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'Pauline Hanson's One Nation' party has shaken Australia's political system. It reflects a grassroots protest about the perceived failure of Australia's 'elites' in dealing with economic and social change. This paper speculates about the causes and implications of dissatisfaction with Australia's performance, and submits one contribution to resolving it. It covers these issues only superficially in order to produce a quick result.
Pauline Hanson was elected to the Federal House of Representatives in March 1996, as an independent member for Oxley. This followed her expulsion from the Liberal Party on the basis of remarks concerning aboriginal policies.
Attachment A presents her maiden speech to Parliament, which outlined the types of issues with which she was concerned. Major themes in that speech were that:
2. Public Reaction
Public reaction to such ideas (and similar ideas expressed elsewhere) has been deeply divided, ranging from endorsement to vigorous criticism.
'Pauline Hanson's One Nation' party was founded in April 1997, and has achieved some popular support - gaining more than 20% of the vote in the Queensland state election in June 1998 and a substantial block of Members of the Legislative Assembly.
An outline of representative examples of reactions published in some mainstream media is included as Attachment B, and drawn together as major themes in Attachment C.
Those themes suggest that:
Four interested observers where asked to explain what was going on, and indicated (in effect) that Pauline Hanson's One Nation has emerged as an expression of the frustration which supporters feel about factors affecting their lives (See Attachment D). One observer suggested that supporters' dissatisfactions reflected real injustices, while another felt that supporters had no valid claim to special attention.
3. One Nation Expresses Dissatisfaction with economic prospects
Both the review of published comment and these observers' views suggest that Pauline Hanson's One Nation expresses, and provides a release for, 'grass roots' concerns about the conditions of people's lives as a result of economic, social and political change. Governments and other elites are seen as unsuccessful in dealing with these problems.
Overwhelmingly the source of support for One Nation appears to be concern about the economic outlook. Dissatisfaction about this seems justified for several reasons:
There has been a huge transfer of wealth from nations and companies that produce commodities (agricultural, mineral and simple manufactures) to consumers of these products - through price reductions as a result of oversupply. This will not be quickly reversed, as technology continues to produce commodities more cheaply. And genetic engineering will begin to flood markets with cheap food in a few years. One Nation supporters react predictably to this wealth transfer, and to the fact that improved communication technologies have rendered the physical presence of some services unnecessary. The Commonwealth's recent budget described Australia as an island of prosperity - but too many people are suffering for this to be credible. In technology, Australia has turned its back on the rest of the world, but unless we rejoin it, young people will have no future here. And Australia's tax system must be brought into line with that in the USA (Gottleibson 'The Grim Truth of Wealth Transfer', Business Review Weekly, 6/7/98)
However capital intensive mass production (manufacturing) industries moved to newly industrialised countries at the same time as Australia recognised the need to diversify, and raised the requirements for success in high value added industries to knowledge intensive production (ie from industrial, to post industrial, development). In addition:
- globalisation both creates new opportunities and introduces foreign competition in traditionally localised business and economic functions - but requires a higher level of business capability and supporting commercial and technological infrastructure.
- current global economic changes (eg those associated with the Asian financial crisis) could impact particularly on commodity markets and regional Queensland
The community wide deficit in understanding of the immensity of the economic challenge led to an inability in government (with some exceptions) to foresee or understand the community's problems
- Attendance at meetings of officials and Brisbane business leaders considering strategy for developing the economy, indicate that few had a deep understanding of how a modern developed economy actually works. Responding to other's 'projects' was typically seen as 'development'.
- Stanford Research Institute staff (who prepared the Quality Queensland strategy in 1988) privately described Queensland as the most relatively underdeveloped economy in the Western world (ie reflecting the community's high resource based affluence, and low business capabilities).
The knowledge required to identify new economic opportunities or of how economic infrastructure (eg for financing, innovation, trade, intelligence gathering, marketing) might be enhanced, has generally not been available to Queensland's (branch office, small) business community. Also there are few, if any, industry linked research bodies in existence to assemble it. Regional economic development initiatives typically fail because there is no basic information from which to produce a strategy, and technical research is seldom supported in the strategy process. Thus strategies propose visions of 'being the greatest', rather than 'this is what we can do to be the greatest'.
- those strategies were relatively ineffective (because they did not mobilise the necessary practical information or commitment from the community); and so
- little 'energy', apart from government resources, was available to support strategies;
- those who were expected to operate in the new economic environment, gained little understanding of that economic environment, or of their constraints and options, or of what they needed to do to succeed (so that too many did not succeed);
- 'strategists' were never exposed to the difference between the economic system they were proposing and Queensland's traditional political economy (see (f) below)
- many in the community could not see why change was needed at all
The internalised approach to producing strategies appeared to be used to ensure: political control; and that strategies were seen as government initiatives.
The purpose of strategy should be to develop the capabilities required to cope with an anticipated future environment (see Craig J., Strategy Development in Business and Government, March 1997). It is arguably the absence of the economic capabilities (in individuals, firms, and regional economies) required for success in the rapidly changing economic environment that gives rise to the dissatisfaction which Pauline Hanson's One Nation primarily reflects.
Preparation of strategies by strategists in isolation was the method used in corporate strategy development in the 1970s - which generally failed because of an inability to mobilise the necessary information and commitment (op cit). In the 1980s, effective strategy (to ensure that capabilities matched the requirements of the future environment) became essential to corporate success because of the speed of economic change - and better methods were developed whereby strategists catalysed the efforts of line operatives in identifying strategic requirements.
Corporatism is one of the three main Western traditions of political economy (the other two being liberal capitalism and socialism) (Williamson, Varieties of Corporatism). Traditional state corporatism was mainly a European phenomenon from the industrial revolution up to 1940 (when credibility was lost due to its association with Mussolini's regime). It involved rejection of both socialism (ie state ownership of the means of production) and of the individual liberty required for market capitalism (initially because of concern about moral laxity which liberty was seen to imply). Under this politically authoritarian system, the means of production were privately owned, but represented and regulated by 'corporations'. The economy was administered, rather than being organised through market relationships amongst firms. This system was deployed most noticeably in Queensland in: the organisation of agriculture; the highest level of economic regulation in Australia; the past protective ownership through Treasury financial institutions of controlling interests in major Queensland firms; and (to some degree) in the corporatisation of government owned enterprises and in the means used to orchestrate responses to major investments.
Except in limited areas, the Queensland community was not well equipped (in its economic institutions and knowledge, administrative arrangements and social relationships), to cope with a market based economy which the various economic strategies over the past decade have sought to create.
This fact was concealed by an emphasis on 'free enterprise', and little attempt was made to ensure that communities understood and supported what was proposed.
- economics does not deal well with 'systemic' issues like the effectiveness of mutual support amongst enterprises - which is one criteria for a developed economy and is central to current theories of competitive advantage (eg those of Michael Porter).
- analysis assumes (because economics seeks to be a 'positive' science like physics) that the causal relationships in economic systems remain unchanged (and that optimisation within those relationships is the key to success). However the most important impact of knowledge (now seen by economists as the key to competitiveness and productivity) may be that it can constructively change such causal relationships. Thus conventional economics (which sees information only as an 'input' to the production system- not as a means for changing it) can not develop adequate understanding of either innovation or economic development.
The practical consequence of this can be illustrated by:
- National Competition Policy which seeks to increase competitiveness by imposing competition - without considering how the capabilities required for success (many of which can not be created by individuals or enterprises alone, and may suffer a 'chicken and egg' constraint) are to emerge;
- treating market power as an economic 'bad' (because it poses some risks to consumers) though: competitor nations in Asia (for better or for worse) adopted 'competition' policies based on increasing the market power of their national firms; and a business strategist has argued credibly that market power (from strategy) is needed if high value added is to be achieved. (Carter, Determining Industry Policy, AGSM Conference of Creating the New Australian Economy, 1992).
- organisations such as the Industry Commission have emphasised competition on the basis of 'efficiency' (in the sense of low costs) rather than considering the requirements for creating competitive advantages - which are required for high value added to be achieved. It has been suggested that mainstream economics does not seem to have noticed what business has been forced to learn over the past 20 years (Carter, opcit)
However external investors can not be expected to act primarily in the interests of the Queensland community, and governments can not themselves take the lead in addressing economic opportunities in a post industrial environment.
Briefly: Past approaches involving development of infrastructure are inadequate. It is now necessary to enhance the physical, cultural and environmental conditions - through developing people and providing communities with the abilities to be flexible and to master change. The development of ongoing 'learning' systems (eg through creativity, innovation and entrepreneurship) requires capable people, an appropriate institutional capacity to cope with change and a community culture.
Such change involves a process of 'learning' by the community and requires leadership by organisations which are 'market conscious' rather than those which are 'politically conscious' if economically productive outcomes are to be achieved. The difference between being market and politically conscious can be illustrated by the example of a business function currently supported by a Queensland government agency, which was planned (by the political process of consulting an interest group) to provide services to a particular sector. In practice the business function (which operates on a cost recovery basis) finds that enterprises in that sector do not want to pay for the service - so it provides services to an entirely different sector. If the service relied on political directions (rather than market directions) it would not survive commercially. While commercial success is not the be all and end all of economic goals, it is vital if the essential increase in community income is to be achieved
A related conclusion (but from a different direction) was presented in, Beyond Left and Right: The Future of Radical Politics (1994), by Anthony Giddens one of the architects of Tony Blair's 'middle way' in the UK. For example, he argued that Keynesianism [by which he appears to mean government intervention in a mixed economy] worked well in a world of simple modernisation - but can not work in a world of reflexive modernisation [meaning here a world in which it is not possible to have fixed knowledge about social reality - because decisions made are constantly altering that reality]. Giddens' work appears to be exploring issues similar to many which One Nation's emergence implies in Queensland.
Thus leadership in addressing economic opportunities is required by 'market conscious' (rather than 'politically conscious') institutions. The former could be enterprises, business groups, financial institutions, associations, or individuals providing they operate under socially and environmentally responsible protocols. Difficulties experienced over the past decade may be the result of trying to achieve economic adjustment through a series of primarily 'politically conscious' processes.
Another Problem: Queensland's branch office, small business economy lacks large numbers of strong 'market conscious' organisations able and ready to provide the leadership in private / public partnerships for economic change - and care is required to avoid diverting available capabilities primarily onto matters of concern to governments, or 'smothering' initiative with the need for governmental approvals.
Queensland risks being caught by economic change which has not gone far enough to provide prosperity for all, but has gone too far for segments of the community to cope with.
The impact of change has been far greater in rural and regional areas than in metropolitan areas, because: resource based sectors have been particularly important, and there was initially even less basis for success in a globalised, post industrial economy. This has been compounded by: droughts; distorted international agricultural markets; weak commodity prices; the complexity created by native title arrangements; the ending of regional development programs; population drift; and the withdrawal of services partly as a result of rationalizations to boost economic efficiency.
4. First Implication - Real Development of the Economy is Essential
The dissatisfaction leading the emergence of One Nation implies a need to achieve success in developing Queensland's economy - so as to establish the capabilities required to eliminate the major dissatisfactions which currently exist.
Solutions are available, and Queensland is currently not badly placed in developing those solutions, which might be achieved (in part) by:
One of many possible ways to engage the community could be to create a Public Policy Commission for a limited term to: publicly seek expert and community proposals for alternative state policy options; commission expert evaluation of these; suggest how proposals could be applied; and publicly report the results. This could: gain the benefit of insights which may have been neglected; and improve public understanding of popular policy fallacies which may exist. Control of such a Commission could be broadly based - reflecting a wide range of viewpoints (of both experts and non-experts - with the latter selected (perhaps) by a method like that used for juries).
Significance: While high unemployment has been a major problem in developed Western economies, the experience of Europe and the United States were different over the past 25 years. Following the loss of the ability to create large scale high quality employment in manufacturing, Europe - with high wages fixed by a regulated industrial relations system - proved unable to create any net new employment. In the US by contrast, tens of millions of jobs were created over the same period - because a flexible labour market priced workers into available jobs - but these were generally of low quality. However it now appears that a style of economic organisation (networked (rather than hierarchical); tele-communicated; globally oriented; and knowledge based) may have been developed which allows large scale high quality employment to emerge - because it allows such entities to recapture the competitiveness required for high value added which the USA had been losing to Japan. Competitiveness had been lost arguably because the hierarchical style of traditional organisations was unable to 'learn' as fast as firms operating under Japanese management styles - a situation which may now have been reversed (see The New American Economy)
Productivity is high where there is a large difference between the market value of what is produced, and the costs incurred in producing it. High productivity supports high profitability for investors, high wages and salaries and high net payments to government. In a competitive environment, those who rely on the comparative advantages available generally in a region, often find prices bid down to near their costs. Value added can be large through having competitive advantages, based on the capabilities (such as scale, technological knowledge, marketing capabilities, quality, service capabilities or increased efficiency) of firms in the region. (Carter, op cit). These allow additional 'value' to be captured, but often only temporally, before competitors catch up. High ongoing productivity requires the ability to constantly create competitive advantages.
A Scenario - Major Inland Cities: In 2005 six inland centres in Queensland (Charleville, Roma, Emerald, Longreach, Charters Towers and Mt Isa) are growing rapidly, a prospect which has been noted by national companies and property developers and is beginning to be reflected in their investment plans. In each centre, the community is developing competitive advantages through their enterprises' knowledge, skills and effective international connections, which have dramatically increased the productivity of industries in the region. Investment in those industries has increased, and specialised suppliers to those industries are moving in. Individuals and small firms whose business is conducted by telecommunication, as well as retirees, are locating in these centres because of lifestyle advantages, the improving facilities in the area, and the prospect of capital gains on property. Local authorities are concerned about the need for proper planning for rapid growth, and about funding the necessary infrastructure. Delegations are sent to state and federal governments to ensure they are made aware of what has happened, and that the needs of these centres are reflected in government budgets. Several other inland communities are adopting ambitious goals for their future.
- recognise that more than competition is required for competitiveness (ie to be able to be successful when subjected to competition) - with the difference being capabilities (which need to be created in part through effective strategy);
- broaden the definition of public benefits to include qualitative factors such as equity, ecology and the effectiveness of economic, social and administrative institutions.
Theory the above approach is consistent with mainstream policy directions, with enhancements based on principles explored by the author in Transforming the Tortoise: A Breakthrough to Improve Australia's Place in the Economic Race? (1993). This dealt with the effect of qualitative change on increasing economic performance - ie through innovation or economic / organisational development. It suggested that such change (which reflects the impact of deploying knowledge) affects output by changing the function (f) in a production function (like Y=f(k,l)) rather than by increasing inputs (k or l). It includes an analysis of the intellectual basis of Japan's rapid economic development (which also has weaknesses), and suggests that mainstream Western economics fails to develop an adequate theory of economic growth and development because it seeks to be like a classical science (eg physics) and so seeks to understand (rather than to change) the causal relationships within an economic system. This conceptual defect applies also to 'new growth theories' which include knowledge as an input to a production function, rather than as a means for changing the structure of the production function itself.
Initiatives emerging under principles like those above should be built off existing capabilities wherever possible - to ensure that they are practical and realistic.
The risk of an escalation of the Asian financial crisis (which could be deep and prolonged) further indicates the need for real development of the economy.
Briefly: Australia's rising current account deficit (potentially 6% of GDP or more) appears likely to require that growth be slowed substantially to reflect slowdowns by its trading partners unless trade can be diverted. If growth slows, then unemployment can be expected to rise sharply. If a high current account deficit is seen as unsafe, then unemployment will not be able to be cut by increased public spending (unless on activities which produce high financial returns) - as the more that is spent just to stimulate growth, the more other measures (eg increased interest rates) would have to be used to slow it to produce a 'safe' current account deficit. The suggestions above should reduce this constraint to some degree, by increasing the future income generated from expenditures (see Attachment E)
5. Second Implication - Social Policy Suggestions
While the author has no expertise in social policy questions, some suggestions which might be worth considering are:
Briefly: One version of an such indicators was developed for the USA (Daly and Cobb, For the Common Good - Redirecting the Economy towards the Community, 1990), and has this been adapted for Australia by Hamilton and Saddler (The Genuine Progress Indicator, Australia Institute, July 1997). Similar indicators are being developed elsewhere, eg in Europe, and the Australian Bureau of Statistics is developing a system of supplementary accounts to deal with such matters. (Craig J. 'Modifying GDP to reflect environmental and social values', unpublished, Department of Premier and Cabinet, July 1997)
Dimensions of this question might include:
- the disadvantages suffered by many aborigines as a result of: the legacy of history; discrimination; and the clash between their traditional cultures and the expectations of the 'modern' world;.
- native title rights, and the difficulties in creating a practical and acceptable means for implementation
- the differences between what various aboriginal tribes would regard as equality <195>
- the role of the welfare state (ie whether providing state support ensures equitable outcomes; or whether it results in welfare dependency - and perpetuates long term disadvantage for affected individuals and their children).
- practical difficulties in achieving good amenities and services
- the difference between treating individuals equally (a strongly held view in mainstream Australia and apparently supported by both Pauline Hanson <Attachment A> and her vigorous critics <25>), and treating cultures equally (which is not the traditional mainstream view). It can be noted that the capabilities flowing from, and consequences of, various cultures are different (eg economically, ecologically); and some cultures have 'undesirable' characteristics such as slavery (pre Civil War US south); human sacrifice to ensure the sun rises (Aztecs); or individual equality and democracy (Australia, in the view of those traditional 'Asian' societies, that prefer social hierarchy).
Aspects of this question may include:
- the increasing complexity of social and economic issues, which may make it difficult to achieve a universal understanding of what is 'just';
- the pressures for economic change which have been interpreted as originating with government, because they were communicated to the community through reducing government support
- the focusing of public administration onto business-like aspects - and a consequent loss of focus on government's traditional role of 'governing';
- the implementation failures widely experienced in activist policies in the 1970s, which analysts ascribed to: the difficulty of managing an overlapping array of programs; and the complexity of social and economic systems which made it difficult to understand causes and their effects;
- the increasing centralization of public policy, and resulting removal of policy issues from the influence and understanding of citizens;
Briefly: In the absence of Western 'universalist' ethics, traditional 'Asian' values seem to expect everyone to 'be' racist (ie act exclusively for the benefit of their own ethnic group) but to preserve other's 'face' by not making this explicit. Australia's 'racism debate' may be offensive not only because it makes racism explicit, but because it implies that being racist is wrong. And if One Nation is actually endorsing economic nationalism and ethnic superiority <82>, then it is also endorsing two traditional 'Asian values', and so taking the lead in becoming truly 'Asianised'.
Every effort should be made to avoid policy discussions in racist terms out of consideration for Australia's 'Asian' neighbours. This might be achieved by defining a 'racist' as a person who claims that some races are inherently superior to others <73>. Unless clear 'racism' exists, then policy debates should not be conducted in terms of 'racism' but rather in terms of the advantages and disadvantages of the policy. Also there is no way to solve problems debated in racist terms <12>. There could be value in making such an approach clear to national and international audiences, to avoid the negative reactions which a 'racism debate' triggers. Grossly distorted reports on the current situation are reportedly circulating internationally. <123, 145>
More effective communications amongst the various groups dealing with different parts of this economic and social agenda seems desirable, combined with effort to understand the situation facing various groups in the community.
A significant obstacle to attempts to deal with such problems over the past decade has been: the complexity of the situation which implied that specialised expertise applied to one part of the agenda has adverse implications for others, and which was irrational from their viewpoint; and a large body of under-informed opinion exists which periodically engulfed considered development of policy. A Public Policy Commission as suggested above (Section 4(a)) might help in improving understanding and communication.
6. Non-solutions to the Expressed Dissatisfactions
Options which would not deal with presenting problems include:
- Australia's economic performance during that period - though better than it was subsequently in a harsher global environment - was worse than many others achieved at that time, because Australia thereby missed the main benefits of the post war boom in international trade;
- the export performance of Australian agriculture was below that achieved by other agricultural exporters after 1970, because the high level of regulation of the industry prevented the development of agribusiness - which proved very effective in improving market access;
- the type of 'projects' which such an approach could provide (dams, roads, ports, railways, power stations), while essential, are not a sufficient basis for a high productivity modern economy - or one which could achieve a reduced ecological footprint.
- a market based approach to economic management arose from the need for a practical way to manage economic diversification - and the experience of large losses in Europe in the 1970s when governments intervened in an attempt to preserve traditional industries. The name, 'economic rationalism', is ironic because it appears to be based on the 'limits to rationality' which constrain economic planning in achieving such change.
(see We've lost the Economic Plot, unpublished, Department of Premier and Cabinet, May 1997)
There is nothing to be gained by further weakening the economic capabilities of Queensland's rural and regional communities. Prosperity will only be assured by becoming world class - a goal which is quite achievable.
7 Some Conclusions
The emergence of One Nation reflects a grassroots protest, and a desire for better future prospects. In terms of economic considerations, such dissatisfaction seems justified.
Attempts over the past decade to create a more productive market based economy have not been sufficiently effective, for reasons suggested in Section 3. Also attempts at social change experienced problems (eg abuses (allegedly) arose). These difficulties have arisen both because the challenge of economic change was harder than that facing developed economies (as suggested in Section 3(a) above), and because of the methods used.
However there has been little consideration of what could be done about this, because of the distraction of: the 'racism debate'; and criticism of the protestors' policy proposals.
Looking in the Wrong Place: Once upon a time a nightwatchman came upon a drunk crawling around on the ground under a street light. The watchman asked the drunk what he was doing, and the was told that he was looking for some lost keys. So the watchman got down to help the drunk search. After some time, with no sign of any keys, the watchman asked the drunk if he was sure that this was where the keys were lost. 'Oh no!' said the drunk, 'I lost them over there' - pointing out into the dark - 'but under this light is the only place that I can see'.
As observers we might modestly suggest that the nightwatchman turn on his torch and take the drunk over to where the keys were lost, and help him search there.
The primary characteristic of those who are (justifiably) dissatisfied about the results of past economic change is their lack of the capabilities needed for success in the current economic environment. Rather than criticizing their economic proposals, it makes more sense to consider what is needed for them to gain those capabilities - and so also be able develop policy proposals more likely to be to their advantage than: redistributing wealth seen as unfairly provided to special interest groups; or the adoption of historical economic management styles.
Developing capabilities to cope with future conditions is the goal of strategy - but, so far, strategies have not achieved this. This paper suggests steps which might be better - though to prove this one way or the other (and to translate these suggestions into simple and practical steps) requires more resources than have been available to date.
Until those who are not suffering the effects of change do more than criticize those who are, the protest can be expected to become stronger, and an ongoing poorly developed understanding of cause and effect may now lead to debate of policy proposals that undermine Queensland's commercial and governmental credibility.
The Revolt of the Elites? Philip Lasch (an American writer) has claimed that elites in many societies have largely abandoned concerns for the disadvantaged in their countries - through seeking global engagement - and have left others as a leaderless 'mob' (see Craig J. The Revolt of the Elites, unpublished, Department of Premier and Cabinet, June 1997). In Australia's case it has not been self interest or global engagement which caused elites to leave others leaderless, but rather the belief that they were already doing the best they could.