Cambodia). This isalmost twice as many as died in the Vietnam War.And this government killing still continues.

To view this double standard from anotherperspective, consider the horror over the deathsfrom mankind's two greatest wars. Nine milliondied in battle in World War 1; fifteen million inWorld War II. Both wars cost together twenty-fourmillion lives. But many more than this number oftheir own citizens have been killed by the Soviet orChinese communist governments alone. From1918 to 1953, the Soviet Government executed,slayed, slaughtered, starved, beat or tortured, todeath, or otherwise killed, 39,500,000 of its ownpeople (not counting the Lithuanians, Latvians,Estonians, Pole's, Romanians, Germans etc., theSoviets exterminated during its military occupa-tion of these countries and absorption of all or partof them). This is my best estimate among figuresranging from a minimum of 20 million killed by

Stalin to a total over the whole communist periodof 83 million. For China under Mao Tse-tung, thecommunist government eliminated, as an averagefigure between estimates, 45 million Chinese. Thenumber killed for just these two nations is about84,500,000 human beings, or a lethality of 252 percent more than both World Wars together. Yet,have the world community and intellectuals gen-erally shown anything like the same horror, thesame outrage, the same outpouring of anti-killingliierature,over these Soviet and Chinese megakill-ings as has been directed at the much less deadlyWorld Wars?

When one considers this killing per 10,000population, the comparison is even starker. Warshave killed 22 people per 10,000 of the populationsinvolved. The Soviet Government killed 2,323 per10,000; the Chinese Communist Government 672;the Cambodian Khmer Rouge 2,667.

Compared to war, these figures are so large as toseem absurd. Yet, even if the most conservative,indisputable figures are used, the difference remainsincredible. The minimum and best documentedfigure on the Soviet Union that I have seen is the 20million killed under Stalin given by Robert Con-quest in his The Great Terror (and this he considers aprobable underestimate by 50 per cent or more).Even that absolute minimum is greater than the bat-tle deaths of World War 11, more than half of thedeaths in all international and civil wars in this cen-tury; it is an absolute minimum of 1,176 peoplekilled per 10,000, or 54 times the number killed per10,000 of the populations involved in war—that is54 tines the death risk of war.

As can be seen from Table 1 and especiallyfrom Figure 1, communist governments are overallalmost four times more lethal to their citizens thannon-communist ones, and in per capita termsnearly twice as lethal (even considering the hugepopulations of the USSR and China). However, aslarge as the per capita killed is for communist gov-ernments, it is nearly the same as for other absolu-tist governments. This is due to the massacres andwide-scale killing in the very small country of EastTimor, where since 1975 Indonesia has.eliminated(aside from the guerrilla war and associated vio-lence) an estimated 100,000 Timorans out ofa pop-ulation of 600,000. Omitting this country alonewould reduce the average killed by non-commu-nist, non-free governments to 397 per 10,000, orsignificantly less than the 447 per 10,000 for com-munist countries.

In any case, even including the special case ofthe forced repatriation of millions to the Soviet

29

DEADLIER THAN WAR

Union by .the Allied Democracies, we can still seefrom the table and from Figure 2 that the morefreedom in the nation, the fewer people killed bygovernment. Freedom acts to brake the use of agoverning elite's power over life and death to pur-sue their policies and ensure their rule. Why shouldthis be so? For the same reasons that libertariangovernments are least violent and militaristic.

Where there are civil and political rights, freeand secret elections, and a wide franchise, the gov-erning elite are dependent upon the electorate fortheir power and continuance in office. Moreover,their power is limited and divided among differentelites and groups, and they constantly have an offi-cial opposition looking over their shoulder for theslip, the mistake, the misuse of power that could beused to wrest authority from them in the next elec-tion. Moreover, with such freedoms, the societydevelops diverse overlapping groups, elites, andpower foci, a rich pluralism that cross-pressuresand thus moderates interests and policies. Govern-ment is not only responsive to the core interests ofafree people, but also reflects the central moderationand civility of the plural, cross-pressured society,produced by freedom.

But above all, people are not interested inbeing sent to slave-labour camps, executed for theirbeliefs, or tortured and beaten for criticizing thegovernment. In its essence, no libertarian govern-ment can do other than mirror and respond to thiscore interest of the people in self-preservation andavoiding pain.

This axiom appeared to be violated in twoaforementioned special cases. One was the FrenchGovernment carrying out mass killing in thecolony of Algeria, where compared to Frenchmenthe Algerians were second=class citizens, withoutthe right to vote in French elections. In the othercase the Allied Democracies acted during and justafter wartime, under strict secrecy, to turn overforeigners to a communist government. Theseforeigners, of course, had no rights as citizens thatwould protect them in the democracies. In no casehave I found a libertarian government carrying outmassacres, genocide, and mass executions of itsown citizens: nor have I found a case where such agovernment's policies have knowingly and directlyresulted in the large-scale deaths of its peoplethrough privation, torture, beating and the like.

Where the government is totalitarian, as underSoviet communism or the current Muslim ayatol-las of Iran, or absolutist as under Idi Amin ofUganda or Francisco Macias of Equatorial Guinea,the ruling elite have the same effective power overtheir people that slave masters have over their

slaves. Mass killings, executions, forced depriva-tion; and the like, then become a practical means tomaintain power, eliminate opposition, punish dis-obedience, and pursue political, economic, social,and religious policies. Without the restraints ofopposing power foci, regular competitive elections,free speech, and a pluralistic social system, it is nat-ural that human life will be secondary to a regime'sdesire for self-preservation, power, and the successof its policies.

Hitler's Mass murder of millions of Jews iswidely believed to have been an historical aberra-tion, a once only, monstrous result of an absoluteruler's sick racism. If this article achieves anything,I hope that it shows that the Jewish Holocaust, forall its horror and the outrage it has deservedly pro-voked, is but a particular example of mass killingsby governments—and not even among the blood-iest. Hitler killed from 4.2 to 4.6 million Jews, buthe also killed (aside from military action) 425 thou-sand Gypsies, 2.5 million Poles, 3 million Ukrain-ians, 1.4 million Belorussians, and 2.5 to 3 millionSoviet prisoners of war. Overall, Hitler was respon-sible for the mass murder of about 17 millionpeople. But Stalin killed a minimum of 20 million.Mao killed perhaps 45 million. And Pol Pot, hav-ing slaughtered over 25 per cent of the Cambodianpopulation in four years, might have even doubledthe records of these bloody tyrants if he had ruledas large a population for as long.

Of course these tyrants are responsible for thisbutchery. But what enabled them to do it was theirabsolutist and totalitarian power. It would be agrave error to focus on them alone as the cause ofmass killing. We should concentrate instead on theenduring political pattern that breeds such mons-ters and encourages and facilitates their bloodywork. Such is the pattern whose variations we calltotalitarianism and absolutism and dictatorship.And such a pattern is at its core the lack of civilrights and political freedom. It is non-freedom.

Absolutism is not only many rimes deadlierthan war, but itself is the major factor causing warand other forms of violent conflict. It is a majorcause of militarism. Indeed, absolutism is man-kind's deadliest scourge of all.

In light of all this, the peaceful, non-violentpursuit and fostering of civil liberties and politicalrights must be made mankind's highest humanitar-ian goal. Not simply to give the greatest number thegreatest happiness, not simply to obey the moralimperative of individual rights, not simply tofurther the efficiency and productivity of a freesociety, but also and mainly because freedom pre-serves peace and life.

30

Handb-. oks.for Good

GovernmentMichael James

The Australian Institute for Public Policy in Perth and the Centre of Policy Studies at Monash Universityin Melbourne have each produced detailed programs on how to reduce the size of and thereby improve thequality of government in Australia.

During the campaign that preceded its re-electionon 11 July, the Hawke Government gave very littleindication of how, and how fast, it intended to con-tinue the restructuring of the public sector and thereordering of priorities that it began in its Expendi-ture Statement last May. It returned to office boundby few clear and precise commitments, the twomain ones being: not to increase the burden oftaxa=tion over the next three years, and to abolish childpoverty by the end of the same period by means ofa new, selective welfare program, the Family Assis-tance Scheme. Since then; however, it hasannounced a radical reorganization of the publicservice, involving a cut in numbers employed by3,000 and an estimated saving of $96 million. Thispromising start to Mr. Hawke's third term suggeststhat the Government may be receptive to the ideascontained in two major and independent policyhandbooks that were published in the first half of1987.

Mandate to Govern and Spending and Taxing'are both products of the growing disenchantmentwith big government, a mood reflected not only inWestern public opinion but even in some of thereforms recently introduced in the_ communistcountries. They are also evidence of the extent towhich policy studies have ceased to be 'the exclu-sive concern of governments, but are now pursuedby an increasing number of private bodies, not justpolicy institutes but employer organizations andtrade unions. This is itself an effect of big govern-ment, which, so it is widely believed, now protectsso many powerful partisan, bureaucratic and pro-ducer interests that it can only benefit from private

competition in the generation of long-term policygoals..

The Proposals Compared

Both these books put forward detailed, practi-cal ways of reducing the scale of government inter-vention in Australia. But they differ in someimportant respects ; Mandate to Govern has a briefintroduction, setting out the rationale and the stra=tegy of the book, followed 'by useful chapters onmacroeconomic policy and government andadministration. Spending and Taxing goes muchfurther in this respect.. It begins with several chap-ters that -summarize the facts. about the -size andgrowth of Australia's public sector, explain whygovernment growth seems to be out of control, andargue for -ways • of determining which activitiesshould'be left'to'the market and which should beundertaken, or at least assisted, by government.

These chapters incorporate some of the latestresearch findings about the redistributive effects ofthe welfare state. The main such finding is that cashtransfers are much more effective in targeting wel-fare. to the needy and disadvantaged than are 'in-kind' services like health and education, which to agreat extent simply .churn government revenueback into the pockets of the original taxpayers. Theauthors demonstrate how easy it is for special inter-ests to `capture' the processes of politics and to vetothe discontinuation of spending programs fromwhich they benefit, even when those programs nolonger serve any public purpose. One very impor-tant result of this finding is that, although the free

Dr. 1tIichael James is a Senior Lecturer in Politics at La Trobe Universit -1. Mandate to Govern: A Handbook for the Next Australian Government, edited by John Nurick, is published by andavallablefrom the Australian Institute for Public Policy, 25 Mount Street, Perth. Spending and Taxing: Australian Reform Options,edited b y J. Freebairn, M. Porter and C. Walsh, is published by Allen and Unwin in association with the Centre of PolicyStudies National Priorities Project.

31 IPA Review, August-October 1987

HANDBOOKS FOR GOOD GOVERNMENT

Mandate to Govern and Spending and TaxingSummary and Comparison of Main Policy Recommendations

Mandate to Govern Spending and TaringTaxation

Immediately index tax thresholds and allowances to CPI.

Establish committee to design a reformed tax system, to bepresented within a year to Parliament for acceptance orrejection as a package.

Cut business tax revenue by $2.4 billion, and cut top companytax rate to 30%.Cut income tax revenue by $5 billion and reform tax systemas follows:Cut top personal income tax rate to 30%. Protect worst-off bysystem of rebates, social benefit rate adjustments, and familyincome supplement. Adopt one of the following options:Option T: tax all income received, but apply income testsproviding tax-free thresholds for low and middle incomeearners only.Option U: allow optional individual or family tax filing, and a$3,500 tax-free threshold for low and middle income earnersonly. Place a 5% tax surcharge on higher incomes io recaptureincome tax forgone by threshold.Option V: Replace wholesale sales tax with 10% broadbasedVAT, and raise all pensions and benefits by 6% to compensateworst-off for price rises caused by VAT.

Public SpendingPromise that public spending will not be higher in real termsafter three years than on taking office, except for defence, andthat the budget deficit will be eliminated within three years.

Cut public spending by $12.1 billion to eliminate budgetdeficit and finance tax cuts. Make savings from health, labourmarket, education, and social security programs as below.

Increase Medicare levy to cover full public health costs andlower income tax by same amount.Require minimum health insurance, and subsidise lowerincome groups and the chronically ill.

HealthAbolish Medicare and universal subsidies.

Subsidise health insurance for lower income groups andnon-social security recipients.Transfer subsidies for the poor and the chronically ill to socialsecurity budget and deliver via health card orcircumstance-tested voucher system.

Privatize Medibank Private and allow a competitive privateinsurance market.Fund public hospitals by fee-for-service system for public aswell as private patients.

Allow a competitive private insurance market.

Fund public hospitals by direct charges and eventuallyprivatize them.Net savings: $7 billion.

The Labour MarketEnd compulsory membership of trade unions.

End compulsory arbitration and facilitate legally bindinglabour contracts.Adjudicate labour contracts in ordinary courts.Guarantee free choice of superannuation funds.Abolish Community Employment Program and replace withmodest work-for-dole scheme.

Increase labour market flexibility to help young gain jobexperience and work skills.

Abolish a]I labour market programs and replace with trainingand education loans or vouchers for young people.Net savings:$500 million.

EducationReplace recurrent funding of non-government schools with Introduce universal voucher system, each voucher worth 85%regulated voucher system, with higher value vouchers for ofcurrent expenditure per pupil.disadvantaged children. Cut funding of government schools by 15%.

32

HANDBOOKS FOR GOOD GOVERNMENT

Mandate to Govern

Introduce a universal system of literacy and numeracy testingin schools.

Transfer responsibility for tertiary education to the States(except in the ACT).Require ANU to charge fees at rate of 12.5% of average cost ofthe course undertaken.Introduce Commonwealth scholarships and loan guarantees.

Spending and Taxing

Retain and increase external assessment in schools.Consider merit pay for teachers.Abolish Schools Commission and Tertiary EducationCommission..Make universities and colleges raise 50% of current grants byself-generated income (e.g. fees).Facilitate student loan transactions.Net savings: $2.5 billion.

Social SecurityRaise minimum age for dole to 17.Allow dole for new claimants only ifgainfully employed for atleast 6 months of preceding year.Means test family allowance.Maintain supporting parents benefit but enforce maintenanceawards through private debt-collection agencies.Remove tax liability from pensioners and beneficiaries andintroduce revised means test.Retain Family Income Supplement and increase with savingsfrom housing expenditures.

Raise minimum age for dole to 18.Reduce dole by 25% after 6 months (but allow supplementarybenefit for worst-off, tested for family income and assets).Means test family allowance.Cut supporting parents benefit by 25%.

End tax concessions for superannuation.

Net savings: $2. I billion.

Main additional Policy Recommendations in Mandate to Govern

Foreign Affairs and Defence . Privatize airports, Qantas, Australian Airlines and AustralianIncrease defence spending by at least the 3°/° assumed in the National Line.Dibb Report. CommunicationsPrivatize the naval dockyards and the government defence Place Australia Post, Telecom, OTC and AUSSAT on whollyfactories. commercial footings.HousingAbolish first home-owners scheme.End Commonwealth-States Housing Agreement and increaserent' allowances and Family Income Supplement payments toachieve equity between low-income tenants in privately andpublicly-owned dwellings.

Trade and IndustryPhase out all protection in 10 equal steps over 5 years, withmodest adjustment assistance measures.Abolish cost-ineffective non-tariff import barriers.Abolish controls on mineral exports.Abolish the Foreign Investment Review Board.Strengthen and extend the Trade Practices Act.Halve expenditure on CSIRO.

TransportRegulate only the prices and supplies of monopoly producers.Terminate the two-airline agreement.Deregulate air fares, routes, capacity, and imports and exportsof aircral.Allow freedom of entry into Australian coastal shipping.

Require cost-based pricing for all services and opposecross-subsidies.Rapidly increase the number of TV channels in the cities:Reduce funding for the ABC and encourage it to close RadioNational.Hand SBS over to the ethnic communities.

Primary IndustryDeregulate and privatize Commonwealth meat inspection.Deregulate the price and delivery requirements of wheat.Discontinue the super and nitrogen fertilizer bounties.Discontinue drought subsidies and underwrite private rainfallinsurance policies.

The EnvironmentIncrease conservation areas substantially.Allow mineral exploration according to a standard strict codein conservation areas.Allow oil exploration on the Barrier Reef but require explorersto be adequately insured against clean-up costs after a spill.Where resistance from conservationists is politicallyimpossible to override, consider vesting land rights inconservationist organizations.

33

HANDBOOKS FOR GOOD GOVERNMENT

market can fail' in various ways.to bring about thebest social outcomes, it doesn't follow that govern-ment intervention will automatically remedy thosedeficiencies. Rational decisions about where gov-ernment should intervene need to be based on care-ful comparisons between the performance of the-market and that of the state.

These chapters are very well written and areworth reading in their own right as well as in prepa-ration for the detailed policy proposals that followthem.

Mandate to Govern and Spending and Taxingdiffer also in the range of policy areas they address.As the accompanying table summarizing and com-paring their main recommendations makes clear,Spending and Taxing confines itself to taxation andbudgetary reform, especially in the high-spendingareas of health, education and welfare. Its aim is toreduce public spending by $12.1 billion (about 10per cent of the 1986-87 total), while targeting wel-fare more efficiently towards the genuinely disad-vantaged. This would bring the public sector'sshare of Gross Domestic Product down from 44.3per cent to less than 40 per cent, which is where itwas in 1981-82. Cuts ofthis magnitude would elim-inate the budget deficit (about $4 billion) andfinance income tax and business tax cuts of about$7.4 billion, with a substantial margin to allow fordifferences in judgments about precise costings.

The main aim of the tax cuts is to provide theopportunity for radical income tax reform, which isreally the centrepiece of the study. The authorsoffer three income tax reform options, each ofwhich reduces the top rate to 30 per cent and, bybeing integrated with social security adjustments,protects the position of low-income groups. Theauthors are confident that the incentive and effi-ciency gains from the reforms would be substantial,and generate about $2 billion of extra revenue.However, they have not taken this sum intoaccount in calculating the cost of the reforms, treat-ing it instead as a bonus that could in principle beused to finance additional tax cuts.• In contrast, Mandate to Govern avoids

detailed costings of its proposals. It calls on thenext government to promise not to increase publicspending in real terms. The implication is thatrevenue increases should go primarily towardsclosing the budget deficit, which it wants done inthree years. It also avoids offering detailed taxreform proposals, and confines its recommenda-tion here to a government commission chargedwith elaborating a non-negotiable package ofreforms that Parliament would have to accept or

reject as a whole. It sees this as the only way ofavoiding a repeat of the fiasco of the 1985 TaxSummit.

Otherwise, Mandate to Govern offers by far thewider range of policy prescriptions. It looks notonly at the high-spending programs but also at themany `off-budget' interventions in.areas like trans-port and the environment, but above all. in thelabour and the import markets. Sometimes itsdetermination to comment on every type of inter-vention exceeds its inspiration: for instance; in asection on regional and country television, itsolemnly declares that `The government should askcountry viewers what they want' (p. 175). But thebook is an education in the sheer scale and com-plexity of government intervention in Australia.Opponents of cuts in government interventionoften claim that Australia's public sector is notespecially big by Western standards. That may betrue of budget outlays, but not of interventions likepublic ownership and regulations', which permeatethe economy and go far towards explaining itspresent stagnation and rigidity.

The Strategies Compared

The books differ in scope and emphasisbecause they are pursuing different strategies ofreform. They agree that the problem is one ofcreat-ing a constituency for reform that is strong enoughpolitically to overcome the formidable coalition ofvested interests that defend the status quo and col-lectively veto attempts to substantially cut back thepublic sector. Mandate to Govern adopts an essen-tially indirect approach as a way of economizing onscarce supplies of political will and capacity. It con-centrates on deregulation and privatization, sincein these areas at least, politicians may have achance to isolate the special interests that opposethem, and to override them with the full politicaland intellectual weight of public opinion behindthem. The economic growth that should followsuch measures will then greatly ease the task ofreforming taxation, which in the meantime willprobably have to be tackled by the . minimal-change' approach introduced by the Fraser govern-ments and continued by the Hawke governments.

Spending and Taxing, meanwhile, aims to cutdirectly through the tangle of interests bound up inthe major public spending programs. The authorsreject the minimal-change approach to tax andspending reform because it brings plenty of across-the-board pain but very little in the way of com-pensating pleasure, and so is unlikely to have any

(continued on page 55)34

Review's 40th Birthday

The first number of IPA Review-appeared in March 1947. This year is therefore its 40th anniversary.

Throughout the years Review can claim to haveplayed a major part in influencing official and pub-lic opinion on the leading economic controversiesof the time.

Since its inception Review has been concernedto elucidate the . economics of the market economyand to demonstrate the superiority of free competi-tive enterprise over government-dominatedeconomic. systems.

There is much still to be done to advance thisgoal. Nevertheless there has been growing recogni-tion in recent years on both sides of politics of theessential` validity , of the case ' for a free market.Review has played a considerable part in bringingabout this-change of attitude.

In the last two years, two senior Labor politi-cians-- Treasurer, Paul Keating, and NSW Ministerfor Planning and the Environment, Bob Carr—have voiced in the pages of Review their disillu-sionment with doctrinaire socialism.

In the mid 1980s under the editorship of RodKemp, the range of issues which Review coveredgreatly expanded. While continuing its long-stand-ing concern with economics and industrial rela-tions (the first Review was composed entirely , ofarticles on this latter subject) Review took to exam-ining cultural issues—such as education, the radi-calization of the churches and media bias—andforeign policy.

This is one of three major changes to theReview since its foundation. The other two havebeen the complete revamping of the journal's sizeand layout. in 1985 •(with modifications since)accompanied by its introduction to the news-stands (encouraged by the former President, SirJames Balderstone), and the - opening of Review'spages to experts . from academia, business, themedia, the professions and other sections of thecommunity. .

. Until 1982 the great part of Review was writ-ten by the founding Director, Charles (Ref) Kemp.An exhibition-winning student of ProfessorsGiblin and Copland at Melbourne University,Kemp played a unique role during the post-warperiod. At a time when academic economists were

still flirting with versions of central economicplanning and pump-priming development, Kempwas a leading voice on the realities (and con-straints) of the free enterprise system. IPA Reviewthrough these years provided commentary onnational policy which still reads with a freshnessand relevance. Inflation, for example, was a centralconcern. Hardly a year has passed without severalarticles analyzing its causes and stressing its threatto a stable social and economic order. Ref Kempwas assisted by Maurice Williams (now a memberof the Victorian State Parliament) and in- lateryears by Jacob Abrahami.

Until recent years all Review material was sub-ject to the critical scrutiny of an editorial commit-tee before publication. ' Since Review never pulled

IPA 's founding Director, Charles Kemp, addressing anaudience at the University of Melbourne in 1954.

35 IPA Review, August-October 1987

REVIEW'S 40th BIRTHDAY

its punches, discussion on the committee was oftenmarked by some strong exchanges. The first Chair-man of the Committee was Geoffrey Grimwade,blunt, intelligent and altogether an admirable char-acter. One article was so strongly critical of an arbi-tration court decision that it was felt it ran the riskof "contempt of court". Grimwade bluntlyobserved that in the event of proceedings againstthe IPA a member of the full-time staff and not thechairman would have to stand trial.

On his regular visits to Canberra during the'fifties and 'sixties Ref Kemp usually visited theincumbent Secretary to the Treasury. Once, whenwith Sir Richard Randall they were interrupted bythe number two man, the legendary MaurieO'Donnell, who kindly stated that the only worth-while critiques of government budgets were thosepublished in Review.

On another occasion, Ref Kemp in a visit toCanberra was granted an interview with the PrimeMinister, Sir Robert Menzies. Since Review, in anumber of recent articles, had been strongly criticalof Government economic policies he approached itwith some trepidation. The interview, however,proceeded in a friendly fashion. But when Kempwas on the point of leaving and had reached thedoor of the PM's office, Sir Robert called out "Bythe way, what about saying something nice aboutthe Government now and then in that publicationof yours?"

Review of course could not please everyone allthe time, even those amongst its most prominentsupporters. During the "Korean" inflation of theearly 1950s it decided to advocate, among otherthings, a 10 per cent appreciation of the exchange

rate. Sir Walter Massy-Greene, chairman of someof Australia's greatest companies, whose interestslay in the export field, was horrified and threatenedto resign from the IPA if publication went ahead.

But Grimwade was adamant that the commit-tee should not retract. He asked the Director tosmooth things over with Sir Walter. It took Kempsome lengthy letters and interviews to accomplishthis difficult and unenviable task.

Ref Kemp retired from full-time employmentwith the IPA in 1976 although he continued to con-tribute regularly to Review. Roger Neave and laterGerry Hampel (for one year) also assisted with theeditorial and production of Review up to 1982, whenRod Kemp took over directorship of the IPA.

John Stone was appointed a Senior Fellow ofthe IPA from 1984 to 1987. In opening the IPAbranch in Canberra in April 1987, he recalled thatthe April-June 1969 Review contained his first pub-lished article, entitled, "Inflation and the Interna-tional Monetary System."

Dr. Ken Baker, now . Editor, has guided thejournal into new topics and formats. His analysis ofthe National Bicentennial Program in the Summer1984-85 Review is acknowledged in the 1987 Ency-clopaedia Britannica Yearbook as having spear-headed the criticisms of the Australian Bicenten-nial Authority's plans.

How successful Review has been must dependon the judgment of others. But over the years it haswon accolades from prominent Australians,including Sir Robert Menzies, who early on said ofReview: "On the documentary side of politicaleconomy no better work has been done during my21 years of Parliamentary life."

36

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The last decade has witnessed a remarkable shiftin the political systems of Latin America and theCaribbean toward democracy. In ten years tencountries have democratized. In nine of the ten,elected civilians replaced military presidents:Argentina (1983) stimulated by Britain's victory inthe Falkland's War, Bolivia (1982), Brazil (1985),Ecuador (1979), El Salvador (1984), Guatemala(1986), Honduras (1982), Peru (1980) andUruguay (1985). In the Caribbean Basin, the sixformer British dependencies—Antigua and Bar-buda, Belize, Dominica, St. Christopher andNevis, St. Lucia, and St. Vincent and the Grena-dines—that became independent nations duringthe past decade did so as democracies.

Fifty nationwide elections in 24 independentcountries have been conducted since 1980, withrecord numbers turning out to vote. Even in coun-tries where voting is not compulsory turn-outswere often high, for example 85 per cent in Gren-ada in 1984 and 89 per cent in The Bahamas in1982.

An improvement in education is one factorwhich has contributed to democratization. In1960, only 35 per cent of the region's children aged12-17 were enrolled in school; a mere 6 per cent ofthe university-age population attended universi-ties and technical colleges. By 1980, these figureswere 63 per cent and 26 per cent respectively. Thegrowth of the middle classes has been a key factorin the trend toward democracy. The tradition ofauthoritarian centralism in much of LatinAmerica is strong, however, and it remains to beseen whether the new democracies can achievestability.(Source: Democracy in Latin America and theCaribbean: The Promise and the Challenge, U.S.Department of State. Washington D.C., 1987.)

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FOCUS ON FIGURES

Jacob Abrahami

1947 to 1987:Improved LivingStandards & DecliningProspects

Forty years ago, in March 1947, the first issueof the IPA Review was published. What kind ofworld was it then? How different from today?

The accompanying charts and table highlightsome of the changes in Australian society in thepast 40 years. Of course not all changes tan be con-densed into a set of figures and summarized in achart or table. In particular no set of figures candescribe the changing mood of a nation. Yet there islittle doubt that a marked change has taken place.

In 1947, Australia, in common with the rest ofthe free world, had recently emerged. victoriousfrom a global war, full of hope and expectations of aprosperous and harmonious future. Today, whilethere is no immediate threat of a global conflict,there is nonetheless a great deal of pessimism anduncertainty about the future.

While some of the hopes and aspirations ofpost-World War II Australia have been largelyrealized, several disturbing trends have emerged totake the glint off these achievements.

On the positive side we begin by noting thatworkers today earn (in real terms) 50 per cent morethan they did in 1947. Pensioners are even betteroff with benefits twice those available 40 yearsago.

After paying income tax the 1987 worker is,however, only one-third better off than his 1947counterpart.

In 1947 53 per cent of families owned or werebuying their own homes; today the figure is over 70per cent.

Jacob Abrahami is Senior Economist at the IPA.

While public transport may not haveadvanced in 40 years, private means of transporthave expanded spectacularly. The number ofmotor vehicles over the period has risen from onefor each eight Australians to one for each two. The

Income Recipients by Source of Income

7947 Veterans 10.4%

Govt Employees 14,3% 409,000564,000 Sick and Other 0.3%

11,000

Unemployed 0.2%6,000

Widows 1.1%43,000Aged & Invalid 9.6%376,000

Private Employees 64.2%2,524,000

1987

Sick and Oth er 1.0% Single Parents 1.7%103

Veterans 6.3%

179

620,00Unemployed 5.9%

654,000000 ,000

Govt Employees 16.7 Widows 1.5%1,742,000 153,000

Aged & Invalid 16.5%1,720,000

Private Employees 50.4%5,256,000

IPA Review, August-October 1987 40

"gadgets" of modern life have spread at a similarrate. The number of telephones, to quote oneexample, has increased almost ten-fold from lessthan a million to nearly nine million, therebyincreasing the ratio of telephones from ten for each100 Australians to one for each two.

The resources devoted to education at alllevels have also greatly expanded. For instance, theproportion of adults now studying at universities isalmost twice that of 40 years ago. Of course it isquite another thing whether education standardshave improved.

Life expectancy over the 40 years hasincreased by some 10 per cent to 79 years forwomen and 73 for men. Infant mortality at thesame time has declined by two-thirds from 30 per1,000 births to only 10 per 1,000.

Despite improved health conditions thecurrent population growth of less than 1.5 per centper annum is substantially below the 2.3 per centrate of the late 1940s. Yet Australia over the 40years has managed to more than double its popula-tion from 7.5 million to over 16 million. In nosmall measure this is due to the large influx ofmigrants. In 1947 one in 10 Australians was bornoverseas, today the figure is around one in five. Themigrants have come from an increasingly diversi-fied background. Whereas in 1947 about three-quarters of foreign born Australians came from theUK and Ireland, today a little more than a thirdwere born in the UK and Ireland.

FOCUS ON FIGURES

Many of the things that make life today morecomfortable were not available in quantity, if at all,40 years ago. For example, today Australian house-holds commonly have washing machines, dish-washers and microwave ovens which enable themto devote more time to their televisions, videos,personal computers, direct interstate and interna-tional dialling and live satellite broadcasts fromaround the world.

At work main-frame computers, word proces-sors, automatic bank tellers, facsimile machinesand more recently robots have all improved effi-ciency and reduced some of the drudgery asso-ciated with what was previously mundane routinemanual work.

The frontiers of medical science have alsoadvanced with the development of organ trans-plants, micro-surgery, artificial joints and invitro-fertilization.

None of these improvements were available in1947.

If Australians of the 1980s are more highlypaid, better educated, healthier and more comfort-ably housed why is there so much gloom about thefuture?

The great improvements of the past fourdecades have been mainly of a physical or materialnature. Less tangible, but no less important, aspectsthat make up the quality of life have in manyrespects deteriorated. In particular two negativedevelopments stand out: the decline in traditional

INDICATORS OF CHANGE 1947 and 19871Unemploy-

Adult Weekly ment Benefit Consumption ConsumptionAward Wage Basic Pension Rate Adult with Cost Portable Melb. to Syd. Weekly Rent of beer per of wine per

Rate wife & child Radio Airfare for House head head%of Award

S S Wage Rate $ $ $ $ litres litres

1947 172.86 50.25 29.1 67.00 460 148 34.40 69.7 6.21987 289.23 112.15 38.8 204.00 6 170 133.30 115.6 21.3

C'weatth & Per cent ofC'wealth & State Taxes Share of Share of Unemployed

GDP per State Outlays per head per Exports going Exports going Housing Loan ReceivingPopulation head per head week to Japan to U.K. Interest Rate Govt Benefit Bankruptcies

Million S S S % % %

1947 7.5 5760 2217 28 1.81 29.0 3.8 7.4 3521987 16.1 16270 6530 94 28.40 3.5 15.0 89.0 8597*All money figures are in 1987 dollars.' Or nearest years for which figures are available.

41

FOCUS ON FIGURES

standards and values and the erosion in someaspects of individual freedom.

The rising crime rate, for example, is onereflection of the decline in traditional standards.The crime rate has increased more rapidly than thepopulation despite a more than three-fold increasein the number of police.

Many people link the rise in the crime ratewith the decline of the family as the basic institu-tion of Australian society. While the traditionalfamily is still the dominant unit, marriage is not aspopular as it was in the 1940s and divorce is verymuch more common. The current marriage rate of70 per 1,000 of population in the 1980s is littlemore than two-thirds the 101 per 1,000 of 1947.While the population has doubled in the last 40years the divorce rate has increased almost five-fold. As a result there has been a large increase inthe number of households not able to function as atraditional family and in need of State support. Forexample in 1987 there are 177,000 supportingparents, mostly mothers, receiving $1,300 millionin financial assistance from Government at anaverage of $7,300 per head per year. In 1947 therewas no such benefit.

In 1947, there were three private sectoremployees for each person receiving a pension orbenefit from government. Today the ratio is five tothree. If we include in "dependency" calculationspeople who receive wages and salaries from gov-ernment and their authorities, then the dependencyratio doubled from one dependent for each two pri-vate sector income earners to one for one.

Dependence on the State involves a loss offreedom not only for the dependants but for those

who foot the bill. That the loss has been substantialis easy to illustrate. Tax collected by governmentsincreased from $828 million in 1946/47 to $78,500million in 1986/87. Adjusted for inflation this is aseven-fold increase. Per head and adjusted forinflation tax collection has risen from $28.40 perweek to $93.80 per week.

But even taxes of this magnitude are notenough to satisfy the apparently insatiable appetiteof governments for spending money, which havehad to resort to ever-increasing borrowings. In1947 public sector debt stood at around $6 billion,of which at least half was associated with the thenrecently concluded war. Current public debt standsat $105 billion with little prospect of that figuredeclining noticeably in the near future. This hascontributed in no small measure to the high inter-est rates with which Australian businesses andhouseholds are now forced to live. Housing loans,for example, cost 3.8 per cent in 1947; today therate is around 15 per cent.

There has also been an enormous increase inbusiness and private debt, placing further strain onthe Australian economy.

In such an environment it is not surprisingthat many feel the prospects for the future are lessthan good. We are creating a divided nation; one-half dependent on government and the other halfwho must keep handing over an ever-increasingproportion of their income to support the increas-ing number of dependants. While this generationmay be able to muddle along and live on the fruitsof the past, we are handing over to future genera-tions a debt-ridden economy ill-equipped tohandle the problems created by this generation.

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42

Public Service or PoliticalServiceLes McCàrrQy

Within the Westminster system of government, the tradition has developed of an independent, professionaladministration responsible to the Ministry and charged with implementing government policy and adminis-tering the day-to-day affairs of State. It evolved of necessity from the past when patronage and nepotismwere the order of the day-and preferred appointments of relatives and friends resulted in administrationcharacterized by incompetence and favouritism. Today the wheel is in danger of turning a full circle withpolitical patronage replacing the royal variety.

The rise of the new breed of Labor politician, well-educated, middle-class .rather than working-class,pragmatic rather than visibly ideological and moremanagerially-oriented than the old guard - it dis-placed in the 1970s, is bringing about revolutionarychanges to the form and machinery of governmentin Australia.... • .

Impatient and often scornful of the traditionsand constraints of the Westminster system of par-liamentary government, Labor has 'set aboutexpanding the power and authority of the Ministryand making the administrative arm—the PublicService—more subservient to party objectives andcontrol. This preoccupation with exercising tighterparty control over administration, personnel andthe sources of advice to government is mostapparent in Victoria and Western Australia but isnot exclusive to those States.

The roots of the change can be traced back tothe time of the Gorton Government. They spreadrapidly under Whitlam, were nourished by Fraser,but have acquired wholly new dimensions in recentyears.

The most disturbing aspect of this . unan-nounced revolution is that it is making fundamen-tal changes to the formal working relationships andthe checks and balances between Parliament,Executive Government and the administrativearm, the public service, with no prior indication ofobjectives or public debate of the issues involved.

To some observers it is an undesirable trendtowards more authoritarian government throughthe decline of the authority of Parliament and the

politicization of the public. service. The architectsof the change can be heard to argue that it is nomore than the process of evolution from the inhe-rited Westminster style of government towards theUS system -where the elected Executive has greatercontrol over senior appointments and thereforeover .the administration of government.

But the direction we are taking in Australia istowards greater control by the party in power overall sectors of Government than is the case in the USwhere the outworking of the , balance of powersbetween the Executive, Congress and Senatefrequently cuts across party lines.

Whatever the position taken on this issue, it isundeniable that the changes made over the last fewyears in some States have , been far-reaching,frequently lacking regard for the rights and dignityof the individual and destructive of managementauthority and effectiveness.

They have generally been advanced under thecloak of administrative reform and a much neededshake-up of the public service. However, - the"reforms" we have seen in recent years, though pre-sented as such, seem to have done little to improveefficiency in public service management or indelivery of services. The outward signs are easilyrecognizable: reshuffling and change of name ofdepartments, removal of senior, experienced per-sonnel with their replacement in many cases bypeople regarded as more supportive of the govern-ment's aims. Ministerial offices have expanded tobecome mini-departments in their own right andparty faithful appointed as "advisors".

Les McCarrey is Director of the IPA States' Policy Unit in Perth and held senior posts in the public service for 25 years, rising toserve as Under Treasurer in Western Australia between 1975 and 1983.

43 IPA Review, August-October 1987

PUBLIC SERVICE OR POLITICAL SERVICE

The first objective of the "reforms" is appar-ently to replace public service input to Ministers byadvice from people regarded as more politically intune and more likely to give palatable advice.

There can be no valid objection to govern-ments obtaining advice on the working of today'scomplex world from wherever they can. IndeedMinisters have an obligation to seek broadly-basedadvice if they are to arrive at informed andbalanced decisions. Also there can be little argu-ment against the appointment by Ministers of alimited number of advisors of the same politicalconvictions if their activities are restricted toadvice that is openly given and exposed to com-ment and criticism from those in the public serviceand elsewhere with a knowledge of the subject. Butthat does not seem to be the case today with thenew generation of advisors who tend to surroundtheir activities and advice with secrecy andtogether constitute a type of closed-shop againstthe public service.

An advisor with executive authority is a con-tradiction of terms but many have substantialexecutive authority and mediate between the Min-ister and senior administrative staff who can find itdifficult to penetrate to the Minister and are some-times unsure of whose views they are hearing.

To the public and the business community theadvisors become gatekeepers to the Minister, tak-ing over in part his/her role and seemingly assum-ing the Minister's authority. In many cases they arebetter informed of government policy and, in prac-tice, exercise more real power than a head ofdepartment.

Professor Laffin, who conducted an extensivesurvey of politician—public service relationshipsin Victoria' quotes a senior public servant as sayingthat in many ways the chief administrator hadbecome "a glorified personal assistant".

It is significant that some advisors havemoved from that role to senior public service posi-tions by Ministerial influence. Just how their closepolitical connections and means of accession tooffice can be reconciled with their responsibility aspublic servants to serve a subsequent governmentof different political persuasion has never beenexplained. Certainly a new government could notbe expected to tolerate them in positions of trust orrespect their advice. Does the whole process beginagain and what are the consequences for effectivecontinuity of administration and confidence

between Ministers and senior public servants?Peter Henderson, a career public servant for

33 years, former head of the Department of ForeignAffairs in Canberra from 1980 to 1985 and"involuntarily resigned" under new regulationsintroduced by the Hawke Government in 1984,expressed his concerns about politicization of theCommonwealth Public Service recently when hesaid, "If preferment is increasingly given to syco-phants and yes men—the professionalism andquality of the public service as a whole can onlysuffer."

The worst feature of this trend in both theCommonwealth and State administration is thatthe public servant who sticks to his/her principlesand provides frank and honest advice becomes outof favour and isolated. At best further promotion isunlikely; at worst his job is at risk. As a result,middle-level executives now have real doubtswhether experience, competence and diligence areenough for them to be able to aspire to the highestpositions in public administration. Popularity withthe Minister and being assessed as sympathetic andreliable are likely to carry greater weight in deter-mining their career prospects.

Management

The second objective of the Labor "reforms"has been to extend the role of the Minister frompolicy director to department and personnelmanager.

John Cain made no bones about it. In anaddress to the Royal Australian Institute of PublicAdministration, Mr. Cain said "The principle ofdistancing the politicians from management of per-sonnel tended to extend to the idea that civil ser-vants, not Ministers, should be responsible foradministration generally." In his Government, Mr.Cain said, Ministers would reject any notion thatMinisters are responsible for policy and publicservants for administration.

Just how far Ministers should involve them-selves in the day-to-day direction of administra-tion and how they are to obtain the capacity toexercise administrative and managerial controlover several departments in addition to theirCabinet, Parliamentary and electorate respon-sibilities was not made clear.

Few Ministers come to Parliament and thenceto the Ministry with any experience in manage-

1. Martin Laffin: "No Permanent Head" a paper presented to the Annual Conference of the Australasian Political StudiesAssociation, Brisbane 1986.

44

ment of even a small office let alone of a largeorganization containing a multiplicity of profes-sional skills and with, in many cases, a complexrange of responsibilities. It is also rare to find aMinister appointed to a portfolio in which he/shehas any relevant qualifications or experience.

The danger of Ministers being surrounded by acoterie of politically active advisors with lines ofcommunication back into the party is that the latterare in reality non-elected politicians, unknown toand not responsible to the public, but frequentlywith more power and influence than backbenchMembers of Parliament.

This trend is just another manifestation of thedowngrading of the role of Parliament. ExecutiveGovernment is of the Parliament and responsibleto the Parliament but increasingly we see Parlia-ment treated with contempt by Ministers whoseown authority stems solely from their party having,for the time being, a majority of seats in theHouse.

Question time, the traditional means by whichelected members obtain information on the deci-sions and actions of government and the adminis-tration, has become farcical in many AustralianParliaments. Information on important issues isdenied Parliament by Ministers not answeringquestions or providing deliberately irrelevantanswers. Even questions on the use or misuse ofpublic money can be rejected by the absurd claimthat the information is commercially confidentialnotwithstanding the long-established conventionthat governments cannot deny the public informa-tion on the use of their money. This requirement isfundamental to the democratic process, but itsdemise has been accompanied by little resistancefrom Speakers who should be the watchdogs ofParliamentary rules.

Governments have been able to adopt thesetactics with little concern or remark from com-pliant press galleries which seem to accept and evenadmire the triumph of politics over Parliament. Oris it that today's journalists simply do not under-stand how thin the line of defence is against corrup-tion of the democratic process and that they are theforward scouts for the forces of truth and open gov-ernment? To the extent that governments areincreasingly able to deal in disinformation or pro-vide no information at all with little protest fromthe media, the journalists are failing Australia.

The public service is, of course, subject to gov-ernment direction and must implement the poli-

PUBLIC SERVICE OR POLITICAL SERVICE

cies of the government of the day within the law.But traditionally it needs to have a high degree ofindependence of thought and advice and, mostimportantly, in the responsibility of providing ser-vices to the public within the policy guidelineswithout bias, discrimination or favouritism.

Sir Paul Hasluck, one time public servant,Minister of the Crown, politician, academic andGovernor-General of Australia put this very wellin a recent article in Quadrant2.

"If there is to be any discussion of the theory ofGovernment, close attention would also have to begiven to the principles on which a career public ser-vice has been developed in Australia. The advo-cates of changes have been concerned chiefly withthe relationship between public servants and min-isters and have given scant attention to the rela-tionship of the public service to the community.For the past hundred years at least, Australianshave taken it for granted that the public servantacts with probity and is incorruptible and impar-tial. The citizen does not expect that there will befavouritism or prejudice at the post office counter,the police station, customs barrier, permit office orat any desk where he can make a complaint or seekan entitlement. One does not expect better servicefrom telling the clerk that one voted for the party inpower.

The ideal for which we have striven is a publicservice which can serve the public without bias andwhich does not have to curry favour, fear reprisalsor solicit benefits for itself. By and large we haveachieved that in Australia and the achievementwas founded on the idea that appointments to theservice and promotion within the service was openand competitive without political patronage orclass favouritism."

With the weakening of the role and authorityof Parliament, governments have become increas-ingly autocratic in style. This impatience with theforms and traditions of government has beencoupled in the case of recent Labor governmentswith a suspicion and distrust of the public serviceand an impatience with advice that might; basedon knowledge and experience, differ from viewsformulated in the party room.

The danger that arises from subsequent movesto `get control of the public service' and ensureappointment of amenable people in key positionsis that a compliant and muzzled public servicecombined with an emasculated Parliament putsthe government in a position to exercise autocratic

2. "Politics in tire Public Service" Sir Paul Hasluck, Quadrant, March 1986.

45

PUBLIC SERVICE OR POLITICAL SERVICE

power with no effective checks or balances. Thereis a consequent temptation to ride rough-shod overproper forms and conventions and even circum-vent the spirit of the law.

In the United States the powers of Congressand the Senate and their right to call on and ques-tion the administration through a well-developedcommittee system stands as a strong counter-balance to an Executive which seeks to exceed itstraditional or constitutional authority. Events inrecent years have demonstrated the effectiveness ofthat balancing mechanism for which we have noeffective counterpart.

The Westminster system is a fragile one restingas it does on respect for and observance of the con-ventions and traditions developed over the cen-turies and upon the integrity of those elevated topower within it. An important part of that system isan independent, professional public service withappointments and promotion based on merit andfree from nepotism and political influence.

There is a great deal of room for improvement

in the operations and in the efficiency of Australianpublic services, but that will not be achieved bypoliticization. What needs to be acknowledged isthat in general Australia has been well served by itspublic servants over the years and that on thewhole their record for integrity and straight dealinghas been somewhat better than that of our politi-cians.

The empires need to be pruned (although notall are public service creations) and managementtightened. That is unlikely to occur in conditions ofweakened and confused leadership, low moraleand uncertainty as to the role required of publicservants.

But at bottom what is at stake is the carefullyconstructed balance and probity of our system ofgovernment. As Sir Paul Hasluck put it, "The onlysure and certain protection against authoritarianrule in Australian government is a professional,competent career public service independent of thefavour, of ministers and conscious of its ownspecialized role in the conduct of public affairs."

IPA COUNCILS

VICTORIA83 William Street,Melbourne, 3000EMERITUS COUNCILLORSSIR WILFRED BROOKES,C.B.E.. D.S.O.SIR JAMES FOOTSW.A. INCE. C.M.G.R.A. SIMPSON

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' E.rrruti re Comutiltee

46

PHILOSOPHERS FOR FREEDOM

Ten Conservative PrinciplesRussell Kirk

Russell Kirk is one of the great intellectual figures of post-World War!! America. His best known book, TheConservative Mind (now in its seventh edition) on the nature and historical sources of conservatism, isacclaimed for the subtlety and breadth of its analysis. He is also author of Roots of the American Order,Eliot and his Age and editor of The Portable Conservative Reader. For twenty-five years he wrote a column,"From the Academy", for National Review, and founded two journals, Modern Age and The UniversityBookman. His intellectual inspiration clearly owes more to the great scholars of old than the cultural windswhich have prevailed over recent decades. He has been called "The American Cicero".

This paper was delivered at The Heritage Foundation in Washington D.C., at which Dr. Kirk is now aDistinguished Scholar.

Being neither a religion nor an ideology, the body ofopinion termed conservatism possesses no HolyWrit and no Das Kapital to provide dogmata. Sofar as it is possible to determine what conservativesbelieve, the first principles of the conservative per-suasion are derived from what leading conserva-tive writers and public men have professed duringthe past two centuries.

Perhaps it would be well, most of the time, touse this word "conservative" chiefly as an adjec-tive. For there exists no Model Conservative, andconservatism is the negation of ideology: it is astate of mind, a type of character, a way of lookingat the civil social order.

In essence, the conservative person is simplyone who finds the permanent things more pleasingthan Chaos and Old Night. (Yet conservativesknow, with Burke, that healthy "change is themeans of our preservation.") A people's historiccontinuity of experience, says the conservative,offers a guide to policy far better than the abstractdesigns of coffee-house philosophers. But of coursethere is more to the conservative persuasion thanthis general attitude.

It is not possible to draw up a neat catalogue ofconservatives' convictions; nevertheless, I offeryou, summarily, ten general principles. It seemssafe to say that most conservatives would subscribeto most of these maxims, although the diversity ofways in which conservative views may find expres-sion is itself proof that conservatism is no fixedideology. What particular principles conservativesemphasize during any given time will vary with thecircumstances and necessities of that era. The

following ten articles of belief reflect the emphasesof conservatives nowadays.

First, the conservative believes that there existsan enduring moral order. That order is made forman, and man is made for it: human nature is con-stant, and moral truths are permanent.

47 IPA Review, August-October 1987

TEN CONSERVATIVE PRINCIPLES

This world order signifies harmony. There aretwo aspects or types of order: the inner order of thesoul and the outer order of the commonwealth.Twenty-five centuries ago, Plato taught this doc-trine, but even the educated nowadays find it diffi-cult to understand. The problem of order has beena principal concern of conservatives ever sinceconservative became a term of politics.

Our twentieth century world has experiencedthe hideous consequences of the collapse of beliefin a moral order. Like the atrocities and disasters ofGreece in the fifth century before Christ, the ruin ofgreat nations in our century shows us the pit intowhich fall societies that mistake clever self-interest,or ingenious social controls, for pleasing alterna-tives to an old-fangled moral order.

It has been said by liberal intellectuals that theconservative believes all social questions, at heart,to be questions of private morality. Properly under-stood, this statement is .quite true. A society inwhich men and women are governed by belief in anenduring moral order, by a strong sense of right andwrong, by personal convictions about justice andhonour, will be a good society—whatever politicalmachinery it may utilize; while a society in whichmen and women are morally adrift, ignorant ofnorms, and intent chiefly upon gratification ofappetites, will be a bad society—no matter howmany people vote and no matter how liberal itsformal constitution may be.

Second, the conservative adheres to custom,convention and continuity. It is old custom thatenables people to live together peaceably; the des-troyers of custom demolish more than they knowor desire. It is through convention—a word muchabused in our time—that we contrive to avoid per-petual disputes about rights and duties: law at baseis a body of conventions. Continuity is the meansof linking generation to generation; it matters asmuch for society as it does for the individual; with-out it, life is meaningless. When successful revolu-tionaries have effaced old customs, derided oldconventions, and broken the continuity of socialinstitutions—why, presently they discover thenecessity of establishing fresh customs, conven-tions, and continuity; but that process is painfuland slow; and the new social order that eventuallyemerges may be much inferior to the old order thatradicals overthrew in their zeal for the EarthlyParadise.

Conservatives are champions of custom, con-vention and continuity because they prefer thedevil they know to the devil they do not know.Order and justice and freedom, they believe, are

the artificial products of a long social experience,the result of centuries of trial and reflection andsacrifice. Thus the body social is a kind of spiritualcorporation, comparable to the church; it may evenbe called a community of souls. Human society isno machine to be treated mechanically. The con-tinuity, the life-blood, of a society must not beinterrupted. Burke's reminder of the necessity forprudent change is in the mind of the conservative.But necessary change, conservatives argue, oughtto be gradual and discriminatory, never unfixingold interests at once.

Third, conservatives believe in what may becalled the principle of prescription. Conservativessense that modern people are dwarfs on the should-ers of giants, able to see farther than their ancestorsonly because of the great stature of those who havepreceded us in time. Therefore conservatives veryoften emphasize the importance of prescription—that is, of things established by immemorial usage,so that the mind of man runneth not to the con-trary. There exist rights of which the chief sanctionis their antiquity—including rights to property,often. Similarly, our morals are prescriptive ingreat part. Conservatives argue that we areunlikely, we moderns, to make any brave new dis-coveries in morals or politics or taste. It is perilousto weigh every passing issue on the basis of privatejudgment and private rationality. The individual isfoolish, but the species is wise, Burke declared. Inpolitics we do well to abide by precedent and pre-cept and even prejudice, for the great mysteriousincorporation of the human race has acquired aprescriptive wisdom far greater than any man'spetty private rationality.

Fourth, conservatives are guided by their prin-ciple of prudence. Burke agrees with Plato that inthe statesman, prudence is chief among virtues.Any public measure ought to be judged by its prob-ably long-run consequences, not merely by tem-porary advantage or popularity. Liberals and radi-cals, the conservative says, are imprudent: for theydash at their objectives without giving much heedto the risk of new abuses worse than the evils theyhope to sweep away. As John Randolph ofRoanoke put it, Providence moves slowly, but thedevil always hurries. Human society being com-plex, remedies cannot be simple if they are to beefficacious. The conservative declares that he actsonly after sufficient reflection, having weighed theconsequences. Sudden and slashing reforms are asperilous as sudden and slashing surgery.

Fifth, conservatives pay attention to theprinciple of variety. They feel affection for the

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proliferating intricacy of long-established socialinstitutions and modes of life, as distinguishedfrom the narrowing uniformity and deadeningegalitarianism of radical systems. For the preserva-tion of a healthy diversity in any civilization, theremust survive orders and classes, differences inmaterial condition, and many sorts of inequality.The only true forms of equality are equality at theLast Judgment and equality before a just court oflaw; all other attempts at levelling must lead, atbest, to social stagnation. Society requires honestand able leadership; and if natural and institutionaldifferences are destroyed, presently some tyrant orhost of squalid oligarchs will create new forms ofinequality.

Man being imperfect, no perfect social orderever can be created. Because of humanrestlessness, mankind would grow rebelliousunder any utopian domination, and wouldbreak out once more in violent discontent--orelse expire of boredom.

Sixth, conservatives are chastened by theirprinciple of imperfectibility. Human nature suffersirremediably from certain grave faults, the conser-vatives know. Man being imperfect, no perfectsocial order ever can be created. Because of humanrestlessness, mankind would grow rebellious underany utopian domination, and would break out oncemore in violent discontent—or else expire of bore-dom. To seek for utopia is to end in disaster, theconservative says: we are not made for perfectthings. All that we reasonably can expect is a toler-able, ordered, just and free society, in which someevils, maladjustments, and suffering will continueto lurk. By proper attention to prudent reform, wemay preserve and improve this tolerable order. Butif the old institutional and moral safeguards of anation are neglected, then the anarchic impulse inhumankind breaks loose: "the ceremony of inno-cence is drowned." The ideologues who promisethe perfection of man and society have converted agreat part of the twentieth century world into aterrestrial hell.

Seventh, conservatives are persuaded that free-dom and property are closely linked. Separate pro-perty from private possession, and Leviathanbecomes master of all. Upon the foundation of pri-vate property, great civilizations are built. The morewidespread is the possession of private property, themore stable and productive is a commonwealth.Economic levelling, conservatives maintain, is not

economic progress. Getting and spending are notthe chief aims of human existence; but a sound eco-nomic basis for the person, the family and the com-monwealth is much to be desired.

Sir Henry Maine, in his Village Communities,strongly puts the case for private property:"Nobody is at liberty to attack several property andto say at the same time that he values civilization.The history of the two cannot be disentangled." Forthe institution of several property—that is, privateproperty—has been a powerful instrument forteaching men and women responsibility, for pro-viding motives to integrity, for supporting generalculture, for raising mankind above the level ofmere drudgery, for affording leisure to think andfreedom to act. To be able to retain the fruits ofone's labour; to be able to see one's work made per-manent; to be able to bequeath one's property toone's posterity; to be able to rise from the naturalcondition of grinding poverty to the security ofenduring accomplishment; to have something thatis really one's own—these are advantages difficultto deny. The conservative acknowledges that thepossession of property fixes certain duties upon thepossessor, he accepts those moral and legal obliga-tions cheerfully.

Eighth, conservatives uphold voluntary com-munity, as they oppose involuntary collectivism. Ina genuine community, the decisions most directlyaffecting the lives of citizens are made locally andvoluntarily. Some of these functions are carried outby local political bodies, others by private associa-tions: so long as they are kept local, and are markedby the general agreement of those affected, theyconstitute healthy community. But when thesefunctions pass by default or usurpation to central-ized authority, then community is in serious dan-ger. Whatever is beneficent and prudent in modemdemocracy is made possible through co-operativevolition. If, then, in the name of an abstract demo-cracy, the functions of community are transferredto distant political direction—why, real govern-ment by the consent of the governed gives way to astandardizing process hostile to freedom andhuman dignity.

For a nation is no stronger than the numerouslittle communities of which it is composed. A cen-tral administration, or a corps of select managersand civil servants, however well-intentioned andwell-trained, cannot confer justice and prosperityand tranquility upon a mass of men and womendeprived of their old responsibilities. That experi-ment has been made before; and it has beendisastrous. It is the performance of our duties in

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TEN CONSERVATIVE PRINCIPLES

community that teaches us prudence and efficiencyand charity.

Ninth, the conservative perceives the need forprudent restraints upon power and upon humanpassions. Politically speaking, power is the abilityto do as one likes, regardless of the wills of one'sfellows. A state in which an individual or a smallgroup are able to dominate the wills of their fellowswithout check is a despotism, whether it is calledmonarchical or aristocratic or democratic. Whenevery person claims to be a power unto himself,then society falls into anarchy. Anarchy never lastslong, being intolerable for everyone and contrary tothe ineluctable fact that some persons are morestrong and more clever than their neighbours. Toanarchy there succeeds tyranny or oligarchy, inwhich power is monopolized by a very few.

The conservative endeavours to so limit andbalance political power that anarchy or tyrannymay not arise. In every age, nevertheless, men andwomen are tempted to overthrow the limitationsupon power, for the sake of some fancied tem-porary advantage. It is characteristic of the radicalthat he thinks of power as a force for good—so longas the power falls into his hands. In the name ofliberty, the French and Russian revolutionariesabolished the old restraints upon power; but powercannot be abolished; it always finds its way intosomeone's hands. That power which the revolu-tionaries had thought oppressive in the hands ofthe old regime became many times as tyrannical inthe hands of the radical new masters of the state.

Knowing human nature for a mixture of goodand evil, the conservative does not put his trust inmere benevolence. Constitutional restrictions,political checks and balances, adequate enforce-ment of the laws, the old intricate web of restraintsupon will and appetite—these the conservativeapproves as instruments of freedom and order. Ajust government maintains a healthy tensionbetween the claims of authority and the claims ofliberty.

Tenth, the thinking conservative understandsthat permanence and change must be recognizedand reconciled in a vigorous society. The conserva-tive is not opposed to social improvement,although he doubts whether there is any such forceas a mystical Progress, with a Roman P, at work inthe world. When a society is progressing in somerespects, usually it is declining in other respects.The conservative knows that any healthy society isinfluenced by two forces, which Samuel TaylorColeridge called its Permanence and its Pro-gression. The Permanence of a society is formed by

those enduring interests and convictions that giveus stability and continuity; without that Perma-nence, the fountains of the great deep are brokenup, society slipping into anarchy. The Progressionin a society is that spirit and that body of talentswhich urge us on to prudent reforms and improve-ment; without that Progression, a people stagnate.

Therefore the intelligent conservative endea-vours to reconcile the claims of Permanence andthe claims of Progression. He thinks that the liberaland the radical, blind to the just claims of Perma-nence, would endanger the heritage bequeathed tous, in an endeavour to hurry us into some dubiousTerrestrial Paradise. The conservative, in short,favours reasoned and temperate progress; he isopposed to the cult of Progress, whose votariesbelieve that everything new necessarily is superiorto everything old.

Change is essential to the body social, the con-servative reasons, just as it is essential to thehuman body. A body that has ceased to renew itselfhas begun to die. But if that body is to be vigorous,the change must occur in a regular manner, har-monizing with the form and nature of that body;otherwise change produces a monstrous growth, acancer, which devours its host. The conservativetakes care that nothing in a society should ever bewholly old, and that nothing should ever be whollynew. This is the means of the conservation of anation, quite as it is the means of conservation of aliving organism. Just how much change a societyrequires, and what sort of change, depends uponthe circumstances of an age and a nation.

Who are today's Conservatives?

Who affirms those ten conservative principlesnowadays? In practical politics, a body of generalconvictions is commonly linked with a body ofinterests. Marxists argue, indeed, that professedpolitical principle is a mere veil for advancement ofthe economic interests of a class or faction: that is,no real principle exists—merely ideology. Such isnot my view: but we ought to recognize connec-tions between political doctrines and social or eco-nomic interest groups, when such connectionsexist; they may be innocent enough, or they maymake headway at the expense of the general publicinterest. What interest or group of interests backthe conservative element in politics?

That question is not readily answered. Manyrich people endorse liberal or radical causes,affluent suburbs frequently vote for liberal menand measures; attachment to conservative

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TEN CONSERVATIVE PRINCIPLES

sentiments does not follow the line that Maixistanalysts of politics expect to find. The owners ofsmall properties, as a class, tend to be more conser-vative than do the . possessors of much property(this, latter often in the abstract form of stocks andbonds). One may remark that most conservativeshold. religious convictions; yet . the officers of main-line Protestant churches, together with church bur-eaucracies, frequently ally themselves with radicalorganizations; while some curious political affir-mations have been . heard recently among theCatholic hierarchy. Half a century agd, it mighthave been said that niost college professors _wereconservative; that could not be said truthfullytoday; yet physicians, lawyers, dentists, and otherprofessional people—or most of them—subscribeto conservative journals and generally vote forpersons they take to be.conservative candidates.

In short, the conservative interest appears totranscend the usual classification of most votingblocs according to wealth, age, ethnic origin, reli-gion, occupation, education, and the like. If we niayspeak of a conservative interest, this appears to bethe interest bloc of,people concerned for stability:those citizens who find the pace ofchange too swift,the loss of continuity and permanence too painful,the break with the past too brutal, and inhumane.Certain material interests are bound up with thisresistance to insensate. change: nobody relisheshaving his savings reduced to insignificance byinflation of the currency. But the moving powerbehind the renewed conservatism of the Americanpublic is not some scheme of personal or corporateaggrandizement; rather, it is the impulse for survi-val of a culture that wakes to its peril near the endof the twentieth century.. We might well call mili-tant conservatives the Party of the PermanentThings.

Perhaps no words have been more abused,both in the popular press and within the Academy,than conservatism and conservative. The . NewYork Times, not without malice prepense, now andagain refers to Stalinists within the Soviet Union as

conservatives. Silly anarchistic tracts, under thelabel libertarian, are represented in some quartersas conservative publications—this in the -UnitedStates of America, whose Constitution is describedby Sir Henry Maine as the most successful devicein,the history of politics! Even after more thanthree decades of the renewal of conservativethought in this land, it remains necessary to make itclear to the public that conservatives are notmerely folk content with the dominations andpowers of the moment; nor anarchists in disguisewho would pull down, if they could, both the politi-cal and the moral order; nor persons for whom thewhole of life is the accumulation of money, like somany Midases.

Therefore it is of importance to know whereofone speaks, and not to mistake the conservativeimpulse for some narrow and impractical ideology.If the trumpet give an uncertain sound who shall goforth to battle? For intellectual development, thefirst necessity is to define one's terms. If we canenlarge the understanding of conservatism's firstprinciples, we will have begun a reinvigoration ofthe conservative imagination.

The great line of demarcation in modern poli-tics, Eric Voegelin used to point out, is not a divi-sion between liberals on one side and totalitarianson the other. No, on one side of that line are allthose men and women who fancy that the temporalorder is the only order, and that material needs aretheir only needs, and that they may do as they likewith the human patrimony. On the other side ofthat line are all those people who recognize anenduring moral order in the universe, a. constanthuman ,nature and high duties toward the orderspiritual and the order temporal.

Conservatives cannot offer the fancied Terres-trial Paradise that always, in reality, has turned outto be an Earthly Hell. What they can offer is politicsas the art of the possible; and an opportunity tostand up for thatold lovable human nature; andconscious participation in the defence of order andjustice and freedom.

51

The Capture of the WelfareState

Delia Hendrie and Michael Porter

The main object of any welfare system is to improve the well-being of those who are particularly disadvan-taged, or suffer misfortune. But as our experience with the welfare state shows, those who benefit from thesystem are often not those most in need.

One major source of the welfare state's problems isthe fact that the process of democratic governmentis one readily captured by interest groups. Success-ful groups are typically articulate, narrowly focusedin electoral terms, keen on rhetoric regarding thebenefits to the needy, but far from poor them-selves.

Because the costs of individual governmentprograms are spread thinly, through taxes and gov-ernment borrowing (future taxes), or through cross-subsidies via state enterprise, while the benefits areconcentrated on particular interest groups, thepublic at large rarely has any capacity or indeedincentive to attempt to undo a government pro-gram. Over time, a wide range of projects gainsapproval, with the size of government growing andwith the government becoming increasinglybeholden to narrow interest groups, all in the nameof redistribution and the "welfare state". But thewelfare which is being enhanced is rarely the wel-fare of those with real disadvantage. What is more,the tax burden of redistribution to the powerfuldeters the very activity which is capable of employ-ing and benefiting the disadvantaged.

A second process which often undermines thegood intentions of the welfare state is that many ofthose requiring support are in difficulties largelybecause of the operation of other policies of gov-ernment, not least in the area of labour markets,education and training, and because of the struc-ture of benefit levels relative to award wages. Poli-cies which impose artificial minimum standardshave the effect of precluding others from compet-ing for jobs, in particular those with less skills andexperience. Thus any package which looks at thefundamentals of welfare reform needs also to look

beyond issues of delivery of welfare services, and toreassess the strategic issues related to why, despiteour affluence, the number of persons in disadvan-taged situations has grown out of all proportion,despite growth in community income and theimposition of high minimum incomes for those inemployment.

Finally, the welfare state is undermined by thegrowth of transfers to persons who are not disad-vantaged, in forms such as family allowances,dependent spouse rebates, tax-free thresholds,compulsory medicare arrangements and subsi-dized education. All of these have created a sizableexpansion of "middle-class welfare" and an asso-ciated escalation of marginal tax rates. The highermarginal tax rates resulting from universal benefitsare counter-productive, in part because theyimpose high marginal tax rates on the peoplereceiving the benefits.

The Persistence of Welfare Problems

Despite the fact that per capita real expendi-tures (1986 dollars) on social security have risenfrom $514 in 1970/71 to $1,300 in 1986/87, andwith similar escalations in spending on health andeducation, serious problems for disadvantagedgroups have persisted. A number of major andloosely related causes seem relevant.• The very growth of government spurred on by

the capacity of interest groups to exploit thedemocratic process has left little room formanoeuvre in government, with the relativelypowerless and less influential members of thecommunity simply failing to gain a hold owing tothe escalation of all the other claims on govern-

Delia Hendrie is Research Assistant at the Centre of Policy Studies.Michael Porter is Professor of Economics at Alonash Universit y and Director of the Centre of Policy Studies.

IPA Review August-October 1987 52

ment. Furthermore, governments are increas-ingly preoccupied in fighting powerful interestgroups whenever they do try to cut ineffectiveand largely wasteful items of government spend-ing. They thus have little time or resources forthose who really do need help, or who wouldrespond to greater incentives.

• It is now essentially illegal to employ and trainyoung persons on terms they would accept. Thisis the outcome of the imposition of wage minimaand conditions which create costs of employingyoung persons far in excess of those whichapplied when youth unemployment was not aproblem. As a result, young people do not get a"toe in the door" and fail to accumulate one ofthe most valuable assets—work experience.Instead, they accumulate the quite distorting anddispiriting experience of life on welfare. The les-son of Hong Kong, which, despite the absence ofa welfare state, has greatly enriched the standardof living for millions of (initially) unskilledChinese peasants, without the assistance ofunions, or minimum wages, is a reminder thatwe do not have a monopoly of wisdom when itcomes to devices for looking after low incomegroups.

• Those allegedly caring for the interests of theunemployed, including groups such as theACTU, typically focus on raising minimum con-ditions which preclude the less skilled, and thenadvocate increased welfare spending on thosedisplaced. When they do focus on reasons forunemployment they often emphasize "redherrings", such as technological change, failing tonote that there is no significant connectionbetween unemployment trends and technologi-cal change—with new technology simply allow-ing us, if we invest, to obtain higher incomes andso meet more of our essentially insatiable wants.There is no evidence of"demand failure" to propup notions of the inevitability of persistentunemployment.

• The design and level of welfare benefits havemade it less unattractive to be a single parent orunemployed, and have created an apathetic atti-tude on the part of many individuals towardsproductive employment. Bernstam and Swan'have argued that in the USA there is a markedpositive responsiveness of both unemploymentand the numbers on supporting parent's benefit

THE CAPTURE OF THE WELFARE STATE

to the levels of both real minimum wages andsingle parent benefits.

• Government is increasingly taxing Peter to payPeter, not Paul. When we tax $1 away, the econo-mics of the process are such that we are forced toraise marginal tax rates and generate a loss ofeconomic efficiency—with the effect that, as acommunity, we only have a net 70c-80c ofincome to give back, once we allow.for the directand indirect effects, at the margin, of such taxeson effort, investment and savings and the result-ing loss of community income.z

Interest Groups and Middle-Class Welfare

The above problems reduce to (1) interestgroup capture of government process; and (2) theconnected point, the growth of middle-class wel-fare, or the "churning" of taxation and social secur-ity payments throughout the community, such thatwe are taking dollars out of one pocket of (lowincome) workers and putting in the other pocketaccess to services and allowances, thresholds,rebates, subsidized education and health, which aretypically worth far less than the taxes extracted. Aconsequence of such widespread policies is the highprobability of such a worker spending most of hisor her working life paying marginal tax rates in the40 per cent to 50 per cent bracket, and an evenhigher probability that he or she will be dis-couraged from productive activity by the burden ofhaving to support similar people in similar situa-tions.

The vast bulk of well-intentioned transfers forunemployment benefits, education, health insur-ance and other areas of policy are made necessaryby the malfunctioning of the system, indeed by theoperation of government and regulatory rulesregarding employment and education and training.We are probably spending over $5 billion perannum compensating for the consequences of anArbitration Commission process and a labourmarket and training "system" which put hugebarriers in the way ofyoung people wishing to workand train. And when we realize that the same ten-dency to churn taxes through the welfare systemand to redistribute to those paying such taxes, hadbefore July 1 pushed top marginal tax rates toaround 55 per cent or 60 per cent, when they needonly be around 25-30 per cent, it becomes clear that

1.Bernstam, M. and Swan, P. (1986) "The State as Marriage Partner of Last Resort: A Labour Market Approach to Illegiti-macv in the United States': 1960-1980, mimeograph. See also "Brides of the State" IPA Review, May-July 1987.2. Findlay, C. and Jones, R. (1982), "The Marginal Cost of Australian Income Taxation', Economic Record, 58,162,253-262.

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THE CAPTURE OF THE WELFARE STATE

the system is indeed . in need of fundamentalreform. A society in which the average industriousworker faces 50 per cent to 60 per cent (direct andindirect) tax rates at their earnings peak is one inwhich such persons are encouraged to becomecreative in precisely the wrong ways, that is toavoid and evade taxes (often by not doing the pro-ductive things they would otherwise do), resultingin a smaller pie and a greater difficulty in achievingdesirable distributional goals.

The more government is caught up in actualproduction and distribution, the more itbecomes beholden to interest groups. Theresulting inefficiencies of state provision aresuch that there will be less capacity to helpthose that most of us really wish to help.

There is a need to move away from middle-class welfare towards withdrawal of the govern-ment from the production and management ofmost goods and services (activities at which it has aproven disadvantage in providing efficient ser-vice), so that government may concentrate inadministering a more generous and targeted wel-fare system which is capable of looking after thedisadvantaged without discouraging the efforts ofboth the disadvantaged and the rest of the com-munity. We believe that the major implication ofmost research on state enterprises and other ulti-mately politically controlled corporations is thatgovernment should not be running school systems,airlines, electricity or even communications, butrather should use its taxing and subsidy powers totilt the terms on which some individuals may gainaccess both to key services and to income. Themore government is caught up in actual productionand distribution, the more it becomes beholden tointerest groups. The resulting inefficiencies of stateprovision are such that there will be less capacity tohelp those that most of us really wish to help. -

If taxpayers did not have to fund whatevereducation package is chosen by students in theartificial world of unpriced and bureaucraticallyrun tertiary education, they, like their parents,would have far greater post-tax income than higherquality education would cost. (Those who enjoynot paying for the education services they use,should realize that the subsidy increases, on aver-age, the total cost they pay for everyone else!)

Parent and student discretion exercised in choosingcourses, and more accountability on the part ofteachers and researchers, mean that costs of fee-charging and competitive tertiary will beless than current costs, just as private schools inAustralia cost significantly less than governmentschools.'

We should also stress that the general pointregarding the capacity of interest groups to capturethe governmental process does not stop with areassuch as education, but extends into the whole rangeof state enterprises, enterprises which are largelythere because oftheir capacity to disguise the cross-subsidies which they facilitate. If state enterprisewere not simply about the desire to disguise andconceal cross-subsidies from the taxpayers at largeto narrow groups, then by and large they would bereplaced by private enterprises subject to the usualprivate incentive structures and takeover possibili-ties, tending to make them more efficient. Such pri-vate enterprises could still receive (explicit) subsid-ies and transfers from the government in order tohelp those deemed worthy of subsidy or privilegedaccess, but the key advantage is that there wouldnow be a management structure with an incentiveto keep the value of services up and costs down.

Airlines are another example of capture of thewelfare state in the interests of the privileged. If theconsumers who face excessive air fares, and whoare offered very limited access to airline schedulesand innovative packages, had the opportunity tounderstand the extent to which they cross-subsid-ize groups of aviation workers, none of whom arein particular need or suffering deprivation, thenthey would have contempt for the current regula-tion of airlines, including by means of state owner-ship of Australian Airlines and Qantas. Similarly, ifthe taxpayers of Victoria were aware of the extent($40 million in 1986/87) to which their govern-ment is currently redistributing towards the StateElectricity Commission and selected customers,and if they were aware of the extent to which cer-tain unions captured the profitability of power gen-eration by delaying the construction of Loy Yangand so almost doubling its capital cost (see studiesby Hartley and Rheinbraun), then they too wouldbe fairly indignant. It follows that if one isgenuinely concerned in Australia to increase thecapacity to look after low income persons, onealmost certainly wishes to reduce the capacity ofgovernment to look after privileged lobby groups,

3. See the chapter by Parish in Freebairn, J. W., Porter, M.G. and Walsh, C. (eds) (1987) Spending and Taxing: AustralianReform Options, Allen and Unwln/Centre of Policy Studies/National Priorities Project.

54

and this implies far less state enterprise, far lessregulation by government and its agencies, and afar more open and competitive market process inAustralia. The point here is that while market out-comes may not be perfect, they are intrinsicallyopen, and not conducted behind regulatory doors.

If market outcomes do not conform to politi-cal preferences, government can, through taxingand subsidy mechanisms, make sure that evenunder full private ownership of various organiza-tions and institutions they can achieve a largemeasure of change in the distribution of benefitsand costs, but openly in the full gaze of Parliament.However, it is a major point that interest groupstypically do not wish such an open process, and nordo most politicians. Politicians are not rewarded,electorally, for their cost-saving efficiency in meet-ing social objectives, but for handing out benefits

THE CAPTURE OF THE WELFARE STATE

and opportunities to those whose favour they seek.State enterprises fit nicely into this scheme ofthings, as all political parties demonstrate. It is onlywhen budgetary times are tough, as in New Zealandand Australia at present, that we tend to see themore courageous finance ministers become willingto face facts and attempt to undo the capture of thewelfare state.

It should also be accepted that where there isactual "redistribution", much of it is received bythe same persons complaining about high taxes, yetreceiving education subsidies, family allowances,large tax exempt thresholds for husband and wife,compulsory health insurance and so forth. A keyquestion in 1987 is whether it is possible to restruc-ture this system before the excess of governmentspending, and the resulting external deficits anddebts, convert us into a third-rate nation.

Two Handbooks for Smaller Government–Michael James(continued from page 34)

long-term effect on the upward trend of govern-ment spending. Their answer is to package cuts intaxes and spending so as to deliver the lasting gainsof lower public spending along with the temporarylosses. The reasoning runs like this: the only way toget taxes down is to cut spending, but the only wayto make spending cuts acceptable to welfare reci-pients is to compensate them with substantial taxcuts. Most taxpayers would find themselves withmore after-tax income; they would have to spendmuch of this on services like health and educationthat the state used to provide `free' for everyone;but they would appreciate the greater scope forconsumer choice allowed by higher incomes and bygreater competition between producers.

Mandate to Govern has already been criticizedfor demanding less, and Spending and Taxing fordemanding more, than the political system candeliver. Which of the two strategies is likely to bemore successful? Treasurer Paul Keating's Expen-diture Statement of last May leaves the questionopen. As an exercise in minimal change, it was notlarge enough even to eliminate the budget deficit,let alone finance a tax cut. It was accompanied byno revised trilogy-style promise that overall spend-ing would not be allowed to creep up again to pre-vious levels. Yet it was more than just an 'across-the-board' exercise. By means testing family

allowances, abolishing the Community Employ-ment Program, and raising eligibility for the dole toage 18 (all recommended by one or both hand-books) it began the slaughter of sacred cows thatmust continue if public spending is ever to bebrought under control and targeted to appropriategroups of beneficiaries. Australia's economic con-dition is such that politicians have no option but toproceed in the direction indicated by Mandate toGovern and Spending and Taxing; but how far andhow fast they go depends very largely on the imagi-nation they display in appealing for popular sup-port and focusing public opinion against thetyranny of special interests.

Whatever the strengths and weaknesses oftheir respective strategies, these books contributegreatly to the indispensable task of informing pub-lic opinion about the often self-defeating andillusory nature of many of the `benefits' of biggovernment. By helping to articulate the publicdemand for a more rational and discriminatingpublic sector, they reduce the risks politicians facein trying to deliver one. In a democracy, detailedagenda for reform may have a greater effectthrough their long-run influence on public opinionthan through their immediate impact on the politi-cians to whom they are addressed in the firstinstance.

55

Privatization a la FrancaiseSince the time of Louis XIV the French have made a virtue of the State regulating and controlling industry,Under Prime Minister Chirac, according to this report by a special European correspondent, all this haschanged.

Jean-Baptiste Colbert, the illustrious Frenchstatesman, is reported to have muttered on hisdeathbed in 1683: "Si j avais fail pour Dieu ce quejai fait pour cel homme, je serais sauve dix fois".("If I had done for God what I have done for thisman, my soul would have been redeemed ten timesover").

"This man" was Louis XIV, the Sun King, andColbert may not have been exaggerating. From thevarious strategic posts which he occupied at onetime or another in Louis' administration, includingthat of intendant of finances, Colbert devoted him-self single-mindedly to fostering a strong Frenchindustrial and commercial presence. The country'scolonial resources were harnessed and, wherenecessary, resort made to skilled foreign artisans tofound royal manufactures. The entire undertakingwas pursued within a framework of strict govern-ment regulation.

Although Colbert was scarcely a pioneer—Louis XI's royal backing for the creation of a silkindustry in the fifteenth century could be cited asan earlier example—he remains a symbol of Statedirigism and his spirit has permeated French offi-cial attitudes toward economic management eversince. Laurent Fabius, the then Prime Minister,asserted in late 1983: "In this context I hear thatsome people would like to denationalize what wasnationalized not only in 1981, but carried away bytheir enthusiasm, even in 1945—poor General deGaulle—and even under Colbert—poor Colbert!That conflicts with both economic reality in ourcountry and French economic tradition".

Francois Mitterrand himself had earlier con-firmed in 1977: "We believe in the superiority ofthe Plan over the market. This is not merely apledge or a wish, but a fact. ...we think that funda-mental decisions concerning the well-being of ournation should be made on the basis of knowledgeand the confrontation of interests, needs and aspi-rations democratically debated at all levels, and not

be subject to the law of those who, under the pre-text of market forces, exercise a dictatorship: mon-opolies, multinational corporations and bankers".'

The Plan referred to by President Mitterrand(which still exists, but deprived of its operationalsignificance) is an obvious, but not unique, mani-festation of this tradition. The movement of topFrench public servants, typically the products ofelite tertiary educational establishments ("grandesecoles') and moulded in a civil servant interven-tionist attitude, into top business positions is a notunusual phenomenon.

Right-wing Governments have lived happilywith this heritage. General de Gaulle himself insti-gated a wave of nationalizations in the immediatepost-war period, although he was inspired by adesire not only to increase control over the alloca-tion of resources (via major banks and insurancecompanies) but also to punish wartime collabora-tion (Renault). The Socialists nationalized 47enterprises in 1982 at an estimated cost (share-holder compensation plus interest accrued on thedebt thereby incurred) of close to FFr 35 milliards,bringing close to 90 per cent of banking and impor-tant sections of industry under State control. Dur-ing 1981-84 a further FFr 49 milliards of equity wasinjected into the nationalized sector. Belief in theomniscient State's ability to allocate resources forthe greatest good of its citizens reached a high pointin the industry plans devised within the Ministry ofIndustry and Research under its Socialist MinisterJean-Pierre Chevenement in which the national-ized industries were allocated a key role. Industrywas rationalized into neatly drawn vertically-inte-grated industrial groupings ('filieres"). "Untidy"diversification was not tolerated.

Prime Minister Chirac's Government's pro-gram of privatization consequently represents aradical break with tradition. Yet, timid privatiza-tion straws were already in the wind during thelater stages of the Socialist administration which

1. This is not to imply that the French enjoy a monopoly of infatuation with the States' mystical omniscience and superiorityLord Stockton, formerly Prime Minister Macmillan, as an old man, deplored Margaret Thatcher's selling off'of (somewhattarnished) ' family silver".

IPA Review, August-October 1987 56

PRIVATIZATION A LA FRANCAISE

had begun to realise that centralized State controlover virtually the entire financial sector and largesections of industry was stifling the competitivepressures which alone could ensure the necessaryadaptation of French industry to rapidly-changingworld markets. Furthermore, resort to , privatecapital would ease the burden on the public purseat a time of burgeoning fiscal deficit. A law passedin January 1983 provided for nationalized com-panies to issue non-voting, negotiable investmentcertificates (certificats d'investissement) and parti-cipatory titles (titres participatifs). However, thepresent Government's program is of a quite differ-ent order of magnitude, and represents a clearbreak with traditional attitudes, being inspired byreaction to the demonstrable failure of Socialismwith which the more recent nationalizations and,more generally, State intervention were identified.

Privatization is governed by two acts of theFrench Parliament:

Law 86-793 of 2nd July 1986 authorizes, inconformity with the Government's election plat-form, the sale to the private sector by at latest 1stMarch 1991 (that is, within the 5-year life of thepresent Parliament) of 65 groups in which the Gov-ernment holds, either directly or indirectly, amajority interest. These are distributed by sector asfollows: 9 industrial, 13 insurance, 38 banks, 4finance companies and one communications. Inall, 1,454 companies (57 per cent of all firms inwhich the government has a majority sharehold-ing) with 755,000 employees are concerned.

However, the present Government's programis of a quite different order of magnitude, andrepresents a clear break with traditionalattitudes, being inspired by reaction to thedemonstrable failure of Socialism with whichthe more recent nationalizations and, moregenerally, State intervention were identified.

Legislation enacted on 6th August 1986 laysdown the detailed procedures to be followed:• A Privatization Commission (created in Sep-

tember 1986)—consisting of seven memberschosen for their economic, financial or legalcompetence and experience—evaluates the com-pany after audit of the latest accounts andevaluation by the bank retained as advisor to theGovernment. The criteria laid down are: stockmarket quotation of shares or investment certifi-cates (where applicable), value of assets, profits,subsidiary holdings and future prospects. On the

basis of this opinion, which is made public, theMinister of Finance takes the final decision as tothe price, which may not be below the Commis-sion's estimation.

• A public information bulletin, prepared by thecompany to be privatized and checked by theCommission des Operations de Bourse (theFrench Securities Exchange Commission), setsout its activities, past and projected financialresults, as well as the share offer conditions.

• Generally speaking, the distribution of shares ismade according to the following pattern:—70 per cent is subject to a public offer of sale

(offre public de vente—OPV), which sets outthe number and price of shares on offer as wellas the period of sale (about two weeks). Frenchcitizens and residents are accorded certainprivileges including priority allocation of up to10 shares per person and one free share (up to alimit of five) per 10 purchased if held for atleast 18 months.

—Maximum 10 per cent is reserved for presentand former employees of the company, whoalso benefit from preferential terms—a reduc-tion of up to 20 per cent on the announcedOPV price (but where greater than 5 per cent,the shares must be held at least 2 years), up to 3years to pay, and the attribution of one freeshare for-each purchased (subject to certainlimitations) if held for at least a year.

—Maximum 20 per cent (which may be reducedin the national interest) is allocated toforeigners.

• The Finance Minister may set a 5 per cent limiton the acquisition by any single purchaser at thetime of issue, and may also arrange for the pri-vate placement of shares. This latter provisionhas been used in order to reduce the volatility ofshareholding by selecting a small group of stableinvestors (groupe d'actionnaires stable—GAS).Furthermore, the State may acquire a "goldenshare" (action specifique) where such is deemedin the national interest, but this right has so farbeen exercised only once.

Share applications are transmitted to theChambre syndicale des agents de change (StockBrokers' Association) which, where demandexceeds supply, makes a pro-rata allocation, sub-ject to the priorities indicated above.

The proceeds of issues are paid into a specialTreasury account. The FFr 30 milliards of receiptsbudgeted for this year are allocated as follows:reduction of the debt incurred by the 1982 nation-alizations (FFr five milliards), capital injections to

57

PRIVATIZATION A LA FRANCAISE

public-sector enterprises (FFr nine milliards) andreduction of the Government's fiscal deficit (FFr16 milliards). In fact, after the privatization of theSociete Generale in mid-1987 an estimated FFr 52milliards will already have been collected.

Choice of the first candidate was critical forthe success of such a major undertaking which isvariously evaluated at upwards of FFr 200 . mil-liards over five years? The selection of Saint-Gobain for this role was based on sound technicalconsiderations (well-known, blue-chip, profitableand in a relatively stable industry), but is not with-out historical irony since the company can trace itsvery origin to Colbert's desire to break the thenVenetian monopoly in glass making. In 1665 heinstalled four artisans in Paris after having smug-gled them out of Venice and then proceeded toclose the frontier to Venetian glass in order toensure the success of his venture. From this hum-ble beginning gradually emerged the Manufacturede Saint-Gobain which subsequently survived thevicissitudes of French history and in the processassumed a multinational dimension. In 1982 it wasnationalized by the Socialist Government.

The Saint-Gobain privatization, the hithertolargest single operation on the Paris Bourse,entailed the offer during the period 24 Novemberto 5 December 1986 of 28 million shares at a unitprice of FFr 310 (net of costs). The French Treasuryretained Kleinw'ort-Benson, which has accumu-lated considerable experience from the British pri-vatization program, as well as a French bank asadvisors. A special price reduction of five per centwas offered to employees without restriction as toholding period or of 20 per cent if shares were heldfor at least two years. The 50-60 thousand certift-cats dinvestissejnent issued in June 1986 could beexchanged for shares. The offer proved a great suc-cess, being 14 times oversubscribed. The percen-tage attributed to foreigners was reduced to 18, giv-ing the final distribution of holdings:

French public 72 per centForeigners 18St. Gobain employees 10Paribas, the first of the financial institutions to

be offered, was oversubscribed nearly 40 times andnow has 3.8 million shareholders. The Societe Gen-erale, a major retail bank, being brought to marketin June this year, is the first of the immediate post-war vintage nationalizations to be (re) privatized.

The Government hopes to create a broadly-based share-owning public. A survey ordered by aleading French business magazine, indicated that55 per cent of persons interviewed approved of pri-vatization, and Socialist Party threats to renation-alize have been limited to the TV station TF1. Sofar, the program has been extremely successful, theinitial responses having far exceeded the Govern-ment's expectations. About one-half of Saint-Gobain employees took up shares. In addition,over one and one-half million individuals becameshareholders, about seven times the pre-national-ization figure, of whom probably at least 300,000had never before held shares either directly or viamutual funds. Of domestic holdings, 85 per centare in the hands of individuals and 15 per cent withinstitutions. How enduring this pattern will proveremains to be seen. As indicated above, incentiveshave been provided for retaining holdings forperiods of up to two years and in the cases of Saint-Gobain and Paribas studies indicate that about 15per cent of the issues changed hands rapidly. Hand-some profits have been made in many cases; Saint-Gobain's price soared after its initial SE quotationof FFr 369, peaking at FFr 467.5; it has since slip-ped to FFr 416 (early June) which still represents aone-third gain over its offer price. But perhaps thefirst major market downturn must be awaited inorder to better judge how profoundly mentalitieshave changed.

2. As at end-1986. the value ofall shares listed on the Paris Bourse amounted to FFr 1,150 milliards, and 7.6 per cent of Frenchhouseholds owned shares.

58

Around the StatesLes McCarrey

How the Money Comes and Goes

In shaping their budgets each year, State Gov-ernments have their room to manoeuvre confinedby the dominance of Commonwealth Grants overtheir revenue and the huge expenditure demands ofeducation and health services which togetheraccount for about 45 per cent of recurrentexpenditure.

Consolidated data on State budget revenueand expenditure are not available on a uniformbasis. However the overall pattern does not varysubstantially from State to State and the NewSouth Wales figure may be taken as representative,at least for the larger States.

The followinggraphs show the breakdown ofgg Pr v andexpenditure for the Newrecurrent revenue a d ,

South Wales 1986/87 budget.The demands of education, which weighed

heavily on State budgets in the 1960s and 1970s,have eased with declining enrolments in Stateschools (see below) but have been replaced by pres-sures from health services and law and order(police and law courts) as crime escalates through-

•out Australia.Although the Commonwealth takeover of

income taxation during World War II and HighCourt rulings on the nature of Excise Duty are theprincipal causes of the revenue imbalance, thedependence of the States on Commonwealth assis-tance has its roots in the division of powersbetween the Commonwealth and States at the timeof Federation. Social services expenditure, particu-larly on education and- health, was a relativelyminor aspect of colonial expenditure at the turn ofthe century and access to revenue sources betweenthe Commonwealth and the States was determinedaccordingly.

The founding fathers could not have foreseenthe enormous upsurge of spending on social ser-vices that has occurred in more recent years and theway it would come to dominate State Governmentspending and taxation. Had they been able to do so,it is certain the division of taxing powers in the

Constitution would have been very different.Indeed it is possible that, faced with a future of bur-geoning expenditure demands and inadequaterevenue resources dooming the States to increasingdependence on the Commonwealth Government,the colonies would have gone their separate ways—as did New Zealand—and the Australian nationwould not have been born.

Recurrent Revenue

State Taxation40.5%

OtherRoyaltiesa Y5.2 /o

':.;<<>''` "'' &Land 2. /

Dept Chargesa sat^^oeese$ ome v Q

Fines 5.2 /a'.3 }R 4'L 'rik ;Fa' h~ 111

C'wealth Grants46.7%

Recurrent Expenditure

Debt Servicing Other 29.8%13.8% (inc general admin)

Rail &UrbanTransport

6.5% Law, Order'`' & Safety

6.6%Education

21.3%

Health 22.0%

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

59 IPA Review August-October 1987

AROU NI) TILE STATES- LES MCCARREY

Education ExodusA government-sponsored report recently

released in Western Australia claims that teachersare suffering from severe stress because of longworking hours, isolation in the classroom and lackof support. Teachers in that State are also up inarms over the confusion created by what they claimis the too rapid introduction of the State Govern-ment's "Better Schools" program which amongother problems, has thrown a significant additionalburden of curriculum development on to seniorteachers.

The WA `reforms' and the resulting turmoilseem to be direct transplants from Victoria where arecent Education Ministry project team reportedthat, after four years of `reform' and 'restructuring'of the State education system, "a managerial foghas settled over large sections of the educationalenterprise. Executives have become increasinglyuncertain about their authority, decisions havebeen deferred or not taken, delays have becomeinstitutionalized and a great deal of time andmoney has been wasted."

It is also reported that in New South Wales,spelling bees are causing children to feel inferiorand depressed because of competition in the class-room. To overcome this, the curriculum is to beamended to move the emphasis from spelling andgrammar in teaching language to a more holisticapproach—whatever that means.

In a recent national television program, asenior official of the NSW Education Departmentclaimed that "we are not in the business of prepar-ing people for the work place."

A curriculum consultant to the same depart-ment is reported as saying "we live in a post-literatesociety—there is no need to teach spelling andgrammar any more."

An ABC current affairs interviewer chides anemployer group spokesman by reminding him thateducation is about providing children with lifeskills rather than employment skills.

David Clark, writing in the Financial Reviewreports a primary school teacher telling him "Itgoes against the grain when I am told that I don'thave to correct spelling and grammar any more."

In Western Australia, a teacher writing to adaily newspaper claims that the main role of teach-ing is being eroded by enforced additional roles andby a requirement to implement education policieswhich fluctuate constantly, creating confusion, dis-

illusionment and a sense of futility. The same cor-respondent pointed to the injustice of teachersbeing sandwiched between the unrealistic demandsof the educational authority and the degenerationof society.

So there it is. Pity the dedicated teacher, ofwhich there remain many, trying to teach kids inclassrooms which have been turned into sociallaboratories by the education trendoids (thanks toDavid Clark for that expressive word) and workingin a sea of confusion as to educational aims andmanagement with precious little support fromabove.

That there is widespread concern amongparents throughout Australia can no longer bedismissed by the politicians and teachers' uniontrendies. Enrolments in State schools have beenfalling in recent years in all States except Queens-land where they appear static. Although there hasbeen an overall drop in school enrolments due tothe demographic trough of school-aged children, akey factor has been the swing to non-governmentschools in all States as the following table shows.

Increase/(Decrease) in EnrolmentsGovernment vs Private Schools 1984-1986

Percentage Change

Govt Private TotalSchools Schools

NSW (2.1) 5.1 (0.3)Vic (4.6) 3.6 (2.1)Qld -- 4.2 0.1SA (4.4) 7.1 (2.1)WA (1.0) 7.9 1.0Tas (2.6) 6.0 (1.0)Australia (a) (2.4) 4.8 (0.5)(a) Includes ACT and NT.Source: Commonwealth Department of EducationNational Schools Statistics Collection Australia 1986.

While an elitist attitude no doubt contributesto some parents' decision to enrol their child at aprivate school, a number of other reasons aregiven. The private school system is seen as promot-ing competition and encouraging the children toachieve, although the cancer of a non-competitive.academic environment is also permeating the pri-vate school body. Discipline is tighter, imposed in

60

part by the children themselves who are madeaware of the monetary value placed on their educa-tion by the household sacrifices required to meethigh school fees. .

The debate on government funding of privateschools waxes and wanes. Federal and State Gov-ernment funding for private schools currentlyamounts on average to about $1,580 per studentand there is no doubt that if this funding were with-drawn many schools would be forced to close. Butthe political reality is for even greater governmentsupport of the private school system with over 26

AROUND THE STATES—LES McCARREY

per cent of school children now attending non-gov-ernment schools and the potential for substantialbudget savings if government schools are relievedof enrolment pressures.

Australia has an enormous investment and agreat deal of talent and integrity in the governmentschool system. Perhaps one answer to the per-ceived decline in education standards is to findways of enabling the voice of the experienced class-room teacher to be heard over the trendoids andsocial engineers. In the meantime, the exodus willcontinue.

Is it Time for Another Niemeyer Statement?

In July 1930, faced with the crisis of the depressionand a 19 per cent unemployment rate, the FederalGovernment invited the Governor of the Bank ofEngland, Sir Otto Niemeyer and his colleague T. E.Gregory to Australia to advise on measures tocombat the crisis.

Their principal recommendations for abalanced budget and an across-the-board wage cutof 10 per cent and the subsequent effects of thosemeasures in the circumstances of the time are well-known. Perhaps less well-known was a recommen-dation for monitoring the financial position of theStates which led to production by each State on astandardized basis ofa monthly statement of finan-cial transactions on the public account. This state-ment, .known to this day as the Niemeyer State-ment, is supplied to the Federal Government toenable some limited monitoring of State finances.

The Niemeyer Statement is restricted in scopeand is of little value in terms of providing an over-all assessment of the impact of the State sector onthe economy.

The controversy earlier this year over theaccuracy of ABS estimates of the net public sectorborrowings of the States points to a major defi-

ciency in the compilation and reporting by StateTreasuries of total public sector receipts and out-lays in National Accounts format. It is a safe betthat no State Cabinet has before it at budget timeeven rough estimates of the net public sector bor-rowing requirement (PSBR) resulting fromplanned expenditure programs, including those ofits major statutory authorities. In the critical eco-nomic circumstances of today, State Governmentsas members of the Loan Council, should subjectthemselves to the discipline of at least knowing theeconomic effect of their aggregate financial transac-tions and be prepared to pool that information.

To this end, Loan Council should call for areturn from State Treasurers of public sectorreceipts and outlays on the ABS format followingcompletion of State budgets and quarterly there-after. (No doubt the Bureau would be grateful forthe involvement and assistance of State Treasuriesin tightening up the initial PSBR estimates).

Admittedly that would seem to be locking thedoor after the horse is well down the road but itshould at least ensure that State Governmentsmake an attempt to look at a wider perspective ofState public transactions than they do at present.

61

Disarming the Cynics "The cynics whothink peace is passe, or that International Year ofPeace was just window dressing, should have been atthe Peace Education Resource Centre last week... theJournal was!" enthuses the Jou rnal of the VictorianTeachers' Union. "A delegation of schoolchildren whohad written to the leader of the Soviet Union pleadingfor peace received an official letter from theAmbassador of the Soviet Union in Australia and avisit from the Secretary of the Soviet Embassy," theVTU Journal continues. "The Secreta ry, YuriVelobrou, read out the letter which expressedunderstanding of the sentiments of the children andstated the Soviet Union's commitments to the cause ofpeace and disarmament. "

The Journal also reprints a sample of the letterssent to Mr. Gorbachev by Victorian school children."You should take notice of the 'International Year ofPeace, " says one, "for in Australian schools, childrenare making things for peace, things like paper cranemaking, peace posters and dancing and music forpeace. Peace is a different thing to war, a muchdifferent thing." If only the teachers of the 1 930s hadtaught their children how to dance for peace, makepaper cranes and write nice letters to Mr. Hitler theSecond World War might never have happened.

Big Sibling is Watching "Clayton'ssexism is the sexism you practise when you're notbeing sexist," according to The University ofMelbourne's "Guide to Gender-Neutral Speech andWriting," devised by a committee set up in response tothe University's Equal Opportunity Policy. Clayton'ssexism, the booklet informs us disapprovingly, "isdisplayed by people who know what sexist usage is,but don't think it a serious problem. Although reluctantto be seen as impenitent sexists, they reveal theirsexism nevertheless by mocking a caricature ofnon-sexist usage. For example: 'He's very manly.Oops! Should I say 'personly'?"

Meanwhile at La Trobe University officialSelection Procedures for the filling of academic staffvacancies insist that a sex count be done of thoseshortlisted, by a committee on which "both sexesshould normally be represented".

"After the shortlist has been drawn up, themeeting will consider whether both sexes arerepresented on the shortlist. If one sex is notrepresented, the meeting will review the applicants andtake one of the following steps:

a) the best-qualified applicant of theunrepresented sex will be included in the shortlist; OR

b)document the reasons for the non-inclusion of

one sex on the shortlist for the Staff Office to collateand forward to the Equal Opportunity Committee':

No prizes for guessing which is the line of leastresistance.

Big Brother—oops! Big Sibling—is watching.(Please excuse the Clayton's sexism.)

Class Oppression Despite efforts to reformthe system in recent times, the insidious practice ofgrading students according to merit apparently stillpersists in some classrooms. Michael Read, in TheVictorian Teacher, the journal of the VictorianSecondary Teachers' Association, hits out at theinjustice of it all:

"Children under fifteen are compelled by law toattend school. When they get there they may discoverthat their efforts to master new disciplines, theirproductions and their creations are treated asperformances subject to measurement andclassification. They may be compared with otherchildren and ranked in order of merit. Some may evenbe labelled as 'failures' if their performance does notconform to certain criteria of which they may havelittle or no ken. Such students must find schoolprofoundly alienating. My point here though is that it isunjust: compulsion to attend allied with grading istantamount to double jeopardy."

You Can't Think When You're -Angry Angry Anderson, lead singer of the rockband "Rose Tattoo" and recipient of an AdvanceAustralia Award, reveals, in the glossy pages of NewAge magazine, Simply Living, his deep compassionfor the victims of man's cruelty to animals. Not so,apparently, the thousands of victims, includingrefugees, of Cuba's and Vietnam's communist despots."...some of my greatest heroes have beenrevolutionaries'; Angry says in the interview. "Butbefore that they were visionaries. I've stayed awayfrom the Marxist-Leninists and gone for the moreexotic and colourful characters like Che Guevara,Fidel Castro and Ho Chi Minh. "

"But'; interrupts the interviewer, "they were allMarxist-Leninists':

. "Yes' says Angry, determined not to let realitycloud his vision, "but not dogmatic; they liberated toliberate, not to suppress. "

Present Education For the person who haseverything Box Hill TAFE (Technical and FurtherEducation) in Melbourne offers a course in "CreativeGift Giving" For the person who doesn't haveeverything, a course is run in "Assertiveness".

IPA Review, August--October 1987 62

Turn s

If You Can't Beat Them (1) While inthe left-wing weekly, The New Statesman, Britain'ssocialists theorize on the possibilities of "marketsocialism'; Italy has seen the establishment of acommunist merchant bank. The bank called Finec is70 per cent owned by the Communist "Lego deltaCo-operative" (National Co-operative League), reportsthe Financial Times. And in the United States,Nuclear Free America has launched its own creditcard, the Working Assets Visa Card. Every timesomeone new signs up for the card five dollars goes toNuclear Free America and after then five cents everytime the card is used to make a purchase. The interestrate is not low, but then it's only fair that card carryingsocialists should pay for their principal as well as fortheir principles.

If You Can't Beat Them (2)Psychologist and spokesman for the VictorianAssociation of Mental Health, Stephen Wallace, hascondemned what he claims is the continued use ofcorporal punishment in Victorian State schools.Referring to the teachers who use corporalpunishment, Wallace said: "Our major concern is thatthese red-necked Rambos will produce yet anothergeneration of violent, aggressive children, not just inthe classroom but outside the classroom." At the sametime, according to the report in The Age, "Mr.Wallace said corporal punishment was generallyuseless in stopping undesirable behaviour because thepunishments normally advocated, such as the strap,were not painful enough. "

On the Nose Workers on a building site nearSydney's Chinatown objected to having to work withthe smell of Chinese cooking in the air. It was not thatthey did not like the aroma, but that it made themhungry for Chinese food. The employeesdemanded—and received—a `dim sim' allowance forChinese food. (From the Liberal Party "Rort Report"on the Building Industry).

Terror Australis In the aftermath of

Tasmanian Aboriginal lawyer Michael Mansell's visit toLibya in April, the Rev. Charles Harris, leader of theUniting Aboriginal and Islander Christian Congressreflects on the subtle differences which distinguishAustralia from Gadaffi's Libya. `I am not sure which isthe worst, " ponders Rev. Harris in Land RightsNews, "having to face Gadaffi style terrorism whichgives instant death, or the kind of terror anddegradation which has been inflicted on the Aboriginal

people for over 200 years and continues to be wagedin this country by the present Hawke LaborGovernment. Both mean Aboriginal people die adeath less than human. " The terrorism of which theHawke Government, indeed the whole country, isguilty, according to Rev. Harris, is "sophisticatedterrorism'; whereas, presumably, Gadaffr's is gauche.

Australia's Handicap "Here is a singlemother, who has a graduate diploma in outdoorstudies, and experience in 'non-sexist teaching',sending in a complaint to a government unit about`discrimination' because she can't get a job. Thereason could be many things: real wages may be toohigh, imposing structural unemployment, or as aperson the single mother may be a pain in the neck.But she is certain that she is unemployed because she'sa woman, and one who `took the trouble to be amother'. She now asks the Government to'compensate' for these twin 'handicaps'. And theGovernment does compensate her. " (From TheAustralians by Ross Terrill).

Will They Ever Learn? in April 1970Current Affairs Bulletin introduced an article headed"USSR—and the Indian Ocean" with thisextraordinary comment on the state of foreign policyat the time. `7n August fast year, Mr. Gordon Freeth,then Australian Minister for External Affairs, said thatthe Government would consider with close interest anySoviet proposals that seemed to be in line with thecollective security of the South-east Asian region. Inthe context of a Soviet naval presence in the IndianOcean this was widely interpreted to mean thatAustralia was perhaps ready to co-operate, in militaryterms, with the Soviets in some form of regionalsecurity system. "

Awareness of the threat posed by a Sovietpresence in our region has come a long way since then... or has it? In June this year, our current Minister forForeign Affairs, Mr. Hayden, was quoted in TheAustralian as describing Mr. Gorbachev's I986Vladivostok speech heralding greater Sovietinvolvement in the Pacific as "an extremely impo rtantand encouraging statement—my inclination would beto encourage the Soviets to be drawn more and moreinto productive and harmonious economic involvementthrough the Pacific basin."

Current Affairs Bulletin in its 1970 piece notesthat "subsequent election results ... suggest that Mr.Freeth's speech was politically disastrous for him. " Tothis extent, times have changed.

63

An Economic "Bill of Rights"Extracts from a speech by the President of the United States, Ronald Reagan, at

Independence Day Celebration, The Jefferson Memorial, July 31987.

Freedom is not created by Govern-ment, nor is it a gift from those inpolitical power. It is, in fact, secured,more than anything else, by limita-tions placed on those in Govern-ment authority. It is absence of theGovernment censor in our news-papers, broadcast stations, and uni-versities. It is the lack of fear bythose who gather in religious ser-vices. It is the absence of officialabuse of those who speak up againstthe policies of their Government.

Inextricably linked to thesepolitical freedoms are protectionsfor the economic freedoms envi-sioned by those Americans whowent before us. There are fouressential economic freedoms.

First is the freedom to work—to pursue one's livelihood in one'sown way, to choose where one willlocate and what one will do to sus-tain individual and family needsand desires.

Secondly, the freedom to enjoythe fruits of one's labour—to keepfor oneself and one's family the pro-fit or gain earned by honest effort.

Third is the freedom to ownand control one's property—totrade or exchange it and not to haveit taken through threat or coercion.

Fourth is the freedom to parti-cipate in a free market—to contractfreely for goods and services, and toachieve one's full potential withoutGovernment limits on opportunity,economic independence, andgrowth.

Just as our political freedomsneed protection by and from Gov-ernment, our economic freedomsneed similar recognition and pro-tection.

We must insist, for example,that there be a limit to the level oftaxation, not only because excessivetaxation undermines the strength ofthe economy, but because taxationbeyond a certain level becomesservitude.

In the same vein, regulation ofan individual's business or propertycan reach a degree where ownershipis nullified, where value is taken.Property rights are central to libertyand they should never be trampledupon.

It is time to protect our peopleand their livelihoods with restric-tions on Government that willensure the fundamental economicfreedom of the people, the equival-ent to an Economic Bill of Rights.

The centrepiece of the Econo-mic Bill of Rights, the policy initia-tive we launch today, is a long over-due constitutional amendment torequire the Federal Government to

Thomas Jefferson:"T wish it were possible toobtain a single amendment toour Constitution, I would bewilling to depend on thatalone for the reduction of theadministration of our Gov-ernment to the genuine prin-ciples of its Constitution; Imean an additional articletaking from the FederalGovernment the power ofborrowing. "

do what every family in Americamust do, and that is to live within itsmeans and balance its budget.

Raising taxes, should not bedone without a broad national con-sensus. We propose that everyAmerican's paycheque be pro-tected —as part of a balanced budgetamendment—by requiring that taxincreases must be passed by bothHouses of Congress by more than amere majority of their members.

I will, by Executive order,establish a bipartisan PresidentialCommission on Privatization todetermine what Federal assets andactivities can and should bereturned to the citizenry. At thesame time, I will order the Execu-tive Branch to find additional waysfor contracting outside of Govern-ment to perform those tasks thatbelong in the private economy.

We must also re-examineFederal policies to ensure that theyhelp, not hinder, all Americans toparticipate fully in the opportunitiesof our free economy. ' We need toreplace a welfare system that des-troys economic independence andthe family with one that createsincentives for recipients to move upand out of dependency.

We propose changes that willensure "Truth in Spending" byrequiring every new program tomeet this.test: if congressional pas-sage of a new program will requireincreased spending, it must be paidfor at the same time, either with ofsetting reductions in other programsor new revenues.

Citizens have a right to beinformed as to what Federal legisla-tion will cost. Full disclosure of suchcosts up front may well temper thedesire to over-regulate and over-legislate.

Ours is a vision of limited Gov-ernment and unlimited opportun-ity, of growth and progress beyondwhat anyone can see today.

Y

64

You .c,an o throu hg gan of our,Y

checkouts withouthandingover a cent.

Of course you will pay. But not in cash.Instead, you will use the Electronic Fund Transfer (EFT)

terminals at our checkouts.EFT terminals have now been installed across Australia

in every Woolworths supermarket and BIG W store as wellas selected stores in other divisions.

Which means we have more EFT terminals than anyother retailer in Australia.

In fact, with terminals in more than 540 stores, we . havemore than any other retailer in the world.

And considering we turn over more than $100 millionevery week, it's nice to know it's not all floating around in cash.

As seven million cardholders will no doubt testify,Electronic Fund Transfer is an efficient, foolproof system.

And for us, it's paying off. Even if we, don't see a cent.

Woolworths Ltd.And you probably thought we were just a chain of supermarkets.

W LW H 0020

GIFT10 THE NATION

To celebrate Australia's Bicentenar y in 1988The National Trust and AMATIL Limited are presenting

a Gift to the Nation.This communing-based heritage program is amongst

the largest of its kind ever undertaken in Australiaand 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 restoredand important museum and educational facilities

will be developed to assist and encourage all Australians tobetter understand and enjoy the architecture,

history and culture of our young nation.

Old Government House, George Street, Brisbanewas constructed in 1860/62 as the residence for the first Got,erynor

of Queensland. The exterior has been restored btuthe Queensland GoLrrnnrent and through The Gift

the interior will be returned to rte fo inerglor^!

AMATIL markets leading consumer brands in the tobacco,beverages, snack foods, poultr y and packaging industries.

Our activities cover all of Australia and extend tomarkets in the Pacific, South Last Asia and Europe.

As well as serv ing consumers cif our products, AMATILmakes a significant contribution to community life.This takes the form of sponsorship of community

activities and donations to voluntar y groups.For Australia's Bicentenary AMATIL is pleased to be the

sole sponsor of such an important heritage programmeas A Gift to the Nation.

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